WeWork isn't a moonshot tech company: Varney
Investors are all-in with technology.
Startups can go to the moon. There's serious money to be made. So there's a temptation to jump on the technology bandwagon, in the hope of riding the money train.
That’s what WeWork is doing. It wants to raise tens of billions by selling shares to the public.
But it’s not really a technology company. It says it will "elevate the world's consciousness." Very new-age, but the heart of its business is leasing office space -- it’s not a moonshot tech company.
A lot of people were taken in: SoftBank and the Saudi Vision Fund chipped in $10 billion. A group of banks gave a $6 billion credit line. All in the hope that when WeWork went public, big money would be made.
It’s not working out that way. Investors were shocked to learn that CEO Adam Neumann made $6 million for himself, selling the "We" name. And he's made money on his ownership of four buildings that were leased to WeWork. And, if Neumann dies or is incapacitated, his wife decides who replaces him. That just doesn’t seem quite right.
Add this to the mix: WeWork has lost $4 billion since 2016. And, it has competition, and that competition is profitable!.
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Big trouble, and now, things seem to be falling apart. SoftBank wants the IPO "shelved," in other words, dropped for now. There’s intense pressure to drop it completely. Why? Because investors are clearly unwilling to buy the stock.
What a mess. Some of the key players in all this will lose money and reputation.
But there is a winner: Sunlight is the best disinfectant, and it was informed investors who dug deep and discovered WeWorks' flaws. As the Wall Street Journal points out, that’s why "U.S. capital markets remain world leaders".