Thread by @AlmingtonCap

1/ Thread on our recent note on the @WeWork IPO:

TL;DR - VC has bid WeWork's valuation to ridiculous levels, but public markets won't be nearly so generous. Its bloated valuation will soon be on the butcher’s block. This short will be fun.

Full note: gurufocus.com/news/870303

2/@WeWork's cash burn is insane, getting worse every year. A $1.9B net loss in 2018 set a new embarrassing record.

And the losses are not likely to end soon, if ever. Bernstein analysts estimate it will need $19.7B in financing through 2026.

wsj.com/articles/wewor…

3/ The premise underpinning @WeWork's business model is that it can "make it up on volume". The Silicon Valley notion that physical businesses can scale just like software startups has proven contagious. But it is nothing but a fantasy.
cnbc.com/2019/04/29/the…

4/ To date, @WeWork has been able to tap private investors to feed its spending habit. @SoftBank's Vision Fund has been its top sugar daddy, pouring in $8B. But SoftBank's now on thin ice with its Gulf State backers, who are skeptical (surprise, surprise).
wsj.com/articles/softb…

5/ Some @WeWork investors see the writing on the wall & have headed for the exit. The last round ended up being as much about providing exits as it was about providing operating cash: $1billion was set aside to let backers & employees cash out.
nytimes.com/2019/01/07/bus…

6/ While VCs have been content to post paper gains from successive up-rounds, the public market is likely to take a more critical view of @WeWork’s valuation. A lot of investors will take advantage of the IPO to abandon ship rather than hold through years of punishing dilution.

7/ Even @WeWork's CEO seems to recognize the absurdity of the valuation, based on conventional financial metrics anyway. Instead, he proposes a valuation based on its “energy and spirituality” rather than anything so mundane as earnings - or even revenues.
axios.com/wework-ceo-val…

8/ @WeWork's shtick has played well with its well-heeled Silicon Valley backers thus far. But it won't play with Wall Street analysts.

This cash incinerator's stock is set to implode upon contact with reality.

Full note: gurufocus.com/news/870303