WeEnron?
Do you have a buy or sell recommendation on We Company?
First, before anything else, please subscribe. Thanks.
Now to my rant—
What’s the point of starting a business. Obvious answer is to have the business make a profit. That’s literally what a business is suppose to do. So, why do we celebrate companies that are making hella losses with no conceivable path to profitability? Why would you buy stock in a company that’s not paying dividends or doesn’t remotely look like it will pay dividends? By the way, that’s one key way to build wealth—dividend paying stocks. Contrary to what people might think, stock price appreciation shouldn’t be your primary motivator to buy a stock. That’s lazy.
I had a conversation with my client last night about WeWork and their upcoming IPO. I read their S-1 some time back and for lay man like myself, I really don’t see where WeWork is going to succeed. Am I missing something? If I am, please let me know. Anyway, this creative accounting WeCompany is peddling just reminded me of Enron (co-incidentally, I listened to a podcast on Enron this morning. Shoutout to Gabbie who listens to American Scandal too.) Here’s a snippet of our conversation:
——
SO:
*sends Business Insider article on WeWork*
AB:
Red flags all around
SO:
Charlie
where are the analysts?
What are they doing?
AB:
Negative cash flow and their projections aren’t looking healthy
Wall Street knows how to package **** and make it look like caviar
😂😂
SO:
Charlie
But you don’t need a sharp mind to see beyond things
Ratios
Deep analysis of cashflows
AB:
Yea the average retail investor doesn’t see that though
SO:
The sun will always rise in the east and set in the west
It will always snow in winter
And rain in June/July for GH
I understand retail investors don’t
But what about the institutional investors?
With all their analysts and things
They can’t see anything?
AB:
They’re looking at stock appreciation I think. Not necessarily getting paid dividends etc. Or it’s a vanity play
“We invested in WeWork and Uber” is more for show than anything else
SO:
Yeah. True.
Go with the hype
Make their fund look good
I pity their LP’s
AB:
😂😂😂
SO:
I really think it’s a fools errand
AB:
That’s why for some reason I appreciate when investors first question to African companies is “are you profitable?” Because that’s what’s going to build strong companies
SO:
Its stupid to think you can lease expensive prime real estate and rent them out to startups
AB:
In the west it’s all financial engineering
SO:
Its the only thing that makes sense
Cash will always be king
But if there isn’t cash, show me profit
At least so I can sleep at night
I used to say
I never saw the difference between Regus and WeWork
But Regus’ model was to rent cheap locations
Not prime places
And have office addresses for small businesses
They were able to survive for while
WeWork
Expensive leases at some ridiculous prime location
Only banks and insurance companies can afford
Why lease?
You might as well buy the properties
'Deferred rent' is WeWork's cash-flow secret
Creative accounting
Lol
AB:
Financial alchemy chale. Conjuring numbers and formulas from nowhere. The new Enron
Community-adjusted EBITDA
what does that even mean?
😂😂
SO:
😂😂
Community adjusted EBITDA
😂
****
It means the EBITDA has been changed to suit WeCompany’s community
——
Well, there you have it. I’m genuinely convinced Wall Street is just packaging and selling to anyone who’s not educated enough and is just buying. Watch the documentary on Enron, “The Smartest Guys In The Room”. and let me know your thoughts please. Maybe I’m missing something.
Article List—Articles I’ve read in the past 24 hours or so
Why Is the One Percent So Obsessed With Magic?: “Yea why are we so obsessed with magic? You wouldn’t know 🙄”
It is really difficult to see how WeWork will ever be profitable: “Is this the new age Enron?”
Four Proven Ways to Add Value to People: “JAY Z said “Meeting new people out here is very important, thats how you network. Maybe I can help you in my field; maybe you can help me in your field. And relationships is way more important than money, because if you got relationships, you can always get money. You can progress.” Adding value to people is the best way to network.”
Startup School Library: Michael Siebel: “50% of my email replies tell people to check out the startup school library. If you are a founder who is looking for a 1 stop place for startup advice - click the link.”
Startup Success — The Israeli Formula Driving $100m+ Exits Every Week: “Africa, when oo! Alexis mentioned we should go to Israel but I couldn’t understand why till i saw this. “On average, one Israeli startup was acquired for over $100m every week in the first half of 2019.” This isn’t raising $100m. Acquiring. Meaning people are cashing out every week. Alexis, we move.”
Africa’s Lost Decade: “Structural Adjustment Policies are our equivalent of “trickle down economics”. Neoliberalism FTW”
35 Things To Know About Work in Your 20s: My favorites are: 1. Develop commercial orientation by reading more, doing specific research, networking and becoming a subject matter expert. 2. A Career Mentor or Personal Development Coach can help advance your career significantly. 3. Build your reputation and gain credibility by delivering on your promises.
Podcast— A podcast channel listened to this morning
American Scandal: Enron - A Sense of Urgency | 1. Listen to the first episode on how Enron’s scandal began to unravel. “In the mid 1990s, Enron Corporation solidifies its position as the number one energy company in America. Investment manager Sherron Watkins lands a dream job there, but quickly learns that Enron's office culture and accounting practices make it a treacherous place to work.”
Book—What I’m reading now or in the recent past or want to read…my book list is nearing 1000 books 🌚
Yo, you really need to read this book. Favorite parts from the last 20 pages I read:
“The blistering pace of China’s economic rise hasn’t alleviated that scarcity mentality. Chinese citizens have watched as industries, cities, and individual fortunes have been created and lost overnight in a Wild West environment where regulations struggled to keep pace with cutthroat market competition. Deng Xiaoping, the Chinese leader who pushed China from Mao era egalitarianism to market driven competition, once said that China needed to “let some people get rich first” in order to develop. But the lightning speed of that development only heightened fears and concerns that if you don’t move quickly—if you don’t grab onto this new trend or jump into that new market—you’ll stay poor while others around you get rich.”
“That was fantastic news for our project, and even better, Guo was just getting started. He didn’t want to only throw money at one incubator. He wanted to understand what really made Silicon Valley tick. Guo began peppering me with questions about my time in the valley during the 1990s. I explained how many of the area’s early entrepreneurs went on to become angel investors and mentors, how geographic proximity and tightly woven social networks gave birth to a self-sustaining venture capital ecosystem that made smart bets on big ideas.
As we talked, I could see Guo’s mind working in overdrive. He was absorbing everything and formulating the outlines of a plan. Silicon Valley’s ecosystem had taken shape organically over several decades. But what if we in China could speed up that process by brute forcing the geographic proximity? We could pick one street in Zhongguancun, clear out all the old inhabitants, and open the space to key players in this kind of ecosystem: VC firms, startups, incubators, and service providers. He already had a name in mind: Chuangye Dajie—Avenue of the Entrepreneurs.”
This is what makes China, China. And why I’m quite worried for the rest of the world. Including, and more especially our very own Africa.
Remember folks: “until the lion learns to write, every story will glorify the hunter.”
Please share + subscribe.