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Hope that you all had a nice 4th of July.
Worthy Insights / Opinion Pieces / Advice
Economist – At any given time in their lives, people have two dozen regular haunts 6/28
Economist – America Inc and the rage against Beijing – Schumpeter 6/28
FT – Lex in depth: Why WeWork does not deserve a $20bn price tag – Elaine Moore and Eric Platt 7/2
- “WeWork’s steep valuation depends on a blinkered faith in its originality despite a crowded market of competitors. If the company’s equity value was based on the same multiple of sales as flexible workspace peer IWG (formerly Regus) it would be worth less than $3bn.”
- “The company’s pitch is scale. WeWork envisions a world in which offices are so attractive that workers will choose to spend more time in them. Eventually, it pictures global cities of We-flats and We-offices, where members work out at We-gyms, learn at We-schools and network at We-events — all the while tracked by the We-operating system.”
- “WeWork’s valuation comes courtesy of the deep pockets of Japan’s SoftBank and the Saudi-backed $100bn Vision Fund , which led a $3bn investment last year. That came with an additional $1.4bn raised for WeWork’s Asian subsidiaries. The fundraising round transformed WeWork into one of the world’s top 10 most valuable start-ups. Further financing from the Vision Fund, valuing WeWork at $35bn, has been mooted. This would exceed the value of SpaceX, Elon Musk’s space technology company.”
- “In the meantime, WeWork needs financing. It is likely to require at least $2bn from investors in the next two years. To plug future outflows, it may seek far more. A successful initial public offering will require WeWork to convince investors that its value is based on more than giddy markets and a millennial-friendly aesthetic.”
- “Unfortunately for WeWork, costs are growing just as steeply. Some look extravagant. Last year the group spent an additional $6.5m on events that included a weekend summer camp. The company justifies this as the price of growth.”
- “However, WeWork’s valuation is based on its growth potential. Airbnb might therefore be a better comparison. It is valued at a higher $31bn. Yet even this is a more sober reflection of business than WeWork’s. The value is equal to 12 times trailing sales versus 20 for WeWork.”
- “For now, WeWork is far from self-sustaining. The company lost nearly $1bn last year. Office occupancy at 82% is higher than IWG’s 75%. However, average membership fees are falling. There is little reason to think the decline will reverse while expansion is driven by Asia, where rates are lower.”
- “Funding rounds were the only reason the company ended 2017 with cash of $2bn on the balance sheet. On FT estimates it is likely to need about $2bn more by the end of 2019.”
Markets / Economy
WSJ – Daily Shot: Deutsche Bank – US-Europe monetary policy divergence 7/3
Real Estate
- “FlyHomes’ ability to turn clients into cash buyers exploits a quirk in the capital markets that’s arisen since the housing meltdown: Consumers are being put through more rigorous standards when they apply for a mortgage. Meanwhile, it’s comparatively easy for companies—even those with new, barely tested ideas—to get buckets of money from banks, venture capitalists, and other institutional investors.”
- “Redfin CEO Glenn Kelman says these new ventures are part of a shift in how homes will be bought and sold. ‘There is just money coming out of every possible part of the world, and it isn’t going toward the consumer,’ he says. ‘It’s going toward real estate businesses who charge the consumer for access to that money.’”
Bloomberg – U.S. Retail Vacancy Rate Jumps on Toys ‘R’ Us Store Closings – Jordan Yadoo 7/2
- Considering the headwinds of retail over the last few years, I’d say things are doing not too shabby considering it took the closure of Toys ‘R’ Us to push the absorption rate negative (granted local situations vary).
Environment / Science
Bloomberg – Stemming the Tide of Plastic Pollution – The Editors 7/2
Asia – excluding China and Japan
FT – Samsung finds unlikely ally in stance on worker safety – Song Jung-a 7/2
- “S Korea commerce ministry backs view that transparency may compromise tech secrets.”
FT – South Korea to cap working week at 52 hours – Song Jung-a 7/2
- “Cut from 68-hour maximum aims to improve life balance for country of workaholics.”
- “The country is home to the longest working hours and highest suicide rate in the developed world. South Koreans put in an average of 2,024 hours in 2017, the second-most after Mexico among members of the Organization for Economic Cooperation and Development (OECD). But the long hours have not translated into better productivity, with the country’s per-hour productivity ranking near the bottom.”
China
WSJ – Daily Shot: Shanghai Shenzhen CSI 300 Index 7/3
India
Bloomberg Businessweek – India’s Push to Fast-Track Bankruptcies – Iain Marlow 6/26
