Hello Folks,

Here’s what we are covering today:

👉 The WeWork Bankruptcy

👉 The Impact of Interest Rates on Stocks

👉 The Rise and Rise of Bitcoin

So, let’s get into it.

WeWork Files for Bankruptcy

WeWork just filed for bankruptcy yesterday!!!

Founded in 2010, WeWork was valued at over $1 billion in early 2014. At its peak in 2019, its valuation surged to $47 billion 💰, making WeWork one of the most valuable start-ups globally.

The real estate company raised $22.2 billion in total funding across 23 rounds and is currently trading at a market cap of at less than $70 million 👀. So, what went wrong?
 
A failed IPO in 2019 raised concerns over WeWork’s ex-CEO’s leadership style, excessive spending 💸, and creative accounting practices. The COVID-19 pandemic also acted as a massive headwind for WeWork due to the global shift towards remote work.
 
It listed on the public markets via a SPAC merger two years back and outlined a strategy emphasizing it would focus on

• Key markets

• Reduce costs

• Target larger clients

However, in the last three years, it reported cumulative net losses of $11.4 billion. WeWork entered into long-term agreements with property owners but leased them to tenants on a short-term basis, exposing it to massive risks 💀.

A flawed business model, rising interest rates, and the work-from-home trend magnified the risks significantly. It ended the June quarter with $2.9 billion in long-term debt and more than $13 billion in long-term lease obligations.

Ouch.

Interest Rates and the Stock Market

In the last two years, equity markets in the U.S. have delivered negative returns after trading near all-time highs in late 2021. The primary reason- interest rates.

The U.S. economy has various interest rates, and the central bank's federal funds (fed funds) rate is a key one when it comes to managing inflation.

The fed funds rate directly impacts stocks and the economy because higher rates can harm stock valuations. Remember: investors often value stocks based on the present value of their future cash flows.

When interest rates rise, so does the discount rate used to convert future values into today’s dollars, which means those forward-looking cash flows are worth less.

Higher interest rates also make it more expensive to borrow money, which reduces corporate and consumer spending and dents economic growth.

Bitcoin Was Launched In October 2008

The Bitcoin white paper was first unveiled on October 31st 2008. Today, the digital asset is valued at $688 billion and is the world’s largest cryptocurrency.

Here are some of the interesting numbers surrounding Bitcoin:

👉 The total number of Bitcoin that can be mined is limited to 21 million

👉 More than 90% of the total available Bitcoin has already been mined

👉 Bitcoin miners have earned $47.4 billion in revenue to date

👉 There are more than 43 million BTC addresses

👉 More than six million BTC have been lost, valued at $35 billion today

There is a good chance for a spot Bitcoin ETF to launch within the next months, which will be the next big driver of price and adoption for the cryptocurrency.

Headlines You Can’t Miss!

Shell posts $6.3 billion profits in Q3

Indian travelers to be the fourth largest global spender by 2030

Delta Air Lines announces layoffs to cut costs

Roku stock gains pace post Q3 results

Elon Musk slams NFTs or non-fungible tokens

Chart of the Day

Japan’s equity market is having a breakout year, and Warren Buffett has increased exposure to the country significantly in 2023. Why?

For starters, Japanese companies are shifting their focus from internal stakeholders to actual profit. They’re also unwinding cross-shareholdings between companies (that’s when two or more companies hold shares in each other’s ownership), which means more cash to potentially be returned to shareholders.

And with the economy finally seeing a return of inflation (ending years of deflation), it no longer makes sense for people to stash their money under their mattresses. They’re turning to investments like stocks and bonds for real returns.

Plus, with companies able to raise prices again, they’re gaining the confidence to raise wages too. That means people now have more money to spend (and the incentive to do so), fueling demand – and that, in turn, is boosting sales and profits.

But bear in mind that a steeper-than-expected economic downturn in the U.S. or Europe won’t leave Japan’s export-oriented, relatively cyclical stock market unscathed.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.