Dec 20, 2019

Tom Cotton says WeWork debacle is driving Americans toward socialism

WeWork founder Adam Neumann. Photo: Jackal Pan/Visual China Group via Getty Images

Sen. Tom Cotton (R-Ark.) last week told CNBC that the WeWork debacle is driving some Americans toward socialism.

The state of play: Cotton's argument is an unintentional critique of American capitalism, at least as codified by legislators like Cotton.

Cotton first raised this line of argument via Twitter in October:

What happened: Neumann did get an insane amount of money from SoftBank, as an effective bribe to effect its rescue package and then relinquish his voting shares and board seat. It was just shy of $200 million. Cotton gets to $1.7 billion by also adding in Neumann's share sale via a SoftBank-backed tender that was available to all WeWork holders, plus a restructure of around $500 million in existing loans.

When it happened: Neumann exited in October. That's the same month that Sanders experienced his lowest average polling of the 2020 presidential race, per the RealClearPolitics average. So perhaps Cotton really meant to cite Elizabeth Warren but, either way, it's hard to argue that their messages only began resonating two months ago.

There continues to be zero evidence that Neumann committed financial fraud at WeWork. Arrogant governance and a surfeit of hubris? Absolutely. But I've spoken to numerous sources, both inside the company and outside advisors, and none of them have found fraud.

  • Conventional wisdom among these sources is that WeWork could have successfully gone public had Neumann fixed governance before publicly filing the company's prospectus. Not at a $47 billion valuation — likely at less than half, which Neumann was said at the time to have accepted — but public nonetheless.

The bottom line: Neumann ran afoul of the markets, but not of the law. Suing him would be akin to suing lightly-regulated capitalism. If that's Cotton's true belief, then he might be backing the wrong presidential candidate.

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The world's 500 richest people saw their collective net worth grow by 25% in 2019

Priscilla Chan and Mark Zuckerberg. Photo: Ian Tuttle/Getty Images for Breakthrough Prize

The world's 500 richest people added $1.2 trillion to their collective net worth in 2019, boosting their holdings by 25% to $5.9 trillion, according to Bloomberg.

Why it matters: Income inequality has become a key issue for politicians around the globe, highlighted by the fact that the wealthiest 0.1% of Americans now hold a larger share of wealth at any point since 1929 — the start of the Great Depression.

Go deeperArrowDec 27, 2019

Scoop: SoftBank shafts startups

Illustration: Eniola Odetunde/Axios

SoftBank Vision Fund has walked away from investing in several startups, months after submitting term sheets worth hundreds of millions of dollars and promising that closing delays were only temporary, Axios has learned.

Why it matters: This is highly unusual behavior, even for the idiosyncratic SoftBank, and threatens its ability to invest in highly sought-after companies. SoftBank, which has invested record amounts into startups over the past few years, confirmed that it has "regret" over these situations.

Go deeperArrowJan 6, 2020

Why firing the CEO of a company doesn't change anything

Illustration: Aïda Amer/Axios

When a CEO is forced out of a company, a lot of people hope and expect big changes. Much like Inigo Montoya in "The Princess Bride," those people are going to have to get used to disappointment.

Why it matters: It's big news when names like Dennis Muilenburg of Boeing and Travis Kalanick of Uber are forced out of their jobs. But that doesn't mean the company is going to change. The reality is that corporate cultures change slowly if at all.

Go deeperArrowJan 2, 2020