Business Insider Proclaims WeWork is Tremendously Overvalued. Is it?

Business Insider Proclaims WeWork is Tremendously Overvalued. Is it?

In a video about overvalued companies, WeWork made the top of the list. The current valuation equation puts the value of each WeWork customer at more than $550,000. In other words, WeWork is operating as if each client will generate over half-a-million bucks for the company. That’s like every client paying $5,000 per month in rent for nine years.

Realistically, that’s not going to happen. So why is WeWork riding so high? In short, trend.

Right now, WeWork spaces are generally expensive, and the company has very low vacancy rates. With this kind of money coming into the company, someone will have adamantly pointed out that WeWork is likely operating in a bubble. And all bubbles pop. (See: Housing, 2007)

However, WeWork is leading a trend. For example, right now several large companies are utilizing WeWork instead of managing their own office spaces. (That’s gunna shift.) Plus, WeWork is capitalizing on venture capitalists who want to see their money at work in super-trendy workplaces with free lemon water. (Is lemon water really worth $5,000 per month?)

Coworking is growing – very quickly. So it’s highly probably that WeWork has created several contingency plans to adapt when there’s a shift in coworking demand. At these rates, big companies will eventually see coworking as wasted money. And venture capitalists might stop investing in companies with less than five employees and shift to more established operations. (See: Tech Industry, 2001)

When the winds shift, WeWork will adapt. They likely have five and ten-year commercial leases, so if IBM moves its operations out of WeWork New York, WeWork will have to fill that vacancy with someone.

And it all comes down to the little guy. At $250 or $300 per month, coworking spaces can quickly fill its vacancies with general and “hot desk” members. The real trend is not in coworking, it’s in the entrepreneurialism of the gig economy. It’s the American dream to be your own boss.

The coworking companies are here to stay. They are becoming our second home – our oasis in a life of soccer practices, mean bosses, and in-law visits. All of those employees showing up for work at a WeWork coworking space are the future tenants for the company. And that is worth $5,000 per month.