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We Work Vs. Regus (update)

Update:  It seems that the IPO is now on the shelf (at least for the time being), in a related note, Softbank is seeking to hire a new "valuer" for its assets!   As I said, even $20 billion seems rich considering that IWG market cap is around $3 billion (and that's just risen by $500 MM based on WeWork's "valuation").  I suspect that IWG share price is going to feel some pain with re-adjustment...maybe


Soooo WeWork shareholders are starting to see the nature of the problem...in ascribing a valuation of more than $47 billion, the arranger may have overshot a realistic valuation that buyers would be ready to consider.  Now let's be clear that figure of $47 billion was driven by Softbank (that has its own issues) where the valuation there was driven by the latest round in which Softbank participated.  The guy responsible for the valuation is Ron Fisher (yep there's a real name there not just an organization).

Part of the problem is that WeWork is still unprofitable, it's business model is entering into long term lease agreements and subleasing, under short term lease, to start-ups and other "cool" businesses.  So far nothing wrong with that, aside from the massive losses that WeWork has so far generated (looks like Uber).

Apparently, the IPO valuation has been reduced to $20 billion (down for the $47 billion mentioned above),  Note sure this is still good for Softbank, it could be that its average price will clear at that level...who knows!

Still, the price of $20 billion on a business that generates about $2.5 billion in turnover is expensive...ish but with strong growth rate maybe it can be justified.  Trouble arises from the net losses that WeWork has so far generated.  I hear that it exceed $1 billion per annum.

Basic IB analysis will force investors to think about what exactly they are getting here.  There is another, better-installed player in this area -- its called Regus and it has offices all over the world, with a range of services that outshine WeWork. 

The worse part, Regus (IWG Plc) generates $2.5 billion in revenues, it is profitable (not huge but doing OK), and its market cap is around $3.5 billion

Now in this business that's a real price point:  The market evaluated a $2.5 billion revenue stream and $120 million net profit stream at $3.5 billion -- not cheap but still better than $20 billion!

Part of the problem is hype into thinking that WeWork is into a different business than that of leasing offices space, its working on the basis of a valuation that assumes a "dot'com" value when its really not that at all.





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