The board bungle behind WeWork's fall

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• Mark Zuckerberg has made his return to Capitol Hill to talk about Libra. Live updates from his testimony.
• Boeing's Q3 revenue fell 21% from a year earlier to $20 billion, and profits fell 51% to $1.17 billion.
• Last night in sports: The Nats won the first game of the World Series and the NBA is back.

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1 big thing: The board bungle behind WeWork's fall

By: Dan Primack ? Newsletter: Axios Pro Rata

WeWork last night made it official: SoftBank will pump $9.5 billion into the beleaguered company, including a $3 billion stock tender, $5 billion of new debt, and $1.5 billion that is being accelerated from an existing equity commitment.

The big picture: There's been lots of talk of how this mess will impact startup valuations, business models, and IPO opportunities. But far too little on how it should impact board oversight and founder control.

• Remember, SoftBank had two directors on the WeWork board. But then decided, more than a year later, that it had to bring in Marcelo Claure to figure out what was really going on. What were those directors doing all this time?
• The board either wasn't paying attention, or was paying attention but powerless to fix problems before it was too late. And, if the latter is true, then what was the point of having a board in the first place? Optics?

The state of play: Under the new deal, SoftBank will hold an 80% stake in WeWork on a fully-diluted basis, but apparently will not have a majority of votes on the to-be-expanded board. As such, SoftBank is claiming it does not control WeWork.

But, but, but: When I spoke to an internal WeWork spokesperson today, she directed most questions about future board structure, appointments, etc. to SoftBank.

• The press release does not make any reference to the Adam Neumann payoff, perhaps to avoid rubbing further salt in employee wounds.
• My understanding of the tender is that all company shareholders, including both employees and investors, can tender up to 33% of their shares at $19.19 each. Were more than $3 billion to be tendered, it's likely that the company would reduce payoffs on a pro rata basis.
• That scenario could be impacted by how much Neumann himself tenders, as he's eligible to reap more than $900 million.

The bottom line: Venture capital has spent more than a decade bending over backwards to appease founders, often with positive results. But along the way they've too often abdicated fiduciary obligations to limited partners, believing that their job ends at "making the deal" and then "helping out when needed," such as with introductions to potential new hires.

• Investors can be founder-friendly while still packing some emergency parachutes into term sheets. And if an entrepreneur objects to even the loosest of restraints, then maybe it's not a deal worth winning.

Go deeper: How SoftBank plans to save WeWork

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2. Warren says big banks are crying wolf

By: Dion Rabouin ? Newsletter: Axios Markets  

Illustration: Drew Angerer/Getty Staff; A?da Amer/Axios

The banking industry has argued in recent weeks that the problems in the systemically important repo market are the result of excessive regulations and could result in larger and more damaging liquidity events in the future.

Driving the news: Sen. Elizabeth Warren wrote to Treasury Secretary Steven Mnuchin on Tuesday to call foul and request an explanation of what's really going on in the market.

Background: Rates in the repo market that banks use to access quick cash spiked last month, reaching five times their normal level.

• This prompted the Fed to step in with emergency funding, and now daily cash injections and a standing $60 billion a month facility.
• Bankers, research analysts and fund managers have worried that the turmoil portends larger problems in the equity and bond markets and could lead to a wide-ranging liquidity crisis.

What's happening: Bank lobbying groups and a handful of CEOs have said the problem stems from too much regulation of the financial sector.

• “Recent repo market volatility highlights ... how policies intended to promote financial stability can sometimes frustrate it," Bank Policy Institute chief economist Bill Nelson told Axios.
• JPMorgan CEO Jamie Dimon said last week that his bank had the capital but was unable to step in to calm the spiking repo market because of liquidity requirements.
• State Street CEO Ron O'Hanley said Saturday that regulations will lead to more liquidity issues.

Between the lines: In her letter to Mnuchin, Warren said she's not buying the argument and the Treasury Department and Financial Stability Oversight Council, which Mnuchin chairs, should not buy it either.

• “Banks are reporting profits at record levels, and it would be painfully ironic if unexplained chaos in a small corner of the banking market became an excuse to further loosen rules that protect the economy from these types of risks.”
• Just last week, the Fed and four other regulatory agencies approved the rollback of some restrictions on banks' adherence to the Volcker rule.

Warren isn't the only one who's dubious of the banks' cries for reduced regulation. Minneapolis Fed President Neel Kashkari told Axios that his patience is "basically gone" for bank complaints about reduced liquidity.

• Kashkari points to the Fed already providing a discount window where banks can access cheap emergency funding to deal with exactly the sort of liquidity squeeze that hit the repo market.
• "The banks are using this as a manufactured crisis," Americans for Financial Responsibility policy director Marcus Stanley told Axios. "They do that all the time and they’re doing it here. ... We’ve seen the damage that deregulated finance can do and it’s very extreme and long-term damage."

Go deeper: Elizabeth Warren takes on private equity

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3. Brands use buzz around space industry to market their products

By: Miriam Kramer ? Newsletter: Axios Space

Illustration: A?da Amer/Axios

Fashion, food and media brands are using the buzz around the space industry to market their products, shaping the way people on Earth understand and interact with the extraterrestrial sphere for years to come.

What's happening: Last week, Virgin Galactic announced a partnership with Under Armour to produce a line of spacewear to be worn on the company's suborbital flights to the edge of space.

• It's the latest in a series of brand partnerships Virgin Galactic has penned in recent years, defining itself as a luxury space brand in the process.
• Budweiser wants to become the first beer brewed on Mars and has sent beer-brewing experiments to the International Space Station.
• Israel's Aleph Farms just announced that it grew meat on the Russian side of the station.
• Astrobotic — a company aiming to land a robotic spacecraft on the Moon — has a deal with DHL to allow the mail company to manage logistics of lunar deliveries for the commercial spaceflight company and its customers.

The backdrop: Historically, NASA has not taken part in marketing activities for commercial products.

• As the only U.S. game in space for years, those prohibitions naturally limited how much advertising made it to orbit.
• But today, companies like SpaceX, Blue Origin, Rocket Lab and others don't have those restrictions.

The catch: The idea that the night sky and space in general could be polluted by advertisements and marketing campaigns doesn't sit well with some.

• Rocket Lab's Humanity Star — a satellite designed to be visible to the naked eye as a piece of art — received major criticism from astronomers for its frivolous nature.
• Pepsi also received negative attention when it was reported that its Russian subsidiary was looking into the idea of buying a billboard in space that would have been visible in the night sky. (A U.S. law prohibits the launch of any ad that could be seen from space with the naked eye.)
• Brands should make sure their space marketing and advertising feels authentic, Brian Talbot, the founder of Adaptive Consulting, told Axios.

Yes, but: Some experts think advertising and branding in space could give the industry and space science a boost in prominence and power.

• "We lose a great deal of the population when we treat science or space as some kind of exquisite activity that can't be touched by popular culture or marketing," Mike Gold, a vice president at Maxar and member of the NASA Advisory Council, told Axios.

What's next: NASA's plans to turn over more operations on the space station to private entities will open up more opportunities for brands to conduct marketing activities.

Go deeper: The new global race to space

Sign up for Miriam's weekly newsletter for more on the science and business of space — from the latest industry news to the wonders of the Universe.

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