The WeWork Saga Continues... 🤔

Remember WeWork? The story continues to unfold… February 7, 2024 | Peel #642 Silver Banana goes to... [DealRoom. ](=) In this issue of the Peel: - 🤩 Fed President Loretta Mester saved the day and our portfolios! - 🆘 A recent IPO stock has started tanking—guess which one? - 🏢 Remember WeWork? The story continues to unfold… Market Snapshot 📸 Banana Bits 🍌 - Get the inside scoop on this [missing Investment Banker in China](=) - [The DOJ is set to release a special report](=) on those pesky classified documents Biden wishes would go away - Elon Musk is the mystery backer behind a [lawsuit by this famous actress against Disney](=) - ESPN, Fox & Warner Bros realized they were better off together and [created a joint streaming service]( = Looking for ways to optimize your diligence practice and increase collaboration across the M&A Process? Join us for an on-demand webinar with Miro and their Head of Corporate Development & Venture, Shrey Parekh, as he shares his experience and gives a live demo showcasing how he leverages the DealRoom platform today to increase efficiency across their deal lifecycle. [Access Webinar Now]() Macro Monkey Says 🐒 Loretta to the Rescue We did it, Joe! This is what I imagine the market would say if it could talk after Cleveland Fed President Loretta Mester’s speech. According to Mester, policymakers will likely gain confidence to cut interest rates “later this year.” That’s just the shot of espresso needed to re-energize the market after The Grinch (Jerome H. Powell) gave his not-so-fun speech the other day. While Mester reinforced the scripted line about the Fed wanting to make sure inflation is at 2% blah blah blah and cautioned against lowering rates too soon, she did say that if the economy continues chugging along at this pace, the market could get that coveted rate cut it’s been so diligently seeking. It’s important to keep in mind that Loretta Mester is a voting member of the 12-person board, as opposed to a non-voting member who speaks and exists in the land of the theoretical and should be immediately dismissed (kidding). Mester sees three rate cuts in 2024, which has been her consistent view for a while now. She pointed to two key indicators: Strength in the labor market via low unemployment and continued GDP growth. On the flip side, she brought up a number of potential risk factors, which include geopolitical tensions and banking sector stress. See New York Community Bancorp for an example. Still, the overall message was pretty positive. Minnesota Prez Neel Kashkari was a bit less optimistic in his tone, stating, “We’re not all there yet” when referring to progress on inflation. Kashkari wants the Fed to take a more measured approach and take the time to really digest incoming data before lowering rates. The Fed has held rates between 5.25%-5.75% since July. They have clearly signaled that rate hikes are a thing of the past, so now the market’s primary question is whether we get another pause or a cut. There was some irrational exuberance around the idea of a March rate cut, which was quickly put to rest. After March, the FOMC will meet once in May, June & July. A rate cut is still on the table for all three meetings. What's Ripe 🤩 Palantir Technologies (PLTR) 📈30.7% - Palantir looks to be beating the “numbers look off” allegations. The stock soared after delivering its first profitable quarter ever. This is a big deal, particularly for a tech stock with high expectations since its IPO. Investors waited patiently for the company to deliver a profit, and the wait seems to have been worth it. - Palantir said demand for its artificial intelligence technology is driving growth. It delivered $210mn of net income, beyond analysts’ expectations of $194mn. - “Our commercial business is exploding in a way we don’t know how to handle,” said CEO Alex Karp. Music to a shareholder’s ears. Palantir will spend 85% of its time focused on “rebuilding the whole company” to meet future AI demand. Coherent Corp. (COHR) 📈17.3% - Coherent reported a third straight quarter of sales beats related to demand for its AI/ML-related Datacom transceivers. Additionally, they are expecting a commercial launch of their new product, the 1.6T transceiver, in 2025. - Second-quarter sales of $1.1bn beat consensus estimates slightly, and earnings per share of $0.36 was well above consensus of $0.26. The 17% jump in the stock price was the largest 1-day move for the stock in four years. - Coherent also provided an updated range for 2024 EPS estimates, rising from $1.00-$1.50 to $1.30 to $1.70. The stock has already rallied 33% so far this year, beating the broader NASDAQ index by almost 30%. What's Rotten 🤮 Fabrinet (FN) 📉18.3% - Electronics manufacturer Fabrinet beat on earnings in the second quarter, but that proved to be useless as third-quarter estimates came to light. While EPS in 2Q of $2.08 handily beat estimates of $1.90, 3Q estimates of $2.08 fell short of the $2.11 number that investors were looking for. - Analysts expressed concern over the growth of its communication business. This is the part of the business that is supposed to be on fire, given an uptick in AI demand. The company doesn’t seem to be capitalizing on that as quickly as investors would like. - Fabrinet’s struggles highlight the intense competition within the 800G data market. Sometimes, having a great market tailwind isn’t enough. Companies also need a competitive edge to take advantage of that market growth. Alto Neuroscience (ANRO) 📉11.1% - Alto Neuroscience went public less than 5 days ago to a fanfare of love and adoration, trading up over 40% on its first day as a public company. Those investors are starting to turn on the company based on recent market activity. - Alto is a clinical-stage biotech company pioneering a new approach to psychiatric drug development. The IPO was led by Jefferies, and it was a hot deal, with investors putting in orders that outstripped the actual number of shares offered in the IPO. - However, that seems to have created some concentration risk, with the majority of the shares being taken by a few investors. When those investors decide to sell, there isn’t enough buy-side demand to stabilize the stock price. = Thought Banana 🤔 Adam Neumann’s Unrequited Love Adam Neumann just might be about to pull off one of the biggest heists of all time. Though I’m unsure who’s getting taken advantage of—his former company WeWork, us as investors, or himself? Here is the basic rundown. Adam Neumann birthed WeWork in 2010, eventually building it into a $47bn company. The company filed to go public in 2019. In relation to the IPO filing, investors got the opportunity to uncover tons of previously confidential financial information on the company. They saw a series of fictional, non-GAAP financial terms like “Community-Based EBITDA” and got a whiff of Neumann’s sketchy self-dealings and said, “No thanks.” WeWork pulled the plug on the IPO, laid low for a bit, and then re-emerged as an entirely revamped company ready to test the public markets! Not really. It was the same exact company, but they decided to go public via a SPAC because while those also smell fishy, they’re a much more socially acceptable brand of fishy. So What's The Problem? The company, which was worth $47bn, went public at a humble $9bn valuation. The problems didn’t end there, though, as they got rocked during the pandemic when nobody showed up to an office for two years. In simple terms, the main issue the company faces is that when it purchases office space, it signs multi-year leases. Due to remote work, demand for office space has plummeted. WeWork essentially is on the hook for paying for these long-term leases with no tenants to fill them. The best solution for this is to file for bankruptcy, which they did in November. Now, the company has an equity value of precisely zero dollars and zero cents (after-tax, of course). While the company was burning in flames, Neumann was off jet-setting the world, having left the company well before its problems came to a head. We haven’t heard much from him besides the small startup he founded called Flow. But now, Neumann is back, and he’s offered to take over WeWork again. While WeWork doesn’t have much (or anything) by way of equity, what it does have is a lot of debt. If Neumann were to take over the struggling company, he would need to pay off investors who hold about $4bn in debt before making any strategic moves to grow WeWork. Despite the circumstances, you can’t not root for this guy. He’s pulled off one of the most epic trades we’ve ever seen. Create a company, fluff it up with tons of debt, secure a multi-billion-dollar valuation off of sketchy accounting practices, cash out all of your stock, and then buy it again when it goes back to $0. Here’s to seeing whether or not Adam Neumann can reunite with his true love. 💭 The Big Question 💭: What’s next for WeWork? Will Neumann really take over WeWork again? Will WeWork actually stay afloat, or will they simply go bust and declare bankruptcy? Banana Brain Teaser 💡 Yesterday 🗓 An open box in the shape of a cube measuring 50 centimeters on each side is constructed from plywood. If the plywood weighs 1.5 grams per square centimeter, which of the following is closest to the total weight, in kilograms, of the plywood used for the box? (1 kilogram = 1,000 grams) Answer: 18.75 kilograms Today 🕐 A garden center sells a certain grass seed in 5-pound bags at $13.85 per bag, 10-pound bags at $20.43 per bag, and 25-pound bags at $32.25 per bag. If a customer is to buy at least 65 pounds of the grass seed, but no more than 80 pounds, what is the least possible cost of the grass seed that the customer will buy? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “An investment in knowledge pays the best interest.”—Ben Franklin How Would You Rate Today's Peel? 😁[All the bananas]() 😐[Meh](=) 😩[Rotten AF](=) Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]() // [WSO ALPHA]( // [ACADEMY]() // [COURSES]() // [LEGAL](=) [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353