Wednesday, October 23, 2019

"When the winner can lose everything"

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The bursting flight of the shared office giant and the growing difficulties of Uber and Netflix show that the unbridled growth of some stars of the new economy sooner or later finds its limits when profitability remains hypothetical, says Stéphane Lauer, editorialist at "World".

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Chronic. For years, the stars of the new economy have used a magic formula to attract investors: "It does not matter the losses, provided that the growth of turnover is at the rendezvous. " This mantra has enabled many unicorns, these companies valued over a billion dollars, to raise the stock market sums considerable, essential to their development. At the end of the day, singing tomorrows, on the faith of the intangible principle, according to which "The winner takes all" (the winner wins everything). In other words, whoever manages to become a leader in a market is likely to win the prize by occupying an almost impregnable place by its competitors.

The system worked perfectly for the most famous of them. But is not Facebook or Amazon who wants. The bursting flight of WeWork, a New York company specializing in shared office activity, just days before its IPO, is a spectacular counter-example, which has something to think about this crazy race. the growth.

WeWork is a business meteorite, which did not support its entry into the stock market atmosphere. After several weeks of procrastination, despite the substantial reduction of its introductory price, the sidelining of its founder, Adam Neumann, and the overhaul of its governance, the start-up ended up giving up September 30 at its listing on Wall Street. The fact that it was not until the last moment to ask the right questions about the viability of the economic model speaks volumes about the glare, which is currently being faced by more and more investors. So ask the Japanese SoftBank, shareholder of the first hour of WeWork, who engulfed 10.5 billion dollars.

A senseless adventure

It is true that the story was beautiful. After ten years of unbridled development with a doubling of its turnover every two years, WeWork has tried to make Wall Street believe that it could be worth fifty billion dollars. His recipe is however of a disconcerting simplicity: to rent buildings to lessors, to arrange them in an attractive way and then to sublet them to professionals. But, in order to cut the grass under the foot of increasingly numerous and aggressive competitors, Adam Neumann has embarked on a leap forward to multiply the openings of sites to hold today more than 500 located in a hundred cities.

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