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WeWork’s disastrous attempt to go public has been full of twists. But this week has delivered the biggest shocker: After reportedly losing the confidence of key board members, co-founder Adam Neumann is out as CEO.
Neumann will continue as non-executive chairman of the board, the company confirmed following news reports.
“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction,” he said in a statement. “I have decided that it is in the best interest of the company to step down as chief executive.”
His departure is highly unusual in the startup world, which has historically rewarded high-profile and freewheeling entrepreneurs. Such founders have typically been allowed them to maintain tight control of their companies even as they tapped public markets.
But in recent weeks, the governance structure at WeWork, along with Neumann’s own behavior, has come under the microscope. The company’s business model has also faced major doubts after it became clear that WeWork is burning through money.
The We Company — which had been previously valued at $47 billion by top investor SoftBank (SFBTF) — was said to be looking at an IPO valuation closer to $20 billion.
For startup executives, it’s a warning. Investors seem to be losing patience with lofty valuations at loss-making companies. See also Uber and Lyft, whose shares have plummeted since their flashy IPOs earlier this year.
According to my CNN Business colleague Sara Ashley O’Brien in New York, Neumann will no longer have majority voting control. He will have three votes per share, down from 20 votes per share, as outlined in the company’s original IPO paperwork.
The rub, from Sara: “It is unclear if The We Company will go public anytime soon, even with the leadership change.”
One China expert thinks this data is a ‘real tell’
It’s no secret that growth is slowing in China. Recent data, such as figures on industrial production, have clearly indicated that the trade war between Washington and Beijing is taking a toll. Economists believe that further monetary stimulus from the government is inevitable.
Leland Miller, CEO of China Beige Book, says he knows the situation is bleak because credit is freely flowing throughout the economy — but it’s still not enough to offset softness in manufacturing, according to his firm’s survey of businesses in the country published this week.
“This high level of credit should be growing the economy,” Miller told me. “Because it’s not, this is a real tell.”
Miller said that his firm’s third quarter survey showed the weakest results of the year. His team observed rare issues in the labor market, which shows that the services sector is not picking up the slack for manufacturing.
Worth watching: Amid the narrative that China is just experiencing growing pains as it transitions from an export-based economy to a consumption-based economy, that’s concerning. “This is not an economy that’s in transition,” Miller said.
Alexa, what’s new? We’re about to find out
The company, which wants to keep a commanding presence in the fast-growing virtual assistant space, is expected to unveil a wide range of Alexa-related products Wednesday for different areas of the home, as well as updates to Alexa’s functions.
Why it matters, per my CNN Business colleague Rachel Metz: “Over the past five years, the market for smart speakers that use virtual assistants — Amazon’s Alexa and its Echo smart speakers in particular — has ballooned.” Companies including Amazon, Google and Baidu shipped 26.1 million smart speakers in the second quarter of this year, according to researcher Canalys, and Amazon is out front.
That doesn’t mean the internet giant is getting complacent.
“I think fundamentally Amazon wants to be in every fricking room in the house,” Carolina Milanesi, a consumer technology analyst at Creative Strategies, told Rachel.
Shares of Amazon are up almost 16% this year, compared to gains of nearly 22% for the tech-focused Nasdaq index.
Add US political uncertainty to the list of global risks
The US-China trade war. Attacks on Saudi Arabian oil facilities. Protests in Hong Kong. A looming Brexit. The list of geopolitcal risks weighing on markets was already quite long. And it just got longer.
Following House Speaker Nancy Pelosi’s announcement of a formal impeachment inquiry into President Donald Trump, investors will need to consider the risks attached to an escalating political situation in Washington. Most likely, they’ll enter wait-and-see mode. But the inquiry will do little to help wavering global sentiment.
“Given how this increases the prospect of heightened political uncertainty in the world’s largest economy … risk assets and global equities in particular remain in the firing line,” said Lukman Otunuga, senior research analyst at FXTM, a currency broker.
Keep an eye on Amazon’s hardware event in Seattle, which kicks off at 1 p.m. ET.
- US new home sales for August arrive at 10 a.m. ET.
- American crude oil inventories will follow at 10:30 a.m. ET.
Coming tomorrow: We’ll get a look at the final reading of US second quarter GDP.