SCOTT GALLOWAY: WeWork finally went public this week. Don’t let the stock price fool you – the company still loves burning money.

Former WeWork CEO Adam Neumann
Former WeWork CEO Adam Neumann.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway discusses the recent WeWork IPO and the company’s financial history.

Two years ago, WeWork’s IPO was aborted, and the company was put on SoftBank life-support. Things changed yesterday. WeWork took its first steps in the public markets, opening at $9.5 billion, which is a fifth of its 2019 valuation. Sanity restored.

The stock’s doing well. It closed up 13.5%, which is an especially nice gift to Adam Neumann, whose 11% ownership is now worth more than $1 billion. He celebrated in standard douchebaggery: spraying champagne at the Standard Hotel in a shirt that read “Student for Life.” It took the greatest catastrophe in IPO history for Neumann to realize he’s not fit to teach.

But don’t let the stock price fool you. WeWork still loves burning money. The company lost more billions over the past 18 months, a nasty habit investors expect it’ll drop once the world returns to more flexible working patterns. I wrote about this habit earlier this year – not much has changed.

[The following was originally published on May 28, 2021.]

MeWork

I’ve lost a lot of other people’s money. The most stressful times in my life have been when people believed in me and invested tens (if not hundreds) of millions in my company or idea, only to see their capital go up in smoke. I’ve also made a lot of people a lot of money – but only in America would someone with my (lack of) pedigree be given this many swings at the plate.

To be a truly great investor or operator/CEO, you need to be a bit of a sociopath: You have to be able to sleep at night even as you lose other people’s hard-earned money or lay people off. Working with “OPM” (i.e., Other People’s Money) is often phrased as a positive, but the real luxury is to be in a position to lose your own capital. If things go wrong, it’s a private failure.

The willingness to risk capital on a captain and harpoons (the 19th century whaling sector was proto-venture capital) has always been a key ingredient in the secret sauce of the US economy. But the secret is out. While the US still produces the most unicorns, and the most mega-corporations, China is gaining … fast. Interestingly, despite the rhetoric, re: China challenging US hegemony, it’s European innovation that has drowned in the rising red tide. But that’s another post.

Scott Galloway

We should celebrate billion-dollar successes, so long as they come at the risk of failure – the whaling captain and the entrepreneur earn their wealth in part thanks to their willingness to come home empty-handed, or not at all. However, there’s a new class of billionaire in America. Meet the MeWork generation, which makes their fortune despite returning to harbor with less than they embarked with.

To help identify members of the MeWork generation (they can be any age), we’ve devised two metrics: the Daily Benjamin Burn™ (DBB) and the Earn-to-Burn Ratio™ (EBR). The first is how much money an executive lit on fire per day during their tenure. The second is the percentage of those lost Benjamins they siphoned off for themselves – think of it as a commission on destruction. In an efficient and fair (dangerous word) market, the EBR ratio would be zero. If we can measure someone’s burn in daily stacks of hundred-dollar bills, they’ve created no value and should get no compensation. Spoiler: That’s not what happens.

Daily Benjamin burn™

What does the DBB look like in practice? A lot like Quibi. That likely won’t mean anything to you, unless you’re one of the dozens and dozens of people who subscribed to the short-lived short-video service. In 2018 Jeffrey Katzenberg and Meg Whitman raised $1.75 billion, launched a bad app with worse content, and shut it down six months later. Roku combed through the rubble and found $100 million, so Jeff and Meg immolated $1.65 billion in 750 days, or $2.2 million per day. If you stacked that $1.65 billion in 100-dollar bills, you’d have a pile over a mile high, or the height of 2.2 Burj Khalifas, the world’s tallest building.

Eating my own Benjamins

In 2008, I raised $600 million from a hedge fund, became the largest shareholder in the New York Times Co., and ran an activist campaign against the Gray Lady. They put me on the board, where I ranted about the evils of Google, advocated for the divestiture of noncore assets, envisioned sunlit uplands of subscription revenue, and … lit Benjamins on fire. During my 24-month tour of duty watching the Great Recession kick ad-supported media in the groin, I managed to turn $600 million into $350 million, for a DBB of about $350,000. The stack of Benjamins I lost would have reached only to the top of 30 Rockefeller Plaza. Only. Jesus …

I. Want. To. Throw. Up.

Scott Galloway

Earn-to-burn ratio™

Jeff, Meg, and I all made an old-school mistake. We failed to find a greater fool (e.g., the public markets, gullible board members, SoftBank) to secure a mega-payout for our Bonfires of the Benjamins. I was paid approximately $500,000 in board fees and a retainer from the fund; I speculate that Jeff and Meg pocketed more (their compensation remains private). But none of us pocketed millions.

That brings us to the Earn-to-Burn Ratio™ and the Hall of Fame for broken compensation.

EBR Hall of Fame

In 2012, Yahoo replaced its CEO with an executive from Google: Marissa Mayer. But the new chief executive made a series of poor decisions, including canceling the company’s telecommuting policy while she worked from home herself and paying $1.1 billion for a porn site, Tumblr. (Note: Six years later, Yahoo sold Tumblr for $3 million.)

When Mayer took over, Yahoo was valued at $14.4 billion (not including a 20% ownership stake in Alibaba). In July 2016 the company sold itself to Verizon for $4.5 billion, and Mayer was gone. That’s $9.9 billion turned to ash in four years (or 13.5 Burj Khalifas), for a DBB of $6.8 million. Mayer’s compensation began with a $30 million signing bonus and went up from there, totaling an estimated $365 million, giving her a $250,000-per-day commission for destroying $7 million per day of other people’s money. That’s an EBR of 3.7%. Shocking, sure, but not the gold standard.

Adam Neumann founded WeWork in 2010, but he didn’t start burning Benjamins at epic scale until SoftBank began shoveling billions into the WeWork furnace in August 2017. By the time Neumann was fired in September 2019, SoftBank had invested $10.3 billion; a few months later it wrote off $9.2 billion of that. That’s a $13.1 million DBB on SoftBank’s money alone, or like flying a decade-old Gulfstream 450 (I browse planes at night – pathetic) into a mountain … every day. Impressive, but only half the story. Neumann’s compensation for this value destruction was complicated by his ouster and a subsequent lawsuit, but we estimate he made off with around $1.023 billion, most of it coming out of SoftBank’s deep pockets. That’s $1.5 million per day during those two years: an EBR of 11.1%.

Scott Galloway

Joining Mayer and Neumann on the podium is Randall Stephenson, who ran AT&T from 2007 to 2020, when his chief lieutenant, John Stankey, took over. If you owned AT&T stock in 2007, you’ve collected $25 in dividends since, but you’ve also watched the share price drop from $39 to $29, for an aggregate annual return of 2.5%. This was a period when S&P 500 companies as a whole returned 9.8% a year – much of it on the back of AT&T’s own mobile and data networks – and AT&T’s competitor Verizon returned 7.9% to its shareholders. How did Stephenson manage this? Among other mistakes, AT&T spent $67 billion to buy DirecTV (a pending massive write-off whenever Stankey needs a distraction from some other screw-up), blew $4 billion when it failed to acquire T-Mobile, and spent an additional $108 billion to buy WarnerMedia, which Stankey just sold to Discovery. To his (partial) credit, Stankey may have managed to net the Warner deal out as a wash.

Scott Galloway

So while Stephenson didn’t destroy capital outright, he was a poor steward. Had AT&T eked out even a 4% return from 2007 to today, it would have made an additional $50 billion for shareholders. That’s an implied DBB of $10 million. How did the board respond to Stephenson’s 13-year-long sideways run at the iconic firm? His total comp was at least $250 million, including a $64 million pension as a parting gift. That’s an EBR of “only” 0.5% but still a huge payout in the face of mediocre performance.

Honorable mention

In April 2014, toward the end of Steve Ballmer’s controversial run as CEO, Microsoft closed the $7.2 billion purchase of 1999’s leading mobile handset maker, Nokia. Just 15 months later, Ballmer was gone, and the company wrote off $10 billion for the failed acquisition – the deal was so bad it ended up costing Microsoft more than it paid, mostly due to severance for laid-off Nokia employees. That’s an incredible $22.2 million per day, the highest DBB we could find. (Ballmer only made $1.65 million his last year at the company, so a minimal EBR.)

Burning Benjamins doesn’t just happen in the US In 1998, Daimler-Benz acquired Chrysler for $35 billion in the largest industrial merger ever at the time. After nine years of culture clash and billions in losses, Daimler unloaded 80% of Chrysler to a private equity firm for $7.4 billion, valuing the company at $9.25 billion. That equates to an impressive $7.8 million DBB.

How do these corporate money losers compare to the largest and longest-running Ponzi scheme in history? Bernie Madoff ran his fake fund for nearly 30 years, costing investors an estimated $19 billion. The date his fraud began is disputed, but assuming it was 1980, that’s a DBB of just under $2 million per day. A massive, decadelong legal project has repaid most of these losses through fines and settlements, and Madoff died in prison, but only after a multidecade run paid for by the destruction of thousands of people’s economic security.

Scott Galloway

MeWork

Growing up, I loved to watch my dad pack for business trips. He smelled of Aqua Velva and draped his Izod sweaters over a Ram Golf bag. He’d iron the mammoth collar of his Pierre Cardin shirts, fold them around a piece of wax paper, and lay them into his Hartmann luggage like newborns. It was ceremonial, just as when he would wear his kilt. Elegant yet masculine. During one of these pre-business-trip ceremonies, when I was about 8, my mom walked in. I looked at my dad’s stuff and asked, “How come dad is so rich, and we’re so poor?”

My dad loves this story and laughs out loud when he tells it. But it wasn’t funny. He’s been married – and divorced – four times. There was some financial stress, there was incompatibility. But the real fissure was that there were two Americas … under one roof.

Scott Galloway

Whether we’re executives, parents, or just average citizens, we need to ask ourselves: Have our interests diverged from the people who matter most to us and society? Do our spouses, children, neighbors, employees, and countrymen win and lose in reasonable harmony? Are we part of a family, part of a nation? Or have we become the MeWork generation?

Life is so rich,

Scott

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Reddit is vying for a spot in the new class of meme stocks as it targets individual investors for its public offering

reddit day trader stock market phone app
Reddit.

  • Reddit CEO Steve Huffman wants his site’s users to invest in the company’s initial public offering.
  • “I want our users to be shareholders, and I want our shareholders to be users,” he said, ahead of an expected Reddit IPO next year.
  • He told the Wall Street Journal that Reddit is powered by its communities, like r/wallstreetbets.

Reddit is vying for a spot in the meme stock leagues as it seeks to attract its own users – the same ones who have driven GameStop and AMC to record highs – to its initial public offering.

“I want our users to be shareholders, and I want our shareholders to be users,” Chief Executive Officer Steve Huffman said at the Wall Street Journal’s Tech Live conference Monday.

On Reddit, users are anonymous and band together on various so-called subreddits to discuss topics of interest. The site attracted millions of users to one subreddit alone during the COVID-19 pandemic: r/wallstreetbets.

On the thread, an army of retail traders joined together to drive massive rallies in shares of struggling companies, including GameStop, AMC, and BlackBerry, among others, in January. Other retail investing threads have since proliferated like as r/Superstonk and r/amcstock, which have 653,000 and 435,000 users, respectively.

At the conference Monday, Huffman said his social site is powered by its communities and subreddits like WallStreetBets, the Journal reported. Now, the CEO wants those same users to invest in his public company.

The Reddit IPO could come early next year with a $15 billion valuation, Insider previously reported. In August, the site earned a $10 billion valuation from a private fundraise with Fidelity Investments.

At the conference, Huffman said retail traders generally get in last to initial offerings, and at the worst price. But, he said retail trading apps like Robinhood have made the markets more accessible outside Wall Street.

“That historically has not been the case,” he said, according to the Journal. “But the way the market is evolving to be more fair I think is really exciting.”

Earlier this year, Robinhood revealed a new service called “IPO Access” on its app to allow retail traders into public offerings at the initial price.

Then, when the app launched its own IPO, Robinhood offered a small percentage of shares to retail traders at the IPO price. It warned investors that the company might become a meme-stock play, if retail traders buying into the IPO caused the shares to rise to an unsustainable price.

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Robinhood could sink 22% this year as ‘the big unlock’ releases millions of shares into the market, JPMorgan says

Robinhood logo stocks investing
REUTERS/Dado Ruvic/Illustration

  • JPMorgan analysts said Robinhood’s price may drop as millions more shares are freed up.
  • The stock will “more likely to trade on fundamentals rather than sentiment,” JPMorgan said.
  • The analysts gave the stock a $35 price target and an underweight rating.
  • See more stories on Insider’s business page.

Robinhood stock could plunge in the coming months after millions more shares are added to the market, JPMorgan analysts led by Kenneth Worthington said in a Wednesday note.

The analysts gave the company an underweight rating with a $35 price target – roughly 22% lower than Tuesday’s closing price – saying that as more shares are unlocked, retail investors will have less influence, “making the stock more likely to trade on fundamentals rather than sentiment.” The “big unlock,” analysts said, is Dec. 1 when more than 500 million more Robinhood shares are freed up.

Robinhood went public in July and, in a rare move, gave retail investors access to buy into the stock at the $38 IPO price. The stock is trading around $44.10 as of 12:06 p.m. ET Wednesday.

The positive sentiment around the company is already reflected in the “rich valuation,” JPMorgan said, but it’s unlikely to last long-term.

Robinhood has advertised itself as a brokerage with the goal to “democratize finance for all.” But the focus on small accounts with limited room for profitability could limit the company’s ability to be competitive, the analysts said.

Its position as a brokerage is “inferior to larger existing participants,” the analysts said. While it “brings investing to those that have been underserved, we don’t see a technological competitive advantage, and we see a brand and product offering that risks investors graduating to other more comprehensive financial institutions over time.”

The analysts also noted in the third quarter, new downloads sunk 78% from the second quarter, according to Apptopia data. Though management warned the summer months would cause an expected slowdown, the analysts said the drop is greater than crypto and more traditional trading apps.

“Market conditions need to remain robust to buy time for Robinhood to build out the infrastructure needed to compete over time,” the analysts said.

Robinhood did not immediately respond to Insider’s request for comment on the note.

In an Op-Ed to the Wall Street Journal Tuesday Robinhood CEO Vlad Tenev defended the company’s mission to help people build wealth.

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Warby Parker soars 36% in direct-listing debut, valuing the eyewear retailer at $6 billion

warby parker
Warby Parker store.

  • Warby Parker jumped as much as 36% in its direct listing debut on Wednesday.
  • The eyewear retailer’s trading debut valued the company at more than $6 billion, well ahead of its last private funding round valuation of $3 billion.
  • Warby’s direct listing price came in at $54.70, ahead of its reference price of $40 per share.
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Warby Parker soared as much as 36% in its direct listing debut on Wednesday, handing the eyewear retailer a valuation of more than $6 billion.

The firm’s direct listing price came in at $54.70 per share on Wednesday, well above its reference price of $40 per share. Warby Parker will have around 111.5 million shares outstanding with 77.7 million available to trade. The firm will not raise any proceeds from the direct listing.

The stock trades on the New York Stock Exchange under the ticker “WRBY.”

Warby Parker was founded in 2010 as one of the first direct-to-consumer brands that offers affordable prescription glasses and sunglasses online and at physical store locations. The company also provides eye check-up services at most of its physical locations to help facilitate a one-stop shop for eyecare needs.

Warby Parker recorded net losses of $55.9 million on $393.7 million in revenue in 2020, according to its S-1 filing. The company saw year-over-year revenue growth of 6%. For the six months ended June 30, Warby Parker generated $7.3 million in net losses on $270.5 million in revenue. Warby broke even in 2019.

In 2020, Warby Parker generated 95% of its sales from the sale of glasses, 2% from the sale of contacts, 1% from eye exams, and 2% from the sale of eyewear accessories. The average revenue per customer was $218 in 2020. Warby Parker plans to operate about 160 physical stores by the end of its fiscal year.

Warby Parker has raised more than $500 million from venture capitalists since its founding. In August 2020, the company raised $245 million at a $3 billion valuation from D1 Capital, Baillie Gifford, T. Rowe Price, and Durable Capital Partners.

The company joins a slew of firms that opted for a direct-listing rather than a traditional IPO. Other firms that went public via a direct listing include Roblox, Coinbase, and Spotify.

“We believe a direct listing is a more transparent and inclusive process for lots of fans of the brand who in a traditional IPO wouldn’t have the option of getting an allocation. It creates a fair playing field for all,” Warby Parker co-founder and CEO Dave Gilboa told Axios.

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An exchange for trading in shares of private companies is going public via $2 billion SPAC deal

Wall Street
  • Forge Global will go public in a merger with a SPAC valuing the firm at $2 billion, the WSJ reported.
  • Forge allows investors to trade shares of pre-IPO companies.

Forge Global, a firm that allows customers to trade shares of pre-IPO companies is going public in a SPAC merger with Motive Capital Corp. in a deal that values the company at $2 billion, the Wall Street Journal reported on Monday.

The deal is expected to close later in 2021, and would mark the first public listing of a marketplace for private shares. Forge expects to raise $500 million from the offering, according to the WSJ.

Forge, based in San Francisco, says it has almost 400,000 registered users, though due to Securities and Exchange Commission guidelines, individual investors must be accredited or high net worth individuals, while the rest using Forge’s platform are professional investment managers.

According to the WSJ, Forge has handled $10 billion of trades in shares of 400 companies since it was founded in 2014, including Lyft, Robinhood, and Palantir before they went public. While Forge will be the first private share marketplace to go public, there are a number of other firms competing in the same space.

Earlier this year, Nasdaq announced it would spin off its private shares exchange into a separate business backed by investment from Citi, Goldman Sachs, and Morgan Stanley, among others. Other firms similar to Forge include Carta, EquityZen, and ClearList.

Motive Capital is a blank-check company backed by fintech-focused private equity firm Motive Partners. The SPAC is led by former JPMorgan executive Blythe Masters.

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Goldman Sachs plans a London IPO for its $5 billion Petershill assets as it cashes in on the private equity boom

A reception desk at London Stock Exchange on August 29, 2019 in London, England

Goldman Sachs plans to list the alternative assets of its Petershill Partners unit on the London Stock Exchange, in a move that could value the investments at more than $5 billion.

Petershill, which holds minority stakes in 19 alternative asset managers, will be a standalone company run by the Goldman Sachs Asset Management team and will have an independent board, the group said in a filing on Monday.

The sale of new shares for the investment firm, which manages assets worth $187 billion, is expected to raise $750 million, according to the filing. The initial public offering is likely to take place within the next month, Reuters reported, citing a source close to the deal.

The London IPO, which would offer new and existing shares, is aiming at a valuation for Petershill above $5 billion, according to multiple reports.

Founded in 2007, Petershill was the first among a series of investment vehicles to take stakes in private equity and other alternative investments. Its floatation would allow it to become the largest listed alternatives business in London, according to the Financial Times.

“Through Petershill Partners, investors would benefit from the expertise of Goldman Sachs as its operator both in terms of managing the existing portfolio and developing opportunities to make additional future investments in this rapidly growing industry,” Naguib Kheraj, non-executive chair of Petershill Partners, said in the filing.

The firm has delivered high growth recently, with distributable profits to partners doubling from $108 million in 2018 to $243 million in 2020, and reached $310 million for the 12 months ending 30 June 2021.

Petershill had a technology-focused dedication to providing growth capital in 2017, but after the pandemic it has begun to reposition to sectors including healthcare, environmental, social and governance (ESG), and balance sheet repair, according to the filing.

With the listing, Goldman seems to be tapping into the potential of private equity funds, which have soared in value over the past year as investors looked for higher returns at a time of historically low interest rates.

Petershill said its business takes advantage of the association with Goldman Sachs track record and management team, which aid its ability to source acquisitions in alternative asset management.

Read More: Credit Suisse says to buy these 47 stocks set to capitalize on an inevitable economic acceleration after a dismal August jobs report

Update: This article has been updated to clarify that the Petershill Partners portfolio of alternative assets will list on the London Stock Exchange, not the unit itself.

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Goldman Sachs plans a London IPO for its $5 billion Petershill spin-off as it cashes in on the private equity boom

A reception desk at London Stock Exchange on August 29, 2019 in London, England

Goldman Sachs plans a listing for its asset management unit Petershill Partners on the London Stock Exchange that could value the investment vehicle at more than $5 billion.

Petershill, which holds minority stakes in 19 alternative asset managers, will be a standalone company run by the Goldman Sachs Asset Management team and will have an independent board, the group said in a filing on Monday.

The sale of new shares for the investment firm, which manages assets worth $187 billion, is expected to raise $750 million, according to the filing. The initial public offering is likely to take place within the next month, Reuters reported, citing a source close to the deal.

The London IPO, which would offer new and existing shares, is aiming at a valuation for Petershill above $5 billion, according to multiple reports.

Founded in 2007, Petershill was the first among a series of investment vehicles to take stakes in private equity and other alternative investments. Its floatation would allow it to become the largest listed alternatives business in London, according to the Financial Times.

“Through Petershill Partners, investors would benefit from the expertise of Goldman Sachs as its operator both in terms of managing the existing portfolio and developing opportunities to make additional future investments in this rapidly growing industry,” Naguib Kheraj, non-executive chair of Petershill Partners, said in the filing.

The firm has delivered high growth recently, with distributable profits to partners doubling from $108 million in 2018 to $243 million in 2020, and reached $310 million for the 12 months ending 30 June 2021.

Petershill had a technology-focused dedication to providing growth capital in 2017, but after the pandemic it has begun to reposition to sectors including healthcare, environmental, social and governance (ESG), and balance sheet repair, according to the filing.

With the listing, Goldman seems to be tapping into the potential of private equity funds, which have soared in value over the past year as investors looked for higher returns at a time of historically low interest rates.

Petershill said its business takes advantage of the association with Goldman Sachs track record and management team, which aid its ability to source acquisitions in alternative asset management.

Read More: Credit Suisse says to buy these 47 stocks set to capitalize on an inevitable economic acceleration after a dismal August jobs report

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Reddit is targeting a $15 billion valuation in its New York IPO and looking to hire advisers, report says

In this photo illustration the Reddit logo in App Store seen displayed on a smartphone screen.
  • Reddit is targeting a $15 billion valuation when it lists on the US stock market, Reuters reported late Thursday.
  • The discussion site is looking to hire investment bankers and lawyers, according to people familiar with the matter.
  • Reddit CEO Steve Huffman recently said that “all good companies should go public when they can.”
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Reddit is eyeing a $15 billion valuation for its public market debut in New York early next year, and is looking to hire advisers to help it with the launch, Reuters reported late Thursday, citing people familiar with the matter.

The online forum, which inspired this year’s meme-stock trading frenzy, scored a $10 billion valuation in a private fundraising from Fidelity Investments last month.

Aiming for an initial public offering in early 2022, Reddit is working on hiring investment bankers and lawyers, two sources told Reuters. The timing and size of the IPO depend on market conditions, they added.

The company’s CEO Steve Huffman said “all good companies should go public when they can,” speaking recently to the New York Times about Reddit’s stock market ambitions. But no firm timeline has been decided for the IPO, he added.

Reddit didn’t immediately respond to Insider’s request for comment on the IPO valuation and recruitment of advisers.

The number of people using the discussion site surged in 2021 as retail traders coordinated their efforts on forums such as Wall Street Bets. Their aim was to drive the price of GameStop, AMC, and other highly shorted stocks higher, hoping to profit as hedge funds covered those short positions. The chat on the WSB subreddit took on a populist tone where rebellious novice investors banded together to give Wall Street a black eye.

It counted about 52 million daily active users and more than 100,000 sub-reddits as of October 2020, Reuters reported. Its total number of active users stood at 430 million as of July this year, according to Statista data.

Founded in 2005, Reddit was acquired by magazine publisher Conde Nast just a year later. The employee headcount stood at 700 at the start of 2021, but Reddit had announced plans to double that number. Fidelity Investments, Andreessen Horowitz, Sequoia Capital, and Tencent Holding are its biggest investors.

Trading app Robinhood, among the popular brokerages used by investors in the Reddit-fuelled rally, launched an IPO in July. Its shares are up 28% since.

Read More: A doge miner whose setup earns up to 24 dogecoins a day shares how he maximizes returns – and explains how a single machine rakes in passive income from multiple cryptos

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A SPAC sell-off has destroyed $75 billion in value over the past 6 months as interest in blank-check deals shrivels

Wall Street
Chinese career agencies promise to help students land top-tier internships

  • SPAC deals are falling from grace as $75 billion of value has evaporated in just six months, according to the Wall Street Journal.
  • Some 75% of the 137 deals that closed by mid-February have fallen below their initial listing price.
  • SPAC investors’ discontent is evident in growing redemptions – cashing in on their right to pull out.
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SPAC deals are swiftly falling from grace as $75 billion of value has evaporated in just six months, according to a Wall Street Journal report.

The collective value of 137 deals that closed by mid-February has plunged 25% since the start of the year, totalling $75 billion in lost value, according to the Journal, citing a Dow Jones Market Data analysis. Some 75% of the deals have fallen below their initial listing price – a marked contrast to the salad days of SPACs when prices would almost always go up.

That compares unfavorably to the Renaissance IPO ETF, which tracks the fortunes of recent IPOs and which lost 12% during the same period. Both trailed the broader S&P 500, gaining about 20% year-to-date.

The SPAC losses were particularly pronounced in green-energy deals that have attracted outsized attention from investors, including from those traditionally focused on fossil fuels.

“Air has come out of the bubble,” Roy Behren, managing member at Westchester Capital Management, told the Journal. “That’s the cost of speculating in companies that have potentially bright but uncertain futures.”

Existing SPACs that have not yet closed deals are increasingly facing a choice between bad and worse. More than 95% of SPACs that have not announced deals are trading below their initial listing price, but it is now common for deal announcements to shrink share price, according to the Journal.

SPAC investors’ discontent is evident in growing redemptions – cashing in on their right to pull out. On average, SPACs that closed in August saw 58% of shares get redeemed, according to SPAC Research data cited by DealBook.

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Binance’s US arm is considering an IPO within the next 3 years, boss Changpeng Zhao says

Changpeng Zhao, CEO of Binance, speaks at the Delta Summit, Malta's official Blockchain and Digital Innovation event promoting cryptocurrency, in St Julian's, Malta October 4, 2018.
Changpeng Zhao, founder and CEO of Binance.

Crypto exchange Binance is planning an initial public offering for its US arm within the next three years depending on business growth, CEO Changpeng Zhao told The Information in a recent interview.

“Binance.US is just going to do what Coinbase did,” Zhao told the tech-based publication in a Zoom interview published Wednesday.

He suggested Binance has an edge over Coinbase in terms of cost structure. “The users using Binance.US pay about one-fifth of the fees that they pay on Coinbase – so it’s about five times cheaper,” he said.

Some experts said Coinbase’s public listing, the first for a major crypto exchange, was for crypto what Google’s IPO was for the internet.

Without mentioning any names, Zhao said Binance.US is about to close a “large” private fundraising round in the next two months that should reduce his control of the board. It plans to IPO after that, he said.

“If the business can grow consistently over the next three years, then three years should be sufficient for an IPO, but if there’s a prolonged bear market for, I don’t know, maybe three or five years, then it may be a little bit longer,” he added.

Binance has recently been under fire over a series of regulatory clampdowns around the world, which have prompted the company to double the size of its global compliance team by the end of 2021. Binance has been slapped with multiple warnings and banned from operating in some jurisdictions due to failure to register with local regulators.

Founded in 2017, Binance offers hundreds of cryptocurrencies for traders around the world. Its ambitions for an IPO follows a mass adoption of cryptocurrencies in the last year, with more traditional finance companies beginning to incorporate digital assets into their client offerings.

The company generated profits as high as $1 billion in the last year, triple the net income posted by Coinbase in the same period, Zhao told The Information. While Binance US is the American partner of Binance, profits from the US unit are independent.

Before pursuing a stock market debut, Binance US will have to find a new leader since Brian Brooks resigned as CEO after just three months in the position. Zhao suggested one among the company’s new senior hires could become his replacement.

“Binance.US has hired a few senior people already and any one of them could be the future CEO,” he said.

Zhao himself has said he’s open to stepping down as CEO of Binance, in favor of someone who has a more current approach to compliance. “If you have a CEO for longer than 10 years, that’s a lot of time-the organization probably has a lot of stale thinking,” he said. “Four to five years is probably a good time frame. Presidents only do four-year terms.”

In the interview, Zhao also revealed he owns only bitcoin and Binance’s BNB token. He said he isn’t against holding other digital currencies, but that he doesn’t have the time to accommodate them.

“I think those things are interesting. I’m not against those projects,” he said. “I like those projects, but I don’t have time to deal with many different cryptocurrencies.”

Read More: The head of trading for a crypto brokerage firm shares 11 altcoins he’s bullish on – and 3 rules he abides by in the hyper-volatile and fast-moving market

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