The WeWork IPO: The Day The ‘Music’ Died

“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing,”

Citigroup™ CEO Chuck Prince in a July, 2007 interview with the Financial Times™.

There are a lot of quotes pertaining to the hubris of those deemed to be “in the know” that brushed aside any calls of caution from those they saw as: below their pay-scale. The above is just one, but it may be the most poignant, because not long after – it all fell apart.

All of it.

Of course there are those some may consider just as memorable. But the originator, along with the entirety of the network that still portrays him as someone people should listen to, continues desperately hoping viewers will forget his most infamous call on Bear Sterns™.

My guess is that Mr. Prince possibly danced for joy after hearing it thinking he was outdone. But I digress.

Another famous quote that seemed to encapsulate the absurdity of hubris when it came to what constituted a true business, where absurdities like net profits were an integral concern, was the term “It’s different this time,” along with its differentiator known as “disruptive tech.”

This is (my conjecture) the sales pitch vernacular created to quell instinctive fears such as when you’d hear the words “Dot Com,” “Guaranteed Returns,” “Ponzi,” or “Madoff.” And for a time, almost 10 years to the date, it all worked brilliantly. It appeared the party would never end.

Then, someone walked in and barfed on the shoes of the “Market” host. But they weren’t finished, by a long shot…

Then they staggered across the carpet depositing sidewalk remnants of “San Fran” clinging to their own, mounted the stage at the D.J. station, raised their bottle of _______(fill in the blank) and passed out mid cheer, collapsing on the turntables causing a firestorm of electric lightning from fuses blowing everywhere, ruining the party for those still waiting to cash out. Not to mention their hanger-on entourage of business vapid plebes that surround them.

That someone – was of course: the WeWork™ IPO.

The thing that’s truly different this time, is rather than calling in the EMT’s (also known as “new money”) – they’re letting this once “king” of the unicorn stable perish right there in the pool of swill and toxic mess he created known as its S-1 filing.

Not only does no one appear ready to help try and resuscitate this beast with a bit of mouth-to-mouth aka “emergency liquidity.” But everyone seems to be all of the same mind, rather than call an ambulance, they’d rather call a SERVPRO® van. Because, after all, they’re probably the only entity with a tag line that truly matters and is needed now, more than ever. e.g., “Like it never even happened.”

The problem is it has, and in front of $Billions, many of which now appear to be not just circling the drain – but already down it. And no amount of emergency measures may change what already is. Although that may not stop those with no other option than to try to do just that, regardless of how utterly ludicrous the proposals may be. (i.e., Son to buy even more as his own Vision Fund appears to be floundering.)

The issue here is this debacle is not a symptom – it’s the culmination, or what may be compared to the metastasizing of the cancer that has infected the capital markets this last decade. i.e., That a viable and valuable business no longer relied on net profits and growth to matter. What now constituted a valuable and viable business was only narrative growth and/or spin to propel the “greater fool theory” to never before seen in human history heights.

Again, this it did, brilliantly. That is, until… (see above for clues)

The issue currently that entails the entirety of both “disruptive tech” along with the once vaunted V.C. enclave specializing in just that, is this latest debacle represents a clear, understandable poster-child for those whose 401K’s and more have been the prime targets of these utter disasters.

And the fury and backlash, I believe, is only just beginning in earnest.

If you think this is hyperbole, let me illustrate what many (again, my conjecture) are currently pondering as they look at their most recent “returns” on those prior “growth” stocks many were advised “You gotta get in on this!” as they seem not only can’t remain at their IPO offer level, but sink further and further into the oblivion. Hint: Uber™, Slack™, Spotify™, etc., etc., etc.

WeWork is now being reported to be only months away from possible (wait for it…) bankruptcy.

WeWork – just six weeks ago – was also being told/sold (aka “reported”) to the investment community at large (which probably included your retirement fund) to be worth nearly 50 $Billion.

I may not be that great at calculus. But what I am pretty sure of, is that I can calculate anyone reading the above two lines required no calculator to quickly noodle, then rendered the precise sum known as, “A F’n fraud!!”

Then again, maybe it is just me. But from the lack of further “investment” queries, along with the sudden rash of “late to the after-party” press coverage. I don’t think so.

The other issue facing not just the IPO world, but the “markets” in general is the one that enabled this entire “magic show” to happen in the first place, supplying evermore smoke and even more creative flexible mirrors, has suddenly reached its own “curtain pulled” moment of reckoning with the suddenly, panicky Repo Market.

The problem here is, that when it comes to “music,” it appears that not only has it stopped, but most assuredly worse…

The banks seem to not even trust those they brought to the “dance” themselves, and are willing to leave them flat, looking for their own ride home. All while the entirety of the mainstream business/financial media seems to collectively parse “nothing to see here” as it whistles past the graveyard of “things that go bump in the repo-night.”

Let’s just hope the next tune we hear isn’t “Helter Skelter.” Or maybe that’s precicely what that humming is we’re already beginning to hear.

© 2019 Mark St.Cyr