BIG BIG NEWSNEWS
22 August 2019 | SHARES | 9O
ŶƚŚĞĨĂĐĞŽĨŝƚtĞtŽƌŬ͛ƐƉƌŽƉŽƐŝƟŽŶ
ŵĂŬĞƐƐĞŶƐĞĂŶĚƚŚĞƟŵŝŶŐŽĨŝƚƐŝŶŝƟĂů
ƉƵďůŝĐŽīĞƌŝŶŐ;/WKͿĐŽƵůĚŶ͛ƚďĞďĞƩĞƌ͘
tĞtŽƌŬƉƌŽǀŝĚĞƐƐĞƌǀŝĐĞĚŽĸĐĞƐŽŶŇĞdžŝďůĞ
contracts with all the bills taken care of so that
companies can concentrate on growing, and
ĚĞŵĂŶĚŚĂƐƚĂŬĞŶŽīĂƐŽĸĐĞǀĂĐĂŶĐLJƌĂƚĞƐĨĂůů
across the globe.
However the risks to investors are such that,
as with another disrupter, Uber, we would
recommend staying away.><K&^hWW>zZ/s/E' DE
As property experts Knight Frank observe in their
ϮϬϭεŐůŽďĂůŽƵƚůŽŽŬ͕͚ŽĸĐĞŽĐĐƵƉŝĞƌƐĨƌŽŵĂůů
sectors and of all sizes are seeking product that
ďĞƩĞƌĂůŝŐŶƐƌĞĂůĞƐƚĂƚĞƚŽƚŚĞŝƌĚŝƐƌƵƉƚĞĚ͕ĨĂƐƚ
ŵŽǀŝŶŐŽƉĞƌĂƟŽŶĂůƌĞĂůŝƚLJ͘&ůĞdžŝďůĞƐƉĂĐĞǁŝůůďĞ
ŝŶĚĞŵĂŶĚƉĂƌƟĐƵůĂƌůLJŝŶƚĞĐŚĚŽŵŝŶĂƚĞĚŵĂƌŬĞƚƐ
such as Berlin, London, Boston and Singapore.’
In the last year alone the amount of available
ŽĸĐĞƐƉĂĐĞŝŶ>ŽŶĚŽŶŚĂƐĨĂůůĞŶĂůŵŽƐƚϮϬйƚŽ
ρ͘ςй͕ŝƚƐůŽǁĞƐƚůĞǀĞůƐŝŶĐĞĂƵƚƵŵŶϮϬϬϳ͘dŚŝƐůĂĐŬ
of supply is driving up rents which in turn is driving
ĚĞŵĂŶĚĨŽƌŇĞdžŝďůĞ͕ƐĞƌǀŝĐĞĚƐƉĂĐĞ͘
/ŶĞƌůŝŶ͕WĂƌŝƐ͕,ŽŶŐ<ŽŶŐĂŶĚdŽŬLJŽƚŚĞŽĸĐĞ
vacancy rate was just over 2% last year according
to Knight Frank, and new supply over the next
ƚŚƌĞĞLJĞĂƌƐǁŝůůďĂƌĞůLJŵĂŬĞĂĚŝīĞƌĞŶĐĞ͘GONE BANANAS
,ŽǁĞǀĞƌƚŚĞtĞtŽƌŬ/WKŚĂƐďĞĞŶĚĞƐĐƌŝďĞĚĂƐ
‘bonkers’, ‘bananas’ and a ‘triumph of hype over
ĨƵŶĚĂŵĞŶƚĂůƐ͛ďLJƚŚĞh^ĮŶĂŶĐŝĂůƉƌĞƐƐ͘
dŚĞĮůŝŶŐĂĚŵŝƚƐƚŚĂƚtĞtŽƌŬŚĂƐ͚ĂŚŝƐƚŽƌLJ
ŽĨůŽƐƐĞƐ͛ʹŝƚůŽƐƚΨϭ͘εďŶŝŶϮϬϭΘŽŶΨϭ͘ΘďŶŽĨ
ƌĞǀĞŶƵĞƐĂŶĚŚĂƐĂůƌĞĂĚLJůŽƐƚŶĞĂƌůLJΨϳϬϬŵƚŚŝƐWhy WeWork’s IPO doesn’t
work for investors
Despite the appealing narrative, the risks are too many and too greatthis year).Z/^<^W/>/E'hW
ƐǁĞůůĂƐǀĂůƵĂƟŽŶƌŝƐŬƚŚĞƌĞŝƐďƵƐŝŶĞƐƐƌŝƐŬ͘
tĞtŽƌŬŵĂŬĞƐůŽƐƐĞƐďĞĐĂƵƐĞŝƚůĞĂƐĞƐŽĸĐĞƐŽŶ
a long-term basis, spends a fortune refurbishing
ĂŶĚĂĚǀĞƌƟƐŝŶŐƚŚĞŵ͕ĂŶĚƌĞͲůĞƚƐƚŚĞŵŽŶĂ
short-term basis. This means it needs a constant
stream of new tenants, which may or may not
cover its costs.
Its model also makes it highly vulnerable in a
downturn when demand dries up, rents fall and
ǀĂĐĂŶĐŝĞƐƌŝƐĞĂƐŝƚƐƟůůŚĂƐŚŝŐŚĮdžĞĚĐŽƐƚƐ͘
Finally, there is corporate governance risk. The
ĨŽƵŶĚĞƌ͛ƐƐŚĂƌĞƐʹǁŚŝĐŚĂƌĞďĂĐŬĞĚďLJĂΨρϬϬŵ
credit line secured on another class of shares –
ŚĂǀĞϮϬǀŽƚĞƐĞĂĐŚĂŐĂŝŶƐƚŽŶĞǀŽƚĞĨŽƌĐŽŵŵŽŶ
ƐŚĂƌĞƐ͕ŵĞĂŶŝŶŐŚĞŚĂƐĐŽŶƚƌŽůŽĨŚŝƌŝŶŐĂŶĚĮƌŝŶŐ
the board of directors among other things.
The founder and other board members have
ƉƌĞǀŝŽƵƐůLJůĞĂƐĞĚƉƌŽƉĞƌƟĞƐƚŽƚŚĞĮƌŵ͕ǁŚŝůĞ
the founder’s wife – WeWork’s ‘chief brand &
ŝŵƉĂĐƚŽĸĐĞƌ͛ʹŐĞƚƐƚŽĐŚŽŽƐĞǁŚŽƐƵĐĐĞĞĚƐŚĞƌ
husband in the event of his death, rather than the
board or the shareholders.year – and that it
has no idea when or
if it will ever turn a
ƉƌŽĮƚ͘ŽŵƉĂƌŝƐŽŶƐ
with Uber are
inevitable.
It hopes to raise
Ψϯ͘ρďŶŝŶŝƚƐůŝƐƟŶŐ͕
ǀĂůƵŝŶŐŝƚƐŽĸĐĞͲ
rental business at
ΨκϳďŶŽƌŵŽƌĞƚŚĂŶ
US semiconductor
maker Micron
Technologies (which
is expected to
generate pre-tax
ĞĂƌŶŝŶŐƐŽĨΨϳďŶ