What is We!? Understanding the WeWork IPO

Byrne Hobart
20 min readAug 16, 2019

American political discourse undoubtedly peaked in 1952 when a Mississippi legislator with the wonderfully Dickensian name Noah “Soggy” Sweat, delivered the “If-By-Whiskey” speech. Reading the WeWork S-1, it kept coming to mind.

If by WeWork you mean the capital inferno; the overhyped infernal machine that will only get shareholder funds for as long as Vision Fund I needs to show a high enough IRR to close Vision Fund II; the bizarre multidimensional Flying Spaghetti Monster of nested C-Corps, LLCs, and LPs, all rife for abuse by its controlling shareholder; the commercial real estate operator whose delusions of tech unicorn grandeur have justified a temporary valuation premium and a permanently high level of overhead, I am against it.

If by WeWork you mean a company that can invest in the multi trillion-dollar commercial real estate market and consistently generate better unit revenues and faster breakevens than competitors, while continuously extending its offering into residential real estate, health and wellness, employee benefits, and more; a company whose CEO is a champion salesman and a stellar dealmaker, who can ensure that your high multiple as a buyer is your low cost of capital as a long-term shareholder; then I am for it.

That is my stand. I will not retreat from it. I will not compromise.

(Full disclosure: I have a dinner bet with a friend on where WeWork will price its IPO. Other than that, no interest besides curiosity)

The numbers are certainly impressive. Who wouldn’t kill for a growth chart like this?

Unfortunately, that’s a chart of their adjusted EBITDA losses.

The revenue chart looks basically the same, though, and is in the same ballpark: in Q2 ’19, WeWork’s revenue was $807m, up 91.4% Y/Y. Adjusted EBITDA was negative $524m, up… 104% Y/Y.

WeWork is an unusually Hegelian situation. Thesis: it’s a tech company that happens to have some real estate on the balance sheet, and thus deserves a premium multiple. Antithesis: it’s a real estate company that’s trading high overhead for a high multiple in order to gull VCs with more cash than ideas, real estate investors with tech company FOMO, and RobinHood investors with margin accounts. Synthesis: it’s a full-stack tech company that monetizes a high-margin, scalable software and marketing business…



Byrne Hobart

I write about technology (more logos than techne) and economics. Newsletter: https://diff.substack.com/