Corporate governance was definitely a factor, but getting cut down from $47B to $10-15B is... a lot. Public market investors clearly have a much worse opinion of We's fundamentals than SoftBank did.
You are presuming that SOftBank believed in the fundamentals, and not in the proposition that if you carefully stage a series of cash injections at increasing valuations, the charismatic founder's PR halo will impart a shine onto the company's shares.
In which case, the major failing of We was that it did not go public fast enough. I wonder if we'll see this translate into time pressure for future startups to go public a little earlier before the bloom is off the rose.
I don't think speed would help. If Softbank were the only people putting in the last few rounds, that suggests that nobody else wanted to invest in this business with this governance.
People already knew what kind of business WeWork was. Sure, they were getting press, but when actual institutional investors looked at it, they must not have liked what they saw.
That has been going on for the last few rounds, so I suspect that they couldn't have gone public then, either. Nobody was buying what they were selling, except Softbank. And once the S-1 dropped, the press and social media saw all the red flags together in one document.
Those red flags would have been just the same if they'd gone public earlier.
> if you carefully stage a series of cash injections at increasing valuations, the charismatic founder's PR halo will impart a shine onto the company's shares.
Can you give some examples where this has worked in the past?
I'm not claiming it ever worked, what I actually wrote was that perhaps Softbank believed in the proposition that it could work.
The alternatives are either that Softbank believed in WeWork's fundamentals, which honestly feels unlikely, or to believe that they went in early, then discovered that nobody else would invest, so they kept putting more of their own money in to avoid closing the business and taking a write-down.
Yeah - these institutional investors have a lot riding on "the market was responding to weworks governance structure" and I don't think that is really representative of the facts.
I mean, it likely doesn't hurt anything. I'm sure the underwriters (JPM etc.) have spoken to their institutional clients and no one has said "getting rid of Adam will make my valuation go down."
So you get rid of Adam (and his supermajority voting rights) have some quiet conversations about how people value the company now. Then you decide if you're willing to take whatever haircut the market is offering from the last private round.
If We is to be believed the other option is to halt all expansion. They claim that mature locations are cash flow positive. If that's true then you don't necessarily need to take a haircut, you just stop expanding, prove to the market that you actually do have a business, and then either start siphoning off the cash or try to IPO again.