[vadym909]

I can guess (however unlikely it may be) how Uber might some day make money through its monopoly power or use of autonomous cars and justify its valuation. I just can't imagine how WeWork could continue growing and turn a profit if it can't do it in this booming economy. The freelancers and small businesses that use it are likely the first to end their memberships and work from home or coffee shops.

[kelnos]

From what I've read, the WeWork locations in their mature markets are profitable, but they've been investing heavily in new/immature markets. Despite We's bizarre straddle between being a real estate company and trying to be a tech company, it's a fairly standard growth play: burn money now in order to gain more market share over time.

If they wanted to, they could slow down on new purchases/rentals/construction and likely become profitable without too much trouble. But that would of course be at the expense of growth.

Not saying they're a great company or that they deserve a crazy high valuation, but suggesting that they're unprofitable because they have a bad business model is missing the whole picture.

[mkohlmyr]

Perhaps the whole picture might also include their astronomical lease obligations..

If they are going to have to shut down all these sites the second the market slows down (or indeed as soon as the obligations are due), perhaps one might argue it was imprudent to open them to begin with.

Any marketing benefit gained by being "everywhere" is surely undone when they have to publicly shutter a large portion of their locations.

[rgoldste]

Not disputing, but could you please provide a link or two that argues they are profitable in existing markets? I’ve only looked at their S-1, and there wasn’t hard information (e.g. single building operating statements) for me to conclude this.

[brainflake]

The difference lies in their enormous existing lease obligations. Most corporate leases are for 10 years and they have very large payments that must be made, so it's not like they can just easily scale back in the loss-making locations.

[egdod]

Their income stream is month-to-month and can disappear quickly in an economic slowdown. Their lease liabilities have a timescale of years.

[wwthrowaway]

As an ex-employee I am indifferent to WW’s success or failure, but to set a few things straight, very few of their members are on month to month deals. The larger deals they do for corporates are often multi-year commitments.

As long as a sophisticated large corporate sees a net benefit of being in a wework they will stay.

As an analogy, everyone knows running servers on AWS is more expensive per unit of compute than running your own hardware, however, there is a genuine value for a company to hand off the running of an office space (and the capital investment on buildout) to a third party in exchange for predictable monthly opex.

[luckydata]

That's a myth, most of their revenues come from large companies building satellite offices but those are also the first to go in a recession.

[chadash]

The freelancers and small businesses that use it are likely the first to end their memberships and work from home or coffee shops.

Coffee shops are great places to get work done for a few hours. But stay in one for a whole day and you start to get weird looks unless you are buying coffee continuously. And once you buy enough $5 coffees to justify sitting there for a day, you might as well be in a WeWork.

Working from home simply isn't an option for many people. If you live in a downtown area, you likely don't have the space for a proper setup. Even if you do, many people don't like working alone. Also, if you want multiple employees working together in person, an office starts to make a lot more sense.

So I actually think the freelancers and small businesses who remain in business are the last ones to leave. If you chose to be in WeWork in the first place, you probably like it, and the cost of office space there is negligible compared to payroll. The first ones to leave are the corporate customers who cut head counts. Small companies tend to have less waste, so it's hard to cut people in a downturn. Big corporations, where the people making the firing decisions don't actually know the people being fired personally, have easier time laying people off during recessions.

[kd0amg]

If you live in a downtown area, you likely don't have the space for a proper setup.

When the money's tight, being short on space doesn't necessarily keep you from doing it anyway. Hot desking at WeWork would cost more than half my rent.

[rdtwo]

It can easily turn a profit as long as it stops growing. Somehow they managed to con the building owners into leasing to shell companies which means they can break any of their leases at any time by shutting down the shells. As such once the growth phase ends they will shut all the unprofitable offices and can hum along as 3% growth real eastate company and feed the founders heirs forever or at least till the leases expire.

[jpalomaki]

Maybe large corporations will find their services useful in future.

Might be that the concept of huge corporate campus won’t be so popular in future and companies start looking at more flexible solutions.