Financial Times Europe 27Mar2020

Friday27 March 2020 ★ FINANCIAL TIMES 7

CO M PA N I E S

E R I C P L AT T 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

WeWork urnt through $1.4bn in the b
final three months of 2019, nearly all
the cash its principal backer SoftBank
provided, as costs from opening new
buildings and laying off thousands of
employees mounted.

The company said it ended the year with
$4.4bn of cash and commitments,
according to a letterSandeep Mathrani,
WeWork chief executive, and Marcelo
Claure, executive chairman, sent to
bondholdersyesterday and seen bythe
Financial Times.
SoftBank injected$1.5bn of cash ntoi
WeWork in October in a bailout that
gave it control of the group, but prom-
ises of more funding ave been thrownh
into doubt s SoftBank threatened toa
walk away from a share purchase deal.
The letter from Mr Mathrani and

Mr Claure showed that WeWork gener-

ated $3.5bn in revenues in 2019, up

90 per cent from a yearbefore. How-

ever, it did not include the full-year or

quarterly loss. WeWork in November

disclosed that it had lost $2.2bn during

the first nine months of 2019.

The cash burn figureunderscored the

strain on the company’s finances, even

before thecoronavirus utbreak. Whileo

thebusiness has closed only a handful of

locations, investors and employees fear

that its tenants could soon begin cancel-

ling leases en masse.

“We want to reiterate that WeWork

has a strategic plan and a sound finan-

cial position,” Mr Mathrani and Mr

Claure wrote.

“We believe this provides us the finan-

cial resources and liquidity to execute

our plan through 2024, including man-

aging the hallenges and volatility pre-c

sented by Covid-19.”

The year-end cash position revealed

yesterday represented a sharp deterio-

ration from the $6.9bn in cash and com-

mitments the company said it had at the

end of November.

The $4.4bn figure for December

included $1.3bn of cash WeWork had on

its balance sheet, as well as $800m of

restricted capital. It said it also had

$2.2bn of cash it could draw down from

a debt financing finalised with SoftBank

last year, and $100m it was still owed

from the Japanese group for one of its

joint ventures.

SoftBank warned this month that it

couldback out of its deal o buy $3bn oft

WeWork shares from existing investors,

a transaction the board thought was all

but done. WeWork disclosed that a fur-

ther $1.1bn of new funding it had

expected fromSoftBank ad been put inh

doubt, given the financing was tied to

that tender offer.

Technology

WeWork bleeds $1.4bn of cash in last quarter

O L I V E R R A L P H— LO N D O N

D E M E T R I S E VA STO P U LO— WA S H I N GTO N

The chairman of Lloyd’s of London said

the insurance industry could be “in

jeopardy” if it was forced to pay out for

Covid-19 claims that it never intended

to cover.

Insurers have said that infectious dis-

eases are excluded from most business

interruption policies, prompting fury

from customers facing huge losses.

Lawmakers in the US want the indus-

try to soften its stance and pay out any-

way. But speaking to the Financial

Times, Bruce Carnegie-Brownsaid any

move along those lines would have seri-

ous consequences.

“Fundamentally the insurance indus-

try relies on contracts,” the Lloyd’s

chairman said. “We pay out from the

premiums we collect, and if we haven’t

collected premiums for covers like coro-

navirus, it would put the industry in

jeopardy to be paying claims for those

risks.”

In the US, a bipartisan group of 18 law-

makers in the House of Representatives

has urged insurance companies to rec-

ognise the losses that businesses — par-

ticularly small ones — face from the eco-

nomic fallout of coronavirus.

In a letter totrade associations repre-

senting insurance companies, the law-

makers urged them to “work with your

member companies and brokers to rec-

ognise financial loss due to Covid-19 as

part of policyholders’ business inter-

ruption coverage”.

In the UK, the parliament’s Treasury

committeeyesterday wrote to the Asso-

ciation of British Insurers asking

whether the industry would be flexible

over business interruption.

Mr Carnegie-Brown said: “We will

work very hard to try to make sure that

customers benefit from the policies that

they’ve got but it will be difficult to pay

out if customers have not specifically

bought protection.”

He added that Covid-19 would cause

claims on more than a dozentypes of

policy, andtotal payouts could match

those for a big natural catastrophe.

Mr Carnegie-Brown said it was too

early to put a figure on the size of poten-

tial claims, but added that it would be a

“large loss event” for the market. Large

natural disasters typically cost insurers

many billions of dollars.

The crisis has hit Lloyd’s balance

sheet. Its solvency ratio, which is a

measure of capital available as a propor-

tion of the minimum required, has

fallen from 238 per cent at the end of

December to 205 per cent last week

because of financial market volatility.

Mr Carnegie-Brown saidthe solvency

ratio was “still very comfortable”.

Insurance

Lloyd’s flags up ‘large loss event’ risk to sector

R I C H A R D M I L N E
N O R D I C A N D B A LT I C C O R R E S P O N D E N T

Jacob Wallenberg has warned govern-
ments to weigh the economic threat
fromthe virus more heavily or risk
depression, social unrest, and alost
generation.
The Swedish industrialist, whose
familyvehicle has controlling stakes in
companies from telecoms equipment

maker Ericsson to bank SEB, aid poli-s

cymakers must protect the vulnerable

but not lose sight of the impact of con-

tainment measures on businesses, from

local restaurants to multinationals.

If the crisiswent on for long, unem-

ployment could hit 20 per cent to 30 per

cent while economies could contract by

the same, hesaid.

“There will be no recovery. There will

be social unrest. There will be violence.

There will be socio-economic conse-

quences: dramatic unemployment. Citi-

zens will suffer dramatically: some will

die, others will feel awful.”

Mr Wallenberg aid he wanted to starts

a debate about the long-term conse-

quences of the crisis.

“I am dead scared of the conse-

quences to society. I want to put the

view: what else can we do? Right now,

we’re just going on one path... We have

to weigh the risks of the medicine affect-

ing the patient drastically.How does

tomorrow look? One of these days there

is a tomorrow. We have to prepare our-

selves as well.”

Sweden isan outlier, keeping schools

and borders open and making fewer

restrictions than other European coun-

tries. There hasbeen adebate about

whether the economic costs of certain

restrictions outweigh the health bene-

fits. Mr Wallenberg said thedebate had

been very much “business versus life”,

but he wanted to take a “life versus life”

perspective. Elderly people should be

protected more, perhaps by being

placed in mandatory quarantine.

There should be a parallel discussion

on how to return to a vibrant society

with a rich cultural offering and lively

restaurants, and a need o think aboutt

the next generation.

Mr Wallenberg said that his call for a

debate on what happened after “the

acute phase of the crisis” was backed

by European Round Table for Industry,

50 industrialists who represent compa-

nies with revenues of €2tn.

“Authorities are all working very hard

to help society. They are not looking

around the corner as much. They are

not taking the longer-term perspective.

This is something that is very important

for society and for the EU,” he said.

Industrials

Wallenberg warns on long-term job losses

Swedish magnate says

protracted economic crisis

risks sparking social unrest

H A N N A H M U R P H Y— S A N F R A N C I S C O,
DA N I E L T H O M A S A N D M A R K D I ST E FA N O
LO N D O N

At 9am every day in the UK, hundreds of
thousands of children stand in front of
the televisions in their living rooms to
jump like kangaroos or learn to do
planks as fitness instructor Joe Wicks
takes them — and often their parents —
through their paces.
On Monday, the first day of the coun-
try’s lockdown, Mr Wicks’s exercise
class attracted about 869,000 live view-
ers. By Tuesday the number had
climbed closer to 1m, with his popular-
ity spreading globally as he interspersed
his easy exercises with shout-outs to
kids from New York to Jamaica.
Now dubbed the “nation’s PE
teacher”, Mr Wicks has doubled his fol-
lower count on YouTube, where some of
his video posts ow have more than 4mn
views,earninghim a name as one of the
breakout stars of thecoronavirus risis.c
“It’s a little bit of fun, a little bit of silli-
ness at a time when people are stressed
and worried,” Mr Wicks said, talking
from his west London home. “I am the
busiest man in the world. I am so fired
up... It’s amazing. I’m a TV channel!”
While celebrities andinfluencers
have traditionally broadcast aspira-
tional content relating to fashion and
travel, now, with travel bans nd noa
events to dress up for, social media plat-
forms are producing more everyday
stars: DJs live-streaming from their bed-
rooms, teachers hosting classes over
YouTube and chefs broadcasting cook-
ing tutorials on Instagram Live.
Mr Wicks is one of a roup ofg people
who have built up uge global online fol-h
lowings and household-name status in
recent weeks, as the millions confined to
their homes search for entertainment,
escapism and education online.
For many, the new-found clout offers
them a strong foothold in the lucrative
$8bninfluencer marketing ndustry,i
with social media platforms offering a
growing range of ways to generate reve-
nue. These include creating sponsored
content for businesses for a fee, which
can be in the thousands of dollars, or
even accepting tips — a feature Insta-
gram is weighing on introducing.
“There is a switch in influencer con-
tent online,” said Scott Guthrie, a con-
sultant at Luxmoore Consulting and co-
chair of the influencer marketing panel
at the Chartered Institute of Public Rela-
tions, citing cooking, fitness and
humour as the most popular categories
forpeople searching for a sense of “com-
munity” at a time ofsocial distancing.
Though social platforms have been

faced with severe advertising head-

winds during the recent downturn, as

marketers slash their budgets amid

fierce new economic pressures, they

have also been reporting unprece-

dented spikes in traffic.

On Tuesday, for instance, Facebook

said in a blog post that users had been

spending 70 per cent more time across

its apps in Italy since the crisis took

hold, while Instagram and Facebook

Live views here had doubled in a week.t

Some platforms are rying to generatet

new revenue streams from influencer

activity — a move that could help to off-

set the financial hit felt by popular crea-

tors whose usual brand sponsors are

retreating amid the crisis.

Instagram is exploring ways to allow

users to tip the influencers on its plat-

form, sources familiar with the plans

told the Financial Times.

Meanwhile, Twitch announced on

Tuesday that it was partnering with

events site Bandsintown to allow musi-

cians to monetise live-streamed per-

formances via paid fan subscriptions

and online tips. Patreon, which allows

artists to charge “patrons” for a sub-

scription to their live streams, said that

it had garnered 30,000 new creators in

the first three weeks of March alone.

As households in quarantine try to

stay healthy, fitness gurus are fast

becoming social media’s standout win-

ners. The topic is currently the number-

one driver of views on YouTube, while

this month in the UK, views of home-

exercise videosrose more than 200 per

cent comparedwith the daily average

for January and February this year.

But educational content — typically

virtual lessons provided by teachers—

has also gained traction: 24,000 people

have registered their interest in a live-

streamed Facebook “Spellathon” on Fri-

day from a Leighton Buzzard-based

teachercalled English with Holly.

Meanwhile, global views for cooking

shows are soaring,rising 5 per cent in 4

the first three months of 2020 from the

sametime last year, according to

YouTube. Michelin-star chef Massimo

Bottura, for instance, has hosted a show

calledKitchen Quarantine very night ate

8pm on Instagram TV since his Modena

restaurant Osteria Francescana was

forced to shut downthis month. The

videos have been streamed hundreds of

thousands of times.

Proponents argue that the new class

of influencer may boost the reputation

of the industry, which is often criticised

for its shallownessand for attracting

fraudsters who pay for fake followings.

Young people are even beginning to

look to influencers as “a trustworthy

source of news”, Mr Guthrie said. The

World Health Organization and the UK’s

Department for International Develop-

ment have partnered with influencers

on Instagram, TikTok and YouTube to

spread messages about social distanc-

ing, handwashing and detecting Cov-

id-19 misinformation, for example.

“People are turning to [influencers] in

tough times; this is legitimising the

value they can have,” said Neil Waller,

chief executive and co-founder of influ-

encer marketing agency Whalar.

Still, bad behaviours have emerged

among more opportunistic players,

including some wellness influencers

reportedly spreading harmful informa-

tion about virus-preventing supple-

ments, or exploiting the pandemic to

sell overpriced products and services.

Some believe influencers will be rela-

tively insulated from the dvertisinga

downturn, since their content is cheap

and easy to make.

For now, ome of the more spontane-s

ous coronavirus stars say they are

focused n building online communitieso

as a hobby, rather than making money.

“You rediscover old books, old

records, the pleasure of cooking for your

family. It’s the chance for us to build

something special, that’s why we are

doing it,” Mr Bottura, the chef, said.

“The virus has taken everything from

us, except free time and technology.”

Technology. ocial mediaS

Viral-influencers power ahead under lockdown

Quarantines arecreating

household celebrities in fields

from exercise to education

UK children join

the ‘nation’s PE

teacher’ Joe

Wicks for an

exercise session.

The fitness

instructor has

doubled his

follower count

on YouTube,

where some of

his videos have

more than 4m

views —Charlie Bibby/FT

R I C H A R D M I L N E— O S LO

A little-known Norwegian hedge fund

manager is taking over as chief execu-

tive of the world’s largest sovereign

wealth fund just as the coronavirus cri-

sis presents it with its sternest test.

Norway’s central bank saidyesterday

that Nicolai Tangen, who founded Lon-

don-based hedge fund AKO Capital in

2005, would succeed Yngve Slyngstad as

head of the oil fund in September.

The fund, which was founded in 1996

to safeguard and manage Norway’s oil

revenues, has amassed $930bn in assets

and, on average, owns 1.4 per cent of

every listed company globally.

Oystein Olsen, Norway’s central bank

governor, who led the search for the

chief, defended the choice of a hedge

fund figure to lead an organisation bet-

ter known for tracking stock market

indices rather than making big bets.

“There are differences in allocation

and size but there’s a high equity share

in the oil fund,” he said.

Espen Henriksen, an oil fund expert

at BI business school in Oslo, said Mr

Tangen had been “phenomenally suc-

cessful” with his hedge fund but it was

“a surprise that the governor has chosen

a stock picker and hedge fund manager

to head a de facto index fund. You have

to trust that the board has done a good

job and that he is a quick learner”.

The challenge facing Mr Tangen, who

lives in London but will move to Oslo,

was underlined as the fund revealed it

was facing one of its worst quarters on

record with a 16 per cent drop this year

after the pandemic hit stock markets.

Under Mr Slyngstad, the fund’s assets

almost quintupled.

Knut Kjaer, the fund’s first chief, said

that Mr Tangen was the “best possible

person” to take over the job and

“uniquely well qualified”.

Unlike in the 2008-09 financial crisis,

Norwayhas been hard hit by coronavi-

rus and a sharp fall in oil prices. Unem-

ployment has more than quadrupled in

the past two weeks.Its government

could end up withdrawing a record

amount from the fund this year, even as

its value declines, analysts believe.

Mr Tangen, who will pay tax in Nor-

way, told the Financial Times that the

biggest challenge facing the fund was

that “financial markets are moving

faster than ever before” at the same

time as big technological shifts and the

rise of populism in politics.

“I don’t think financial markets have

ever been more exciting,” he added.

There were “very big similarities” in

how his hedge fund and the oil fund

were “run and measure performance”.

Mr Slyngstad said the oil fund would

need to buy equities soon as part of its

rebalancing rules after its equity share

fell to 65 per cent of total assets, against

its target of 70 per cent. Closing that gap

would imply purchases of about $50bn.

Mr Henriksen voiced some surprise

that a wealthy hedge fund manager was

taking a position that last year paid Mr

Slyngstad about $630,000.

Mr Tangen said that “for the Norwe-

gian sovereign wealth fund, it’s particu-

larly important to get the intrinsic moti-

vation going. The fund is working for a

higher purpose than just working in a

normal bank”, he said.

Financials

Norway’s oil

fund picks

chief to steer

way through

testing times

‘The virus

has taken

everything

from us,

except free

time and

technology’

‘You have to trust that

the board has done a

good job and [Tangen] is

a quick learner’

‘There will be no recovery.

There will be social unrest.

There will be violence’

Jacob Wallenberg

MARCH 27 2020 Section:Companies Time: 3/202026/ - 17:45 User:cathy.pryor Page Name:CONEWS1, Part,Page,Edition:EUR , 7, 1