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Adam Neumann’s role in SoftBank’s deal to take WeWork public

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An unlikely figure helped set the spark for SoftBank Group’s $9 billion deal to take WeWork public.

Adam Neumann, WeWork’s co-founder and ousted chief executive, met in November with the head of the special purpose acquisition company that would go on to clinch a deal with WeWork, according to people familiar with the matter.

Neumann was locked in a fierce legal battle at the time with SoftBank over a $3 billion deal for a portion of his and other investors’ stake in the office space-sharing company.

The introduction between Neumann and BowX Acquisition co-chief executive Vivek Ranadivé over a Zoom call was facilitated by a senior UBS Group capital markets banker, the sources said. It preceded discussions the SPAC chief had with WeWork.

Neumann played up WeWork’s prospects on the call and the conversation piqued Ranadivé’s interest, the sources said.

Ranadivé’s SPAC had been looking for an acquisition target after raising $420 million in an IPO in August.

The ensuing deal announced on Friday cushions some of the blow SoftBank has suffered with its investment in WeWork. It has invested at least $18.5 billion in WeWork since 2017, including $6 billion when a fundraising round valued the startup at $47 billion in January 2019.

Vivek Ranadive is a 63-year-old technology executive turned investor and owner of the Sacramento Kings basketball team.
Vivek Ranadive is a 63-year-old technology executive turned investor and owner of the Sacramento Kings basketball team.
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The sources described the meeting between Neumann and Ranadivé on condition of anonymity. Representatives for Neumann, WeWork, UBS and SoftBank declined to comment. Ranadivé did not respond to multiple requests for comment.

Neumann, who has kept a low profile since his unceremonious ouster after WeWork’s failed IPO attempt in 2019, has had a contentious relationship with SoftBank.

The Japanese tech investment giant pushed for his ouster before it took over WeWork in a $10 billion rescue financing deal in October 2019. It later backtracked on an agreement to buy $3 billion of WeWork shares from Neumann and other investors, citing criminal and civil investigations into WeWork, the company’s failure to restructure a joint venture in China, and the shift to remote work due to the COVID-19 outbreak.

One week before the case was due to go to trial, SoftBank reached a settlement with Neumann and other investors in February to pay out about half of its original commitment. It did not want the potential legal liability to jeopardize the SPAC deal, the sources said.

Neumann also stands to benefit from the SPAC deal as he still has a roughly 10 percent stake in WeWork, worth around $790 million.

Limited options

Neumann had no role in the SPAC deal after his discussion with Ranadivé, the sources said. Ranadivé and his team began discussions with WeWork in December. SoftBank Chief Operating Officer and WeWork Executive Chairman Marcelo Claure led the negotiations on behalf of SoftBank, with SoftBank CEO Masayoshi Son also stepping in, one of the sources said.

WeWork was apprehensive about opting for a traditional IPO following its failed attempt in 2019, and its options for a SPAC deal were limited. BowX was the only SPAC that expressed a serious interest in WeWork, two of the sources said.

Ranadivé, a 63-year-old technology executive turned investor and owner of the Sacramento Kings basketball team, said last week WeWork stood to benefit from a shift by many companies to a hybrid model of working that calls for employees to come in to a workplace just a few days a month.

He called the shift a tailwind for WeWork.

The deal was received well by Wall Street, with BowX shares ending trade on Friday up 20 percent following the merger’s announcement.

WeWork’s valuation was revised down in the final stages of the negotiations. Investors participating in the private investment in public equity (PIPE) transaction managed to drive down WeWork’s valuation in the agreement from $9.9 billion to $9 billion, including debt, the sources said. The size of the PIPE increased to $800 million from $500 million.

Ranadivé and the rest of the BowX senior team will receive WeWork shares worth almost $90 million after investing $11.7 million of their own money. They will be restricted from selling these shares for the first year unless certain share price targets are met.



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Tesla more than doubles Q1 sales, delivers 185,000 vehicles

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Tesla says it delivered nearly 185,000 electric vehicles in the first quarter despite a shortage of computer chips that has hit the global auto industry.

The number was more than double the deliveries for the same period last year. And it beat Wall Street estimates of 168,000 for January through March. The company says in a statement that the Model Y small SUV in China has been well received.

Tesla lists no production figures for its older models, the S sedan and X SUV, during the quarter, but it delivered just over 2,000 of them. It says new equipment has been installed at the Fremont, California, factory and production of new versions is in the early stages.

The strong sales are a sign that demand for the company’s relatively expensive vehicles remains strong despite the pandemic. Analysts polled by data provider FactSet estimate that the average selling price of a Tesla is $49,100.

Shares of Tesla are down more than 9 percent so far this year as some of the shine wore off electric vehicle and tech stocks, which had experienced a big runup last year. The stock closed Thursday down just under 1 percent at $661.75. Markets are closed for the Good Friday holiday.

Tesla Model 3s (seen here) and its Model Y accounted for nearly all of Tesla's first-quarter sales.
Tesla Model 3s (seen here) and its Model Y accounted for nearly all of Tesla’s first-quarter sales.
Xinhua News Agency via Getty Images

Tesla sold just under 500,000 vehicles last year, barely missing a target set by CEO Elon Musk. The company hasn’t given much guidance for this year’s sales figures.

Wedbush analyst Dan Ives called the first-quarter numbers a “jaw dropper,” and a huge home run in the eyes of bullish investors. “We believe China and Europe were particularly robust this quarter as the trajectory now puts Musk & Co. to exceed 850k for the year which is well ahead of whisper expectations,” he wrote Friday.

The Model 3 small car and the Model Y accounted for nearly all of the Palo Alto, California, company’s first-quarter sales. Tesla said it sold 182,780 of both models combined.

Ives wrote that analysts expected more than 12,000 sales of Models S and X, with the miss driven by the chip shortage.

The strong sales came even though the company shut down much of its Fremont production for several weeks in late February and early March. It did not say why, but it’s likely that the company ran short of computer chips.

President Joe Biden’s announcement this week of $174 billion in spending on electric vehicle incentives and charging stations, and rising global demand for electric vehicles should shift sentiment toward Tesla stock, Ives wrote.

“It’s been a brutal sell-off for Tesla and EVs, but we believe that will now be in the rearview mirror,” he wrote.



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55 firms paid no federal income tax last year, report finds

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Dozens of America’s biggest companies paid no federal income taxes last year thanks to a range of tax breaks — including some brand-new ones, a new report says.

The 55 corporations avoided a total of $8.5 billion in taxes on more than $40 billion in pre-tax profits in their most recent fiscal year, according to the Friday report from the Institute on Taxation and Economic Policy.

In fact, 52 of those firms — including household names such as Nike, FedEx and Dish Network — ended up pocketing federal tax rebates worth a collective $3.5 billion, the left-leaning think tank’s analysis found.

And 26 of them haven’t paid a penny in federal income tax in the three years since the Tax Cuts and Jobs Act reform bill was signed into law in 2017, the report says. That group includes shipping giant FedEx and power company Duke Energy, which reported nearly $15 billion in pre-tax income for those three years, according to the findings.

Nike sneakers
Nike is among dozens of major corporations reported to be paying little to no federal income taxes.
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“Duke Energy fully complies with federal and state tax laws as part of our efforts to make investments that will benefit our customers and communities,” company spokesperson Catherine Butler said, adding that Duke paid more than $2 billion in annual state and local taxes in 2020.

Major companies have used loopholes in federal tax law to help their bottom line for decades, the think tank’s researchers note. But they got a fresh boon from the CARES Act, the $2.2 trillion stimulus bill that aimed to help businesses weather the COVID-19 pandemic.

Big firms were able to take advantage of a provision in the bill to use losses they racked up in 2018 or 2019 to offset profits from previous years, which slashed some of their 2020 tax bills to less than zero, according to the report. That measure accounted for at least $500 million of the 55 giants’ tax breaks, the report says.

FedEx stood by the CARES Act tax breaks, saying the law helped it and other companies “navigate a rapidly changing economy and marketplace while continuing to invest in capital, hire team members, and fund employee pension plans.”

FedEx truck
FedEx is said to be among major firms pocketing federal tax rebates while avoiding federal income taxes.
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But many companies also used more established methods for giving themselves tax discounts.

Those include write-offs for paying executives in stock, which were used by more than a dozen companies, while at least half a dozen took federal research and experimentation credits, the report says.

The list included some companies hit hard by the pandemic, including crafts retailer Michaels, as well as companies that thrived despite the lockdowns, like Salesforce.com, the cloud computing company that announced record 2020 earnings in February.

Salesforce logo
Salesforce is reported to be among thriving firms able to take advantage of numerous write-offs.
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By reining in tax breaks like those, “or by re-introducing some form of a ‘minimum tax’ requiring profitable companies to pay at least some tax in any profitable year, Congress and President Biden could take a major step toward a fairer and more sustainable tax system,” authors Matthew Gardner and Steve Wamhoff wrote in the report.

Salesforce, Michaels, Nike and Dish Network did not immediately respond to requests for comment.



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China admonishes H&M over ‘problematic’ map on website

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Swedish retailer H&M continues to clash with Beijing, this time over how it has portrayed the region geographically.

Chinese officials admonished H&M Friday over a “problematic” map on the company’s website in the latest sign of escalating tensions after the Swedish retailer criticized China’s controversial cotton-picking region.

Shanghai government regulators summoned H&M managers to a meeting after internet users complained about the map, officials said on social media.

Chinese officials did not provide any detail about the alleged offense, which they said H&M managers quickly corrected.

But H&M got in trouble with China in 2018 for listing Taiwan as a country on the Taiwanese version of its website. China claims the democratic island country is part of its territory.

H&M was told to “bolster its awareness of the national territory, and really ensure the standardized use of the Chinese map,” the Cyberspace Administration of China’s Shanghai arm said in a post on the WeChat social network, according to The Wall Street Journal.

H&M did not immediately respond to a request for comment Friday.

The map flap is just the latest headache H&M has faced in China, the fast-fashion retailer’s top clothing supplier and its fourth-largest market by sales.

The company was hit with boycott threats last week and had its products pulled from Chinese e-commerce platforms over a statement it made last year saying it does not source cotton from the Xinjiang region, where Beijing has been accused of forced labor practices against Uyghur Muslims.

H&M tried to tamp down the backlash Wednesday with a new statement saying it’s “dedicated to regaining the trust and confidence” of its customers, colleagues and business partners in China, where its store locations were reportedly scrubbed from digital maps last week.

The company said it wants to be “a responsible buyer, in China and elsewhere,” but did not mention Xinjiang specifically.

With Post wires

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