WeWork Sinking Softbank?

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The story of WeWork, at this point, is well known. What is also known is the issues with the commercial real estate leasing company (is that what we are calling it).

Basically, WeWork sets up leases on office space which it, in turns, rents out to tenants on an individual basis. I presume the idea is to "Uberize" the commercial real estate market. If you need to use some space for a few days, just go to the WeWork app and you can find some near you.

In theory, it might be a good idea. The practice, however, is turning out to be completely different.

This is a stock that many are predicting to go down to nothing. Bankruptcy is in the future according to many. While there are always bears who believe that about any stock, this one does have some traction in that direction.

Softbank just announced its numbers, which were not good.

The company lost a ton of money last quarter, in great part to its sustaining of WeWork. Certainly the company itself (Softbank) is on solid footing since it is so large. However, mounting losses in any one area is never a good thing.

WeWork required $5B to bail it out in addition to other moneys that were put in. All told, this is running into the tens of billions for Softbank.

Masayoshi Son, Softbank's founder, had a mea culpa moment. He admitted the difficulties and mistakes were made BUT he feels the situation with WeWork is turning around. The problem with that statement is that is what they always say.

Many felt Bear Stearns was turning things around also. I guess there are a few people out there who believe Deutsche Bank is also reversing course and moving in the right direction.

Softbank invests in technology companies meaning it is willing to assume a greater degree of risk. Getting in early on technology increases the chance of failure since so many things can go wrong. The payoffs, obviously, are enormous if one is correct.

WeWork, in my opinion, is going to sink. Softbank is going to have to decide when to cut the proverbial bait on this one. While the concept might be okay, the reality of how things unfolded shows it is not working. Who knows, perhaps it is just a timing issue and, in 5 years, this could be a homerun.

That is the added risk with technology. Even if the idea is sound, financing plentiful, and the team in place to make it work, the timing simply could be off.

Good thing Softbank has other investments that are faring a lot better.

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