WeWork Saga Has It All as a Cautionary Investment Tale
Investors face many risks when searching for higher returns in venture capital.
It has it all: inflated valuation, mismanaged growth, a personality cult and bad assumptions about exits.
Photographer: Bryn Colton/BloombergIt’s tempting to dismiss the latest twists and turns in the WeWork saga as yet another illustration of the peculiarities of an individual company. But such a narrow focus would be a mistake. The WeWork debacle has broader implications for an investment world that has over-extended its romance with certain less-well-understood investment risks.
Among the many stunning latest developments is the announcement that the valuation of WeWork implied by the proposed SoftBank rescue is less than one-fifth of the one targeted in the now-withdrawn initial public offering of just two months ago. Meanwhile, the rescue — which follows a failed financing path through junk bonds — would give SoftBank control of the company. Adam Neumann, the company’s founder, is to be replaced as chairman by an executive who will need to scramble to climb up both the sector and corporate learning curves. Neumann’s generous payout stands in stark contrast to the large-scale employee layoffs that are ahead.