Whelp, WeWork raised another billion dollars.

https://www.wsj.com/articles/wework-raises-1-billion-in-debt-from-softbank-as-revenue-doubles-1533849008

Also, they've lost $723m this year. This raises Softbank's investment to over $5b in a company that loses more than a billion dollars a year.

...which matters little as WeWork's core assets are a hole in the ground at this point.

They've even knocked $10m off the jet.

Yeah - but what I'm saying is liquidating WeWork is going to be a grindingly unsatisfying exercise. Even their S1 lists $27b in assets and $24b in liabilities and that doesn't include their $47b in leases due. They go Tango Uniform and there's $47b in leases looking for $3b in remedy of which the big stuff has already been sold off.

The fact that their core is well-protected is fundamentally irrelevant if their bank vault is empty anyway.

Dueling news articles put forth by the WSJ's commercial real estate report this morning:

Advocates, officials try to prevent Philly’s coming wave of coronavirus evictions

At a news conference last week, Councilmember Kendra Brooks called the proposals “humane protections to keep people in their homes during this unprecedented public health crisis.”

Garland noted that these are measures “that frankly most good landlords are doing.” But others, she said, are illegally locking out tenants, charging “exorbitant” late fees, and threatening to call U.S. Immigration and Customs Enforcement.

The Reinvestment Fund report also highlights the importance of legal representation for both tenants and landlords and finds better outcomes for both parties when all know their rights and responsibilities. In line with most legal proceedings, tenants who bring lawyers to eviction negotiations tend to get better deals, including being allowed to leave a unit without owing more money or entering an installment plan instead of owing a lump sum.

But nearly two in three tenants do not have an attorney when entering into agreements with landlords without a judge’s participation.

But wait! The Wall Street Journal to the rescue!

Fixed Rent Payments Could Be the Latest Pandemic Victim

LOL J/K that's if you're a publicly-traded retailer

A number of retailers are already asking landlords to waive some of their rent in return for a share of future revenues. Ross Stores Inc. said last month that it would pay a rent equivalent to 2% of sales when its stores reopen. Guesst, a New York-based technology company, recently launched software to help retailers and landlords manage revenue-sharing arrangements.

Co-working giant WeWork, which had been looking to switch to more revenue-sharing arrangements before the pandemic, has accelerated the shift over the past month and hired two brokerage firms to renegotiate its real-estate deals. Some apartment-hotel operators, suffering from a downturn in tourism, are also looking to lower their real-estate bills and are willing to grant property owners a share of their profits in return.

Lease alternatives can come in many forms. Some firms sign deals that include a few years of revenue sharing upfront, followed by a period of fixed rent payments. Other deals include a low monthly rent, topped off by a share of revenue. Still others include no rent at all.

Average rent, Philadelphia: $1652/mo

Average salary, Philadelphia: $5666/mo

2% of average salary "revenue:" $113/mo

Go ahead and try revenue sharing with your landlord. See how well it works without a $32b market cap.

My boss is advocating for us NEVER returning to the office. Our team is still killing it - profitable, productive, etc. - but we were pretty physically separated anyway, due to the regional nature of our sales team. One guy in Vegas, another in Georgia, a guy in ... umm... Cincinnati, I think?... and about 6 of us in our HQ office here in Seattle(ish), with three of those on the road most of the time.

And I've been hearing this from a lot of different people in different companies. My housemate works inside the Amazon buildings downtown, and has had to go in twice a week for the last month or so. He sees 5-7 people A DAY in the Amazon cafe he runs.

If the spike we are currently entering into here in the US continues without a Federal program to address it systematically (which will never happen), we won't even get to a second wave until next year. The first wave will continue through the end of the year. Approaching maybe half a million deaths by Christmas? (130k so far, 4 months into the pandemic stage, with 6 months to go, and people/businesses getting desperate to go out. So far we have been pretty well behaved. But that's ending pretty fast, and this weekend will surely spike the numbers like we haven't seen yet.)

So then companies have to cut costs dramatically if they want to stay in business. Furloughs. Reduce operational costs, like facilities. Offices.

Commercial real estate becomes cheap and plentiful.

But millions of people still need to work, and can't work 100% from home.

So WeWork-COVID opens up in all this cheap, new, accessible office space. Coworking at a social distance becomes common, and with the reduced costs of not having any kitchen facilities and coffee break room/supplies. Everyone is self-sufficient. Bathroom trips become longer as you sanitize before and after you use it.

I think there's a potential for "office work" to change a lot for many kinds of modern jobs.

But the meat packers? Production lines? Shipping departments? Still fucked.

Someone I know on LinkedIn pitched the idea of "park offices" - you bike or walk to your own pleasant single-unit office with a view of the forest, or the park. You build a WeWork network of them and then give big corporations discount for letting every employee from that place go there. It was just an idea and I'm not sure the economics work out but sign me tf up, man.

That aside, this whole gestures broadly is turning out to be quite the reminder of how inequal the workforce is and the consequences are. White collar have it easy, man.

BAM

WeWork is suddenly worth $20b.

Fundamental value theory states that a stock is worth the future value times the odds of it going up divided by the odds of it going down minus the value of the starting investment in a risk-free vehicle.

Castle in the air theory holds that a stock is worth what you can sell it for.

Fundamental value theory has been out of vogue for twenty years. WeWork is worth $47b because you'll be able to sell it for $80b in another couple years (right? right!).

ETFs are the way to go because everybody knows that ETFs are what you want to buy. Until ETFs are what you want to sell and suddenly, ETFs aren't worth as much.

It's not a crisis because there are no poignant images, there are no famous people affected, and because poverty and eviction cut to our deepest shame.

Piketty kept talking about the rentier - those whose livelihood comes from owning something and charging someone else to use it. That would be "landlords" if you aren't a French economist. Rentier made up a very large portion of the bourgeoisie in pre-revolutionary France and they make up a very large portion of the bourgeoisie in pre-postcapitalist America.

WeWork has 9 million square feet of space in NYC. 2 million of that has no one paying rent on it. That number is not going to go down anytime soon. 50% of commercial rents are in arrears across the United States.

I didn't really understand The Great Depression until I read Ken Galbraith's book. The problem was basically this: a whole bunch of people who were counting debts owed to them as assets had to write them down when they were forced to conclude they would never be paid.

Let's say you own an 10-unit apartment building. Everyone in it pays you a thousand a month. You own a ten unit apartment building because the mortgage and expenses cost you eight thousand a month. Suddenly half your tenants can't make rent. You went from making two grand a month to losing three. I'll bet you needed that grand a month; the bank was expecting six grand, the property manager was expecting a grand, the state was expecting a grand. So now the property manager is fucked. The state's fucked but it'll take them a year to 18 months to get to you. The bank is going to get something but not nearly enough so now the bank has to cover that shortfall. And we're all shining it on and pretending that cruise ships are going to make a big comback next year because the most shameful sentence in the English language is

"I can't pay my bills."

Obviously the people most fucked are the ones getting evicted. Not going to minimize that in the slightest. That is a life-changing event, and not for the better. Ignore that tragedy for a minute though and contemplate the fact that on average, pressing one eviction and all it entails through the courts runs between three and six months' worth of rent.

If you evict half your building you're in the hole for a minimum of 15 months even if you have people lined up to pay full price for the empty units. And you don't.

My wife bought this house in 2000. Our mortgage is adorable. We'll be okay. Guys next door?

...yeah.

No. You know what? No. Calling bullshit on this. The dude was "chastened" for arguing against an entire approach to technology:

$174M lessons here. We passed on Altschool multiple times, mainly because disrupting school was a terrible strategy, but also b/c founders didn’t understand #edtech is all about partnering w/existing districts, schools and educators (not just “product”)

He wasn't "bragging about not investing in a company that failed" he was celebrating the death of a bad idea that had been backed by big fucking money. goobster's comparison to Hollywood is apt - there are all sorts of abominably bad projects drifting around where the first thing you do is look and see what rich, powerful asshole is backing it - I mean obviously a movie in which a father and son speak babytalk to each other for two hours while communicating psionically to avoid a space bear is never gonna get made except when it is. And of course big backers can't steal all the good ideas from one idea to prop up another except when they do.

You know why Hollywood makes nothing but fucking superhero movies now? Because in order to get anything done you need some asshole with $150m and the only thing he's going to make is sure things so now we've got Disney which bought Marvel which will stack 27 fucking movies together to drag your ass to Avengers Endgame. Meanwhile, every decent idea anyone has ever had eats shit.

So here's Mark Zuckerberg and Peter Fucking Thiel and they've decided they're going to AynRand fucking primary school and somebody - the guy who was at the fucking Gates foundation for ten years - calls bullshit on it and you are BENDING OVER BACKWARDS to figure out a way for the blowback to be his fault.

I'ma drag thenewgreen into this because I love how offended he gets whenever I mention Theranos but you know what? Theranos happened because Elizabeth Smart grew up next door to, and played with the daughter of, Tim Draper. So she bats her eyes at Tim Draper, says that her magical bullshit patent doesn't violate the space-time continuum, and inside ten years, $700m are up in smoke. Because nobody is gonna call bullshit on Tim Draper or else they'll be punished for it and now, the entire medical technology space smells like poison.

No. The dude's future was existentially threatened for calling a spade a spade. In a space where WeWork has gone from a $57b valuation to a $10b valuation in six months only because the financial press has started going what the fuck softbank.

Sure - saying you're smart because you passed is inane. But saying certain business models deserve to fail is the sort of thing investors should be allowed to hear.