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What's going on?

A new report from investment bank Morgan Stanley advises clients to shy away from stocks but WeWork may have a workaround for that…

What does this mean?

Global stock markets are up 16% this year. But with economic conditions worsening worldwide, Morgan Stanley thinks that company profit forecasts look overly optimistic and so, therefore, do stock prices. Compared to other investments, the banks recommendation for stock ownership over the next three months is its lowest in five years. And thats assuming that therell be helpful interest rate cuts in 2019…



When shunning stocks, investors often turn to bonds instead. Government bonds have been in much demand recently but corporate debt is getting love too. Enter WeWork: it emerged late Sunday that the coworking space company is planning to raise up to $4 billion of new debt to shore up its finances before going public later this year.

Why should I care?

The bigger picture: WeWorking the system.

If Morgan Stanleys right, there may soon be less demand for stocks including WeWorks forthcoming public shares. The firms already had to work hard to sell itself: earlier this year, Japanese conglomerate SoftBank significantly lowered the size of a planned investment. While viewed as risky business by several investors, building up a war chest should help WeWork steel itself against any potential downturns and make it less dependent on investors cash when it does go public. If it raises enough fresh cash, it may even offer fewer shares for sale potentially making those that are available more attractive to investors and avoiding an Uber-style first-day drop.



For markets: Also not selling stock: Deutsche.

Deutsche Bank released details of its major restructuring plan on Monday. Crucially for investors, the bank said it wouldnt need to raise extra money by selling new shares something that couldve watered down the value of the stakes held by existing investors. They nevertheless sold Deutsches stock down 5%.

 

Originally posted as part of the Finimize daily email.

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