Shulou(Shulou.com)11/24 Report--

At the end of 2019, Jack Ma and son had an open dialogue at the University of Tokyo. Jack Ma praised son on the court as "the boldest investor in the world". Sun Sang smiled and replied, "Yes, I have too much courage, so sometimes I lose a lot of money." His face could not tell whether he was happy or wry laughing at himself. That year, son invested $10 billion in WeWork, but lost 70% of his valuation.

But son later added, "I still trust my instincts." Intuition has brought son the most successful return on investment in history. At the beginning of 2000, son invested 20 million US dollars in Alibaba, which Jack Ma had just founded. Over the next two decades, this investment brought a return of up to 72 billion US dollars to Softbank Corp. Group. Son recalled many years later that he relied entirely on intuition and believed in Ma Yun's dream of e-commerce changing the world.

Trust intuition, believe in dreams, maybe every time you think of investing in Ali, son will believe in his intuition. When Ali went public in the United States in September 2014, I ran into son in a corner of the New York Stock Exchange. At that time, almost everyone's eyes were focused on the senior team of Ali, such as Jack Ma, and the unaccosted son wandered leisurely in the field. When he was in a good mood, he chatted with me for a while. I asked him how long he was going to hold Ali shares. Sun Sang smiled and said, "for a long time." His eyes laughed like a crack.

After 18 years of investing in Ali, son seems to have seen Jack Ma's dream and passion again in a high-spirited American entrepreneur. He once again believes in his intuition that the company, like Alibaba, will change the way people around the world work. But this time, Sun Sang was completely defeated, and he lost almost every penny of the $16 billion he invested.

Interestingly, over the past decade, Softbank Corp. Group has been cashing out by constantly selling Ali's holdings, raising funds for son's global technology investment dream, paying for his investment after investment, and covering his losses again and again. Softbank Corp. 's $16 billion loss on WeWork also came from the sale of Alibaba's stake. Now that Softbank Corp. has basically cleared Ali's shareholding, what should he do next time for Sun Sang's huge investment and loss?

The nightmare project from $47 billion to filing for bankruptcy cost son 16 billion dollars is WeWork. Shares were suspended last week after WeWork filed for Chapter 11 bankruptcy protection in New Jersey. When it filed for bankruptcy, WeWork had total assets of $15.06 billion and liabilities of $18.66 billion. WeWork has been raising money urgently for the past three months, but it is still unable to avoid filing for bankruptcy.

In just four and a half years, the global shared office giant WeWork has achieved a peak valuation of $47 billion to a free fall to file for bankruptcy. After a series of frenzied leaps and scandals and civil strife, what was once the most highly valued startup in the world is now left with a pile of bad debts and chicken feathers. Softbank Corp. 's US $16 billion investment also came to naught.

It took WeWork seven years from its inception to its peak valuation of $47 billion, but it took them only four and a half years to file for bankruptcy and now has a market capitalization of just $40 million. The rapid expansion and rapid fall of the WeWork bubble is breathtaking, and it has become another classic bubble textbook in the field of American shared economy.

GreenDesk, the predecessor of WeWork, was founded in New York in 2008, and the two founders re-founded the company in 2010, named WeWork and began to raise money. In April 2011, WeWork opened its first office in the SoHo district of Manhattan. In October of that year, they received the first seed financing of $1 million.

WeWork's business model is not complicated. They rent office buildings, transform them into shared office space, and then rent them to individuals or small businesses for office use in the form of subscriptions and services. At that time, it was the rise and growth of the shared economic model in the United States, and the emergence and rapid growth of start-ups in many areas, such as shared travel, shared accommodation, shared office and so on. Uber, Airbnb and other sharing economy giants were founded in this period.

The rise of the shared office model has its time background and basic conditions, which conforms to the two major trends of telecommuting and entrepreneurial activities. The improvement of Internet infrastructure in the United States has created conditions for telecommuting, and many people who work from home need better and more efficient office space like WeWork.

On the other hand, after the financial crisis of 2008, the US economy began to recover gradually in 2010, venture capital activity became increasingly active, and the advent of social networking and mobile Internet era created a large number of start-up companies. In the initial stage, they prefer flexible shared office, and WeWork's shared office and entrepreneurial services are popular with them.

Although WeWork was not the only shared office company at that time, they managed to raise the most money, ensured rapid business expansion, was recognized by many well-known startups, and eventually became the biggest star of the track. As WeWork's shared office space expands around the world, their valuations have grown unbelievably sharply.

In 2014, three years after its founding, WeWork was valued at more than $1 billion, becoming the first unicorn in the shared office space. Just a year later, in 2015, WeWork was valued at more than $10 billion; in August 2017, it exceeded $21 billion; and in January 2019, it peaked at $47 billion, making it the most highly valued startup in the world.

Although WeWork's financial management and profits have been chaotic, losing $2 billion in 2018 alone, investors value their frenzied financing and rapid growth, their future dream of shared office, and believe that this model will upend the global office form in the future. It was at the end of 2018 that Masayoshi son, the "most dream-chasing investor", joined WeWork and began the nightmare they regret now. WeWork founder Adam Newman (Adam Neumann) described to son a beautiful dream for the future, so that son thought in a trance that he had seen another Jack Ma.

In January 2019, Softbank Corp. Group invested US $5 billion in WeWork and pledged to invest a total of US $16 billion (actual investment exceeded US $10 billion), becoming the largest investor in WeWork and valuing WeWork at US $47 billion.

2019 is the peak year of WeWork, which also marks the beginning of their rapid fall. This year, WeWork began to apply for listing, had to publish a lot of financial data, and many of the chaotic problems behind the rapid expansion of the past few years began to be made public, and questions about the sustainability of its business model led to a sharp decline in its valuation.

In the filing for listing, WeWork announced that future lease payments amounted to $47 billion, but revenue from future leases was only $4 billion. This means that if WeWork fails to rent out shared office space, they will face incredibly huge losses.

What is even more unbearable for investors is that the co-founder and CEO Newman took advantage of WeWork to enrich himself. Not only did he set up a number of shell companies to trade with WeWork to make high profits, allowing his wife to run various sideline projects under WeWork and use the company to buy private jets for his own profligacy, and WeWork even had to pay him a license fee to use the company name.

It is against this backdrop that WeWork's valuation has shrunk to $10 billion in September 2019, even below WeWork's total financing quota of $12 billion, forcing them to postpone the listing. Softbank Corp. 's huge investment has shrunk by more than 80% in less than a year. But they have no choice but to continue to invest to push WeWork to complete its listing.

While continuing to invest 5 billion US dollars, Softbank Corp. began to promote the restructuring of WeWork. Newman, co-founder and CEO, was knocked out by the board of directors. Softbank Corp. got more than 80% of WeWork's shares, and the company's valuation continued to slide to 8 billion US dollars. After Softbank Corp. took over, he laid off and reorganized WeWork in an attempt to sort out the chaotic business and re-list, waiting for the investment return of future market capitalization growth.

Bankruptcy in freefall is followed by a global epidemic, with home quarantines, long-term closure of commercial office space and complete shutdown of the shared office model. For Softbank Corp., it was like falling from one nightmare to another deeper nightmare. In March 2020, after the outbreak began, the WeWork model continued to decline to US $2.9 billion, directly back to the 2014 level.

However, as the epidemic gradually recedes, WeWork business is also gradually recovering. In October 2021, WeWork finally completed its backdoor listing through the acquisition of special purpose investment vehicles, valuing it at $9 billion, giving Softbank Corp. hope that some stops would be released in the future.

At the end of last year, WeWork operated 779 offices in 39 countries, generating revenue of $3.2 billion. However, the fundamental problems of WeWork have not been solved, and it has always been faced with the heavy pressure of huge debt and operating cash gap brought by previous disorderly expansion. A mountain of spending and debt will eventually crush.

In order to curb inflation at a 40-year high, the Federal Reserve continued to raise interest rates last year, raising US interest rates to a 20-year high, which also added to the burden on WeWork to continue financing. Last quarter, WeWork spent up to 80% of its revenue on rent and interest. Although revenue continues to grow, it has always been in a state of huge losses. WeWork posted a net loss of $1.16 billion in the second half of last year and nearly $700m in the first half of this year.

WeWork has been in the shadow of bankruptcy since 2023. In April, WeWork was delisted from the New York Stock Exchange and its market capitalization shrunk to $360 million because its share price had long been below $1. In August, WeWork announced that it could no longer operate and might file for bankruptcy protection, prompting investors to sell the company, and WeWork's market capitalization continued to shrink to a trough of $40 million.

After holding on for three months, WeWork finally couldn't get out of bankruptcy. After filing for bankruptcy protection, WeWork will be able to restructure its business and apply for reformulation and termination of leases in the United States and Canada.

The biggest winner continues to start a business after five years of investing in WeWork, Softbank Corp. sterilizes this nightmarish investment almost every quarter. Softbank Corp. Group reported a loss of US $6.2 billion in the second financial quarter, the fourth consecutive quarterly loss. Although the Vision I fund made a profit of $300m from the sale of shares in Arm, the Vision II fund, which invested in WeWork, lost $2.1 billion.

Although Arm's listing brought a capital surplus of as much as $4.65 billion, WeWork's bankruptcy filing led to another big write-off of Softbank Corp. 's assets, which dragged down the quarterly results. Continued capital support for WeWork led to an increase of 57.5 billion yen ($380 million) in debt last quarter, said Softbank Corp. CFO Goto Fangguang.

The bankruptcy of WeWork once again became the biggest topic on the analyst conference call after the announcement of the results. Yoshimitsu Goto, CFO of Softbank Corp., said bluntly that it was a great shame for WeWork to file for bankruptcy and that Softbank Corp. must learn from it and avoid making mistakes again in future investments.

Masayoshi son, who originally approved the investment, did not attend the analyst conference call to avoid the embarrassment of being tortured by analysts again and again. As a result of one huge investment loss after another, facing constant pressure from the media and investors, son even mocked himself as "Jesus crucified".

Ironically, while WeWork went bankrupt, its co-founder Newman was enjoying life in his $44 million Miami mansion, with a personal wealth of more than $1 billion, far exceeding WeWork's market capitalization. He is a close friend of Kushner, the son-in-law of former President Donald Trump, who lives nearby. They are both American Jews.

In order to get Newman out completely, Softbank Corp. offered him a break-up fee of up to $1.7 billion, including buying out his stake in WeWork and providing him with an annual consulting fee of up to $46 million. This means that Newman is completely isolated from WeWork, preserving his personal wealth. Newman was the final big winner in the bursting of the WeWork bubble.

Although he has long been rich and free, Newman does not plan to retire early. He is busy with his next start-up project, this time in his accustomed real estate sector. After receiving $350 million in financing led by the Anderson Horowitz Fund last year, Newman once again created a unicorn valued at more than $1 billion and is ambitious to change the world. Son could not help but shudder.

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.