WeWork is in the news. Not for anything good. Looks like some tough sledding for those who bought into the ridiculous valuation placed upon this company. We are told the last “buy” was at a $47 billion valuation. This for private buyers. Private buyers are the ones that very often make out in a big way. Currently, WeWork cannot even come public as estimates now are for a $10-$15 billion valuation. We believe that even at those levels, the valuation is insane.
We can get into the why…long term leases and short term rent, hardly recession resistant, trying to sell the company as a technology company (a laugher), self dealing, un-disciplined CEO! But for us, the simple issue is the investment banking community again tried to foist stuff onto an unwary public at valuations that are outrageous. For comparison:
IWG…formally known as Regus
$500 million profit
120 countries 3,000 locations
$3.7 billion valuation
WeWork
$1.9 billion loss
29 countries 528 locations
$10 billion – ? valuation
All one had to do was some homework and ask themselves SAY WHAT? Anyone want to pay $100 for a $20 bill?
But WeWork is just the outcome of what has been going on for the better part of the past two years. Simply put, the investment banking community has been once again, lowering the bar on the quality of what they brought public while keeping the bar ridiculously high on valuation. Estimates are that in the past year, over 80% of the companies brought public, lose money. This has caused even the supposed “no brainers” to be squashed.
UBER $45 IPO price, couldn’t get over $47 after coming public…currently trading at $31.50. Even at these levels, a $55 billion market cap on a company that admits it will continue to lose a ton and may be cutting itself thin by getting into a slew of other businesses is quite insane.
LYFT $72 IPO price…opens hot at over $88…closes same day at $78…currently $42.30. Just another company that loses a ton of money.
But these are the names that are known. How about the ones not so known? A short list:
CIFS $10 IPO…now $1.70.
JP $9.50 IPO…now $2.25.
SOGO $13 IPO…now $4.90.
NEW $17 IPO…now $9.30.
JMIA $14.50 IPO opened at $30, as high as $50…now $10.30.
FTCH $20 IPO opened at $30…now $8.75.
SDC…$23 IPO just came public 2 weeks ago…already $16.
We can list many others but for brevity, we will leave it at that. The lesson: pick your poison. The lesson: the goal of investment bankers is to get the highest price no matter what. The lesson: valuations matter. The lesson: losses matter. The lesson: do your homework. Once again, greed took over. Once again, stuff was foisted not only onto an unwary public but what is supposed to be wary and smart private equity buyer. All lost!
