We have talked about WeWork on a few occasions in this forum. WeWork operates a handful of coworking office spaces in various cities around the world. There isn’t much to the business but investors continue to fall in love with it. Recently the Wall Street Journal reported that Japanese investment giant SoftBank Group was exploring investing “well over $1 billion” in the company. If Softbank closes on the investment, it will imply a valuation for the entire company of more than $17 billion.
The people at Softbank are supposed to know what they are doing. But for the life of me, I cannot understand what they see in the company. While WeWork spaces impress with enough single origin coffee and flavored water to re-hydrate the thirstiest of techies, we are still talking about “office space.” There is nothing stopping another landlord from designing a similar office.
This point was driven home a few weeks ago when my colleague, Steve Johnson, visited and I found myself scouring the New York City digital map for larger temporary office space to accommodate the two of us. Everywhere I turned, a new website popped up offering temporary workspace. Some offered their own offices like WeWork. Others like peerspace.com and liquidspace.com provided digital platforms by which anyone with an empty office could rent it out by the hour. And then there was airpnp.com. PnP – get it? For those truly enterprising capitalists willing to rent out their bathrooms on a per use basis.
While the vast majority of my choices tended towards the traditional drab corporate office suite, plenty offered a bit of pizzazz. At this point, WeWork can’t even claim to have the trendiest space in town. We thought the company was overvalued compared to coworking peers like Regus, but it looks like the rank and file are getting into the shared economy as well. Take away the exposed ceilings and kegs of beer, WeWork is simply a real estate business that Softbank seems to be confusing for a tech startup.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.