WHAT IS WEWORK?
WeWork provides coworking spaces and services to technology startups, Fortune 500 companies and everything in between.
The basic business model is simple.
Sign long-term commercial leases around the globe and pay *relatively* lower rents (per sq. ft). Parcel out those prime location offices to a collection of companies who will pay *relatively* higher rents (per sq. ft).
Layer on top of that a collection of services (software and marketing) and brand that turns a relative commodity (real estate) into a high margin, scalable platform.
Btw, commercial real estate is a $29 trillion market.
WHY THE BIG FUSS?
WeWork is losing $219,000 per hour.
Yeah. You read that right.
In 2018, the company's losses and revenues both doubled, to $1.9 billion and $1.8 billion, respectively.
In economics, you read about the financial bubbles of history. It’s easy to wonder how in 1637, at the peak of tulip mania, some single tulip bulbs sold for more than 10 times the annual income of a skilled crafts worker.
This makes that seem like child’s play.
WeWork founder Adam Neumann has personally taken more than $700M out of the business for himself.
Bezos and Zuckerburg didn’t sell anything remotely close to that much before Amazon and Facebook went public.