They called it a cult.
The reported goings-on at startup WeWork under the leadership of co-founder and former CEO Adam Neumann were controversial, to say the least.
Partying on private jets, lavish condo renovations, and mistreatment of employees laid the groundwork for Neumann’s fall from grace.
And when various news outlets started reporting on it, a company that was once loved and lauded was thrown aside like a pariah…
As I wrote a few weeks ago, being a real estate investor and analyst for decades, WeWork had been on my radar since 2010. A company that promised to change the office real estate space was right up my alley… until Neumann’s scandals unraveled.
But as I’ve learned – a change in management can change a company’s whole identity and outlook. And the way I learned it is by meeting CEOs and other leaders and speaking to them about their businesses.
While I didn’t get to speak to Neumann back in the day… I recently sat down for an interview with WeWork’s new CEO.
Today, I’ll share what I heard from him and his plans to completely revitalize the company.
Meeting face-to-face with leaders like this is what gives me the edge when finding the best sleep well at night (SWAN) investments. And today, I’ll share that edge with you.
A Tale of Two Managers
Here’s what I wrote back in August on WeWork’s initial rise and fall:
Back in 2010, [Neumann] cofounded the now infamous WeWork. The business opened communal office space for entrepreneurs looking to save money, network, and meet clients outside of their homes.
It was a great idea led by a charismatic individual who knew how to wine and dine financial backers like a pro. As CEO, Neumann helped the business grow – fast – gaining international praise and even worship.
Naturally, that went to his head.
Also naturally, it didn’t end well.
In that essay, I told you I’d interview Neumann’s successor to get more insight into what’s next for the company. And thanks to my connections and experience with business leaders, I was able to secure one.
That’s how about a month ago, I sat down with Sandeep Mathrani, who became WeWork’s CEO in 2020, to discuss the company’s prospects under his management.
He and Neumann are very different individuals. And not just in age, though Mathrani is obviously the elder of the two. That much is obvious from his business experience.
As CEO of real estate company GGP Inc., he helped the once bankrupt mall REIT rise from the ashes and achieve eight years of impressive growth – enough to attract the buying power of the much larger Brookfield Property Partners.
After GGP was bought out in 2018, Mathrani served as CEO of Brookfield Properties’ Retail Group and vice chairman of Brookfield Properties itself.
He also served as president of retail for Vornado Realty Trust and executive vice president at Forest City Ratner. And he’s been on or is on multiple publicly traded company’s boards of directors.
That’s an impressive resume to consider.
Neumann, on the other hand, was (and still is) a career start-up guy. He likes creating companies, which works well for some people… but is a notorious field for failures for the majority.
A Cheap Stock Set to Report Earnings Soon
Don’t think that Mathrani’s decades of experience makes him out of touch, though. As he told me, “The office sector is the last [one] to be disrupted,” and he understands the ins and outs involved in doing so.
For instance: “Pre-pandemic, our product was a ‘nice have.’ [But] the pandemic increased the desire of co-working for small, medium, and enterprise clients.”
In its early days, WeWork mainly offered space to individual entrepreneurs and more modest teams. But today?
“If you’re a 40,000-50,000 square-foot user who wants flexible [office options], we’re the only firm who can do it,” Mathrani says. That moat is helping it achieve 80% occupancy “in every international market… The only lagging country is the U.S.,” where it’s “a quarter or two behind.”
And he’s confident that will change for the better going forward. After all, occupancy already rose from 68% at March’s end to 72% a quarter later.
When I asked Mathrani about growth prospects, he pointed out that WeWork “should have $4 billion in revenue by 2024.” All the company has “to do is lease to 85% occupancy.”
Over Q1 and Q2 this year, it’s generated $1.6 billion in revenue. We’ll see how it ended the third quarter on November 10.
Now, admittedly, few people have faith in WeWork. It’s been losing money for several years thanks to its previous management and is still losing it today – just at a much slower pace. And the current economy, of course, is uncertain at best.
That’s why the stock is down from $11.78 when it went public a year ago… to around $2.80 per share.
This is not a sleep-well-at-night company, yet we have confidence in the new management team and its ability to expand its footprint in a unique category.
Time will tell whether Mathrani will be successful in breathing new life into WeWork and transforming it into a SWAN.
But luckily for us, we have a list of over two dozen time-tested SWAN stocks, including those that my past research and interviews with experts have led me to.
These are companies with proven management teams, reliable dividend growth, and decades of experience through all kinds of market conditions under their belts. To learn more about them, click here.
In the meantime, I’ll continue interviewing CEOs and business leaders to help put the SWAN stocks of tomorrow on your radar.
Happy SWAN investing,
Brad Thomas
Editor, Intelligent Income Daily