Reading between the lines of WeWork CEO’s letter to shareholders

Apparently offices are the new retail. So people keep telling me, anyway. I’m not so sure. Granted, post pandemic, much traditional workspace remains surplus to requirement as three days in the workplace becomes the norm, but just as the death of retail was grossly exaggerated, so too is the death of the office.

With retail, what we actually saw was the sector split into winners and losers, the winners tending to be e-commerce retailers, the losers high street bricks ‘n’ mortar brands. In his letter to shareholders last week, WeWork chief executive Sandeep Mathrani argued that a similar bifurcation is taking place in the office sector, with the traditional office model now “in question” and “a new world of work” emerging.

“This is WeWork’s moment,” he declared. But is it? Is it really as simple as the traditional office is the past and flex the future? Even if it is, has WeWork really turned things around to the extent its time has come once more?

As with his messianic predecessor Adam Neumann, much of what Mathrani said was less “new world of work”, more “Emperor’s new clothes”. While WeWork has improved its revenue to $3.25bn, this figure is less than the $3.35bn to $3.37bn it was forecasting as recently as November, itself a downgraded forecast, and although it halved its net losses, it still racked up $2.3bn over the year, taking its accumulated losses to a reported $16.2bn.

Then there was the language Mathrani used. To my mind, there were far too many uses of the word ‘believe’ or variations thereof. First, he said that one of the reasons why he had participated in his first TV interview as CEO three years ago was that he wanted to explain “why I believed flexibility would drive the future of the office and the way we work”.

There were six other uses I spotted:

“We believe that the traditional market must be agile and flexible to adapt to this new demand.”

“… we believe a seismic behavioral shift is transforming the traditional commercial office landscape – putting WeWork front and center as the flexible solution.”

“We believe that WeWork is the only provider than can deliver on what companies need today with a holistic flexible and digital solution through our three core products.”

“… we believe that WeWork will have a balance sheet that supports its business plan for the long term.”

“… we believe flexible space is on a trajectory to be a separate channel of distribution for office space, similar to the transformation of retail and e-commerce.”

“Today, we believe we have created a category of our own.”

So what?, I hear you say. Lots of people use the word ‘believe’. Well, here’s the thing. I believe I’ll own a Ford Mustang one day. That doesn’t mean it will happen. Mathrani’s letter has a similar whiff of wishful thinking, or worse, flat earth news, about it.

Think I’m nitpicking? You should read the extraordinarily lengthy disclaimer on “forward-looking statements” that accompanies it. It references ‘believe’ first in a 18-strong list of words and terms (including ‘project’, ‘expect, ‘anticipate, ‘intend, ‘should’ and ‘will’) that it says identify forward-looking statements.

Such statements, it continues, “are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties… [WeWork] can give no assurance that its expectations will be attained, and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks, uncertainties and other factors.”

I could go on and repeat the full list of said factors, but for everyone’s sanity I won’t, beyond the opening few: “Such factors include, but are not limited to, the terms of the transactions, which are highly uncertain; WeWork’s ability to complete the transactions on the terms contemplated or at all; WeWork’s ability to obtain the required stockholder approvals; WeWork’s ability to otherwise refinance, extend, restructure or repay outstanding debt, its outstanding indebtedness, its current and projected liquidity needs to operate its business and execute its strategy, and related use of cash…”

Mmm. It doesn’t exactly instil confidence, does it? Neither does Mathrani’s boast that “in a time of uncertainty for space occupiers, WeWork can provide certainty”. Why not simply “provides certainty”?

Particularly concerning are the statements that the proposed transaction to fully capitalise the company, reduce leverage and extend maturities through to 2027 “could achieve these three primary objectives…” and “could result in total funding and capital commitments of over $1bn”.

‘Could’ isn’t actually mentioned in the list of forward-looking statement identifiers, but it is as hypothetical as they come, and then we’re back to beliefs and arguably the most worrying of all: “… we believe WeWork will have a balance sheet that supports its business plan for the long term.” Aside from the “believe”, note the “will have” rather than “has” and “its” instead of “our”.

Mathrani signs off with an: “I remain incredibly confident… “ I’d read the disclaimers if I were you. Then you’ll see how confident WeWork really is. As for the letter itself, swap out the word ‘believe’ for ‘hope’ or ‘pray’ and you’ll be more on the money.