The WeWork IPO Filing

August 27, 2019 | BlogBlog

Another day, another Unicorn warms up for its debut on Wall Street. This one is both highly anticipated and, well, very strange indeed. I give you the WeWork IPO filing.

Now, there are some parts of WeWork’s march to the public markets that are well, well-worn. The combination of massive growth with massive losses, for example. Perhaps not a winning formula in the wake of the bursting of the dotcom bubble, but hey, it’s been almost twenty years, right? The world – or at least Wall Street – has moved on, why shouldn’t the investing public? I mean, I read recently that subprime mortgages are making a comeback…

Let’s not bother with the … uncertainties … surrounding WeWork’s business model. Things are working out for Uber, right? C’mon, get with the new reality. I mean, WeWork did ditch (apparently at the SEC’s behest) it’s proposed “Community Adjusted EBITDA” financial metric, albeit for the similarly obscure “Contribution Margin Excluding Non-Cash GAAP Straight Line Lease Cost” metric.

So, forget all the conventional metrics, particularly those rooted in the dismal science. Perhaps economics, in whatever new age we are in this week, isn’t so dismal anymore.

But then there is the good stuff. Or the bad stuff, I suppose, depending on your sense of irony.

Let me preface these remarks by noting that it takes ten pages – of pretty small and dense print – of WeWork’s filing to explain WeWork’s … unusual … relationship with its founder (let’s call him “Founder.”) That’s a heck-of-a-lot of what, when I used to draft such things, was called “artful disclosure.”  Taking some of the art out of the disclosure, here are some of the more … interesting points.

  1. Founder has voting control of his company. (And, as near as I can tell, it is most assuredly his company).
  2. On the other hand, if Founder and his spouse don’t give away at least $1 billion to charity over the next ten years, the extent of Founder’s voting control gets reduced. I’m not sure what this means. Which is concerning (to me, anyways) in its own right.
  3. Should Founder get hit by the proverbial bus, his spouse will have a big say in picking his successor. Seriously? A succession plan tied to a marital relationship? Maybe that worked for the Tudors and Windsors, but a 21st Century business
  4. Then again, according to the Prospectus, Founder “is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and innovator, while thriving as a community and culture creator."  And if you don’t believe that, I had a dream last night where I saw the guy walking on water. (Alas I couldn’t tell whether it was a lake or a puddle.)
  5. Oh, and did I mention that they had to give Founder a huge, complex (tax optimized, of course) incentive to take WeWork public in the first place? Maybe he can use the extra dough to make those charitable donations.
  6. Finally, in this Woke era, there is this: WeWork’s Board is exclusively male. Perhaps this explains Ms. Founder’s outsized role in the selection of Founder’s successor.

I hope this doesn’t come across as an attack on WeWork, its team, or its investors. As noted, on the economics, WeWork is just another Unicorn surfing the current Wall Street wave – and it’s a big one. But the wave will crest at some point, and the inevitable post-crest collapse will likely take a few surfers to ground with it. Not being a market timer, I won’t predict that here. But if I was a timer, well, I’d be speaking up, and the WeWork Prospectus would be Exhibit A.

Oh, upon reflection I think it was a puddle.

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