Jamesian Philosophy Refreshed

Softbank, the great Japan based holding company (not a bank), has agreed to buy Ampere Computing, an important chipmaker based in California.  According to a report from Reuters, this is an all-cash transaction, for $6.5 billion on the barrelhead. Now: I would not have you draw the conclusion, "the smart money is getting into chips, maybe I too ought to be getting into chips!" Softbank hasn't always been all that 'smart' in its use of money, I'm afraid.    Softbank was, for example, a big investor in WeWork, the company that gave some excitement and Silicon Valley gloss to the idea of shared working spaces.  The business plan was simple: enter into long-term leases for a lot of office space, and rent it at for shorter terms and higher rent.  WeWork looked good in the period 2010-2019. It was a private company and could keep most of its cards close to its vest.  Then it decided that there was money to be made in an IPO. But a public offering requires complia...

  I wrote a post here in March about the bankrupty proceedings in regard to WeWork, a company that had attempted to arbitrage the commercial lease market. It leased temporary office space, used for example by companies in the midst of a transition, whose new digs aren't quite ready yet.  It leased such space long term from the owners of suitable properties, and subleased them short term, counting on the fact that you can get more money on a per-day basis leasing short term. As I indicated when I wrote it up in late March, WeWork seemed o a knife's edge. Either it would end up liquidating OR it would end up being re-organized on a solvent basis. The issue would turn on how effectively it could stiff its own leasors, the building owners, in the bankruptcy process. The situation is an unusual one because, although most businesses do pay rent to someone, including most businesses that are cash strapped enough to seek bankruptcy court protection, in the usual case this is a humdrum...

  The arbitrage of rental periods turns out to be a somewhat common (or at any rate a not-too-rare) business model. A company or other business entity can enter the market as a tenant, taking long-term rental properties, and then turn around and serve as landlord, leasing out the same spaces (perhaps after renovating them, etc.) to shorter-term and higher-rent paying tenants. If this works: great!  The arbitrager has one stream of money going out the door and another larger stream coming in the door.   If it doesn't work ... the relations between a landlord and a tenant can become a complicated matter once the tenant has placed itself under the protection of a bankruptcy court by way of a chapter 11 filing. As sub-lessor tenants attempting this arbitrage play have done repeatedly.  This isn't the most exciting subject in the world but, hey, this is a hobby blog. My hobby blog. I may come up with something that interests you more the next time.  If a busines...