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Really, We do.

Oh you know, just another quiet week at The We Company:

• The WeWork IPO is full speed ahead with roadshow to kick off as soon as Monday (CNBC, Sept. 10)

• WeWork Mulls Governance Changes To Save IPO (Bloomberg, Sept. 11)

• SoftBank to Buy at Least $750 Million of WeWork Parent Shares in IPO (WSJ, Sept. 13)

• WeWork considers IPO valuation of as low as $10 billion (Reuters, Sept. 13)

• WeWork loan modified to reduce lender risk ahead of IPO (Reuters, Sept. 13)

• WeWork to launch IPO roadshow as soon as Tuesday (New York Post, Sept. 16)

• WeWork’s top communications executives are jumping ship as the company struggles to go public (Business Insider, later on Sept. 16)

• WeWork Parent Expected to Postpone IPO (WSJ, later still on Sept. 16)

We is in the business of elevating consciousness, but lately the collective consciousness may have been elevated above its liking. Investors are unhappy with how much control Adam Neumann (“Adam”) has over the company and all his weird financial entanglements with the firm. For once they seem perturbed at the idea that a company losing billions of dollars might expect the market to just hand it several more billions to lose (“invest”) to keep the growth story alive. People are not having it! “We is now expected to wait until mid-October at the earliest to start its investor roadshow following the conclusion of the Jewish High Holidays, which Mr. Neumann observes,” reports the Wall Street Journal, adding that “some existing investors, including SoftBank, have pushed the company to wait until next year to launch its IPO.”

We postponing its IPO caps a year of spectacular comedowns for once-buzzy tech startups. By far the best performer of the year has been Beyond Meat, which isn’t even a tech company but gets valued and grouped in with them so often that I put it into the list for consideration. Next is Zoom, which you might recall was actually profitable at the time of its IPO. Uber and Lyft aren’t doing so hot. SmileDirectClub, another company that is not really a tech company but somehow ended up being treated like one, debuted last week with one of the worst first days of trading for a major IPO this century.

It has not been a good 2019. And yet, WeWork still wants to go public, probably needs to go public, because, well, money. Late last year, WeWork and Softbank were in talks to have Softbank pump $15 billion to $20 billion into WeWork, taking a majority stake in the business. Then, in January, Softbank scrapped that plan after pushback from Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala Investment Co., the two main backers of its $100 billion Vision Fund. WeWork got a couple more billion from Softbank and a new identity as The We Company (which, side note, cost it $5.9 million in fees to Adam that he recently returned) but that was a lot less than it had bargained for. It had aimed to raise $3-4 billion in an IPO, plus a related $6 billion line of credit.

We had about $2.5 billion of cash as of June 30. In the first half of the year, its cash from financing was $3.4 billion, it spent $2.4 billion on investing activities, and its cash from operations came in at negative $199 million. In other words, We raised $3.4 billion in cash and spent it mostly on investments like leasehold improvements (new paint job, nicer lighting), security deposits with landlords, and “strategic investments” and acquisitions, like buying the flagship Lord & Taylor building.

If We turned off all those investments and just ran its operations at their current pace, it would have about 6 years of cash left. If it continued at current expenditure rates without raising additional capital, it would have less than a year from June 30. Adam Neumann, a man with wild hair and wilder ideas, is used to tossing back tequila shots and collecting fat checks. But where can We go for cash now? Not the public markets. Not the junk bond market. Maybe not even Softbank.

Lock outs.

Elsewhere in the WeWorld:

Neeraj K. Agrawal@NeerajKA

My friend’s entire company is locked out of their WeWork office because an umbrella fell, jamming the door. No one can figure it out. It’s been like this for 2 days.

September 17th 2019

25,195 Retweets137,781 Likes

There is something beautiful about a company literally getting locked out of its WeWork office by something as silly as umbrella at the same time that We has been effectively locked out of its IPO by many things that seemed silly until they became quite serious. The umbrella situation was reportedly resolved a few days later after WeWork, feeling “the heat,” dispatched an engineer to drill a hole in the ceiling and feed a wire down. Here is the account as told by Mike Ponticelli, the man whose umbrella locked the office:

That day, WeWork brought in an engineer who specialized in getting in closed offices. The engineer tried the exact same things we did—jiggle the handle, tried to stick their fingers inside the crease. The engineer said this was beyond his pay grade and we were told there was an elusive, super engineer, that’s very rare and takes days to schedule. WeWork said it would be quite expensive, and that this was all beyond anything anyone had ever seen before.

…Tuesday evening, around 6pm, someone cut through the floor of the fifth floor and into our fourth floor office. Then they used a bit of wire to pry loose the umbrella. There’s still a hole in the ceiling now, about the size of a gherkin.

Incidentally, “quite expensive and beyond anything anyone had ever seen before” would also be a good tagline for WeWork’s IPO.

Speed bump.

Investors are cooling on micromobility tech, according to the latest data from PitchBook. The sector, which includes shared e-scooters and bikes, has raised $795 million from investors in the current quarter across 7 deals and $1.3 billion so far this year across 33 deals. That’s compared to $4.8 billion in the first three quarters of 2018 over 48 deals, a decrease of about 73% in dollar terms. Part of the reason for the drop is that there haven’t been any “mega” deals to scooter companies recently, versus 2018 when Bird and Lime raised $385 million combined in the first half of the year. Bird’s June 2018 $150 million funding round made it then the fastest company ever to become a unicorn.

The drop in financing suggests investors may have grown warier of the scooter proposition, after the off-the-shelf consumer scooters many companies initially rolled out turned out to have short lives and poor economics. Bird, which started out with rebranded Xiaomi devices, posted a $100 million loss in the first quarter of this year, which its CEO attributed to a “one-time accounting write-off from old retail scooters.” Companies are now designing better, more durable scooters for shared use, something investors probably want to see before handing over too much more money.

On a related note, I will be at the Micromobility Europe conference in Berlin on Oct. 1, and probably the day before too, moderating a panel on “Capital for Micromobility.” It will be a good time. If you will also be in Berlin, let me know! We can grab a drink or ride some scooters, but probably not both, because, well, that ends badly.

The gig is up.

California governor Gavin Newsom yesterday signed AB5, rewriting state employment law and the rules of the gig economy:

SACRAMENTO — California businesses will soon face new limits in their use of independent contractors under a closely watched proposal signed into law by Gov. Gavin Newsom on Wednesday, a decision praised by organized labor but unlikely to quell a growing debate over the rules and nature of work in the 21st century economy.Newsom, who signed Assembly Bill 5 in a private ceremony in his state Capitol office, had already committed to embracing the new law. Legislators gave final approval to the sweeping new employment rules before adjourning for the year last week.

The lawsuits are already rolling in. An Uber driver sued Uber in a proposed class action for misclassifying drivers as contractors. San Diego’s city attorney sued grocery delivery company Instacart for misclassifying shoppers as contractors.

As I said before, the huge unanswered question is what will actually happen to companies if their workers are found to be employees, and not contractors, under the new law. Fortunately in the delivery space we already have an idea: there are several delivery companies that operate with employees, including global parcel giant UPS and package-delivery startup Deliv, which made the switch from contractors just last month. You can read all about it in my Quartz story, but here is the key point:

Companies that rely on contractors have different concerns from those that rely on employees. In the contractor model, the main concern is the supply of workers. Companies need a big labor pool to draw from because, as contractors, workers are free to turn down jobs. Contractors get paid per delivery, which gives them an incentive to get more done (provided it’s ultimately worth their time). With employees, efficiency is the most important metric, because they earn an hourly rate regardless of how many deliveries they do. It’s up to the company to make sure employees are productive enough to make the hourly wage it pays them worth it.

The result is that, as Uber and others have warned, companies with employees do tend to exercise more control over their workers than those that hire contractors. Efficiency, usually measured in deliveries per hour, is everything. As Adam Price, CEO of delivery company Waitr, put it: “To reap the benefits of employees, you have to exert all the control.”

Other stuff.

Uber raising $750 million in debt to fund Careem acquisition. Airbnb plans IPO for 2020. Airbnb says second-quarter revenue topped $1 billion. New York stands between Airbnb and an IPO. Uber to take seven floors at World Trade Center. Uber lays off 435 people. Postmates backs California commercial property tax reform. Denver a testing ground for Uber, Lyft. Grab weighs payments merger to compete with Gojek. Mercedes-Benz enters the scooter market. MoviePass shutting down, for good this time. Uber pulls Jump bikes from Atlanta and San Diego. Lyft raises scooter prices. Spanish city cracking down on scooters. Ditto Sweden. Drunk scooter rider rushed to hospital after crashing into police officer. Suspected bomb threat turns out to be scooter battery. Brooklyn restaurant has no chef, no trash. No-deal Brexit sandwiches. Silicon Valley’s Worst Nightmare Is Ready for Her Next Act.

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Send tips, comments, and rogue umbrellas to @alisongriswold on Twitter, or oversharingstuff@gmail.com.

Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last week, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.

WeWon’t.

Softbank is having a hard year. The bet it made on Uber looks less prescient than disastrous. In January 2018, the Japanese conglomerate plowed $9.3 billion into Uber through a mix of direct investment (25.6 million Series G-1 shares at $48.77 per share) and secondary share purchases (242.8 million shares from existing stockholders at $32.97 per share). Uber, which went public at $45 in May, closed yesterday at just over $32, valuing Softbank’s stake at roughly $600 million less than it paid to begin with.

Another Softbank investment, Slack, has also struggled as a public company, with its share price yesterday falling below its $26 reference price for the first time. Unlike with its Uber holding, Softbank at least still stands to profit from its Slack investment, since it bought shares in private rounds for well below their current trading price.

Then there is WeWork, the office-space rental company in which Softbank is by far the largest shareholder. Softbank is reportedly now urging WeWork to shelve its IPO after a frosty reception from investors that could value the company at $15 billion to $20 billion, a staggering discount to its last private valuation of $47 billion. Softbank has invested more than $10 billion in WeWork through its $100 billion Saudi-backed Vision Fund, including $2 billion earlier this year.

WeWork’s year isn’t going any better. Despite cutting all mentions of “community adjusted EBITDA,” the IPO documents it unveiled last month received withering criticism for WeWork’s substantial losses and weirdly close relationship with co-founder and CEO Adam Neumann. Last week, WeWork added a woman to its all-male board and said Neumann (“Adam”) would return the $5.9 million he charged the company to acquire the trademark to “We” when it rebranded as the, er, We Company.

The stakes for WeWork are high. The Financial Times reports WeWork would lose access to a $6 billion loan from a group of banks if it didn’t go public, not to mention the $3 billion to $4 billion in new capital it had hoped to raise through the offering. WeWork, which lost $900 million in the first six months of this year, needs investor financing to pay the bills while it pursues loftier goals, like elevating the world’s consciousness, that seem to require operating at a loss. “We do not lose money, we invest money in the future,” Neumann told Business Insider in May.

For Softbank, the fate of WeWork and underperformance of its other investments could affect its ability to win new money from investors as it aims to raise a second Vision Fund of $108 billion. On a call with investors in August, Softbank CEO Masayoshi Son defended WeWork’s $47 billion valuation. “I don’t think that it is overvalued as an enterprise,” he said. “It is a wonderful company.”

And in case you were wondering, “Is there precedent for a lease-based real estate company pulling its hotly anticipated IPO on valuation concerns,” Wall Street Journal reporter Eliot Brown has the thread for you.

Bill time.

Uber and Lyft are desperately seeking a way around Assembly Bill 5, which would rewrite the rules of the gig economy. With the Sept. 13 deadline for the California state senate to vote fast approaching, Uber and Lyft are reportedly circulating a 19-page bill that would create a new category of worker, a “network driver,” and explicitly state that they are not employees.

The bill offers benefits, each with a catch. For instance, it would guarantee drivers “1.27 times minimum wage” but only once the driver has accepted a trip. That means the effective hourly wage would be much lower, as Uber and Lyft drivers spend 33% to 43% of every hour waiting for a fare. The bill would also create a “Driver Advocate Program” to represent workers in discussions with companies, but bar the program and its members from discussing employment status or participating in labor strikes.

The gig economy was always an arbitrage, and a gamble: hire workers as contractors to do jobs through a platform, eliminating the costs associated with traditional employment. The immediate threat of AB5 is that the bill for these employment-based costs finally comes due. That includes payroll taxes, workers compensation, and training costs for employees, higher wages once workers are protected by minimum wage laws ($12 an hour in California and $15 an hour in some cities including San Francisco), and assorted other benefits like health care. An open question is when and how AB5 would be put into effect, and whether the law could be applied retroactively, compounding its costs to companies.

The longer-term threat is that California inspires other states to pass similar legislation, until the gig model is unwound on a national scale. Analysts at Morgan Stanley estimate global ride-hail bookings could fall by 5% to 9% if something like AB5 were adopted across the US. Analysts at investment firm Cowen made a similar observation in a research note sent last week:

California is both the 5th largest economy in the world and a policy Petri dish for other "blue states." The ABC test is on the books in approximately a dozen states, though is more focused on unemployment and worker compensation claims. Massachusetts has very similar legislation in law similar to AB5, which is where the Dynamex decision pulled from (Massachusetts ABC test went live in 2004). With passage in California, we would expect other states like New York, New Jersey, Washington, Oregon and Illinois to be next in the queue. We also expect the U.S. House to push similar legislation at a national level this fall via the PRO Act (Protecting the Right to Organize Act).

AB5 passing is a nightmare scenario for the gig economy because it proves that such legislation is possible and politically viable. Even if a company-sponsored ballot initiative to keep drivers classified as contractors prevailed in 2020—and that’s a big if—California would still have given other states a roadmap to reining in the gig economy, which is something no amount of lobbying can undo.

Service disruption.

Here is a story from CBC about Bonavista, a Newfoundland town with an unusual approach to getting Airbnb hosts to pay taxes at the local business rate based on the assessed value of their properties:

[Bonavista mayor John] Norman said there is a town staff member who monitors Airbnb consistently looking for new accommodations. When there are new listings, the information is recorded and a staff member will make a house visit.

"We have gone to some pretty serious measures to collect. We have literally dug up driveways and turned off water sewer service until the bill is paid, cutting them off completely from all municipal services."

Yes, you read that right. If Airbnb hosts don’t pay Bonavista, Bonavista will dig up their driveways and turn off their water.

The goal is to put Airbnb hosts on a level playing field with local bed-and-breakfast owners, who collect taxes upfront and pay other fees such as the provincial tourism registration fees. Airbnb told CBC it doesn’t know of any other Canadian municipality that taxes Airbnb hosts as businesses based on their property values.

The mayor said the taxation method has been successful, but he acknowledges not all Airbnb owners are pleased.

"I don't think some are happy about it, but it is what it is."

Scooters!

The head of a German physicians group would like to see them banned:

"E-scooters should be completely banned," Andreas Gassen, head of the KBV, told regional newspaper, the Neue Osnabrücker Zeitung (NOZ). "That’s the only thing that would help to avoid injuries. From a medical point of view, they're just too dangerous, so get rid of them."

Gassen said his "worst fears" have come true. "Wherever these vehicles are now riding around, we have significantly more injured people,” he said. 

Germany legalized electric scooters in June. Users don’t have to wear a helmet, but are supposed to stick to cycle paths. There’s no single good data set on scooter incidents, but scattered studies and news stories have reported many serious injuries—often involving head trauma—as well as a few dozen deaths, which tend to involve the rider being his by a car or truck. The typical reaction to such incidents has been for local officials to call for a crackdown on scooters. Safety is certainly good, but you also have to wonder at what point the political focus will shift to tackling the root cause of the problem: developing infrastructure that is safe for vehicles other than cars.

This time last year.

Please ride your toy scooters on the sidewalk

Other stuff.

Porsche ups stake in Croatian electric carmaker to 15.5%. Uber plans bus system for Lagos. Getaround raises $200 million at a $1.7 billion valuation. Mexican property-tech startup Flat raises $4.6 million. Amazon makes Fresh available to Prime members for low fees in the UK. Uber Eats pulls out of South Korea. Starship delivery robots land on Purdue University. DoorDash heading to Australia. WeWork invests in furniture-rental startup. WeWork’s conflicts of interest list keeps getting longer. Uber hiring 2,000 people for Uber Freight in Chicago. Uber getting into small loans business. Lyft adds new safety measures after barrage of sexual assault allegations. Airbnb leads $20 million investment in Atlas Obscura. San Diego at war with scooters. Co-warehousing. The first foreign ambassador to Silicon Valley. The Great Breakup of Big Tech Is Finally Beginning. How to Major in Unicorn. “Founders are always killing it.”

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Send tips, comments, and creative tax-collection tactics to @alisongriswold on Twitter, or oversharingstuff@gmail.com.

Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last week, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.

Time’s up.

California is in the final stretch. On Friday, Aug. 30, the state’s Senate Appropriations Committee cleared Assembly Bill 5, moving it a crucial step closer to becoming state law. It is now widely expected that the bill, known as AB5, will pass a full Senate vote before the legislative session ends Sept. 13 and be signed by state governor Gavin Newsom. The bill would likely force many gig companies to reclassify their independent contractors as employees, pulling the very foundation of the gig economy out from under it.

Newsom had kept his cards close to the vest on AB5, but on Monday, Labor Day in the US, he publicly declared his support for the bill in an op-ed in the Sacramento Bee. “Reversing the trend of misclassification is a necessary and important step to improve the lives of working people,” Newsom wrote. “That’s why, this Labor Day, I am proud to be supporting Assembly Bill 5, which extends critical labor protections to more workers by curbing misclassification.”

Easy as 1, 2, 3.

AB5 would codify the test for determining whether a worker is a contractor or an employee that was outlined by the Supreme Court of California last year in its Dynamex decision (pdf). The court instructed hiring firms to apply a standard commonly referred to as the “ABC” test, which says a worker is “properly considered” an independent contractor to whom certain wage and hour regulations don’t apply only if:

(A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) that the worker performs work that is outside the usual course of the hiring entity’s business;

and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

Previous debates over whether workers such as Uber drivers are contractors, as the companies tend to claim, or employees, have focused on how much control these firms exercise over their workers. This is similar to A in the ABC test, and there is evidence for both sides. Uber drivers set their own schedules and enjoy a degree of flexibility uncommon in many employee positions. They do not, however, set the rates they earn as an independent contractor like a plumber might, or have much control over where their work takes them. Gig companies also tend to manage their workers indirectly—through algorithms and user-based ratings systems—and can “deactivate” workers who fall below a certain threshold, tech-speak for firing.

It’s harder to argue both sides on B. Do Uber or Lyft drivers perform work “outside the usual course of the hiring entity’s business”? Admittedly, I am not a lawyer, but it seems pretty clear that drivers drive, and driving is essential to the “usual course” of business for Uber and Lyft. You could say the same of couriers who deliver food for, well, food-delivery companies such as DoorDash and Postmates. As for C, Dara Khosrowshahi seeded the idea that Uber drivers are independent business operators on the company’s second-quarter earnings call, noting that they “run their own business.” It’s an old Uber talking point that seems to have been rehabbed recently.

Plan B(allot).

Perhaps the surest sign that AB5 will become law is that gig companies have shifted gears from trying to crush the bill to planning a ballot initiative that would exempt them from it. Uber, Lyft, and DoorDash last week pledged $90 million to a ballot initiative that would give drivers some benefits while preserving their independent-contractor status. That’s not cheap, but it’s a lot less than the estimated $800 million Uber and Lyft alone would owe per year in added payroll taxes, training costs, and workers comp if their workers were employees. “As a Plan B, we are reluctantly funding this initiative,” Uber chief legal officer Tony West told the New York Times.

Uber’s latest proposal includes paying drivers a minimum of $21 per hour, including the cost of average expenses, while on a trip. That sounds pretty good until you consider that the average ride-hail driver across six US metro areas spends about 33% of their time waiting for a fare, another 9-10% driving to pick up that fare, and only about 58% of the time with an actual passenger in the car, according to a recent study commissioned by Uber and Lyft. Depending how you define “on a trip,” that means the typical driver isn’t “working” for 33% to 43% of every hour, putting the effective hourly wage at closer to $12 to $14. (New York City’s pay floor for ride-hail drivers cleverly solved this problem by adjusting for driver wait-time with a “utilization” rate.)

Other gig companies have also offered concessions. Postmates announced an expanded partnership with Stride Health to give 350,000 couriers access to a “full suite of health and wealth benefits and rewards through the Stride mobile app.” AB5 could hit Postmates particularly hard because such a large share of its business takes place in California. Instacart promised similar health and wellness benefits, workplace injury coverage, a student loan repayment program, and a free membership with Care.com. Uber and Lyft previously paid drivers to protest AB5, and encouraged them to contact their legislators to oppose the bill.

Uber has launched a website, independentdriver.org (not to be confused with the Independent Drivers Guild) that it bills as a “one-stop-shop for information, updates, and action in support of driver flexibility and independence.” The site features a small number of video testimonials from drivers who “care about being independent” and invites visitors to record a message “about why flexibility and independence are important.” Uber also published a blog post on Aug. 30 making its case for “progressive legislation”—read: not AB5—and citing a bunch of its own research, because policy fights like these are what Ubernomics was made for.

What happens next?

The huge unanswered question is what would actually happen if AB5 were passed and signed into law. It’s one thing to talk about reclassifying hundreds of thousands of workers to employees from contractors and another to actually do it. Presumably there would be a lot of paperwork. In addition to having to deal with payroll taxes and workers compensation and minimum wage and other things like that, there’s also the very real question of how many workers these companies could actually sustain once employee-related costs got added to the equation. Uber’s and Lyft’s stock prices have sunk to all-time lows.

Uber has repeatedly said that if drivers were employees, it would “likely have to exert more control over drivers” and “would likely hire far fewer drivers than we currently support.” As much as that sounds like a threat, it also may be the truth. A 2017 economics paper co-authored by Uber researchers and John Horton at NYU Stern argued that Uber could do little to raise fares so long as it maintained an open market where drivers could come on and off as they pleased. The logical inversion was that for Uber to raise wages, it would have to close the market, limiting the number of drivers who could come on at any given time, and the hours they could work.

This is already proving the case in New York City, the only metro area to have set a pay floor for ride-hail drivers. After the pay floor took effect, both Lyft and Uber stopped accepting new drivers. Lyft also started giving priority to certain drivers, such as those who maintained especially high acceptance rates or who rented their vehicles directly from its Express Drive program. It’s not so crazy to think that if and when AB5 becomes law, something similar could happen in California.

This time last year.

"Move fast and break things" is broken

Other stuff.

Instacart CFO Ravi Gupta leaving for Sequoia Capital. WeWork IPO road show could kick off next week. The investor with a lot riding on WeWork’s IPO. Passengers complaint rate declines in Phoenix for Waymo vehicles. Amazon in talks to invest in ride-hail firm Go-Jek. Miami rounds up dockless bikes and scooters ahead of Hurricane Dorian. Didi Chuxing plans robotaxi service in Shanghai. Fair gets $100 million credit facility from Ally Financial for online car leasing. India’s restaurants rebel against food-delivery apps. Via licensing technology to New York City school buses. London-based Cazoo raises €28 million for online used car market. Oyo acquires data-science firm Danamica for $10 million. China leans on ride-hailing to boost sales of electric vehicles. Former Barclays CEO tells banks to beware the Uber moment. Stop buying new stuff.

Thanks again for subscribing to Oversharing! If you, in the spirit of the sharing economy, would like to share this newsletter with a friend, you can forward it or suggest they sign up here.

Send tips, comments, and other ABCs to @alisongriswold on Twitter, or oversharingstuff@gmail.com.

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Pay the bond.

This late edition of Oversharing brought to you by Anthony Levandowski, the one-time tech wunderkind who was arrested today and charged by federal authorities with 33 counts of attempted trade-secret theft:

The criminal indictment from the United States Attorney’s Office of the Northern District of California open a new chapter in a legal battle that has embroiled Google, its self-driving car spinoff Waymo and rival Uber in the high-stakes contest over autonomous vehicles. The case also highlights Silicon Valley’s no-holds-barred culture, where gaining an edge in new technologies versus competitors can be paramount.

Levandowski is the ideal villain for a corporate thriller: a rising star at Alphabet-owned Waymo, he (allegedly) absconded with trade secrets plus a host of Waymo employees to found a competing autonomous technologies startup, Otto, which he sold to Uber for $680 million shortly after Otto exited “stealth mode.” Travis Kalanick, who needs no introduction, found a “brother from another mother” in Levandowski. The pair bonded over shared interests like “winning,” “squeezing our attorneys like toothpaste,” and the “Greed Is Good” speech from the 1987 film Wall Street. They plotted to win and to get their pound of flesh.

Waymo sued Uber in February 2017; the case went to trial a year later in San Francisco. After four days in a packed courtroom, the two companies settled, but a separate federal probe into Levandowski’s actions continued. Lesser mortals might have retreated into quiet obscurity, but not Levandowski. He founded a new driverless trucking startup, Pronto.ai. “I don’t really dwell on the past,” Levandowski told the Guardian last December.

Levandowski, 39, reportedly self-surrendered this morning, and was arraigned in court in San Jose this afternoon. Law360 reporter Dorothy Atkins has a detailed Twitter thread: Levandowski pleaded not guilty to all charges; he didn’t wear a tie. Prosecutors feel he’s a flight risk because he has dual US and French citizenship and made $120 million in bonuses from Google. Friends and family offered up their houses as sureties on a $2 million bond. His next hearing is set for Sept. 4.

The indictment contains new details on what Levandowski allegedly stole from Alphabet. It charges him with downloading files that included schematics for printed circuit boards used in custom lidar products, instructions for customizing and fine-tuning those lidar products, and technical goals for the driverless car team. There are specific file names like “projects/Laser/YBr/ybr-pulser/ybrpulser_1-1-0/driver.SchDoc” and “TBR TESTING STATION.” For once, nothing is redacted.

Federal authorities are taking a victory lap. “Silicon Valley is not the wild West,” said John Bennett, an F.B.I. special agent, at a press conference. “The fast-paced and competitive environment does not mean federal laws do not apply.” Waymo seems cooly pleased; Pronto.ai has promoted its chief safety officer to CEO. Things don’t always work out the way you planned. Levandowski probably never thought that when the pound of flesh came due, he’d be the one to owe it.

Tipping point.

DoorDash announced a new pay structure for delivery workers (“Dashers”) last week, a month after its old tipping policy exploded into a viral controversy.

Under the new model, Dashers are paid a base determined by time, distance, and “desirability,” plus incentive pay, plus customer tips. DoorDash said Dashers will get 100% of tips on top of base pay and promotions, a direct response to the critique that under the old model it used customer tips to subsidize Dasher wages. DoorDash said Dashers will earn more both from DoorDash and overall under the new pay model, which it said will roll out to all Dashers in September. DoorDash said it would work with an unnamed “independent third party” to make sure earnings increase. (Amazon announced a similar change to pay for Flex drivers last week.)

The specific changes to the pay model were less telling than the reasons DoorDash gave for revising it. “We initially resisted change even in the face of public pressure because we built our model in direct response to feedback from Dashers,” DoorDash CEO Tony Xu wrote. “When we rolled out our model in 2017, an overwhelming majority of Dashers told us that they preferred it, and in the years since, we’ve seen meaningful improvements in overall Dasher satisfaction and retention.” He continued:

We thought we were doing the right thing for Dashers by making them whole if a customer left no tip, but the feedback we’ve received recently made clear that some of our customers who were leaving tips felt like their tips didn’t matter. We realized that we couldn’t continue to do right by Dashers if some customers felt we weren’t also doing right by them.

Customer sentiment was also the first of three “guiding principles” that DoorDash shared to explain its new pay strategy:

1. Every customer should feel like their tip matters. Under our old model, DoorDash would boost pay if a customer left little or no tip. Although boost pay was intended to help Dashers, we recognize that it also had the unintended effect of making some customers feel like their tips didn’t matter. Under our new model, every dollar a customer tips will be an extra dollar in their Dasher’s pocket. If you leave a $3 tip on your order, your Dasher will earn an extra $3.

DoorDash has stuck to this version of the story throughout the months-long controversy: We thought we were doing the right thing, customers didn’t understand, so we’ve changed what we do to make customers happy. The entire thing is vaguely patronizing, suggesting DoorDash decided to humor customers who simply failed to see the bigger picture.

I am reminded of how Uber for years insisted it cut driver pay rates each January to help them earn more, because cutting prices boosted demand and what drivers lost in rates they made up in volume. At some point Uber quietly abandoned those pay cuts and a study co-authored by its own researchers later found that actually, nothing Uber did to fares had much effect on driver earnings because the market was so elastic that hourly earnings tended to revert to the same equilibrium.

Quite the contrary to relying on the free market and vague claims from Uber researchers, the most successful effort to date to raise Uber driver wages was accomplished by regulatory intervention—i.e., the pay floor New York City set for its ride-hail drivers. The local taxi commission said in June that the rules, implemented on Feb. 1, lifted driver earnings by $152 million (pdf) in their first three months. Uber CEO Dara Khosrowshahi, for his part, told investors on a call in May that the minimum rates mandated by the city were “translating into pretty substantial price increases to the consumer.”

House hunters.

Here is a story about companies that pay internet contractors to find the exact addresses of properties on Airbnb and HomeAway, essentially “doxxing for money,” as one anonymous worker put it. Contractors use readily available tools like Facebook, Google Maps, White Pages, and Zillow to pinpoint addresses for online listings that sites like Airbnb obscure until booking to protect host privacy. Then they send them to companies like Host Compliance, which sells the intel to city governments:

A current contractor leaked Motherboard an internal training video for those working for Host Compliance. When working on a task, contractors are presented with a Google Maps style interface, with yellow and orange pins on top of buildings, according to the video. Orange pins are ones that the automatic part of the system has determined are likely rental properties, the video narrator says. Contractors can use people search tools such as WhitePages.com embedded within the Host Compliance panel to conduct searches. Workers can then filter potential matches for the correct address by property owner name if they have that information, before selecting which address they believe the Airbnb or other listing is from. At the end, contractors are asked to provide evidence of their work, be that screenshots or links.

Airbnb has a fraught history with cities, particularly when it comes to data. The company has resisted sharing certain specifics of its listings that it says would infringe on user privacy, and which cities argue they need to enforce rules on short-term rentals. Earlier this year, for instance, Airbnb finally agreed to hand over partly anonymized data on some 17,000 listings in New York City—a major development in a nearly decade-long feud between the company and city—but only right before a judge ordered it to turn over even more detailed information on some guests and hosts.

Airbnb should know better than most companies that when it doesn’t provide a service, someone else will pop up to offer it. By turning millions of casual home owners and renters into hospitality providers, Airbnb launched a cottage industry of businesses that help its hosts manage their listings—what I like to call the Airbnb shadow economy. Third-party companies sell property management software, offer à-la-carte services like cleaning and ad marketing help, or manage listings from top to bottom for their hosts. Airbnb is well aware of these services and has tacitly condoned them, advising online that hosts who choose to use third parties will “be held to the same standards and policies as other Airbnb community members.”

Companies like Host Compliance are just another side of this shadow economy. By refusing to share certain data with cities that they desired, Airbnb created a market for that data and companies popped up to provide it. That these companies rely on online contractors who earn piecemeal wages through gig platforms like Mechanical Turk—Host Compliance reportedly pays $2 for each correctly ID’d listing and has a shady-sounding bonus scheme—is also fitting. Host Compliance is a temporary solution to a temporary problem. If Airbnb has a change of heart and decides to start widely providing the data these contractors currently dig up, then Host Compliance won’t have to fire anyone, it can just release its workers back into the MTurk void.

Bad taste.

Analysts at investment firm Cowen think Uber Eats is losing $3.36 per order, will still lose $0.46 per order in 2024, and won’t even hazard a guess at when the unit economics of Uber Eats might become profitable. Where all that money is going is unclear: maybe driver promotions, maybe customer discounts, maybe the same bonfire that burned a $5.2 billion hole in Uber’s second-quarter results. Maybe instead of scrimping $200,000 on Uberversary balloons—roughly the salaries of 1.6 software engineers—Uber should #FindTheMoney by losing less on every burger-and-fries order it delivers to Eats customers. It sounds like there’s a good bit of money to find over there.

This time last year.

Oversharing was off while I hiked around the US Southwest, where I learned that natural arches like Delicate Arch (below) are formed from general weather erosion while a natural bridge is formed primarily by water erosion. Being there was like stepping into a Georgia O’Keefe painting, all grand and imposing and hyper-saturated. I highly recommend it.

Other stuff.

Kamala Harris backs AB5. WeWork competitor Knotel raises $400 million. WeWork acquires Spacious. WeWork HR in turmoil. Uber and Lyft take more from drivers than they say. German cities crack down on electric scooters. Uber rival Bolt starts food delivery service in Estonia. DoorDash buys autonomous driving startup Scotty Labs. Uber suspends Jump bikes in Rhode Island after reports they were used for vandalism and assault. The complete guide to autonomous vehicles. Uber gets $24 million incentive deal for Dallas hub. Grab adds delivery hub for popular Hawker stalls. Cosi raises €5 million for managed short-term rentals. Zuul opens ghost kitchen in Manhattan’s Soho. Uber still claiming to reduce congestion. How to ID scams on Airbnb. Dockless Spin scooters to get docks. Self-diagnosing scooters. LAPD tickets hundreds of scooter riders. Chicago scooter trips peak during rush hour. Liberal candidates spend heavily on services they condemn. Uber paid Beyonce $6 million in stock to play at a party. Travis Kalanick could launch a new cash war in China. Sharing economy transfers wealth from rich investors to rich consumers. Why Norwegian Air is failing. Silicon Valley’s Crisis of Conscience.

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Send tips, comments, and fun geology facts to @alisongriswold on Twitter, or oversharingstuff@gmail.com.

Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last week, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.

I am We(Work).

WeWork Cos., The We Company, WE, is not you, me, or even us. It is one person, and that is Adam Neumann.

That WeWork is all about Adam, its co-founder, CEO, part-time landlord, part-time borrower, visionary, spiritual guide, spirit animal—was the bottom line of the IPO filing the company unveiled last week. But we already knew that. “WeWork is me, I am WeWork,” he told Business Insider in May.

The filing revealed the gritty dealings of that relationship. Adam—he is often just Adam in the filing—earns no salary from WeWork but he controls the company through his near-total ownership of super-voting shares with 20 votes apiece. His wife Rebekah, also a co-founder, is WeWork’s chief brand officer; two other immediate family members have been employed or paid for their services by WeWork. Adam has an ownership stake in four buildings leased to WeWork, which the company made payments worth $20.9 million on from 2016 to June 2019. Adam has received personal loans from WeWork, including a $7 million loan issued at a generous 0.64% interest rate in June 2016 and a $362 million loan issued in April 2019. He has a personal line of credit provided by banks involved in WeWork’s IPO and secured by shares of WeWork Class B common stock. When WeWork rebranded as We Co. earlier this year, it had to buy the trademark to “we” for $5.9 million from We Holdings LLC, an entity Adam controls.

Venture capitalists often talk about investing in people not ideas. Take that to its logical extreme and you get WeWork: a startup whose founder believes he is the company. WeWork made its name building spaces for startups at a time when Uber and Airbnb had dozens of imitators and startups were the hottest investment around. WeWork talks about community but what it really sells is cookie-cutter culture. It leases buildings from landlords, outfits them with all the trappings of Silicon Valley offices (industrial-chic decor, beer-on-tap) and rents the space out to tenants at a premium on flexible terms. WeWork relies on billions of dollars in investor financing (hi, Softbank) to expand and gain market share, but also to fund the startups that pay it rent. The company depends on the startup boom that created it.

That WeWork may not survive a recession is no longer a niche theory. Any sort of economic downturn could freeze the venture funding pipeline, squeezing WeWork and the companies that rent from it. Venture funding is also only one of the macro trends currently working in WeWork’s favor. The company has enjoyed a strong commercial real estate market and a robust global economy. Younger generations are much more open to renting and shared assets, and they are living and working in cities, which represent the majority of WeWork’s revenue.

Despite the fact that the odds have favored WeWork since the company was founded in 2010, its net losses resemble Pride Rock. WeWork argues in its S-1 that it will make money once its buildings reach “maturity,” which it defines as open for more than 24 months, but with only 30% of locations classified as “mature” as of June 1, time may not be on its side. Economists don’t know when the next recession is coming, but the indicators they watch are flashing warnings. If the economy goes south, as is bound to happen eventually, venture capitalists may pull their funding, and startups may decide that a chic office with regular happy hours isn’t worth the premium rent.

Neumann has said the company is ready for, and could even benefit from, a recession. “We do not lose money, we invest money in the future,” he told Business Insider in that same May interview. He believes WeWork offices are cheaper than the competition, and that the company has secured a lucrative pipeline of enterprise clients. He says WeWork is big, and more importantly it has a lot of cash. “This is part of the reason why it's important to be very well funded,” he told Business Insider. “You have a lot of optionality.”

Whatever you take Neumann’s stance for—savvy, salesmanship, bravado, ignorance, blind faith—it makes sense in his world: the world where WeWork is me, I am WeWork. Adam and WeWork are the ultimate synergy, mysteriously increasing each other’s value. Adam sets the vision, collects fat checks from investors, and has a direct line to Softbank CEO Masayoshi Son, whom he calls “Yoda.” Adam has gone to great lengths to arrange things—power, money, connections—in favor of Adam. If you really, truly believe not just that he is WeWork but also that WeWork is him, then you believe he has gone to equal lengths to arrange things in favor of the company as well.

Lock-ups.

Pricing an IPO is hard. Set the price too low, and you miss out on money the company could have raised. Set the price too high and you risk shares sinking right off the bat, which doesn’t inspire confidence in a newly public company. There are probably different schools of thought on what a perfectly priced IPO looks like, but there is definitely one thing you don’t want the IPO to be, and that’s a down round.

By down round I mean a situation where the IPO price winds up below the price the company sold shares at in private funding rounds. In general you hope the share price rises in each consecutive funding round as the company gets bigger, more mature, and more valuable. The IPO is sort of the natural conclusion of those rounds, and also if the IPO price is lower than private fundings, it means some of your private investors are likely out of luck unless the stock price climbs above what they paid.

Lyft hasn’t done great since it went public in March but it did clear the not-a-down-round bar. The $72 IPO price represented a 52% premium on the price investors in Lyft’s Series I funding round, its final one prior to the IPO, paid in June 2018. Lyft’s stock is down nearly 30% from that IPO price, but has hovered just above the Series I price. That meant private investors were still on track to book gains on their holdings when the company’s IPO lock-up expired yesterday, letting company insiders sell their shares to the public for the first time.

The lock-up expiry made roughly 258 million shares of Class A common stock available for trading, out of a total of around 280 million, or 341 million on a fully diluted basis that includes shares that have yet to be converted. Lyft stock slipped 1.5% on heavy trading volume while the Nasdaq rose a point.

The company that should be far more worried about its lock-up ending is Uber. Uber’s IPO was a down round. It priced shares at $45, the low end of its range and less than what investors in its Series G, G-1, and G-2 funding rounds paid. The stock has since traded down about 25%, dragging Uber’s current share price below what investors in its Series F round paid, and dangerously close to the price paid by Series E investors as well. Uber’s market cap is sitting at $61 billion, well below its last private valuation of $70 billion. It’s a rough situation, but it looks nice in a chart.

Cash on hand.

Here is an odd article from the Wall Street Journal that highlights Airbnb’s “strong cash position” and contrasts it with money-losing firms WeWork and Uber, while failing to clarify whether Airbnb is currently profitable itself:

Airbnb’s finances tell a different story than other initial public offerings from large technology companies. Real-estate business WeWork Cos., which is expected to go public as soon as September, unveiled its financial prospectus this week, showcasing operating losses of $1.37 billion in the first six months of this year. Ride-sharing business Uber Technologies Inc., which went public in May, faced investor concerns over its losses. The company lost over $5 billion in its most recent quarter, in part because of IPO-related costs.

Technology businesses often drown in marketing costs, but Airbnb has been able to grow while keeping these expenditures in line.

Airbnb, as the Journal notes, has previously said it was profitable on an Ebitda (earnings before interest, taxes, depreciation and amortization) basis in 2017 and 2018, a slightly different metric from overall profitability. Whether that trend has continued into 2019 is unclear from the Journal’s story, though the absence of a clear statement that Airbnb remains profitable on an Ebitda basis makes you wonder if it hasn’t. At any rate, the company had a “strong first quarter performance” that included 91 million nights booked or $9.4 billion in total bookings, up 31% from the same time a year ago. Airbnb had $3.5 billion in cash on its balance sheet as of March 31, or about three unicorns. It’s aiming for an IPO in the first half of 2020.

Scooters!

They’ve started driving themselves:

Segway-Ninebot Group, a Beijing-based electric scooter maker, on Friday unveiled a scooter that can return itself to charging stations without a driver, a potential boon for the burgeoning scooter-sharing industry.

Ninebot said Uber (UBER.N) and Lyft (LYFT.O), the ride-hailing giants that are expanding into scooter-sharing, would be among the customers for the new semi-autonomous vehicles that are expected to hit roads early next year.

A scooter that can return itself to a docking station is an interesting idea. One of the main problems with the dockless electric scooter model is that people are terrible. People are constantly leaving scooters in places they shouldn’t be left, like in the middle of public roads and sidewalks, in lakes, and up trees. Scooter companies have tried to combat this behavior with educational materials and digital fences that alert riders when they have parked a vehicle inappropriately. Some companies require users to take a picture of their parking job to return a scooter at the end of the ride.

But what if you didn’t need to rely on people at all, because you the scooter would just take itself back to an appropriate parking space? Better yet, what if you could install a network of charging stations, similar to what exists for certain electrified bike-share programs, and rely on the scooters to plug themselves in after each trip, thus reducing the need for workers to roam around swapping out batteries or taking scooters home to recharge themselves? That could cut operating costs, reduce scooter-related emissions, and eliminate a lot of headaches for the companies. The autonomous models are pricey, at £1,169 (about $1,400) each, but maybe they’re worth it.

This time last year.

SoftBank bets everyone hates rental cars

Other stuff.

Dropbox evacuates office after electric scooter catches fire. Lime courts investment from Softbank. New York considers cap on food delivery service commissions. Lyft plays hardball in New York City. Postmates gets permit to test autonomous delivery robots in San Francisco. Options traders sour on Grubhub. Caviar employees say DoorDash, Square mishandled their offers in acquisition. Domino’s rolls out e-bike customized for pizza delivery. Chili’s bets on food delivery. DoorDash launches in Montreal. Uber perfect for older people, if they’ll try it. Oyo investing €300 million in European vacation rentals. Birth control delivery startup Nurx raises $32 million. Skip unveils new scooter designed for heavy use. Waymo tests heavy rain capabilities in Florida. Postmates workers say they weren’t told their names would appear in an anti-labor ad. Bath being ruined by Airbnb party homes. Uber boat. Central Park West residents want their parking spaces.

Thanks again for subscribing to Oversharing! If you, in the spirit of the sharing economy, would like to share this newsletter with a friend, you can forward it or suggest they sign up here.

Send tips, comments, and WeWork thoughts to @alisongriswold on Twitter, or oversharingstuff@gmail.com.