Discernment and Propaganda on Wall Street | The Acquirer's Multiple®

During their latest episode of the VALUE: After Hours Podcast, Taylor, Carlisle, and Trainer discussed Discernment and Propaganda on Wall Street. Here’s an excerpt from the episode:

David: So, yeah, for me, I think when we struggle a lot so much right now in society in general, it’s like, are we discerning about what we pay attention to and don’t pay attention to or what we trust and what we don’t trust. We lack that in so many ways. I think we see that in politics, and we see that in Twitter and social media, in general, where people are getting so upset and worked up, and then are isolated or polar in the way they address issues. You’re either like hardcore right or hardcore left, there’s no in between, there’s no civil discourse around things because people are, I think, feel like just so polarized.

It’s because they’re not discerning enough about what they’re paying attention to. You have to realize that most of what dominates the newswires, the TV, the research, is people who can pay to be at the top of the list. And they can pay to be at the top of the list because they’re making a lot of money doing what they’re doing. They’re more about making that money than they are about informing you. They’re at the top of the list because they want you to do what makes them money. Wall Street is a great example.

I’ve been replaying a video, the quiver quantitative people put together for us on WeWork. We were the first to blow that up. But remember, all of the propaganda about this great new idea, community adjusted EBITDA, right?

Jake: [laughs]

David: What’s WeWork worth now? Almost zero. Even the SPAC that they use to sneak into the public markets is about to go to zero. All that propaganda, they tried to sell that to the market. $45 billion valuation. And now it’s a zero. Does Zoom give me an icon for that now? No, it doesn’t look like–

Tobias: Did you take a look at WeWork through New Constructs?

David: We did. We did. We were one of the first to raise a red flag. We wrote an article. It was featured in Forbes. It was called This is the most ridiculous IPO of 2019.

Tobias: There was a lot of competition.

David: There was. There really was, and that made some headlines. That headline got featured in a couple of documentaries. People have sent me some screen shares of that being featured.

Tobias: Do you– [crosstalk] Yeah.

Jake: Yeah. What was the accounting that was throwing up the red flags there?

David: Well, it was the community adjusted EBITDA and how–

Jake: [chuckles] How could we have known? [laughs]

David: Yeah. That doesn’t sound weird? It’s a great example, like, of Wall Street crafting a narrative to make you want to buy something that’s worthless. The other thing that was an issue is in the footnotes, there were a lot of related party transactions that made it particularly bad, because we had a lot– Like you said, Tobias, there was a lot of bad IPOs in that period. But the related party transactions and the conflicts of interest that were disclosed were pretty bad. Adam Neumann paying his family exorbitant fees to cater parties and things like that, and him himself being paid a whole bunch of money for the WeWork.

Jake: Yeah, he bought buildings and then was leasing them back or something as part of that.

David: Yeah, it was all pretty ugly for a business that was highly unprofitable and then valued so richly. And the voting structure. That was the same with a lot of other IPOs. Voting structures were very anti-friendly to public investors. You’re basically going to give them all this money and have no voting power. It sounds like a great deal.

Tobias: It’s very common. Increasingly common these days. It seems like every company’s got the super voting shares.

David: Yes. So, it just gets to the point that as a great example of just how bad the propaganda can be, how far they’ll go to mislead people in order to get them to try to buy something that they want to sell. It doesn’t just happen with the WeWork. It happens all the time. That’s the majority of information people are getting, whether it’s about stocks or politics.

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