What's next for WeWork

Situational awareness: Adam Neumann isn't the only CEO without a job this morning. Kevin Burns is out as CEO of Juul, and Devin Wenig has stepped down as CEO of eBay.

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1 big thing: WeWork picks up the pieces after ousting its CEO

By: Dan Primack ? Newsletter: Axios Pro Rata

Founder and CEO Adam Neumann was fired on Tuesday in a boardroom coup that he enabled by recently changing governance terms.

State of play: He remains non-executive chairman, but is no longer an employee and didn't attend a company all-hands meeting yesterday. Adam's wife Rebekah, who had been WeWork's chief brand officer and head of its WeGrow education unit, is also out.

Then there are WeWork's investors, who have seen the value of their shares plummet over the past month. Even if lead backers SoftBank and Benchmark believed Neumann was a cancer that needed to be removed, their surgery was stunningly sloppy, thus exacerbating the damage and hurting their own reputations in the process.

• And, for SoftBank, there will be even more scrutiny on its strategy of pushing growth at all costs — with Neumann, that was like sending a kid into a doughnut store with a credit card.

J.P. Morgan may still have WeWork as a client, but its reputation took a major hit. The bank played multiple sides here — IPO underwriter, lender to the company, lender to Neumann, investor, debt syndicate arranger — and kept trying to sell Neumann to prospective investors until the bitter end. It has a lot riding on Wednesday's Peloton IPO.

WeWork employees are apoplectic. Not because Neumann has a vocal booster club like Travis Kalanick after his ouster, but because they had been told to expect a liquidity event. Even if they blame Neumann, it doesn't change the lack of change in their bank accounts. Particularly for those who might have expiring options.

• The company promoted president/COO Artie Minson and vice chairman Sebastian Gunningham to co-CEO roles. There are no current plans to launch an outside CEO search.
• Minson is a "make the trains run on time" sort of guy, coming from another company (Time Warner Cable) that required lots of upfront infrastructure spend and long-tail payback.
• Gunningham is the "high growth" guy, having previously spent a decade at Amazon (most recently leading its marketplace unit).
• Yesterday they told employees that very difficult decisions will need to be made (i.e., layoffs and unit closures) and acknowledged that WeWork will require some sort of capital infusion (it has $2b of cash on hand and is owed another $1.5b next year from SoftBank).
• An IPO remains possible, but highly unlikely. As an inside source said to me Wednesday: "The markets might just need a break from WeWork for a while."

The bottom line: Almost everyone lost here. But WeWork isn't vaporware. It has a real product with lots of customers and revenue. A sequel remains possible.

Go deeper: Pro Rata Podcast: WeWork and the cult of the founder

Sign up for my daily newsletter Pro Rata for insider views on deals and dealmakers in venture capital, private equity and mergers and acquisitions.

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2. The market just wants a U.S.-China trade deal

By: Dion Rabouin ? Newsletter: Axios Markets  

Illustration: Sarah Grillo/Axios

Bullish stock traders have taken just about every opportunity to buy U.S. equities after positive news about developments in the U.S.-China trade war this year, but both the S&P 500 and Nasdaq had their worst day in a month on Tuesday as obstacles to that deal mounted.

What's happening: Stocks reversed earlier gains after President Trump addressed the UN and accused China of failing to keep its promises and engaging in predatory practices that had cost millions of jobs in the U.S. and other countries.

• "Trump's comments to the U.N. were very antagonistic toward China. In the last couple of weeks there's been optimism trade would go in a positive direction," Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, told Reuters.
• "It was the tone and the fact he listed out in great detail all the gripes the U.S. has with China."
• "All that trade optimism that's been building has been sucked out of the air and replaced with pessimism."

U.S. stocks fell further after Congressman John Lewis committed his support for impeachment proceedings based on reports Trump pressured Ukraine's president to investigate former Vice President Joe Biden and his son by withholding U.S. aid.

• “This is going to be news that spills out over time, but I can’t imagine the start of this process improves the tone of the U.S.-China trade talks … if I’m China I feel empowered," Art Hogan, chief market strategist at National Securities, told CNBC.
• "This is a market that’s been hanging on that tone getting better and I think it just got worse on the president’s hawkish tone at the UN and this process."

Where it stands: The impeachment inquiry House Speaker Nancy Pelosi announced Tuesday doesn't realistically portend a Trump exit from the White House, but it does further cloud what the market can expect from government policy, said Marc Chandler, global market strategist at Bannockburn Global Forex.

• “My sense is the impeachment is well ahead of the country. I don’t think it’s going to be successful, and ... I don’t think the country is behind it. It just adds to uncertainty,” Chandler wrote in a note.

Go deeper: China cancels U.S. farm visits while Trump holds out for a "big deal"

Sign up for Dion’s Markets newsletter for a daily look at the news, trends and intrigue dominating business, finance and markets.

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3. Vox Media acquires New York Magazine parent company

By: Sara Fischer ? Newsletter: Axios Media Trends

Photo: Vox Media

Vox Media, the D.C.-based digital media company that's home to several popular internet brands, like Polygon, Eater, SB Nation and others, agreed to acquire New York Media, the parent company to New York Magazine, on Tuesday in an all-stock transaction. Deal terms were not disclosed.

Why it matters: New York Media has been in the hands of a private family trust for years. Its sale underscores a growing trend of media companies consolidating either for stability, survival or growth.

Details: According to a joint statement, New York Media CEO Pam Wasserstein, whose father purchased New York Magazine in 2003, will continue to run New York Media's properties while also overseeing strategic initiatives for the company, including commerce and consumer businesses.

• Her new title will be Vox Media president, and she will take a seat on Vox Media's board. Vox Media Chairman & CEO Jim Bankoff will remain in his role.

The backstory: Reports surfaced last summer that Wasserstein was looking for a buyer. She ended her search in June after speaking with Vox, the New York Times reports.

• "As I began talking with Jim about what the future might look like together, it quickly became apparent that our companies pair incredibly well," Wasserstein said in a statement.

Be smart: New York Media, which also owns a handful of digital news and culture sites, like The Cut, The Strategist, Grub Street, the Intelligencer and Vulture, has in many ways grown its company in a similar fashion as Vox Media. Both started out building digital first brands that they later commercialized through other revenue streams.

• Both own their own custom CMS (content management) software businesses that they license. And both license storylines to studio production teams for money. (It was announced Monday that New York Media would sign with the same talent and content licensing agency that currently works with Vox Media, WME.)
• Where they differ is that New York Media brings a strong commerce brand to the combined company, while Vox Media brings a strong podcasting business.

Yes, but: Don't expect the content to change all that much, at least for now. While the companies say they look forward to "opportunities for collaboration," the editorial networks from the two companies "will remain distinct."

• New York Media brands will continue to be led by New York Media Editor-in-Chief David Haskell and Vox Media brands will continue to be led by Vox Media Publisher Melissa Bell, per the joint statement.

The big picture: Digital media companies, especially those like Vox Media with venture capital funding, have struggled to grow their businesses meaningfully over the past few years, resulting in fire-sales and layoffs.

• An over-reliance on advertising revenue at a time when Big Tech companies began to dominate the online advertising business is generally blamed for many of their downfalls.

By the numbers: Per the Times, the combined entity "is expected to generate more than $300 million in annual revenue and will be profitable."

• Vox Media, which was once valued at $1 billion, and has raised over $300 million in funding. Reports have suggested that is was profitable in 2018.
• But New York Media was reportedly losing money before a recent upswing, per The Times.

Our thought bubble: For the past few years, a narrative has been built that digital media companies need to scale to compete against tech giants for ad dollars. This merger shows a new strategy that could potentially be the start of a different trend: Merge to combine complimentary assets, not eyeballs.

Go deeper: The risks of VC-backed media

Sign up for Sara’s weekly Media Trends newsletter for a look at the trends reshaping the digital media ecosystem.

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