I’m back on the newsletter this week – thanks to my deputy Meredith for subbing in!
We’re hot on the trail of WeWork, the high-flying, but money-losing, $US47 billion coworking company expected to IPO this fall. It’s known for its well-designed office space, which it leases itself and then rents out to customers like startups and, increasingly, big corporate clients.
As WeWork prepares to go public, there’s increasing scrutiny on it that can be boiled down to three major concerns: the stability of its model (pairing long-term office leases with short-term occupants and what that might look like during a downturn), its categorization (is it a tech or real-estate company?), and the wild card that is its CEO, Adam Neumann.
This week, we did a deep dive on the company’s top landlords, which until now have largely avoided media scrutiny. We also spotlighted a little-known Mexican real-estate investment trust, which is WeWork’s biggest landlord and highlights how quickly the company has grown overseas.
While coworking is seen as primed for explosive growth, large real-estate companies will have to decide how much they want to work with young flex-space firms that haven’t been tested through a downturn. If the economy were to turn, it would mean that some of its tenants may choose not to renew their leases (or negotiate lower rent), while WeWork would still owe payments to its own landlords.
WeWork’s financials, in particular, are also giving some prospective IPO investors pause. The company is haemorrhaging money: $US219,000 every hour of every day during the 12 months leading up to March, according to the Financial Times. As the company moves toward an IPO, it will need to convince investors that its significant growth makes it a worthwhile long-term investment despite equally large losses.
There was also a relatively small piece of news that we reported on this week that you may have missed but may have major ripple effects in the next couple of months. Swell, a 2-year-old environmental, social, and governance (ESG) investing app, is shutting down. While socially conscious investors are pouring capital into these types of funds that claim to support social good like clean water and gender diversity, there is no one consistent standard for ESG qualifications, and some are sceptical that these funds are more than a marketing gimmick. With tons of ESG-focused funds popping up every day, a shakeout may be on the horizon.
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Have a great weekend!
The flexible-office provider WeWork’s top US landlords include industry giants like Blackstone and Brookfield, a slew of New York City-based firms, and itself, according to a Business Insider analysis of data from CoStar Group.
The list, along with data from WeWork, provides one of the most comprehensive looks so far at who’s leasing to the coworking company as it prepares to go public.
With a hotly anticipated initial public offering on the horizon, and details of WeWork’s financials – and wide losses – emerging, more attention is being paid to the company and those that touch it.
Charles Schwab’s retail head and marketing chief are out – and the firm’s still figuring out what’s next
Charles Schwab is shaking up its retail arm, and two key executives are leaving the firm, Business Insider has learned.
Terri Kallsen, the executive vice president of investor services, and Andy Gill, Schwab’s chief marketing officer, are out as part of a restructuring, the Charles Schwab spokesperson Mayura Hooper confirmed to Business Insider on Tuesday.
The departure comes just over a week after The Wall Street Journal reported that Schwab was in talks to move further into wealth management by buying USAA’s brokerage and wealth operations, which would bring Schwab some $US100 billion in assets.
The brokerage’s restructuring and key departures also come as the broader wealth-management and investing landscapes shift; digital entrants are creating a crowded space, and clients’ fees are broadly headed to zero as competition ratchets up.
Citi’s trade-financing is thriving as trade wars heat up – here’s why instability is a good thing for the business
While many Wall Street businesses are suffering amid market turmoil, Citi’s treasury and trade-services business is surging, the bank reported in its second-quarter earnings results.
Amid Brexit, President Donald Trump’s trade wars, and other geopolitical flare-ups, long-standing trade flows are shifting. China, once the largest importer of US soybeans, is buying from South America instead, for instance.
Citi’s trade-financing business, thanks to the bank’s presence in nearly 100 countries, has benefited from the disrupted trade routes, in some cases financing the same trade flows twice as countries adapt.
The dynamic showcases the value of the bank’s global network, but the Citi global trade head John Ahearn cautioned there are early signs the volatility is slowing the global economy.
Blackstone raised $US14 billion to invest in bridges, tunnels, and wind plants. Now comes the hard part: Spending it.
Blackstone has raised a massive fund to invest in infrastructure, but analysts are focused on the challenges that come with deploying $US14 billion in capital.
Business Insider spoke with a person familiar with Blackstone’s strategy who said the firm is targeting long-term, billion-dollar-plus deals in North America.
Competition for assets is stiff and funding plentiful as investors see infrastructure as an alternative to low-yielding fixed-income products.
The disgraced New York financier Jeffrey Epstein invested $US30 million in Second City Capital Partners I, a private-equity fund also backed by the husband of California Sen. Dianne Feinstein, Richard Blum, among 38 other limited partners.
The investments by Epstein and Blum were disclosed in public documents reviewed by Business Insider and confirmed by people familiar with the fund.
It’s unclear whether Epstein was aware of Blum’s investment in Second City, or vice versa. But the multimillionaire convicted sex offender has a long history of using money to cultivate relationships with powerful political figures.
Greg Fleming’s Rockefeller Capital wants to grow to as many as 200 high-end advisers. The firm’s private-wealth head describes his ideal candidate.
Rockefeller Capital Management‘s wealth-management head, Chris Randazzo, spoke with Business Insider in a keynote interview. He talked about what the firm is looking for in an adviser as it grows its wealth business.
The firm’s division has 30 advisers and wants to grow to 100 to 200 advisers over the next five to eight years.
“We’re never going to become thousands of advisers,” said Randazzo, who previously held executive roles in the wealth-management divisions of Morgan Stanley and Bank of America Merrill Lynch.
By comparison, Morgan Stanley, a much larger player in the space, said on Thursday it had 15,633 wealth representatives at the end of the second quarter.
Wall Street move of the week:
In tech news:
- The 2 power players at Netflix who are leading its early marketing work with brands like Coca-Cola and Lyft
- Instagram Stories is surging, but a measurement firm found most brands are using it wrong
Other good stories from around the newsroom:
- Here’s exactly what it takes to get accepted into Harvard Business School, according to 5 grads and the managing director of admissions
- ‘Like we were being forced to gamble with our son’s life’: Health insurers won’t pay for a $US2.1 million drug for kids, and parents say they’re running out of time
- Big brands like Delta, P&G, and Under Armour are increasingly hiring Hollywood talent agencies like CAA, Endeavour, and UTA for marketing – posing yet another threat to traditional ad agencies