The financial world has gone crazy.
WeWork is not yet a listed company and does not need to disclose financial information to the public. However, bonds were issued in April 2018, showing some signs of financial performance to the hapless bondholders. WeWork made this presentation available to financial media including Wall Street Journal and Bloomberg. The Four Outstanding Numbers Reported:
- Sales in 2018 doubled to $ 1.82 billion
- . The losses in 2018 doubled to $ 1.93 billion.
- fell [80%] from 84% in Q3 meaning that the room was expanded faster than it could fill.
- The average revenue per "member" per year dropped to $ 6,360. and has fallen by 1
For a nine-year-old global company, it's an art to generate more operating losses than revenues that do something, and requires the full approval of investors whose money this is – but all they want to do is Selling the thing for a big price to the public and washing your hands.
The company can not, after nine years, be able to stand on its own self-supporting business model. buys growth at a very high price, which seems to be higher. But …
"We are sitting in the far north of $ 6 billion in cash," said WeWork Vice President Michael Gross. "We have a lot of money in many pockets and we have a great opportunity ahead of us."
In other words, it depends on the billions of billions it has taken from investors, and it burns and when It goes public through an IPO, it will bring in more and billions of investors and also burn them. It will burn billions and billions until investors refuse.
The hapless bondholders are already stewing. In April 2018, WeWork issued $ 702 million of 7.875% notes due in May 2025. S & P rates them with B +, four steps in the garbage (corporate rating scales from S & P, Moody's and Fitch). And Moody & # 39; s pulled back the credit rating of bonds in an unusual step last August. He cited "insufficient or otherwise inadequate information". Bonds were down nearly all the time, closing today at 91.25 cents FINRA / Morningstar data.
In January, the company was renamed We Company to make room for other companies it founds or buys, including a primary school (WeGrow) and furnished apartments (WeLive). However, 93% of revenue comes from 400,000 "members" who rent desks in shared and flexible office space.
These losses of nearly $ 2 billion in 2018 are operating losses and no investment in new office projects. After renting office space, it takes up to 18 months to fill the space. In this time, many costs arise, but the revenue starts at zero and grow only gradually until the area is filled. That's the price for expansion.
But then there is a lot of churn, as "members" may not need that desk for so long, and WeWork has to work furiously to find new "members" who rent these desks, and that also causes a lot of expense.
The company burns cash. The largest investor is the Japanese conglomerate Softbank. In January, Softbank approved a $ 2 billion deal, of which only $ 1 billion was new funding. However, this was lower than a $ 16 billion initial $ 16 billion dollar deal. Previously, WeWork had entered into contracts with Softbank worth $ 4 billion, a $ 1 billion convertible and a $ 3 billion warrant.
But WeWork is just one example of a company that has been in the business for a while, has thousands of employees and balloons loses sums of money and now wants to go public.
Lyft, a six-year-old company, is the first company on the IPO to happen while speaking. Slack, Uber, Palantir, Pinterest and the like are in the wings. Almost all of them are high-performance machines. Pinterest is the exception after only $ 63 million in 2018. Lyft lost in 2018 911 million US dollars. According to S & P Global Market Intelligence, the loss of Lyft set a record for every company in the 12 months leading up to its IPO.
Uber has lost about $ 800 million a quarter. If it goes public at some point this year, it will beat Lyft's record. When WeWork goes public in front of Uber, it will beat Lyft's record first before Uber beats WeWorks record. So, it's going to be a glorious year in the annals of giant cash burn machines – and the mere fact that investors are calling for huge amounts of fuel for these cash burn machines is a sign that the financial world has gone crazy.
And on a more global scale of a financial world that has gone mad – read … The countries with the most monstrous corporate debt. US wimps out on the 25th place!
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