Third Quarter Review — with Aswath Damodaran | Prof G Markets

WeWork's Collapse

Scott Galloway provides an in-depth analysis of WeWork's financial collapse, attributing it to unrealistic valuations and strategic missteps. He recalls the inflated expectations during the Softbank era, where companies with modest revenues were valued at billions, a mindset that ultimately led to WeWork's downfall 1. Scott highlights the absurdity of WeWork's initial valuation and its mission statement, which he found laughable upon reviewing their S-1 filing 2.

I thought it was a joke. I thought it was something from the onion. It said, our mission is to elevate the world's consciousness.

--- Scott Galloway

He suggests that the bondholders, now the new owners, might profit from the bankruptcy by leveraging it to renegotiate leases and reduce debt obligations 1.

   

Franchise Strategy

Scott explores the potential for WeWork to pivot towards a franchise model as a recovery strategy. He envisions a scenario where WeWork could reduce its locations to the most profitable ones and adopt a model similar to the Four Seasons, which licenses its brand and systems to franchisees 1. This approach could transform WeWork into a high-margin business by charging franchisees a percentage of their revenue for using the brand and technology platform.

I would take their, whatever it is, 1100 locations down to the most profitable two or 300, and I would move to a franchise model.

--- Scott Galloway

Such a shift could potentially stabilize WeWork's financials by focusing on profitability and reducing overhead costs associated with direct ownership of numerous locations.