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- [00:00]
A
Bloomberg businessweek is brought to you by Evolving Money, a podcast that explores how cryptocurrency is the next logical evolution of the financial system. Follow the podcast, which is sponsored by Coinbase. Wherever you get your audio programs. When you own your own business, you own every decision. Now own the card that rewards you for it. Chase Sapphire, Reserved for Business is a painful card that elevates your travel experience and offers premium benefits that can take your business to the next level. Sapphire, Reserved for business, offers 8x points on all purchases through Chase Travel, 3x points on social media and search engine advertising, airport lounge access, and more. With over $2,500 in annual value, it's the card that gives back all you put in. Learn more@chase.com ReserveBusiness Chase for Business make more of what's yours Accounts subject to credit approval restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank NA member FDIC Hiscox Small Business Insurance Knows there is no business like your business across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online', @hiscox.com that's his ox.com there's no business like small business. Hiscox Small Business Insurance Bloomberg Audio Studios Podcasts Radio News this is Bloomberg businessweek Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Massar and Tim Stenebeck on Bloomberg Radio. Let's see what next Afghan has to say. Bloomberg businessweek Senior Reporter he's also co host of the Everybody's Business Podcast, author of the Contrarian Peter Thiel and Silicon Valley's Pursuit of Power. He joins us right here in our Bloomberg Interactive Broker Studio. This is Peter Thiel's company. What are you making of this? It sounds like just gangbusters.
- [02:18]
B
Yeah, I mean this is a company where you have a couple of trends working in its favor. One is, and we heard it mentioned earlier, I you know, Palantir is marketing itself as like essentially a way for big companies to incorporate artificial intelligence in their workflows. That's obviously something lots and lots of companies are spending huge sums of money on. The other thing is this is a big defense contractor and it happens to be and you mentioned Peter Thiel's name earlier. He's co founder of the company, you know, it is a, it is a company that is very close to the Trump administration. So, so it's both a company that is sort of well positioned to, in its government business, at least in the US and well positioned in its commercial business. You're seeing revenue grow now, I think what, what you see, skeptical analysts say, and this is a company where there's a bit of a divide between how professionals see it and the kind of masses, you know, who are trading, you know, on platforms like Robinhood. I think a lot of, a lot of analysts feel like this stock is wildly overvalued. You're talking about, you know, even at $4 billion of annual revenue, it's not a huge amount of money for a company that's worth like a half a trillion dollars in terms of market cap. Um, but for now, you know, the market likes it. This has become, you know, it's almost a cliche to say, but it is a meme stock. It is, it is a, a company that has a real business, but also a company that has this very, very, you know, dedicated following.
- [03:45]
C
Why would you call it a meme stock? I mean you kind of answered the question right then. You said as a dedicated following. But this is a company that has an increase in revenue of 63%. Analyst on average estimated a $1.09 billion in terms of revenue increase went to $1.18 billion. Average projection of $1.19 billion for sales for the current quarter that the company says it'll come in at 1.33 billion. There are some real numbers here that I think critics would say. Okay, well meme stocks don't have those kind of.
- [04:14]
B
Yeah, I mean it's different from like, haha, this is totally a joke. That's not what I'm saying at all. What I'm saying is that the demand for this stock is, is happening at the retail level. Just like Tesla mot, you know that. Which is another stock with similarly like very elevated price. The price to earnings ratio on this company is huge. It's really, really high.
- [04:35]
A
691 the forward PTF forward P E. Excuse me, 320. I mean like what you said before about how much in revenues and what the market cap is, it's going to take a lot of growth over and over.
- [04:48]
C
Just for context, for multiple videos, PE ratio is 60.57.
- [04:52]
B
Yeah. Even for a tech company, even for a high growth tech company, we're talking about a very, very, very expensive stock. And that, you know, that stock either reflects the Kind of new dynamics that, that certain equities are trading at where.
- [05:07]
D
Where.
- [05:08]
B
Where if there's demand on social media and, and the Bloomberg story that was published gets into some of this. You know, investor Alex Karp, the CEO of Palantir is this kind of almost like a cult like figure, a cultural figure. Certainly shareholders call him Daddy Karp, you know, and he has, he has these antics, right? Like it's, he is this kind of larger than life figure. And there is also a business story. It's not like, it's not like it's totally just hot air, right? The, the, the idea is that artificial intelligence is, is becoming more and more important. Palantir is, is positioned well.
- [05:40]
A
What exactly do they do?
- [05:42]
B
They build software that essentially makes it easier for companies to organize their data and so and, and make decisions. Now the thing you've probably, most people have probably heard most about with Palantir is the military and, and, and intelligence agencies incorporated software in their sort of in like searching out terrorist cells and that sort of thing. Now there's a lot of debate about just how sort of automated this is, how important it is, but it is a piece of software that, that is being used in more and more big companies to handle data. And that's a valuable thing because like, once the software is being used by a given entity, it's kind of hard to take it out. It's kind of same dynamics that protect lots of sellers of enterprise.
- [06:28]
C
Soft max. This is a company that was founded back in 2004. Facebook was also founded back in 2004. I think this, a lot of people would say this was kind of a late bloomer. For a lot of years. It kind of just like got by until then. Suddenly it was on everybody's radar. Why was it so slow to grow?
- [06:47]
B
Well, I mean, it took them a very long time to figure out a product. And the company was founded essentially with the idea of providing, you know, intelligence gathering software to the military, adapting some of the security tools that Peter Thiel and his co founders had used at PayPal and applying it in other areas, that was the pitch. Took them a really long time to find a customer base, but once they did, and as they've been able to kind of build a brand and take the company public and benefit from some of these trends that I'm talking about, these cultural trends, it's really, it's gone. Gone very, very well.
- [07:26]
A
You know, it's interesting too. I'm looking at the FA page on the Bloomberg. So at the end of last year, about almost 55% of their revenue was government, and then about 45% was commercial. And I'm just thinking like, they compete with, right, Like Microsoft, Amazon, Google, and then some of these data specialist companies out there, whether it's Snowflake and others. I mean, is there somebody who could ultimately, you know, take over their business? I mean, or do they really own their niche?
- [07:53]
B
No, there, there are other, there are other players in this space. I think a lot. Also a lot of the company, a lot of those competitors, companies are buying both Palantir and Microsoft. It's not like you're buying one at the expense of the other. I mean, you know, Palantir is, I think, very recently got into some litigation with a copycat product. There are other companies that are attempting to offer sort of similar, kind of like data integration services. We've also seen critics over the years sort of say, like, this company, this is actually a consulting company kind of masquerading as a soft. There's some, there's, there's a lot of debate over just how, how, how much it is like a product company and should be valued that way. Although, of course, like on Wall street or, sorry, on the stock market, that debate is long gone because it's being traded, you know, at multiples that are much higher than, than even some very, very successful software companies.
- [08:43]
C
How big of a deal is it that this administration has, or members of this administration have been aligned, at least philosophically, with leadership at Palantir?
- [08:52]
B
If you, if you listen to Palantir, they're going to say, no, this is not political, that we're people, the government is just choosing our product because it's the best product. I think if you look historically, the last Trump administration was an incredible time for Palantir. The company grew a lot. It managed to go public, won lots and lots of contracts, including taking some contracts from some other big tech companies. And, and if you look at what has happened over past, whatever it is, 10 months of the Trump administration, it's great for Palantir. You had this do. I mean, obviously the Doge effort. We haven't heard much about it, but, like, the idea of building these databases that are better going to integrate, you know, information across different agencies, that is like, right up Palantir's alley. And, you know, you're seeing Alex Karp show up at the White House, show up at these dinners. They are punching above their weight in terms of influence.
- [09:43]
A
We should point out, though, shares of Palantir now down about a quarter of a percent here in the aftermarket, so they've definitely pulled off their highs of this session. Hey Max, thank you so much.
- [09:54]
C
Stay with us. More from Bloomberg businessweek Daily Coming up after this.
- [10:01]
A
Bloomberg businessweek is brought to you by Evolving Money, a podcast that explores how cryptocurrency is the next logical evolution of the financial system. The program investigates how traditional finance firms are integrating crypto into their operations now that Washington has begun to pass much needed regulations. Follow the podcast, which is sponsored by Coinbase. Wherever you get your audio programs.
- [10:25]
D
Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is, you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi asset portfolio for the long haul, a stocks, bonds, options, crypto. It's all there plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC trading provided by Zerohash. Complete disclosures available at public.com disclosures Hiscock.
- [11:24]
A
Small Business Insurance Knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online', @hiscox.com that's his cox.com there's no business like small business. Hiscox Small Business Insurance. You're listening to the Bloomberg Businessweek Daily podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple Carplay and Android Auto with the Bloomberg Business app or watch us live on YouTube. Let's see what Megan Hornman has to say. She's back with us. She's Chief investment officer at Verdant's Capital Advisors. Firm has more than 4 billion in assets under management once again with us from Hunt Val, Maryland. Meghan, good to have you here. It has been quite a bounce back from the lows back in early April. How do you describe the market environment.
- [12:28]
E
Right now, I think there's a lot of over optimism about several things. We did get the Fed that cut rates and that's what really, you know, the markets were focusing on prior to September. We got the Fed cutting rates. We got two of them this year. The jury's still kind of out for the December number. But we also have seen some thawing in the trading tension since that, you know, April tiff, I get a tariff tiff. And now you have the AI taking back over again. So you have this momentum trade that's driving these markets higher into the year end here.
- [13:00]
C
Worried about valuations?
- [13:02]
E
Absolutely. We are very worried. Specifically from the Mag 7, the technology. This, this, these are all looking a little bit bubble like. I'm not saying this is a dot com bubble, but there is the risk here for some valuation correction. Keep in mind that these valuations have driven higher on this, you know, pricing imperfection, the perfect soft landing of the economy, the perfect fix to inflation and the Fed coming in and easing policy. This is something that's really up in the air into 2026, that there is no certainty. And I think the Fed was pretty clear about that when they mentioned that the December meeting is not a foregone conclusion.
- [13:41]
A
Megan, you say it's not akin to the Internet bubble, but it is bubble like. But it looks bubble like. But why do you say that? Is it, you know, what we always hear is, well, wait, there's companies that actually have revenues and earnings and I get. But the company that I feel like is the nucleus of this AI trade. OpenAI, we have yet to really see their books. Right. It's a privately held company, they're tying up with everybody. There's this massive spend. It's hard not to feel like this is a bit heady and wonder where it all ends.
- [14:13]
E
Yeah, and you said it exactly. There's not a lot of clarity. This is what we're seeing is just more this euphoria around this changing technology and we completely believe in that. And AI is going to change the way we do a lot of things. It's going to make a lot of things, a lot of things efficient. But we've seen this before in other market bubble type of situations where the markets just have this overly optimistic view. You can even go back to some of the times when people said, oh, home prices will never go down. You heard that in the 0809 crisis. So go ahead.
- [14:45]
A
Well, the one thing I want to ask you about with the AI trade and like I said, there are companies and we know with the hyperscalers where we see an roi. And we were just talking with our own Randeep Singh about some of the numbers that we see. I think it was specifically, was it in Google and so on. So we do see payoffs. But having said that, the other thing we were just talking with a member of the Google and Alphabet team is about jobs that could be lost, whether it's in coding and other places. If we have an economy where a lot of people are put out of work and there's a dislocation, be it for a year, two years, five years, seven years, who knows, maybe a generation, that's got to be a problem.
- [15:24]
E
No, Yeah, I think, but I don't. We're not as negative on what AI can do to the job market as some people are. Let's keep in mind that some jobs will be replaced by AI. These may be some clerical type of jobs, but then if you look at a lot of other areas in this market, in the labor market, some of these jobs may just get better productivity, efficiency will just improve by the use of AI. So I'm not ready to say that this is a really detrimental thing to the labor market going forward. I think that it can actually help improve. Improve quite a bit.
- [15:55]
C
Okay, so how do you advise clients to, I mean to what to do in this bubble like environment that we're in, sit on their hands and do nothing or move a little bit away from some of these Mag 7 companies?
- [16:10]
E
Yeah, absolutely. First of all, look at your allocation. Are you overweighted to these MAG7, to these growth sectors? Because keep in mind just the market movement itself may have you allocated to this a lot more than you should be. So rebalance. And I know that may seem kind of boring, but it's the end of the year rebalance portfolios where you think is, is necessary, where it's overrun the growth technology names, these are the most at risk. So any of these big high flyers that you've seen this year, those with really high multiples, these are the ones that we would start reducing. Make sure that you're more diversified than just holding onto those. Because what we have seen in historical pullbacks or corrections in the market that sometimes when there's a valuation correction, the biggest winners are the ones that get sold because there just turns. It turns into this indiscriminate selling where you're selling all the winners. So be very careful there. Make sure that your portfolio is balanced where you want to be and don't be overweighted a substantial amount to these Growth and technology, large cap names.
- [17:10]
A
And then yet having said that, those large cap tech names are the ones that continue to, you know, provide. You know, you see the growth top and bottom line over and over again. And it's kind of interesting that everybody's like, wait, time to back off. And then we see once again another quarter or another year where that's where the momentum is. So how do you be smart about not just chasing maybe gains that won't happen or realizing the reality of our world is a big tech world and you look at those companies and they are part of really almost all of our lives in a big way.
- [17:42]
E
Yeah. Just be careful of what you're paying, the price that you're paying for these names. Are you paying for earnings that are now two years forward? And that's what we see. When you look at the S&P 500, which is primarily your Mag 7 stocks, you can see that earnings estimates going on to 2027, you put a reasonable valuation on that. There's really not much upside if you're looking at the fair value of the S&P 500, and that's in 2027. So just be very careful what level of earnings you're paying for and how far out, because there is a lot of uncertainty between now and 2027. So be careful paying up for that momentum.
- [18:17]
C
You're happy with earnings thus far?
- [18:20]
E
Thus far, yes, earnings have been great. But let's also keep in mind that earnings tend to beat the estimates between 3 and 5% every earnings season. I'm more concern what we see for next year and then now that we are starting to get some of Those estimates for 27, what are people looking at going forward?
- [18:35]
A
What do you think is the biggest risk in a week where we have the Supreme Court taking up a case against President Trump's tariffs? If that gets undone, what would that mean for financial markets?
- [18:47]
E
I think the markets are looking for any kind of news because we don't really have the economic data, obviously with the government shutdown. So they're looking for any catalyst, whether it's it's to the upside or downside. Unfortunately, we think there's more downside risks in the near term.
- [19:00]
A
But if that tariff gets undone, what would that mean for financial markets? Just got about 20 seconds.
- [19:06]
E
I think just, just volatility instability because then we've all got to go back and kind of reprice what the tariff expectations may be. So, and then what will the Trump administration do? What's the next lever that they may have to pull in order to get the tariffs through.
- [19:20]
A
It'd be kind of messy, that's for sure. All right, Megan, thanks so much.
- [19:23]
D
Much.
- [19:23]
A
You're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch US live on YouTube.
- [19:38]
C
Ryan Gould is a Bloomberg News US IPO and deals reporter. Red Brown is Bloomberg News consumer reporter. They both join us here in the Bloomberg Interactive Broker studio. Can view surging as much as 20% earlier in the session. Kimberly Clark falling as much as 14.5% earlier in the session. Now down just 14%. But still investors are sending the message. When I heard this news this morning, I'm thinking to myself, where did this come from? Well, we're on the call, we're on our editorial call. And, and I'm saying who wants to deal with the litigation that Tylenol could potentially see as a result of being front and center in this, these comments that President Trump and RFK said at the White House earlier this year here Red Can View is not just Tylenol, Zyrtec, Listerine, Band Aid, Neutrogena and more. But what's the litigation risk here for Kimberly Clark?
- [20:30]
F
It's obviously, it's hard to say right now. Like this is a very fast moving story when it comes to Tylenol. Like we have just that one lawsuit right now in Texas. There's been some asks, some, some, some petitions, some, some consumer petitions to have label changed on Tylenol as well. But I think what you're getting in the reaction in Kimberly Clark shares today do kind of underline that that is what is on people's mind, right? Is this legal risk. There is a, there is a, there's an argument to be made that like Ken View is a really great property. Like Tim, you just named off all of those like marquee brands. Right? So, you know, I think there's a kind of a consensus among the analysts that this is probably a long term play, like potentially maybe getting a really good deal here considering how, like how poorly can these shares have so far this year? That's not just the legal risk. It's also just kind of bad performance as well. But remains to be seen, I guess on this legal risk question, we should.
- [21:23]
C
Remind everybody this is the consumer products division of Johnson and Johnson. It was spun off back in 2023. Shares have struggled this year. There's the, the Bayer Monsanto situation that one analyst brought up, Carol, earlier today, Red and Co. Writing that vital knowledge is Adam Krisafulli said that there could be concern about whether the Kleenex maker is getting itself into a Bayer Monsanto situation referring to Bayer's acquisition of Monsant in 2018 which laden the German pharmaceutical company with legal costs.
- [21:52]
A
Could have, would have, should like we have to guess, I guess see how it like plays out. Ultimately we should point out shares of Canv you are down 23% year to date. Ryan, come on in on this. I mean they are paying a 46 premium to can view his closing price on Friday. Mind you, the share has been, the share price has been beaten up a little bit. What's the thinking? What are you hearing from bankers about why this has come together and why now?
- [22:12]
G
Well, just on the buyer Monsanto piece I think you know it's something to wear. Also hearing this morning, I think if depending on who you speak to, I think on the can view side there's a view that you could in no way make that comparison. These are very, very different types of companies. I think you know, we're just talking about the litigation risk. But at the same time I thought it was really interesting and I think Mike Su, the CEO of Kimberly was out this morning saying that in the statement that the world's foremost scientific or medical, regulatory and legal experts had kind of concluded that, you know, this is something you need to go for for I mean to go on the record saying such things so publicly I think is one thing. But the other piece of this is that, you know, there's a massive dispute within Kenji as to what the actual liability is. And so depending on who you speak to, I think there's a view that there could actually be no liability at all. Which you know there's. That's going to be for a court to decide and maybe not for me to speculate on. But that's what this comes down to. Which is why I think you can have people come out and say things like, you know, this is a general generational value creation up opportunity but they're.
- [23:10]
A
Talking about it that there is potentially a liability issue. The folks at Canvue.
- [23:16]
G
Yeah. Oh no, for sure. And I think there's you know a couple people I was speaking to kind of said that they would probably take the under on, you know, exactly how much market cap can be you has lost in this whole debacle vis a vis the liability that they'll end up with. That's one view. But you know, you could also say the flip side. Right. Because who knows how this is going to turn out and you know this could be a case study in an HBS at HPS in a few years time.
- [23:40]
A
So we should point out that can view at its highs up almost 20% in today's session as much as $17.18 a share here recommend red come back, come back in on this because I do wonder is there anybody else who might come in and say we're interested or not necessarily.
- [23:56]
F
I haven't heard anything on that. I'd be interested what Ryan has to say on that bit. But like there was a lot of interest in the company. Like, like I said like it is marquee brands, Tylenol probably chief among them despite some of these, these risks that they did that are overhanging that that unit. But you know the company has, has all of the the the pieces to do well over the long term. And I think that is why there is the conviction that this is could has good long term potential. And then just on the legal issue there, you know, Les Ryan makes a point like they, they have the top scientists going in and speaking with them in the room like this is not a, this is not a surprise that this issue is kind of going on in the background.
- [24:37]
G
So I think what I would say just in the dynamics of this and Carol, to your question on whether we'll see an interloper or not, you know take the fact that this had not one but two but actually three activists in the stock. You know, Starboard chief among them. July 14 this year the company announced the replacement of the CEO. Replaced the CEO and then said they were going to explore strategic alternatives. Doing that at the same time as having a hedge fund hotel in your stock. We kind of make this point in the deals newsletter today. I think the process was very robust.
- [25:09]
A
Okay.
- [25:10]
G
And so you know there were definitely multiple parties around this situation.
- [25:14]
C
Kimberly Clark, known for diapers, toilet paper, Kleenex. They also have ingredients like you know and like some of the brands are like Scott Cottonell, Viva and more Huggies. Ken View known for of course Tylenol but also Motrin, Band Aid, Benadryl, Desitin. I'm just trying to think of like this you know, quote unquote synergies which oftentimes mean job cuts. But there's some back end stuff, there's some distribution stuff. But, but how do these brands come together?
- [25:45]
G
Ryan, I think that's a really interesting question because I asked someone this morning who is around this deal, you know exactly how you you defining the synergies. I mean is it cost? Is it Is it strictly cutting cost? I think. Can you see this as, you know, they see a massive upside in keeping the brands together. I know that there was interest in Listerine, for instance, on its own, and I think there were other pieces where you could say there was a standout buyer. But I think as you think about this combined company. Yeah, I think it's probably a location factor, it's a supply chain factor and I think it's about concentration of suppliers as well. And so, yes, paper, you know, paper is, you know, they hit the company caucus of making Kleenex. But, you know, Huggies has that, that solvency, absorbency, paper factor too.
- [26:29]
A
So, yeah, I would say the shelf space is kind of similar, but it's good to have some different products.
- [26:33]
G
Right.
- [26:33]
A
To kind of fill those shelves.
- [26:34]
F
Definitely, Definitely. I think one of the, during the investors presentation today, one of the things that I found most like, convincing was this like, regional discussion. Like, I don't, I don't know if, if Kimberly Clark has a great, like, presence in India. And that was one of the points that the, that both CEOs made during the call. As an example, they use of the potential synergies is that like, you know, can view has like 1.3 million. I think if that's the, I think that's the correct number of distribution points within the country. And like, we all know that India is a fantastic, you know, market to be in with the potential growth there. And it doesn't seem like that's right where Kimberly Clark has presence. Yet another example they use was Singapore. I believe, again, Can View has. Doesn't have like a smoking cessation business there yet. Where then, you know, Kimberly Clark has a robust supply chain there. So like can be.
- [27:17]
C
Makes Nicorette.
- [27:18]
F
Exactly, exactly. So there's, there's the potential there to just kind of use those existing distribution channels and, you know, potentially increase the marketing around some of these new products that Kimberly Clark is picking up.
- [27:27]
A
It's kind of fascinating in a world where we spend so much time talking about, you know, the AI build out in data centers. Read that. It's just these are products that we all use, right? And no matter what, we're going to use them. Good times times, bad times, we might trade down a little bit, but these are things that we use all the time.
- [27:42]
F
Yeah, yeah. No, it's a great point and I think probably is. Was what kind of underlining a little bit of the conviction here from, from Kimberly Clark, I think.
- [27:52]
G
Did I come into this year thinking that Kimberly Clark acquiring can View would be the fourth largest M&A deal.
- [27:59]
C
No, probably not the fourth largest in this year.
- [28:02]
G
It's announced this year. I mean you've got OpenAI Nvidia, which you know, we are Bloomberg classifiers. As a deal you could sort of make two ways about that. But Norfolk Southern by being acquired by Union Pacific second and then you've got electronic cards being taken out by the Saudis and then this. So sign of the times maybe. I don't know.
- [28:22]
A
Stay with us. More from Bloomberg Businessweek Daily coming up after this.
- [28:29]
D
Support for the show comes from public.com you're thoughtful about where your money goes. You've got your core holdings, some recurring crypto buys, maybe even a few strategic option plays on the side. The point is you're engaged with your investments and Public gets that. That's why they built an investing platform for those who take it seriously. On public, you can put together a multi asset portfolio for the long haul. Stocks, bonds, options, crypto. It's all there. Plus an industry leading 3.6% APY high yield cash account. Switch to the platform built for those who take investing seriously. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market paid for by Public Investing. All investing involves the risk of loss, including loss of principal. Brokerage services for U.S. listed registered securities options and bonds in a self directed account are offered by Public Investing Inc. Member FINRA and SIPC. Crypto trading provided by ZeroHash Complete disclosures available at public.com disclosures Hiscox Small Business.
- [29:30]
A
Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online', @hiscox.com that's his cox.com there's no business like small business. Hiscox Small Business Insurance.
- [29:59]
D
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A
Metronome.Com you're listening to the Bloomberg Businessweek Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.
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C
Their next guest player in the industry. The company reporting earnings later this week. Adam Goldstein is founder and CEO of Archer aviation. It's the 6.0 billion market cap aerospace company that trades under the ticker ACHR. He joins us from San Jose, California. Archer designing and developing electric vertical takeoff and landing aircraft EVTOLs for use in urban air mobility networks. When are Carol and I going to take one of these to New York Airport? We're flying out tomorrow. We're both taking cabs.
- [31:13]
D
Well, it's great to be here. The industry is actually, you know, as you said, it's been around for a while and it's getting pretty mature. So the good news is that in June of this year, President Trump issued an executive order that'll mandate really the speed of these being brought to market. So by next June, you should expect to be seeing these aircrafts flying in and around the big urban cities. Five cities are getting announced. They'll be announced in January. They'll be flying in June. And so that's when you'll start to see them flying around in the US.
- [31:43]
C
Flying in June without passengers.
- [31:46]
D
They'll start piloting with just no passengers. And the goal is to ramp operations there through the certification process.
- [31:52]
C
So go back to my original question, which is really when we will be using these as easily as we can hail a cab using Uber or Lyft.
- [32:00]
D
Yeah, it's hard to say. It's really, you know, the company's job to build the safe airplanes and then the the FAA's job to certify. So our hope is soon after that period of time when we're showing that these aircrafts are safe, we're showing that there's a really good consumer experience. And overall, we've gotten a lot of, you know, buy in from community acceptance.
- [32:17]
C
Are you having active conversations with the FAA right now?
- [32:22]
D
Yes. So there's constantly active conversations. Of course, the government shutdown, you know, kind of created some, some slowdowns with that, but the conversations continue and it's been ongoing for a very long time. We have long standing relationships there. And the programs are very, very well established. This is a priority of the administration. That's what the executive order in June was all about. And so this is one of those programs that I think does get a lot more attention. We kind of punch above our weight as an industry. And so, you know, they've been very good to us so far.
- [32:52]
A
So what is your definition, Adam, of commercial operations? And exactly when do they start meaning revenue generating passenger flights? I just want to clarify.
- [33:01]
D
So Archer has two sides of the business. We have a civil business which is moving around in a defense side of the business. On the civil side of the business, we have a two pronged approach. There's an international strategy and a domestic strategy. On the international side, we've been working very closely with the UAE and the UAE government specifically. The largest helicopter operator in the Middle east is called Abu Dhabi Aviation, which we've partnered with and has acquired aircraft. So we've already started to receive dollars from that. We'll start to recognize revenue in the first quarter of next year. And so that's when you'll start to see some of those numbers come in. It'll be very small though, to start and then we'll ramp that over time. On the defense side of things, the contracts have to be announced. And so that still hasn't happened yet. There's a lot of talk and I think the programs are starting to firm up and there's a lot of excitement around new, what they call autonomous and attritable aircraft. But those programs have yet to be announced. We're hopeful those will be announced soon.
- [33:55]
A
So my understanding too, going back to the stuff you're doing in Abu Dhabi, so that launch was the first correct of your company's launch edition program and was supposed to be kind of the playbook for Ethiopian Airlines and in Indonesia. So lessons learned so far and how is it among those lessons being learned changing the future rollout?
- [34:20]
D
Yeah, those are great questions. Launching in the UAE or really just the broader GCC has provided a lot of lessons around weather.
- [34:30]
B
Weather.
- [34:30]
D
And so of course it's very hot there. There's a lot of, you know, kind of harsh conditions with a lot of sand in the air. So we've learned a lot about how to keep these aircrafts cool in very, very hot weather. Not just the interiors for consumers, but actually like the safety of the aircraft. So that testing, I think has been hugely helpful. And so you start in one of the harsher environments, you can work our way to some of the more mild environments like here in California. And so that's provided a lot of the sort of base layer lessons for operating in really difficult conditions. But the goal is really to just continue to get reps, learn, figure out how these aircrafts will get to market. The good news is they're all based around safety and so multiple sets of propellers providing multiple sets of redundancy. And so I think we can deliver a really high quality, safe product from an infrastructure perspective.
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C
Carol mentioned that we have to have infrastructure in the right place. I'm wondering if there are cities in the US that work right now or do not work for this type of technology.
- [35:27]
D
Well, I've had my, my sights set on Los Angeles as sort of the, you know, the best city I think in the US for this, this platform. There are, there's so much traffic in Los Angeles. There are over 5 million daily trips that take greater than an hour by car going less than 20 miles in Los Angeles. So an incredible city to offer this type of platform. So last year we announced the LA Network which, which really start to show the different points of interest. So partnerships with SOFI Stadium, with Woodland Hills, with USC Coliseum. So places where there already is existing infrastructure, heliports that are there and we'll start building that network up. Of course we have the Olympics coming in Los Angeles in 2028 where we're going to be increasing the infrastructure that gets built in and around the Games. And Archer was announced as the exclusive air taxi provider for that event. So Los Angeles is a perfect city to go launch this. But of course there's other great cities like New York, Miami and San Francisco that I think will be also great places for us to launch. But pretty much anywhere they use helicopters will be great for this product.
- [36:29]
A
So exclusively or taxi partner for the Olympics out in Los Angeles. So that means you're going to actually be flying folks around.
- [36:38]
D
That is certainly the goal. So the goal is to move VIPs, dignitaries, fans in and around the Games. We have been partnering very closely with LA28 to do that. I'm confident in that goal we'll be able to get there. It's a super exciting time for the industry. That's actually a goal that was set out by the FAA back in 2022. So they coined the term Innovate 28 which was the first city where you'll see these aircraft used in mass will be at the LA 28 games. So that's an alignment that, you know, the goals were put out there a while ago and we hope to deliver against that.
- [37:10]
A
Do you feel at all that investors though are feeling a little bit of, of fatigue from kind of the repeated delays in the start of revenue generating passenger flights? I mean the Stock's up about 7% year to date, but you look at the chart over the last year, it's like a, a rough ekg. It's a little tricky. So I'm just wondering, are you feeling like investors? I think it was back in 2021 that you guys slated the launch of a taxi launch Service in Miami LA by 2024. So I get it, you want to get it right, you want it to be safe. But do you feel like your investors are getting a little antsy? Just got about 30 seconds, then we take a break and come back and talk a little bit more.
- [37:46]
D
I would say it's actually quite the contrary. And that's not just an Archer statement. I think that's an industry statement. So one of our peers and one of my, my good friends, Kyle Clark is ipoing his company called Beta here. I think it's supposed to price this week. And from what I've heard is the thing is massively oversubscribed. There's tons of demand. So I think there is a ton of interest in the Evtol space. I think the investors are very excited about the, the progress that we have and I think that'll continue to, to pay off.
- [38:13]
A
Hey, one thing I want to know, Adam, is progress on pilot certification. Where are you guys on that?
- [38:22]
D
So the certification process is a long one and this is actually the first new category in a very long time time, first new category in 60 years at the FAA. So it's a new process really for everybody. And there's two sides. You have to figure out the rules, which they call policy, and then mix that against the execution. So showing that the aircrafts are safe against that policy. So we're deep into the policy side, nearly done with that, and then starting to work on the execution side of that as well. So the goal is to grind through that. But what I think the sort of the better proof points rather than trying to understand this kind of black box certification process will be the executive order from President Trump where we'll start to see these aircrafts flying next summer in around these cities. That's really the point where we can help gain the consumer confidence, consumer awareness of what we're doing and ultimately showcase these aircrafts are safe in and around urban environments.
- [39:09]
C
Adam, we're in a world where we're trying to remove humans from the equation, whether they're Uber Lyft drivers with, with Waymo and Tesla's cyber cabs, or with other elements and like, you know, warehouses with robots and Amazon. Do you envision a future where Archer does not have pilots?
- [39:29]
D
Well, we are deep also in the autonomy process in aviation as well. There are lots of autonomous solutions that exist. In fact, we've flown the aircrafts autonomously many times. That being said, I think the difficulty in aviation is in around the regulation and in and around how the aircrafts will operate with the existing environments. So how will air traffic control communicate with these aircrafts if they're autonomous? How will they land with a given infrastructure? So I do think we will get there. I think they will start out piloted and then work their way into the autonomy stack. I do think it's new companies like Archer that will actually invent those autonomy stacks and really try to create the network that's necessary to deploy autonomous aircrafts. But still more to come on that.
- [40:09]
A
All right, and look forward to hearing more from you in the future. Adam, thanks so much. This is the Bloomberg Business Week Daily Podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business App. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.
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D
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