WeWork Rise Helped by Wall Street's Cash and Credibility

WSJ What's News


Now our main story this morning it has to do with we work. But this time we're not going to be looking at co-founder founder of Newman's behavior or a soft bank's role in funding the company's rise. Instead we're going to turn to Wall Street reporting that part of what fueled we works. Rise was access to large loans from institutions like J. P. Morgan and Wells Fargo but even as the banks lent millions internally. They worried about the weak company. Charlie Turner are has been finding out more from David. Benoy Te David we works rise and fall was pretty dramatic. What happened to the office? Space Leasing Company. I mean it was a Wall Street Darling with major banks jockeying for a role in the company's IPO lending at hundreds of millions of dollars. Sure Yeah I mean certainly I think when a company loses forty billion dollars in valuation. There's there's a lot of blame blame to go around What what we've been looking at recently is sort of in the rise section of that of that narrative how Wall Street financing really power our this company and it was lifeblood in a lot of ways in a way that we haven't really explored before? Well what about the conflict between the banks basically building up this company and questions about its money and also its business model so what we found was that inside the banks on their lending side. They were pledging these. These large urged lines of credit to we work five hundred million and six hundred and fifty million and then they had struck this deal with the IB over six billion dollars in debt. I A huge loan really on on any scale for for a company like this but internally they were they were actually pretty concerned about we have reporting back through two thousand seventeen of banks blanche at the model that we work was doing it. It's cash flow insane. Well Horse Second. If we're going to give you money we're GONNA need one a lot of protection that you're GonNa pay this back and you know we're going to do a lot of fees so that six billion dollars came with two hundred and fifty million dollars of fees okay. Well that was the fees end of what about the money end of it on On we works day was it was chronically bleeding cash right right. Their their model was to essentially bleed cash. They willfully did not make money while they grew we works. Rises really elite. Fueled by by these bank lines of credit so the way the company works is it goes to a landlord signs a long term lease the landlords at the beginning need a bank letter. Just like when you rent engine apartment you might need a guarantee for a few months upfront. So the way we were structured this was they went to the banks and they got these big pots of money and they took parts of those and would send them out as letters and they'd come back and I was how we work was able to grow at such a rapid rate. Even though it wasn't bringing in cash it didn't actually need the cash to grow in needed. These bank financing lawyers. Why don't you talk about wells? Fargo and their role. Sure so so wells. Fargo's an interesting player in this because they're not typically known as a as a Silicon Valley type bank they're not typically the big IPO bank. They got involved in two thousand seventeen and what our reporting turned out was actually kind of a big deal inside Wells Fargo and they got pretty worried and what they they were worried. Read about the the cash flow. The company are worried about Mr Newman and his personality. Essentially and so we heard that the the loan went through several rounds of appealed field and got rejected internally by the bank and ultimately had to be signed off on by top executive and that just shows that's just one example we think of showing inside the banks there were actually the legitimate concerns about what was going to happen. We work there weren't really portrayed out externally until the IPO fell then Where did things start to go sour for for we work As it approached its IPO date or it's planned IPO date. Sure so the banks are giving all this money trying to help take it out public to investors and that's when it starts going sour they put up the perspectives that details. What we work is in all of its dealings and investors say well? We're not comfortable comfortable with that somewhat. Echoing what we had found out the banks had been internally saying. When is this company going to turn a profit? When when are we going to be able to reap some of the awards if we work in investors said? We're not buying this at the valuations. You think it's worth

Coming up next