Who Is This Guy and What Have They Done with Jamie Dimon?

The WeWork debacle is in the red-meat stage. Now that the emperor—Adam Neumann—has been shown to have been wearing no clothes for quite some time, the press is on it. The Wall Street Journal’s latest bit of piling on goes after SoftBank and its formerly could-do-no wrong $100 billion “Vision Fund”:

SoftBank Fund Dials Down Risk; Staff Struggles With Chaotic Culture.

But let’s be honest. Did anyone doubt it was chaotic at that joint? The worst prospective client a money manager ever gets a call from is the lathered-up guy who says, “I want to put some money to work.” That is code for, “I missed the bull market and I want you to make money for me now, and here it is, I want results.” Softbank had $100 billion to “put to work.” It was never going to be done rationally.

But our job here is not to join the scrum.

Our job is to perhaps put the pack animals on a different scent—the scent of a CEO we here at NotMakingThisUp have always had enormous respect for: Jamie Dimon, CEO of JP Morgan, whom Mr. Neumann, the aforementioned clothes-less emperor evidently counts as among his “allies,” if the Wall Street Journal’s reporting is to be believed.

Worse, JP Morgan, it seems, not only invested in WeWork (in the C-round, at a not-insanely-ridiculous valuation), but lent money to the visionary-cum-clothes-less emperor Mr. Neumann against his own WeWork shares at a quite-insane-enough-thank-you-very-much valuation. Naturally, Jamie was quite anxious to see the money returned, and his bankers were working on a rescue package until SoftBank agreed to throw more good money after bad and took control of an office-rental company pretending to be a magical mystery dream factory.

Jamie Dimon, for you home-gamers, was one of only a literal handful of financial CEOs who kept his head screwed on straight in the years leading up to the 2008 financial crisis, and was savvy enough to see opportunities when they presented themselves during those perilous times. After the AIG bailout, for example, when all the world was freaking out and nobody seemed to think the Feds would recover their investment in AIG, Jamie Dimon said, and your editor remembers him saying it quite crisply to the skeptical analysts on one of his company’s earnings calls that dark autumn, “That’s a good deal. I’d do that deal.”

Alas, such clarity of thought appears to have been clouded over by a decade-long bull market and the prospect of ginormous fees from an imaginary unicorn. No, this is not rear-view-mirror thinking on your editor’s part. The real world—including more than a few of Jamie Dimon’s quite legitimate commercial real estate customers—has been full of skepticism towards the WeWork model, and they’ve said as much.

Why, my Sentieo workstation [think: much less costly than Bloomberg, but more useful] came up with a couple dozen skeptical—sometimes quite pointedly so—observations about WeWork on quarterly earnings calls as far back as November 2017. This one, from Empire State Realty Trust back in September 2018, sums it up:

“I think, from our perspective, we don’t have WeWork as a tenant in our portfolio. Our view, as Tony has articulated, is we don’t like the proposition of providing a long-term lease to someone who’s, in turn, entering into short-term agreements. And then…very often, not creditworthy entities, not that the enterprise business is different. But we don’t see it as a good credit.”

  Thus, WeWork violates Banking 101: instead of borrowing short-term and lending long-term, it borrows long-term, sells short-term.  A banker with the brains of Jamie Dimon would have seen this with his eyes closed.   So, what have they done with Jamie Dimon and who is that guy masquerading in his place?