The Secret Broker: When WeWork becomes Don’t Work
The Secret Broker
The Secret Broker
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In life there are a few Golden Rules to follow.
One of them, ignored by Hollywood, is that actors should age gracefully into suitable roles.
Sylvester Stallone is 73 years old and starring in Rambo 5. He has less wrinkles now on his forehead than when he made Rambo 1 in 1986. I mean come on!
Luckily for us, Clint Eastwood is 89 years old so a sequel to the original Dirty Harry is not going to happen because if it did, his famous line about “in all the excitement I can’t remember how many bullets I have left” would be now actually be true, along with “where is my gun and are my pants around the right way?”.
Another Golden Rule comes into play when you are a broker taking an IPO company chief exec and their prospectus out for a show ‘n tell to savvy investors.
The rule is, if they push back on the valuation, don’t try and justify it.
Just get up and say “thank you for your time” and politely leave, with the entourage in tow. The minute the CEO tries to justify it, to a group that has told him it’s too expensive, they are GONE!
You learn this rule at some point in your IPO career, as you only get one chance — so get it right.
The old brokers in the office would wince in pain if his next suggested idea was lowering the valuation and going back.
They know from experience that the IPO was now cursed and the 10,000 printed prospectuses in the post room should be delivered straight to the recycle bin.
Unfortunately, this Golden Rule and all sensible advice was again completely ignored in the US as brokers tried to IPO WeWork at a valuation of U$67bn and collect U$200m in fees.
WeWork is a company that just supplies serviced offices, has no technology, owns nothing but liabilities and they only came up with ‘We’ because of the ‘i’ in iPad and iPhone.
It only recently cancelled unlimited free beer for employees and had ambitions to open a serviced office on Mars.
The founder’s wife had people sacked for having ‘the wrong energy’ and a rogue umbrella managed to lock out office workers for two days after it jammed against a door.
The founder is a self-confessed visionary; or fruit loop as I call them.
Over the course of just seven days, they dropped the valuation down not once but four times, the last one being delivered on hands and knees.
Apparently, the meetings went like this:
$US67bn – “You gotta be kidding.”
Two days later, how about $US30/$US40bn? – “You guys back again?”
Next day: Ok, does this sound better … $US15/$US20bn? – “Who let you in?”
And then finally, have we got a deal for you! $US10bn – “Security, get up here now.”
WeWork had raised money 9 times since 2012, all from the same VC group (Softbank) and each time at double their last valuation.
That’s how they arrived at a valuation of $US67bn, 14 times higher than their mature rival, Regus. Simples!
So, the IPO got cancelled and the founder and his wife got sacked.
All they had to do was gracefully leave the room and quietly exit stage left and not Rambo up and keep trying to justify their valuation.
Now though, they can reflect on their rule breaking and go and see Downtown Abbey at the cinema, and learn from Maggie Smith et al on how it’s done.