WeWork Withdraws IPO, Repo Strains, AI in Hiring

work withdrawing its initial public offering perspectives. After a tumultuous month, we are seeing some movement in the bonds going lower now at their lowest levels. Wow, at eight seven cents uh and a quarter uh per on the dollar. And this, you know, comes at a time when borrowing casts are supposedly lower. Not for we work joining us nationally, boss who covers all things up finance for us here at Bloomberg.

I'm wondering this doesn't come as a surprise. No, no, I mean this is this is something that's been known exactly, so it's not a shocker, right. I mean that they were going to delay their I p O. The question that's looming over everyone's minds two things is when will this happen, Will it ever happen? And how are they going to raise money without a happening? So what is the thinking here? Because I know that they had a big debt financing that was gonna was contingent upon them

going public, that obviously is not going to happen. And is Leasa's point out earlier they are going to need cash in the relative near term? Is there a plan out there for this company? So right now they're in talks for multiple things potentially happening here. H soft Bank may make another equity injection, but with the ft actually reporting that it could be more than a billion dollars,

I mean that that is huge. Remember, the interesting thing about soft Bank making another injection is we're waiting right now on whether soft Bank is going to write down the stake of their we Work investment. And soft Bank is already bleeding right now from a lot of different investments that are that are troubled right now. Just to put this in a perspective, when Jefferies took a write down on their we Work stake of less than one percent,

it was over a hundred million dollars. And so the we Work right down with the stake of almost maybe a little more. When you count how much they have in UM convertible shares, it could be very significant. So how are they going to make another equity injection when they're already writing down their existing stake? Could be really interesting tension. Another interesting tension is what's going on in the C suite at JP Morgan, which I believe was going to be the lead banker on the I p OH.

How big of a liability is this for them? So think about how many aspects they have connections to we work, right, they have the it's it's something like a margin loan. So Adam Newman took out a loan based on his his stock hundreds of millions of dollars led by JP Morgan. JP Morgan also is responsible for the mortgages for Adam

Newman's own homes. They also have exposure to a lot of the buildings that we work as exposed to and so they have some and that's on top of helping lead this loan as well as the I p O that's not happening. So those are fees you're not going to see for J P. Morgan in their upcoming earnings report because the I p O obviously never happened. But then you also have to wonder how these other moving parts affects JP Morgan. Their own investors are also invested

in early we Work stock. Some of those investors have told me that they're not thrilled with the right ups and the right downs that maybe UM embedded in JP Morgan funds that have we Work shares in them. So brought it out from JP Morgan and we work here. I mean, there's been a lot of big disappointing deals here in twenty nine Uber Lift and just on and on the list goes. And this was supposed to be the year when the bankers got fat and happy and I PO investors got fat and happy. It hasn't worked

out that way. Has there been any meaningful pushback on the bankers and saying, you guys just haven't done a very good job this year. Totally, so get this. Tomorrow is the day in Silicon Valley that all the big venture capitalists will be meeting, and the bankers are not invited because they are looking to change the I p

O model as we know it. They don't like the initial pop that got in an I p O and they certainly don't like the first day fall you get lately with Smile Direct, Club and and Peloton were two of the very rare companies to fall on their first day of trading that are that big and raise how much money? How much is the banker's fault? How much is the venture capitalists fault for valuing these companies as

highly as they have? Well, if you talk to the ventral capitalists, what they're gonna do is they're going to deflect the responsibility not just away from the venture capitalists, but over to soft Bank, which has been really inflating some of these um silicon value valuations. And you know, there's a lot of people that say a lot of these new big fundraisers we're seeing is in response to

soft Bank really changing the dynamics of the market. Least you've covered this a lot too, But the bankers are not without blame here for certain. The next big one that I think we were waiting on was Airbnb. What's the status of that TBD? The thing that's nice. The thing that's nice about airbnb is that it does turn a profit. It is kind of a darling and you no matter you can think about it, when the I P O market's bad, it's not that it closes up completely.

People still want listings and so they're going to look for the best possible ones. And so I think Airbnb still dangles a little bit of hope in front of investors and in front of UM, in front of in front of banks as well. Shinali Bassett, thank you so much for joining a Shonali's investment banking reporting for Bloomberg News.

Journey us here on our Bloomberg Interactive Broker studio, bringing us up to date on that news that we work UH plans to withdraw its I p O perspectives as expected, but still a shocking formative for a company that just a couple of weeks ago I was looking to raise, you know, a huge amount on a very high valuation. A lot of questions now Number one, where will we work raise money? Number two? What does this to to

investment bankers? And a sort of tom was a year generally for I p O s sale was was was putting out there? And number three for soft bank at what point do they just say forget it, We're gonna let you fail. Exactly right time to check in with Bloomberg Opinion. We're joined by opinion columnists Brian Cheppetta. Brian is a debt markets calumnist. He joins us here in

our Bloomberg Interactive Broker Studio. So, Brian, I know you're out with a column and you're basically saying it could be a shaky time for the bond market, but investment grade issues are just flooding the market here. So what's going on in your side of the credit markets? Yeah, I thought it was really fascinating to see that a D seven investment grade bond deals cluded the market as

of the end of last week, which is a record high. UH. No month has ever seen so many investment grade companies come and borrow, And it's just it's really surprising because you saw all this different, tumultuous activity in various corners of the markets. But it was steady as she goes. I guess uh for corporate And even though they're down a little bit this month, first monthly loss this year because of yields rising, UH, still out performing treasuries and

still up year data, pretty strong, pretty strong year. So this is this is such a fascinating area because there seems to be a flood of cash coming from overseas into the US investment grade bond market trying to get some yield. Uh, since there is still some yield in the United States. That said, Morgan Stanley crunched the data and found that liabilities that the event of debt versus income have reached their highest level in the investment grade

corporate sector since two thousand and nine. And they were talking about how forty of all investment grade issuers now have debt levels more equivalent to junk ratings, even though they are still rated with the with the top tiers of credit grades. Should people be concerned? Well, I guess when I see that all the pushback, I always have the thing I always want to see, and maybe maybe there is some data out on that is sort of Okay, the debt levels are high, but what are the borrowing costs?

Because yes, it's the highest since two thousand nine, But you have to sort of look at where yield levels are now relative to where they were ten years ago. Because you can borrow, you can refinance, and yes you have higher debt, but it's it's cheaper to borrow, So I mean sort of the question is the corporate structure, I mean, is it is it economically more feasible and and better to to actually have have some debt if

you can borrow it. I'll push back on that. I think that you know you're right that it net interest costs are coming down, right just simply math, because rates are lower and there is so much money and interest coming into this market. That's said. The reason why leverage picked up to such degree, according to this Morgan Stanley analysis was twofold. It was because the borrowing more and

the revenues are coming down. Right there. The extra debt that they are borrowing is not helping them boost their profits. And so at what point is debt for debt's sake really going to potentially crimp companies as we head into

potentially another downturn. Yeah, I mean I think that's a fair I mean, I think everything that we sort of know about this cycle and what companies have been doing effectively taking on more debt, doing more share buy backs to boost their equity price, I mean, all those things are not what you would ideally like to see. But I guess the question going forward that people have to think about is what else do you do in an

economy that's growing but not growing that fast? I mean, it seems like all of these executives sort of have come to the decision that this is the way that we go. We we take out debt to maybe finance murders and acquisitions, or even just to buy back our shares. So what are we seeing in terms of credit quality out there? Are we seeing any signs of a deterioration

in credit quality? Well, I think that the high yield market is where you're starting to see a lot of investor pushback and some deals had to be show l that aren't getting done. I mean there have been downgrades, um. I think that Tupperware was the one that was mentioned in the Bloomberg News story today being cut to junk UM. But overall, UH, downgrades are happening, but not quite at the clip. I think that people were really worried about.

The question will be obviously if for some reason the economy gets worse, we head into even even more slow down. If that will change, UH, you want to shift gears a little bit to the repo market. Since we are reaching quarter end and this has been the time that people really were worried about, we are seeing overnight repo costs go up. How big of a concern is that. I think a lot of people are sort of thinking that, Okay, the repo market is a problem area and the FED

doesn't have a quick fix. They're in there doing their temporary repo operations for now, and it'll be generally okay, we'll muddle through now. But I think everyone's really focused on what will the FED come out with UH in there are after there are October meeting. What sort of

permanent solution is there? Are we going back to buying more treasuries uh in an attempt to sort of flood the system with more reserves, or will they have some standing repo facility, But it sounds like they're not as close to that as people might expect, So it sounds like they might go back to sort of organic growth of the balance sheet. Brian Chabot, thank you so much for being with us. Thank you. Brian Chabot is a Bloomberg Opinion columnist, joining us here in our Bloomberg Gotter

Active Broker Studios. You can read all of his columns at O, P, I N GO, on the Bloomberg Terminal or Bloomberg dot com Slash Opinion. His columns are great, so are those of his colleague and you can catch them all there. Let's shift gears to what's been going on in Washington, D see some of the political turmoil with respect to the impeachment probe and the hearings last week.

How much does that trickle into markets? Jeff Powell, managing partner at Polari's gray Stone Financial Group, joining us now by phone from San Francisco. Jeff, how much did you care and pay attention to the political tumult that we saw over the past week. Well, I mean, obviously we have to pay attention to headline news, and obviously something

like an impeachment inquiry is a very serious thing. Um. Personally, I don't think that a impeachment walk her under the circumstances, but it certainly plays into sentiment of marketplace, and it's certainly complicates what's going on with our trade negotiations with China. So it's a very important thing for us to consider to track progress of what's going on there and also

the impacts of it as in other areas of the marketplace. Yeah, Jeff, I've actually been I guess a little bit surprised at the market has kind of taken this news in stride um, and but I guess the question investors are just trying to get a sense of where could this really hit me in terms of the economy, And I guess you mentioned one area is trade and that's clearly been the big driver this market over the last year. So so give us your thoughts to kind of how do you

think this may impact trade negotiations if at all? Well, yeah, absolutely, I mean if you think back to May when we heard Donald Trump tweet about how he was unhappy with the Fed and if the Fed had been more aggressive about cuts that we would have as strong in an economy as China had, And all of a sudden, we had China rethinking what was going on with our trade negotiations. So, uh, Premier,

she obviously is a lifetime position for him. We obviously don't have lifetime positions for our leaders, and so when you look at it, I believe the Chinese kind of negotiate on kind of a different calendar than we do, so they may be in a situation where they tried to outweigh outweight President Trump under these circumstances, but it certainly weakens his position with trade negotiations with China. Do you trade on the headlines, No, we don't at all.

I mean, but I mean obviously you know things, things spiral, and so uncertainty is a major factor. I mean, if you just look at what happened in the fourth quarter of last year, almost everything that was going on during fourth quarter was sentiment of and everybody was worried about the potential of a of having an economy that was weakening or even going into recession, when there was really no evidence of it. We had a strong economy, we

had really strong earnings. You have the markets drop during that time period. So really we're looking at headlines and their impact. I mean, you can run into circumstances that become self fulfilling prophecies where you have people become more and more worried about what's going on economically as a result of headlines, which would be a driving factor for us to make a decision to get more defensive and portfolios. So, Jeff, we are, um, you know, at or near this the

all time high for the smp fived. You talk a little bit about getting defensive. How are you thinking about your positioning right here, given where we are in the economic cycle, given where the FED is, are you taking on additional risk here? Are or are you getting more defensive? It's kind of funny you bring that up, but it's it's more of a neutral stance right now, more of a wait and see um. When we talk about economic cycles, I mean I have a very hard time really gauging that.

I mean, we talked about how long the economy has been expanding, yet you've had government intervention going on until they'll end the part of two thousand fourteen, we dealt with three different quantitative easing time periods in which you had the government stepping in and really pressing yields down very low as a result of quantitative easing. How do you gauge true economic expansion when the government was being was involved basically for seven of the years of that expansion.

So it's challenging. It's it's very challenging to sit there and and really step in hard with this. I think that we are going to see a a smattering of disappointments going into earning season, especially with what's going on with tariffs in the trade war that we have going on. I think it's hard to get really really aggressive with within the markets based upon that. So we're going in, we're being we're market weight with what we would typically be for a client and their risk levels and so on.

That being said, we are lower beta stocks more so than we would be in a normal circumstance with the allocations that we're in. Are you boosting your allocation to cash we did about a month ago. We're holding tight with what we are now. We have our laundry list of names that we like, and we're looking or the right opportunity to step back into the market a little bit more heavily and get into an overweight position should

the need arise. So, Jeff, one of the issues I've heard about getting a little bit more cautious is utilities reads. You know, consumer staples by historical standards, they're not cheap. You're absolutely correct, and so, I mean we are market weight and all three of those categories, but we are not overweighted into them. Uh So, it is something that is a little bit more challenging to sit there and

and chase that kind of performance. I mean, if you look at what utilities have done in particular, I mean, they've had an amazing run, an amazing year for that particular category. But you're absolutely correct, it makes it very challenging to go into an area of the marketplace that is considered to be expensive even though it's considered to be defensive. Jeff pal thanks so much for joining us. Jeff's a managing partner for Polarist gray Stone Financial Group

based in San Francisco. Jeff and just via phone from San Francisco giving us his thoughts on the market. A lot of workplaces talk about the difficulties of hiring qualified people are frankly hiring people in general. There is a question of what role artificial intelligence can play in that. Joining us now is A L. Graevsky. He's chief executive officer of Maya Systems, joining us from San Francisco. I can you just talk a little bit about what Maya

Systems is. Yeah, So, Maya Systems is a recruitment automation platform using conversational AI. So we built this conversational AI assistant named Maya, who engages with candidates through natural language and helps guide them through the recruiting process, helps source passive leads for hiring teams, and manage many different phases of the process. So I'll just give us a sense

of you know, what types of companies use your system. Yeah, so we work with some of the largest enterprises and staffing companies in the world, so six of the eight largest staffing businesses, as well as organizations like the Lloyd Laureal a b M BEV, very large enterprises like Singapore Airlines that leverage the technology to both manage their talent pools as well as automate and guide candidates through the recruiting process. What's the goal, I mean, why did you

create this company? Yeah? So what I learned from the many years working as a recruiter is that the recruiting process is still wildly manual, and you see recruiters spent about seventy of their time on what we call repetitive tasks, which really slows them down. And later when I actually went out and started searching for jobs early in my career, I applied about forty jobs her back from two companies. It's incredibly frustrating of applications fall into the black hole.

You have about a fifty seven to one chance of getting a job when you apply, so it's a very inefficient process. And what we saw was an opportunity to build a technology that can really engage and communicate with people at a large scale so that we can learn about those individuals and then in building that profile and understanding their interests, we can help guide them and convert them into their next job. So we really saw that

unique opportunity to bridge the communications gap. It's interesting, you know, I think the LinkedIn is really emerged as a recruiting tool. Give us a sense of kind of how you either compete with or complementary to a LinkedIn type of service. Yea, So we we be viewed complementary and that LinkedIn is very much a marketplace, and of course they have a platform that organizations can um used to source and engage passive candidates and and so forth. What we are is

really an enterprise staff business. We integrate into our clients systems and we support recruitment across many different sources. So LinkedIn might be one of the sources that are generating leads where Maya might engage that candidate and convert them through the funnel. Uh, and then of course Maya. The really interesting thing about what we're doing is we can use the technology to engage our customers database of candidates,

people that they've engaged within the past. Many of our customers have millions of candidates that they've acquired over the years and maya can really engage, re engage and surface leads directly within your existing pool. So um, in that way, sometimes we use the reliance on external sources like LinkedIn. So given the fact that you you probably have conversations with a lot of different companies, they are trying to

tailor this to their specific needs. Are you getting any sense that there is a shift in what employers are looking for in terms of the skills that will determine whether a candidate will be successful and will stick around versus not. Yeah, so, um, there's absolutely shifts in in perspective and how employers are making decisions on candidates and

and that's probably gonna change on an employer to employer basis. Um. You know, really our goal as a as a product is is to really learn and understand the candidate and surface those insights that might be hidden not on the resume, not in the LinkedIn profile. You know, these are insights that typically our surfaced from like a phone screen, and we'll help build that profile that enriched profile and understanding

of the candidate as it pertains to the job requirements. Um. Really, based on the criteria that the recruiter is looking for and then we'll let the recruiter make that educated decision. But yeah, companies are gonna very much differ and how

they think about candidates. Another cool thing that we're doing is we're really understanding how candidates are engaging UM and how other candidates in the past that we've screened or that we've engaged with our performing, so we can help our customers make predictions that are really grounded in data and and and grounded in analytics over time. Hey, I'll ye have ski. Thank you so much for joining us.

Just fascinating discussion. Ails, the chief executive officer for Maya Systems, joining us on the phone from San Francisco, talking about the recruiting process, the hiring process, the retaining talent process, and how artificial intelligence and other technologies can help recruiters, companies, UH and candidates themselves find a better fit. 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 bram Woyds. I'm on Twitter at Lisa A. Bramwoit's one before the podcast. You can always catch us worldwide on Bloomberg Radio