We don't Work
We don't Work
WeWork, the trendy flexible office space provider, is on the brink of collapse. Here’s why
Adam Neumann, WeWork’s big-thinking and heavy-drinking founder, once said he wants to be the king of the world. He also said he wanted to be a trillionaire and to live forever. No one could accuse him of dreaming small. But the company he founded and got rich and famous for is on the verge of collapse. WeWork is failing for three reasons: the business model is broken, office space demand is crashing, and investors have ignored the leverage effect of leases.
First, the WeWork business model doesn’t work. Over the last ten years, the firm has produced average operating margins of -89%. They had improved slightly during the previous two years but were still -26% last quarter. That puts WeWork’s margins in the bottom 5% of all global real estate management firms. With fat operating losses, the company burns through a lot of cash. In fact, they’ve lost a cumulative $13bn in the past decade on $16bn of revenue.
Moreover, the business is capital heavy and reliant …