All bets are off.

Back in April, I excitedly watched as Sandeep Mathrani, the CEO of WeWork (WE), seemed to be on the journey to righting the ship.

With incredible experience at bringing back companies from the brink of bankruptcy, I was confident with him at the helm.

But trusting my gut, I told you to wait for my next update before buying.

Well, here it is.

Do not buy WeWork. In fact, stay far far away.

It abruptly announced in May that Sandeep Mathrani officially stepped down as CEO to take a new position at Sycamore Partners, a private equity firm.

2023 was supposed to be the year that WeWork would finally be profitable, but instead the person who did the most to make this happen decided to depart.

Today I’ll touch on why I think the company is now a sinking ship, and answer two subscribers’ mailbag questions.

WeWork is Not Working

I’ve known Sandeep Mathrani for about a decade. And I was just as shocked as the next person to find out that he was leaving WeWork.

Sandeep is a fighter, and when he takes on a project, he sees it through to the end.

And he had all the ingredients for WeWork’s turnaround: work ethic, discipline, intelligence, and leadership – all traits necessary to put the embattled PropTech back in the profit zone.

In under 4 years, Sandeep brought the company through the pandemic, closed unprofitable locations, fired incompetent staff, renegotiated rent deals, took the company public, eliminated $2.3 billion in recurring costs, and lowered WeWork’s debt by $1.4 billion in recent negotiations.

But a leader like that, can’t lead with his hands tied behind his back.

It was recently revealed that Softbank, WeWork’s largest shareholder and lender, has not been moving fast enough to restructure WeWork’s debt issues.

Although WeWork experienced its first ever profitable month in December of 2022 under Sandeep, WeWork is still burning through cash.

Previously, Sandeep predicted the WeWork would be profitable by 2023, but in a recent earnings call before he announced his departure, his prediction was pushed back to 2024.

And if that isn’t enough of a red flag, the newly hired chief operating officer (CFO) for WeWork, announced his plan to depart two weeks after Sandeep.

If Sandeep is abandoning ship, there is no hope of survival for WeWork.

Now on to our reader mailbag questions.

Reader Mailbag Questions

There are two reader questions that I want to address this week.

The first question is from Edward S.:

Mr. Thomas, is it possible to invest in dividend payers inside a Roth IRA account? Thereby avoiding paying taxes twice – first, as a result of having taxes taken out of my paycheck, and secondly, having to pay taxes on capital gains in a brokerage account. – Edward S.

Answer: Edward, thanks for your question. Because of the unique nature of each person’s financial situation, I suggest everyone consult their CPA when it comes to tax matters (which can often be complicated and nuanced, presenting challenges and advantages depending on any given situation).

However, in general, you’re right… Buying dividend stocks, especially high yielders, in a Roth IRA is a great idea because moving forward, those dividends can compound, tax-free.

When you put money in a Roth, you pay taxes up front based on your income levels and tax bracket at the time you make the deposit. After those up-front taxes, you can compound your wealth and passive income stream over the long-term.

Plus, the current tax rules regarding Roth IRAs mean you won’t ever pay taxes on those gains – or the dividend income that you generate within the account – again.

And the next question is from Rick H.:

Brad – do you give recommendations and research on business development companies (BDCs) and closed-end funds (CEFs)? I am currently subscribed to your Intelligent Income Daily, which I’ve found very informative and helpful.
– Rick H.

Thank you, Rick. I am glad to hear our daily e-letter is worthwhile to you.

Yes, we do recommend BDCs in in our High Yield Advisor service.

In this service, I partner with my chief analyst Stephen Hester and research the best and safest alternative income investments out there. These little-known plays are what market insiders use to profit from downturns.

Most are simple to buy right from your brokerage account. And now, you can add them to your overall investment strategy to generate healthy double-digit yields, manage risk, and limit exposure to the broad markets… regardless of whether stocks go up or down.

Because BDCs payout higher dividends, our focus is on quality companies with secure dividends. To find out more about the High Yield Advisor, click here.

In reference to closed-end funds (CEFs), we don’t recommend any in our current services.

But I did just finish writing my book, REITs For Dummies, and dedicated an entire chapter to ETFs and CEFs.

For those who aren’t aware, a CEF is a pooled investment fund with a manager who oversees it. CEFs charge an annual expense (based on a ratio) to cover the costs involved before the investor begins to see performance kick in. CEFs start out by raising a fixed number of shares through an initial public offering (IPO).

CEFs can be incredibly lucrative investments but they are a more of a speculative asset class than those we choose to focus on at Wide Moat Research… Especially in this volatile market.

If you have a question that you want answered, please never hesitate to reach out to our team. We read all feedback and you can always contact us here.

Enjoy the long weekend and remember to stay far, far away from WeWork!

Happy SWAN (sleep well at night) investing,

Brad Thomas
Editor, Intelligent Income Daily