Originally published at: https://boingboing.net/2019/10/24/softbank-gives-weworks-ouste.html
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i do not understand the world any more
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it’s the same world that gave jamie dimon a $16 million bonus in 2009 after the housing market collapse that resulted in his company getting an enormous bailout from the government. same world.
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From the outside it seems like Softbank has fallen for the sunk cost fallacy. They were I think the biggest creditor for WeWork. All I can think is they are 100% certain that the business plan is solid, it’s just the founder that is the problem. Maybe it is a solid idea, but from the outside it is hard to see a scenario where WeWork manages to dig itself out of the giant hole it is in. Couldn’t they have let the whole thing collapse and then open up some holding company that buys the pieces for a song and dumps all of the nonsense from the original company?
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From here, I wonder whether Softbank (or at least the people making the decisions there) are in so deep that they have no choice but to keep doubling down and hoping for a miracle.
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If I were a Softbank shareholder (I should check if I am), I’d be pissed off. They’ve already screwed the pooch on a bunch of their portfolio companies, and now in this desperation move to put all their money on this bum-of-the-month they’ve made this destructive clown a billionaire.
We’re getting close to the end and the smart money is starting to head for the exits or demand profits. Enjoy all those subsidised car service rides and cheap delivered meals and other gig-economy goodies while you can.
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Oh sure, it’s easy to moan about CEOs being paid billions of dollars, but it’s just fair compensation for someone who shaped the company into something that will likely never be profitable, and reasonable in the face of the mass layoffs the company is currently enacting. People are just jealous that they weren’t smart and hard working enough to totally ruin a $24 billion dollar company.
(/s, in case it needed to be said)
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Grifters gonna grift.
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SoftBank gives WeWork’s ousted CEO an unbelievable golden parachute
Almost makes you think he tanked the company on purpose, crazy I know…
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here’s a really good article from august explaining what a slapstick tragedy wework is. i read that at the start of september and wished at the time that wework had publicly traded shares outstanding so i could take a short, short position on it.
edited to add a link to the article.
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From a Guardian article. Mostly about Washboard (the buy $20 of coins for $27 start-up) so the link is not worth clicking if you want to find out about WeWork - but a fine comparison of the two firms.
WeWork’s business model always made about as much sense as Washboard’s. A charismatic CEO, Instagram-ready aesthetic and on-tap kombucha only go so far in papering over the cracks that arise when your company has no assets, tons of long-term obligations, and a customer base that only commits to short-term agreements in a highly cyclical market. That’s all before you factor in Neumann’s dilettantish side projects, penchant for extravagance and general mismanagement. The goose was cooked before anyone took an ill-advised tequila shot.
Here’s a longer article - albeit from a month ago - that IS worth a read, being much more of an analysis, with investors’ views included.
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$16 million, $1.7 billion - the same world, just more so by some orders of magnitude, apparently.
Yep.
Is that different from the sunk cost fallacy? (Or not just a rationale for having fallen into the sunk cost fallacy?)
All the analysis I’ve seen indicates WeWork’s fundamental business model isn’t profitable and never will be (and things are only getting worse for them). What Softbank seem to have been hoping for was a bigger sucker they could unload their albatross upon, at best, but it wasn’t a rational decision.
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Not really different from, but the extreme case. Because people worry about about sunk costs even with the loss if affordable. But in the extreme case, there is little difference between being bankrupt because you have $1m in negative worth or 100m in negative worth, so people will keep rolling the dice and hoping.
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I wont pretend to understand any of this… There are so many zombie companies wreaking havoc on real markets, propped up by cheap money (and the Saudis and others)… When does the bill come due? I just have the worst suspicion that it wont be the perpetrators who pay for it when these companies crash. That so many of these endeavors are wrapped up in the sheen of “innovation” makes it all the worse.
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Great to know that taking hostages still works.
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How do you lose money being a landlord? I guess if they don’t charge enough rent.
My understanding is that the primary problem with WeWork is the way they structured the office space deals so the company was funneling money into the founder’s personal accounts as much as possible. In a more traditional landlord setup I don’t see why it would be impossible for them to be profitable assuming they can keep the office space filled with paying customers.
I think in Japan this may be especially attractive as a way to break up their stagnant corporate culture and get back on the bleeding edge of innovation again.
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This is unclear. If he owns part of the company, then he’s selling his part of the company – they’re not paying him to go away. Certainly, it is an absolutely stupid amount of money and it defies comprehension how the company could have such an astronomical value – but it seems he invested his money, and now that’s what the investment is worth. Or is he getting paid $1.7 billion on top of selling his stock for $1 billion?
Of course, getting paid $500 million + $185 million doesn’t make any sense either.
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The total is $1.7B. The problem with the “$1B in stock” is the valuation. It’s not worth that much, not by a long shot, but he negotiated that valuation from SoftBank, somehow.
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This article really needs #GuillotineWatch tag
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It is not a bug, it’s a feature.
