Issue 28- On WeWork and US Presidential Elections
In today's Finshots brief, we will discuss
- WeWork's latest bid to go public and
- A new election predictor
An IPO on the cards once again?
WeWork is back and this time the company’s CEO thinks they have a winning formula.
But before we get too ahead of ourselves , some context.
WeWork was supposed to go public last year. They had planned to raise billions of dollars from retail investors after Adam Neumann (the co-founder) promised to “elevate the world’s consciousness” through WeWork.
But the moment it made its intentions clear, the public scoffed at the issue. The gigantic losses, the founder’s dodgy transactions with the company, and the absurd valuations put off even the optimists. Eventually, they had to shelve the whole thing. The only problem — WeWork desperately needed cash to stay afloat. And with time quickly running out, the company’s largest investor, Softbank had to intervene. They announced a rescue package that included a $1.5 Billion investment in the company, an offer to buy $3 Billion worth of shares from other investors, a $5 billion loan and close to $1 Billion in cash to the company’s co-founder Adam Neumann.
In return, SoftBank was expected to corner 80 % of WeWork and Neumann was expected to leave (which he did).
In the meantime, they also roped in Sandeep Mathrani — a veteran of the real estate industry, in a bid to turn around the company. And while its always a tall order to plug gaping holes in a multi-billion dollar business, Mathrani actually seems unfazed. In fact, in a recent interview, he stated the company might actually go public in 2021.
So what changed?
Well, according to the new CEO, they now have a plan. The company has already laid off close to 8,000 employees. They've reviewed 75% of all their locations to see if it makes sense to hold on to these properties and they are in line to save about $1 Billion. All thanks to these cost-cutting measures. And the CEO contests that these savings could translate into free cash flows and maybe even put the company on track to achieve profitability by 2021.
However, he also pointed out that WeWork would need to achieve occupancy rates of about 65–70% before they can break even. And while he seems confident that the target is within reach, you never know what might happen considering we still have a pandemic at large. We will just have to wait and see, eh?
How to predict elections?
People use all sorts of indicators to predict election results. Some use economic indicators. Some use polls. Even others use data from the Chinese Wholesale Market!!!
Yes, like the market where you buy tangible goods.
So here’s the story. Yiwu, a county city in the Zhejiang province harbours the world’s largest wholesale market. And if you’re a global retailer trying to import stuff from China, then this is the place you visit. You get all sorts of things. T-Shirts, Caps, Banners — you name it. However, right now the only things selling like hotcakes are merchandise fashioned using the likeness of US presidential candidates. Actually, that’s not entirely accurate. There are two presidential candidates — Joe Biden and Donald Trump. Joe Biden merchandise isn’t actually that hot. It’s the Trump stuff that’s actually selling. So if you were to use this as a barometer to predict elections, you’d argue that Trump will probably emerge victorious since retailers are looking to buy his merchandize by the bulk.
But if you were pragmatic you’d argue that modelling something as complicated as the US election using one variable is an exercise in futility. To each, his own, I suppose.
The Final Settlement?
If you’ve been following the SP Group-Tata Group tussle, you’ve probably been wondering how Tata was planning to buy out Shapoorji Pallonji’s stake. Well, guess what, it seems the SP Group has an answer now. They’ve proposed a non-cash settlement scheme, where they get access to shares in Tata’s listed entities on a pro-rata basis in exchange for giving up Tata Sons. Know more here.
Ant IPO on fire
Also, the frenzy surrounding Ant Financials' record-breaking IPO just reached a fever pitch yesterday when the people responsible for the IPO (underwriters) had to stop accepting new orders from global institutional investors ahead of time because of overwhelming demand. Know more here.