what a difference a year makes…
Twenty four little…er, periods of just over two weeks. Well, If you’re Adam Neumann, WeWork’s founder and CEO, about forty billion US to be precise. Adopting the loud-mouth slot recently vacated by Elon Musk following his own annus horribilis, Neumann, who openly boasted of the belief he was both going to be the world’s first trillionaire and would live forever, has every reason to feel sorry for himself but is he really to blame for his spectacular downfall? Behave, of course he is.
Only ten short months ago, the supposed tech ‘dacacorn’ (a privately held company with a valuation north of $10bn), which began life as a single space in Manhattan in 2010, was being touted with a pre-floatation value of $47bn. Rebranding itself as We Group, and with a disclosure that it had burned through more than £2.4bn during last year alone, the botched non-float has been canned amid hopes that the market is finally coming to its senses in realising the lunacy of such valuations for businesses with losses even greater than their equally ludicrous claims of future growth.
Shares in Peloton, the hamster-wheel exercise bike company have fallen over twenty percent of late. Uber’s shares have dropped by almost 30% since the ride-hailing company floated with an extraordinary value of $82bn in May. Their arch-enemy, Lyft, has plunged 40% since its shares started trading in March and, admittedly after jumping on their first day of trading, collaborative-working software company, Slack’s shares have fallen by 15% as investors doubt they’ll triumph against the likes of old stalwart, Microsoft. Speaking of which, when Big Bill floated his company back in 1986, its 52-page prospectus detailed more than four years’ financial depth, highlighting healthy profits in each and every year. By contrast, Uber’s weighty 431-page IPO tome proudly proclaimed, amongst other priceless pieces of gobbledegook, that its “mission is to ignite opportunity by setting the world in motion”. WTF and there was me thinking evolution had already conquered that particular task. Needless to say, it was cleverly devoid of any factual or accurate financial reporting and rest assured emperor Neumann will be travelling in one of Kalanick’s cars, whilst tweeting Dorsey about the new threads he’s just tried-on for size.
Mind, the particular valuation that is… er, exercising my tiny mind is exactly how an app that connects me to restaurants which subsequently delivers the luke-warm fast-food in grease-smeared cardboard packets via a self-employed minimum-waged kid on a pushbike, could possibly be worth £5bn?
The aforementioned Just Eat charges you 2.94 for the privilege of your sweet & sour, while the receipt of Colonel Sanders’ secret recipe of eleven herbs & spices will set you back a bite-sized £2.99 Deliveroo charge and, at £3.50, Uber Eats will cost you more than the actual price of the tasty Kahuna burger you’re about to clog your arteries with. Yet, with a usual urban restriction of only one-and-a-half miles it would take you less than twenty minutes to get off the sofa and go collect it yourself. Financially, nutritionally and environmentally, none of this adds up. A third of our children at primary school are currently overweight at best, morbidly obese at worse, and The World Obesity Federation predicts that by 2030 twelve percent of our kids will be thus.
Similarly, spare a thought for the delivery drivers and riders largely without a guaranteed minimum wage, confirmed working hours, holiday pay, sick pay or tangible employment benefits. Adding only minimum value to our economy, it was, ironically, Tory prime Minister, Ted Heath, who, alarmed by the collapse of Britain’s manufacturing and production industries, declared of the service economy, “we cannot live permanently by taking in each other’s washing.” We may now only have a quarter of those working in Germany’s manufacturing sector (2.9m vs 10.6m) but little did he know that we’d go on to lead the world in tasty-take-away-treat delivery!
Anyway, back to Adam and before you feel too sorry for him and his train-wreck of a company, don’t shed too many tears as he still stands to pocket more than $1bn from the $10bn refinancing deal agreed with his major shareholder, Softbank. No, save those tears for the shareholders in that particularly extravagant company as it nurses its initial $16bn investment in Neumann. WeWork don’t work. Caveat emptor. Or not as the case may be…
