When it comes to investing in WeWork, you could say that T. Rowe Price’s investment team has some regrets.
In their letter to shareholders in the annual report of the firm’s Mid-Cap Growth Portfolio, Brian W.H. Berghuis, chairman of the fund’s investment advisory committee, and John F. Wakeman, the portfolio’s executive vice president, said that the portfolios‘ stake in the commercial real-estate startup had brought them „outsized headaches and disappointments.“ The investment, which the portfolio made in 2014, was done with the understanding that WeWork would moderate its rapid growth and improve its bottom line, they said. Though the company took steps in that direction soon after T. Rowe Price’s investment, it soon went back to its big spending ways, they said.
WeWork’s profligacy eventually caught up with it. Its attempt at a public offering last summer collapsed in the face of investor concerns about its massive losses. After its IPO failed, its valuation collapsed from $47 billion to less than $8 billion, and it nearly went bankrupt before SoftBank bailed it out. The end result of all that was that T. Rowe’s remaining stake in the company is now worth much less than what it once was, Berghuis and Wakeman said in the letter.
„While it’s possible that WeWork’s new management will improve operations somewhat, we are ready to declare this a terrible investment,“ they said.
The letter was an unusually frank assessment from a high-profile investor. T. Rowe Price led WeWork’s Series D Round, in which the company raised $355 million at a valuation of $4.65 billion, according to PitchBook.
Berghuis, Wakeman, and their team have had misgivings about their WeWork investment for years now, particularly with regards to the company’s corporate governance and the trustworthiness of its former CEO, Adam Neumann. Neumann at one point had iron-clad control over the company with 20 votes for each share he held and was the target of criticism for numerous personal transactions he engaged in with the company.
Adam Neumann promised WeWork would be profitable
The T. Rowe team was particularly incensed about the company’s ever growing losses.
Neumann „promised profitability was just over the horizon,“ they said in the letter. „We did not take him at his word, and we communicated to WeWork’s management and board our displeasure with its eroding corporate governance.“
T. Rowe sold off a total of 16% of its stake in WeWork – recouping about half of its initial investment – in private transactions in 2017 and 2019, they said. They planned to sell off their remaining stake last year, but WeWork’s management, which had veto power over the transaction, blocked the deal.
„It is clear that we misread the motivations of WeWork’s management and our investment partners,“ Berghuis and Wakeman said in their letter.
Mutual fund companies have increasingly been investing in private startups, in part because companies are delaying going public until later in their lifespans, if they go public at all. Some policy makers and many in the finance industry have been pushing to make it easier for everyday investors and investment vehicles, such as mutual funds, to buy into startups. But some consumer advocates have raised concerns about that notion, because of the limited amount of financial information that private companies make public and the high risk of failure of such companies.
In their letter, Berghuis and Wakeman defended their portfolio’s investment in private companies, arguing that their strategy shouldn’t judged based on what happened with WeWork. The combined value of the portfolio’s private investments comprised only 0.58% of its total worth, they said. Many of those investments have delivered good returns, and they provide insights into how industries are changing and future competition to the portfolio’s public investments, they said.
„In short, we believe the WeWork debacle was an error in judgment, not in process,“ they said.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
