Morning Markets: In today’s boom, rare is the tech giant that makes money. And some even lose a lot. And then there’s WeWork.
WeWork, now styled as The We Company, grew quickly in 2018. The famous unicorn doubled its revenue from $886 million in 2017 to around $1.8 billion in 2018. That growth came stapled with stiff losses, however.
Reporting this week from Axios and CNBC and Bloomberg detail the cost of WeWork’s growth, including the fact that the company’s net losses grew by nearly $1 billion in 2018 alone.
Let’s quickly explore WeWork’s results and try to come up with a bull case. The bear case, as we’ll see, writes itself.
Burn....MUCH MORE
Up front, here are the top-line figures that show how quickly WeWork is growing, and how much that has cost the company in recent years:
That works out to a net margin of -105.3 percent in 2017, and -104.4 percent in 2018. That’s flat. So, in 2018, WeWork did not manage to materially increase its profitability despite scaling revenue by more than 100 percent.
- WeWork’s 2017 revenue: $886 million
- WeWork’s 2017 net loss: $933 million
- WeWorks 2018 revenue: $1.82 billion (+105.4 percent)
- WeWork’s 2018 net loss: $1.9 billion (+103.6 percent)
That trend does not appear set to change. According to Axios, “WeWork President and CFO Artie Minson says to expect both revenue and net loss figures to continue growing, as the latter relates largely to upfront construction and long-term rental contract costs.”
So what we can see is not a company that sells $1 bills for $.50. Instead, over the past two years, WeWork has sold them for a little less than $0.50. That’s a great way to grow, but a difficult way to reach profitability....
Previously:
March 26
"WeWork Made $1.8 Billion In Revenue Last Year; It Lost $1.9 Billion"
And the post that proves I am addicted:
January 14, 2019
Programming Note: Climateer Investing Is Dropping Coverage of the Company Formerly Known as WeWork
It was fun back in 2014 when headlines like WeWork Worth $5Bil., Weally were fresh and new.
And in 2015 it offered an intellectual exercise: How To Convince Investors Your Startup Is Worth $10 Billion: "There has got to be a way to short this". And $16 Billion Valuation WeWork Cut Forecasts as CEO Asked Employees to Change ‘Spending Culture’:
"It has been a long cherished dream to figure out a way to bet against this one, links below....
Climateer Investing even took "WeWork: 'Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.'" at face value:
Roger that, energy and spirituality. Over....C.I. did not disclose our response to WeWork's mandatory veganism: strategically located bar-b-que food trucks equipped with giant fans to waft the aroma at WeWork properties.
Even when our go-to WeWork jounalist left FT Alphaville we soldiered on:
"WeWork is getting a lot bigger, but so are its losses"But this latest is too much.
With Alexandra Scaggs leaving FT Alphaville for Barron's* it appears there is an ecological niche that needs to be filled—WeWork....
From StreetInsider, January 8:
WeWork to rebrand to The We Company and announce a major corporate and strategic shift - Fast Company.
WeWork to rebrand to The We Company and announce a major corporate and strategic shift - Fast Company. (LINK)And TechCrunch::
"The new structure is part of Neumann’s heady ambition to push the company’s market and opportunity beyond commercial real estate. Rather than just renting desks, the company aims to encompass all aspects of people’s lives, in both physical and digital worlds, he says."
The CEO also talked about the disappointing SoftBank round.
WeWork rebranding won’t work
The company formerly known as WeWork has rebranded as the We Company — although a better name for its network of on-demand office spaces for the newly incorporated and nominally employed, co-living spaces for the same easyJet-set and educational and coding services could be “House of Cards.”...They should have gone with "WeWork wÄ“bwanding won't work" for the Elmer Fudd alliteration.
When it comes public get your shortin' shoes on.
And when the stock cracks we might relent and resume coverage of The Wee Co.
Here's our parting gift, 2017's "The story of WeWork’s mysterious first investor".
