Says blockbuster left at the companys original movie by mail service. We will hear his latest thoughts on streaming wars and tech culture. First, it finally happened. Wework is pushing back its ipo. What was once one of the most anticipated to abuse of 20 anticipated debuts of 2019 is being pushed to october. Governance problems and financials. At one point, this was the post to be a 47 billion company. Now that number is about 15 billion and perhaps smaller. Ing me to discuss, the new york, crystal, who has been covering this troubled ipo. What was the problem today . Financials, ors, governance problems . All of the above. The simple answer is they have a lot of things to address before they can go to the investors again and ask them for their money. Now we are hearing it could be 15ow as 12 billion to billion. There have been a lot of changes to governance, but investors are looking at valuations, whether they will improve financials, and whether more is needed for them to be convinced about the valuation . This morning on the open, someone had some comments as it related to the valuation part. Take a listen. The valuation is really a wakeup call to private investors that the Public Markets are holding them accountable. The specific reason i think this report was the cash burn, a consistent theme and your setup addressed this. Companies losing a lot of money are being held to lower valuations. It is more than what tesla lost to put that in perspective. i would say wework is kind of in a space of its own. Andink a mix of lyft, uber, wework planning to come public in 2019, i think we are seeing most losing companies. We are seeing companies that are burning only 100 million, 200 million in cash. Writing off 37 billion of value over a period of 34 weeks will catch the attention of investors. We can joke about how you Value Company using a discounted cash flow to evaluate company that does not have cash flows. We started by looking at a multiple of revenue. , theyrst thing we found were trading at one or 1. 5 times revenue. We earned revenue in 2018, so to come out at a valuation seemed ludicrous. I think the biggest thing for wework is trying to explain itself as a Technology Company when it is really a Real Estate Company that has some technology bells and whistles. Taylor bondholders also had a recalibration. The price of those wework following a record amount this morning, as low as 95, no hovering . 97 on the dollar or so. How nervous do bondholders continue to be . Crystal will the ipo perform or will it happen at all . We put out a statement saying they were committed to finishing this ipo within the end of this year. That should give bondholders a little bit of confidence. Evaluation continues to be the biggest concern. If it becomes a 15 billion company, bondholders are going to get nervous. Taylor talk to me more about that valuation. What does the private market see that the Public Markets are missing . Phil one thing we saw is that there actually wasnt that much interest for wework, particularly at the valuations it had obtained. We saw much healthier markets for companies that went public recently, Companies Like docusign, slack, that were little bit more popular with investors. We have thought to see something similar with a company like wework because the brand is so ubiquitous. Billionet north of 20 in valuation, you are not talking about hundreds of unicorns anymore. When you have that valuation coupled with losses, it was kind of a recipe for disaster. We have been in very much a bull market in private stocks, and that has led to terms on how they raise capital. At some point, you are going to have the pendulum swing. When you have this kind of headline, a cut in valuation will shift those numbers over to investors that will ask for more Corporate Governance and other aspects within the cap structure that they feel more comfortable with. That 6you mentioned billion financing was contingent upon that ipo. Assuming that doesnt happen, when does we work get more cash and where . Crystal i think the simple answer is they always need to get more cash as soon as possible. Intomay look into tapping softbank to get more funding. There were some talks about softbank being willing to put another couple hundred of million couple hundred Million Dollars into the country. Taylor quickly, any ideas on when is the drop dead deadline for raising more cash . Phil i have to think they want to push this over to 2020 but only about 3 billion, 3. 5 billion of cash available to them, this could get messy. Some lenders have promised capital if they raise their ipo before 2019. If i were them, i would spend the next quarter really tightening the belt, trying to overhaul spending, negotiate with some of the banks. Haslett and crystal tse, thank you. Coming up, apple says it is playing by the rules. The latest and the eus battle with the u. S. Tech giant, next. This is bloomberg. Taylor apple told a European Union court that it was unfairly painted as a tax dodger. Apple lawyer, an said in fact the company is the worlds top taxpayer. They look to overturn a ruling that they have to pay 14 billion in back taxes to ireland. Apple is coming facetoface with european regulators and the biggest tax case in the world. The company has appealed a 13 inlion euros fine imposed 2016. The idea behind it according to the europeans is that apple received special tax treatment which allowed the company to pay artificially low taxes. Apple says this is not the case and has appealed. A you are hoping to get moment from the company, that was not the case. Apple said they pay the most tax in the world and claimed the decision from the europeans lacked any logic or sense, and they claimed the numbers were tweaked in a way that presented apple in a bad light. Essentially, pretraining the company is paying no taxes. If you look at the european side, they tell you that they still believe they are right, that it is pretty obvious that apple has set out a tech structure in europe to pay the least amount possible. They do believe, if the arguments are validated or vindicated by the courts, they can continue to get tough on American Tech Companies to make them pay more in europe. Of course, these cases are happening as tensions continue to play out between the United States and europe over big american tech. The president of the United States donald trump has said many times that this is only happen because they cannot compete on the innovation, so they must compete on the taxation. The europeans say they just want everyone to pay their full share. Taylor for more, i am joined by creativeident of strategies. He has covered the field of computers and technologies since 1981 and served as a consultant to Companies Like apple my ibm, and microsoft. What do you make of the fact that apple has said, we are the biggest taxpayer in the world . Tim from an actual numbers standpoint, they probably are. Apple is also one of the richest in terms of overall market value and the amount of money they bring in every year. To understand this, you have to go back a little bit to the beginning where apple did this deal as part of a partnership with the Irish Government in 19881989 when the Irish Government was very concerned about what they call the brain drain. They were graduating hundreds of engineering and business students, but there were not enough jobs in ireland to fill the needs or fill the jobs for these kids. , the u. K. ,o europe france, the u. S. The government was concerned that the only way they would keep these people and was to bring other companies, especially Tech Companies, into ireland. Over this time, apple has built up over 6000 jobs and contributed greatly to the irish economy. Structureiginal tax was based on bringing apple in and that is what they continued to do until about 2015. Taylor like you said, negotiated in good faith and now having some of that reversed on them. What does that mean for apple in future dealings with ireland and the eu . Tim that is part of the problem and that is why i believe apple and Tech Companies that could be in the crosshairs will fight this. What the eu did is they changed the laws and the rules in 2010 and they are now finetuning. Hem think of yourself as an american company. If you went in with a series of agreements and all the agreements got changed, that puts you off. American company, i would be concerned about investing in europe. These American Companies really are looking at expanding into europe because it is great for distribution, customer service, at this point it sets a bad precedent. Taylor any thoughts on companies that start to feel the ripple effects if that goes through . Tim im sorry, repeat that. Taylor what companies would be next in terms of feeling the ripple effects if this fight were to continue . Tim at this stage, it is a little unclear. Companies including hp, microsoft, others, who might want to do more expansion. That is not exactly clear. A lot of companies here are watching this particular case very closely because it will be factored into whether they actually do expand into europe and the future . Eu not perhaps the concerned about that from this lawsuits perspective. , president m bajarin of creative strategies. Thank you. Coming up, more from the interview with ibm ceo Ginni Rometty. We are on twitter. Technology. T this is bloomberg. Taylor sony is rejecting a suggestion by actavis investor dan loeb to selloff some of its businesses. They are planning to hold onto both units. Sony says that computer chips are key to growth and that retaining Financial Services will enable the companys value. The man disclosed a stake in sony three months ago. Ibm inometty started at 1981, became ceo in 2012, and has overseen a dramatic transition of the company. As technologyeen takes over our daytoday lives. Caroline hyde spoke to her about diversity isut how key to the relationships with employees and customers. Ginni i deeply believe in responsible stewardship of technology. People have got to trust these systems. The second is that you have to prepare society for them. The third is around verse the end inclusion. For as long as i can remember, for ibm, it is what the firm has been built on. I have really grown in that environment. The first woman senior vice wasident was 1943 and she 27 years old. The timestforward, in in america, for the civil rights amendment, 11 years before that had declared all of the same points. It has always been about that you have got to get the best valuesce, and the set of so people can come to work and give their best. Buildou jump to, if you those technologies, you have to build them with a diverse workforce. You have to represent one of the biggest things around bias. Bad bias. Ood bias and treatst something which cancer patients. It with only trained three institutions. We are like, they are the three a badn the world, is that idea . ,his idea of who trains things otherwise you will get there have been many examples of this out in the world. Obliviousn completely to whether it is gender or whatever it is. You do need a diverse workforce. Caroline i think that is fascinating that you are talking about trust, ethics, bias. Things plaguing technology and technology in the u. S. And worldwide at the moment. Do you believe orbit leadership in the u. S. Corporate leadership in the u. S. Is taking this on board . Some of the jarring that technology brings. Ginni i think this is a very icky point. Business needs to. If society cannot trust these technologies are us, you cant operate. I think that the reason ibm is 108 years old is that society has given us the license to operate. Your actions, what you say you do and you will do your values. We manage 90 of the worlds financial transactions, credit Card Transactions come 80 of airline reservations, mobile phones. You have got to trust. Another company has to trust that we dont handle that data wrong. First, you have to have a set of principles. We wrote them down because i said, this time, we had better write them down and make sure everybody understands that we feel we have always lived by them. You have to live by them, be willing to be audited, and everyone has to generally agree. To me, they are very simple. The purpose of technology is to augment what man does. Man as in mankind. I have something to say, my people, what they do. The second is that data, its ownership, insights, and especially true with ai, the models, they belong to the owners of data, the creators. The third, for these models to be trusted, they must be explainable, free of bias. I have learned this as we bring out the technology to doctors, actuaries. Their first question is why. You have to have a set of principles and live by them. They are deeply rooted in your own values. I think this is trust, one of the determining factors of this era. You have to be clear what they are. You have got to live by them. In history, a government would say, can i get into your software . No, we never a backdoor in our software. In the United States, when we were asked, would we support legislation that said, if we knowingly had child sex trafficking on our cloud, would we be liable . Yes, knowingly. These are based on a set of values. I think in this day and age, being clear. There should be regulation, but i call it precision regulation. I am very afraid that if it is overreactive, you will derail the hold of the the old digital economy. Go after the bad actors. Consumers have the right to know what data you have, delete it, correct it. That was our exclusive interview with ibm chairman, president , and ceo Ginni Rometty. A reminder to tune in tomorrow on bloomberg technology. We will bring you more of our conversation with Ginni Rometty and you can go online to catch the full 30 minute conversation. Oracle, an operating system that runs without the need for human oversight. It is part of a line of new Software Tools that will make it easier for the company to transition to cloud computing. Worlds second largest Software Maker and is looking to restore growth after years of stagnant revenue. Work inp, wework wont Public Markets as they delay the ipo. Will this cause other companies to rethink going public . This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Taylor this is bloomberg technology. Wework has announced it is putting off its troubled ipo, planning to list by the end of the year. Wework will be valued at less than a third of its original valuation. Is this an issue of timing or valuation . Nicole quinn joins me now to discuss. Around surprised at all the volatility of wework . With regards to wewere, it has been an interesting one if you think about it. In the first half of the year, they had 1. 5 billion in revenue. There was probably a day when the market was ok with that, but the market right now is not comfortable with that. You have seen that with uber, with lyft. The market is not comfortable with those losses. Previous career had been at Morgan Stanley taking a lot of public. Mpanies we would say we really need to see a line of sight in the next 12 to 24 months profitability and that is what i think is lacking here. Taylor within your decades of experience bringing a lot of these companies to the Public Market, is the Public Market more than ever being more discerning . The companies where, frankly, like you said, the bottom line does not match. I think that is exactly the right question to be asking because markets right now are still very much open for business. A lot of companies to very well straight after ipo. Those include solid, consistent businesses, but you are right the market is very much thinking about if these companies will be profitable, and that is where you are seeing a real distinct inference in the market. Taylor do you think that markets feel overvalued . Are they too lofty . No, i dont think that is what we are seeing. If you add up all the technology unicorns in total, they only add up to 5 of the s p, so theres still a huge amount of growth to be seen, but also valuations. Sayink people like to often that private market valuations are too choppy, but when there is a good, solid, consistent business focused on the bottom line as well as consistently growing the top line and having a true line of sight, the market is reeling to pay a good valuation for that and will often trade up pretty significantly. I think we will continue to see more of that. Taylor i had an interesting conversation with john chambers, formerly of cisco, last week, and he said these private Companies Need to be coming to Public Markets much sooner, that they are staying private too long. How do you feel . I think you are not going to see a big change with that for a while. In fact, theres more and more Later Stage Companies being built. We have 9 billion assets under management. We have earlystage funds but also growth stage funds, and the reason for that is we see companies waiting longer and longer to go public and preferring to stay private, so it makes sense for us to also adapt our Business Model to have a growth vehicle to be there to support those companies while they want to stay private, and when they get to a point in their Business Model where they are stable, than it is a great time for them to go public, but theres no point in them going public when the market is going to see it as too volatile, so good for them to have that option. Investor inare an some pretty s