David Rosenthal: evaluation

Transcript context

…They’re one of the most highly-leveraged companies that exist. If you look at it, they would make a privately equity person blush. Exactly, and now if they almost unconsolidate this balance sheet, jack up the liabilities on the balance sheet, that’s going to torpedo their debt ratings at the corporate level. That’s going to increase their cost in capital hugely. That’s terrible for the company. I think they’re doing all these gymnastics to, (a) avoid that from happening, but then (b) why do all these gymnastics? Then you go back to the Vision Fund. At this point, I don’t even think it’s about raising Vision Fund, too. I think it’s about just trying to salvage Vision Fund I. They can’t let WeWork go to zero because the alternative here is WeWork is going to die as you said in a month. Dan. The thing that’s interesting is, this is still a real business. I’ve seen the oldest, the next Theranos. No. Theranos didn’t have a product. Didn’t work. This has a product that works. Go to any city. There are people who went to work this morning to WeWork and not who work for WeWork. Lots of them. They have real buildings as buildings still exist, all that stuff. There will still be thousands of employees left even after the massive layoffs. Obviously, certain facilities will close that are underperforming. Obviously, expansion slows down. But it is a real business. I will say that the word “SoftBank” isn’t arbitrary. “Soft” is the software piece, I believe. I’m a tech visionary. But the “Bank” part is important, too. He is a financier, so the stuff you said about balance sheet, that’s all real. I will bet that SoftBank still believes long-term there can be business here. The one thing about Masayoshi Son that I’ve always found fascinating is he made an enormous amount of money in the dotcom boom. I saw him sitting next to Bill Gates at one point. He said to Bill Gates, “At one point,” he said, “in the late 90s, I was richer than you.” He said, “Two weeks later, I was broke,” and that’s true. What happens to most people who went through that, the dotcom boom, Andreessen talks about how people who went through that are too risk-averse. That’s true. Usually, you are because you were so scarred by it. Masa went the other way. Masa decided to take up all that risk again and he caught the Alibaba train and he did great with it. And then he decided to I go over the top. That’s why he’s so unusual and I would say with this, he might look out and say, “Things are really bad right now, but there is a business. I still believe in the thesis of the business. Maybe the management got away from us. If I can get in what I believe is relatively cheap and control this thing, maybe we can make it go with this. Here is my attempt to put a bow on the whole thing. We talked about this in the Vision Fund episode. It was the largest fund of any type, any asset class raised ever masquerading as a venture capital fund. Well, that doesn’t make sense. Venture capital fund should be bigger than private equity funds. Is this an unmasking of the Vision Fund for what it is is a private equity fund. And when you look at this, they just made a $1.5 billion equity purchase that now has them owning a majority of the company. Oh, and they’d levered of $5 billion of debt on top of it? Wait a minute. I’ve seen this played before.…

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