Evercore is going after JPMorgan and Goldman; WeWork's CEO explains why he thinks his $47 billion company is recession-proof

Hey, readers!

It was a big news week in the finance world. Both Goldman Sachs and JPMorgan announced their biggest-ever acquisitions since the financial crisis, trade talks continued, and even Bitcoin rebounded.

WeWork said on Wednesday that it's growing incredibly fast, but is still losing money. The company's revenue more than doubled in the first quarter to $728 million as it expanded in international markets such as China, but still posted a net loss of $264 million.

Investors are watching the coworking company especially closely as it inches closer to an initial public offering.

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While there are some signs that investors are becoming more skeptical of unicorn tech companies that have grown super fast but still aren't profitable (see Uber's IPO struggle), WeWork brushed off those concerns, saying its losses should be treated more as investments.

Not everyone's convinced. While WeWork CEO Adam Neuman told Business Insider that his company is recession-proof because its space is cheaper than traditional offices, some analysts said they're still worried about the 9-year-old company's future, largely because it hasn't seen a full market downturn.

"Do they lose more tenants than a regular office building in a recession? My gut tells me they'd probably lose a few more," one analyst told us.

Questions around the company's creative accounting practices haven't gone away either, with its use of a made-up metric called "community-adjusted EBITDA" to measure profitability.

Earnings before interest, taxes, depreciation, and amortization exclude those expenses and can help investors get a clearer sense of how a company is doing. But critics have pointed out that WeWork's version appears to strip out some operating costs that would normally be included.

"For those with long memories this is surely be reminiscent of that series of spurious valuation metric such as price/eyeballs ratios that we saw at the peak of the 2000 tech bubble," wrote Albert Edwards, the cohead of global strategy at Société Générale, in a client note.

Love it or hate it, everyone seems to have an opinion on WeWork, and I'm interested in hearing yours as we double down on our coverage of the company. Please email me at ooran@businessinsider.com if you have a story to share.

One more thing! Business Insider is hosting a (free!) finance event tied to our "100 people transforming the world of business" list, which ran in April. The event is called IGNITION: Transforming Finance, and it will be held on June 10, 8-9:30 a.m., at the New York Stock Exchange. It'll feature a number of speakers from our list, including Omar Ismail, the head of consumer digital finance in the Americas for Goldman's Marcus business, and Huy Richards, the head of digital investment banking at JPMorgan.

Please reach out to me if you'd like an invite or want more information.

I'll be off next week for the holiday weekend.

See you in June!

Olivia

Evercore has torched competitors with the best returns on Wall Street over the past 10 years. Now it's setting its sights on Goldman Sachs and JPMorgan.

Since Ralph Schlosstein joined Evercore about 10 years ago, the independent investment bank has produced a nearly 600% total return, and grown its advisory revenue to $1.74 billion from $180 million.

No publicly traded competitor — bulge bracket or boutique — beats Evercore's performance over the past decade.

Part of the firm's success is explained by what it says is a persistent and uncompromising approach to recruiting: It'll hire only those it considers the best senior bankers, even if the courtship lasts years.

But can an independent investment bank ever truly contend with the industry titans Goldman Sachs, JPMorgan, and Morgan Stanley?

READ MORE HERE >>

Goldman Sachs execs are opening up about their plans for Marcus, and they think it can do to banking what iTunes did to the music industry.

Goldman Sachs' consumer-finance business may be only three years old, but the bank's execs already have ambitions of having as big of an influence as two other giants in their respective industries: Amazon and Apple.

That's the message to come out of three recent interviews Goldman execs have given. In a video posted this week on Goldman's website, Harit Talwar, Goldman Sachs' global head of consumer, said the firm was looking directly to Seattle and Cupertino, California, the homes of the two tech behemoths, for inspiration in growing its consumer banking footprint.

READ MORE HERE >>

WeWork's CEO explains why he thinks his $47 billion company is recession-proof, and how he keeps his ego in check as a young billionaire.

Adam Neumann is the cofounder and CEO of WeWork, the global coworking-space company valued at $47 billion.

WeWork, under its umbrella The We Company, filed for an initial public offering in December. Analysts are concerned with last year's $1.8 billion in revenue compared with its $1.9 billion in losses.

Neumann told Business Insider that WeWork was capable of being profitable but had chosen to invest in rapid global expansion. He said that the company was well positioned in case of an economic downturn in the US and that he would no longer personally lease properties to WeWork.

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The next big venture-capital gold rush may be in Opportunity Zones, dubbed the "emerging markets of the United States."

Venture-capital firms are starting to launch and raise funds to invest in companies located in designated Opportunity Zones, where investors can get protection from certain taxes.

So far, most of the money pouring into Opportunity Zones has been from funds looking to purchase real estate, but recent regulatory guidance from the Internal Revenue Service says it's also possible to invest in businesses.

The Opportunity Zone tax break, pushed through Congress by Sens. Corey Booker and Tim Scott, defers taxes on the sale of a stock, bond, property, or business if an investor places the money into a fund that invests in a low-income area.

VC funds that have been set up are targeting companies in Scranton, Pennsylvania; Brooklyn, New York; Newark, New Jersey; and Provo, Utah.

READ MORE HERE >>

Why Goldman Sachs just did its biggest deal in nearly 20 years as part of a pivot to less wealthy clients.

David Solomon is wasting little time. The Goldman Sachs CEO, an investment banker who took over from Lloyd Blankfein last October, signed the bank's largest deal in more than 15 years on Thursday, announcing the $750 million purchase of the United Capital wealth-management firm.

The transaction is intended to fill in Goldman's wealth offering and bring in more recurring revenue to a firm that still gets more than 60% of its top line from trading, and private investing activities.

More broadly, the deal is a sign that Solomon and his management team of CFO Stephen Scherr and president John Waldron recognize that investors haven't given the firm credit for maintaining some of the highest returns in the industry, according to analysts.

READ MORE HERE >>

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