I don’t know if you know the case A real estate company specialized in setting up coworkings, offices for companies. It was in full swing of valuation and consideration, about to go public… when David Bonilla published one discovering his shame.
It was Bonilla saying it… and international analysts began to publish negative reports about WeWork: that if their data were pure imagination, what a dark management of its CEO…
In the end, things ended badly. CEO expelled from the project and his majority partner trying to lift itbut very far from the assessment and image it had.
So we wanted to talk to David Bonilla, a man from Madrid who declares himself “proud Galician by adoption and militant” so that he can tell us how he feels after sinking WeWork. And by the way, talk a little about coworking spaces, startup evaluations and, of course, a little about his Galician language, his La Bonilista newsletter and how Tarugo Conf was.
4:24 You announced in Tarugo that your newsletter, La Bonilista, was going to start being published in La Voz de Galicia and you stated it as “I have to win my father-in-law’s heart.” How is that conquest going?
Well, my father-in-law’s heart is cold and hard as a stone, but I have taken an important step by publishing in La Voz, because as a good Galician it doesn’t matter if you appear in the New York Times, everything that is not in La Voz does not exist. Posting there makes me very excited.
4:50 And a while ago you set up a recruiting company called Manfred. Where does the name come from?
Well, I could invent anything, but the truth is that the domain, the Twitter account was free and it was something that sounded the same in practically all languages, and we didn’t think about it anymore. The name is a label, the important thing is what’s behind it, look what a horrible name is Google or Twitter.
8:22 The focus issue that I’ve mugged you for is how David Bonilla viciously murdered WeWork’s global expectations, causing its IPO to fail. Do you feel responsible?
Totally, I feel super guilty, to think that this kid Neumann had them all and suddenly has to leave with 700 million of nothing. If we ever agree, I will tell him that I am very sorry, that those 4 or 5 billion have been reduced to 700 for a list written by a Galician.
9:33 Tell us a little in perspective what made you notice the case to write about it in your newsletter
to start that I work from a coworkingis a topic that touches me a lot, that I have looked at a lot in terms of prices and others, and one thing that we have not commented on is that it is a company that has been set up by lungs and every euro is looked at.
It has always caught my attention at the price level and other reasons why it charged double or triple that of other coworking spaces, so I always had a bit of an eye on it and all its figures seemed a bit crazy to me. Basically what I did was comment on it and with the data that they published in the brochure that they took out for that IPO that in the end was unsuccessful.
10:23 What was your analysis? For those users who have not yet registered in the Bonilista.
After much thought about why people pay so much to go to WeWork, I came to the conclusion that they paid a premium, a surcharge per molar, being in WeWork is like “Wow, you’re there”, with super nice offices, super central in the cities, but little else, and there was no logical justification for paying that premium.
And as soon as you investigated a little you realized that the entrepreneur who paid that premium was really the product, not the client, because the bulk of WeWork’s income did not come from the small company, but of the large companies that asked him to make large spaces.
For example, a Microsoft arrived and asked for 400 positions, that you open 3 floors just for me, and if you scratched you saw that on the one hand it was because of having that flexibility at the space level, but also for being close to that molonism, close to these large corporations, a premise that is based on the fact that if they approach innovative companies by pure osmosis, they will also be innovative. That’s WeWork.
12:19 It amazes me that when it fails, everybody’s going to kick the shit out of it, but the hard part is seeing it first. In the end what there is is a loss of awareness of what money means.
I think here comes a perfect storm of several things. The first is that companies that borrow money now have it much cheaper than before. On the other hand, real estate is relatively expensive, and the latest, I think access to investment has become more and more democratized and that is very dangerous.
Before, only big investors invested in an IPO, investors who loved corporates. Now anyone can buy almost anything: Nasdaq stocks, and that power and freedom without context and without information is very dangerous.
When an investment bank makes a valuation, it is subjective, because it is an agreement between the one who buys and the one who sells, but it is true that there are some practices that make banks value things and one of them is the simple comparison.
In WeWork there was not much else, your assessment did not make sense. If it is true that in an IPO not only the current figures are taken into account, but also the expectation, the truth is that it was going very high, and there was no comparison, for example, with Regusa coworking company that already existed, and invented their own cool brand which is spaceswhich was worth a fraction of WeWork, having many more offices and making a profit, unlike WeWork.
I think what made everything explode was the infamous information brochure with which they intended to go public, which were several banking and stock market analysis firms, said that it was a masterpiece of obfuscation, that is, of trying to hide information. That, together with an operational governance that smelled very bad.
For example, the company itself lent its CEO Newman money to buy a building, which Newman then leased to his company. They were part and art.
Another maneuver to try to save taxes was that he owned the brand and rented it to the company. Crazy. That along with the investment fund that is behind all this, soft bankit was already kicking up enough dust: it was the perfect storm.
20:06 If you were to find a silver lining to this, it’s that the stock market filter worked in this case.
Yes, but I think that, for each of these, there are 7 or 10 operations in which normal people like you or me palm graze. It is true that they always tell you that, if you see the history on the stock market, in the long term you usually make money, but you have to know, and if you don’t know, you are sold because there will always be someone who knows more than you.
If you don’t know much about the stock market or don’t have time to be on top of it all day, it’s best to put your eggs in many baskets instead of just investing in one company. I think there have been many people who have gone crazy to go to these IPOs, not only in the normal stock market but also in the ICOs (initial coin offers) of cryptocurrencies, and basically it is partly to blame for that democratization of access to investment that It is not accompanied by minimal training.
https:///world-most-valuable-startups/
22:41 What has happened with the WeWork case? Since you published your newsletters, how did the story end?
The CEO resigned or basically they resigned him. The company left with the agreement “you leave, you leave us all the shares”, I think it kept the minimum participation with this agreement of 700 million, something that for anyone is a lot, but the truth is that I think Softbank had few more options, since he owned the brand, and if he wanted he could continue there until the end and it would sink completely.
The truth is that they had a certain urgency, and the bank’s money did not give them much more, and they had committed loans linked to that IPO. For Softbank it was to make that last bet, or put a zero on your balance.
We must also take into account that they were about to raise their second fund, they now have to justify it to their own investors. In the first fund they believe you because you have no history, but in the second they judge you for what you do in the first.
25:55 What’s your prediction? What do you think will happen to WeWork?
Suddenly everyone is against WeWork, everyone knew and no one was talking. I don’t like to make firewood from the fallen tree, I saw things that I didn’t understand and the reflection I made was that the companies paid simply for molar and I don’t see any more value in it. But I I don’t think WeWork is a chestnut, I think that what they do makes all the sense in the world, I don’t know if they are charging money, but on paper it makes sense.
I believe in the coworking model, but one thing I didn’t understand about WeWork is that they said that they rent with flexibility, but then they say that their average contract is one year. Of course, for a large company it is very flexible
WeWork was perfect because it allowed annual budgeting, and secondly it grew very quickly.or, and it is that these companies look for a unique supplier. I don’t know if it’s the money he charged startups, but on paper the coworking model has a great future, what happens is that prices have to be adjusted, and that overpricing is what has gotten out of hand.
Update October 2020: WeWork has put its business in Spain up for sale. The American multinational has put its Spanish subsidiary on the market and has commissioned its sale to the real estate brokerage firm C. B. Richard Ellis. Such is the financial crisis in which the company finds itself that its reference shareholder, the Japanese bank Softbank, has had to inject another 1,000 million euros last August through a preferred debt issue.
30:09 The interesting thing that is coming out now is that the logical parts of the model are coming out, which gives WeWork, just like Spaces and any coworking, that flexibility.
It’s not bad to be cool, and it’s all part of the marketing. Sometimes the super-offices that have giants like Google, Apple or Facebook get in our eyes, and that’s cool for cool and it’s part of marketing, what happens is that it’s not marketing for pure sale, but to get them to have much more resumes, and that is For a long time in Spain, the IT worker’s workplace was the basement.
36:15 In the end, this type of news ends up dirtying the startup scene a bit again. Do you think there are many WeWorks that we should be aware of?
I think there is everything. WeWork sold itself as a technology company, and for technology it had zero. They did have their own app, but WeWork is a real estate company. The theme was to achieve the valuation multiples that technology companies obtain and are given by pure scalability.
If at WeWork you want to sell a thousand more jobs, you have to rent real buildings and refurbish them and do construction work and ask for permits. When you sell software you don’t have to do any of that. Google can sell to a million or a hundred with the same infrastructure and template and this…
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