The Water Coolest is a free daily business news and professional advice email newsletter created for weekday warriors that is delivered fresh daily at 6 AM EST. Signup here to receive The Water Coolest every weekday.

 

THE HEADLINES

 

WE OUT HERE

Or is it “out there”? “In here”? I digress…

We Company aka WeWork is joining the IPO(arty). The real estate/technology/cult play best known for renting out millennial-friendly (read: bean bag chairs!) co-working spaces to companies in high-cost markets announced that it filed a confidential IPO with the SEC in December and made an amendment last week that furthered the process. That method of filing has become a popular one with tech companies as it allows them to limit the financial information (read: massive losses) released initially.

WeWork would be the second highest valued company, after Uber, to come to market this year following its latest funding round in January which pushed its valuation to $47B. According to its latest (unaudited) financials, the company had net losses of $1.9B on revenues of $1.8B in 2018, up from $933M and $886M, respectively, in 2017.

The big losses come as little surprise for the capital intensive business. We spends a f*ck ton up front to acquire property (and kombucha). But as the co-working space fills up, some poor VC’s money flows back into Adam Neumann and We’s pockets.

The company hasn’t committed to an IPO date yet, nor does it have to if it doesn’t like what it sees. After Lyft’s meteoric rise and fall, expect companies to tread lightly as they enter the market.

 

BAD PARENTING

Google’s parent, Alphabet, had a worse first quarter than the Rockets did against the Warriors on Sunday. With only $36.3B in revenue, the internet juggernaut came up roughly $1B short of its forecasted earnings. Gavin Belson would not let this sh*t happen at Hooli.

And Alphabet appears to be suffering from a “growing” problem. It’s cool man, we’ve all been there. The company posted its slowest growth rate in almost four years. Revenue was up 17%, compared to 26% in last year’s Q1, while its margin fell to 18% from 25% over the same period. For reference, Facebook saw its revenue grow 26% this quarter.

Earnings per share also disappointed investors, at $9.50 per share versus an expected $10.17 per share. News of Alphabet’s poor performance led to a 7% drop in share price on Monday.

But, why?

Welp, a $1.7B fine from the EU for limiting competition in April doesn’t exactly scream investor confidence. And analysts are becoming wary of Alphabet’s Google product, raising concerns that it’s more or less a one trick pony.

Companies like Facebook, Amazon, and Twitter have been eating away at Alphabet’s once untouchable online advertising market share. For what it’s worth Alphabet still boasts one-third of all internet ad revenue, with Facebook taking second place with 20%.

 

---

IN OTHER NEWS

• Consumer spending picked up in March while inflation stayed flat. One would think that’s a good sign but the Fed was actually looking for an uptick in inflation as that is an indicator that the economy is growing. The fear is that rising interest rates led to a decrease in borrowing and financial activity. Annnd cue the Trump “I told you so” tweet.

 

• Snap-ify. Social media giant Snapchat and online marketplace Shopify are joining forces. The two have worked out a deal that will allow small businesses to advertise on Snapchat’s Discover channel. Shopify merchants will now be allowed to buy and manage Snapchat Ads. Snap joins Facebook and Google as Shopify’s third partner in this capacity.

 

• If the glove (counter)feits. China’s Alibaba agreed to pay $250M in a settlement to investors over allegations that the company did not disclose that it had turned a blind eye to counterfeit goods on the site prior to its IPO. The company came to market with a $25B valuation. The settlement resolves a litany of suits that turned into a class action against the Amazon of the East.

 

• Spotify has reached 100M paid subscribers, the first music streaming service to do so. What a time to be alive … 100M idiots pay for something they can get for free. The achievement comes on the heels of Apple surpassing Spotify for paid users in the US. Investors will also be happy to hear that Spotify’s quarterly losses are becoming less and less astronomical. In the quarter ended in March, Spotify posted a €142M loss vs. a €169M loss over the same period in the year prior.

 

• You know the old saying: if you can’t beat ’em, steal their strategy and hope for the best. Or something like that. Microsoft is “pulling an Amazon,” mirroring AWS’ previous partnership with VMWare that will allow VM clients to move their technology systems to Microsoft’s cloud. Sucks to suck, Bezos.

 

Ready to become the most well-informed bro in any room? You can subscribe here.