(The Verge) WEWORK ISN’T A TECH COMPANY; IT’S A SOAP OPERA (15/0

This a 1month old article, I missed it at that time but interesting read now with all what happened

WEWORK ISN’T A TECH COMPANY; IT’S A SOAP OPERA
I dedicate this to the energy of We

On August 14th, The We Company (the company formerly known as WeWork) filed its mandatory S-1 paperwork to go public, and it’s worth reading in full. I mean, forget the serious stuff for a moment. The thing begins with an epigram: “We dedicate this to the energy of we — greater than any one of us, but inside all of us.”
The energy of we. I get it from a branding perspective — they’re literally calling themselves The We Company — but, you know, normal people would just say “our energy.” I tease Silicon Valley’s tech companies a lot, but New York easily matches them in ego. Look at these kids, literally bending the English language to their will!
Anyway, please join me on an annotated trip through my favorite parts of the mandatory filing.
IS THE WE COMPANY A TECH COMPANY?
WeWork — excuse me, The We Company — is primarily a landlord for freelancers and companies. You pay rent on your desk or whatever, and then you don’t have to work in the same place you live. (There are also conference rooms.) And yet the word “technology” appears 110 times in the S-1. “We provide our members with flexible access to beautiful spaces, a culture of inclusivity and the energy of an inspired community, all connected by our extensive technology infrastructure,” The We Company tells us. But I am having the damnedest time figuring out what the “extensive technology infrastructure” is. Does this just mean Wi-Fi? Is it the neon lights? Is it… lasers?
It’s true that The We Company hires lots of engineers, product designers, and so on. But, like, what major company doesn’t? If that’s the standard by which one considers a tech company, JPMorgan Chase is one of the biggest and most important tech companies on earth.
I am just going to drop The We Company’s org chart here because it honestly leaves me speechless:
This is the planned structure for The We Company after its IPO, as it appears in its S-1 form. I’d try to explain it, but I don’t understand what the fnck is happening.
The We Company, taken broadly, is interested in co-working spaces (WeWork), private schools (WeGrow), and apartments and hotels (WeLive). The We Company isn’t a tech company, though it is very successfully posing as one. It also has investments in a private club targeting women called The Wing; The We Company owns a 23 percent stake, according to these documents. Its other investments are mostly real estate. This is to say nothing of the fact that there are two ways the company makes money: 1) from people paying fees to lease its shit, and 2) from sponsorships and ticket sales for events.

The We Company’s main competitor is IWG, a real estate company that is not pretending to be a tech company, as Recode points out. “IWG has had substantially more square footage and more customers, and has actually made a profit — yet its market cap is just 8 percent of what SoftBank’s latest funding round thinks WeWork is worth,” Recode helpfully tells us. The We Company isn’t just a regular real estate company, then; it’s a real estate company that’s taken a lot of money from SoftBank and other firms by just saying “tech” a lot.
Anyway, I went further into the documents, and wow. Adam Neumann, CEO of The We Company, and Rebekah Paltrow Neumann, founding partner of The We Company and first cousin of Gwyneth, have a succession planning document that does not even consider the possibility of divorce. If anything happens to Adam, Rebekah plus two board members (in some circumstances, of her choice) get to pick the next CEO.
Now, if Rebekah can’t do this — perhaps because she is dead or disabled — a trustee acting on behalf of the Neumann estate will pick up the work of finding a new CEO. This company appears to be all about the Neumanns, especially Adam Neumann.
A MAJOR RISK FACTOR: ADAM NEUMANN
Adam is a risk factor. Seriously, check the Risk Factors section. “Adam will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors. As a founder-led company, we believe that this voting structure aligns our interests in creating stockholder value.” Well, it creates value for Adam, anyhow.

Adam Neumann bought buildings that he then leased to WeWork, The Wall Street Journal reported in January. Adam made millions on the deals. In May, he said he would sell the properties that WeWork leases to a real estate investment unit run by WeWork and funded by outside investors, The Wall Street Journal reported.
The investment vehicle, called ARK, will manage Adam’s holdings in 10 commercial properties, the IPO form says. Four of those properties are leased by WeWork.
This chart from the S-1 forms describes ARK’s structure. I don’t understand it either.
The S-1 form notes that Adam “currently has a line of credit of up to $500 million with UBS AG, Stamford Branch, JPMorgan Chase Bank, N.A. and Credit Suisse AG, New York Branch, of which approximately $380 million principal amount was outstanding as of July 31, 2019.” That loan is secured by some of The We Company’s shares.

Adam is also $97.4 million in the hole to JPMorgan Chase “across a variety of lending products, including mortgages secured by personal property,” though those “lending products” aren’t secured with We Company shares. Incidentally, JPMorgan Chase is one of the underwriters of The We Company IPO. (Others include Goldman Sachs, Bank of America, Citigroup, and Barclays. The IPO may be worth more than $122 million in fees, according to Bloomberg.)
While Adam hasn’t taken a salary for his We Company work — neither has Rebekah — the company issued him a $7 million loan in June 2016. (It is repaid, with interest.)
There are a few reasons to launch an IPO: a big one is to take on new investment. IPOs also let insiders cash out. Before 2019, Adam had not received any equity awards, the documents say. But as The We Company got larger, the board of directors decided to give Adam reason to do an IPO, so Adam received options to purchase more than 42 million shares.
The breakdown of the shares in Adam’s compensation package is as follows:
  • 9,438,481 options vest every month for five years
  • 9,438,481 options are performance-based vesting and vest monthly for five years
  • 7,078,861 options will also be granted monthly “if we attain a public market capitalization of $50 billion and vest monthly for a period of years after that”
  • 7,078,861 options “meet the performance-based vesting conditions if we attain a public market capitalization of $72 billion, and vest monthly over a period of two years from that date”
  • 9,438,481 options “meet the performance-based vesting conditions if we attain a public market capitalization of $90 billion, and vest monthly over a period of two years from that date”
This led to the $362.1 million loan Adam got in April from The We Company to exercise his stock options. Adam repaid the loan this month by giving the shares back. “Following the settlement of this loan, the Company issued to Adam the number of profits interests equal to the number of shares surrendered by Adam in settlement of the loan.” I am not totally sure I follow this sentence, honestly, but it seems like Bloomberg’s Shira Ovide did, and here is how she describes it: “Neumann swapped out a portion of those options the company valued at more than $360 million in a complicated transaction with the company that gave him a financial instrument tied to future WeWork profits.”

Adam spread the financial love to his wider family, too. From the filing:
One of Adam’s immediate family members hosted eight events relating to our Creator Awards ceremonies in 2018, for which she was paid an aggregate of less than $200,000. Another one of Adam’s immediate family members has been employed as head of the Company’s wellness offering since 2017, and he receives less than $200,000 per year for acting in this capacity.
Also, while we’re talking Adam-related risk factors: interviews Adam gave to Business Insider and Axios possibly violated the Securities and Exchange Commission’s IPO quiet period. They’re listed in the form as risks to the business. See, The We Company filed for IPO in December; the SEC’s required quiet period starts when a company files its registration, and it ends when the SEC staff declare the statement “effective.”
In total, as Shira Ovide at Bloomberg points out, there are 10 pages’ worth of the filing that are just disclosures about Adam.
WHAT ABOUT REBEKAH?
Rebekah, Adam’s “strategic thought partner,” appears significantly less often. As I mentioned, she’s never received a salary. She also kicked up a fuss in September 2018 by making some pretty weird comments about what women are supposed to do, according to CNBC: “A big part of being a woman is to help men [like Adam] manifest their calling in life.”

This is a dim view of marriage: only one partner can “manifest their calling in life.” While The We Company walked back those comments — sort of! — by adding more context, it didn’t help because the context is: “The reality that I see today is that there is nothing bigger that women can do, in my opinion, than empower their partners — and that can be a man, a woman, a friend, it doesn’t matter, but empower others.”
At The We Company, Rebekah is the CEO of WeGrow, the school. At Cornell University, she majored in business and also studied Buddhism. Actually, I’m just going to quote her biography on WeGrow: “Rebekah has traveled the world apprenticing and studying under many Master Students, such as His Holiness the Dalai Lama and Mother Nature herself, and is committed to creating an educational community that fosters growth in humans’ minds, bodies, and souls elevating the collective consciousness of the world.”
She’s even attended the Dalai Lama’s birthday party, according to a 2016 Fast Companyprofile. “We don’t have a line at all between work and life,” she told Fast Company. “It’s not even a blurred line. There is no line.”
Since Rebekah is the one in charge of branding, I presume the following sentence from the S-1 is her doing: “We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness.”
I BLAME SOFTBANK
Okay. So we know that The We Company, hilarious as it is, isn’t a tech company. So why does it have this sky-high evaluation? The answer appears 51 one times in the S-1: SoftBank.
SoftBank, its Vision Fund, and its CEO and founder Masayoshi Son, have loomed large over the tech industry, with investments in Slack, Uber, and GM Cruise. “SoftBank’s strategy has been to put enormous sums — its smallest deals are $100 million or so, its biggest are in the billions — into the most successful tech startups in a given category,” Sarah McBride, Selina Wang, and Peter Elstrom wrote in a Bloomberg profile last year.
In that article, an anonymous Silicon Valley partner calls SoftBank a “big stack bully,” which is a poker expression for someone who has so many chips that no one else will bet. (If you are reading this, anonymous source, please drop me a line. You sound fun!) The investments made by SoftBank are huge — and often push the companies SoftBank has invested in past their competition in both valuation and scale.

In January, SoftBank dropped another $2 billion into The We Company, bringing it to a valuation of $47 billion, according to The New York Times. SoftBank’s total investment in The We Company — including those made by its Vision Fund — is something like $10 billion, that report said. The Vision Fund, which raised about $100 billion, is backed by Saudi Arabia’s Public Investment Fund, Apple, and the government of Abu Dhabi, among others, according to Bloomberg.
That $2 billion might seem enormous, but it wasn’t as big as one of the deals SoftBank considered: buying out all other investors for $10 billion and then adding $6 billion more to The We Company, The Wall Street Journal reported. “Within SoftBank, the strong support for WeWork has been controversial,” wrote Eliot Brown. ”Several executives questioned the lofty valuation of a company primarily focused on real estate.”
If the company is to continue expanding at its current pace, it needs to get cash from somewhere. The IPO was filed in December 2018. In early January, several papers reported that the SoftBank cash injection was smaller than expected. And “in the first half of 2019,” the CEO got his first performance incentives, which are tied to the public market, per the documents.
AN ELEVATED CONSCIOUSNESS OF DOWNSIDE RISK
So this company, The We Company, used to be called WeWork, but it changed its name. The new name was owned, Bloomberg’s Ellen Huet reports, by We Holdings LLC — so WeWork paid $5.9 million to acquire “we” and changed its name last month. We Holdings — you guessed it! — manages stocks and assets owned by… WeWork’s founders.

I tell you what, this has absolutely elevated my consciousness. For instance, the average initial term of The We Company’s leases is 15 years. The company will pay $47.2 billion, minimum, on the leases it’s already signed as of June 30th. And it’s still trying to grow.
I don’t know, friends. I just don’t know. I have never seen anything like this, and I cannot wait to see what the SEC has to say about loaning your founder, CEO, and controlling shareholder money while also paying him rent. This is to say nothing of who got paid by the name change or any of the rest of it. “As an investor, why would you be willing to put your confidence in this structure?” Charles Elson, a corporate governance professor at the University of Delaware, told Bloomberg.
I love chaos, and I am now very interested in The We Company. This company is heavily dependent on one guy, Adam, who seems to have a propensity for absolutely incredibledeal structures. I am very excited to find out who will pony up for shares. Whee!

>>> US Early premarket gappers

Early premarket gappers

Gapping up:

  • BYND +13.5%, WSC +3.7%, VNRX +3.1%, AIR +2.9%, EXAS +1.4%, MINI +1.4%, PLMR +1.2%, BIP +1.1%

Gapping down:

  • PSO -16.7%, ENTA -10.2%, BTAI -8.8%, PLYM -6.9%, FUL -5.8%, CTRP -5.6%, ERIC -2.1%, HDS -1.6%, FOR -1.5%, KBH -0.5%

(CNN) Whistleblower tentatively agrees to testify, attorneys say, as long as the

Whistleblower tentatively agrees to testify, attorneys say, as long as they get appropriate clearances to attend hearing
The anonymous whistleblower who filed a complaint with the intelligence community inspector general, which includes allegations about President Donald Trump's conduct, has tentatively agreed to meet with congressional lawmakers, according to correspondence obtained by CNN.

The meeting could take place on the condition that acting Director of National Intelligence Joseph Maguire approves appropriate security clearances for the individual's legal counsel so that they can accompany their client, the correspondence showed. Rep. Chris Stewart, a member of the House Intelligence Committee, said on Twitter late Wednesday night that the complaint had been declassified but the document was not immediately available publicly.
House Intelligence Committee Chairman Rep. Adam Schiff wrote a letter to Maguire making the request Wednesday after the whistleblower's lawyers agreed to meet with lawmakers if that condition is met and requested assistance in expediting approval from the acting DNI.
CNN reported Tuesday that the whistleblower's legal counsel "wrote to the Acting Director of National Intelligence to request specific guidance as to the appropriate security practices to permit a meeting, if needed, with the Members of the Intelligence Oversight Committees."
"This is a reasonable request that the Committee strongly supports and expects your office to fulfill immediately," Schiff wrote.
Schiff's letter comes after the whistleblower's legal counsel wrote to the committee Wednesday reiterating the conditions of a possible meeting between lawmakers and their client.
"We have reaffirmed our client's request for direction by correspondence to Acting Director Maguire, a copy of which is included as an enclosure. Furthermore, we have requested for the Acting Director to process and grant myself, I. Charles McCullough, III, and Mark S. Zaid the appropriate security clearances so that legal counsel may be in attendance at any meetings with our client. I am sure you can understand that it is imperative that a whistleblower, especially one caught up in such a high profile matter involving the President, have experienced legal counsel by their side. Your cooperation in ensuring this occurs would help facilitate a future meeting or testimony," the letter said.
The whistleblower will not appear before lawmakers on Thursday, nor are they currently scheduled to appear before Congress, a source familiar with the situation told CNN.
The source said that the process is underway to ensure the lawyers have access, if needed, to the relevant classified information. Lawmakers have not been told the identity of the whistleblower or where the complainant works in the government.
The whistleblower's complaint -- which was hand-delivered to Capitol Hill on Wednesday for lawmakers to review -- deals, at least in part, with a phone call Trump had with Ukrainian President Volodymyr Zelensky on July 25. A transcript of the conversation released by the White House shows Trump repeatedly pushed Zelensky to investigate former Vice President Joe Biden and his son, Hunter.
There is no evidence of wrongdoing by either Joe or Hunter Biden.
Even before the whistleblower complaint was made available to lawmakers, House Speaker Nancy Pelosi on Tuesday declared Trump had betrayed his oath of office and announced she was opening a formal impeachment inquiry into the President.
Trump has downplayed the significance of the complaint, claiming the whistleblower is partisan and his conversations with foreign leaders have been "appropriate."
Speaking to CNN Wednesday, Rep. Eric Swalwell, a California Democrat, said the whistleblower complaint points to "further evidence to seek" including "other witnesses to find, and documents as well as witnesses who would corroborate what he or she is complaining is an urgent and credible concern."
Swalwell described the complaint as a "five-alarm concern," echoing strong rhetoric from other Democratic lawmakers who viewed the document Wednesday.
While most lawmakers declined to comment on the complaint Wednesday, some Republicans did push back on the way Democrats were framing the document.
Rep. Chris Stewart of Utah told CNN after viewing the complaint that he has "no concerns" and that "there's nothing in there that changes the way I felt" earlier in the day when he had expressed support for Trump's accounting of events.
Schiff's letter to Maguire comes the same day the acting DNI director rebuked a Washington Post report stating that he threatened to resign if the White House tried to restrict his testimony before Congress.
"I have never quit anything in my life, and I am not going to start now," he said of the report. "I am committed to leading the Intelligence Community to address the diverse and complex threats facing our nation."

FT : Saudi Crown Prince risks destroying his own script

Saudi Crown Prince risks destroying his own script
The Saudi Aramco valuation should be determined by the markets

When Prince Mohammed bin Salman announced his plans to launch an initial public offering for Saudi Aramco, he said taking the world’s biggest oil company public would create “more transparency”. In theory, he was right. A well-managed IPO should subject the kingdom’s national champion to scrutiny like never before, forcing it to open its books and become accountable to outside shareholders. Three years on, Prince Mohammed, the headstrong de facto leader of the kingdom, is destroying his own script.

The Financial Times reported last week that the government is pressing wealthy Saudis to become cornerstone investors as part of a plan to achieve the $2tn valuation coveted by the Crown Prince. There is nothing unusual about securing anchor investors ahead of an IPO. But the fear is the heir apparent is determined to dictate the terms of the partial privatisation rather than leave it to market forces. The Saudi government denied putting pressure on families or individuals. Saying no to Prince Mohammed, however, would not be an easy option even if there were no coercion, given his propensity to detain or silence critics and rivals.

Indeed, some of the families being targeted had members locked up in an extraordinary anti-corruption drive that led to more than 300 princes, tycoons and former state employees being detained at Riyadh’s Ritz-Carlton. Many of those incarcerated in November 2017 were only released after transferring cash and assets over to the government.

The legacy of that shakedown is still being felt as a cowed private sector sits on its cash and nervously watches from the sidelines, rather than providing the investment Prince Mohammed needs to drive his economic reform programme and generate much-needed jobs for young Saudis.

The brutal murder of Jamal Khashoggi by Saudi agents a year ago exacerbated fears about the direction in which Prince Mohammed was taking the kingdom. As a result, foreign investors who had once been willing to overlook the crown prince’s autocratic style began to weigh the political risks of being associated with the nation.

All this has seriously undermined the crown prince’s ambitious (and necessary) economic reform programme. That, and the urgent need for cash to fund grandiose megaprojects, helps to explain why Prince Mohammed has injected fresh impetus into the delayed Aramco IPO with a planned sale of up to 3 per cent in Saudi Arabia.

He desperately needs an economic win and the IPO has always been at the centrepiece of his plans. Yet he has insisted that the valuation should be above $2tn, despite analysts cautioning that $1tn to $1.5tn is a more realistic outcome. The danger is that the crown prince thinks he can force an issue that should be determined by the markets.

Aramco is the world’s most profitable company and a well-run organisation. There should be plentiful demand for its shares — at the right price. But putting pressure on wealthy Saudis to buy into the listing raises the spectre of market manipulation. It threatens the integrity of what may be the world’s largest IPO before it has even begun.

Saudi Arabia’s Tadawul exchange was this year included in the MSCI Emerging Markets Index. That means passive institutional funds will have little option but to buy the stock. But active investors will have a choice, and should be extremely wary of any signs of price inflation. Prince Mohammed’s brash decisions have already damaged the economy he promises to reform. Even absolute monarchies should know they have no right to abuse the markets. They do so at their peril.

>>> After Hours Summary: AIR +3%, FUL -7%,



After Hours Summary: AIR +3%, FUL -7%, KBH -1% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: AIR +3%

Companies trading higher in after hours in reaction to news: WSC +4% /  MINI +1.4% (Reuters report suggests potential WillScot bid for Mobile Mini), VNRX +3.7% (continued strength), EXAS +1.2% (initiated with Outperform at Oppenheimer; tgt $130)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: FUL -7.2%, KBH -0.9%

Companies trading lower in after hours in reaction to news: BTAI -15.8% (commences underwritten public offering of $19.0 mln shares of common stock), PLYM -6.6% (proposes offering of 3 mln shares of common stock), CTRP -1.1% (files for ordinary share shelf offering by the company and selling shareholders), HDS -0.4% (downgraded to Mkt Perform from Outperform at William Blair)

>>> Closing Stock Market Summary



Closing Stock Market Summary

The S&P 500 gained 0.6% on Wednesday, as upbeat trade news and strong economic data and earnings helped investors brush aside impeachment concerns. The Dow Jones Industrial Average also increased 0.6%, while the Nasdaq Composite (+1.1%) and Russell 2000 (+1.1%) outperformed after leading yesterday's decline. 

The stock market struggled for direction to begin the day, with the S&P 500 dipping to session lows (-0.5%) just before new home sales for August and the notes taken from President Trump's call with Ukrainian President Zelensky were released at 10:00 a.m. ET.

The annual pace of new home sales for August (713,000) exceeded the Briefing.com consensus of 659,000 and was one of the highest readings since October 2007. Regarding the notes, the Department of Justice said there was no indication of any violation of campaign finance laws. 

Safe-haven assets like gold ($1513.10/ozt, -$27.60, -1.8%) and U.S. Treasuries began to sell off, with some curve-steeping activity contributing to the gains in the S&P 500 financials sector (+0.7%). Trade-sensitive areas like the information technology (+1.2%) and consumer discretionary (+1.0%) sectors gained traction after President Trump said a trade deal with China could "come sooner than you think."

Likewise, the Dow Jones Transportation Average (+1.0%) and Philadelphia Semiconductor Index (+1.8%) finished with noticeable gains as the broader market steadily increased throughout the day. The defensive-oriented health care (-0.5%), real estate (-0.1%), and utilities (-0.1%) sectors were the lone S&P 500 sectors to finish in negative territory.

Nike (NKE 90.81, +3.63, +4.2%) and Cintas (CTAS 266.62, +14.48, +5.7%) padded the advance after both beat top and bottom-line estimates, with Cintas issuing upside FY20 EPS guidance. Philip Morris International (PM 75.28, +3.72, +5.2%) ended merger talks with Altria (MO 40.56, -0.17, -0.4%) as scrutiny of Juul/vaping intensified. Altria owns a stake in Juul. 

The 2-yr yield increased six basis points to 1.67%, and the 10-yr yield increased ten basis points to 1.73%. The U.S. Dollar Index rose 0.7% to 99.03 amid weakness in the euro and British pound. WTI crude lost 1.3%, or $0.76, to $56.56/bbl, extending its recent pullback as inventories unexpectedly increased, according to the weekly report from the EIA.

Reviewing Wednesday's economic data, which included New Home Sales for August and the weekly MBA Mortgage Applications Index: 

  • New home sales surged 7.1% m/m to a seasonally adjusted annual rate of 713,000 units (consensus 659,000) from an upwardly revised 666,000 (from 635,000) in July. August trailed only June as the highest-paced sales month since October 2007.
    • The key takeaway from the report is that the strength underscores the impact of low mortgage rates on buyer demand, as the higher-priced West region saw the biggest increase among all regions.
  • The weekly MBA Mortgage Applications Index fell 10.1% following a 0.1% decline in the prior week.

Looking ahead, investors will receive the following reports on Thursday: the third estimate for Q2 GDP, the weekly Initial and Continuing Claims report, Pending Home Sales for August, and the Advance reports for International Trade in Goods, Retail Inventories, and Wholesale Inventories. 

  • Nasdaq Composite +21.7% YTD
  • S&P 500 +19.1% YTD
  • Dow Jones Industrial Average +15.6% YTD
  • Russell 2000 +15.0% YTD