Neumann, by taking money from SoftBank, was completely complicit. He knew his financials, he knew the company was a flaming dumpster, he knew he had no plan to fix it, other than buying a wave pool company and assigning his family to high-level positions.
You really think if the company had gone public, Neumann would have what, stepped up and said "see, this is why we need to add more investor protections"?
There are plenty of private companies with outside capital that are not structured for a stock market debut. WeWork was one of them and the investors tried to list it on the stock markets anyway.
Neumann played the best cards available to him and cemented his consolidated ownership, with a different share class becoming a mere conduit for payment, and voter control allowing for unilateral signing off on contracts to himself and his other entities.
Sure, the people who chose to work for WeWork now have worthless equity, but that's always a risk when working for a startup, and they knew that going in.
imo this is always one of the first tells that company owners aren't good to be in business with. I've never had a good experience with family-run businesses in my entire career- have learned to completely avoid them at this point.
That values WeWork somewhere between -15.2B and 1.8B based on their 2018 performance data.
Measured against their competitors, they're still about 5X over-valued.
WeWork was way overvalued because they sold themselves to the public as a "tech company" that dabbled in real estate, not a real estate company that dabbled in tech. I mean, they had a lot of the same characteristics (such as crazy revenue growth while operating at a loss), but let's be clear: WeWork isn't a tech company, they're a real estate company in "tech clothes."
To circle this back to the parent comment - I still don't think they'll be profitable after drastically cutting spending. They might be able to keep the company afloat for a little bit. But their spending cuts target parts of the business that aren't under their "core competency" which is leasing office space on a short-term basis. So for example, they ax'd plans for WeLive or WeSchool (or whatever their kindergarten plans were called) as part of their turnaround plan.
WeWork has something like $17B in long-term lease liabilities across major cities in the US (and UK, I believe). They signed these long-term (10+ years I believe) leases with hopes of turning around and leasing them back to freelancers/businesses on a short-term (3-6mo) basis. If the economy slows down and demand for this variable-term space dries up, WeWork will still be on the hook for those $17B leases.
History doesn't repeat itself, but it rhymes. I wish I could have hope that this wouldn't happen again in the future (banks selling an overvalued business to the public markets via IPO) But really, this has happened before and it will happen again. Human irrationality knows no bounds.
I suspect the only way that would maybe go away would be both greater transparency requirements and the ability for the market to parse all of the data in an informed way. So in other words technically possible but probably not going to happen.
Until the next bubble, at least.
And yet - as bad as their "losses" were - precisely none of those people are actually suffer (in actual personal, physical terms) anywhere near as badly as the laid off / outsourced service workers referred to in the article.