Q: How did WeWork spiral from a $47 billion valuation to talk of bankruptcy in just 6 weeks?

It seems crazy at the moment, but simply put, the WeWork IPO was an aggressive bet that in Year 10+ of a bull run that the public markets would pay a high but perhaps justifiable price for the crazy high revenue growth of WeWork, while overlooking the losses for now. WeWork is growing almost 100% at a $4,000,000,000 run rate. That, in isolation, is mighty impressive.

Also, customers/tennants like WeWork. It has 80%+ utilization, which is substantially higher than its direct competitor.

“The company reported revenue of $934 million for the quarter, up from $482 million a year earlier.”: WeWork’s losses doubled to $1.25 billion last quarter

Wow. That is some crazy growth.

The losses though are crazy, too. 😉

In other words, the IPO was a bet that in the Best of Times, enough public market investors would believe losses would eventually come down, and just look at the top-line growth.

An aggressive bet, but one that was consistent with the private bets made by Softbank and others.

But the bet was that, in The Best of Times, the public markets would see WeWork a bit like a crazy Amazon for space, one that would consume billions more, but revolutionize one of the largest markets in the world — office space.

And it’s a huge pace we do need to revolutionize. 5–10+ year leases are awful. Landlords are archaic to deal with. And the transaction costs are huge.

In the end, there weren’t enough crazy optimists in the public market to fund the crazy losses, too.

Perhaps if the S-1 wasn’t so crazy though, it might have gone through. Perhaps if the losses were a bit less steep. Perhaps if there was less self-dealing and craziness by the CEO. Perhaps if there hadn’t been crazy metrics like “Community Adjusted EBIDTA”. Maybe then, just enough optimists would have believed. And the IPO would have happened.

Maybe WeWork really just overplayed its hand.

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