undefined | Better HN

0 pointsJumpCrisscross6y ago0 comments

> You can thank loose monetary policy

I'm not so sure. WeWork is the product of three capital sources.

One, Mortimer Zuckerman, who was "not just their landlords AND seed investor," but also "happened to own Fast Company and NY Post which were instrumental in propping up WeWork in the press before anybody knew who they were" [1].

Two, MBS, who backed the Vision Fund to the tune of $45 billion [2].

Three, Masa Son.

Mr. Zuckerman's investment was too small to be affected by monetary policy. And I doubt the Saudis invested in the Vision Fund because their bonds weren't yielding enough. The only monetary actor is Son, though that is more based on Japan than dollar dynamics.

WeWork's competition, on the other hand, is juiced by monetary policy in the form of construction loan and mortgage rates. But that doesn't create WeWork, just lots of commercial real estate.

[1] https://medium.com/@henry.hawksberry/is-we-work-a-fraud-5b78...

[2] https://www.reuters.com/article/us-saudi-pif-investment-fact...

0 comments

rhizome6y ago

Aren't there also tax strategies/techniques that offer benefits from these investments when they fail as well? That both making and losing money in the VC/FinEng context each have their tax advantages (in the US)?

My impression is that upon this foundation and US interest rate/monetary policies create a perverse incentive where the investor doesn't really have to care too much how the company turns out. Like sure, a success pays off much more, but bankruptcy isn't bad either. Did I dream all this? :)

JumpCrisscrossOP6y ago

> Aren't there also tax strategies/techniques that offer benefits from these investments when they fail as well?

The Vision Fund will have a $10bn capital loss to write off against future capital gains taxes. But those losses are worth a hell of a lot less than $10bn in cash.

WeWork has no federal guarantees and basically no assets. Its downside scenario is grim for shareholders. The only one walking away with cash might be Adam, though I expect he'll burn a good amount of it defending against litigious shareholders and possibly prosecutors.

notyourday6y ago

> Aren't there also tax strategies/techniques that offer benefits from these investments when they fail as well? That both making and losing money in the VC/FinEng context each have their tax advantages (in the US)?

Nope. It is always better to have income and pay taxes on it than to have losses and not pay taxes on the losses when we are dealing with entities over certain ( rather small ) size.

evrydayhustling6y ago

I think you are actually illustrating the point. Zuckerman's investment is too far upstream of WeWork's size to take the blame. And the fact that competing companies are able to rely on loans and mortgage easing is exactly why folks with a surplus of capital (Saud + Son) have to accept worse terms - they have more competition.

j / k navigate · click thread line to collapse