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(Bloomberg) -- Peloton Interactive Inc. has been pilloried online and punished on the stock market following the release of a holiday ad for its stationary exercise bike that was deemed culturally insensitive. But the backlash could be a good thing for the company in the long run.The commercial, which features a woman documenting a year in her life with the Peloton bike her male partner gave her, struck some viewers as out of touch -- suggesting the already thin “Grace from Boston” was undergoing a strenuous workout in order to lose weight for the guy. The video, released about a month ago, went viral on social media, eliciting a scathing parody by comedian Eva Victor and prompting Peloton to close comments on the official YouTube video.As the internet buzz seemed to hit a peak earlier this week, Peloton’s stock fell 9%. But some experts say the increased attention could end up boosting sales. The shares were up 3.7% on Friday in New York.“They might benefit more because people are looking it up and learning more about it,” Laura Ries, president of advertising consultancy firm Ries & Ries, said. It’s still a short-term bump for a company that has historically been largely successful with marketing, with a total member base of 1.6 million people including more than 560,000 who have one of the proprietary bikes or treadmills plus a fitness subscription, according to Peloton’s most recent quarterly report. The official Peloton ad on the company’s YouTube channel has been seen by more than 3.6 million people.The controversy comes at a crucial time for the New York-based company, which is new to market scrutiny after listing shares in September, as it seeks to capitalize on the all-important holiday sales season and expand in new markets like the U.K. and Germany. The shares had gained 27% since its initial public offering before the wave of internet commentary dragged it down on Tuesday. The company is also facing increased competition in the booming at-home fitness market, especially among workout apps. Nike Inc., Aaptiv Inc. and apps like Kayla Itsines’s Sweat with Kayla have all gained followings for exercise programs available on a user’s phone.Peloton has been punished by Wall Street for its focus on growth over profitability. The company sells a stationary bike starting at about $2,000 and a treadmill that costs about $4,000, in addition to a basic “connected fitness” subscription plan at $39 a month for those pieces of hardware, and the separate digital apps that don’t require equipment. Its loss narrowed in the three months ended Sept. 30 to $49.8 million.The stock surged almost 10% last Friday after the company was reportedly seeing strong demand on Black Friday. And earlier this month, Peloton lowered the price of its digital subscription app to $12.99 a month from $19.49 in conjunction with the launch of new apps for Amazon’s Fire TV and the Apple Watch, a move that could entice new users. JMP Securities analysts raised their price target on the stock after the subscription reduction, saying it “broadens Peloton’s reach, improves conversion, and reduces purchase friction.” Ronald Josey, a JMP analyst, said there are “a lot of good things going on” at the company and that people will continue to buy the bike and other products despite the controversy.According to the most recent earnings report, Peloton expects its user base to grow to 680,000 or more by the end of its second quarter thanks to holiday sales and New Year’s resolutions.Scott Galloway, a professor of marketing a the NYU Stern School of Business, said the commercial itself is tone deaf and borderline offensive. But “in this attention-driven economy, anything that gets attention is arguably a positive,” he said in an interview. “It’s bringing Peloton into the social discourse on very regular basis, which is what ads are supposed to do.” If Peloton had to do it again, Galloway said, “I’d argue they probably would.”(Updates shares in third paragraph. A previous version of the story corrected a company error in the subscription price.)To contact the reporter on this story: Julie Verhage in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Mark Milian at email@example.com, Molly Schuetz, Anne VanderMeyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Unite the Country, a super-PAC started by former aides of Joe Biden, is launching a $650,000 advertising campaign in Iowa promoting his candidacy.The group’s first spot features a montage of photos starting with Biden as a young man and excerpts from a speech in which Biden highlights his stance favoring marriage equality, his sponsorship of the Violence Against Women Act and the assault weapons ban enacted as part of the 1994 crime bill he sponsored.The ad doesn’t mention other Democratic candidates. It also doesn’t mention President Donald Trump, whose attacks on Biden were cited by the super-PAC’s founders as the reason they were forming the group. Trump’s campaign spent $8 million on television and digital ads starting in late October that criticized Biden over his son’s work for a Ukrainian energy firm.Unite the Country bought air time starting Monday in four Iowa markets, according to Advertising Analytics, which tracks political commercials. Biden is in fourth place in the state, according to the Real Clear Politics poll average.Warren Gets Clean Bill of Health in Report (9:10 a.m.)Democratic presidential candidate Elizabeth Warren is a “very healthy 70-year-old woman,” her doctor said in a medical report released by the campaign Friday.“Senator Warren is in excellent health and has been throughout the 20 years I have served as her physician,” said Dr. Beverly Woo, an associate professor at Harvard Medical School and senior physician at Brigham and Women’s Hospital. “There are no medical conditions or health problems that would keep her from fulfilling the duties of the president of the United States.”The records show that she got her most recent physical examination in January and her annual flu shot in October. Warren has “excellent” cholesterol levels and normal blood pressure. At 5 feet 8 inches, she weighs 129 pounds. Her only medical condition is hypothyroidism, for which she takes levothyroxine, which keeps her thyroid hormone levels normal, Woo said.Warren “has never smoked, used drugs or had any problem with alcohol use,” the report said. “She exercises regularly and follows a healthy diet despite her very busy schedule.”Warren is the only top-tier candidate to release medical records so far. Bernie Sanders, 78, who had a heart attack in early October, said he will make his available at “the appropriate time.” Joe Biden, 77, has not yet released his information but has said he will do so before the Iowa caucuses in February. Pete Buttigieg, who at 37 is the youngest candidate in the race, has not released any records. -- Misyrlena EgkolfopoulouSanders Aims to Break Up AT&T, Comcast (8:34 a.m.)Senator Bernie Sanders’ $150 billion plan aimed at bringing high-speed internet access to all U.S. households would break up Internet service provider and cable “monopolies,” singling out such companies as Comcast Corp., AT&T Inc., and Verizon Communications Inc.“The internet as we know it was developed by taxpayer-funded research, using taxpayer-funded grants in taxpayer-funded labs,” Sanders said in the plan, which was released Friday. “Our tax dollars built the internet and access to it should be a public good for all, not another price gouging profit machine for Comcast, AT&T, and Verizon.”Sanders said the internet, telecom, and cable companies “exploit their dominant market power to gouge consumers and lobby government at all levels to keep out competition.” He’d mandate providers offer a “basic, quality Internet plan at an affordable price.”The Sanders plan comes as one of his rivals, Senator Elizabeth Warren, is leading the charge to to break up large tech companies. Warren published an October essay titled “Here’s How We Can Break Up Big Tech,” calling for splitting up Amazon Inc., Facebook Inc., and Google.AT&T, Verizon and Comcast rose fractionally before regular U.S. trading, with gains of less than 0.5%. -- Elizabeth WassermanCOMING UPJoe Biden is on an eight-day, 18-county bus tour of Iowa through Saturday.Presidential candidates including Biden, Sanders and Pete Buttigieg will participate in a forum hosted by the International Brotherhood of Teamsters in Cedar Rapids, Iowa, on Saturday.Warren, Sanders and Biden are scheduled to take part in town hall meetings hosted by UNITE HERE Culinary Workers Union in Las Vegas on Dec. 9-11.(Michael Bloomberg is also seeking the Democratic presidential nomination. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)\--With assistance from Misyrlena Egkolfopoulou.To contact the reporter on this story: Bill Allison in Washington DC at firstname.lastname@example.orgTo contact the editors responsible for this story: Wendy Benjaminson at email@example.com, Max BerleyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
A slew of advanced data breaches is expected to increase the demand for cloud security offerings in the coming years. The prospects are prompting cloud service providers to up the ante in this space.
WEC Energy's (WEC) board of directors is set to increase annual dividend rate by 7.2%, in sync with its target of a dividend payout ratio of 65-70% of earnings.
As stock market volatility continues, the blue-chip index is showing fluctuation. However, a closer look into the index reveals that not all stocks are erratic.
(Bloomberg Opinion) -- Social-media companies insist they’re making progress in fighting the manipulation of their platforms. But two researchers, working on an extremely modest budget, have just shown that their defenses are routinely bypassed by an entire manipulation industry, largely based in Russia.In a report for NATO’s Strategic Communications Center of Excellence, Sebastian Bay and Rolf Fredheim described an experiment they ran between May and August. In the first two months, during and just after the European Parliament election campaign, they hired 11 Russian and five European “manipulation service providers,” who they found simply by searching the web. The companies then delivered 3,530 comments, 25,750 likes, 20,000 views and 5,100 followers on Facebook, Twitter, Instagram and YouTube — all fake.Given how serious the social-media platforms claim to be about purging inauthentic activity, the experiment’s success rate was stunning. Four weeks after they were posted, a vast majority of the fake engagements were still live; even reporting them to the platforms didn’t get most removed.The study reveals a major weakness in the way the social-media giants report their anti-fraud efforts. Facebook has a lot to say about how much content it removes, for instance, but that’s like the mayor of a town reporting that 50% of its roads are now pothole-free: You never know which 50%. The important metric is how much manipulative content gets through. Bay and Fredheim found that, once professionals get involved, most of their work sticks, to the extent that they often deliver more engagements than promised for the money. Defenses only work on the most basic level. The pros are always a step ahead.NATO, of course, is mostly interested in political manipulation, and the researchers found that some of the same accounts that helped carry out their study “had been used to buy engagement on 721 political pages and 52 government pages, including the official accounts of two presidents, the official page of a European political party, and a number of junior and local politicians in Europe and the United States.”An important question is whether such efforts actually work. One recent paper tried to determine what effect the Russian troll farm known as the Internet Research Agency has had on U.S. political attitudes. The IRA, whose employees and owner were indicted in special counsel Robert Mueller’s investigation into meddling in the 2016 election, used some of the same techniques as the NATO Stratcom researchers. But, the paper said, their fake accounts were effectively preaching to the converted. Even for users who directly interacted with the IRA accounts, the researchers found “no substantial effects” on their political opinions, engagement with politics or attitudes toward members of the opposing party.This doesn’t mean social-network manipulation is ineffective for political purposes; much more research would be needed to draw any sweeping conclusions. What’s clear now, though, is that the manipulation industry isn’t primarily geared toward political uses. Bay and Fredheim found that “more than 90% of purchased engagements on social media are used for commercial purposes.” Even though it’s Russian-based, this industry isn’t about evil Kremlin masterminds trying to turn technology against American democracy. Rather, it’s about talented Russian engineers, stuck in the wrong country for launching grand commercial ventures like Facebook or YouTube, trying to make money by milking the existing platforms.What that usually amounts to is helping online “influencers” cheat advertisers. The abysmally low removal rates for fake video views in the Stratcom experiment show the platforms aren’t fighting such abuses hard enough. They don’t have to: They’re still essentially black boxes from an advertising client’s point of view. As a result, perhaps billions of dollars (estimates vary wildly) are lost to such fraud each year.Platforms have spent enough time trying, and failing, to prove that self-regulation can work for them. Governments should act to protect not so much voters as advertisers from the manipulation industry, penalizing social-media companies for their inability to prevent fraud and demanding more transparency. Now, as Bay and Fredheim wrote, “data is becoming scarcer and our opportunities to research this field is constantly shrinking. This effectively transfers the ability to understand what is happening on the platforms to social media companies. Independent and well-resourced oversight is needed.”Policy makers need to realize that the platform-manipulation industry doesn’t thrive because it’s a Kremlin weapon. Political weaponization is only a side effect of a parasitic industry built on the flaws of the social-media business model. It’s the model that needs to be regulated.To contact the author of this story: Leonid Bershidsky at firstname.lastname@example.orgTo contact the editor responsible for this story: Timothy Lavin at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg Opinion) -- One consequence of America’s Cyber Monday shopping binge is the imminent arrival of $9.4 billion worth of merchandise on the nation’s doorsteps. And that will cue the annual cries of frustration about porch pirates — along with a raft of local news stories on how to evade them, and a few viral tales of consumers attempting to spook them with booby-trapped packages or glitter bombs.The fixation on thwarting porch pirates is understandable. (I, for one, will confess to being irrationally angry recently when a $27 baby onesie was swiped from my front stoop.) But it is also a flawed way of thinking about a legitimate and persistent problem with e-commerce.The problem is not just theft. It is that shipping giants such as United Parcel Service Inc. and FedEx Corp., as well as big retailers, are not moving fast enough to make delivery of online orders more flexible and to turn over more control to shoppers.Consumers and neighborhood associations should spend less time trying to answer the question, “How can we create a world where expensive goods can sit on my doorstep for hours and not get stolen?” Instead, they should be asking, “How can we make it so that expensive goods are not left on my doorstep in the first place?”UPS and FedEx, to be fair, have made strides toward giving customers more options. Each has a network of thousands of access points where shoppers can pick up packages, including at ubiquitous stores such as Dollar General or CVS Pharmacy. Both shippers have apps that allow residents to provide delivery instructions for a driver.Retailers, too, are getting more creative. Amazon.com Inc. now offers the option of choosing a single day each week for all of your recent orders to arrive, making it easier to ensure you’ll be home when your haul is delivered. And both Amazon and Walmart Inc. are piloting services that rely on smart-home technology that allows a driver one-time, secure access to your home.Surely such a service, or some variation of it, will become commonplace within a decade. (After all, there was once a time when it was creepy to get in a stranger’s car, but thanks to Uber and Lyft that’s now ordinary.) For now, though, the choices for consumers are underwhelming or confusing — or, in some cases, both.For example, UPS and FedEx both trumpet the convenience of letting you reroute an in-progress shipment to an access point. But online shoppers aren’t able to fully take advantage because retailers can put restrictions on packages preventing the recipient from redirecting them. This is likely a well-intentioned anti-fraud tactic, but it means access points aren’t the reliable solution they’re cracked up to be.And retailers aren’t always great at steering customers toward desirable secure options. Amazon, for example, routinely tries to nudge me at checkout to try a pickup point that is a 30-minute drive from my home, even though there is a Whole Foods Market with Amazon lockers in walking distance.But there are bigger ideas that could do even more to ensure package security. What if UPS or FedEx were to more routinely provide narrower time windows for drop-offs, or to allocate more workers for nighttime deliveries when nine-to-fivers are likely to be at home? What if retailers allowed customers to choose their shipping provider at checkout, which might force shippers to compete for their loyalty?Such changes would further complicate the “last-mile” delivery challenges the industry has been addressing for decades, and would likely add costs. But these are the same logistics experts and retailers that were able to make speedy two-day delivery standard. It’s not unreasonable to expect them to innovate their way to giving shoppers more choice.Even if it’s difficult, improved delivery flexibility is a far better remedy for porch piracy than other headline-grabbing approaches. Police departments have experimented with planting bait packages on doorsteps that are outfitted with GPS trackers, potentially allowing them to catch individual thieves. Texas has a new law on the books that makes package theft punishable by up to 10 years in prison.Never mind that there are already laws against theft. These kinds of punitive measures are not useless, but they are likely to be helpful only in a limited area for a limited period of time.The more productive approach is to focus on reducing the unsecured supply of porch treasures. And no one is better equipped to attack that problem than the retailers and shippers. So shoppers should raise their expectations of these companies and demand that they do more.To contact the author of this story: Sarah Halzack at firstname.lastname@example.orgTo contact the editor responsible for this story: Michael Newman at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. The European Union’s chief trade negotiator Phil Hogan will sit down with U.S. Trade Representative Robert Lighthizer next month to discuss an American threat to hit France with tariffs on $2.4 billion of its exports.“We are looking at all possibilities, but we prefer to have a negotiated settlement,” Hogan said in an interview in Kildare, Ireland, referring to what actions the EU may take if the U.S. follows through with the levies. “I will be visiting the U.S. in January to meet with my counterpart Ambassador Lighthizer in order to explore possible avenues where we could reach agreement rather than engage in confrontation.”The office of the USTR announced this week that it was considering the tariffs in response to a French digital services tax that it says unfairly discriminates against U.S. companies. The levy would hit tech companies including Google, Apple Inc., Facebook Inc. and Amazon.com Inc.France moved ahead with the tax despite objections from the U.S. because it says that the structure of the global economy has changed to one based on data, rendering current taxation systems archaic. The tax affects companies with at least 750 million euros ($832 million) in global revenue and digital sales of 25 million euros in France.“We have a lot of things to discuss with the U.S. and we look forward to an engagement in a cooperative way rather than a confrontational way so I hope the U.S. thinks likewise,” Hogan said.To contact the reporter on this story: Peter Flanagan in Dublin at firstname.lastname@example.orgTo contact the editors responsible for this story: Ben Sills at email@example.com, Richard Bravo, Andrew AtkinsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Want to receive this post in your inbox every day? Sign up for the Balance of Power newsletter, and follow Bloomberg Politics on Twitter and Facebook for more.Angela Merkel will visit the Nazi death camp of Auschwitz-Birkenau today at the long-standing invitation of the former Polish foreign minister, Wladyslaw Bartoszewski, a camp survivor who has since passed away.As the chancellor pays tribute, she’ll be prompting her fellow Germans to reflect on their country’s troubled past. She’ll also focus attention on troubling modern developments.Jews in Germany are again on the defensive with anti-Semitic incidents on the rise. In October, two bystanders were murdered in Halle in the first armed attack on a synagogue in Germany since 1945.In France this week, graves in a Jewish cemetery were daubed with swastikas, and the U.K. election campaign has seen accusations of anti-Semitism.In politics, the language of hatred is proliferating, from attempts by Germany’s AfD party to relativize the Nazi era, through the Italian League’s casual denigration of migrants, to Donald Trump’s tweets telling U.S. lawmakers of color to “go back” to the “corrupt and inept” countries they came from.In the twilight of her chancellorship, Merkel worries the next generation of leaders won’t be able to reverse the slide, Arne Delfs reports.As Merkel visits Poland, her coalition partner meets to deliberate moves that could hasten her departure. Whether she stands down sooner or later, Merkel will leave behind a moral tone that’s increasingly lacking in politics today.Global HeadlinesCorbyn’s reckoning | Britain’s election was supposed to be all about Brexit. As Kitty Donaldson and Robert Hutton report, it instead looks more like a referendum on Jeremy Corbyn, the socialist whose personality cult has cemented its grip on the Labour Party. As he and Prime Minister Boris Johnson prepare for a televised debate this evening, it may be the last chance for Corbyn to ensure his project isn’t dead on arrival.Moving fast | U.S. House Speaker Nancy Pelosi has set Democrats on a rapid path to impeaching Trump, a timetable that fits with both her political imperatives and those of the president. Judiciary Committee Democrats will be working through the weekend and by next Thursday could begin to draft the articles of impeachment that will shape the debate in a Senate trial that likely will be held next year.Trump likes to boast about his unwavering Republican support in the face of impeachment. But that backing is softer than he suggests, Ryan Teague Beckwith reports.Look back in anger | From Bolivia to Iraq, Hong Kong to South Africa, it’s been a year of protests. Public anger at political leaders has spilled onto the streets with remarkable regularity — with varying outcomes. We’ve mapped the global unrest to show the political impact, and places to watch going into 2020. Notable among them is France, where unions have extended a mass strike, turning up the heat on Emmanuel Macron.‘Damn liar’ | Joe Biden called an elderly Iowa voter a “damn liar” and challenged him to a push-up competition after the man accused the Democratic presidential contender of improper dealings with Ukraine. The 83-year-old retired farmer said Biden was “selling access” to the White House and was “too old” to serve as president, prompting Biden — who has a history of verbal gaffes — to challenge him to physical and mental acuity tests.Angry generation | The black-clad protesters who have battled for the political destiny of Hong Kong this year are also the future of its economy. As Jeff Black and Hannah Dormido report, the students and recent graduates who form the bulk of the protesting populace are also set to be part of a generational shift in the city’s labor force as the working-age population enters decline.What to WatchDemocratic Presidential candidates including Biden, Bernie Sanders and Pete Buttigieg will participate in a forum tomorrow hosted by the International Brotherhood of Teamsters in Cedar Rapids, Iowa. An opposition presidential candidate in Ivory Coast, Mamadou Koulibaly, says the West African nation is too focused on doing business with France and should open up its market to investors from a wider range of countries.Pop quiz, readers (no cheating!). Which world leader was called “two-faced” at this week's NATO summit? Send us your answers and tell us how we’re doing or what we’re missing at firstname.lastname@example.org.And finally … Since the ouster of Sudanese strongman Omar al-Bashir in April, men and women are carving out new freedoms that would have been unthinkable a year ago under his Islamist policies. Like Saudi Arabia, Sudan is undergoing something of a social revolution. Laws criminalizing drinking alcohol and wearing revealing clothing have been scrapped, and the school curriculum is being revised to restore classes in philosophy, music and theater. But as Mohammed Alamin reports, the risk is that the new era is just a prelude to another incarnation of a long-festering culture war. \--With assistance from Kathleen Hunter and Ruth Pollard.To contact the author of this story: Alan Crawford in Berlin at email@example.comTo contact the editor responsible for this story: Karl Maier at firstname.lastname@example.orgFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
On October 2 2018, at 1.14pm, Jamal Khashoggi, probably Saudi Arabia’s best-known journalist, walked into the Saudi consulate in Istanbul, by prior appointment, to collect documents he needed for his forthcoming marriage. The Saudis then said a negotiation to persuade Khashoggi to return to Riyadh from self-imposed exile in Washington had gone badly wrong. Khashoggi, a court insider whose outspokenness fell foul of Mohammed bin Salman, the crown prince and de facto Saudi ruler, had been writing trenchant if measured columns in the Washington Post on the unbridled autocracy of the headstrong young prince.
(Bloomberg) -- SoftBank Group Corp.’s massive investment in WeWork triggered a multi-billion-dollar writedown and a rare apology from founder Masayoshi Son. But one analyst argues the deal is likely to work in the end and SoftBank will have the “last laugh.”Chris Lane of Sanford C. Bernstein says WeWork can have a bright future if SoftBank overhauls the business plan and more carefully focuses on the evolution of the corporate office market. He likens WeWork’s business model to Starbucks’s, where branding, consistency and global scale give it an advantage over the competition.Lane argues WeWork can achieve profitability if it pulls back on extraneous areas and calms a frenetic pace of expansion to focus on filling up existing space. That will allow it to grab an estimated 8% of an emergent market for pre-fitted offices for corporate clients, almost like a white-label tech gadget or home appliance.“We think investors should think of the basic business as being similar to Starbucks,” Lane wrote in a 21-page research report. “While profitable, the scale of profits that can be generated from a single site is small. Starbucks as a corporation only makes sense if you plan to open thousands of outlets.”It’s a contrarian take on a WeWork deal that has been widely viewed as a fiasco. After SoftBank invested in the co-working startup, its planned initial public offering fell apart as investors balked at its enormous losses and conflicted governance. Son conceded “there was a problem with my own judgment” as he announced the writedown last month. SoftBank has put about $14 billion into a startup that’s now valued at less than $8 billion.The Japanese company’s shares are down about 30% from their peak in April. They were little changed on Friday.After discussions with management, Lane explains they see an opportunity for WeWork to move beyond the niche of providing space for entrepreneurs to offering flexible real estate for a broad range of companies. He calls this “managed space as a service” and compares it to “software as a service,” which is the way many companies now buy from Microsoft Corp. and Salesforce.com Inc. WeWork, Lane says, sees the potential to make $500 per month on memberships as “an on-going annuity,” far more than software generates.SoftBank named Marcelo Claure, the former chief executive at Sprint Corp., executive chairman of WeWork and put him in charge of the turnaround effort. Under his leadership, Lane says the company will be able to focus on profitability by stopping any incremental expansion, filling its existing space and slashing overhead by getting rid of expansion staff and non-core businesses. WeWork’s ability to gather data about office-use and optimize layouts -- while not entirely substantiated -- could prove disruptive to the industry, he added.He estimates that WeWork’s revenue will rise from $720 million a quarter to about $1.5 billion if it can push occupancy to 90% on its current portfolio. Once profitable, WeWork will once again try to go public, perhaps in 2023, and then raise additional capital to resume expansion, albeit more slowly than before.With a discounted cash flow model, Lane projects WeWork would have an enterprise value of $28.8 billion in 2025. That would make SoftBank’s 80% stake worth about $19.1 billion, roughly 40% more than the estimated $13.8 billion the company and its Vision Fund have invested.“We believe WeWork’s valuation is justified if you believe in the long-term, ‘office space’ will be a managed service outsourced to professionals – and that WeWork will be the leading global player,” Lane wrote. “Despite the huge embarrassment WeWork has been for SoftBank this year, we suspect SoftBank will have the last laugh when they bring the company back to market in a few years – bigger and profitable.”(Updates with shares in the sixth paragraph.)To contact the reporters on this story: Pavel Alpeyev in Tokyo at email@example.com;Takahiko Hyuga in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Edwin Chan at email@example.com, Peter ElstromFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Markets) -- They flew in from across the U.S.—venture capitalists and entrepreneurs—to discuss a new way to sell stock to the public and keep more money for themselves. The venue, appropriately, was a landmark hotel nicknamed “The Bonanza Inn.”Not invited: the bankers who’ve long dominated initial public offerings.For much of that September day at San Francisco’s Palace Hotel, investors behind many of Silicon Valley’s biggest unicorns took turns railing against Wall Street. Some fumed over the hefty fees bankers collect for ushering companies onto the stock market. Many criticized IPOs for being priced too low—shortchanging the company owners—so banks could deliver quick profits for big money managers.Such complaints have been around for decades, but now there might be a solution. In 2018 a technique called a direct listing proved that technology can glide a company onto a stock market as smoothly as an expensive fleet of Wall Street underwriters.Two of the dominant U.S. IPO underwriters, Goldman Sachs Group Inc. and Morgan Stanley, are helping to develop the direct listing system in a bet that they can keep a place for themselves in the process. But the San Francisco gathering made it clear that much of Silicon Valley wants to limit the involvement of banks.What a ‘Direct Listing’ Is, and Why Banks Are Nervous: QuickTakeInstead, the Valley crowd is giving a bigger role to Citadel Securities, a Chicago-based firm with little stake in the existing IPO underwriting market, for its market-making technology.Bringing privately held, capital-hungry companies to the exchange for a public offering of stock is one of Wall Street’s oldest and proudest functions. Bankers advise startups on how much they can raise and when to go to market. Once conditions are ripe, the companies embark on a roadshow to drum up investor interest and price the new stock. On the big day, a syndicate of banks—sometimes numbering in the dozens—buys up blocks of stock to parcel out to money manager clients. The typical 7% fee on the money raised in a U.S. IPO has withstood competition for the deals, though some of the most high-profile debuts get discounts. Last year, global IPO fees surpassed $7 billion, with the top three banks each bringing in more than $500 million, according to data compiled by Freeman & Co.Companies have tried alternatives. In 2004, Google Inc. (now Alphabet Inc.) famously opted for a so-called Dutch auction, in which investors submit bids and the final price is the highest at which the entire offering can be sold. Low demand forced the company to cut the offering in half and sell at the bottom of the price range it had sought. But the stock popped on the first day, and then the shares kept climbing. There’s been debate ever since over whether Google could have gotten more money with a traditional IPO.A direct listing moves a company’s stock onto the public market, allowing venture capitalists and employees to cash out, without raising new capital. It does away with the order-building phase, relying on software to match private shares and public demand on the fly. The risk is that supply and demand fall out of whack, leading to violent price swings or even a trading halt, potentially inflicting major damage. Bankers try to keep that from happening by gauging investor interest.In 2018, Stockholm-based music-streaming company Spotify Technology SA became the first high-profile startup to go public through the technique. Its stock swooned as much as 11% from the opening price of $165.90 and remains below that level today. The company paid about $35 million to Goldman Sachs, Morgan Stanley, and Allen & Co. By contrast, if Spotify had raised $2.4 billion in a traditional IPO—selling about 10% of the company—it would have paid $75 million even at a discounted 3% fee. For its part of the process, Citadel Securities was paid by the stock exchange.Slack Technologies Inc. followed in 2019. On an overcast morning in June, as a jazz band played in front of the New York Stock Exchange’s massive columns, startups across the country watched to see if the technology would succeed in matching a supply of closely held shares with a flood of investor bids in real time. Everything hummed.The opening stock price valued Slack at more than double its latest private funding round valuation. (It has since fallen, on a depressed outlook for company revenue.) Trading volume at the open was the third-highest for any debut in the U.S., the New York Stock Exchange said. Slack, which paid advisers $22 million, probably reduced its costs by about a third compared with a typical IPO, according to bankers involved in the deal, who said they immediately started talking to other companies interested in direct listings.When venture capitalist John O’Farrell lingered on the trading floor, it wasn’t to see the bankers. Instead, he waited next to a booth occupied by Citadel Securities, the market-maker majority owned by billionaire hedge fund investor Ken Griffin, to introduce himself to a pair of low-key executives steeped in the deal’s wiring. It was their computers that had handled the deluge—and $1 billion of their firm’s own money facilitated 1 out of every 5 trades. Citadel Securities wouldn’t say if it earned profits on those trades.O’Farrell was clearly impressed. His firm, Andreessen Horowitz, an early investor in Facebook Inc. and Twitter Inc., among others, wields immense clout in deciding how Silicon Valley stock offerings are carried out. If an era of direct listings is commencing, the starting point may be that afternoon he spent with Joseph Mecane, Citadel Securities’ head of execution services, and Peter Giacchi, head of floor trading, on the floor of the NYSE.“Everything we design in the first couple of days is about smooth performance,” Mecane would say later at a Citadel Securities office near the stock exchange. “We feel like we have our brand and reputation on the line with this business.”Mecane, the former head of electronic equities trading at Barclays Plc, jumped to Citadel Securities in 2017 and has been busy building a team to ensure smooth trading in the more than 1,400 listed entities for which the firm serves as designated market maker. Citadel Securities aims to expand that client set by helping more companies go public. In that sense, the listing business is just an entry point for potential future revenue. Citadel Securities says its goal is to work with banks on listings and not to compete with them.Mecane’s counterpart on the trading floor is Giacchi, who’s been making markets for more than 20 years, watching machines replace the functions of hundreds of people. Direct listings put the emphasis on traders and their role in price discovery, a development Giacchi welcomes.“It’s given the floor a renewed sense of value,” he says. Now, helped by technology, there is “the ability to process information quickly and reinvent yourself on the floor.”Just a few months after O’Farrell’s trip to the trading floor, his firm would help lead the charge in San Francisco to tell the other attendees about the promise of direct listings.In June, famed venture capitalist Bill Gurley at Benchmark Capital encouraged his more than 400,000 Twitter followers to call Citadel Securities and Morgan Stanley and pursue their own direct listings. “Other banks want to position direct listings as ‘exceptional’ or ‘rare,’ ” Gurley wrote.Five more companies may pursue direct listings in 2020, according to Morgan Stanley.Still, it may yet take years for IPOs to give way entirely to direct listings, says M.G. Siegler, a partner at Google Ventures, another major backer of startups. But “I’m not writing it off that it could be the majority of listings moving forward.”Basak covers Wall Street for Bloomberg News, television, and radio in New York.To contact the author of this story: Sonali Basak in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Christine Harper at email@example.com, David ScheerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Rudy Giuliani, whose work in Ukraine is at the heart of U.S. impeachment proceedings, is back in the country -- and officials in Kyiv appear to be keeping their distance.People with knowledge of his trip say Giuliani flew into Kyiv from Budapest on Wednesday, the same day that U.S. hearings stemming from his shadow diplomacy in Ukraine kicked over to the House Judiciary Committee. Social media postings show him meeting with current and previous Ukrainian political figures as part of a cable news documentary series that’s critical of the impeachment inquiry.But President Volodymyr Zelenskiy of Ukraine won’t be meeting with him, according to the president’s spokeswoman. Igor Kolomoisky, a Ukrainian billionaire who had ties to Zelenskiy, also said he wasn’t planning to meet Giuliani. Zelenskiy’s predecessor, Petro Poroshenko, met Giuliani twice in Kyiv in 2017; through a spokesman, he, too, said he had no plans to see Giuliani during his trip.Andriy Yermak, a key aide to Zelenskiy who figured prominently in the House’s impeachment report, was in London for a conference on Ukraine. He also said he wasn’t meeting Giuliani. “How can I? I’m in London,” he said.Giuliani has been accompanied in Kyiv by Andriy Telizhenko, a Ukrainian who worked at the Ukrainian Embassy in Washington in 2016 and is the source of unsubstantiated allegations that his country interfered with the 2016 U.S. election.Telizhenko, who featured in the first episode of the documentary series on the One America News Network, declined to comment on the meetings, citing security issues.Others who have figured prominently in Giuliani’s Ukraine overtures in the past year -- former prosecutors Viktor Shokin and Kostyantyn Kulyk -- didn’t respond to requests for comment on whether they would be meeting Giuliani. In a Facebook post, Telizhenko said Giuliani would meet with Shokin and with former Ukraine prosecutor general Yuri Lutsenko on Friday.Giuliani’s decision to descend on Kyiv to meet with some key people in the impeachment saga comes after months of public testimony in Washington about his back-channeling in Ukraine. Journalists in Kyiv clambered to learn where he was holding meetings. A group of reporters rushed to the Fairmont Grand Hotel, which declined to comment on whether he was staying there.With his visit, Giuliani appears to be doubling down on his efforts to dig up dirt in Ukraine on political opponents of President Donald Trump. He met, among others, with Andriy Derkach, a Kremlin-friendly Ukrainian parliamentarian who recently wrote a letter to Giuliani beseeching him to support criminal justice reform in the country -- an effort that could help Giuliani take on the mantel of corruption fighter rather than dirt digger.Meanwhile, Zelenskiy’s government is pursuing its own anti-corruption efforts. Giuliani’s visit to Kyiv coincided with a visit by Philip Reeker, the acting U.S. assistant secretary of state for European and Eurasian affairs. On the same day Giuliani met with Lutsenko -- who is accused of corruption in the House impeachment report -- Reeker was meeting with Ruslan Ryaboshapka, Zelenskiy’s new prosecutor general, to discuss changes to the country’s law enforcement structures.“The new prosecutor office will be oriented at society’s trust,” Ryaboshhapka’s office said in a written statement. “It must be effective and fair.”(Adds Telizhenko Facebook post in seventh paragraph.)To contact the reporters on this story: Stephanie Baker in London at firstname.lastname@example.org;Daryna Krasnolutska in Kiev at email@example.comTo contact the editors responsible for this story: Jeffrey D Grocott at firstname.lastname@example.org, David S. JoachimFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.