The Weirdness of WeWork’s IPO Filing: CEO Daily

August 16, 2019, 10:38 AM UTC

Good morning and happy Friday.

The recession watch was back on again this week, thanks to the fact that interest rates for ten-year Treasury notes dropped below those for two-year Treasury bills. Other economic indicators are more mixed. Fortune looks at several of them here, and comes up with no clear conclusion.

But if a recession is coming, the WeWork IPO filing, out this week, will be a fitting capstone for the peak.

Writing for Fortune, Ellen Florian looks at the oddities of corporate governance in the filing—not only that founder Adam Neumann has voting control, but that his wife chooses his successor. “It’s a mess any way you look at it from a governance standpoint,” says Charles Elson, a corporate governance expert.

Meanwhile, Fortune’s Kristen Bellstrom writes that the company is coming to market with an all-male board—exceedingly strange for a supposedly woke company.

Bloomberg’s Shira Ovide notes WeWork is spending almost as much in operating costs as it takes in in revenue. “It’s growth is overwhelming, but it’s not clear it got there in a sustainable way,” she says.

And then there’s the odd clause that gives Neumann a giant payday if the company’s valuation reaches $90 billion. Really?

Here’s how Ovide sums it up:

“In short, everything about WeWork is utterly odd. It is a real estate company valued like a tech company. It is a young company with questionable economics that has committed to paying tens of billions of dollars in future years for office building leases. This is a company whose intricate relationships with its chief executive requires 10 pages of disclosures. And this may be the first time I’ve seen an IPO filing with a section titled “Expected Resilience in a Downturn.”

The end may be near. Other news below.

Alan Murray


Cathay Pacific

Cathay Pacific CEO Rupert Hogg has resigned following controversy over employees' participation in the Hong Kong protests. One of his deputies, Paul Loo, also resigned—the board said it was time for new leadership at the Hong Kong flag carrier. "These have been challenging weeks for the airline and it is right that Paul and I take responsibility as leaders of the company," said Hogg. South China Morning Post

GE Tumble

Harry Markopolos, the financial examiner who once raised concerns over fraudster Bernie Madoff, has now claimed that GE has been engaging in "accounting fraud" by hiding losses. GE claims Markopolos is only interested in hammering its stock, as he is working with an "undisclosed hedge fund partner." However, Wall Street analysts see smoke, and GE's share's fell 11% on the report's release. Bloomberg

Coinbase Custody

Coinbase may soon be storing 5% of all the Bitcoin in circulation—worth over $7 billion—thanks to its $55 million purchase of Xapo's under-a-Swiss-mountain custody business. Xapo retains its exchange business and Wences Casares is still its CEO. Casares: "It’s hard to do a consumer business well at the same time as an institutional business. Earlier this year, we looked for a home for it." Fortune

FTSE Snafu

The London Stock Exchange suffered what it described as a "technical issue" this morning, leading to a suspension of the opening of trading in FTSE 100 and FTSE 250 shares. The FTSE hit a six-month low yesterday and was expected to bounce back this morning—but traders were left tapping their feet. The 100-minute outage was the exchange's worst in 11 years, and when it was over, the FTSE did indeed open up. CNBC



Iranian Tanker

Gibraltar has freed a seized Iranian tanker despite a major push from the U.S. to take control of the vessel. The U.K. and its Mediterranean territory had apprehended the ship on suspicion of transporting Iranian oil to Syria, but Iran promised the Grace 1 would not bust EU sanctions and Gibraltar let it go. Gibraltar insists "there was absolutely no defiance of the U.S." in its decision. Financial Times

Trade War

Far from winning the trade war, President Trump is pushing the U.S. towards a recession, Shawn Tully writes for Fortune. Trump's one-size-fits-all tariffs are threatening GDP growth—buying goods from other countries than China adds extra costs for producers and consumers—while China is slapping tariffs in a more targeted fashion on goods that the country can't buy at comparable cost elsewhere. Fortune

Trump Eyes Greenland

President Trump has reportedly (and repeatedly) floated the idea of the U.S. purchasing Greenland, the autonomous Danish territory. He is apparently taken with its resources and geopolitical importance. The U.S. has unsuccessfully tried to buy Greenland twice before. Coincidentally, Trump will visit Denmark next month. Wall Street Journal

Korean Jeopardy

North Korea insists that talks with South Korea are over, and launched two short-range ballistic missiles this morning. The North is irked by joint U.S.-South Korea military drills, although these are largely computer simulations. These are not the first missiles it's fired in recent weeks. Reuters

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.

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