Gavin Baker+ Your Authors @GavinSBaker Husband, Becky Painter. CIO, Atreides Management. Former PM, Fidelity OTC fund. investorfieldguide.com/baker/ No investment advice, views all my own. Sep. 15, 2019 1 min read + Your Authors

1) A media pile on always make me want to look at the other side. WeWork’s core cash on cash unit economics are good, which was highlighted in the excellent Bernstein pre-IPO research and can be teased out of the S-1.

2) Would imagine that the CEO has learned from this experience and the corporate governance changes are positive. Board having the power to remove the CEO is interesting offset to supervoting stock, although details are scarce.

3) Sidenote - am generally in favor of supervoting stock that gives founders 35 to 45% of the vote if it sunsets. If you can’t get 10-30% of other shareholders to agree with a proposal, it might be a mistake worth reconsidering…

4) Board having power to remove CEO is a similar construct and eliminates the “absolute power corrupts absolutely” risk, while preserving long term thinking & other arguments in favor of supervoting stock.

5) WeWork CEO deserves credit for creating/scaling a new category that I think is here to stay. Regus isn't WeWork. Wework reminds me of Dell in the 1990s – seems like it should be easy to compete with the strategy, but no real scaled competitor yet. Harder than it looks.

6) And the reality is that even at the reported $10 to $15bish valuation, WeWork created a lot of value for early investors and employees. Converting to common stock gets them out from under a presumably huge preference stack.

7) Primary risk from all the negative publicity is that the real estate ecosystem – lenders, landlords and buyers/sellers – begin to think differently about WeWork as a result of all the negative publicity. i.e. If lenders start penalizing landlords for having WeWork as a tenant

8) Curious to see if Softbank is going to be able to outrun the 8% preferred return on the Vision fund – being underwater on their two largest investments which are roughly 20% of the overall fund puts immense pressure on the rest of the portfolio.

9) Looking forward to the Twitter outrage from all the "contrarians" who are negative on Wework! 😀


You can follow @GavinSBaker.



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