Everyone is going bankrupt
- This post originally appeared in the Insider Today newsletter.
Hello! How strong do you think your closest relationships are? Give the "bird test" a shot and see how your partner stacks up.
In today's big story, we're looking at why WeWork's bankruptcy filing could be the first of many.
But first, the actors' union SAG-AFTRA announced Wednesday evening that it had secured a tentative deal with Hollywood studios to end a strike of nearly four months. That means some film and TV productions will be starting up again.
What's on deck:
- Markets: An oil giant usurped Tesla as the most-shorted stock.
- Tech: Leaked numbers reveal the fastest-growing product at Google.
- Business: Read this before you start your next group chat.
And now, we should restructure some things.
The big story
Businesses beware: It's about to get ugly.
WeWork, the real-estate company that cosplayed as a tech startup, filed for Chapter 11 bankruptcy this week. It's not exactly a shocking resolution for WeWork, which first showed signs of its demise during a disastrous IPO attempt in 2019.
But one Wall Street veteran believes WeWork will be the first of many companies to succumb to a similar fate. In a recent note, New Constructs CEO David Trainer said hundreds of "zombie companies" — unprofitable businesses holding significant debt and burning through cash — will also file for bankruptcy, writes Insider's Jennifer Sor.
Trainer's concerns aren't unfounded. More US companies filed for bankruptcy in the first eight months of the year than the total number of bankruptcy filings in 2021 and 2022, according to data from S&P Global.
Defaults on corporate debt have also been on the rise globally, per another S&P Global report. Bank of America estimates we'll see $46 billion in distressed debt next year.
Rising interest rates have been a key culprit.
After years of a near-zero rate environment, getting money became a lot more expensive. That type of change throws quite a wrench in your plans if your business strategy amounts to burning cash while you figure things out.
WeWork kicking off a hypothetical bankruptcy boon is fitting.
The former startup was the poster child for Silicon Valley's time-honored strategy of not letting a balance sheet get in the way of a good story (see: high valuation).
But those days are long gone now that venture capitalists have tightened their purse strings. That's resulting in a cash crunch for late-stage companies, forcing them to fold or sell off their best assets, writes Insider's Vishal Persaud.
It's not just formerly high-flying tech startups, though. Small-business bankruptcy filings are also on the rise, according to The Wall Street Journal.
Of course, you wouldn't know things are so bad from WeWork's bankruptcy announcement. The message reads more like a company on the rise than one legally acknowledging it can no longer pay its debts, writes Insider's Katie Notopoulos.
Because if we've learned anything from the WeWork debacle, it's that no one has learned anything.
3 things in markets
- Can the stock market keep this momentum going? After a difficult few months, the S&P 500 and Nasdaq Composite indices are in the midst of their longest winning streak in two years. But, analysts are split on whether the past few weeks are an outlier or the beginning of a bigger rally.
- Jeff Gundlach sounds off on US debt. The Bond King is worried about the $33 trillion debt mountain the US has accumulated, warning a recession is on the horizon. Here are the top quotes from a recent interview with the billionaire about "exploding" US debt expenses.
- Don't — or do — bet against these companies. ExxonMobil surpassed Tesla as the most-shorted stock in the S&P 500, according to a new report. Other companies investors are betting against include Apple and Airbnb. Check out the top 10 here.
3 things in tech
- Experts reveal how to adapt to AI entering the workforce. They suggested developing skills that AI can't so easily replicate. That includes people skills and learning how to write good prompts for AI.
- Amazon is reportedly racing to build a competitor to OpenAI's ChatGPT and Google's Bard. Amazon has doubled down on investing in AI. And its new AI model — reportedly codenamed "Olympus" — will likely be incorporated into Amazon's online stores and smart speakers.
- Leaked numbers: Google's fastest-growing product is YouTube TV. The company found that using TVs and tablets boosted watch time. Plus, YouTube has been making recent bets like partnering with the NFL to stream games.
3 things in business
- A modern etiquette guide for group chats. The group chat has become the room where things happen now — for better or for worse. So remember the official group chat rules, including the perfect size, when to mute it, and never responding with "ha."
- Uber co-founder Travis Kalanick's $15 billion ghost kitchen company lays off staff. Before the Wednesday layoffs, his company had more than 4,300 employees. It comes amid a difficult market for tech with inflation, higher interest rates, and other headwinds.
- Real-estate investor shares the secret to getting a 5% interest rate. Matthew Tortoriello owns over 700 rental units and has been able to secure rates as low as 2%. He revealed that there are ways around high interest rates, including seller financing.
In other news
- Courts force people to download Covenant Eyes, the porn blocker used by Mike Johnson. Even the app's CEO says they shouldn't.
- How I got my job as Twitch streamer Kai Cenat's assistant thanks to an Instagram DM — and a zebra.
- The New York Times got its content removed from one of the biggest AI training datasets. Here's how it did it.
- FDA just approved Eli Lilly's new weight-loss drug that's cheaper than Wegovy — and stronger, too.
- Inside Goldman Sachs' exclusive training program for HBCU students that can result in $1 million in prize money and a prestigious job.
- An Airbnb "tenant from hell" who stayed at a California rental for 570 days without paying has finally left the property.
- X staff almost asked police to carry out a wellness check on Elon Musk after he once locked himself in his office, author says.
- Mark Zuckerberg says WhatsApp is the "next chapter" for Meta and could become a bedrock for business messaging.
- CHART OF THE DAY: US bank stocks hit all-time low relative to the S&P 500 as bond crash weakens balance sheets.
What's happening today
- Happy World Freedom Day. It marks the anniversary of the Berlin Wall falling in 1989.
- Have an Unforgettable birthday, French Montana! Scarface and Sherrod Brown were also born on this day.
- Earnings today: Groupon, News Corp, Sony, and other companies.
For your bookmarks
US phrases that don't fly in the UK. From "pants" to "quite nice," some phrases don't hit the same abroad.
The Insider Today team: Dan DeFrancesco, senior editor and anchor, in New York City. Diamond Naga Siu, senior reporter, in San Diego. Hallam Bullock, editor, in London. Lisa Ryan, executive editor, in New York.
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