WeWork Is Going Public. Are Its Numbers Too Private?

There are at least three very interesting accounting issues affecting these leasing transaction. First: Depreciation of buildings is a non-cash expense. Although profits are reduced by this book entry, cash flow is unaffected by depreciation expense. Second: GAAP may require the capitalization of the leased assets on WeWork's balance sheet, and the recognition of a symmetric liability due to the building's lessor by WeWork, as presented in Investopedia. With such large fixed costs, data on both this depreciation expense and unit revenues would be vital in estimating break-even leased units for WeWork. Third: the tax treatment of real estate investment trusts (REITs) is worth looking at for comparative investment alternatives. REITs, per Investopedia, generally pay no corporate or trust income taxes at the trust level. They must distribute at least 90% of their revenues, annually. And, REITs make two types of distributions to their owners. When positive earnings result for the REIT, these distributions are deemed ordinary income to the share owners. But, if earnings are negative, these distributions represent returns of capital, and this loss, including depreciation expense, reduces the share basis. Such returns of capital qualify for capital gain or loss treatment by investors. [08/30/2019 F 11:35 pm Greenville NC]

You can hang their shares on your wall next to the ones from Uber and Snap and Blue Apron. At least you'd get some insulation out of it.

Years ago, like 45 years or so, there was private leased office space in the Pan Am Building (ask your parents what Pan Am was) in New York. You got a tiny space to work in, use of a fax machine and could even have someone answer your phone using you tiny company's name. It was a great idea, so is this. Thank goodness people don't complain about anything and everything. Will it have problems? Of course not! Who ever heard of a business having problems. That is why they never made any changes to the Model A Ford.

Believe it or not, this is a more charitable piece on WeWork IPO! The amount and level of self-dealing are just astounding. For example, the founders/execs actually own the buildings and lease them to the company which in turn sub-lease to the public. They make Trump and other corporate raiders look like boy scouts!

Can an IPO be shorted? Perhaps that should be any investor's remedy for a company that won't quite say how it's doing. Such detailed financial-health disclosures ought to be MANDATORY, even required under the ad[1], for companies that offer long-term services like life insurance, cable TV, or "free to play" MMO games with premium "subscriptions". A three-month offering is worthless if the provider will go bankrupt—or Hostess-"bankrupt"—in a week. [1] Simple, too: "Visit example.com/finstate to view our financial health details before you purchase."

They lease space from their own CEO and yet not in a partnership.

To work like that shown pictured I guess I'll need to retire first.

Just another DOTCOM balloon waiting to bust.

Although more information is always welcome, this is not unusual. Companies have always navigated the tension between releasing just enough information to please investors and the investor information red line over which they will revolt. WeWork would not be any different. They will release as little as they can to get as much as they want. Alphabet, a giant, does not release YouTube’s results and the market will accept this until it does not. WeWork is pushing to see what boundaries the market will accept. International Workplace Group most likely discloses location data because it helps them. We should wonder about the data International Workplace Group is not disclosing that does not paint them in a positive light. WeWork’s business is new and the likelihood is the market is willing to accept the lack of transparency because the risk of losing out on the IPO is greater than the desire for transparency. Kris www.firmsconsulting.com

I'm in a WeWork. I hate the glass walls everywhere. The echo on conference calls is pretty bad. Also, I notice that I get in at 8 and there is no one there, and when I leave at six there are hardly any people there. So much for the hungry startup people people working their butts off. Yeah, I know that you can work from home, but...

I agree. The founders have to be hoping that the increasing softness in the commercial RE markets doesn’t spoil their IPO. This is not a company with internal strengths or an external value-added proposition that has any real defense against competitors.

I'd love for somebody to tell me what WeWork could possibly do that would create tens or hundreds of billions of dollars in value over the long-term from somebody else's physical space that, if such value peeked its head out from in the red, landlords wouldn't a) replicate, capturing the value for themselves, or b) price into the next lease, capturing the value for themselves. There's nothing. At some point, WeWork will have to start scooping up properties to alleviate this issue. My money's on the next recession, when the values of all the buildings with huge WeWorks plummet far deeper than the values of the buildings with normal corporate tenants. That's the only time when WeWork will have leverage over its landlords. Perhaps they're a Trojan horse tenant...

As soon as the economy starts to tank, their occupancy rates will follow. The few numbers they actually report are as optimistic as they're ever going to be. We're at the end of huge IPO bubble, and WeWork needs to complete theirs before the bubble pops. This a cult of personality company propped up by a good economy.

WeWork exploits the fantasy of a being a successful business owner. Until the profits come one can rent a lifestyle that mirrors the spaces of Google, Facebook, Apple and others. The churn of WeWork's tenants is astronomical as "pretend" businesses and startups run out of cash. Investors would be wise to look at its underlying custome base which is more fragile than meets the eyes

It's called marketing, dear chap, even in the field of investing and IPOs. You want 'all' the data? Oh, that's so old school. You can't fool the people and get rich that way.

Interesting point one should make investors feel informed... hard facts should replace feelings when it comes to buy shares I thought. Are we informed when we feel to be informed ??

Our startup is in a WeWork and about 1/2 the desks are filled on any day on our floor. About 80% of the floor is leased. With that occupancy density, I often need to go to another floor to use the bathroom; the bathrooms should be 2x at least. And I don’t bother trying to take the elevator down; I walk the 16 flights. Better exercise too.