|Bid||0.00 x 0|
|Ask||0.00 x 0|
|Day's Range||6.25 - 6.25|
|52 Week Range||4.66 - 6.30|
|Beta (3Y Monthly)||N/A|
|PE Ratio (TTM)||N/A|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||N/A|
(Bloomberg Opinion) -- The meteoric rise and spectacular fall of WeWork is one for the ages.To sum up: The real-estate leasing startup, which incinerates money, was planning just two months ago to go public at a valuation that some thought would be as high as $47 billion. Once investors got a good look at its finances they couldn't stop laughing. The company instead needed a bailout from its biggest investor and now is valued, perhaps optimistically, at $8 billion.Maybe this episode marks the beginning of a sobering up of cash-burning growth companies with dismal unit economic. If that's the case, what will that process look like? Maybe the transformation of music-streaming service Pandora helps show how busted unicorns — closely held startups valued at $1 billion or more — can find new life. QuicktakeUnicornsWhen Pandora had its initial public offering in 2011, it was a tortoise-beats-the-hare success story, after it launched during the dot-com boom in 2000. It survived several near-death experiences, putting a damper on the cockiness and growth-at-all-costs mentality often seen in fast-growing startups. Rather than grant its chief executive officer super-voting shares and complete control, the CEO owned less than 3% of its stock after several rounds of capital injection that diluted his stake.One can't fault investors for enthusiasm during Pandora's first few years as a publicly traded company. Between the fiscal years ended in 2010 and 2013 it increased its active user base from 16 million to 65.6 million. Annual revenue rose from $55 million to $427 million, much of it driven by ad revenue. The company was still losing money, but it appeared to be manageable. The story was that over time it could convert users into paying monthly subscribers while negotiating better royalty rates on content, leading to margin expansion and profits down the road. When the stock peaked in early 2014, the company had a valuation of $9 billion, or roughly 10 times the $920 million in revenue it would go on to generate that year.That's when the downward spiral of slowing growth, increased competition and a falling stock price began. After more than doubling in 2014, revenue only grew by 26% in 2015. Spotify became the new darling for music streaming, and other companies such as Apple joined a never-ending parade of entrants into the market. Profit margins eroded along with the slowing revenue growth. Between its 2014 peak and the end of May 2017, Pandora's stock price fell by 78%.The following month was the beginning of the end of Pandora's life as an independent company after Sirius XM Holdings Inc. invested $480 million for a 19% stake. Pandora divested its share of Ticketfly, a noncore business, at a loss as it sought to preserve cash. In January 2018 it cut 5% of its headcount and moved other employees to Atlanta from Oakland, California, in a cost-saving move. Eight months later, Sirius bought the whole company for $3 billion in an all-stock deal that was worth about a third of the company's peak valuation.Sirius made a good marriage partner for Pandora investors for a few reasons. Pandora had tens of millions of active users, but unlike Sirius it had not been very successful at converting them into paying subscribers. By buying Pandora, Sirius now had access to a huge audience of music streamers who might become future subscribers. Pandora also had technology that was useful to Sirius, and the combined entity was able to eliminate duplicate positions.So far, it seems to be going as planned. In its second-quarter earnings report, Sirius said that Pandora's revenue increased by 15% while costs only grew by 4%, leading to 40% growth in gross profit. Although it wasn't successful as an independent company, Pandora still has 65 million monthly active users and is an increasingly profitable part of a $29 billion parent company.The lesson here is that when a startup grows quickly, investors often are willing to overlook all sorts of flaws as long as they buy into the long-term vision of a company, whether that's dominating commercial real-estate leasing or music streaming. But when growth slows and cash runs low those growth investors will abandon ship, forcing companies to pitch a value proposition to very different types of investors. Some companies might be able to become profitable in their own right, but for others it might mean seeking out a buyer. Pandora's salvation was having tens of millions of users and technology desired by a competitor. Investors who bought the stock in those heady days in 2014 were never made whole, but five years later the business still exists, albeit in a different form, continuing to provide a service that generates revenue.The high-profile reversal of fortune suffered by WeWork in the public eye over the past few months is leading people to wonder how many other potential disasters loom for closely held money-losing growth companies. But as Pandora shows, although valuations may not recover, that doesn't mean these companies are necessarily doomed.To contact the author of this story: Conor Sen at firstname.lastname@example.orgTo contact the editor responsible for this story: James Greiff at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first […]
(Bloomberg Opinion) -- Revelations about Boris Johnson’s personal life, when they periodically emerge, have tended mainly to serve as tabloid fodder for a few days and then flame out. Two recent allegations, however, could prove much harder for the prime minister to simply swat away.The first emerged over a week ago when the Sunday Times published a story alleging that Johnson, during his time as Mayor of London, used his influence to help American former model and tech entrepreneur, Jennifer Arcuri, now 34, get access to government funds and coveted places on overseas trade missions.The Times stories and those that followed – including reports of frequent visits to Arcuri’s flat from the then-married mayor – would have been media catnip at any time. But it’s the allegation that his private life might have impaired Johnson’s judgment as a public official that gives it legs. They are now the subject of three separate investigations into whether the Mayor failed to declare a personal interest, including a police investigation referred by the Greater London Authority because as mayor, Johnson was in charge of policing and crime-fighting.Johnson has denied any impropriety in his official duties. In keeping with his policy, he has refused to comment on the nature of his past relationship with the entrepreneur.That doesn’t mean the stories will go away. In fact, they could become a major test of whether voters’ concern with Brexit overrides all else in the next general election. For many Conservative voters who have been inclined to support his Brexit policy, and especially for many women, the stories will be a reminder of a long-held, small-c conservative view that matters of personal morality and those of probity in public office are often not very far apart.Arcuri was clearly a force in London’s burgeoning tech scene at the time. Fresh out of business school, she set up a company called Innotech to run events for the tech sector. Johnson’s presence at the events, and hers on mayoral trade missions to Singapore, Malaysia and Tel Aviv, helped put Arcuri on the map in that world. A 2014 Business Insider story names her as one of the 25 top women in tech, along with Net-a-Porter founder Natalie Massenet and Martha Lane Fox of lastminute.com fame. “Thanks to her close ties with London mayor Boris Johnson, the shaggy-haired politician has repeatedly agreed to speak at the event, which also shows the government's interest in the east London tech cluster,” it wrote of Arcuri.That Johnson would grace those events raises eyebrows now, but it didn’t so much at the time. London’s now established tech sector was young and starving for funds and attention; government officials seemed keen to show their support.Arcuri is clearly someone who could gather the geeks and the hooded coder-dudes in a room, make them feel they had superpowers, and then go market those powers to politicians and companies that didn’t know their DDoS from their MitM attacks. She has evangelized for women in tech and tech education. Much of it was also photo-op fodder: Arcuri with Johnson, Arcuri in a selfie with Brexit czar Michael Gove, Arcuri in front of 10 Downing Street in two separate outfits, Arcuri giving a Ted talk. The Sunday Times report said that Innotech received two grants in 2013 totaling 11,500 pounds ($14,149) from a promotional organization that Johnson was responsible for as mayor. Arcuri reportedly received a 15,000-pound government grant, under the Sirius program designed to woo foreign entrepreneurs to build businesses in Britain.Earlier this year, Hacker House, which Arcuri set up with professional hacker Matthew Hickey to provide cyber-security training, received the first disbursement in a 100,000-pound award from the Department of Digital, Culture, Media and Sport, earmarked for U.K.-based companies to provide cybersecurity training and also “boost diversity” in the sector. The government has disbursed 47,000 pounds and frozen the rest pending the investigation. Hickey, who tweets as @hackerfantastic and is also Arcuri’s husband, has vigorously defended her and Hacker House against allegations that it won business improperly. Arcuri has said that all funding was in respect to her position as a legitimate businesswoman.As the Arcuri story was gaining momentum, the first day of the Tory Party conference in Manchester on Sunday was marred by revelations by Sunday Times journalist Charlotte Edwardes, that Johnson had squeezed her thigh, and that of another unnamed woman, at a boozy lunch when he was editor of the Spectator in 1999. Downing Street issued a statement that “the allegation is untrue,” an unusual move because Johnson doesn’t normally comment on such things. Edwardes tweeted in response: “If the prime minister doesn’t recollect the incident then clearly I have a better memory than he does.”Some around Johnson at the party conference showed clear discomfort about the whole thing. Health Secretary Matt Hancock said of Edwardes, “I know her and I know her to be trustworthy,” a sentiment echoed by former cabinet minister Amber Rudd. U.K. Chancellor of the Exchequer Sajid Javid came to Johnson’s defense, saying he has total trust in the prime minister.Together, the two sets of allegations may be harder to shake than any Johnson has faced in the past. Johnson’s ties to Arcuri will have to survive formal investigations, not just trial by media. If Johnson helped Hacker House understand what was required to successfully bid for government contracts, that is one thing; if he failed to declare a personal interest or intervened to see that contracts were awarded, that is entirely another.The second allegations are more complicated to adjudicate. While Johnson’s personal peccadilloes may be tolerated, Edwardes’s allegations, even if many will question the timing, go further than anything previously reported about the prime minister’s character. Former Defense Minister Michael Fallon had to resign over not dissimilar allegations under Theresa May. Her close adviser Damian Green was also forced to resign after being found to have made misleading statements about pornography on one of his parliamentary office computers.Johnson’s strategy seems to be to tar anyone who discusses such matters as being hell-bent on frustrating the U.K. from leaving the European Union on Oct. 31. Will his divided party toe that line? His cabinet is reportedly divided over his Brexit plans and leaks on Monday night suggest that the EU is so far not buying his proposals. It may still be that Brexit is so paramount for Conservative voters – or, if not, then at least keeping socialist Labour leader Jeremy Corbyn out of power is -- they trump everything else in the next election. Forces are coming together that could test that theory to the limit.To contact the author of this story: Therese Raphael at firstname.lastname@example.orgTo contact the editor responsible for this story: Melissa Pozsgay at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Therese Raphael writes editorials on European politics and economics for Bloomberg Opinion. She was editorial page editor of the Wall Street Journal Europe.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.