11 big things: Airbnb is living in WeWork's universe
Everybody forgetting about WeWork for a while probably sounds dandy to Airbnb, the short-term vacation rental company that was valued at $31 billion with its last round of VC funding, back in 2017. The company was thrown into the spotlight this week by The Information, which reported that Airbnb posted an operating loss of $306 million during 1Q, more than doubling its losses from 1Q 2018. For a unicorn in 2019, that's not necessarily a surprise; what is a surprise is that Airbnb had reported an $18.7 million profit for all of 2018, leading some to think it had officially made the shift from red ink to black.....MUCH MORE
Every star in the sky—including our own sun—will eventually run out of the fuel it burns to shine so bright. When it happens to a particularly massive star, the end is spectacular. At some point, as the fusion process begins to create heavier and heavier elements, the core of the star becomes too densely packed to survive. The star collapses in on itself, cannibalized by the overwhelming power of gravity. And then it explodes, ejecting a tsunami of matter and energy, creating a shockwave that threatens anything in its immediate vicinity.
I'm not saying it's a perfect metaphor for WeWork. But it kind of works, right?
The supernova-style saga of the co-working unicorn continued this week, with two of the company's closest allies now said to be offering competing $5 billion lifelines that could help keep WeWork afloat. And WeWork's nightmarish past two months are also having wide-reaching impacts on the rest of the unicorn universe.
For Airbnb, whose finances were the subject of a surprising new report from The Information this week, that means newly pointed questions about its future profitability. Or lack thereof.
The presence of WeWork's looming shadow over the rest of the VC world is one of 11 things you need to know from the past week:
1. WeAreAlmostOutOfMoney
WeWork is on track to run out of cash by the middle of November, according to CNBC. As such, the company's board and new co-CEOs Artie Minson and Sebastian Gunningham are hunting for additional funding. And even though Adam Neumann is gone from the top job, the two candidates to throw WeWork a lifeline are the two investors who for years were Neumann's biggest fans.
Those supporters would be SoftBank (led by CEO Masayoshi Son), which is reportedly offering $5 billion in financing to help rescue WeWork from bankruptcy, and JPMorgan Chase (led by CEO Jamie Dimon), which has reportedly put together a rival $5 billion debt package for the company. Doubts exist about the feasibility of JPMorgan's proposal, according to Bloomberg, because some are skeptical about WeWork's ability to service such a large new debt commitment. Which, considering the company lost $1.9 billion last year, seems eminently reasonable.
It's believed that SoftBank's proposed investment would still leave the Japanese telecom giant holding a minority stake, with Bloomberg reporting a possible valuation of below $8 billion. That's kind of incredible. It would put SoftBank in the position of having invested more than $15 billion in a company that's now worth barely half that, and yet still lacking control of said company. It'd be quite a trick. Even stranger, perhaps, is that prior reports of a possible SoftBank lifeline said the Japanese conglomerate would pursue a majority stake in WeWork. Which would seem to indicate that WeWork has negotiated that down to a minority stake? Which would seem to indicate WeWork still has some sort of leverage over SoftBank? Which would seem crazy to me.
Considering WeWork's desperation for cash, it's likely the company will choose either SoftBank or JPMorgan's offer sometime soon. Perhaps then, at long last, it can finally escape the headlines for a few weeks and get down to the business of trying to recover from a horrific past two months.
Everybody forgetting about WeWork for a while probably sounds dandy to Airbnb, the short-term vacation rental company that was valued at $31 billion with its last round of VC funding, back in 2017. The company was thrown into the spotlight this week by The Information, which reported that Airbnb posted an operating loss of $306 million during 1Q, more than doubling its losses from 1Q 2018. For a unicorn in 2019, that's not necessarily a surprise; what is a surprise is that Airbnb had reported an $18.7 million profit for all of 2018, leading some to think it had officially made the shift from red ink to black.
Not so much, as it turns out. Much of the loss-making was attributed to $367 million in expenditures on sales and marketing in 1Q, a steep YoY increase that shows Airbnb's hunger for new customers. The spending had a positive impact on revenue, which was up 31% YoY in 1Q to $839 million, again according to The Information....
