WeWork may soon be known as WeFailed. Just a few days after announcing a 1-for-40 reverse stock split to regain NYSE listing compliance, the remote-working company continues to stare Chapter 11 in the face.
On Wednesday, Bloomberg reported that WeWork rounded up a group of advisors, presumably in an all-glass-wall conference room, to hash out restructuring plans for its heavy debt load and chart a path forward. Among the advisors tapped for help: law firm Kirkland & Ellis and real estate adviser Hilco Global. Wait a minute — a real estate adviser? Wasn’t WeWork supposed to be a tech company?
Morning Brief
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BlackRock supported few ESG policies this past year.
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Stellantis wants a Chinese partner.
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Peloton keeps crashing.
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Policy
BlackRock Backs Off ESG
(Photo by Nuno Marques on Unsplash)
Three letters BlackRock CEO Larry Fink never wants to hear again: ESG.
The company supported just 26 environmental-social-governance proposals at annual company meetings in the 12 months leading up to June, continuing its declining support of ESG initiatives, according to its latest investment stewardship voting report.
ESG No Go
But this isn’t a sudden shift for BlackRock. In 2021, it supported nearly half of global shareholder ESG initiatives. A year later, it dropped to 22%, and has now fallen to 7% in the past 12 months. The pullbacks are partly to avoid political headaches but the financial juggernaut also acknowledged that some initiatives were “unlikely to help promote long-term shareholder value.”
Political conservatives have been on the attack over pretty much anything that can be classified as ESG. Earlier this summer, a group of House Republicans led by Rep. Bill Huizenga (R-Mich.) highlighted anti-ESG measures they aim to pursue, declaring that “ESG initiatives often fail to generate robust financial returns.” And last year, 19 GOP attorneys general asked the Securities and Exchange Commission to investigate BlackRock’s push into ESG policies, saying that it hurt state pensions as well as the oil and gas markets.
BlackRock also said it views many of the latest shareholder ESG proposals from companies it invests in as “overreaching, lacking economic merit, or simply redundant”:
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Last year, BlackRock supported a measure that would require Amazon to report how much plastic packaging it uses. When a similar proposal was brought up this year, BlackRock voted against it since Jeff Bezos & Co have already started supplying those plastic reports. BlackRock also voted against resolutions that would require companies like Chevron, Exxon, and Goldman Sachs to set absolute emissions reduction targets.
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Fink recently said while BlackRock is still committed to policies that address lowering carbon emissions and workplace discrimination, he’s stopped using the term ESG because it’s often “weaponized” by both the right and the left.
It’s a Numbers Game: BlackRock’s ESG pivot follows an industry-wide trend. The Financial Timesreported that median support for ESG resolutions across the board fell to 15% in 2023 from 32% in 2021. Asset manager State Street backed 32% of ESG resolutions in the first half of this year, down from 44% in the same time a year prior. Last year, Vanguard pulled out of the Net Zero Asset Managers initiative, with CEO Tim Buckley telling the FT, “Our research indicates that ESG investing does not have any advantage over broad-based investing.”
Both BlackRock and State Street reported that their diminished support is also a result of recent changes made by the SEC that make it difficult for companies to block shareholder ESG petitions. With more resolutions coming in, more are going to be shot down.
-Griffin Kelly
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EVs
Stellantis Eyes a Strategic EV Partner in China
The car company formerly known as Fiat and Chrysler is punching China coordinates into its dashboard GPS.
According to a Bloomberg report on Wednesday, Stellantis is seeking a strategic electric vehicle partner in the Middle Kingdom to help drive business in the world’s largest auto market. The news comes just a year after the company shuttered most of its Chinese operations.
Drive to Survive
Stellantis may be the world’s fourth-largest automaker, but it’s barely made inroads in China. Through the first half of the year, roughly just 2% of its sales came from China, India, and the Asia Pacific region, the company recently shared. That’s unsurprising, given that the company closed its sole Jeep factory in China in July 2022, a shift CEO Carlos Tavares labeled as an “asset-light” strategy predicated on vehicle imports rather than domestic manufacturing. Meanwhile, CFO Richard Palmer admitted last year that the company would operate in China as “somewhat of a niche player.”
But it’s hard to entirely steer clear of a potential customer base of 1.4 billion people, no less one that was home to nearly 60% of all EV sales in 2022, and where 535,000 battery-powered EVs were sold in the month of June alone, according to data from the China Association of Automobile Manufacturers. Now, sources tell Bloomberg, Stellantis is looking for inside help to remain “asset light” while muscling into a market dominated by local players like BYD and Changan:
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Stellantis is considering both a business partnership and an outright investment in a local EV firm. In particular, it explored a strategic partnership with Hangzhou-based Leapmotor, sources told Bloomberg.
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A joint venture wouldn’t be new. Stellantis still manufactures Peugeot and Citroën cars in partnership with Dongfeng Motor Group, and the Jeep plant had operated in partnership with Guangzhou Automobile Group.
Beep Beep: Stellantis isn’t even the first Western automaker to mull a partnership with Leapmotor. Earlier this month, Chinese media outlet Cailian Press reported that Volkswagen held talks with Leapmotor on a potential partnership to produce its Jetta cars. That followed a $700 million investment by Volkswagen into Chinese EV-maker Xpeng to develop two new VW-branded EVs for the Chinese market. In other words, the race is on.
– Brian Boyle
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Peloton blew another tire. The beleaguered exercise equipment and media company’s stock plunged more than 22% Wednesday after it reported a steep drop in subscribers that puts a bright spotlight on the speed of its attempted turnaround.
The company said subscribers grew 4% annually to roughly 3 million, but down 29,000 compared to last quarter. CEO Barry McCarthy said in a shareholder letter Wednesday that “consumer spending shifted toward travel and experiences” beginning in May and June, prompting people to spend less time on Peloton fitness gear.
Baby, You Can’t Drive that Bike
But consumer interest hasn’t been the only thing working against the company: It’s still haunted by recalls of its products, which are costing more than expected. Peloton was forced to recall seat posts on its PL01 bikes following dozens of reports that the seats fell off mid-workout. In 12 cases, users were injured.
Replacing more than 750,000 seat posts has cost Peloton $40 million so far, and the company noted up to 20,000 subscribers decided to stop paying their subscriptions in the fourth quarter as they waited for repairs:
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Peloton’s Q4 sales fell about 5% from a year ago to $642 million. Losses narrowed to $241.8 million, but the company’s cash holdings are down about one-third from a year ago.
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In an attempt to boost growth, the company started selling virtual fitness classes in May for $12-$24 a month.
Cardio Day: Peloton’s Tread treadmill also was recalled in 2021 after a swath of reports that it was pulling people and pets under it and severely injuring them. Twenty-nine kids were reported injured, and one was killed. Consumer safety regulators recalled around 131,450 Tread and Tread+ units. But Peloton just got regulator approval for a new rear treadmill guard. McCarthy said he expects they’ll begin re-selling the product during the holidays, which could provide a much-needed cash infusion.
Everybody’s going: Billy McFarland says $500 tickets to Fyre Festival II are already sold out.
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