Chris Lane of Sanford C. Bernstein says WeWork can have a bright future if SoftBank overhauls the business plan and more carefully focuses on the evolution of the corporate office market. According to a bloomberg report, he likens WeWork’s business model to Starbucks’s, where branding, consistency and global scale give it an advantage over the competition.
This comes after SoftBank’s massive investment in WeWork triggered a multi-billion-dollar writedown, for which founder Masayoshi Son had to offe ra rare apology. But Lane argues the deal may work in the end and SoftBank will have the “last laugh.”
He argues WeWork can achieve profitability if it pulls back on extraneous areas and calms a frenetic pace of expansion to focus on filling up existing space. That will allow it to grab an estimated 8% of an emergent market for pre-fitted offices for corporate clients, almost like a white-label tech gadget or home appliance.
“We think investors should think of the basic business as being similar to Starbucks,” Lane wrote in a 21-page research report. “While profitable, the scale of profits that can be generated from a single site is small. Starbucks as a corporation only makes sense if you plan to open thousands of outlets.”
It’s a contrarian take on a WeWork deal that has been widely viewed as a fiasco. After SoftBank invested in the co-working startup, its planned initial public offering fell apart as investors balked at its enormous losses and conflicted governance. Son conceded “there was a problem with my own judgment” as he announced the write-down last month. SoftBank has put about $14 billion into a startup that’s now valued at less than $8 billion.
The Japanese company’s shares are down about 30% from their peak in April. They were little changed on Friday.