Ringing the Bell

I disagree with Peter Schiff about many things, but that's not one of them.

Apologies for the typo on "too".

Endeavor Pulls Its IPO

The Wall Street Journal reports Endeavor Pulls Its IPO.

Shares of Peloton Interactive Inc. PTON dropped on their first day of trading and Endeavor Group Holdings Inc. scaled back its planned initial public offering, dealing a blow to the market for IPOs.

Shares of Peloton, known for its exercise bikes where users can watch workout videos from home, started trading Thursday at $27 a share, nearly 7% lower than the $29 price set in the company’s IPO. The Nasdaq-listed stock closed down 11.2% Thursday to $25.76 a share.

Peloton is one of a handful of notable IPOs this year to fall on its first day of trading. Shares of Uber Technologies Inc. UBER slumped 7.6% when they made their debut in May, and shares of SmileDirectClub Inc. SDC —which started publicly trading about two weeks ago—fell 28% the day they first listed.

Meanwhile, talent-representation company Endeavor lowered its expected range to between $26 a share and $27 a share and reduced the number of shares it is selling to 15 million. That is below the 19.4 million shares it had planned to sell for between $30 and $32 a share.

WeWork Catastrophe

WeWork was initially slated to raise nearly $50 billion in mid-August. WeWork pulled the IPO then lowered its expectation to $10 billion slated for September 17.

Ultimately, WeWork failed to IPO at all.

The BusinessInsider comments WeWork IPO Fiasco of 2019, Explained in 30 Seconds.

I assure you that report will take more than 30 seconds to read and comprehend. But here are some amusing highlights.

  • After the IPO delayed, attention shifted to WeWork cofounder Adam Neumann's inappropriate antics, like smoking weed on a private jet, serving employees tequila shots after discussing layoffs, and trademarking the term "we" and then forcing WeWork buy it for $5.9 million.
  • A former WeWork executive who made $300,000 and is now suing describes strange cultlike culture, including endless flows of alcohol at mandatory sleepover camp for employees and the CEO's children on his lap during an all-hands meeting.
  • Billionaire Oracle cofounder Larry Ellison calls embattled WeWork 'almost worthless'.
  • WeWork is selling the company's $60 million luxurious private jet that Adam Neumann and his family personalized and used to fly all over the world

Who Is "We"?

Inquiring minds may be wondering "Who is the We in WeWork?"

Who is the we who works in WeWork, anyway? If it’s the billionaires and the kings whose work is carried out by their capital, then they’re hardly getting a comeuppance. But if it’s us relatively normal people—you and me—then we should learn an important existential lesson from The We Company’s rise and, well, ebb: WeWork, dear reader, is really just office space. It’s the place you go for a job.

The We Company’s Form S-1 outlined a labyrinthine ownership scheme that would have given Neumann more than half of the company’s voting power. Multi-class stock has caused problems for Facebook, Google, and other tech firms, but Neumann’s attitude was more brazen. He used his authority as CEO to pay himself $5.9 million for rights to use the new name, a change he had championed (he later returned the money under pressure of scrutiny before the IPO). He poured tequila shots for employees after announcing layoffs. He bought stakes in real estate that WeWork later leased. He declared WeWork “meat-free” by fiat in 2018, but failed to outline what that meant for its hundreds of offices and thousands of tenants.

It’s hard to know what’s worse: a poseur collectivist lining his own pockets, backed by increasingly risky debt, luring legitimate businesses into an office-sourcing model that could collapse completely; or bankers beholden to oligarchs and absolute monarchs doing whatever they must to protect the upside of their massive portfolios, lest heads (maybe literally) roll. I mean, at least Neumann was pouring out tequila.

Business Model

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The WeWork model is to rent masses of office space, that presumably independent people like myself would sublease at extravagant enough prices to pay for the exorbitant salaries of WeWork management.

As a side "benefit", the office space would be "meat free".

Note that WeWork swelled into a real-estate behemoth. It employs 12,000 people and occupies more than 20 million square feet of office space.

Last year it became Manhattan’s largest private tenant.

Hmmm. Does anyone smell a Manhattan office rent price crash?

Pets.Com IPO

Wikipedia comments: Pets.Com was a dot-com enterprise headquartered in San Francisco that sold pet supplies to retail customers. It began operations in November 1998 and liquidated in November 2000. A high-profile marketing campaign gave it a widely recognized public presence, including an appearance in the 1999 Macy's Thanksgiving Day Parade and an advertisement in the 2000 Super Bowl. Its popular sock puppet advertising mascot was interviewed by People magazine and appeared on Good Morning America.

During its first fiscal year (February to September 1999) Pets.com earned $619,000 in revenue, and spent $11.8 million on advertising. Pets.com lacked a workable business plan and lost money on nearly every sale because, even before the cost of advertising, it was selling merchandise for approximately one-third the price it paid to obtain the products.

The company announced on November 7, 2000 that they would cease taking orders on November 9, 2000 at 11am PST and laid off 255 of their 320 employees. Pets.com had around 570,000 customers before its shutdown. Pets.com stock had fallen from its IPO price of $11 per share in February 2000 to $0.19 the day of its liquidation announcement.

Pets.Com vs WeWork

Here's the best way to compare Pet's.Com to WeWork.

  1. Both Worthless Failures (except for the founders who siphoned off millions)
  2. Pets.Com at least got the IPO out the door

Sentiment Changes Rapidly

A company that was allegedly worth $47 billion a month ago is now widely viewed as worthless.

At economic peaks, sentiment changes rapidly.

Addendum - Very "impressive" WeWork Stats

Here's an impressive stat from the Financial Times

WeWork expanded to more than 500 offices in 111 cities, reporting a loss of $1.6bn on sales of $1.8bn.

Sales = Losses

Very Impressive

It's a stat destined for greatness.

Mike "Mish" Shedlock