{"id":177475,"date":"2019-09-10T18:06:00","date_gmt":"2019-09-10T23:06:00","guid":{"rendered":"https:\/\/www.panix.com\/~msaroff\/40years\/2019\/09\/10\/completely-not-a-surprise\/"},"modified":"2019-09-10T18:06:00","modified_gmt":"2019-09-10T23:06:00","slug":"completely-not-a-surprise","status":"publish","type":"post","link":"https:\/\/www.panix.com\/~msaroff\/40years\/2019\/09\/10\/completely-not-a-surprise\/","title":{"rendered":"Completely Not a Surprise"},"content":{"rendered":"
Somehow or other, WeWork took a fairly standard real estate play, leasing long, and renting short, and, by adding Kombucha,*<\/sup> managed to sell itself as a high tech unicorn.<\/div>\n

Now that the WeWork IPO is collapsing under the weight of mathematics and allegations of self dealing<\/a>, maybe we should seriously consider a little more scrutiny of both the business plans and the business practices of startup companies:<\/p>\n

Historically low interest rates and quantitative easing are supposed to encourage investors to take more risks, but even in this climate there are limits. WeWork is hitting one as investors conclude they\u2019re wary of investing in Shanghai-on-the-Hudson. <\/p>\n

That\u2019s the main lesson of the slow-rolling deflation of the public-market listing of WeWork parent We Co., scheduled for this month but under threat of postponement. The company filed its paperwork last month hoping to achieve a valuation of $47 billion. Investors haven\u2019t stopped laughing. <\/p>\n

The skepticism is due in part to We\u2019s attempts to pretend it\u2019s a technology company that will \u201celevate the world\u2019s consciousness.\u201d It\u2019s a real-estate company that leases office space for long terms and rents it to small businesses for short terms. Technophilia is a market staple. But We faces established\u2014and old-fashioned\u2014direct competitors such as IWG, owner of Regus business centers, which has traded publicly for years, is profitable unlike We, and sets a benchmark for realistic returns. <\/p>\n

The bigger cause for We\u2019s woes is the corporate-governance risk investors have decided they\u2019re not willing to stomach. In this regard We resembles a Chinese more than American company, and investors have noticed. <\/p>\n

Take WeWork\u2019s name. The IPO listing documents revealed that company founder Adam Neumann had vested trademarks related to the \u201cWe\u201d name in a separate company and then sold those rights to We Co. in exchange for shares worth nearly $6 million. <\/p>\n

American investors squawked, but this sort of arrangement is almost routine in China. In one famous case, Chinese entrepreneur Huang Guangyu, jailed in 2010 for 14 years on questionable charges of illegal business dealings, held onto some of the logos and other intellectual property of his electronics retailing company and used them to establish a competing chain of stores from his jail cell. We Co. has since reversed its deal with Mr. Neumann. <\/p>\n

Another symptom of this China syndrome is We\u2019s extensive web of transactions with related parties. The company disclosed in its IPO filing that it leases four buildings that are owned by Mr. Neumann, and it also reportedly hired an executive\u2019s parents to broker another of its leases. Then there\u2019s the personal control, with Mr. Neumann\u2019s wife Rebekah designated to pick his successor in the event injury or death prevents him from running the company. This again is characteristic of China, or a South Korean chaebol, where the goal is to keep the company all in the family.<\/span><\/p><\/blockquote>\n

Seriously, where are the prosecutions?<\/p>\n

*<\/sup>As Anna Russell would say, “I’m not making this up, you know.”<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Somehow or other, WeWork took a fairly standard real estate play, leasing long, and renting short, and, by adding Kombucha,* managed to sell itself as a high tech unicorn. Now that the WeWork IPO is collapsing under the weight of mathematics and allegations of self dealing, maybe we should seriously consider a little more scrutiny …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[365,368,456,393],"class_list":["post-177475","post","type-post","status-publish","format-standard","hentry","tag-business","tag-corruption","tag-finance","tag-real-estate"],"_links":{"self":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/177475"}],"collection":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/comments?post=177475"}],"version-history":[{"count":0,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/posts\/177475\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/media?parent=177475"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/categories?post=177475"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.panix.com\/~msaroff\/40years\/wp-json\/wp\/v2\/tags?post=177475"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}