WeWork CEO May Be Fall Guy For Investor Misvaluation

rough couple of weeks. First of all, it's evaluation appears to have been dressed dramatically from forty seven billion dollars, So what might be something in the ten to fifteen billion dollar range? Now, even the chair, the CEO is under pressure to resign, So let's get the latest. We bring in Sure overday. She's a technology columnist for Bloomberg Opinion, joining us here in our Bloomberg inter after Broker studio. So sure, it's been a tough couple of weeks for

this company, for this CEO. What's the latest here? Because

it looks like the board might be meeting today. Yes, that is the latest that our colleagues at Bloomberg News and other news outlets have reported the the we Work board is meeting, maybe as early as today, and one of the things they may talk about is um removing Adam Newman or pressuring Adam Newman, who's the co founder and CEO of the company, to step down from the CEO position, which is uh, just the latest very weird twist and what has been a very very weird corporate saga.

So is he being basically the fall guy here? It does feel that way. I mean, the thing to understand about all this is that this is ultimately there's ultimately two players that matter in we Work, and that is we Works, Uh Adam Newman, the co founder and CEO, and Massio Shi sone who's the head of soft Bank, which is UM we Works biggest outside investor, and Son, until I guess now has been Adam Newman and we

Works biggest backer. In the face of resounding doubts from many other people, including SoftBank's own investors and it's very large vision fund investment fund, and Massa has stood by Newman again. Something must have changed in the in the

calculus of Son and soft Bank. I do not know what it is, but it's clear that they are turning billions ten billions that would yeah, well yeah, the valuation cut I think it was is probably the thing that would change the minds of even um sort of idiosyncratic billionaires like Maayoshi. So what's I mean? In reality? Though they can't force him out of the CEO spot can doesn't he still have some super voting stock? Yes, so I can't pretend to understand the corporate structure and what

is or isn't possible. But yes, Adam Newman controls the votes in this company, and he can remove the entire board. Um, but there is also stipulation that you can see and we works i PO documents that the board has the power to remove the CEO. Now, I don't know how those two things could be in conflict, and so I don't know how to resolve those. Um, if it gets to that, what do you think that Adam Newman did wrong? So I don't want to put all the blame on

Adam Newman. Look, this is a company that has been run in rather wild fashion for years, and that was enabled by all of the investors in this company, including soft Bank, and so everything that we work is today, which is this cash burning, maybe financially unsustainable company run by self dealing CEO. That was all information that was known and enabled by every investor in this company the last few years. And that top of that list is

soft Bank. So everybody deserves blame for the company getting to the position that it is today. So let's flip it on its head. Is there anything that Adam Newman rings to we Work and frankly cult of personality among them that would be problematic if the company was stripped of it? Yeah? Look, I mean I you have to

give Adam Newman credit. Again. It may seem baffling to those of those of us on the outside, but he has been a very effective pitchman for this company, both with investors, um and with other business partners and employees. So you know, again, this company is what it is today because of Adam Newman, both the good things and the bad things about We Work. My question is if you if you remove Newman from if Newman is removed or it steps down from the CEO position, do things

really change? I mean, this is now a weekend company. It's reputation. I don't think I've ever seen a company, certainly not on the doorstep of an I P O where the sentiment about it is so relentlessly negative, and in a way, removing the CEO or having the CEO step down is sort of acknowledge ament of how messed up it is. And so I don't know what happens with or without Adam Newman in the CEO position. It's interesting. I like your thought that you know, really his behavior,

of the company's behavior. The company's just the whole rise has been enabled by a whole host of investors, led by soft Bank. So to me, the only thing that's changed in the last two weeks is the valuation. That's the only thing that that's changed. And what that does. It shows that soft Bank miss priced and the other investors anything above ten or twelveillion dollars that's on them,

that's not on Adam Newman. So it's one can make an argument, which I'm sure the Adam Newman camp is going to make, that he is perhaps being used as escapegoat for what is a arguably a flawed business model and a flawed valuation which the public markets are now

shining a light upon. I think that's absolutely right that look, this shows you some of the inherent flaws in the soft bank business model is soft bank investment model, which is we poor, we train our cash ucas on these companies, and we make their success inevitable just by virtue of having more capital than anybody else. The downside of that, as you pointed out, is that they have so much

money that valuations inherently become inflated. And the downside of that is what happens if nobody else but soft Bank agrees um what this company's work. And I think what's changed in the private to public thing in T nine is Uber. It just kind of changed the whole dynamic, which is, if you can't convince me, public shareholder to mutual fund in Boston, that you have a path of profitability that I can value, then I have a hard time,

you know, giving you the valuation you're looking forward. So there's it's almost a pre uber post Uber timeframe, and unfortunate for we Work, they came post I think that's it's a good point. Obviously we can't go back in time, but I do wonder if Uber hadn't gone out first and kind of fallen a little bit on its face, would we work? We would the we work situation be a little bit different. I would point to remember Blue

Apron from two years ago. That was a company again that once it went public, everybody was like, this company doesn't make sense, and then it had. It took a significant valuation haircut and has continued to decline precipitously. So that shows you that Uber wasn't the first time where public investors questioned UM, a highly touted company that had

a lot of question works around its business model. Sure of it A thank you so much for the insight show over a Bloomberg opinion columnist joining us here in our interactive Brokers studios. We're joined by John Author's senior editor for Bloomberg Markets, and Culver Kadonna, chief US economists for Bloomberg Economics. So John, let's follow up on that wide ranging interview that Tom Keene and Jonathan Faroe just had with a former New York Fed chairman President John

UM Bill Dudley. So key takeaways for you as it relates to some of his discussion about the report market. He seemed to be suggesting that kind of a short term issue, nothing major to be concerned about. Yes, I think he was definitely trying to do his bit to

calm things down. I think it is interesting bearing in mind that there's been a lot of anger in the last week about the dismissal of all the early enforced early retirement of Simon Potter, who was very much regarded as Bill Dudley's man, and who is the guy who would have been in charge of dealing with the response

last week, and who has been quoted. I don't think he wanted to be quoted publicly, but talked to be of a and Bloomberg gathered that the typing Potter has been making some criticisms of the way that the Fed has handled this, the new Fetters handled this, So I think he was going quite a long way out of his way to be to downplay the degree of conserve of criticism, the degree of anger that there has been in the market about about the New York Fed itself

and its response, and whether there's been something wrong in the way that Williams has taken over from him. He's being diplomatic. That's that's a really interesting point. Carcadona also joining US GPS economist Karl what was your biggest takeaway? Well, I think it was important to see that he wasn't raising any red flags, because there is this notion that maybe the FED was you know, a day late and a dollar short to respond to the situation. But now

things are well under control. So they did announce uh, you know, recurring operations extending beyond month end, plus a longer term operations. So that that really is taking a buzuka to the problem and should be a very solid temporary patch. What I was looking for in terms of a little bit more color was maybe some timing about when the balance sheet does start to grow again. Uh. And again we shouldn't call it QUWI. I wouldn't even call it QUI light, but an expansion of this point

exactly prudent reserve management. When will prudent reserve pr When will PRM kick in? Uh? And that's going to have to happen relatively soon or we are going to see these funding strains extend through the latter half. Just understand, Carl, is this the permanent um fix for this repo issue. The permanent fix will be expanding the reserves over time that reserve management operation. What they're doing now is really

a temporary patch and it should work. Right. Seventy five billions of repos on a on a daily basis should be enough to add to sufficient liquidity back into the system. They could certainly expand that if they needed to. Unlikely that that would actually become a problem. But the reality is, uh, relatively soon before year end, for sure, the FED is going to have to embark on this balance sheet expansion.

And the reason for that is as the economy expands the banking system, banking system has to keep a pace with it, and that means that reserves have to grow along with economic growth. So I want to shift gears a little bit because I'll tell you what my biggest takeaway was. I thought that actually, probably one of the most interesting things that he said is that, uh, the risk is not necessarily right now looking like deflation. It's looking like he's seeing a little bit more of a

pickup in inflationary trends. Not the risk, but that he's actually seeing the trend go in the opposite direction. And John, I thought that was interesting because it's kind of counter to what the market has been implying. It's drastically counter to what the market has been implying. I actually nervously took a quick look at the break Heavens Well allows minute and they're down again too. This, yes, that's what

I'm saying. Last week's core CPN numbers. Okay, the Fed cares more about ec even core CPI, but they were up. They were the highest they've been, off the top of my head in a decade um. It does certainly look as though you're finally getting the feed through with about the kind of lag you would have expected from all the jolt of adrenaline that was that was delivered during the tax tax cutter for eighteen months or so ago.

And that in turn does give you a very ample explanation for why the FED at this point is so in such a different place from the market. I think the other possibility, and this is one of the things that Powell arrived really trying to make a big signal that he was going to be different from his predecessors, is that he didn't buy that US monetary policy had as big an impact on the rest of the world

as others had said. If you are looking at the rest of the planet, particularly the Eurozone, you are much more likely to be really worried about inflation then if you're just looking at the US, where it looks like we have a not by the comparison with the seventies and eighties. But we have a minor league inflation problem

dreaming here, which suggests we shouldn't be cutting rights. So Carl, what do you think is it related as you know, just what John was saying about inflation, where we might be what we've experienced with the repo market in the last week. Where do you think the FED is right now?

Is I think about the next level meetings? Sure? Well, I think the Fed is, And again Bill Dudley suggested there's not as much division on the committee as maybe looking at the dot plot would otherwise have You believe the Fed is very much looking at taking insurance out to extend a record long economic expansion, and that means

that they're watching the trade negotiations very carefully. And if we do see a significant escalation of tariffs in mid October a scheduled and more follow through in December as scheduled, than the FEED is going to have to act more forcefully. So right now, even the as devish doves on the committee are signaling a willingness for just one additional high game where seven dots excuse me, cut, there were seven

dots calling for a cut by year end. I think that that's going to continue to drift downward if we see those additional tariffs that come into play. And so my team's view is we'll see a rate cut in October and of October and another follow through in mid December, and we can look at what's happening in the market here right there was risk off in August, September was a little bit of renewed optimism, and now as October looms, it looks like we're going back into a risk off mode.

Yields her down, and really the compelling issue for the Fed towards YR end is going to be a trade headwinds stiffening and also the FED having to cut further to uninvert the yield curve. So I'm just curious going forward. First of all, whether Bill Dudley has any impact on the Federal Reserve at this point in the fact he

is no longer with it. I mean, how much do former FED members and leaders have on the current FED john It depends on which former leader it is, evidently, I think I think Stanley Fisher, who apart from anything else, wrote that, literally wrote the textbook that most current FED

governors read when they did their original economics degrees. I read Dornbush and Fisher when I did my economics degree, as he's come out beginning to suggest that negative rates and helicopter money are things that can at least be considered. That makes which is not something I remember thinking was even remotely a possibility from my reading of the Dornbush and Fisher all those years ago. That that's very influential he's beginning to create give them permission to go to

a space that they didn't really previously. Intellect would be like a go, But that's Stan Fisher. Bill Dudley, I doubt is as influential as Stan Fisher. That's said, the New York Fed is unquestionably first among equals. The New York Fed governor is always on, gets to vote in the f O m C. The New York Fed always votes with the governor. Paul Volker moved to the move to the big the hot seat from being from running the New York Fed. Previous New York Fed governors do

matter more. Um final point, I it's very unusual. It was very unusual to see the Fed itself really feel the need to say no, this is wrong, to build Dudley's original um op ed for Bloomberg Opinion, which we are delighted he wrote for us, We're very happy chose us as and we were delighted to continue that that relationship that he built, built it that he foster debate through us. But it was quite interesting that they really did say, no, we don't agree with our former New

York Cha just being onto what John said there. Uh you know, I think there was an important, too too important observation, so one as a uh relates to the ongoing situation in the repo market. I think that Bill Dudley has tremendous way because the Dudley Potter fed you know, was there during the crisis and really understands how these things operate. And uh, you know, he was way out in front talking about banks, you know, the reserves being at a higher level post crisis and where we were

pre crisis. So number one, he has tremendous authority on that front. In number two, he did throw negative rates under the bus, and he's the discussion. The hurdle is very very that will definitely get to that CARCA down in chief you as economist at a later conversation. Unfortunately, thank you so much for being with us, and of course our sincere thanks John Author, senior editor for a Bloomberg Market's both joining us in our interactive broker studios.

In this current era of technology, it really is the STEM careers that are in the front and center that are most needed as well as often has paid. There is a question why are there so few women who are entering the field? Joining us down to discuss this, Corliss Murray, senior vice president, head of Engineering at Abbot based in Chicago, to talk about a new blueprint that they have come up with to get more girls into

the STEM field. Before we get started on that, though, Corless, can you just give us a sense of what it means to be senior vice president and head of Engineering at Abbott. Yes, Lisa, and thank you so much for the opportunity to to speak to your audience today. UM. I'm responsible for UM, the corporate quality, engineering and regulatory organizations, and our team supports all of Abbott's businesses worldwide and we do that through a number of for such as UM.

It could be everything from structural and architectural support to special technical areas including governance of quality policies and procedures and regulatory strategy. So let's gives a sense you know, we we know the numbers in terms of women in STEM underrepresented. Gives a sense of kind of what Abbott is thinking about in terms of its blueprint for you know,

getting young women involved in STEM. Well, I think one of the things that we have found very consistently and it lines up what other research that has been conducted, and that is that many, as not most, girls don't enter these fields because of lack of exposure and lack of role models and encouragement. And so for us, being a science based company, it is essential for us to be able to bring women to help with the diversity of ideas and innovation as well as representing the markets

quite frankly in which we operate UM. And so it's it's a part of our foundation and a part of our talent focus UM at all levels the new organization. And so, but you have to begin with building that pipeline and making certain that we're reaching these young women early in life UM, so that they can get a feel for what it is that that they can do

as far as their careers may go. Okay, so this has been a big question which is how do you exactly counter and the idea that you came up with a blueprint a detailed playbook for successful high school girls going into an internship program. Can you give a sense of what the playbook is? So the playbook is actually UM built similar off our college intern program. And and what we do is we work with based on criteria

to select students to come into the program. We work with high schools that UH they have curriculums that are Project Lead the Way or the International Baculide Program, and these are programs that UM would make sure that these young people are getting some of the higher advanced levels of science and math exposure. UM. We then take that bring it into our organization and work with assignment managers. Assignment managers or individuals that actually work in the professions

UM day in and day out. So they could be cybersecurity experts, they could be UM, you know, mechanical engineers, architects, civil engineers and electrical engineers, biomedical engineers. And then we actually develop assignments that are real projects that are done

by these engineers and others like them. And we create these assignments for the students and we expose them to it and the blueprint goes into a lot of detail on everything around how to work and pardner with a school to how to work and identify assignments to what we call an intern week where they're exposed to other things such as how to conduct yourself in a professional environment, um, you know, basic business ethics and things of that nature,

so that they're well rounded. So court less um Abbott that is a you know, it's a glow little healthcare company. I'm sure lots of demand for engineering math type folks at your company. How do you go about at Abbott trying to ensure that you attract the best and brightest uh and and you know, get a fair representation in your workforce. And I know, I'm sure a lot of these jobs that you have are very important and uh

but define you getting the right talent. We are getting the right talent and we are a company that people want to be a part of. You know when when you look at not only the technical work that we do, but you look at the environment that we have where we've been recognized for you know, being working mothers, working women, be at you know, scientists, you know, UM innovation. We've been recognized on a lot of different venues. And so when you combine UM the total environment along with an

environment that encourages development of people. UM, these young people, we find they're excited about the technologies that we create. They're excited about the people that they work with. Because the mentors and the assignment managers that work with them love developing others and and they want these young people to be successful, and they're excited to share their professions with them and help them to have a better indication

of what they potentially could do. So I think that Abbott creates a holistic environment where people want to be a part of our organization so we get our fair share of talent. If you will to come into this organization. Courtlos Marie, thank you so much for joining us. Corliss as a senior vice president, head of Engineering and Abbott

talking about getting young women into STEM related fields. It was a tremendous story to read the concept of a hundred and fifty thousand tourists stranded on overseas beaches and in vacation hotspots. The UK government is now trying to get back to the country in what is being called the largest repatriation in peacetime history. This all comes after the collapse of tour operator Thomas Cook Group. My question is, Paul, why did this come such a huge surprise and shock

suddenly to leave so many people stranded? And here to answer that question is Richard Weis's reporter for Bloomberg News joining us from Frankfurt. So Richard, what is the answer to that question. Well, the honest answer is it didn't come as a surprise to those who follow the company closely. Of course, the timing was a surprise that this happened at two in the morning local time last night. But they just want to add a little bit of contracts contexts.

As you say, this is the biggest repatriation since the Second World War. There's hunead fifty thousand Brits stranded abroad at this point in time, So the British government is tasked with bringing about twenty thousand people home every day. So if you take a seven four seven jumbo jet, which seats about just under five that's forty jumbo jets every day for about a week, to be organized by a government which doesn't have a fleet of such size for such a task. So that gives you a feel

for what the bridge are undertaking as we speak. So it's again I have to admit I really don't understand how this happened and how I just can't take my ticket that I guess is no longer valid and maybe get another airline to honor it and fly back home. But is that not an option for these people? The good thing is that in Europe for a lot of these things there's consumer protection. In the UK it's called atoll.

It essentially means in a case like this, the government will step in and organize a transport and you even have to pay for it, and if you're lucky, you can even stay for the remainder of your holiday at

your hotel. Of course, at the moment this happens, like last night, this causes shock and awe with the fact that people, but in the end most of the bridge on vacation at the moment, will probably be able to spend the days on the beaches there and they will get home taken possibly even by the same aircraft that

they flew into. The destination. Was just with the difference that the government charges it from wherever owns it, lessers most likely to fly them home, and that money comes from a fund that all two operators have to pay into So Richard, I hate being pedantic here, but I want to go back to the two am filing here

or announcement. I mean, what transpired that led to such a sudden shuddering of the entire operation in anyway with no contingency plan whatsoever to continue to sort of make things go smoothly until the orderly wind down of the company and its operations could be completed. It sounds very dramatic that that's happened tonight at two am, and that's what actually did happen. However, there's a strong rationale behind it.

When a company is bankrupt or have to be liquidated, like in this case, the question is where are the asset and who owns them? So the administrator has to go in basically count everything and see what can I

turn into cash. So if I ground an airline and Thomas Cook is a huge airline with more than one hundred jets in the leisure sector, that's one of the biggest airlines across Europe, when I ground an airline at two in the morning, chances are most of the jets are going to be at their home airports, meaning in the UK this is the UK company, so the insolvency administrator will be able to actually get their hands on the jets and sell them later on. So there's some

practical reasons behind this timing. So this is a you know, Thomas Cook has been around for a hundred seventy eight years. What happened to this company to push it to where we are today. Well, um, if you go back and look into the history books, it was founded by a preacherman who wanted to keep people in Victorian England from drinking.

So it's actually fascinating history. The problem is in the last fifteen or twenty years or so, they haven't been quite up to speed with the changes in the industry as the low cost carriers emerged also across Europe and ticket prices continued to fall over the last couple of years. At the same time, online rivals, both travel agents and pure online travel agents as you know in booking dot Com for example, pushed into this market and squeezed the

margins that were already slim and highly seasonal. It's a business where in the summer the money comes in and in the winter you have to pay the hotels that you buy your beds from. In bulk, so it's very seasonal and you have to be able to withstand shocks. For example, across Europe, a lot of the important destination countries are Tunisia, Egypt, Turkey, and all these countries had political turmoil in the past couple of years, and some of them even had incidents that shut the entire country

is down for a couple of months. Out of a perspective from a tour operator, so that means you may have spent money on sending hundreds of thousands of guests there and in the end you can't. So if you don't have a big financial buffer, this is a very tough business to be in. Richard Wis, thank you so much for bringing this story to us. Just extraordinary. Richard Rice, Bloomberg News based in Frankfort. Thanks for listening to the

Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa A. Bram Woyits. I'm on Twitter at Lisa bramwo Wits. One Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio