My most-recommended reads for 2020

 

The year 2020 presented us with a complete turnaround in the way we conduct our daily routines. COVID-19 pandemic slapped limitations and confined us inside our houses for extended periods of the day. It also paved way for many learning opportunities and since I saved significant time on my commute to work, I got a chance to revisit my old hobby with a full throttle – reading. With this, I have decided to enlist my 5 most-recommended reads of 2020. Over the course of time, I will try my best to build up this list further.

So here are my top 5 reading picks for the year 2020

1)     Surrender experiment (by Micheal Singer): When majority of the people stand by ‘hard-work’ as the only success mantra, former software programmer and a founder of mediation institute, Michael Singer devised an experiment which was a complete opposite to the hard-work theory. Named after the title of the book, Surrender experiment is an act of complete submission to the forces of universe and a corresponding faith that these forces will help manifest one’s desires. Formerly a hippie and drug addict in his teens, Micheal Singer brought a complete metamorphosis to his life by taking to intense meditation practices and getting into frequent flow states. This book will initiate the readers to act of surrender and spiritual practices which can lead to fulfilment of one’s goals. 

2)     Sapiens (by Yuval Noah Harari): Amongst my highly recommended list, this book deserves multiple reads. Yuval Noah Harari’s Sapiens helps the reader discover the ancient roots of human evolution. It is not a factual book reiterating the previously discovered theories of biologist and anthropologists. Instead, it challenges the facts we think we know about being human. This book will surely tickle the curiosity of the readers covering a wide spectrum of topics including the development of human cognition, agricultural revolution, advent of money, emergence of religions, inception of war and much more.

3)     Business Sutra (by Devdutt Pattanaik): Being the former Chief Belief Officer at Future Group, Devdutt Pattanaik has a tremendous knack of weaving lessons learned from the mythological stories into business management. Picked up as a subject in Indian School of Business, Business Sutra is strong reminder of the fact that management is deep-rooted in Indian mythology. Indian style of doing business is empathetic and largely focusses on employee satisfaction rather than increasing the shareholder value. This book narrates short stories from Indian mythology and applies these first-principles to the modern-day corporate

4)     The Buddha and the Badass (by Vishen Lakhiani): Vishen Lakhiani, the founder of the famous personal development company – Mindvalley, had written this book with an objective to introduce spirituality to boost performance at workplace. As the title suggests, Buddha is a person who navigates through his environment with fluidity, nailing complex projects with a smile on his face whereas the Baddas is the modern-day innovator and disruptor who breaks new normal ever single day. The book sets up the codified actionable steps which can help the reader merge his own Buddha and the Badass to grow at the workplace. 

5)     The Power of your subconscious mind (by Dr. Joseph Murphy): To be honest, this was not the first time I have picked up this book. In fact, I had read it multiple times before and honestly, I have even lost the count. This book is one of the most underrated and my personal favorite when it comes to touching upon the concept of ‘Law of Attraction’. This book conveys the mechanics of the human mind and how one can tap into the infinite potential of the subconscious mind to access abundance. Backed up by strong research, this book explains how our current life events are shaped out of our own mental structures and how we can use tried-and-tested methods to alter the reality around us.

A Brief Overview on Shinzo Abe’s 'Abenomics'

 

Last week, Prime Minster of Japan, Shinzo Abe announced his exits from the incumbent post citing health reasons. This decision has sparked off questions in the Japanese political landscape as to who will be his successor. Nevertheless, the successor will be subjected to an economy which is burdened by an aftermath of the COVID-19 pandemic. The GDP has declined by 27.8% at an annualized rate and the economy is on the verge of facing a recession. The Prime Minister had introduced his package of economic reforms called the ‘Abenomics’ in 2013 in order to usher in a new era of economic growth. With the current state of the economy, this post tries to look at the main highlights of Abenomics and the effect it has made on the economy.

In early 1990’s, Japanese economy suffered a real estate and stock market bubble burst. Undoubtedly, there were mistakes made by the Bank of Japan (BOJ) as it reduced the money supply in late 1980s bringing the equity rally to a halt. The equity market collapsed by 60% from 1989-1992 and as the BOJ raised its interest rates, the real estate prices plunged by 70% until 2001. The government started to slash debts and decide to relocate the manufacturing activity overseas. This led to a huge drop in the wage growth along with price of goods leading to a deflationary mode. Natural calamities (Tsunami, earthquakes) along with its aging population added to the increasing stress in economic machinery. Between 1991 and 2003, GDP of Japan grew by just 1.14%. Against this backdrop, Prime Minister Shinzo Abe introduced ‘Abenomics’ which was expected to serve as a caffeine boost to wake the economy from its decades-old sleep. Along with the growth, Abenomics was aimed to be a therapy to shift its dependency from China, which was growing its domination in Asia.

As drafted by Prime Minister Shinzo Abe, Abenomics had a three-arrowed strategy. Firstly, fiscal stimulus package was introduced in 2013 with measures amounting to 20.2 trillion yen. The package was concentrated towards critical infrastructure spending (earthquake-resilient roads, bridges). These measures were beefed up later in 2014 with Abe injecting more 5.5 trillion yen. Post 2014 elections, economic measures observed an increase of 3.5 trillion-yen worth of funds. The second arrow points towards a flexible monetary policy. The BOJ adopted string of quantitative easing programs to inject liquidity in the economy. The value of assets held by the BOJ as against GDP of Japan increased more than 70% during that period. This figure is mammoth as compared to assets held by European Central Bank and the Federal Reserve which stood below 25% of the GDP. The third arrow of Abenomics is for structural reforms including enabling a conducive regulatory environment for business, slashing corporate tax rates and increasing participation of the women workforce. Along with this, Abe had huge expectations from the Trans-Pacific Partnership (TPP) which was formulated by the U.S President Barack Obama to advance US strategic interests in Asia. Its agenda was to expand U.S trade and investment in the Asian region. Japan had tremendous hopes from this partnership to drive its structural reforms. Prime Minister Abe wanted to open up the trade corridors for Japanese exports in the US and reduce reliance on Chinese markets. Without the Trans-Pacific Partnership, Japan would have been sucked in the overpowering Chinese hegemony in Asian region. After Donald Trump’s unexpected withdrawal from the agreement, Japan’s best interests were are at stake. Trump’s exit put stress on Abe to resort to reductions in tariffs and exercise policy support in agriculture segment

After its implementation, Abenomics showed its wonders as the headline inflation hit 3% above BOJ’s target of 2%. Japanese yen collapsed dramatically as the BOJ kept injecting fresh yen in the economy, paving way for exporters to attract higher returns. However, eventually in 2017, the growth became tepid as the household spending decreased by 0.1% and real wages declined by 0.2%. Abe was known to push corporations to increase their pay by 3% but to no avail amidst rising competitiveness. Abenomics hasn’t been effective when it comes to achieving its inflation figure at 2%. As of 2019, the World Bank reports the inflation to be at 0.5%, way below the target. The political leadership led Abe also wanted to impose its deregulation framework to expand the markets. This deregulation model led to an increase in profits. However, the share of income for labour and capital investment went downhill. One of the aspects which Abenomics succeeded is on its unprecedented efforts in curtailing the gender inequality. Female representations across the leadership, middle-level and low-tier management roles showed significant improvements. Evidently, the female workforce following marriage or after delivery of their first child increased from 30% to 48% in 2019.

As every economic objective, Abenomics had its share of ups and downs. However, the new successor to Prime Minister Shinzo Abe will face a rapidly shrinking economy at a pace last observed during the World War II. Even though, he has the economic tools left by Abenomics which are required to put the economy back on the track, only time will tell how efficiently the successor can use the fundamentals of Abenomics to reap the economic benefits.

 

 

* The opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

 

 

 

 

Under the lens – Banking sector – June 2020

A country’s economic growth trajectory is always determined by the stable operations of its banking system. Since last couple of years, India’s banking structures are strained with rising rate of non-performing assets, issues related to governance, and heightened cases of fraud and negligence. This post attempts to trace the crisis faced by the banks right from its origins to the current times.

I

n order to peel the layers beneath the prevailing banking crisis, we have to start from the time when nationalisation of banks took place in 1969. Since farmers and capitalists had a long-standing reputation of non-repayment, the public sector banks observed a receding capital with compromising profitability and operational autonomy. Situations improved after nationalization as the deposits grew by 18% on an average between 1969 to 1991. However, eventually, the focus of the banks shifted from mandatory investments in Government securities to competitiveness and profitability. Furthermore, during the turbulent times of the 2008 financial crisis, banks gave out large loans to ailing companies showcasing an ideal case of ‘irrational exuberance’. The banks went on an aggressive lending spree without an appropriate due-diligence and relied on a feasibility reports by the promoters of the borrowing entity. Besides, the projects that were funded were highly leveraged in nature and banks did not hold on adequate promoter equity as collateral. To add to this, banks resorted to ever-greening in order to advance newer loans which ensured that the non-performing assets remain undetected on the auditory radar.

Pronob Sen , the former chief statistician of India stated that “short tenures for bank chiefs meant that they decided to evergreen the loan and pass on the problem to the next head and this cycle continued”. In 2015, Reserve Bank of India decided to conduct asset quality review to discover the rot underneath the lending mechanism and thereby clean the balance sheets. Post demonetization in 2016, banks lent short-term loans to shadow banks like ILFS (Infrastructure Leasing & Finance Services) who used them to fund long-term projects. An asset-liability mismatch coupled with exposure to bad loans sent ILFS tumbling into a state of default.

Cut to the present-day scenario, banks are still struggling to get out of its hurdles which have been aggravated with the advent of the novel coronavirus. To begin with, the banks have gone under the scissors of the rating agencies.  Along with 11 banks, the rating agency Moody’s has downgraded local and foreign currency deposit ratings of HDFC Bank and SBI to Baa3 from Baa2. The downgrade is attributed to continual periods of low growth and hurdles faced by the banks in curtailing the risks arising with the pandemic. The gross NPA is expected to worsen to 11.3% - 11.6% from the 8.3% figure as of March 2020 which will impact the credit provision of banks and push its earnings into a decline. There is a concept of a ‘bad bank’ which is being floated in the culture which will serve the purpose of a reconstruction company. However, the group of experts have been split into two parties: for and against, in regards to the feasibility of the business model of the ‘bad bank’ in these uncertain times. 

Since May 2020, personal loans have declined by 2.46% including credit card loans and housing loans.  The automobile sector has suffered immense losses with shutdown of its manufacturing processes and sales outlets and huge inventory piling up. With this, bank exposure to automobile sector is also expected to add to the piling debris of the bad loans. As per the FIDC (Finance Industry Development Council) data , in FY18, the total number of loans disbursed to the auto sector was around INR 69,712.72 crore, and in FY19 the figure was around INR 74,339.93 crore. With this, banks are expected to develop contingency plans and make additional provisions for the bad loans which are expected to make their place into the system. With rising strain on wages and consumer discretionary spending, retail loans are expected to take more hits in subsequent months. In order to suppress the effects of the COVID-19 pandemic, Reserve Bank of India (RBI) has planned to remove the Minimum Holding Period (MHP) for securitization of loans and deregulate the price discovery process.

In the post-COVID India, the banks need to reinvent themselves in order to stand up to their relevance. It is evident that when the dust settles, there will be a rise in discretionary spending of the consumers which will aid the much-required boost in loan disbursement. Technology will play a significant role in transforming the banking operations. Banks should invest in technologies to enhance inclusivity across the inaccessible corners of the country. Taking some much-needed lessons from the sudden disruption due to coronavirus, banks should reconfigure their operating models to reduce human intervention for customer on-boarding and credit appraisal. With increasing smartphone penetration across the country, enhanced customer experience is the key to establishing strong banking networks. It is no surprise that the millennial prefer using smartphone technology to manage their finances and get personalized notifications to stay updated continuously. Thus, banks should collaborate with the technology companies in order to capture the newer opportunities created by COVID-19.  

* The opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

Changing times in the oil industry: 1900s to today

The COVID-19 pandemic has left businesses and markets across the world in a shattered state. However, the first wounds of the coronavirus outbreak were felt by the oil economies of the world as the major oil producers were grappling to find a sustainable solution to the diving oil demand. This post I try to navigate the oil economy through its history to the current situation, highlighting the concerns and the potential solutions

Oil price is known to be an important metric governing the economic and financial health of the countries and corporations. Fluctuations in the oil prices are hugely influenced by the supply & demand dynamics and speculations in the financial market. Throughout the early 1900s, oil has proved to be an important resource to suffice the increasing demand for power and automotive industries. Its presence can, however, be traced back to 600 BC when oil was first noticed by Chinese as a valuable fluid seeping out of the ground.  Back then, Chinese used to transport the oil with the help of bamboos. With newer technologies entering the landscape, drilling techniques caught momentum as wells as deep as 800 feet were dug to extract oil. The first such oil well was dug by Colonel Edward Drake in Pennsylvania in the year 1859. Two years later, Spindletop, Texas had its first oil field in the state which previously depended on farming, lumber and cattle ranching to fuel its economy. These discoveries invited a rapid revolution in the corporate world as companies started to look at oil as a potential form of business. Vital additions to technological breakthroughs led to oil emerging as a major energy source with Standard Oil controlling 90% of the refining capacity of the United States in 1904. These were eventually succeeded by Exxon Mobil, Shell and BP.

These oil majors made numerous discoveries of oil reserves in the Middle Eastern countries: Kuwait, Libya and Saudi Arabia. After demand for oil gained steam, companies realized that controlling strategic oil reserves is the route to gaining dominance over the world. With this, seven companies formed a cartel in order to collectively take constructive decisions regarding oil and thus the alliance named Seven Sisters came into existence. By end of 1960s, Seven Sisters controlled 85% of the global oil reserves. The leadership in Middle East observed Western influence in the region as an act of aggression and began asserting their authority over oil reserves. Post renegotiation of business terms with the Seven Sisters, an alliance named OPEC was formed to enhance policy-making regarding oil reserves and provide financial aid to set the stage for the member countries. The year 1970 saw huge energy crisis with countries like US, Canada, Europe, Australia and New Zealand faced petroleum shortages and elevated prices. This warranted a restructuring activity to the oil markets and the first energy derivative trading emerged as an investment alternative on the trading platform.

Cut to the present scenario, oil markets in 2020 have faced a serious damage due to the coronavirus outbreak. On Thursday 30^th April 2020, West Texas Intermediate (WTI) fell to USD 17.20 per barrel and Brent Crude fell to USD 24.30 per barrel. At the commencement of the year, both these prices were around USD 60 per barrel figure. The rapid collapse in the prices is attributed to lowering oil demand coupled with an increased inventory. Russia and Saudi Arabia, two leading behemoths in oil industry, had locked horns in a price war in March. Furthermore, Saudi Arabia engineered a collapse in their prices when Russia rejected its proposal to slash production output in order to bring a balance to the plunging oil prices. With manufacturing operations across the world at a standstill, the oil demand is not expected to pick up anytime sooner. Reacting to Thursday’s numbers, traders dumped their June contracts for oil futures sighting a bleak future ahead. On the inventory front, the global conventional oil storage having combined capacity of 3.4 billion barrels will be exhausted by May end. Besides, the major delivery point in Cushing, Oklahoma in United States has filled up to 2/3^rd of its capacity amounting to ~59.7 million barrels. The United States’ Strategic Petroleum Reserves along the Gulf coast also has filled up to 89% of its capacity (613.5 million barrels of oil in 713 million barrel reserve).  With empty storage spaces heading towards exhaustion, major oil producers are looking at other alternatives like supergiant tankers, rail freight carriages and salt cavern to store their oil barrels.  They have even considered the option of buying ships in order to fulfil their storage capacity. With a dark and bumpy road ahead, oil producers have reached an agreement to slash the production output by up to 9.7 million barrels per day in May and June. 

The energy markets showed its excitement to the piece of news with WTI and Brent posting a weekly gain on Friday closing. With no certainty to when the pandemic will see it closure, it is apparent that the oil markets will continue to observe volatility. However, there is light at the end of tunnel as low prices will help rebalance the markets when stronger demand ushers in after global operations resume.

* The opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

COVID-19's infection spreads to the global markets

Since its inception in December 2019, the dreaded coronavirus has infected more than 106,000 worldwide with 3,500 reported fatalities. With its birth in Wuhan district of China, the virus has slowly penetrated the boundaries of Middle East, Asia and Europe with a heightened risk of a pandemic looming over the heads of individuals. On a destructive spree, the infection has also spread to the businesses and the financial markets. This post I try to dissect the business world to showcase the potential impacts the COVID 19 will have on their operations and the aspects the business leaders should focus their resources on to quell the dangers.

COVID-19 had its origination in the wet markets of Wuhan district of China where animals (dead and alive) are sold for meat. With live animals being butchered and sold, it was evident that the health standards would be awfully low. The virus has believed to have transferred from a bat into the human mechanism and has multiplied, having set its deadly presence in 80 countries. The disease is spread through air with the death rate to be approximately at 20-25%. That said, I am unaware of how long the health authorities would take to contain the virus completely. However, I do want to shed some light on how businesses and markets will face the brunt of this virus.

Some sectors; aviation, tourism and hospitality have observed a lost demand as the people have postponed their vacation plans till the threat subsides. With manufacturing at an all time low, the major manufacturing epicentres; Germany, Japan and China have stalled their factory operations to keep the employees safe. Furthermore, the consumer durables will also see a subsided demand. However, unlike tourism and hospitality sectors, the demand is expected to pick up in the subsequent quarters. The financial markets also have dived with a high investor concern regarding the safety of their equity investments (Refer to Table 1.0)

Figure 1.0: Equity markets snapshot

 The US reported strong employment and hiring numbers with addition of 273,000 jobs in the economy. However, even this failed to act as a strong support to the declining stocks. With rising risks in the markets, investors have switched their asset allocations to fixed income instruments which have, therefore, shown rapid decline in their yields. After the trading session ended on 8^th March 2020 in Wall Street, the 30-year Treasury yield plunged by 28 bps, which according to Bloomberg, is steepest declines since 2008-financial crisis. During such perilous situations, bond markets are closely monitored since they are determinants of future economic growth for the country and from looks of the current scenario, investors believe a decelerating economic future for the United States. To fix the economic repercussions, Fed slashed the interest rates by half bps. “For us what really matters is not the epidemiology, but the risk to the economy. So we saw a risk to the economy and we chose to act “said Fed Reserve chairman Jerome Powell, as per the article in Financial times. Furthermore, corporate is also expected to have lower earnings this quarter with disrupted supply chains and unfavourable macroeconomics.  

The businesses of today are supposed to inculcate a proactive approach to this problem. The primary focus of business leaders needs to be on employee health. Companies must maintain a mechanism for a prompt medical action if any employees are detected positive. The medical action should entail instant attention to the diseased and immediate checking for the spread of virus across the corporate premises. In case of pessimistic situations, companies need to have a contingency plan so as to not disrupt their operations completely. The most favourable method for implementing this is to develop a stress testing module (financial as well as operational) and develop use cases for different scenarios. Lastly, companies who have significant exposure to the deeply affected countries like China should discover alternate supply chains to minimize the risks. Eventually, this exploration can serve the long-term purpose of increasing and nurturing healthy collaborations.

Finally, to conclude I just want to put out my heartfelt message to the readers: Whatever happens to the investments, do make sure that virus doesn’t infect you.  


* The opinions expressed in the article are personal and do not represent the opinions of the organization I work for * 

Under the Lens: Manufacturing industry – 2019

If the heart of India’s growth engine has to keep beating at its peak, it is necessary for the relevant authorities to work on the most important sector: manufacturing. Manufacturing industry has been the prime focus for Indian government who is keen on restructuring and reworking its systems in order to ignite it for a much-coveted take-off. This short post tries to look at the mentioned industry and state the key trends and opportunities which will fuel the industry towards progress.

Manufacturing, being the heart of Indian economic progress, has been a crucial turning point for the Modi Government to make India a manufacturing epicentre. The Government envisages employment opportunities in the sector to the record of 100 mn which currently running at ~30 mn. In order to make this vision a glaring reality, the manufacturing companies need to leverage on the existing trends and opportunities engulfing the economy. To reduce the current account deficit, India needs manufacturing ecosystem to provide a rapid push to the exports. With Industry 4.0 in sight, manufacturing behemoths should build up on their existing operations with the help of updated data analytical tools, statistical modelling and automation software. They should be ready to undergo rapid digital transformations across various verticals: procurement, logistics, sales and aftermarket industry. Currently, the manufacturing industry appears to be optimistic to chart their future outlook with a much broader brush. It has shown revival signs from its 2-year low in October and showing positive signs of progress. IHS Markit, an analytics firm in London, sends out a metric called as a Manufacturing Purchasing Managers Index (PMI) which represents manufacturing growth in the economy. The PMI for December 2018 in India stood at 52.7 as compared to 51.2 in November. To those unaware, the PMI below 50 represents a contraction of the industry whereas a figure about 50 points to a possible expansion. The ingredients which go into a manufacturing PMI include orders, output, job opportunities, supplier’s delivery time and stock of purchases. Apart from suppliers’ delivery time (which remained unchanged), rest all the numbers showed a modest growth rate. The core sector, which determines 40% of Index of Industrial Production (IIP), showcased deeper cuts with a 1.5% contraction.

The growth is mainly led by consumer durables segment which observed a 10% growth attributable to strong sales of cooling products following harsh summers. The growth trajectory can also be recreated in the 2020 as per the opinion of The Consumer Electronics and Appliances Manufacturers Association, President Kamal Nandi (CEAMA). It is debatable whether the growth will translate into robust numbers for consumer durables segment as well.  Meanwhile, the manufacturing giants are expected to beef up their production activity and create more employment opportunities in the sector. As per Pollyanna de Lima, the chief economist at IHS Markit, the manufacturing industry has observed higher input costs and higher output charges which combined with improved pricing power has generated heightened demand conditions. These demand conditions if sustained can help the industry progress in 2020 as well. However, repercussions by a broader economic conditions and global headwinds are subject to debate.

Having set the table, we should look at the few grey shades to this story. Land acquisition is a major hurdle for the foreign stalwarts to make active investments in India. It has discouraged the companies from initiating manufacturing corridors in the country. Apart from this, high borrowing costs and archaic labour laws add fuel to the fire. With NBFC crisis looming large, stressed sectors have drastically lesser access to loan books of the Indian banks. Ideally, the Government should bring in active land, labour and policy reforms in order to make development of manufacturing, a frictionless process. Since, India has jumped ranks in ease of doing business; the foreign trade is expected to flourish following development of the Indian port ecosystems. With exports asking for an upward push, it is necessary for the government to establish India as a manufacturing enclave in order to facilitate better exports. The government’s INR 102 crore in its infrastructure development plan coupled with a possible deal in US-China trade war may alleviate the likely distress in the manufacturing sector.

Low focus on profits and more on growth; WeWork is in a dire need of a ReWork

WeWork IPO has successfully hinted towards how IPO markets are not so favourable towards companies who focus lesser on profitability and more on scaling up. This post I try to look at WeWork as a company and how it has led to some serious loss of investor focus and decline in valuations.

To set the stage, let us look at what WeWork as a revenue model is. WeWork is a young company which leases properties in 100 cities (as of 2018 data) across the globe wherein there is a substantial demand from companies. The company then renovates the space to tailor it to suit the needs and desires of the millennial community and give it a young fresh look to attract GenZ and GenY class of population. When the rental income starts flowing in, the surplus is used to recover the renovation costs and remaining cash is used to generate economies of scale. The target clientele for the company are mature growth companies that are looking for short-term workspaces and also big behemoths who want to experiment with WeWork (The 527,000 memberships of WeWork represent global enterprises across multiple industries including 38% of the Global Fortune 500). On August 14, WeWork filed the paperwork for an initial public offering. Before the filing of the prospectus, the investor community was enthusiastic about the company. However, as the prospectus came under scrutiny, the zeal transformed into serious profitability concerns as WeWork delayed its IPO with stepping down of its CEO Adam Neumann. To be frank, business model does appear blunt and flawed at places. WeWork has dedicated substantial spaces to non revenue generating space like cubbyholes and chatrooms. Being in real estate segment, WeWork has also failed to create cash even in the best of economic scenarios.

 Apart from profitability issues, Neumann’s inappropriate corporate decorum added fuel to the fire. He was seen smoking weed on a private plane, had tequila party post laying off his employees and banned meat from the offices only to be seen consuming meat himself. The kind of behaviour does set the right wavelength chord with the investor lobby whose discontent plunged the valuations from USD 70 bn to USD 15 bn. Besides, WeWork has been constantly flirting with the line between being a technology company and being a real estate company. The leading banks that once extended loan support to help WeWork rise to the occasion have grown cautious with red flags popping up in its prospectus. JP Morgan Chase and Goldman Sachs arranged large fees and strict protections that reflected their growing averseness to company’s future prospects. As per the Wall Street Journal, even, Wells Fargo agreed to give monetary support in return of a bank executive’s promise to keep an eye on Mr Neumann’s activities as a CEO. Even few days before launch of its IPO, WeWork had considerable friction with the Securities and Exchange Commission (SEC) over a key financial metric called the contribution margin through which WeWork concealed its heavy losses. The SEC directed the company to erase the metric; however it still made its way in the prospectus only to be mentioned 100 times in the document.

With exit of Neumann and heavy debt of USD 47 billion categorized as distressed future liabilities to landlords, WeWork is all set to run its scissors across 15,000 jobs and sell its non -core investments in order to restructure and redefine its operations in its 90-day turnaround plan. The stage set for IPO hasn’t been much conducive in 2019 for much of the companies going public. WeWork’s fall has proven to be a reminder of Uber, Lyft, Slack and Pelotron that are trading much below their initial offer prices. The venture capitalists are inflating the market by focussing their capital on growing companies. However, profitability doesn’t seem to be the intellectual spine of their investment philosophies which has led to a serious IPO hype amongst young growing companies. Recently, Softbank has injected a package and took reins of control from Adam Neumann. With Mayoshi Son’s strong acumen and SoftBank’s strategic know-how, it is left for us to see how they look at the future of WeWork.

 * The opinions expressed in the article are personal and do not represent the opinions of the organization I work for *