The Bullish Case for WeWork

Joe Weisenthal (0:12)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:17)

And I'm Tracy Alloway.

Joe Weisenthal (0:19)

Tracy, 2019 has been a lot of interesting things that have happened in markets so far this year, but one of the defining characteristics, I think, has to be that it's really been the year of the IPO, or at least IPOs have been a big story in a way that they haven't been in a long time.

Tracy Alloway (0:36)

Right, and not just any IPOs, we've had quite a few tech company IPOs, right? So we had, let's see, Uber, Beyond Meat, both relatively, I guess some people would call it unsuccessful, given the share price performance since then.

Joe Weisenthal (0:55)

Well, Uber, I guess, has been a little bit unsuccessful in the fact that it didn't have a pop. And Beyond Meat is unsuccessful in the other direction in the sense that it soared to an insane degree since it went public, implying that the company left a lot of money on the table.

Although, to be honest, when stocks soar, I get this argument that a company left a lot of money on the table, but I doubt anyone's really complaining because they're all crazy rich now.

Tracy Alloway (1:22)

Oh, yeah, you hear that all the time that the underwriter's messed up or something. But yeah, I doubt anyone who's standing there watching, like the listing price watching their net value go up is actually upset about that one.

Joe Weisenthal (1:33)

Yeah, like, are they really that upset? They can always sell more stock in a secondary if they want. But yeah, as you said, you know, like we had some like really marquee IPOs this year already, Uber being the most notable, the largest at the time startup in the world or private company in the world, I think, or close to it.

It's kind of fizzled, but actually it's been a pretty kind of euphoric year now between Beyond Me and Zoom Video and CrowdStrike was another recent one. There's a number of companies that have found very enthusiastic receptions on the public market this year.

Tracy Alloway (2:08)

Right, and I believe there's another one that's sort of waiting in the wings. And this is, even compared to Uber, this is a really interesting company that sort of generates a lot of very different opinions, let's say.

Joe Weisenthal (2:24)

Yeah, so you're talking about WeWork, which is the famous or maybe infamous commercial real estate company that's gigantic.

I don't know how many tens of billions it's worth right now. I think maybe just under 50 billion.

But right, they're known for taking out these big leases from building owners and then re-renting the space out to startups and it's a hip office environment and there's a lot of beer. And the company is incredibly controversial, to say the least. There have been numerous profiles written of its CEO, who himself seems to be quite a character, like many of these startup CEOs are. There are lots of people extremely skeptical that it's going to be a long-term money-making business. But after Uber, it really is the gigantic one sort of sitting out there waiting in the wings. I don't think anyone knows exactly when it'll become public, but at some point, it almost certainly will have to file for an IPO.

Tracy Alloway (3:25)

I like that your description of WeWork office space is there's a lot of beer, but you're right.

Joe Weisenthal (3:30)

I think that's like a big thing, like it's office space, but it's supposed to be cool and start-up-y. That means beer taps and cold brew coffee on tap and stuff like that.

Tracy Alloway (3:41)

But I'm just gonna point out, you've already sort of betrayed a slight bias because you called it a commercial real estate company. And of course, the big debate over WeWork and its valuation and its future is whether or not it's actually something more than a commercial real estate company. Because if you're attaching a $50 billion valuation to something, it's probably gonna have the words tech in it or some sort of all-encompassing lifestyle brand. And that's the huge debate currently raging.

Joe Weisenthal (4:12)

Right, or it's gotta be a platform in some way to justify that.

So the interesting thing about WeWork to me is, you know, if you're talking about Uber, there's very easy to come up with the bull and the bear case. You say, okay, the bull case is that sort of on-demand mobility is going to be gigantic and it's barely even started and that there's all other kinds of businesses that they can layer into their ride-sharing business, like food delivery and other logistics things. And then the bear case is, well, they're losing a lot of money. And you can have a real debate. And there seems to be very legitimate two sides to it. And what's really striking about WeWork is it's extremely rare to find a bull or even a partial bull or an optimist it's universally, I think people are skeptical about this company and that's pretty unusual because usually there's someone or a good contingent that says, no, you don't really get this.