WeWork as the AWS of Commercial Real Estate
A lot has been written in the past few days about the upcoming WeWork IPO. I had linked to a few articles on Saturday and FTAlphaville has some pretty sarcastic but good coverage as well.
Yesterday then the always brilliant Stratechery came out with in interesting post. Ben Thompson thinks that WeWork could develop into something like AWS (for real estate) which now is repsonsible for most of Amazon’s profits. But he clearly acknowledges there are a lot of governance issues etc. etc. The “WeWork is like AWS” story is nothing new and is mostly pushed by WeWork itself and combined with what they think is the adressable market (hint: all commercial real estate globally) could justify almost any valuation.
WeWork’s actual product: Open Plan offices (for start-ups and wannabes)
What I have been missing in the whole discussion so far is a look at WeWork’s actual product which in my opinion is the following:
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As mentioned in the comments yesterday evening, I sold my Osram shares at 35,40 EUR yesterday. Why did I do this ? The “new” spread at around 8% is even more attractive than the original spread when I bought it.
The reason is quite simple: in my opinion we have now a very different different situation with the following new issues:
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Disclaimer: This is not investment advice. PLEASE DO YOU OWN RESEARCH.
Ouch, another day, another problem. Yesterday, one of my Special situation stocks Osram lost around -7%.
What happened: The largest shareholder Allianz Global Investors (AGI) announced that they do not support the offer as they consider the price of 35 EUR per share as too low.
A few observations from my side:
- AGI had purchased more Osram shares in the past few months. Beginning in July they announced that they crossed the 10% threshold
- However in their press release they talk about >9% stake so they have sold shares in the past 4 weeks, clearly at a price of lower than 35 EUR. So while AGI is critisizing Osram managment for not believing in their company, AGI (or parts of them) also seems to have some problems in believing their own investment thesis.
- The press release reads like a marketing pitch for their “active management approach” with high fees which clearly is under threat from passive startegies
- They state that “at the moment they would not accept the offer” which in my opinion is not a super hard statement and we are relatively early in the acceptance period
- Although AGI states that that they are investors since the initial listing (which is natural if you had owned Siemens shares which they surely had), in various articles it has been mentioned that AGI’s average purchase price is much higher than the 35 EUR offered as they seemd to have increased their position significantly when the stock still went up.
- As the basis for their current opinion they use an “independent fairness opinion”. Why do they need that ?