WeWork, Softbank & the IPO Super-Cycle: Melting
As WeWork & SoftBank are back in the spotlight, we thought it might be good time to share some updates as well as our November 2019 note.
WeWork accelerated its cash burn by $1.4 billion in Q4 2019:
- Nearly all the cash injection backed by SoftBank
- Compared to a 2.2bn loss during the first 9 months
- The bond is now trading at distressed value, down to 30% from 105% in September.
At the macro level, the Bloomberg LP Startup Barometer is down 41% YoY, with the number of deals/first financings & exits (IPO or sold) all down by 50% or more. VC-financing started to weaken in 4Q 2019 despite the raging Fed-induced stimulus.
The COVID19 shock is now exacerbating the trend. VC firm Sequoia Capital warned of the ‘Coronavirus: The Black Swan of 2020’ (download available for readers), while the IPO doors are now closing for unicorns like Airbnb. Back then, we were arguing that some of the excesses of the ‘Everything Bubble’ were coming unglued. We looked at:
1- The ‘cult of the founders’
2- The (weakened) role of VCs and board members
3 - SoftBank & its ‘Vision Fund’
4 - Challenges to the upcoming “IPO super-cycle”
If you’d like to receive/download the following publications, please share this post and leave a comment:
WeWorked (ed out the system): An early end to the IPO ’super-cycle’
Sequoia Capital’s ‘Coronavirus: The Black Swan of 2020’
Etienne de Marsac is the Associé Head of Absolute Return Strategies at Sunny Asset Management.