♪ taylor: i am taylor riggs in san francisco in for emily chang and this is "bloomberg technology." coming up in the next hour, fed scrutiny. we work faces possible rules violations. plus the multistate investigation into google's ad business extends to its android operations. we will have the latest. the week that was. disney's new streaming service

proved to be the new magic kingdom while the apple kingdom -- apple card can't shake its controversy. first it's all about our top story, we work. they're set to face the securities and exchange inquiry into possible rules violation into the run-up of its failed ipo. the agency's review was said to be preliminary and may not lead to an enforcement case. the company at one point was worth 47 billion dollars before it fell out of favor and needed a bailout from softbank. -- more outlets bring in congratulations on the story. what we know so far about the inquiry? an inquirythere is happening. it is early, preliminary, we don't know what might come of it. we do know that we work has taken steps to respond to it.

they have hired who used to be the head of the sec enforcement division who now works in private practice coming on to help them respond to this. this is also coming from the sec enforcement division, the part of the sec you don't want to hear from. although we don't know exactly what is prompting the probe, we noted in our story this is something that is somewhat expected given all the coverage happening around wework, you might expect acc to kick the tires and see what is going on -- expect the sec to kick the tires and see what is going on. taylor: is it expected given high-profile the company was or more indicative that something more serious is going on? >> this is more predictive that it is a failed ipo and it was a prolific ipo. that being said we all know that

adam runs an aggressive styler when it comes to management. there might have been may be some aggressive accounting going on within the firm. i think that is as far as i would want to take it at this particular junction. about aggressive accounting. one thing that caught my eye was community adjusted ebit. you know more than i do, what the heck is community adjusted ebit? barry: being a read analyst i'm used to non-gap measures. that is kind of par for the course. it is just a way for wework to get the investors to concentrate

with the individual units are throwing off. then they said let's look at the other cash being spent to bring new ones on board. is it straight down the middle type of accounting or the way to look at things? no, but to be honest i did find it a little helpful. not that i was relying on it, but i did find it helpful. talor: are the financials the biggest concern for the sec at this moment? it is interesting to look at the evolution of the s-1 document. community adjusted ebit was one of the more intimate adjustments that showed up when they started selling bonds. it came out with documents

associated with the bond sale. if you look at the past early drafts of the s-1 on the sec website, community adjusted ebit a is there until may or june, and then it is cut from the draft and not in the final perspective made public in august. --seems a hind the scenes behind the scenes they prepared for what they thought was an ipo they were adjusting some of their metrics as well. i don't know what the sec is the most concerned with, but that could raise eyebrows. catch: did anything else your eye? the valuations, the conflict of interest? what other potential violations, for lack of a better word, stood out to you? we have been over the corporate governance and the way adam was paying himself $5 million he was trying to get

personally for the wework name. we saw that in the document. with the revised this one, that was not there. we see aggressive things kind of going on within the document that is -- that investors want to see changed. taylor: what would you like to see from the company next? barry: i think with a new management team they need to really hone in on showing a profit. i think in order to do that with a need to do is kind of stop the signingte and stop new leases. maybe not cut it to zero but pulled back on signing new leases and concentrate -- but pull back on signing new leases and concentrate on projects already in the pipeline and

getting those units to stabilization when i was looking of thes-11 about 1/3 units were stabilized. that is another 2/3 in a process trying to get to stabilization and full occupancy. if they can concentrate on that they will show profitability. like anything in life, there's no such thing as a free lunch, but by doing that what you're going to do is slow the future growth rate of this company. that's why the valuation got a fairlyecause you had big company doubling revenues every 12 to 18 months. there aren't a lot of big companies doing that. the valuation will have to come off given the fact they aren't going to have that growth rate going forward. taylor: you just heard the focus on profit if you look at the chart in my terminal. we know that bondholders are not

happy the way the company is being run. what do you need to see from the company about their spending plans and profitability? ellen: people are going to be watching that. goingexpenses have been through the roof. the company on wednesday gave third-quarter earnings, which they shared with bondholders, something they've done for the last year and a half, and we were able to get some of those numbers and it showed wework lost $1.25 billion in the third quarter. this is at a time they only had a revenue of $970 million was not that is astronomical losses. people are going to see if the company can turn that around. our sources say part of the reason for that big loss comes from hiking up their expenses in anticipation of going public. they wanted to show strong topline growth in the first quarter or two as a public company. they set in motion a lot of

things like getting new leases and buying out furniture, but it was hard to stop that halfway through was that we may see bleeding losses into 2020. foror: thank you both joining. softbank has quietly completed its initial push for its second technology fund. the japanese company has raised roughly $2 billion for the second vision fund so that it can start backing startups. at this stage is known as the first close, and softbank will continue gathering commitments. a spokesman declined to comment. the probe into google's business practices is getting wider. details on what new areas regulators are focusing on will set that's next. this is bloomberg. ♪

taylor: the probe into possible antitrust behavior by google is about to get bigger. multiple u.s. attorneys general are looking into the company's ad business, and they will put the lens to google search and android software. the search into ads. joining us in d.c.'s ben brody, blogging efforts. what do know about the additional probes going on? >> we know the attorneys general divided responsibility for these probes at a meeting early this .eek on monday in denver basically the attorney general wanted to expand some of these. they were staffing questions, so they decided they were going to expand and did deeper into the

issues. it is an interesting issue set. search and android are issues where google has already faced problems in europe. there are cases that have been made, there are known complainers. this is an issue google has been fighting for many years. it's a playbook i know how to do. on the other hand this is a well trod road by enforcers, particularly the android stays there are echoes of the microsoft case. they are going to go down that road now. taylor: which is ou alphabet most worried about when it comes to antitrust? an interesting question. they've already faced a lot when it comes to android in europe. the ad tech one, it is a system where google has done a lot of acquisitions over the years. you can really trace google's

dominance over ad tech. it is something that even those who invest in companies like trade desk are fuzzy about what is going on. when i asked people in the states, explain google dominance in ad tech they take a deep breath and say how much time do you have? it is something that will be complicated for regulars to wrap their head around, and that complexity makes it tough to punch to the heart of the matter . when you look with the states sent to google asking for information, you can tell the person that wrote that was very well-informed. the states are bringing their big guns to the battle. google needs to be careful, because in some parts of the ad tech market they have up to 90% market share. taylor: in your opinion, is this multipronged probe, different probes by different attorneys general helpful, or does it appear not targeted? it is the same here in washington when you go after

people on a lot of different ily.es regulator something shakes loose. it's not necessarily what you want. i don't think the attorney general are worried about the optics of the probe. they will want their document demands going forward to look as specific as the ones they issued on ads. they have to buckle down and learn how they're going to do that. we will see how specific it is when it comes out. taylor: what is alphabet and google saying about how they are interfering with search algorithms and not fact checking local searches? >> alphabet is not saying a lot about some of these criticisms. there was a report in the wall street journal. a lot of those criticisms are long-standing competitors of google had said they feel the

algorithm is sometimes unfair, it's a black box they can't understand how it works. google says it needs to be a black box so people can't game it and get ahead of it in ways google and users wouldn't want them to. they have cues without proof that google is suppressing political viewpoints and toning things down. will has talked about these things when they've come up, and they said -- google has talked about these things when they've come up, and they said our policy is to keep things fair. regulators really want to look inside the black box, and google doesn't want them to at all. it's going to be a tough fight going forward. taylor: thank you both for joining. it was a tumultuous third-quarter stirred by escalating trade war with china. hedge funds made alibaba a top by. spending big on the fund that

tracks the s&p 500. for the second straight quarter uber was among the most favored stocks, while disney and microsoft shares saw heavy selling. if you want to look at the chart i'm showing in my terminal it is alibaba continued to advance against competitors like tencent , expanding that market share. what is your take on alibaba and the buying behind it? >> it is a nice sign. alibaba was the biggest buy by volume. very popular with hedge funds by that tiger club, which is very tech savvy. uber was another big buy, but they are buying off of lows. with alibaba they had a record single day. it's interesting to see a chinese stock that high up given the trade tensions. with that said it's a good sign for alibaba, which, as we know, is doing a humongous listing in hong kong as well.

taylor: is it notable that huber was a favored stock right before the lockup expired? >> it was. you had so many people buying. we had it as the favorite stock the second quarter when a lot of the tiger cubs, big technology funds, they are very heavy on technology, bought in the second endured and declines. it's not that everyone loved it, but in aggregate it was loved and people do love to buy off the lows. whether they stick with that stock over time and where the bottom is will be an interesting question. taylor: where there are winners there are losers. microsoft a big seller given how much gain it has made in its cloud azure products. >> just as people like to buy the lows they like to sell the highs. what is interesting is it's the second quarter in a row again.

at what point is this a trend, and at what point does it become an un-favorite? that is something people didn't love too much. disney, something they didn't love too much. there isn't this universal view on technology that is interesting we are seeing in the stocks. we are seeing winners and losers, with alphabet being very in between. taylor: the winners and the losers is what makes markets. thanks for joining. coming up financial institutions in the u.s. have been investing heavily in cybersecurity after facing foreign attacks in the last decade. this is bloomberg. ♪

taylor: let's look at the top tech calls.

the company gave a revenue outlook that was slightly below consensus estimates. wall street largely brushed they saw. a number of firms raise their price target wringing their average to $220 a share up from just over 200 earlier this week. analyst at barclay think that huber is one major announcement from sentiment turning positive on the stock. food delivery and ride-hailing can be profitable, and we think that huber is one catalyst away from the market realizing it. that is what the analyst wrote. and analysts from bank of america on the black friday outlook raising the price target on the stock to 160 dollars a share. average selling prices on smart tv offerings and a solid set up for fourth quarter account growth, the analyst wrote bastad that is your top tech calls -- analyst wrote.

tech calls.your top morgan stanley believe cybersecurity is about people. she discussed her outlook in an exclusive interview with jason kelly at the 9/11 memorial and museum second annual summary on security in new york city. take a listen. >> i see my mission as an extension of what i've done through my career in national security, which is defending our economic security, given that a big bank is so fundamental to national security. i think you're right. the banking sector is ahead of this problem, and we had to be because new york was attacked significantly in the 2013-2014 timeframe when a group of fighters later identified with the iranian government were doing distributed denial service attacks, launching mass data and websites so people couldn't get

to them and it caused a panic. it illuminated the vulnerability of our critical financial infrastructure. on the back of that banking got ahead of this and put in the right programs, processes, and technology and started investing in that talent so we could strengthen the sector. some things that we have none to come together as a sector and importantly share information, i was encouraged to come from the white house to the banking, to the financial sector to see how much sharing there is, both within the financial sector, big banks are super competitive about talent and business, they are not competitive about sharing information that will keep the sector safe. there is good sharing between the government as well as the private sector, and that will continue to grow and strengthen hopefully in the coming years. >> you talked about the k through gray.

you talk about your own business and the talent gap, how do you fill that? >> we have been successful so far in recruiting the folks we needed with a fusion center. we have reached ready far afield. we had great talent from an engineering standpoint that we brought in to build the center, but we have gone to academia, the military, the intelligence community, we have built a village, because it takes a village to be successful in cybersecurity. developers and programmers, but analysts that can help you understand the cyber threat environment. you need responders who can reverse engineer malware. you need crisis managers to deal with a major threat or vulnerability. it is building this fabric of talent brought in from places

all around the world. we are in new york, baltimore, glasgow, singapore. we are truly mobile. my biggest challenge has not been recruiting, but retention. in a world where there are so many opportunities for cyber cultivate anave to environment that allows you to retain that talent. from my experience leading troops in peace time in combat, you need an environment of psychological safety where people can bring their imagination. they feel they are actively listened to, they can bring great ideas to the table. that is the key to retaining your best and brightest. the was the global head of cybersecurity center at morgan stanley. we look at this week's top tech stories, including disney's massive launch of disney plus.

that's next, this is bloomberg.

taylor: this is "bloomberg technology." i am taylor riggs in san francisco in for emily chang. let's look at our weekly top tech stories. disney is feeling the magic of the mouse. 10 million customers in one day of launching its streaming platform. the service just became available tuesday in the u.s. and canada. to discuss this and the other top tech stories, bloomberg businessweek's max chafkin. 10 million in one day, does this exceed your expectations? >> it was a job dropper.

dropper -- jaw dropper. this was them coming out. somthis was a homerun coming out of the gate. it is part of a re-rating happening with disney. taylor: rich greenfield told me this week that the loser is not netflix, that the loser is cable . do you agree? >> there is something to what he is saying. take a few steps back. we don't normally see these old established companies do something this big this quickly and suddenly seem capable of catching up to the new medium market leader. if this had happened in another industry people would be blown away. for sure, seeing disney, which was key, and is key to the cable business do this throws into

question their business model. taylor: bear with me while i run through the list. i have hbo now, cbs all access, apple tv plus, disney plus, showtime, netflix. is the joke on me? is unbundling really saving me money? $55 is what the average consumer household will pay in streaming. where it is today, about $30. there is room for one or two streaming players, potentially the third, but also a price point. that is why disney priced the way they did, why apple priced the way they did. it is part of the cord cutting phenomenon, but we believe there will be multiple winners. the prior comment about netflix, i believe 10% to 15% of netflix's core customer base could turn because what we're seeing in disney and apple. taylor: tesla finally clearing

the big hurdle and getting the shanghai factory up and running for mass production. what numbers do we see out of china to reassure investors about profitability and demand? >> this is a huge business story, and huge for tesla.china is the biggest market for electric vehicles in the world. possibleof tesla's growth, it is where a lot of or all of the growth will have to come. it is huge. the fact they were able to get this factory built in such a short amount of time, a number .f months, is really impressive it really cuts against some of the negative narrative we have seen about tesla the last year or so. taylor: with the factory in shanghai, announcing an opening in berlin in bmw's backyard, can

you see profitability going forward? >> that continues to be the biggest variable. you look at tesla, you have to give them credit. musk, look at china is so key. ine three is going to be key supply and demand. in europe, that is also key. the growth will come from europe and china. street anden the bleed these stories. if they hit profitability the stock goes meaningfully higher. if not it continues to be one step forward two steps back. that's why this continues to be be ave me story many -- prove mestory -- story to many. taylor: apple card. successful brand, but this isn't what they do. they stepped in it.

they are getting blamed for this thing that is probably a problem across the board in credit. because apple is saying we are different, this is going to be a different kind of card, this combination doesn't work and throws into question apple's ability to do this kind of thing. clearly they weren't ready for this. taylor: when you write a note you move markets. apple's shares closed higher by 1%. when you look at the chart, apple's market cap in part because of that move outweighs the entire energy sector within the s&p 500 as a whole. you upgraded the stock again today with the high price target of 325 on abril. walk me through your call old in the analysis on the apple card. >> what i do is a super cycle. i think some of the skeptics continue to miss, you have 400 million of the 900 million consumers who are going to

upgrade. you combine that with the services, that is the one-to two -twostock being read -- one to the stock being re-rated. it speaks to apple trying to further monetize. that is the golden jewel for them. definitely a stumble as we saw with apple card, but these are the middle innings of a real rating story. taylor: arguably my favorite time of fridays, recapping our top tech stories. thank you both for joining. held out. google the search giant taking heat for their partnership, but the search giant saying they are doing nothing wrong. that is next, this is bloomberg. ♪

taylor: google's partnership with one of the biggest health care providers in the u.s. is drawing plenty of criticism from lawmakers and prompting a federal inquiry. the search giant is denying it is misusing search data with ascension network. accessve permission to records while they build a internal search engine. they deny that any is being used for their ai. it is great to have you. please explain to me and our audience how this is legal. thanks, it's nice to be here.

it is quite possible that this is completely legal. there are a lot of ways under federal privacy law for health care provider like ascension health to transfer data, even large amounts of data, to a commercial partner. there has to be a specific agreement in place. you have probably seen this in the price, a business associate agreement. google and ascension are pointing to this agreement saying there is a business associate agreement, it's fine. that could be the case, but there are a few pieces that are not being discussed that i think would shed more light on what is going on. first of all, if you have a business associate agreement that is appropriately entered into, there can be a transfer of data from a health care provider to a commercial partner. the commercial partner, by

signing the agreement, undertakes a huge compliance burden. you don't just get the data and go on your way. you have to comply with federal privacy laws, similar to the way the health care partner complies . whether or not you have taken those steps determines whether or not the transfer is appropriate and legal under federal law, and probably with the government is looking for now that they have announced they're looking into the relationship. taylor: you answer the question they seem to be following hipaa guidelines. i think that consumers' next question is what happens when google employees get their hands on this data and misuse it, or there is a hack, which frankly is inevitable. what then? coverage where there is outcry over google employees having access to

identifiable health information, but that's how a business associate agreement works. the commercial partners being given data so they can do things with it, and someone has to receive it and use it at google for them to provide the service to ascension. a breach, which there could be, health information is a high-value target, under federal privacy law, certainly google is subject to enforcement, but ascension will own that reach because it's ascension partner, google, is google gets hacked, that would be -- they would be the victim of the breach or the patient would be the victim of the breach, but google would be the target and ascension would own the breach. everyone would get in trouble. taylor: can you speculate on if this should be legal? >> so i think there are couple

of things to keep in mind. this is not an unusual transaction. health care providers and gauge all kinds of vendors to do all kinds of different things. that require health information. there are basis staggering amounts of health information being transferred to commercial partners to do things for health care providers. it is really an important function of privacy law that this is allowed to happen, because health care providers can't do everything. they provide health care. they don't build platforms or service.egal they provide some legal services to themselves, but my law firm is a vendor of health care providers. providing legal services sometimes require us to access health care information. it's an important part of

federal privacy law that this kind of transfer is allowed. equally important consideration is just because something is allowed under federal privacy law doesn't mean that patients are going to be happy with it. when you enter into any kind of collaboration or transaction you have to consider what i have affectionately named the patient freak out factor. it may be perfectly lawful for one provider to transfer health information to a commercial partner, but will patient freak out when they find out that happened, and we seem to be having that here. taylor: just scratching the surface. thank you for joining. moons and planets in our solar system cap unlimited unlimited- have resources.

andl, entrepreneurs honeybee robotics, a nasa contractor, are confident about the mission and their planetary drilling system. yes, the technology exists. we can put something together, send something to the moon that can mine water. we our a trailblazer trying to figure out what is going on on the moon, what's below the surface. designybee robotics drills using nasa's past missions and have future planned missions to the moon, saturn's moon titan, and jupiter's moon europa. developingbeen high-end drilling systems from high sizes all the way to sizes that can't fit in this chamber.

>> they have long relied on their expertise. unlike everyday drills from the hardware store, there drills overcome the numerous limitations of space which include extreme temperatures and low gravity. >> that means you have to be very imaginative, very innovative, to solve these problems. you have to do what we do here on earth with a fraction of the power, a fraction of the mass, a fraction of the volume, and drilling is unforgiving. if you get stuck, if something goes wrong, there is no second chance. >> the difficulty of drilling would delay the placement of the second probe until the second day. >> they use compressed gas tissue material into a container. the ergonomic design allows it to be inside the lander. the nasa funded payloads to the moon and mars's moon. the mining and extracting water on the moon, they created the

planetary volatile extractor. .t not only drills, it mines it is based off a drill that removes a cylinder of material, called a coring drill. >> it is a system with heaters on the inside, so that you drill down to the required depth, heat up the material on the inside of the coring drill, and ice turns into vapor, and vapor moves up into the cold finger. you are capturing water vapor, for example, like in your freezer where you capture condensation. it can get into the soil, it can extract water, it can capture this water in a separate container. we have all of the pieces together, and we can go to the moon or mars and mine it.

>> when it is tested on the moon, which may happen in the next couple of years, it will be the first and to end mining system deployed in space, and they have more futuristic ambitions to use the drill. like this one, which not only extracts and stores water, but uses it to propel its self, like a flying cattle. -- flying kettle. >> it is very futuristic. ofthe main idea is hundreds low cost flying spacecraft all over the solar system to give an atlas of asteroids that have resources. honeybee robotics is one of the many startups that nasa is depending on to develop new innovative ideas. private-public partnership with nasa right now we can sendith twice a year that will send payloads to the moon like instruments and humans. we are doing it, it's happening

right now. it's very, very exciting times. taylor: that's part of our original series called "giant leaps." you can check out more on bloomberg.com. from one of the most promising unicorn startups to a field ipo, we explained that wework debacle. this is bloomberg. ♪

taylor: in less than one year 47ork went from having a billion dollars valuation and being a darling of the venture capital world to needing a rescue package to avoid collapsing. bloomberg originals presents the story of how the company got here. take a listen. ipos andou cover highflying startups, you are used to seeing dramatic changes over short times,, but nothing in my experience has compared to what wework has undergone. people felt like they blinked and everything was different. >> they are running out of cash

very quickly. >> the company could run out of cash by next month. >> i was surprised at the vitriol and speed at which investors exited what wework was trying to do. >> from the first day we started wework it was about bringing people together. the energy you feel will stop energy is something hard to explain, you feel it or you don't. we like to call it the we generation. >> kevin cirilli went to being one of -- wework went from being one of the highest valued ipos to needing a cash bail out from its biggest investor to keep the lights on. to understand how we got here we need to look at the mistakes along the way. >> the ambitious vision of wework is effectively dead, period. >> a case study of a company that got too much money too fast with no effective oversight on how to spend it. >> they are no longer the

leader. that company is going to get smaller. the story is over. as late as summer 2019 the co-working company wework was considered one of the most valuable startups with a $47 billion price tag, more than airbnb, stripe, and spacex. in a few months time that valuation has vanished in the future of the company is in doubt. to understand how this happened it starts with the company's now former ceo and founder, adam neumann. >> adam neumann is the cofounder of wework and was the ceo for a long time. he came over to new york for college after being in the israeli navy and started a few businesses, including my favorite example, baby clothing line with kneepads. in brooklyn he came up with the idea of subdividing that space

which is cofounder, a trained advocate who came up with -- a trained architect who came up with the plans. they came up with a plan which they sold, which was the first iteration of wework, which they started in 2010. >> today there is a movement in changing the way that people work. >> 2010 was a great time to start a co-working company in new york city. landlord had empty buildings and vacancies. wework presented a solution. the first building in downtown manhattan is where wework had its first co-working spot and 2011there from 2010 to doubled in size. from then on the growth was exponential. >> the original investors were people involved in commercial real estate. they got early investment from benchmark. eventually it kept growing and taking on new leases and started

to grow the business starting in new york city. and theess grew quickly company quadrupled its valuation to $10 billion. 23,000 customers paying membership in 32 locations renting desks for as little as $45 a month. let's nots idea was be a commercial office leasing company, let us accelerate the new world of how people work, and make it better. being surrounded by like-minded individuals, being a part of something bigger ton yourself inspires people work harder, spend more time at work, and enjoy doing it. >> they attracted the attention of young entrepreneurs looking to expand their company. >> it's time to give you a tour of where we work. a tour of where we work. a tour of where wework, hey!

>> everyone i have met has been awesome. >> it is almost a cult-like sensation with the early employees realizing that wework was more than a company. it was a family with a community. the members realized they could lean on each other in terms of networking and growing their own businesses. >> the excitement brought more investors to the company. >> this company, it is not 2.0, it is 10.0. when you walk into their space and you see the energy, the excitement, the interaction, it is a very powerful concept. taylor: that is part of the spectacular rise and fall of wework, a production of bloomberg originals. you can watch the rest on bloomberg.com. that does it for this addition of bloomberg technology. loom break technology -- "bloomberg technology" is livestreaming on twitter.

check us out at "bloomberg technology" and follow our breaking news network on tictoc and on twitter. this is bloomberg. ♪

>> you went to harvard business school. did you enjoy it? >> no. >> did you want to drop out? >> yes. >> you went out to raise a fund, was that easy to do? >> i said we are going to fail. >> in 2007, you thought maybe i should take the firm public. >> i had a sixth sense that something terrible was going to happen. >> would you fix your tie? >> people would not recognize me if my tie was fixed. we will leave it this way. okay.