More on the case that started tuesday. And who is laughing now . Netflix cofounder Mark Randolph says blockbuster left at the companys original movie by mail service. We will hear his latest thoughts on streaming wars and tech culture. First, it finally happened. Wework is pushing back its ipo. What was once one of the most anticipated debuts of 2019 is now postponed to october. They are looking to calm doubts. At this was the post to be a 47 supposed to be a 47 billion company. Now that number is about 15 billion and perhaps smaller. Joining me to discuss, phil haslett. And, in new york, crystal tse, who has been covering this troubled ipo. What was the problem today . Is it valuations, financials, or governance problems . All of the above. The simple answer is they have a lot of things to address before they can go to the investors again and ask them for their money. They were looking for a 47 billion valuation, and now we are hearing it could be as low as 12 billion to 15 billion. There have been a lot of changes to governance, but investors are looking at valuations, whether they will improve financials, and whether more is needed for them to be convinced about the valuation . Taylor this morning on the open, there were comments as it related to the valuation part. Take a listen. The valuation is really a wakeup call to private investors that the Public Markets are holding them accountable. The specific reason i think this report reflected that is the amount of cash burn, a consistent theme and your setup addressed this. Companies losing a lot of money are being held to lower valuations. A half,a billion and which is more than what tesla lost to put that in perspective. Phil i would say wework is kind of in a space of its own. In 2018. St 2 billion i think a mix of lyft, uber, and wework planning to come public in 2019, i think we are seeing the largest losing companies. We are seeing companies that are burning only 100 million, 200 million in cash. Wework is an exception to the norm, but writing off 37 billion of value over a period of 34 weeks will catch the attention of capital investors. Taylor we can joke about how you Value Company using a discounted cash flow to evaluate company that does not have cash flows. On a serious note, how do you value this company . We started by, looking at a multiple of revenue. The first thing we found, they were trading at one or 1. 5 times revenue. Wework earned 2 billion revenue in 2018, so to come out at a valuation seemed ludicrous. I think the biggest thing for wework is trying to explain itself as a Technology Company when it is really a Real Estate Company that has some technology bells and whistles. This really is a wakeup call to recalibrate expectations in q4 or later in 2020. Taylor bondholders also had a recalibration. The price of those wework bonds are falling a record amount this morning, as low as 95, no hovering . 97 on the dollar or so. How nervous do bondholders continue to be . Some of this is contingent on how the ipo performed or whether it will happen at all. Wework put out a statement saying they were committed to finishing this ipo within the end of this year. That should give bondholders a little bit of confidence. The valuation continues to be the biggest concern. Some of that is tied to how well they perform. If it becomes a 15 billion company, bondholders are going to get nervous. Taylor talk to me more about that valuation. What does the private market see that the Public Markets are missing . Phil one thing we saw is that there actually wasnt that much interest for wework, particularly at the valuations it had obtained. We saw much healthier markets for companies that went public recently, Companies Like docusign, slack, that were little bit more popular with investors. We would have expected to see something similar with a company like wework because the brand is so ubiquitous. There was hesitation from investors at that rocky valuation. If you get north of 20 billion in valuation, you are not talking about hundreds of unicorns anymore. The number drops precipitously. Particularly when you have that valuation coupled with losses, 2 billion, it was kind of a recipe for disaster. We have been in very much a bull market in private stocks, and that has led to terms on how they raise capital. At some point, you are going to have the pendulum swing. When you have this kind of headline, a cut in valuation , it will really start to shift those numbers over to investors that will ask for more Corporate Governance and other aspects within the cap structure that they feel more comfortable with. Taylor you mentioned that 6 billion financing was contingent upon raising 3 billion with that ipo. Assuming that doesnt happen, when does wework get more cash and where . Crystal i think the simple answer is they always need to get more cash as soon as possible. If the ipo does not happen by the end of the year, they may look into tapping into softbank to get more funding. There were some talks about softbank being willing to put another couple hundred Million Dollars into the country. Into the company. That would not move the needle. They want an ipo to recapitalize. Taylor quickly, any ideas on when is the drop dead deadline for raising more cash . Phil i have to think they want to push this over to 2020 but only about 3 billion, 3. 5 billion of cash available to them, this could get messy. Particularly if a lot of lenders have promised capital if they raise their ipo before 2019. They will put them in this tight bind. If i were them, i would spend the next quarter really tightening the belt, trying to overhaul spending, negotiate with some of the banks. Taylor phil haslett and crystal tse, thank you. Coming up, apple says it is the worlds biggest taxpayer and is playing by the rules. The latest and the eus battle with the u. S. Tech giant, next. This is bloomberg. Taylor apple told a European Union court that it was unfairly painted as a tax dodger. In luxembourg, an apple lawyer said in fact the company is the worlds top taxpayer. Apple is urging the eu court to overturn a ruling that they have to pay 14 billion in back taxes to ireland. Apple is coming facetoface with european regulators and the biggest tax case in the world. The company has appealed a 13 billion euros fine imposed in 2016. The idea behind it according to the europeans is that apple received special tax treatment from the Irish Government which allowed the company to pay artificially low taxes. Apple says this is not the case and has appealed. If you are hoping to get a sorry moment from the company, that was not the case. Apple said they pay the most tax in the world and claimed the decision from the europeans lacked any logic or sense, and they believe the numbers were tweaked in a way that presented apple in a bad light. Essentially, pretraining the company is paying no taxes. If you look at the european side, they tell you that they still believe they are right, that it is pretty obvious that apple has set out a tech tax structure in europe to pay the least amount possible. They do believe, if the arguments are validated or vindicated by the courts, they can continue to get tough on American Tech Companies to make them pay more in europe. Of course, this tax cases are happening as tensions continue to play out between the United States and europe over big american tech. The president of the United States donald trump has said many times that this is only happening because the europeans cannot compete on the innovation, so they must compete on the taxation. When it comes to the eu, they deny this is the case, and they say they just want everyone to pay their full share. Apples tax more on issues in the eu, i am joined by tim, president of creative strategies. He has covered the field of computers and technologies since 1981, and served as a consultant to Companies Like apple my ibm, and microsoft. What do you make of the fact that apple has said, we are the biggest taxpayer in the world . Tim from an actual numbers standpoint, they probably are. Apple is also one of the richest in the sense of their overall market value and the amount of money they bring in every year. To understand this, you have to go back a little bit to the beginning where apple did this deal as part of a partnership with the Irish Government in 19881989 when the Irish Government was very concerned about what they call the brain drain. They were literally graduating hundreds of engineering and business students, but there were not enough jobs in ireland to fill the needs or fill the jobs for these kids. They went to europe, the u. K. , france, the u. S. The government was concerned that the only way they would allow these kids to stay yen was to lower other companies, especially Tech Companies, into ireland. Over this time, apple has built up over 6000 jobs and contributed greatly to the irish economy. So that original tax structure was based on bringing apple in and that is what they continued to do until about 2015. Taylor like you said, negotiated in good faith and now having some of that reversed on them. What does that mean for apple in future dealings with ireland and the eu . Tim that is part of the problem and that is why i believe apple and Tech Companies that could be in the crosshairs will fight this. What the eu did is they changed the laws and the rules in 2010 and they are now finetuning them. Think of yourself as an american company. If you went in with a series of agreements and all the agreements got changed, that puts you off. If i was an american company, i would be concerned about investing in europe. That is why these American Companies really are looking at expanding into europe because it is great for distribution, customer service, at this point it sets a bad precedent. Taylor any thoughts on companies that start to feel the ripple effects if that goes through . Tim im sorry, repeat that. Taylor what companies would be next in terms of feeling the ripple effects if this fight does continue between apple and the eu . Tim at this stage, it is a little unclear. There are other Companies Including hp, microsoft, others, who might want to do more expansion. That is not exactly clear. A lot ofom talking to companies here, they are watching this particular case very closely because it will be factored into whether they actually do expand into europe in the future . Taylor perhaps the eu not concerned about that from this lawsuits perspective. That was tim bajarin, president of creative strategies. Thank you. Coming up, more from the interview with ibm ceo Ginni Rometty. She discusses the huge role diversity plays in the company. Bloomberg technology is Live Streaming on twitter. Check us out technology. This is bloomberg. Taylor sony is rejecting a suggestion by activist investor dan loeb to selloff some of its businesses. They are planning to hold onto both units. Sony says that computer chips are key to growth and that retaining Financial Services will enable the companys value. Loeb disclosed a stake in sony three months ago. Ginni rometty started at ibm in 1981, became ceo in 2012, and has overseen a dramatic repositioning of the company as the tech space continues to evolve and transform. Important, as Technology Takes over our daytoday lives. Caroline hyde spoke to her about how diversity is key to the relationships with employees and customers. Ginni i deeply believe in responsible stewardship of technology. People have got to trust these systems. The second is that you have to prepare society for them. The third is around diversity and inclusion. For as long as i can remember, for ibm, it is what the firm has been built on. Even longer, from the very beginning. I have really grown in that environment. The first woman Senior Vice President was 1943 and she was 27 years old. Then i fastforward, in the time in america, for the civil rights amendment, 11 years before that amendment, 11 years before that had declared all of the same points. It has always been about that you have got to get the best workforce, and the set of values so people can come to work and give their best. That is really what it is, give your best out there. Then you jump to, if you build those technologies, you have to build them with a diverse workforce. Especially with artificial intelligence. You have to represent one of the biggest things around bias. Ofhave built a lot technology to identify if there is bias. There is good bias and bad bias. We built something which treats cancer patients. I was told, you have only trained it with three institutions. We are like, they are the three best in the world, is that a bad idea . We are talking about serious decisions. This idea of who trains things, otherwise you will get there have been many examples of this out in the world. It has been completely oblivious to whether it is gender or whatever it is. It has made the wrong decisions, so you do need a diverse workforce. Caroline i think that is fascinating that you are talking about trust, ethics, bias. Things plaguing technology in the u. S. And worldwide at the moment. Do you feel that corporate leadership in the u. S. Is taking this on board . Some of the jarring that technology brings. Ginni i think this is a very key point. Business needs to. If society cannot trust these technologies are us, you cant operate. I have always felt the reason ibm is 108 years old is that society has given us the license to operate. You can only do that by your actions. Your actions, what you say you hold to your values. We manage 90 of the worlds financial transactions, credit Card Transactions come 80 of airline reservations, mobile phones. You have got to trust. You have to trust that we dont handle that data wrong. First, you have to have a set of principles. We wrote them down because i said, this time, we had better write them down and make sure everybody understands that we feel we have always lived by them. You have to articulate them, live by them, be willing to be audited, and everyone has to generally agree. To me, they are very simple. The first one is, the purpose of technology is to augment what man does. Man as in mankind. I have something to say, my people, what they do. The second is and this is really key data, its ownership, insights, and especially true with ai, the models, they belong to the owners of data, the creators. The third, for these models to be trusted, they must be explainable, free of bias. I have learned this as we bring out the technology to doctors, actuaries. Their first question is why. You have to explain it to them, or they will not trust it. You have to have a set of principles and live by them. They are deeply rooted in your own values. I think this is trust, one of the determining factors of this era. You have to be clear what they are. You have got to live by them. In history, a government would say, can i get into your software . No, we never put a backdoor in our software. In the United States, when we were asked, would we support legislation that said, if we knowingly had child sex trafficking on our cloud, would we be liable . That only took me five seconds to answer. Yes, knowingly. These are based on a set of values. Society has to know you will do that. I think in this day and age, being clear. There should be regulation, but i call it precision regulation. I am very afraid that if it is overreactive, you will derail the whole digital economy. Go after the bad actors. Consumers have the right to know what data you have, delete it, correct it. If someone misuses it, there should be regulation, particularly for things against the wall. Against the law. Taylor that was our exclusive interview with ibm chairman, president , and ceo Ginni Rometty. A reminder to tune in tomorrow on bloomberg technology. We will bring you more of our conversation with Ginni Rometty and you can go online to catch the full 30 minute conversation. Oracle has unveiled an operating system that runs without the need for human oversight. It is part of a line of new Software Tools that will make it easier for the company to transition to cloud computing. Oracle is the worlds second largest Software Maker and is trying to revive sales growth after years of stagnant revenue. Coming up, wework wont work in Public Markets as they delay the contentious ipo. Will this cause other companies to rethink going public . We discuss, next. This is bloomberg. Taylor this is bloomberg technology. I am taylor riggs in san francisco. Back to our top story of the day. Wework has announced it is putting off its troubled ipo, planning to list by the end of the year. , it was expected to be valued at 47 billion. Now it is expected it will be valued at less than a third of its original valuation. Is this an issue of timing or valuation . Nicole quinn joins me now to discuss. Are you surprised at all around the volatility of wework . With regards to wework, it has been an interesting one if you think about it. In the first half of the year, they had 1. 5 billion in revenue. They also had 1. 4 billion in losses. There was probably a day when the market was ok with that, but the market right now is not comfortable with that. You have seen that with uber, with lyft. The market is not comfortable with those losses. I am an early stage investor. My prior career had been at Morgan Stanley taking a lot of these companies public. We would say we really need to see a line of sight in the next 12 to 24 months profitability , and that is what i think is lacking here. Taylor within your decades of experience bringing a lot of these companies to the Public Market, is the Public Market more than ever being more discerning . The companies where, frankly, like you said,