Monday, October 28, 2019

Jassim Mohammed Al Seddiqi: Renaissance Man In The Gulf

Jassim Mohammed Al Seddiqi

https://www.marketscreener.com/business-leaders/Jassim-Mohammed-Al-Seddiqi-0C4FQM-E/biography/ He received a graduate degree from Cornell University and an undergraduate degree from the University of Wisconsin.

https://www.gfh.com/board-of-director/jassim-alseddiqi/ He brings extensive investment expertise, and is known for his dynamic and innovative approach, having pioneered investment strategies in the region.


https://www.cnbc.com/2018/04/18/cnbc-interview-with-abu-dhabi-financial-groups-ceo-jassim-alseddiqi.html

https://twitter.com/jassimalseddiqi

https://www.arabnews.com/node/1175136/business-economy In just a few years, Jassim Al-Seddiqi has become the “go to” financier in the UAE capital Abu Dhabi, and made the company he runs — Abu Dhabi Financial Group (ADFG) — one of the most important investing institutions in the Arabian Gulf. ………. Now Al-Seddiqi, 33, is increasingly switching his attention outside the UAE, and the new economic environment in Saudi Arabia is certain to play a big part in that global focus. “The Saudi privatization program and Saudi Aramco share sale will have a massive spillover effect for all of us,” the ADFG chief executive said. …….. ADFG has gone global in the real estate business, with high-end residential and commercial property, warehouses, shopping malls and hospitality assets across the UK, Middle East and Eastern Europe. …… The “Goldilocks” concept is a new one for regional investors. Al-Seddiqi aims to replicate the strategy of “activist shareholders,” where a shareholder actively influences management toward optimizing the value of the shares, which is something quite common in Western markets. He calls it “constructivism,” or constructive activism, and he has used the tactic in relation to Shuaa and to GFH Financial, the Bahrain-based firm whose shares are listed in Bahrain, Kuwait and Dubai. …….. “Typical opportunities which Goldilocks invests in are companies whose intrinsic values are not recognized by the public market due to complex corporate or capital structures, asset mispricings, under-researched or ‘below the radar’ coverage, inefficient management and the lack of industry or market expertise in extracting value. We seek to add value through board representation and management engagement while investing for the short- to medium-term,” Al-Seddiqi said. ……… Abu Dhabi could also be a model for how the Saudi Arabian financial center might develop over the coming years in the course of the Vision 2030 transformation away from an economy based on oil and public sector dependency. ……. the Kingdom’s $200 billion privatization program launched as part of the transformation program. …….. Lifting the driving ban was a very big thing ……… The Saudi economy is very important for the region. If you’re not involved there, you are not doing the job properly ……. Al-Seddiqi’s rise has been fast, and his ambition is big. One foreign banker in Abu Dhabi said: “He’s the rising force in the UAE financial scene, and could make ADFG into a regional financial powerhouse. He’s the face of the next generation in the Gulf.”

http://www.gfh-capital.com/board-of-director/jassim-al-siddiqi/

https://www.arabianbusiness.com/banking-finance/408595-master-of-the-turnaround Abu Dhabi Financial Group founding CEO Jassim Alseddiqi on what it takes to succeed - no matter what the economic conditions …….. how he’s gone about establishing and leading ADFG to become one of the largest private institutional investment houses in the Gulf region in just eight years. …….. ADFG has grown its assets under management to $20bn, with investments across platforms including debt, private equity, public markets, real estate and technology. And often there is a focus on special situations. Distressed debt? Bring it on. Event-driven situations requiring capital? Out comes the cheque book. “At the right price, we buy.” he insists. …….. We wait and see how markets or companies go up and down and then catch things as they fall ……. Bahrain-based investment bank GFH had lost 92 percent of its market value between 2008 and 2015. But since ADFG executed its turnaround strategy, the stock has gained 208 percent on a total returns basis. ……. “We call them fallen angels.” ……. ADFG is a brand that was born in adversity. …….. In November 2010, Alseddiqi was busy working with two colleagues to put together plans for a growth fund in the Middle East. “We prepared all the documents and in January 2011 we officially started the firm. And then the Arab Spring started,” he recalls. “So there went our growth thesis!” …….. Instead of rueing their bad luck, they pivoted to work with distressed opportunities. ……. “Those initial circumstances made it relatively easy for us to succeed in the subsequently difficult times that we have witnessed,” he says. ……. ADFG’s strong network, holistic platform and track record has made it easy to devise great opportunities that have become part and parcel of the firm’s operations. …….. “Origination sometimes is more important than execution and exit,” he adds. “It used to be more difficult in the past, especially when we started. But since everything was in shambles when we started, origination was really anything you touch.” ……. But what really goes wrong at these companies for them to land in trouble in the first place? The master of turnarounds chalks it all down to just the one thing: management. …… Asked if market conditions are also to blame, Alseddiqi’s response is an emphatic ‘no’. …… Turnaround tactics to weather these storms include the popular US-style zero-based budgeting process, leveraging the power of the ADFG network and its companies for business development, and a management overhaul. “Zero-based budgeting means you start from zero and then add incrementally to reach a stage where you can function, rather than starting with a budget and then cutting-down from it,” the CEO explains. “Turning around is really two things: stopping the bleeding – cost cutting – and then growing,” he adds. …….. In the case of Shuaa, for instance, ADFG took over the company’s board in the December of 2016 when it bought a 48 percent stake. Between 2009 and 2016, Shuaa had lost a total of AED2bn. “We looked at the cost of the firm,” Alseddiqi discloses. “Then we eliminated almost all the fat. But that doesn’t mean you are firing people. In fact, we have more people in Shuaa today than two years ago. We go for cost efficiencies, and we also started using our platform to give it the business. Plus we shut down some non-performing units and revived others that were failing.” ……. “We pushed and recovered assets from ex-management of about $500m, and we gave it a lot of business,” Alseddiqi says. “We supported their investment products by bringing clients to invest in them.” ……. The result, he adds, is that GFH is today the most profitable listed investment bank in the Middle East. …… “There’s nothing Middle Eastern about Abraaj,” he asserts, adding that it is “unfortunate” and “disappointing” that the scandal is being linked with the region. …… “It’s not like a gang of Middle Eastern people are running Abraaj. The board is made up mostly of Western figures and the team is not majority Middle Eastern. They have an office in New York, in London, in Columbia, Brazil, Singapore... the base is in the Cayman Islands. So what is Middle Eastern about Abraaj? ……. “If you invest in a growing company then you keep on growing,” he says. “But what’s special is turning around something. It proves that what was coal can also become a diamond.” ………. In addition to his prime designation at ADFG, Jassim Alseddiqi is also a sought-after board director and chairman for major companies, actively participating in the development of these companies’ strategic plans and leading their growth and development. …….. He was appointed to the advisory board of the MIT Technology Review Arabic and been an observer member of Hyperloop since 2017.










































Turnaround Artist

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In the first nine months of 2019, our revenues hit US$254 million – marking a 23.7% increase from the same period in 2018. Additionally, we recorded a net profit attributable to shareholders of US$73.6 million, indicating a growth of 61.4% from the same period in 2018 when excluding one-off recovery income and restructuring income in the first nine months of 2018. These results were supported by solid contributions from our diversified business lines, including our investment banking, real estate activities, treasury and proprietary investments. Follow the link in our bio for more details. خلال التسعة أشهر الأولى من عام 2019, بلغت إيراداتنا 254 مليون دولار أمريكي – و ذلك يمثل زيادة 23.7 ٪ عن نفس الفترة من عام 2018. بالإضافة إلى ذلك ، سجلنا ربحا صافياً يؤول إلى المساهمين قدره 73.6 مليون دولار أمريكي ، مما يشير إلى نمو بنسبة 61.4 ٪ مقارنة بنفس الفترة من عام 2018 مع استبعاد الدخل المحقق لمرة واحدة من الاسترداد وإعادة الهيكلة خلال التسعة أشهر الأولى من عام 2018. كانت هذه النتائج مدعومة بمساهمات قوية من خطوط أعمالنا المتنوعة ، بما في ذلك الخدمات المصرفية الاستثمارية وأنشطة العقارات والخزينة والاستثمارات الخاصة. للمزيد حول الأداء المالي للربع الثالث 2019 تفضل بزيارة الرابط في البايو. #DeliveringDistinction #TeamGFH

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Sunday, October 27, 2019

My Real Estate Tech Startup Has A Loan Investment

12/19/2019 Update: Fraud Alert: No Harm Done




On October 7, 2019, an investment firm out of Bahrain approved my loan request for $6.1 million. The terms of the loan are excellent. Thank you Noor Almuna Investments Company.

Status of the loan: Approved but pending.

Efforts are also underway to get some real estate companies in the region to invest in the form of convertible debt. At this end, I am also looking to raise a small Seed Fund.

The Next Wave In Innovation: Reimagining Entire Industries
Noor Almuna Chairperson: Jassim Al Seddiqi, the Michael Jordan of Gulf Finance.

There is tremendous pressure in the Middle East to diversify. On the other hand, tech entrepreneurs like me with a Global South background see the confluence of capital and technology as the hope rainbow that will allow for a fundamental uplift for the Global South masses in socio-economic terms.

I have seen numerous rejections over the years and decades. And the ratio of pitch emails that did not even see replies is even larger. But the rejections allowed me to ride wave after wave of changes in technology, intellectually speaking. They allowed me to study the tech startup as if it were some biological specimen. And, because what will happen in tech over the next 25 years is at least 100 times bigger than what has happened over the past 25, all those rejections make for perfect timing in hindsight. There never has been a better time to be a tech entrepreneur than right now.

It takes a lot to build a successful company. In recent years, I have undertaken spiritual journeys that shape what I call the six core values of my company’s corporate culture. Corporate culture is everything. Corporate culture is make or break.

As I see it, tech entrepreneurship is the best way to do the most good for the largest number of people on the planet. If you think the Internet is big, know that the Blockchain is going to be at least 100 times bigger. The Internet has democratized media. The Blockchain will democratize money.

My real estate tech startup is going to be the first of my several tech startup companies. But the real estate space is great because it attracts major investments. Concepts and ideas are harder to explain. But land and houses, most people understand.

The next wave in innovation is reimagining entire industries. You turn atoms into bits. Not literally. But by adding tremendous intelligence. My gameplan is to do that in real estate and revolutionize homeownership in the 100 biggest cities in the world, starting in NYC. We used to make clothes with hands. Then we started using textile mills. We still make houses with hands. We need to start using factories. Costs come down dramatically. Quality goes up dramatically. This is not real estate like the Trump Organization. This is tech like AirBnB.

After my loan was approved, but before it is formalized through the money transfer gives me a narrow window of opportunity to raise a Seed Fund. Usually, you go into round one not knowing if round two will ever happen. That is the risk you take. But here round two is already in the bag. And I still have found it near impossible to get people in my immediate circles to invest. At some level, I found it perplexing. On the other hand, being a successful angel investor is a rare skill. Successful angel investors are much rarer than heart surgeons. How many heart surgeons are there in my immediate social circles? Well, how many angel investors?

Homeownership is a major pain point for most New Yorkers. I see it fundamentally as a demand-supply problem. There is this huge demand and meager supply. My company would like to revolutionize that. We start in NYC and go to cities across the world.

The techies are in India. The money is in the Middle East. And Silicon Valley is no longer geography. It is wherever there is internet access. What is the optimum city culture for tech and innovation? I believe the answer is still out there.

Africa and South Asia are the next two Chinas. And Dubai could be for both what Hong Kong has been for China. More than 60% of the Foreign Direct Investment that goes into China goes through Hong Kong. That number used to be larger.

$6.1 million is a lot of money to raise. And I am thankful to my investors. Thankful enough that I have promised them I will give them first preference during the next two phases. But I am already thinking in terms of much bigger raises and much bigger ventures. I intend to build a city inside the city of Dubai, a tech city that will aim for the optimum city culture for tech and innovation.

The Gulf countries have a 10-year window to diversify or face decline. Clean energy technologies are seeing exponential advances. At some point oil simply gets priced out of the market. But money is the new oil. I see room for a Blockchain-based effort to take identity and the basic financial services to the final billions. That idea deserves 100 billion dollars more than does Masa Son’s Vision Fund. The tech city I will build inside Dubai might be the best location for the idea.





























Jassim Mohammed Al Seddiqi: Renaissance Man In The Gulf
Grammarly 99
Construction Innovation
Remote Work Is Not Either Or
Entrepreneur
Silicon Valley And Dubai
To: The Crown Prince Of Dubai
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Dubai's Remarkable Economic Transformation



















Turnaround Artist





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Saturday, October 26, 2019

The Megacities

The World’s 33 Megacities
Megacity A megacity is a very large city metropolitan area, typically with a population of more than 10 million people.
Ed Rendell Backing 300mph Bullet Train: DC to Philly in 40 minutes?

Tokyo, Delhi, Shanghai, Jakarta, Sao Paulo, Mexico City, Cairo, Mumbai, Beijing, Seoul, Guangzhou, Manila, New York, Shenzhen, Lagos, Kyoto-Osaka-Kobe, Wuhan, Los Angeles, Dhaka, Chengdu, Moscow, Chongqing, Karachi, Bangkok, Tianjin, Istanbul, Kolkata, Tehran, London, Buenos Aires, Hangzhou, Rio De Janeiro, Xian, Paris, Changzhou, Kinshasa, Lahore, Rhine-Ruhr, Shantou, Nanjing, Bengaluru, Jinan, Chennai, Harbin, Bogota, Nagoya, Lima.


Elon Musk's boring company's top contribution to humanity could be that now every megacity, city and town on earth can hope to have cutting edge sewage systems. They don't have to dig up roads. Machines create tiny tunnels underground at rapid clips.

These cities should all look into vertical farming where Singapore seems to be in the lead.

Ultracity is 100 million or more. You deliberately create. A prime target would be the DC to Boston corridor. The component cities continue to function as independent jurisdictions. But ultracity is an infrastructure play. Transporation is hyperloop. Food is vertical farming. Crime control is biometric ID and the Blockchain. If every transaction is on the Blockchain, how do you steal money? You can't.




















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Wednesday, October 23, 2019

Can WeWork Be Rescued?

I have not read too much on this topic, so I will refrain from taking major stands. I will keep my comments to the minimum. But some outlines are obvious even if you just skim the headlines. And WeWork has been making the headlines for all the wrong reasons recently.

Is this like throwing good money after bad? Maybe not. Without this cash infusion, all of Softbank's earlier investment would have gone to zero. I think they had $30 billion into it. Which was a stupid sum to begin with. 30B is a lot to give a company.

The basic business model of WeWork was not and is not unsound. You grab larger properties in big cities, slice them up, and rent out individual desks. I can see a margin there. That can be profitable. But is this scalable? Can it see exponential growth like tech startups are expected to have? Maybe, maybe not. But it looks like WeWork ended up having some major governance issues. Bad governance on its own can kill. But sometimes if there is too much dissonance in what you say you will do, and what you perform, that can lead to governance constipation.

This cash infusion has prevented the immediate death of WeWork. But now Softbank has 40B in this venture. Can this be recouped? Fast enough? I am not sure. I don't know.

WeWork has created some great coworking spaces. I have visited many of them. In fact, I have seen the company from its infancy. I have been impressed. It has grown right before my eyes. Too bad the insides have been less remarkable. I hope WeWork sticks around. But I feel sorry for Masa Son. This 40B is going to be too much of a drag on his 100B Vision Fund. Now there is tremendous pressure on the other 60B to perform. This 40B will not give him 10X, which is considered excellent by VCs. And this might still go to zero. So that is a lot of pressure.

There is plenty of early-stage action. There is more early-stage tech startup action now on the planet (and I mean the planet, not Silicon Valley, or New York) than ever before. So I am not going to argue 100B is too big a size for a VC fund. But Masa did not go into WeWork's early stage. He went in when WeWork was grabbing all the headlines.

There are plenty of Yahoos and Alibabas on the cutting edges of technology today. Too bad Masa was caught sleeping on the wheels. We just saw a very expensive firing of a CEO.


WeWork: Blitzscaling or Blitzflailing? Prominent news organizations, ranging from The Economist to Wired (multiple times), have been describing WeWork as an example of blitzscaling. ....... We argued extensively in our book, Blitzscaling, that these strategies and tactics describe why Silicon Valley Bay Area – which has a population of less than 4 million – generates such a massively disproportionate number of global technology companies. ......... If you add together Apple, Alphabet, eBay, Facebook*, Lyft, Palo Alto Networks*, PayPal, Salesforce, ServiceNow*, Twitter, Uber, and Workday*, these twelve companies alone have a market capitalization of $3 Trillion, a little bit more than the annual GDP of the United Kingdom in 2018. ..........

blitzscaling is prioritizing speed over efficiency in the face of uncertainty

........ Blitzscaling does call for prioritizing speed over profits ....... The purpose of blitzscaling is to achieve enduring market leadership in what we call Glengarry Glen Ross markets. A Glengarry Glen Ross market is a winner-take-most market that occurs when being the first player to reach critical scale brings lasting competitive advantage. The term comes from the classic movie about a sales contest where “First prize is a Cadillac, second prize is a set of steak knives, and third prize is, ‘You’re fired.’” ......... Once achieved, leadership in a Glengarry Glen Ross market can provide decades of substantially profitable operations, repaying and justifying the costs incurred in blitzscaling. ......... In Blitzscaling, we lay out the four key growth factors that enable a company to successfully blitzscale, as well as the two key growth limiters that can make the strategy a poor choice. ........ It doesn’t make sense to expend massive resources to win a small market. ..... A good product with great distribution is more likely to win a Glengarry Glen Ross market than a great product with poor distribution. ........ The purpose of blitzscaling is to win the market so that the company can generate massive profits for years or even decades. (Consider Amazon’s evolution from a low-margin retailer to a high-margin marketplace and cloud computing leader.)....... Network Effects (or other competitive moats) ... This is the key growth factor that defines a Glengarry Glen Ross market. Without this growth factor, it’s hard to financially justify the high cost of blitzscaling. ........ two key growth limiters: ... Product/Market fit doesn’t guarantee long-term success, but a lack of Product/Market fit does guarantee long-term failure. ..... Designing a scalable economic model isn’t enough if the company can’t scale up operations to meet demand. This applies to both the infrastructure and the organization. ........ WeWork business model .. in the first half of 2019, the company had revenues of $1.5 billion and expenses of $2.9 billion. ....... Apple’s gross margin is 38%, and Alphabet’s 56%. ..... WeWork with gross margins of just 3% ...... Unlike software, where you can sell as many copies as the customers want, you can’t rent the same square foot of space to more than one tenant. ........ in the end, WeWork’s business model doesn’t provide any lock-in. WeWork tenants can easily move, and many of its co-working members don’t even need a cardboard box to clean out their dedicated desks. ...... it’s not clear that there is a “Cadillac/steak knives/you’re fired” market dynamic at work. ......... WeWork’s occupancy rate of 80% compares favorably to IWG’s 72%. This suggests that customers like the WeWork product. ....... WeWork offers American Express Platinum customers an entire year of WeWork access for free—a $2,700 value that comes bundled with a credit card with a $450 annual fee. Offers like this can boost occupancy but hurt gross margins. Subsidies only make sense in blitzscaling if they are a temporary measure that allows you to achieve market leadership and establish a profitable and sustainable business on the other side of those subsidies. ............. Alphabet invented AdWords several years after launching; Amazon invented AWS more than a decade after going public. ........

While WeWork’s business model checks the boxes on big market, effective distribution, and Product/Market fit, the poor gross margins (with no clear path to significant improvement), operational scalability challenges, and most importantly, lack of network effects and lock-in, indicate that this is not a Glengarry Glen Ross market where you can build enduring and profitable market leadership. Thus, the choice of blitzscaling is likely a dangerous rather than intelligent risk.

............ Hotel companies like Marriott and Hilton have pursued an “asset-light” strategy where they manage the hotels that carry their brand, rather than owning the actual bricks and mortar. Airbnb is completely asset-less, acting as a two-sided marketplace to bring together hosts and guests. ........ we explain why blitzscalers should never take risks that endanger their customers or pose a significant risk to the fabric of society ....... ethical or integrity risks like the self-dealing behavior that reportedly took place under the watch of WeWork’s founder and former CEO, Adam Neumann. ........ the value WeWork created doesn’t appear to exceed the amount of capital expended to build it. ........

Without major changes to its business model, WeWork’s efforts at blitzscaling seem likely to turn into blitzflailing.



SoftBank to Take Majority Stake in WeWork as Adam Neumann Gets Big Payout The deal reportedly calls for WeWork co-founder Adam Neumann to receive nearly $1.7 billion and surrender his posts as chairman and a director. ...... WeWork chose a rescue proposal from SoftBank over a competitive offer from JPMorgan Chase (JPM), although one source familiar with the situation told Barron’s that JPMorgan never made a serious alternative.

WeWork’s IPO Nightmare a morass of ethical, legal and financial lapses was revealed, to which the investor public's appetite for WeWork sharply waned. ....... WeWork, founded in 2010 by Adam Neumann and Miguel McKelvey ....... The company has over 12,000 employees and manages over 600 properties and operations in over 120 cities worldwide. WeWork is said to manage 46.43 million square feet of property. ...... WeWork scouts buildings and transforms them which it has done for Facebook, Microsoft, HSBC, and Deloitte. ........ “[WeWork] happens to need buildings just like Uber happens to need cars, just like Airbnb happens to need apartments.” (Neumann, A., 2014). ....... The Company also has $47.2billion of location lease liabilities, making it one of the top-3 renting companies in the world ...... “what makes WeWork worth more, the company seems to be saying, is that it’s a tech company — meaning its innovation and flexibility make it better than a regular real estate company” ....... About 40% of WeWork memberships came from companies with 500 or more employees in the second quarter of 2019 ........ Through its $100 billion Softbank Vision Fund (“Vision Fund”), Softbank has invested c.$10.65 billion in WeWork, making it the second-largest shareholder (c.29% ownership), after the combined holdings of the founders. ........ Behind the scenes, it was rumored that Softbank was aggressively pushing for the now ill-fated valuation amount of $47 billion; a significant multiplier in the value of its existing shares if they decided to take the option of reducing their shareholding and ‘cut & run’ from a ‘financially risky’ company ......... Adam Neumann bought real-estate property and leased it back to the Company, the founders owned the trademark on the name “We” ..... these actions essentially constitute ‘double-dipping’ ....... While Neumann received benefits of his role as the Company CEO, he could also receive millions of dollars in secondary income through rent and licensing fees. Even though this might not have raised any legal red-flags, it was certainly ethically questionable, because these actions caused a conflict of interest on the part of the CEO. ........ Ahead of its planned IPO, Neumann liquidated $700 million of his holdings in the Company; a legally acceptable transaction, but ethically questionable; such moves, particularly by senior management members, as showing a lack of confidence in the company. These actions (which could have completely been avoidable), which were never explained, also dampened investor appetite in the Company .......

Nepotism within the Company was rife, where family and friends were granted senior roles, many of which they were not qualified for.

‘The company disclosed two connections in the IPO prospectus: One was Adam’s brother-in-law, who ran the company gym. It also said an immediate family member was paid to host eight live events for the company. ......... The chief product officer was Rebekah’s brother-in-law; the longtime head of real estate was Rebekah’s cousin; and for years, the company’s mega summer retreats were hosted at a venue in upstate New York owned by the cousin’s parents, further evidence of self-dealing. .......

Running high personal expenses, masked as business costs; the Company purchased a $60 million G650 Gulfstream private jet

, and spent even more on upgrades, purchases of chauffeured driven luxury cars, and hosting of lavish parties. .......... Its complex ‘choose-your-adventure’ corporate structure; it makes for such a legal-headache ....... All this was a little too late, as research analysts and social commentators had published their ‘hold’ recommendations and scathing reviews of the Company, respectively. ...... “there appears to be no scale effects, as losses have kept pace with revenue growth. There is little pricing power, as they are still a mole on the elephant of commercial real estate.”

WeWTF In frothy markets, it's easy to enter into a consensual hallucination, with investors and markets, that you’re creating value. And it’s easy to wallpaper over the shortcomings of the business with a bull market's halcyon: cheap capital. WeWork has brought new meaning to the word wallpaper. . ....... WeWork's prospectus has a dedication (no joke): "We dedicate this to the power of We — greater than any one of us, but inside each of us." Pretty sure Jim Jones had t-shirts printed up with this inspiring missive. Speaking of idolatry, "Adam" (as in Neumann) is mentioned 169 times, vs. an average of 25 mentions for founder/CEOs in other unicorn prospectuses. ......... We's mission is "to elevate the world's consciousness." ......... We isn't a real estate firm renting desks, it's a Space as a Service (SAAS) firm. I know, use the word "technology" over and over, despite having little R&D and computers and stuff, and voilà … we're Salesforce. ........ Today I froze water and used this technology to reconfigure the environment encapsulating my Zacapa and Coke. So, I'm Bill Gates. ........ We has begun reporting "Community-based EBITDA," profitability before the BITDA, but is also taking out expenses, including real-estate, that comprise the bulk of cost required to deliver the service. A more honest description of the metric would be "EBEE, Earnings Before Everything Else." ........ As someone who follows stocks and goes on TV to pretend I have any idea which direction a given stock is going, I'd like to suggest a few metrics to provide insight into We: .......... Adam Neumann has sold $700 million in stock. .. This is 700 million red flags that spell words on the field of a football field at halftime: "Get me the hell out of this stock, but YOU should buy some." ............. Adam has several family members working in the business who make “less than $200,000." ...... The corporate governance structure of WeWTF makes Chinese firms look American, pre–big tech. ...... The related party section of this prospectus reads like the Trump administration. Adam owns 10 buildings, several that he leased to WeWTF at a handsome profit. Adam also owned the rights to the "We" trademark, which the firm decided they must own and paid the founder/CEO $5.9 million for the rights. The rights to a name nearly identical to the name of the firm where he’s the founder/CEO and largest shareholder. ........ WeWTF has $47 billion in long-term obligations (leases) and will do $3 billion in revenue this year. What could go wrong? ........ There are other businesses like this (real estate, Hertz), and they are good businesses. Businesses that trade at, I don't know, 0.5 to 2x revenues. ....... But is this firm, trading at 26x revenues, superior to Amazon, which trades at 4x revenues? There appears to be no scale effects, as losses have kept pace with revenue growth. There is little pricing power, as they are still a mole on the elephant of commercial real estate. There is no defensible IP, no technology, no regulatory moats, no network effects, and no flywheel effect (the ancillary businesses are stupid, just stupid). ............ The last round $47 billion "valuation" is an illusion. SoftBank invested at this valuation with a "pref," meaning their money is the first money out, limiting the downside. The suckers, idiots, CNBC viewers, great Americans, and people trying to feel young again who buy on the first trade — or after — don’t have this downside protection. Similar to the DJIA, last-round private valuations are harmful metrics that create the illusion of prosperity. The bankers (JPM and Goldman) stand to register $122 million in fees flinging feces at retail investors visiting the unicorn zoo. Any equity analyst who endorses this stock above a $10 billion valuation is lying, stupid, or both. ............. Adam's wife is Gwyneth Paltrow's cousin






Musings on Corporate Governance for Venture-Backed Companies From my perspective of reading the news, we’ve seen a breakdown in governance for several fast-growing technology companies. Take Ofo as an example, once the leading bike-sharing company in China. The company went from a $3 billion valuation to the brink of bankruptcy in less than a year in 2018. Part of the fault falls on poor corporate governance structure. According to a Tech In Asia titled, “Ofo and the dangers of investment capital,” several common and preferred board members all held veto rights, which was a barrier in strategic decisions. There was an opportunity to merge Ofo with its key competitor Mobike that most board members supported but was voted down by a single board member.




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