10 ★ FT Weekend 19 October/20 October 2019
T I M B R A D S H AW —LONDON
R I C H A R D WAT E R S— SAN FRANCISCOMark Hurd, aSilicon Valley executive
who was most recently co-chief execu-
tive of Oracle, has died at the age of 62.Mr Hurd went on amedical leave fo
absence from Oracle just last month.
The enterprise tech company’s founder
Larry Ellison and co-chief executive
Safra Catz had since taken on his
responsibilities, which had focused on
sales and marketing.
Oracle confirmed that Mr Hurd’s
death had been announced internally
but had no further comment on the
cause or circumstances. Bill McDer-
mott, who recently stepped down as
chief executive of SAP, an Oracle rival,
tweeted hat Mr Hurd was “a self-madet
success in the industry & presided over
mega accomplishments”.
He added: “While we competed vigor-
ously in the market, we enjoyed profes-
sional respect.”
Mr Hurd had been at Oracle since
2010, becoming joint chief alongside Ms
Catz in 2014. He hadjoined from
Hewlett-Packard, where he helpedreturn the Silicon Valley veteran to
growth after the tumultuous leadership
of Carly Fiorina. He wasforced out sa
HP’s chief executive following alleged
breaches of its code of conduct, from
which he was later cleared.
At the time, Mr Ellison — who regu-
larly played tennis with Mr Hurd —
described HP’s move as the “worst per-
sonnel decision since the idiots on the
Apple board fired Steve Jobs”.
Before HP, Mr Hurd had been chief
executive at NCR, spending 25 years at
the maker of cash machines and check-
out terminals.
He played a entral rolec n Oracle’si
transition from a vendor of databases
and servers to a provider of cloud com-
puting services, including overseeing
acquisitions such as NetSuite. He was
also among the tech industry’s most
highly paid executives, with his total
compensation last year exceeding
$100m.
Some Oracle employees paid tribute
to Mr Hurd on Twitter. “He was bliss-
fully unapologetic about his fierce com-
petitive nature, and drive to win,” said
Ann Rombach, a talent adviser.Technology
Former Oracle co-chief
executive Hurd dies at 62
E R I C P L AT T, JA M E S F O N TA N E L L A- K H A N
A N D A N D R E W E D G E C L I F F E- J O H N S O N
NEW YORK
SoftBank and JPMorgan Chase are at
odds over a multibillion-dollar rescue
package for WeWork that might force
the US bank to impose margin calls on
co-founder Adam Neumann.
The Japanese tech group and the US
bank have submitted competing plans
to pump as much as $5bn into WeWork
in a deal that could value the group at
$8bn or less, according to multiple peo-
ple briefed on the matter.
The proposal fromSoftBank, which
hassunk more than $10bn into the com-
pany, would significantly dilute other
equity holders, including Mr Neumann.
Should Mr Neumann’s equity stake
suffer a significant writedown as part of
the deal, he could face a margin call
from JPMorgan, UBS and Credit Suisse,
which have lent the former WeWork
chief executive hundreds of millions of
dollars, using his stock as the main col-
lateral, according to regulatory filings.
To meet the lenders’ capital demands,
Mr Neumann could be forced to pledge
additional shares or cash in the margin
call and sell some of the property and
other assets he has accumulated. The
entrepreneurhas raised t least $700ma
through share sales and loans against
his equity stake.
The stake owned by Mr Neumann and
co-founder Miguel McKelvey was worth
almost $13bn earlier this year, which
would be worth about $2bn if the
group’s valuationfell to $8bn. After
dilution,it would be worth far less. That
does not include the value of a stake that
Mr Neumannwas granted in acomplex
transaction his summer.t
If he were unable to meet the margin
call or repay the loan, the lenders would
face losses. The banks had earlier this
year extended a $500m credit facility to
the WeWork co-founder, with $380m of
that line tapped by Mr Neumann as of
the end of July. JPMorgan has also lent
Mr Neumann nearly $100m, regulatory
filings showed.
Mr Neumann declined to comment
through a spokesperson. Credit Suisse,
JPMorgan, SoftBank, UBS and WeWork
declined to comment.ing. JPMorgan has pitched the offering
to about 100 institutional investors.
SoftBank had earlier committed to
inject $1.5bn into WeWork in April 2020
at a valuation of $47bn. Itwasrenegoti-
ating the size, timing and valuation of
that agreement,people familiar with
the situation said. Onesaid it could put
some or all ofit into WeWork faster to
tackle thecash crunch ut would look tob
do so at a much lower valuation.
Potential conflicts of interest among
directors representing competing own-
ership stakes — including SoftBank and
Mr Neumann — have prompted
WeWork’s board to establish acommit-
tee to evaluate its financing options.
SoftBankhad hired restructuring
bankers at Houlihan Lokey to advise
them on how to revive WeWork, accord-
ing to people briefed about the matter.
The bankruptcy specialistswere assess-
ing ways to cut WeWork’s liabilities as
well as determining the company’s valu-
ation by going through its portfolio
building by building, those peoplesaid.
Bloomberg first reported the $8bn
potential valuation.SoftBank and JPMorgan push
competing plans for WeWork
3 Move to inject as much as $5bn 3 Neumann faces margin call threat
O L A F STO R B E C K —FRANKFURT
DA N M C C R U M —LONDONWirecard’s chairman Wulf Matthias
dismissed calls for an independent
forensic audit of the German fintech
group’s accounts, at the end of a week
which saw its market value drop by
more than a fifth.Mr Matthias said the group’s account-
ants appeared to be acting prop-
erly. “Prima facie, EY is evaluating the
matters sufficiently,” Mr Matthias told
the Financial Times.
Wirecard has faced growing calls for
an independent review of work by its
auditor, EY, after the FT published doc-
uments on Tuesday which appeared to
indicate a concerted effort to fraudu-
lently inflate sales and profits.
The group has categorically denied
impropriety andsaid he conclusionst
drawn by the FT about the files were
incorrect.
The 74-year old — a former senior
banker at Credit Suisse in Germany and
other lenders — called the public discus-
sion about Wirecard’s potential
accounting issues “an annoyance”, add-
ing that “we have endless stories [about
Wirecard], three a day. I have not
looked at them in further detail. We
have other things to do.”
Mr Matthias is due to step down
as chairman of the supervisory board
next year.The comments came after Wirecard’s
shares came under fresh pressure fol-
lowing an anonymous public letter to
the group’s supervisory board mem-
bers, warning them that they couldface
personal liability if they failed to investi-
gate credible allegations of fraud. The
letter was posted yesterday on a web-
site, MCA Mathematik, which unidenti-
fied short sellers have usedto publish
analysis of Wirecard’s financial state-
ments and management commentary.
The FT could not immediately reach
the five other members of Wirecard’s
supervisory board for comment.
Wirecard’s shares dropped 6.3 per
cent on Friday, to €111.65, taking the fall
for the week to 21 per cent, despite the
company announcing a €200m share
buyback.
EY has declined to comment on its
work for Wirecard, citing client confi-
dentiality. In a statement published on
Wednesday, Wirecard said: “Wirecard’s
group auditor Ernst & Young GmbH,
Germany, confirmed that they have
complied and will comply with all statu-
tory and professional audit standards.”
Wirecard faced scrutiny this year as
an accounting scandal unfolded in Sin-
gapore, where white-collar crime inves-
tigators are probing alleged accounting
fraud and forgery.The company has
said there was no material impact on its
financial statements, and EY signed off
on the group’s accounts for 2018.Wirecard head dismisses
call for independent audit
JPMorgan, UBS and Credit Suisse have lent Adam Neumann, WeWork’s co-founder and former boss, hundreds of millions of dollars —Eduardo Munoz/Reuters/FT montage
Adding to the strain between JPMor-
gan and SoftBankwas the fact that the
Japanese grouphad not engaged in for-
mal negotiations with the Wall Street
lender, leaving the bank unaware of how
exactly the SoftBank proposalwould
affect earlier investors like Mr Neu-
mann, one of the peoplesaid.
The WeWork board has onlyweeks to
decide on thelifeline it will choose as its
cash crunch intensifies, and some peo-
ple informed of the talks said it could
settle on a mix of the two deals, with an
equity and debt package that avoids a
margin call on Mr Neumann.
JPMorganwas putting together a $5bn
package that would include about $2bn
in unsecured debt, structured as pay-
ment-in-kind notes and carrying a cou-
pon of up to 15 per cent, said people who
saw the terms of the offer.
The expensive capital, which is still
being negotiated, reflects the risk lend-
ers would be taking on in financing a
group that expects to burn through its
funding by late November — a faster
rate than expected in the aftermath of
September’s aborted initial public offer-Smoke signalVaping backlash threatens to
slam brakes on F1 sponsorship— ANALYSIS, INSIDE
Equity bulls rousedProspect of trade deal
lifts end-of-year rally hopes— MICHAEL MACKENZIE, BACK PAGE
M U R A D A H M E D
SPORTS CORRESPONDENT
When Liverpool face Manchester
United at Old Traffordtomorrow, a vic-
tory for the visitors would cement their
place at the top of England’s Premier
League.
But a loss for Manchester United
could — depending onother results —
plunge the home side into the relegation
zone by the end of the weekend.
Such an outcome would further
expose the gulf between the bitter rivals
on the pitch — just as thefinancial
gap etween them is closing off it.b
Last month, Manchester United,
which for many years has been among
the world’s highest earning football
clubs,projected hat revenues would bet
£560m-£580m this season, the first fall
for more than a decade.
That is primarily because of the
team’s failure to qualify for this year’s
Champions League, Europe’s most pres-
tigious and lucrative club competition,
where more than €2bn is shared
between participants. Meanwhile, reve-
nues at Liverpool are set to rise further
from£455min 2018, after the team won
the Champions League last season.
“Other clubs are closing the gap on
Manchester United,” said Tim Crow, an
independent sports marketing adviser.
“If you look at the Champions League,
which is so crucial, [last season’s final-
ists] Liverpool and Tottenham Hotspur
will earn £200m from participation.”
Manchester United executives have
said there are no concerns over
thestrength of its business, pointing to
record income from merchandise sales,
season tickets and sponsorship con-
tracts this season.
Ed Woodward, executive vice-presi-
dent, who was installed in 2013 to run
the club by its owners, the US billionaire
Glazer family, has said continued finan-
cial strength will ensure Manchester
United will return to the top of the game
over time. “We and our growing global
fan base demand success,” said Mr
Woodward during a call with investors
and financial analysts last month. “Suc-cess means winning trophies. That tar-
get and that standard has never changed
for Manchester United. The progress
w e’ v e m a d e o n t h e b u s i n e s s
side... underpins the continued
investment in the football side.”
After installing former United player
Ole Gunnar Solskjaer as manager last
season, the club spent more than £150m
on transfer fees for new players this
summer, including England defender
Harry Maguire from Leicester City.In a sharp change to its previous
transfer policies, the club has attempted
to focus on acquiring younger players
rather than ready-made stars. It has
hired more scouts, created adata ana-
lytics system to identify players and
investedin its youth academy, all with a
view to rebuilding its squad over time.
This is a strategy that is broadly similar
to Liverpool’s over recent seasons.
In the meantime, the resilience of
Manchester United’s business is beingtested, in particular the team’s attrac-
tion to sponsors, which makes up
around half of club revenues.
The club hasbegun to search or a newf
shirt sponsor following concerns that
Chevrolet, the ar brand that is payingc
$559m in a seven-year dealto have its
logoon the team’s shirts, will not renew
the contract when it elapses in 2022.
In their pitches to potential new spon-
sors, Manchester United executives
have pointed to researchby Kantar that
suggests its number of “fans and follow-
ers” is growing and has reached 1.1bn
worldwide. This ould suggest it is thew
world’s best supportedclub, with more
than one-seventh of the global popula-
tion siding withit tomorrow.
However, analysts at Deutsche Bank
wrote in a recent paper that although
the club’s brand is durable it could be
tarnished if the team does not regularly
challenge for top prizes. That could hit
the club’s appeal to a new generation of
supporters and decrease the value of
future commercial deals.
There are short-term effects as well.
United’s kit deal with Adidas, worth
£750m over 10 years, contains aclause
that means failure to reach Europe’s topcompetition for two consecutive sea-
sons will see it paid £21m less for each
year outside the tournament.
By contrast, companies are taking
extraordinary measures for the right to
be associated with Liverpool. Last
month, US sportswear group New Bal-
ancebegan legal actionin a last-ditch
attempt to prevent the club from sign-
ing a new shirt manufacturing deal with
Nike worth £70m a year.
“I do believe on-field success drives
off-field success,” said Mr Crow. “I have
seen for many, many years, in particular
sponsors who are a big part of United’s
business, they go after the hot teams. All
my clients want to talk about Liverpool
because they are top of the league and
won the Champions League.”
There is one unintended upside if
Manchester United’s form deteriorates
further and the club suffers an unlikely
relegation from the Premier League.
That could convince the Glazers to sell
the club, said John Tinker, a senior ana-
lyst at Gabelli, a research group.
Even the most disgruntled fans, who
have called for the owners to exit the
club, may consider that such a ailuref
would not be a price worth paying.Travel & leisure. elegation riskR
Man Utd under pressure to perform on and off the pitch
Club faces first revenue fall
for more than a decade while
rival Liverpool makes strides
Heads up: the club has projected that revenues will fall —Lee Smith/ReutersOCTOBER 19 2019 Section:Companies Time: 18/10/2019- 18:50 User:timothy.digby Page Name:CONEWS1, Part,Page,Edition:USA, 10, 1