Protocol Index: WeWork’s lesson for recession-confident startups

Protocol Index


Good morning, and welcome to Protocol Index, your daily pop-up report about the financial movements that matter to tech during the COVID-19 crisis. Want Index in your inbox each morning? Subscribe here.

Today: WeWork teeters, Apple's being nice, and Ikea sees an opportunity for AI to plan your remodel.

What Matters Today

  • 5:30 a.m. PDT: If you thought last week's initial jobless claims were bad, prepare to be horrified by the numbers announced first thing today. Economists expect 3.8 million new claims this week, 500,000 more than last week's already record-breaking figure. For context, weekly claims peaked at 665,000 during the 2008 financial crisis.
  • 2 p.m. PDT: Total vehicle sales for March will be reported, which could hint at Tesla's fate amid coronavirus. French car registrations dropped 72% year-on-year last month, so it's not looking good.
  • 6:45 p.m. PDT: Caixin's services PMIs will give a sense of whether China's web giants bounced back in March as COVID-19 eased up there. Manufacturing data has thus far indicated a recovery; services may follow suit.

Layoff Watch

  • Indian coworking company 91springboard asked all 300 employees to go without pay in April. Some workers are expecting layoffs to follow.

Today's News

As of 4:45 a.m. PDT: Nasdaq Futures: 1.31% | Euro 600: 0.58% | Nikkei: -1.37% | Hang Seng: 0.84%




Diving Deeper

It couldn't be going worse for WeWork

I mean, where to begin? Today's news: SoftBank actually followed through on pulling its tender offer for WeWork shares, leaving Adam Neumann, Benchmark Capital, and a whole bunch of employees collectively $3 billion worse off.

  • SoftBank, you'll remember, is in "survive at all costs" mode, and investors were delighted to see it escape yet another ill-advised deal: Its shares were up 2.5% Thursday.
  • But WeWork's investors are also in survive at all costs mode, and some are reportedly planning to sue SoftBank over its U-turn. Though the $3 billion wouldn't actually have helped shore up the business, it may have been the only cash they were ever going to make from it.

All told, it's probably the worst possible turn of events imaginable for the co-working company.

  • Ahead of its failed IPO last year, WeWork tried to make the case that it was recession-proof. The argument wasn't entirely ridiculous: As companies reduce headcount and cut back on spending, they might try to ditch their expensive, big offices and move to WeWork-style ones instead. (Andrew Ross Sorkin even argued that WeWork was too big to fail, and that landlords or governments would bail it out to save the property market. That seems … unlikely at this point?)
  • But it was difficult to anticipate the peculiar nature of this downturn. Who knew a recession would be brought on by a deadly virus that led to a mass uptick in working-from-home, killing the demand for coworking spaces? Still, it's why WeWork is now begging landlords for discounts and tenants for renewals.

People will line up to say "I told you so" about WeWork's travails, presenting it as a cautionary tale of overexuberance. And yes, many of WeWork's problems could, and should, have been addressed.

  • But this particular situation is at least partly out of its control, and it seems harsh to squarely blame the company for it. Not even Adam Neumann could have foreseen this virus.

More broadly, a lot of other companies may find that, even though they were once well-prepared for a recession, they are blindsided by the current crisis — because it's no ordinary downturn.


  • "This shock is going to lead to a very broad pullback in hiring for several months." — ZipRecruiter labor economist Julia Pollak, talking to Protocol about how the crisis is affecting tech recruiters.
  • "I am hopeful that this will be a game changer for sourcing untapped talent from rural areas." — Phill Rosen, CEO of Even Financial, told Protocol that the shift to remote work could change where tech hires.
  • "There was a lot of hope that we had seen the bottom; a lot of these hopes have been dashed in one swift day." — Inverness Counsel's Tim Ghriskey, after yet another dismal day for markets.
  • "COVID-19 is impacting China's raw material supply chain. We are now seeing revenue impact in that region." — A computer and electronic products manufacturer in ISM's latest PMI survey says the impact of the pandemic could last a while. Tech manufacturers reported growth in March, though.

Closing Bell

All's awful in love and lockdown

According to Bloomberg Businessweek, divorces are on the rise in China: Filings surged as couples emerged from lockdown. Hell, it seems, is indeed other people. If the same trend plays out globally, maybe dating apps will be the ultimate winner from coronavirus?

Thoughts/feedback/tips? Email me — — or anonymously contact Protocol. And subscribe to get Index in your inbox each morning. Thanks for reading, see you tomorrow.

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