Rentals Sales Blog

Is WeWork Default Dead or Default Alive?

Originally posted on November 21, 2019 6:31 pm
Updated on November 27, 2019 1:34 am

Previously we talked about How Not To Die as a real estate agent. Another infamous Paul Graham term is “Default Alive or Default Dead“. It sounds extremely harsh and morbid, but that’s part of the point. Calling a company Default Dead should trigger some alarm bells.

WeWork today announced layoffs, cutting 2400 jobs in an attempt to stabilize the company and reach sustainability. Lets do some back-of-the-envelope math to see whether WeWork is likely Default Alive.

According to Glassdoor, they will save an average of $69K per community manager and $120K per software engineer. Most of the layoffs are probably community manager types, but we can be generous. Assume a high $150K average fully loaded cost of each employee, given all the expensive benefits (and ironically, co-working space).

 

 

From the infamous S-1 filing prior to the failed IPO, WeWork was on track to make $3.0 Billion in revenues for 2019. Unfortunately, it seems WeWork is still Default Dead. Operating expenses are at least $3.8 Billion, even if we immediately exclude pre-opening, “growth and new market development”, and depreciation expenses. Operationally they are still $800M in the hole, with the job cuts saving at best $360M less severance, pre-committed leases, and lawsuits.

 

 

To be Default Alive, the cuts need to be more than twice as large, or expect to grow gross profits by at least 15% with the remaining staff and resources.

Ready to Find Your New Home?
RentHop ranks listings based on accuracy, completeness, recency, and more.
Browse Apartments
Fair Housing and Equal Opportunity
Fair Housing and Equal Opportunity
© 2009 - 2019 RentHop.com™