It’s back, Baby!

Feb 22, 2023 The Buzz Stocks

In this buzz: Gautam Adani, Kekst CNC, We Work and Adam Neumann and the story behind overhyped business models and more…

Well, not quite but Adani is trying. A month after a report from a short seller ripped over $130 billion in market value from Indian billionaire Gautam Adani’s conglomerate, Adani is attempting to stage a comeback. He’s hired top crisis communication and legal team, cancelled plans to purchase a $850 million coal plant, repaid some debt (and promised to repay more) and knuckled down on expenses.

Hindenburg Research:
Adani, who used to be Asia’s richest person, is trying to regain his footing and calm lenders after a report by Hindenburg Research on January 24, accused the Adani Group of
– accounting fraud,
– stock manipulation and
– a variety of other governance missteps.
It’s important to note that the Adani Group denies these allegations.

Damage control…
Adani has been in damage control mode since the report dropped. On the top of the list, is portraying the Adani Group as responsible borrowers. They have been making
– on-time payments of debt, made
– pre-payments and
– have been meeting with bondholders;
all wise steps for someone who has borrowed more than $8 billon in recent years.

PR crisis
In a nod to the severity of its PR crisis, the group brought in 💡 Kekst CNC as a global communications advisor. The PR firm is known for its high-profile work on corporate blow-ups like, WeWork Inc’s 2019 debacle. Kekst has been hired to help Adani regain investor trust stemming not only from the Hindenburg allegations but from concerns around the core strength of its business.
Who knows how it will turn out but ❗hey, Adam Neumann has another gig, so Kekst must be good at something.

🧠 Box:
WeWork: An Explainer
What is WeWork?
Co-working spaces to entrepreneurs, startup companies, freelancers, and even larger enterprises. Founded in 2020 by Adam Neumann, Miguel McKelvey and Rebekah Neumann, WeWork’s goal was to offer shared co-working spaces.

How does WeWork make money?
It leases flexible work spaces- traditional offices, shares workspaces and office suites. WeWork had membership plans as well as pay-as-you- go options.

What are its membership options?
Flexibility is key in WeWork’s business model: They ensure that clients no longer need to worry about long-term leases.

What is the problem with WeWork business model?
The problem lies in the business model. WeWork takes on a lot of long-term debt in the form of capital leases and obtains very short-term income from tenants. This can be a valid business model, although it could very easily collapse in a recession.

What is the WeWork scandal?
In 2019,the company began an IPO, which would have made them a public company. The before-the-IPO $49 billion evaluation couldn’t sustaine the finanical findings which lowered the company value to only $10 billion.
– Investors who bought shares in WeWork prior to the failed IPO filed a class-action lawsuit against WeWork and SoftBank. The investors alleged that WeWork downplayed losses and overhyped its business plan.
– Co-founder Adam Neumann stepped down in 2019 after questions arose about the company’s financial sustainability.

What happened with Adam Neumann?
– Softbank, the Japanese tech investment management company who initiall invested in WeWork offered Neumann $1.7 billion to step down from his role as chairman of the WeWork board of investors.
– Neumann was also able to hang on to nearly 20 million WeWork Partnerships Profits Interest Units and,
– he also retained an ownership stake of about 7%
– Forbes estimates that Neumann has nearly $700 million still tied up in WeWork.

Misc:
– 2021 WeWork merged with BowX Acquisition Corp
– Softbank now owns the majority stake in WeWork
– WeWork, which was once valued at $47 billion, was worth an estimated $9 billion when it finally went public in October 2021 under current CEO Sandeep Mathrani.

Does WeWork still lose money?
WeWork said closing the locations was likely to reduce revenue but would benefit the company by cutting costs. The company has lost more than $12 billion since the end of 2018. Demand for office space has plummeted since companies started letting employees work from home during the pandemic. Nov 10, 2022

Despite the chaos, mayhem, and horrible business decision-making, WeWork as a company still exists.

WeWork will finish 2022 with $300 million in cash. That’s less than one-third of what it had at the end of 2021. That’s alarming, considering that in 2021, it had $4.4 billion in operating expenses and $2.7 billion in revenue.