We hope you can join us on Tuesday, November 23rd at 12:30pm ET for our Black Book presentation on WeWork, Inc. (WE), which we just added to the Long Bench earlier this week. WeWork just combined with BOWX and de-SPAC'd after a lengthy and turbulent process towards going public, so we are hoping to fill an informational void and contribute some value-added perspective on the name. To be clear, if we had to pick one company in our coverage to hand a dollar to and get back $0.50 over time, it would be WE. The model, while improving on the margin, is still highly questionable. The company is losing an ENORMOUS amount of money by almost any metric, and we estimate on a lease-adjusted basis is levered about ~29x annualized EBITDAR on our numbers. More to come on that later. With all of that said, most importantly in Quad 2 the RoC on several key operating metrics is accelerating to the upside with the stock now trading well-below the $10/share "par," underpinning our TRADE/TREND long call. We imagine WE being a great short in Quads 3/4 when the time comes.
As many investors in the REIT sector know, WeWork is a flexible office space provider but not a REIT, however a very meaningful player in the global office market so a logical name to cover. WE grew recklessly as a private company under controversial, and arguably self-destructive, founder Adam Neumann, who has since been forced out of the CEO role and replaced by long-time REIT industry veteran Sandeep Mathrani (VNO, GGP, Brookfield). Since then the company has been restructured, with new management cutting a very bloated operating expense structure and shedding many leased locations. The PIPE was rumored to include Starwood Capital and there was an additional $150 million investment by Cushman & Wakefield into the deal, so there is now clear institutional real estate support versus just Softbank previously.
We are going to really focus in on the company for this presentation, as none of the participating sell-side shops have yet to exit the quiet period and launch.
EVENT LINK: CLICK HERE (video, dial-in, materials links)
KEY PRESENTATION TOPICS INCLUDED
- Introduction
- Position Monitor review
- Macro overview
- WeWork, Inc.
- Overall thesis
- Review of key operating metrics
- Analysis of the SPAC transaction
- Profitability
- Liquidity and cash burn
- Capital structure
- Operating lease adjustments
- Company history, leadership, turmoil, etc.
- Other topics
- Appendix:
- Earnings model (if it is even possible)
- Q&A
Please e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
