Whitney Tilson: WeWork will go bankrupt within a year

Excerpted from Whitney Tilson’s email to investors focusing on Wework’s valuation cut ahead of IPO

1) The WeWork debacle continues… On Friday, Bloomberg reported that WeWork’s largest investor, SoftBank Group, is realizing that its “big bet may already be turning sour… fueling tensions among SoftBank employees.”

Tilson Elon Musk valuation cut

Then, the Wall Street Journal published an article raising even more questions about the company’s laughable corporate governance (even by the low standards of today’s unicorns): WeWork’s Long List of Potential Conflicts Adds to Questions Ahead of IPO.

All of this is leading to even more investor skepticism and talk of an even larger valuation cut to get the IPO done: WeWork Parent Weighs Further Valuation Cut.

It’s not going to work. You can stick a fork in this IPO.

And I’ll make an even bolder prediction: I think the company goes bankrupt within a year. That’s what happens when companies run out of cash – and who, exactly, is going to provide this money-losing pig with the billions of dollars necessary to keep its fatally flawed business model alive?

2) I always find it interesting when friends of mine who I greatly respect end up on opposite sides of a stock. Today’s example is Burford Capital (AIM: BUR), the world’s largest provider of arbitration and litigation finance.

My friend and former student Artem Fokin of Caro-Kann Capital won the SumZero Top Stocks contest three years running. His last win, in January, was his long thesis on Burford Capital, which you can read here and watch here.

But then, famed short-seller Carson Block of Muddy Waters Research, who spoke at both of my shorting conferences last year, published his short thesis last month, and the share price got slashed in half.

Artem just published a 68-page rebuttal titled Burford Capital: Muddy Waters Dreams of a Black Cat That Just Is Not There. His article about it on SumZero is posted here, and his full report is on his website here.

I don’t have an opinion on the stock, but I think it’s an interesting case study, and there are many important lessons to learn here regardless of the outcome…

3) What a fascinating story… America’s Orthodox Jews Are Selling A Ton Of The Products You Buy On Amazon. Excerpt:

 But there’s an estimate passed around third-party Amazon consultants that claims 7% of all Amazon third-party sales originate from a single zip code in Brooklyn, and that Orthodox Jewish–owned businesses make up 15% of marketplace sellers. Amazon declined to comment on both numbers.

4) Speaking of Amazon (AMZN), I saw my first Amazon Prime plane while taxiing at the Seattle-Tacoma International Airport on Saturday. Look out FedEx (FDX), United Parcel Service (UPS), and U.S. Postal Service!

About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver