Today just finished reading on Wework titled 'Billion Dollar Loser: The Epic Rise and Fall of Wework'. A very interesting read. My key takeaways are as follows:

- Masayoshi Son primarily uses his instincts for due diligence. Masa liked to say that while his team might perform months or diligence on a company, "my first instinct in the first few minutes is sometimes more meaningful. He often compared his deductive powers to another guru: "Yoda says use the force. Don't think, just feel it."

- To meet NASA's growth expectations, there was literally not enough real estate in West Coast cities to reach those numbers.

- Wework's business model was leveraged bet on flexibility. As compared to traditional real estate business, Wework would take a building on long term lease basis, spend significant amount to upgrade the building to make it desirable office space for GenX and GenY workers and then offer the office space in small units and on short term contracts. Problem with the model (apart from mismatch in expenses and revenue timelines which are peculiar to real estate business) are multifold 

a) Own versus lease: When you own a real estate property, you can choose proportion of debt and equity whereas in leases, lease payments entirely act as financial leverage. Secondly, in case property prices rise subsequently, equity component builds up implicitly, reducing effective leverage. 

b) Explosive growth required to meet NASA's expectations would be adding to explosive leverage on top of operating losses

As against last valuation of $47 bn at which SoftBank had invested, company's valuation at the time of IPO was pegged at $20 bn whereas Prof Aswath Damodaran had valued the company at $ 13 bn. Much below the expectation.

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