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When Los Angeles County dropped its mask mandate in March, I stopped wearing a mask. So did most people here.
That said, I took the pandemic super seriously for two-plus years, following all public health mandates and recommendations. However, it was psychologically convenient to go with the prevailing ethos that the worst is behind us and most cases are mild, if not wholly asymptomatic.
Over the weekend, I tested positive for COVID. A textbook mild case. If this is mild, I don’t want to know what moderate or severe looks like.
Be careful out there.
The Upside Of Being Sick In Bed
My girlfriend (she tested positive too) and I can binge-watch more TV than normal.
Last night, we watched the Hulu documentary on WeWork (WE).
I highly recommend it, if you appreciate both sides of tech:
I don’t recommend the Netflix serial depiction of WeWork – WeCrashed.
It’s over the top and portrays WeWork founder, Adam Neumann, to be more obnoxious and secure with himself than he actually was. Just the type of lame dramatization you’d expect from Hollywood.
That said, all of this talk about WeWork got me thinking about the company’s stock. Come to find out there’s more going on with it than I thought.
Bet You Forgot About This Disaster Of A Company
Before we dive into present day WeWork, a little relatable story.
When I lived in San Francisco at the turn of the century, there was a company called Webvan.
Turns out Webvan was ahead of its time. Webvan was a grocery delivery service.
Place your order online. Pick a delivery window. Webvan does your shopping for you, then brings your order to your doorstep. So commonplace now, but super novel in 1998.
Webvan Was A Massive And Quintessential Dot-Com Bust
Someone needs to do a documentary on Webvan.
Similarities To WeWork
WeWork’s big downfall was rapid expansion, encouraged by investors such as Softbank, who gave the company billions.
WeWork bled cash on this expansion as well as luxurious offices and cult-like company parties and retreats.
In 2019, investor pressure led WeWork to withdraw its IPO application over concerns about lack of profitability and corporate governance. Neumann resigned as CEO, but walked away with billions, including nearly $1.7 billion from Softbank so he’d cut most ties with the company. Oddly, Neumann stayed on in a consultant role with a $46 million salary.
After some downsizing, which included slower growth plans and ending free beer at its North American locations, WeWork finally went public in 2021, not via IPO, but through a special-purpose acquisition merger (SPAC).
Today, WeWork trades at around $6.82 per share, down from an all-time high of $14.98 and off roughly 26% YTD.
Interestingly, there’s some optimism on Wall Street, some of it as recent as the past week.
Piper Sandler suggests buying WeWork stock, saying the company could turn a profit within two years. This would be quite the accomplishment, given WeWork lost $4.6 billion in 2021, up from a $3.8 billion hit in 2020.
This didn’t stop another analyst firm, Mizuho, from arguing WeWork stock could double over the next two years. They say WeWork will benefit from the post-pandemic work transition to more flexible and hybrid models.
There is data to back up this optimism.
WeWork’s 2021 membership includes 63% of Fortune 100 companies. It has enterprise deals and partnerships with major names, including Cushman & Wakefield and Hudson’s Bay Company.
At its 756 locations across 38 countries, WeWork membership does trend enterprise and long-term.
Source: WeWork 2021 Annual Report
Current WeWork management has obviously shifted focus from Neumann’s original idea of bringing individuals together to create community (like a kibbutz) to a more traditional, corporate-skewed co-working model.
Worth noting that WeWork doesn’t show up in our proprietary Trackstar data of the stocks investors are searching for, including in the Real Estate Services category (see the top of this email). This just might mean it’s truly flying under the radar.
The Bottom Line: We’ll keep an eye on WeWork here at The Juice.
The Wall Street upgrades might be jumping the gun, particularly when you consider the company’s massive losses.
That said, if WeWork belongs in your portfolio at all right now, it belongs in that speculative segment we love to talk about. That 5% or so where you keep the stocks with huge risk, but equally as large reward potential. Ones where you see the potential for the type of turnaround stories that can generate meaningful upside, such as a double or better.
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