Aug 11, 2019

The financiers' hour

Photo: Interim Archives/Getty Images

This was a big week for financiers looking to make enormous profits from the empire-building ambitions of businesses with dubious business models.

Exhibit 1: WeWork is planning to go public next month, raising some $3.5 billion. But this is a world where Uber can lose $5.2 billion in a single quarter, and potential shareholders are worried that $3.5 billion still won't be enough. So WeWork is raising $6 billion in debt, too.

  • Leading both deals: JPMorgan Chase, whose CEO, Jamie Dimon, has been buttering up WeWork executives for years.
  • Be smart: WeWork (or just We, as it now wants to be known) is generally considered an office-rental company, even if its CEO likes to say that it's more about energy, spirituality and elevating the world's consciousness. In reality, WeWork is a creature of the international capital markets, upon which it is reliant and without which it could never have been born in the first place. As a vehicle for funneling fees to Wall Street, it has few equals. Hence the personal attention from Dimon.

Exhibit 2: The huge media merger of the week is the acquisition of newspaper chain Gannett by its smaller rival GateHouse. In order to get the deal done, GateHouse parent New Media Investment Group is borrowing $1.8 billion from Apollo at an eye-popping interest rate of 11.5%.

  • Between the lines: The interest rate worries GateHouse shareholders: It clearly reflects an extremely high probability of default, in which case their equity would go to zero and Apollo would end up owning the combined company.
  • It's possible Apollo wants GateHouse to default on its loan. The private-equity giant has already quietly accumulated a very large position in local TV and local radio; local newspapers could fill out the portfolio nicely.

The bottom line: Whether WeWork and GateHouse succeed or fail, JPMorgan and Apollo are likely to come out ahead. It's a nice position to be in.

Go deeper

Private equity giant Apollo wants to consolidate local TV

Illustration: Sarah Grillo/Axios

Apollo Global Management, one of the world's largest buyout firms, believes there's more than just a puff left on the local TV cigar, despite widespread conventional wisdom that the value has been snuffed out.

Why it matters: Apollo could soon become one of America's most influential news broadcasters, even though few Americans know its name.

Go deeperArrowAug 22, 2019

WeWork files for long-awaited IPO

Illustration: Rebecca Zisser/Axios

WeWork on Wednesday filed to raise $1 billion in an initial public offering, although the ultimate offering amount is expected to be at least three times larger.

My thought bubble: There is a ton of investor skepticism over WeWork's business model, with expectations that it could receive Tesla-like treatment from public shorts. That's one reason why the company plans to increase its cash cushion by securing a $6 billion credit facility in conjunction with the IPO.

FinancialsArrowUpdated Aug 14, 2019

The lofty ideals at work behind WeWork's IPO

Photo: Timothy A. Clary/AFP/Getty Images

WeWork has long bet that it can wed the mundane efficiencies of commercial real estate with the lofty ideals of mission-driven tech. That would resolve the age-old contradiction between hard-nosed profit-seeking and high-minded world-changing — and its IPO prospectus aims to prove it right.

The big picture: WeWork knows it looks like an aggregator of coworking office space rentals, but it aims to persuade the public it is instead "reinventing the way people work," helping them "make a life, not just a living."

Go deeperArrowAug 15, 2019