WeWork S-1

This week, WeWork, that famed coworking space startup, filed its paperwork to go public. Here are my takeaways

The Positive Stuff

WeWork grew dramatically in terms of revenue, workstation capacity, memberships, run rate revenue and committed revenue backlog which as of June 30, 2019 is approximately eight times that as of December 31, 2017.

Enterprise memberships which refer to companies with more than 500 employees make up of 40% of all memberships and new locations seem to be filled up quickly

Net Capex per WorkStation added has gotten smaller

The not-so-positive stuff

While revenue grew fast, so did losses. WeWork lost money as quickly and almost at the same rate as they generated revenue. And the company continued to lose money to the tune of approximately $1.7 billion last year and $1.3 billion in the first half of 2019.

The company is projected to continue losing money from its operations and keep investing in new leases and workstation. The contractual obligations run up to $47 billions in the future. It remains to be seen whether the company will start generating profit and honor such a sizable obligation. On top of that, the majority of WeWork’s revenue comes from the US and recently, the inverted yield yesterday which caused one of the worst drops in the stock market’s history is seen as a sign of upcoming recession in two years. One of the concerns about WeWork is whether they can operate in recessions with huge fixed costs in the form of long-term leases.

Additionally, what stood out from WeWork’s S-1 for me is the influence of the CEO and his wife. Here is what the S-1 has to say about the Neumanns

We have entered into a number of transactions with related parties, including our significant stockholders, directors and executive officers and other employees. For example, we have entered into several transactions with our Co-Founder and Chief Executive Officer, Adam Neumann, including leases with landlord entities in which Adam has or had a significant ownership interest. We have similarly entered into leases with landlord entities in which other members of our board of directors have a significant ownership interest, such as through ARK (as defined in “Business—Our Organizational Structure—ARK”).

In the event that Adam is permanently disabled or deceased during the ten-year period commencing upon the completion of this offering, a committee will be formed for the sole purpose of selecting a new Chief Executive Officer. The composition of this committee will be as follows:

Bruce Dunlevie and Steven Langman, who are currently members of our board of directors and members of our compensation and nominating committee, to the extent they are then serving as our directors, will serve on this selection committee with Rebekah Neumann (with the size of the committee fixed at two or three, as applicable); and

if neither Bruce nor Steven is then serving as one of our directors, Rebekah will choose one or two board members who are serving at the time to serve on this selection committee with Rebekah.
In the event that Rebekah is not able to serve as described above, the trustee then acting on behalf of Rebekah and Adam’s estate will serve in all such capacities and make all such determinations. In addition, Adam and our board of directors have a process in place to designate an interim CEO in order to give the selection committee time to select a long-term CEO. Any selection of an individual to serve as our Chief Executive Officer must be made with the unanimous approval of the selection committee.

The company entered into leases with some buildings as soon as Adam acquired ownership of those buildings

For one of these four properties, we entered into a lease agreement with the landlord/partnership entity within one year following Adam acquiring his ownership interest, and in the other three cases we entered into a lease agreement with the landlord/partnership entity on the same day that Adam acquired his ownership interest. During the years ended December 31, 2016, 2017 and 2018, we made cash payments totaling $3.1 million, $5.6 million and $8.0 million to the landlord/partnership entities under these leases. During the year ended December 31, 2018, we received payments from the landlord/partnership entities in the form of tenant improvement reimbursements of $11.6 million related to these leases. During the six months ended June 30, 2019, we made cash payments to the landlord/partnership entities totaling $4.2 million under these leases and received no tenant improvement reimbursements related to these leases. As of June 30, 2019, future undiscounted minimum lease payments under these leases were approximately $236.6 million, which represents 0.5% of the Company’s total lease commitments as of June 30, 2019.

The company paid almost $6 million for the We trademark which was owned by WE Holdings, which is controlled by its own directors

In July 2019, WE Holdings LLC assigned residual rights related to “we” family trademarks to the Company, which we desired to obtain following our rebranding in early 2019. In consideration of this contribution and in lieu of paying cash, the Company issued to WE Holdings LLC partnership interests in the We Company Partnership with a fair market value of approximately $5.9 million, which was determined pursuant to a third-party appraisal.

Even though he will function without an employment contract, Adam will have total control over the direction and decisions of WeWork due to his ownership of B and C class shares. His influence isn’t particularly reassuring given how much has been written about the chaos at WeWork. I had one here

The grand vision which sometimes seems closer to delusion than ambition to me is reflected within the first sentence of the S-1 form.

Mission: “We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness”

I literally have no idea what “elevate the world’s consciousness” means and how a real estate company, not a tech one no matter how much they try to portray themselves so, can turn those words into actions and reality.

Books – All five of The Song of Ice and Fire series and favorite quotes

Disappointed with how the final season concluded, I launched myself into reading the series of The Song of Ice and Fire again, for the 3rd time. I love GRRM’s writing. Below are my favorite quotes for different reasons. It can be just good writing in my opinion, or some interesting details about some characters, be it their sass or their stories, or just some good life lessons.

Game of Thrones

The blood of the First Men still flows in the veins of the Starks, and we hold to the belief that the man who passes the sentence should swing the sword. If you would take a man’s life, you owe it to him to look into his eyes and hear his final words. And if you cannot bear to do that, then perhaps the man does not deserve to die

Death is so terribly final, while life is full of possibilities

“Can a man still be brave if he’s afraid?” he heard his own voice saying, small and far away.

And his father’s voice replied to him. “That is the only time a man can be brave.”

A Clash of Kings

“They will garb your brother Robb in silks, satins, and velvets of a hundred different colors, while you live and die in black ringmail. He will wed some beautiful princess and father sons on her. You’ll have no wife, nor will you ever hold a child of your own blood in your arms. Robb will rule, you will serve. Men will call you a crow. Him they’ll call Your Grace. Singers will praise every little things he does, while your greatest deeds all go unsung. Tell me that none of this troubles you, Jon…and I’ll name you a liar, and know I have the truth of it.”

Jon drew himself up, taut as a bowstring. “And if it did trouble me, what might I do, bastard as I am?”

“What will you do?” Mormont asked. “Bastard as you are?”

“Be troubled,” said Jon, “and keep my vows”

He who hurries through life hurries to his grave

Bear Island is beautiful, but remote. Imagine old gnarled oaks and tall pines, flowering thornbushes, grey stones bearded with moss, little reeks running icy down steep hillsides. The hall of the Mormonts is built of huge logs and surounded by an earthen palisade. Aside from a few crofters, my people live along the coasts and fish the seas…

At sixteen, he was cursed with all certainty of youth, unleavened by any trace of humor or self-doubt, and wed to the arrogance that came so naturally to those born blond and strong and handsome

The wind cut like a knife up here, and shrilled in the night like a mother mourning her slain children

A Storm of Swords

Old stories are like old friends, she used to say. You have to visit them from time to time.

Bronn gave out with a chuckle, but Oberyn only smiled. “We might never have seen you at all but for your sweet sister. You were never seen at table or hall, though sometimes at night we could hear a baby howling down in the depths of the Rock. You did have a monstrous great voice, I must grant you that. You would wail for hours, and nothing would quiet you but a woman’s teat.”

“Still true, as it happens”

This time Prince Oberyn did laugh. “A taste we share. Lord Gargalen once told me he hoped to die with a sword in his hand, to which I replied that I would sooner go with a breast in mine”

He rode till dawn, while the stars stared down like eyes

“…The north will go to your son by Sansa Stark…if you ever find enough manhood in you to breed one. Lest you forget, it is not only Joffrey who must needs take a maidenhead”

I had not forgotten, though I’d hoped you had. “And when do you imagine Sansa will be at her most fertile?” Tyrion asked his father in tones that dripped acid. “Before or after I tell her how we murdered her mother and her brother?”

Dawn stole into her garden like a thief

A Feast for Crows

“I am not Cersei. I have a beard, and she has breasts. If you are still confused, nuncle, count our hands. Cersei has two.”

“Lancel, Coz. I wanted to congratulate you upon your marriage. I only regret that my duties do not permit me to attend.”

“His Grace must be protected”

“And will be. Still, I hate to miss your bedding. It is your first marriage and her second, I understand. I’m sure my lady will be pleased to show you what goes where”

Together, they shoved the dirt on top of Nimble Dick as the moon rose higher in the sky, and down below the ground the heads of forgotten kings whispered secrets

Needle was Robb and Bran and Rickon, her mother and her father, even Sansa. Needle was Winterfell’s grey walls, and the laughter of its people. Needle was the summer snows, Old Nan’s stories, the heart tree with its red leaves and scary face, the warm earthy smell of the glass gardens, the sound of the north wind rattling the shutters of her room. Needle was Jon Snow’s smile. He used to mess my hair and call me “little sister”, she remembered, and suddenly there were tears in her eyes

“Lady? I’m no lady. I’m the queen.”

“My sister will be surprised to hear that.”

“Lord Ryman crowned me his very self.” She gave a shake of her ample hips. “I’m the queen o’ whores.”

No, Jaime thought, my sweet sister holds that title too.

A Dance With Dragons

On starless nights the great cliff was as black as stone, a darkness towering high above the wide world, but when the moon came out it shimmered pale and icy as a frozen stream.

The dwarf rolled over, pressing half a nose deep into the silken pillows. Sleep opened beneath him like a well, and he threw himself into it with a will and let the darkness eat him up

“You should thank the Father Above. He gives gifts to all his children.”

“He does,” he agreed pleasantly. And when I die, please let them bury with me a crossbow, so I can thank the Father Above for his gifts the same way I thanked the father below.

On moonless nights the water was as black as maester’s ink, from horizon to horizon. Dark and deep and forbidding, beautiful in a chilly sort of way, but when he looked at it too long Tyrion found himself musing on how easy it would be to slip over the gunwale and drop down into that darkness. One very small splash, and the pathetic little tale that was his life would soon be done.

The moon was a crescent, thin and sharp as the blade of a knife. Snowflakes drifted down soundlessly to cloak soldier pines and sentinels in white. The drifts grew so deep that they covered the entrance to the caves, leaving a white wall that Summer had to dig through whenever he went outside to join his pack and hunt

The moon was a crescent, thin and sharp as the blade of a knife. The days marched past, one after the other, each shorter than the one before. The nights grew longer. No sunlight ever reached the caves beneath the hill. No moonlight ever touched those stony halls. Even the stars were strangers there. Those things belonged to the world above, where time ran in its iron circles, day to night to day to night to day.

Once outside the godswood the cold descended on him like a ravening wolf and caught him in its teeth. He lowered his head into the wind and made for the Great Hall, hastening after the long line of candles and torches. Ice crunched beneath his boots, and a sudden gust pushed back his hood, as if a ghost had plucked at him with frozen fingers, hungry to gaze upon his face

Let them laugh. His pride had perished here in Winterfell; there was no place for such in the dungeons of the Dreadfort. When you have known the kiss of a flaying knife, a laugh loses all its power to hurt you

In the godswood the snow was still dissolving as it touched the earth. Steam rose off the hot pools, fragrant with the smell of moss and mud and decay. A warm fog hung in the air, turning the trees into sentinels, tall soldiers shrouded in cloaks of gloom.

Alys Karstark leaned close to Jon. “Snow during a wedding means a cold marriage. My lady mother always said so.”

He glanced at Queen Selyse. There must have been a blizzard the day she and Stannis wed

Summer friends will melt away like summer snows, but winter friends are friends forever.”

“For the Watch”. He punched Jon in the belly. When he pulled his hand away, the dagger stayed where he had buried it.

Jon fell to his knees. He found the dagger’s hilt and wrenched it free. In the cold night air the would was smoking. “Ghost”, he whispered. Pain washed over him. Stick them with the pointy end. When the third dagger took him between the shoulder blades, he gave a grunt and fell face-first into the snow. He never felt the fourth knife. Only the cold…

Simple home-cooked meals

In the past two weeks, I wasn’t a bit indisciplined in eating. It was either dining out which could be expensive and unhealthy or eating quick meals that were not as healthy or nutritious as they could have been. So I decided to redeem myself today with the following recipes and give a thank-you shout out to these two sources. I hope I help you guys a bit in SEO as you guys help me and others with the recipes

Lemongrass Chicken

Shrimps marinated in soy sauce, ginger, honey & garlic

Home-cooked meals are definitely healthier, cheaper and can be therapeutic.

Notes from Uber’s earnings call

Uber released their 2019 Q2 results and earnings today. Below are a few things that are worth noting to me

Take rate

Uber defines take-rate as adjusted net revenue divided by Gross Bookings. Basically it is how much Uber takes out of your trip’s fare. Compared to Q2 2018, all take rates went down


Q2 2018Q2 2019
Ridesharing Take Rate21.86%18.99%
Uber Eats Take Rate12.4%9.95%
Total Core Platform Take Rate20.96%17.20%

Part of the reason for the drop in take-rate is the rise of Excessive Driver Incentives. For instance, Uber Eats’ Excessive Driver Incentive this quarter went to 43% of the revenue, compared to 36% in Q2 2018.

Source: Uber

Story of Growth?

It’s no secret that Uber is not profitable and likely won’t be for a while. Their story is one of growth, which is not the case in this quarter as far as I am concerned


Gross BookingsCore Platform Gross BookingsMonthly Active Platform Consumers
Q2 2019 YoY Growth29.67%30.44%30.26%
Q2 2018 YoY Growth48.64%47.92%33%

TripsAdjusted Net RevenueCore Platform Adjusted Net Rev
Q2 2019 YoY Growth35.02%12%7%
Q2 2018 YoY Growth39.71%58%54%

Every metric saw a smaller growth this quarter compared to last year. I do get the laws of big numbers, but when your story is one of growth, this may raise a few concerns.

Among important markets, Latin America saw a 24% decline this quarter despite Buenos Aires becoming the fifth largest city based on trips

Spectacular loss

Uber reported a $5.5 billion loss from Operations. If we take away the stock-based compensation, the loss is still $1.4 billion. While revenue grew by 31%, the operational loss increased by some 89%.

Thoughts

In my opinion, there is nothing in the earnings call from Uber that conveys something remotely close to a clear path to profitability. The story of growth is challenged in this quarter. Perhaps, this is just a bad quarter and the next ones will be better. Or worse. Who knows? Self-driving cars are years and years away, not even 5 years from now. Uber also faces heightened competition in food deliver like Post Mates or Door Dash, companies that attracts big private money as well.

Notes From Match Group’s Earning Call

You should be related to Match Group more than you think. If you are using Tinder, OK Cupid or Hinge, you are using one of Match Group’s services. The group is the parent company of some of the most popular dating apps on the market. It released its 2019 Q2 results yesterday and here are a few notable points that stood out for me

  • In the earning call, the CEO of Match Group cited a study by Prof. Michael Rosenfeld at Stanford, saying that nearly 40% of all relationships nowadays start online
  • Match Group invested in Harmonica, a Tinder-like app that services the Muslim community that makes up 24% of the world’s population
  • Subscriber base grew by 39% on a YoY basis
Source: Match Group

In the first two quarters, Match Group’s revenue reached $950 million. I have to admit that it is surprising since I didn’t think a subscription on dating apps and other add-on features could generate almost $1 billion in 6 months. Average Revenue Per User stays flat, which can be a positive sign as the company doesn’t grow user base by significant discount.

Compared to 2018 Q2, revenue increased by 18% while operating income grew by 15%. International revenue grew at a higher clip than domestic’s. Margin stays relatively flat at a healthy 35%.

Overall, I think that looks like a good quarter for Match. The consumer trend is there to help them and the company seems to be in good shape.

Reforestation

I came across a cool and quite encouraging video on reforestation in Ethiopia. As the climate change concern grows louder every day, it’s great to see such an effort from the African country

Reforestation doesn’t happen only in Ethiopia. According to Human Progress, 31% of the Earth is covered in forest. Moreover, rich areas such as UK, North Korea and Europe possess more forests than they did decades ago.

The article also said that developing countries such as China, India, Vietnam, Russia and Bangladesh have hit a critical mark of $4,500 GDP Per Capita (forest transition) and achieved net afforestation. Though I do doubt that my country has $4,500 GDP Per Capita or net afforestation, it’s a positive observation.

The news from Ethiopia is probably the first positive event since the horrific weekend. It brought smile to my face. Good things are done everywhere in the world and we need them more than ever.