WeWork Weighs Slashing Valuation by More Than Half Amid IPO Skepticism

Now tell me, does this smell like trouble with a capital "T"?  .....Aivars Lode

WeWork’s parent company is exploring a dramatic reduction in its valuation as it aims to go public while facing widespread skepticism over its business model and corporate governance, according to people familiar with the company’s listing plans and its recent talks with major investors.

We Co. is considering putting a price tag on its initial public offering that would value the company somewhere in the $20 billion range, potentially at the low end. That is less than half of the $47 billion mark where it last raised private capital this year, making it one of the largest valuation comedowns in IPO history.

Adam Neumann, We’s co-founder and chief executive, flew to Tokyo last week to meet one of the company’s biggest investors, SoftBank Group Chief Executive Masayoshi Son, and members of his team. There, they discussed the possibility of an additional infusion of capital.

Bad news about unicorns in both the USA and China

The following two articles illustrate the bad news across the world on unicorns....  Aivars Lode

Uber and Lyft close at record lows as investors lose faith in ride-sharing companies

Shares of Uber and Lyft fell to fresh lows on Tuesday, posting their lowest close ever, as the ride-hailing companies face growing skepticism from investors.

Uber closed down 5.7% to $30.70, falling below its previous low of $32.57 on Aug. 30. Earlier in the day, the shares hit an intraday all-time low of $30.67.

Lyft experienced a similarly steep drop, ending the day down 7.2% to $45.42, compared to its previous low of $48.15 on May 13. The stock dropped as low as $45.40 on Tuesday, touching a new intraday low.

Both companies have had a particularly rough ride on the public markets since their respective IPOs earlier this year, as investors continue to question whether Uber or Lyft can achieve profitability in the future. Uber and Lyft were trading on Tuesday more than 30% below their IPO prices of $45 and $72 a share, respectively.

Uber reported a net loss of $5.24 billion for its second quarter of 2019, blaming stock-based compensation costs. By comparison, Lyft lost $644.2 million in the second quarter, representing a significant jump from the $178.9 million it lost a year earlier.

A proposed California law could also represent a major threat to Uber and Lyft’s business models should it pass through the state Senate, as it would force the companies to reclassify their drivers as employees. The bill passed the California Assembly in May and California Gov. Gavin Newsom voiced his support for the bill on Tuesday. Meanwhile, Uber and Lyft have pledged $60 million to a ballot measure that would keep drivers’ classification as contractors.

Lyft and Uber’s leadership have tried to assuage investors’ concerns about their businesses by painting a path to profitability. Lyft CFO Brian Roberts said he believed peak losses for the company were last year, while Uber CEO Dara Khosrowshahi characterized the second-quarter loss as a “once-in-a-lifetime” hit.

Those efforts have swayed some Wall Street analysts who say the price war between the ride-hailing businesses has eased, indicating Uber and Lyft could turn a profit in the near future. In a Aug. 27 research note, Ronald Josey, an internet analyst at JMP Securities, said said data from a recent survey found many riders don’t compare prices between the two services, “highlighting the inelasticity of demand.” Josey holds a Market Outperform rating on both Uber and Lyft.

“With fewer users price comparing between services as ride sharing services compete on brand and product, we believe pricing could continue to be rational,” Josey said.

By Annie Palmer - CNBC Tech Markets

The Venture Capital Boom That Backed The World’s Most Valuable Internet Startups Has Lost Its Steam

Chinese startups from ride-sharing giant Didi Chuxing to media and entertainment juggernaut Bytedance once raised record amounts from the country’s private investors. But this investment boom is petering out rapidly as people are a lot less certain of finding gems amid a global stock market slump.

Speaking on the sidelines of Forbes Asia’s Under 30 Summit in Hong Kong in July, several young venture capitalists and list honorees said worthwhile projects were increasingly hard to come by, especially as more established companies had already built their ecosystem of services and transformed major consumer markets. What’s more, investors are also worried about diminishing returns as the escalating China-U.S. trade war drags global equities lower, clouding their exit strategies.

“The slowdown is very pronounced, and a lot of investors are quite anxious,” says Liu Yuan, managing director of Beijing-based ZhenFund. “We haven’t identified the next big platform in China yet after mobile internet, while the latter has already changed how we live, commute, order meals and shop.”

As investors hold back, equity investments in Chinese startups have plummeted. In the first half this year, equity investment in China’s private startups fell 59% to 261 billion yuan ($37 billion) from a year ago, while funds raised by private equity investors fell 20% to 573 billion yuan, according to Beijing-based investment and research firm Zero2IPO Group. The steep drop stands in sharp contrast with the booming environment in 2018, when Bytedance, parent of the popular TikTok short video app, raised $3 billion at a $75 billion valuation that made it the world’s largest internet startup.

By Yue Wang - Forbes

The developed world is on the brink of financial, economic, social and political crisis

I also think we will have a calamitous period in the not too distant future. However with calamity comes opportunity to buy assets cheap. Warren Buffet says when people are fearful be bold, when people are bold be fearful!  ....Aivars Lode

  

Developed economies are at a crisis point, the powers of unconventional monetary policy are exhausted, and markets are just beginning to wake up to this. That’s the sobering assessment on the current state of the global economy delivered by Donald Amstad from Aberdeen Standard Investments.  

His view is that when developed markets finally crack, there will be serious implications for every asset class and economy. However, those economies where monetary policy remains relatively ‘normal’ will be those best placed to respond. In his view, the emerging markets have more levers to pull when compared to developed markets, where the money printing taps have been turned on and interest rate settings are near zero. 

The irony is that during the Asian crisis it was the IMF and central bankers from developed markets that convinced the emerging market governments not to print money and ‘take their medicine.’ Amstad says that this was a cathartic process for these economies, and they are now looking on in bewilderment as the West has resorts to money printing of an unprecedented scale. 

Gatekeepers reign supreme: Bewildering complexity makes regulating Facebook, Google and Amazon difficult

Do you agree or disagree with the following article on the control of information?

.... Aivars Lode

Back in the 1990s – a lifetime ago in internet terms – the Spanish sociologist Manuel Castells published several books charting the rise of information networks. He predicted that in the networked age, more value would accrue in controlling flows of information than in controlling the content itself. 

In other words, those who positioned themselves as network hubs – the routers and switchers of information – would become the gatekeepers of power in the digital age. 

With the rise of internet juggernauts Google, Facebook, Amazon and others, this insight seems obvious now. But over the past two decades, a fundamentally new business model emerged which even Castells had not foreseen – one in which attracting users onto digital platforms takes precedence over everything else, including what the user might say, do, or buy on that platform.

Gathering information became the dominant imperative for tech giants – aided willingly by users charmed first by novelty, then by the convenience and self-expression afforded by being online. The result was an explosion of information, which online behemoths can collate and use for profit.

The sheer scale of this enterprise means that much of it is invisible to the everyday user. The big platforms are now so complex that their inner workings have become opaque even to their engineers and administrators. If the system is now so huge that not even those working within it can see the entire picture, then what hope do regulators or the public have?

Of course, governments are trying to fight back. The GDPR laws in Europe, the ACCC Digital Platforms report in Australia, and the DETOUR Act introduced to the US Congress in April - all are significant attempts to claw back some agency. At the same time, it is dawning on societies everywhere that these efforts, while crucial, are not enough.