We Work is on the verge of being listed in the stock exchange and has received a heavy valuation, in spite of the consistent quarterly losses. Interestingly, the company sees itself as part of the technology sector, and uses financial indicators likewise. Several experts have denounced We Work’s claim as unsatisfactory, instead claiming that it is a modern real estate company. As a result, these people do not believe in an EBITDA- induced valuation as is being the standard now. Experts though need not brush aside We Work’s tech credentials oh so quick. This is because like Google, Yelp, Uber, Twitter, Facebook and even Airbnb, We Work too has lower variable costs. The capital investments are likewise, pretty low. This does not apply to We Work as its depreciation concerns would be significant. Neither does We Work have the level of data warehousing capability that the likes of Apple, Yelp, Tesla etc. possess. The network effects of such companies is also significant. We Work also comes out short in the last of the factors that states that the expansion in ecosystem can take place without incurring too large a cost.

Source:https://hbr.org/2019/08/no-wework-isnt-a-tech-company-heres-why-that-matters

Uploaded Date:29 August 2019