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- [00:00]
Barry Ritholtz
At Marsh, we believe that perspective powers progress. That's why our individual businesses have come together as one company, a new marsh built to solve the world's most complex challenges and uncover new opportunities for our clients. We're better positioned than ever to help your business navigate obstacles and unlock potential across risk, reinsurance and capital, people and investments and management consulting. Learn more@visitmarsh.com podcast I'm Barry Ritholtz inviting.
- [00:32]
You to join me for the Masters in Business podcast. Every week we bring you fascinating conversations with the people who shape markets, investing and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market. Whether you own stocks, bonds, real estate, commodities, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Shiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors. Michael Lewis, author of the Big Short and Moneyball. Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz. Listen on Apple, Spotify or wherever you get your podcasts.
- [01:33]
Bloomberg Audio Studios Podcasts Radio News this is Bloomberg Business Week 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 Stenbeck on Bloomberg Bloomberg Radio.
- [02:03]
Carol Massar
All right, so what does this all mean? We know that President Trump, as you said, would move said he would move to ban institutional investors from buying single family homes to address housing affordability. So let's see what Jeff Langbaum has to say about that. He's Bloomberg Intelligence senior REITs and commercial real estate analyst. He joins us from BI headquarters in Princeton. Happy New Year, Jeff. Good to have you back here on Bloomberg businessweek Daily. Yeah. What's your initial take off of what we got from the president? Not a lot of details. We'll see where it lands. But your initial thoughts?
- [02:35]
Jeff Langbaum
Well, my initial thought was that I assumed that once he posted something separate about the defense companies that this would already be out of the news cycle. But I guess that's not the case. You know, it remains to be seen what exactly he can do and then really what the impact of that will be. You know, I don't think that he can just outright ban companies from, you know, private market business, but he certainly can, you know, push Congress to try and do something. He can push the regulators to try and do something. He can push the DOJ to investigate business practices. I mean, there's a lot I was going to say to make life uncomfortable.
- [03:15]
Unidentified Bloomberg Host
I was just going to say he can't, maybe he can't ban private companies from doing a certain business, but he can make it very difficult for them to exist through a series of things. I mean, we've seen this happen with, with certain individuals too, that have come to the administration's ire or been the administration's ire. So, so talk a little bit about what would happen to a company such as Invitation Homes. I mean, we're not talking at this point about that company no longer being able to do what it does, which is buy and manage rental homes for people around the country.
- [03:45]
Jeff Langbaum
Well, you know, all we have right now to go on is the language of the True Social post, which specifically said would ban them from buying more homes. So the, the portfolios that they have now theoretically wouldn't be touched. The questions revolve around whether you can build homes, whether you can buy portfolios of homes that were built specifically for the intention of renting, as opposed to buying individual previously owned homes. You know, but if at the end of the day, these companies that, that, you know, are largely, largely growing by buying new rental homes, if they're prohibited from doing that, that takes away a big part of their growth engine. And then it raises the question of whether there's a viable business model there. If the government is anti institutional ownership of rental homes.
- [04:39]
Carol Massar
Yeah. And you just wonder then, what's next? What might they not want institutional investors to buy next? But Jeff, how much, how institutional investors, how, how many homes do they really own? What percentage of the housing stock that's out there?
- [04:52]
Jeff Langbaum
It's a, it's a tiny part. I've seen somewhere along the lines of 2% of the overall housing stock owned by large institutions. And the two rates you mentioned, Invitation Homes and amh, you know, where that's their sole business is owning rental homes. You know, they're a small part of that. So, you know, another way to look at it is, you know, Blackstone obviously got, got beat up a lot today. They were very early in the business. They still have an investment in it. But not only is it a small part of the overall housing stock, it's a tiny part of their overall business. So it's, it's not nearly as big a. A problem as you would think based on this being the proposed solution. But clearly there's political points to be won by talking about improving home affordability and going after the, well, the big private equity guy.
- [05:47]
Carol Massar
Well, Jeff, that's what I want to ask you because when we talk about, you know, we can tell now we've got midterms, right. And to be fair, we should be talking. Many would argue about affordability for a lot of Americans that are having a really tough time and cannot afford a home. What is the real reason that Americans can't afford a home? I mean, I'm just curious if you've come across anything in terms of your research.
- [06:09]
Jeff Langbaum
Well, mortgage rates are still high and the, you know, that has a compounding effect. Obviously it increases the cost to buy any home. But it also precludes people who have a low mortgage from selling their home because then they're going to have to roll it into a higher one. And so, you know, inventories of, of for sale housing are, are, you know, the stuff's not selling and, and prices need to come. Mortgage rates are going to be the primary driver of that if rates come down. But this solution may not even wouldn't, wouldn't even necessarily do what he wants it to do because just like, you know, in some cases rent control, rent caps, you know, while it sounds good and it sounds like it's going to reduce pricing, it just, you know, part of it is stifles new construction. And you can see that happening here depending on how exactly it shakes out. You know, some AMH American homes, their sole expansion business right now is buy is building new homes for rent. If they're precluded from owning those types of properties, you're going to have less construction and less supply means, you know, doesn't necessarily mean lower pricing.
- [07:17]
Unidentified Bloomberg Host
I just want to go to some data points here. Mike McKee sent me this earlier, sent me this report from the American Enterprise Institute. They argue that the market share of institutional investors is less than 1% nationally though there are 22 counties which is 710 of 1% of counties that have a percentage as high as 5 to 10%. I wonder if the, the concern from the people have. And this again this politically seems like a populist, a very populous thing to do and thing to say conflates the idea of institutional investor with the idea of a landlord who's also an investor because it does say that 25% of homes in the fourth in the 20 in the first quarter of 2024 were actually purchased by investors of all sizes. So it's sort of a narrative issue here.
- [08:10]
Jeff Langbaum
It's definitely a narrative issue. But there's a bunch of different components of it. You know, we talked about how the large institutions don't own a lot of these homes. They have been a large buyer of homes over the last couple of years, but recently they haven't been because homes aren't for sale. The pricing doesn't work for somebody who's an economic buyer where you need to get in at the right price and be able to charge a rent to generate a return. The pricing hasn't been there and the transaction activity has actually been pretty low. So, you know, there's, there's a lot of different angles. You can look at this and, you know, wonder whether or not actually would accomplish what it sets out to accomplish. But it does sell. You know, it sells the point of working for the, you know, the someone who's looking to buy a home but can't afford it at the expense of the, you know, the big institutions with all the money. And, you know, it's that inequality issue that, that I think is trying to, trying to earn political points.
- [09:12]
Carol Massar
Jeff, just to be fair and just got about 20 seconds. Is it safe to say that investor money, also institutional money, provides funds to build homes just quickly?
- [09:22]
Jeff Langbaum
Sure. And it's unclear whether his, you know, his post didn't address that, but it's unclear whether the target will go towards institutions building in addition to buying.
- [09:32]
Carol Massar
All right, good stuff. So glad we could check in with you. Jeff Langbaum. He is Bloomberg Intelligence senior REITs and commercial real estate analyst joining us from BI headquarters in Princeton.
- [09:42]
Unidentified Bloomberg Host
Stay with us. More from Bloomberg Businessweek Daily coming up after this.
- [09:49]
Barry Ritholtz
Business challenges and opportunities are never one dimensional. At Marsh, we believe that to thrive, you need perspective. That's why our individual businesses have come together as one company, a newmarsh where each layer of our organization works even more closely together to provide you with a stronger, more panoramic perspective. We're now one firm solving the world's most complex challenges and unlocking opportunities for you across risk, reinsurance and capital, people and investments and management consulting. As business continues to evolve, Marsh will always be here to help you overcome new challenges, answer new questions and take advantage of new opportunities. We're better positioned than ever to provide the perspective you need to fuel progress forward. See how@visitmarsh.com podcast you can get the news whenever you want it. With Bloomberg News now, I'm Amy Morris. And I'm Karen Moscow.
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Carol Massar
Here to tell you about our new.
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Barry Ritholtz
On demand news report delivered right to.
- [10:54]
Carol Massar
Your podcast Feedback Bloomberg News now is.
- [10:57]
Barry Ritholtz
A short 5 minute audio report on.
- [10:59]
Carol Massar
The day's top stories. Episodes are published throughout the day with the latest information and data to keep you informed.
- [11:05]
Barry Ritholtz
Yes, there are other products like this from a variety of news organizations, but they usually rerun their radio newscasts throughout the day. That's not what we do. We create customized episodes that can only be heard on Bloomberg News now. And we don't wait an hour to publish breaking news. When news breaks. We'll have an episode up in your.
- [11:25]
Carol Massar
Podcast feed within minutes.
- [11:27]
Barry Ritholtz
So you're always getting the latest stories and developments. Get the reporting and the context from Bloomberg's 3,000 journalists and analysts.
- [11:35]
Carol Massar
We're all over the world.
- [11:36]
Barry Ritholtz
Listen to the latest from Bloomberg News now on Apple, Spotify or anywhere you listen. You're listening to the Bloomberg Business Week 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.
- [11:56]
Carol Massar
We turn to Bloomberg News corporate and economic statecraft. Senior reporter Joe Doe right here in studio. The seizing of the sanctioned oil tankers, the US Energy quarantine of Venezuela. That along with the US Planning to control future sales of oil from the country and then taking in the money and splitting it between the US And Venezuela. What is, what is that about? What is, what is the kind of end goal here? Who benefits by all of this?
- [12:27]
Barry Ritholtz
It's unclear. You have an extraordinary action taken by the United States of America as a direction by President Donald Trump to remove President Maduro from Venezuela, quite literally remove him, which in normal times would seemingly leave some sort of a vacuum. But we did quickly see the vice president step in and take over a.
- [12:48]
Carol Massar
Friend to the oil industry, as we know.
- [12:49]
Barry Ritholtz
Right. And the question has been, what do we do with the oil? What do we do with the natural resources? The real question is what about the oil?
- [12:57]
Unidentified Bloomberg Host
Right.
- [12:57]
Barry Ritholtz
And we've seen all the actions that you saw play out. What we've seen in the four or five days since is a lot of here are the ideas that we have over how we're going to handle the infrastructure of the oil. And we've been talking to oil majors like ConocoPhillips and Exxon and Chevron, but it's a lot of talk. It's not a lot of clear action.
- [13:21]
Unidentified Bloomberg Host
How does it typically work when it comes to natural resources? You've spent years covering metals and mining. Mining, for example. How does a split typically work when it comes to natural resources? When a company that is maybe from another country goes and extracts those natural resources from a different country, there's all.
- [13:38]
Barry Ritholtz
Sorts of different things. There's like, you have taxes. So, so like, okay, you have to pay a certain amount of tax, like nickel. In Indonesia, for example, years ago, it used to be the Chinese would just take extract nickel out of Indonesia, bring it back to China and process it. The government got smart, call it 12 years ago and said, okay, well, the value add is the processing, so you can continue to extract, but you also have to process within the nation. And so there are certain fees or taxes that go along with that so that the state can actually say to its taxpayers, to its citizens, we are making money off of this as well. Even though it is an extractive industry, this thinking of it this way is a fair way to think of how different nations work with foreign corporations that are in big extractive industries.
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Unidentified Bloomberg Host
Well, let me ask the question in a more extreme way then, because I think there would be some people who perhaps are watching or listening right now saying, okay, well, if, if this is Venezuela's, if this oil is in Venezuela, yeah, it belongs to Venezuela and its people, what right does the United States have to take that oil?
- [14:39]
Francisco Rodriguez
Right.
- [14:39]
Barry Ritholtz
I think there are a lot of fair legal, philosophical arguments that are probably ahead of us. I think that's a really important thing to point out. Like, this is uncharted territory. And while it seems like a plan is being developed by the United States and by Venezuela and by others, it is not clear what that plan is. Obviously we hear the energy secretary saying today, well, it's going to be split and it's going to go into US Accounts and we'll kind of oversee those accounts and make sure the money gets to who rightly has, should be getting that money. But, like, how are they going to execute that?
- [15:16]
Carol Massar
So that $2.8 billion at current market price of the 30 to 50 million barrels of oil from Venezuela to the U.S. we're not saying, like half of it goes to the U.S. government. I mean, does it. Chevron own it or who own who. Who gets that money? Because it sounds. That's where I think people are saying, is this transactional.
- [15:34]
Barry Ritholtz
Right. Chevron by the US Government major actively operating in Venezuela right now?
- [15:38]
Carol Massar
Correct.
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Geetha Ranganathan
Right.
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Barry Ritholtz
The reporting that we had today was that there are talks to try to get ConocoPhillips and Exxon back into the country to also help develop the oil deposits. They're talking about everything from developing to infrastructure. I mean, we have quoted one of the Rice University professors who says, to do this, we're talking like $10 billion a year. That has to be Spent to, to build this out. And then your question is, but, okay, say it happens. Who's getting the money? Well, it's hard to understand if the energy secretary is saying it's going to be split. There are obvious questions in the market that you are asking right now, how does it get split? What do those accounts look like? Who actually controls them? Like, the question I have is the United States president currently has a golden share over United States steel. He has shown that he will, on certain things, have direct, say, one individual. And so does he. He said, I will take these accounts. So will he? I don't know.
- [16:37]
Carol Massar
I want to, you know, roll into this Greenland, because we did have the president talking about that. European leaders issuing a joint statement warning that President Trump needs to respect the territorial integrity of Greenland and Denmark. I do wonder, it almost feels like, is this kind of like the British, that the US Is looking to be in terms of natural resources, or is that the wrong read on it? Like, how do you see it? Like, again? And I go back to, is this transactional? The president wants one thing, gonna get it and then back off.
- [17:07]
Barry Ritholtz
Here's my read on Greenland. Greenland is part of the Western Hemisphere in our national security strategy. Venezuela is part of the Western Hemisphere in our national security strategy. Questions came up to the president over the weekend. If you're doing this with Venezuela, what about other things? And the president mentions Greenland. Greenland has not been discussed by the president, United States, since the summer.
- [17:29]
Geetha Ranganathan
Right.
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Barry Ritholtz
It was striking that he brought up Greenland. And we've seen all the news that's come out, the Danish officials who have said, whoa, whoa, whoa, the points that, hey, if the United States launched an attack on Greenland, that would effectively end NATO. I think we need to pump our brakes for a second, see what plays out. We do know that the President, United States sometimes is a little bit loose with his words, but behind his words, there is some meaning. And I think the market's trying to find out what is that meaning. I think European officials are trying to figure out what is that meaning? And I do bring it back to connecting the dots. The president is not telling us directly why he's talking about Greenland, but there is a connection of this is part of the Western Hemisphere. And he just had in his mind a massive victory of extracting the president of Venezuela and apprehending him, bringing him back to the United States. So on some level, don't forget, Greenland has always been a priority for President Donald Trump. It's just that lately it hasn't been at the top of the pile.
- [18:25]
Carol Massar
It's just fascinating. And I just want to say the news Fast and Furious, we do have a headline crossing President Trump will not allow dividends buybacks for defense companies. So an interesting development there as well. And I'm just looking at Lockheed Martin, for example, it just dropped about 1% here. So the defense sector now also on our radar. Jojo, thank you so much. I know we'll be coming back to you because this story certainly continues.
- [18:52]
Unidentified Bloomberg Host
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [19:00]
Barry Ritholtz
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.
- [19:13]
Carol Massar
Tim, we're going to stay on Venezuela.
- [19:15]
Unidentified Bloomberg Host
Yeah. And what's needed to make this country viable, if that's the goal of all this US Action. For that we welcome Francisco Rodriguez, senior research fellow at the center for Economic and Policy Statecraft at the University of Denver's Joseph Corbell School of International Studies. He joins us from Denver. Professor, good to have you on the program. You write in Foreign affairs about Venezuela after Maduro, the current government, it's still the it's still the former government of President Nicolas Maduro. The acting president is Delsey Rodriguez, his vice president. Is this current government, is this current setup good for Venezuela and its people?
- [19:50]
Francisco Rodriguez
Well, the question is what's the alternative and what was the US Willing or able to do? I mean, what we saw over the weekend was the extraction of Nicolas Maduro, but not a regime change. The regime remains in place. What would have been necessary to change the regime? That would have been a very different operation. The US Would have had to carry out a land invasion in Venezuela. It would have had to occupy the country. It would have needed to get involved in state building. And the US clearly decided not to do that. So then it has to deal with the authorities that actually have control over the territory. What the US Is trying to do is to say, well, to those authorities, what you're going to do is going to be circumscribed by the pressure that we're putting on you, will allow you to sell your oil under certain conditions, but you have to comply with what we're asking you to do. For example, you can't sell the oil to China. You have to sell it to the US or you have to transfer it to the US in some way.
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Unidentified Bloomberg Host
Professor, is it notable to you that there aren't necessarily humanitarian elements that are tied to this? That's Something in the past that we've heard about nation building, the idea of democracy, the idea of human rights, those sorts of things. We don't necessarily.
- [21:05]
Francisco Rodriguez
Well, there's, there's, there's humanitarian and democracy. I mean, there's one problem in Venezuela is that this country has undergone a massive economic collapse. It suffered a contraction of 71% of its GDP, the largest ever peacetime economic contraction in world history. And this country has been under a blockade of oil exports by the US a total blockade for approximately one month. And this country depends only on oil revenue. That's its only source of revenue to fund its economy. So we could be looking at a situation in which the economy suffers another major humanitarian crisis, another major economic crisis. And, and we have migration outflows, we have food shortages, we have quite possibly a famine. Then there's another issue which is the issue of human rights and democracy. The US Government has not talked about human rights. It hasn't talked about democracy. Secretary Rubio said on very vague terms, well, after we stabilize the economy, there's going to be a transition that can be done by the Venezuelan people. But this is very vague. There was an election, it was won by the opposition last year.
- [22:15]
Geetha Ranganathan
Right.
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Francisco Rodriguez
But that doesn't seem to be part of the plans of the, of the US Government to bring this into the picture.
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Carol Massar
Yeah, I guess I just do wonder, is energy, a focus on energy, really the path forward to creating a sustainable economy in Venezuela longer term?
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Francisco Rodriguez
Well, I think that right now you have to worry about the short term more than the long term. I mean, so the Venezuelan economy.
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Carol Massar
So is oil the answer short term? Because we've all talked about the infrastructure.
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Francisco Rodriguez
It has to be. The Venezuelan economy has. More than 90% of its exports have been oil for the last 110 years. You're not going to transform this overnight. This country is in the midst of a massive humanitarian crisis. What you have to do is recover the economy with the anchor of that economy, which is oil. Venezuela used to produce two and a half billion barrels. I'm not talking about ages ago. I'm talking about 2015, before sanctions were imposed, was producing two and a half billion barrels. Now it's producing around 900,000 barrels. That, that is the driver of the Venezuelan economy. You have to increase that oil production, and that has to generate royalties and revenues for the Venezuelan state so that it can fund public spending, so that it can fund imports of basics. This is a country that does not produce enough food to feed itself. It buys that food with the revenues from oil exports. So those oil exports have to be directed primarily at making sure that Venezuela's basic needs are met.
- [23:42]
Carol Massar
Francisco, we've only got about a minute left, unfortunately. I mean, what, what actions by the US Will actually help the company? Do you agree with what they've done so far is big steps forward and will put the company, put the company, put the country on the right path to economic viability?
- [24:01]
Francisco Rodriguez
Well, we're not sure what they've done right now. I mean, we know that they invaded the country and took out the president, but we're not sure what it is that they're doing in terms of this oil deal. The only point is that that I want to make is that this money has to come back to Venezuela. This money has to be able to fund the functioning of the Venezuelan economy. Otherwise you're going to have a massive humanitarian crisis. And what's going to happen is that millions of more Venezuelans are going to show up in other countries and ultimately in US Borders unless you stabilize the Venezuelan economy.
- [24:34]
Carol Massar
All right, we got to leave it there. Thank you so much. Really appreciate it. Francisco Rodriguez, senior research fellow at the center for Economic and Policy Research at the University of Denver's School of International Studies.
- [24:46]
Unidentified Bloomberg Host
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [24:54]
Barry Ritholtz
This is Caroline Hyde and I'm Ed.
- [24:56]
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- [26:00]
Carol Massar
Hey, let's get to it with Geeta Ranganathan. She's bloo, Bloomberg Intelligence senior Media analyst. She joins us from headquarters in Princeton, New Jersey. All right, let's go to just the nuts and bolts at this point. So Warner Brothers rejecting this amended takeover from Paramount Skydance. I mean, is it just increasingly looking like this is a deal that's not going to happen or is it just Warner Brothers saying show me the money?
- [26:22]
Geetha Ranganathan
It is a case of show me the money, carol. So the $30, obviously we've been through this now a gazillion times. It's just not going to cut it with David Zaslav. He obviously wants something higher. In fact, he almost, I think of lays it out in the letter that they sent the board of Warner Brothers Discovery sent to Paramount Skydance. So they lay out something like $1.79 a share that they would need to be compensated for terminating the agreement with Netflix, as well as, you know, kind of going good on some of the financing costs. So they obviously do want Paramount to raise the offer. We're thinking they, you know, it needs to be raised to at least $32 a share to kind of bring the Warner Brothers board back to the table.
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Unidentified Bloomberg Host
So what's the next move then? Does, does Paramount Skydance come back with more money or with a different deal structure?
- [27:17]
Geetha Ranganathan
So I don't know if the different deal structure is actually going to work them because that was what, you know, they did in the December 22amended offer. So one of the big points that Warner Brothers Discovery had raised initially was that, you know, that they were talking about whether Larry ell, the Ellison family was actually personally guaranteeing the bid. They did amend that. You know, they did raise their termination fee. So they, so they addressed some of the concerns. But I think Warner Brothers is really looking for a sweetened bid. And of course, as you just mentioned a little bit earlier, they are talking about very, very high leverage, kind of again, pointing to the uncertainty with the deal, basically just indicating that they need to be compensated for, for all of that risk and uncertainty. And they talk about like the difference between Paramount and Netflix. Paramount being you $14 billion market cap company versus 400, $400 billion for Netflix. So just kind of talking about the quality of the companies. You know, again, it all comes down to David Zaslav's deal making skills. I think they're absolutely top notch. I mean, we've seen this company go from $7 a share to, you know, what is it now, $28.
- [28:24]
Carol Massar
So well done.
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Geetha Ranganathan
Going to try. Yeah, he is going to try and extract as much as he can. The definitely they need a sweetened bed.
- [28:34]
Carol Massar
You know, with any investment though, you got to know when to like kind of say this is good enough. What I'm curious about though, Larry Ellison. I'm looking at Rich go on the Bloomberg. He's worth about $245 billion. So but a lot of that I think is tied to shares and we.
- [28:48]
Unidentified Bloomberg Host
Know choose Oracle ownership specifically.
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Carol Massar
Exactly. What I'm curious about though, and we know Geeth, are that media deals can have a lot of leverage. But again going back to that Paramount is what a baddie for $14 billion market value company. You were just talking about this and this acquisition, we're Talking about almost $95 billion of debt and equity financing. Is that, is it too much? Is it manageable?
- [29:15]
Geetha Ranganathan
It is way too much. Where we're talking about something like seven to eight times leverage. You know, that's what, that's the pro forma gross leverage ratio that we're going to be looking at if this deal were to take place, which just basically puts the combined company at a lot of. So you know all of their cash flows, all of their Ebitda will basically go towards debt financing. So it really definitely puts too much pressure, which is one of the points that Warner Brothers Discovery keeps raising. And you know that any company with a huge amount of leverage and with a declining EBITDA profile, well that's not a good situation to be in. And that actually we've seen that actually play out with Warner Brothers Discovery itself, you know, which when the deal was announced with the Warner Brothers and the Discovery companies coming together, they had promised something like $14 billion in EBITDA with over $50 billion in debt. That never really happened. You know, EBITDA fell short by something like 50%. And so that's kind of the risk that we run in this case as well. Although one can argue that there are synergies and all of that good stuff. But again, you know, David Zaslav only knows too well what the problems are with too much of leverage.
- [30:26]
Unidentified Bloomberg Host
Okay, Geetha, while we have you, I want to talk about Versant shares down another six and a half percent today, down about 25% just in the last three days. That's when it was officially began trading as an official spin off from Comcast. It's the parent of Ms. Now CNBC and others. You have a note out that says you think the legacy challenges will remain in overhang. A sale or combination with other cable networks seems inevitable. Is this just a little stopping point or a holdover until this is part of some other company?
- [30:59]
Geetha Ranganathan
Yeah, I think, you know, the writing is on the wall, Tim. I mean we've seen this now play out for years and years where, you know, we had pay tv, legacy TV assets, especially the cable network business, really in secular decline. And what we thought was kind of this drip, drip of this whole melting ice cube has now kind of turned into this avalanche. And that's exactly what we're seeing even with Versant. Because if you just kind of heard their projections for EBITDA, we're kind of looking at about a 10 to 12% EBITDA decline year after year. And that is really what is reflected in those multiples. I mean this is a stock that should, you know, just kind of given its debt profile, the fact that it has a really clean balance sheet, the fact that there's visibility into affiliate fees, should be trading at least at about 6 times. Just based on historical multiples. It's trading right now at less than four times. So just again goes to reflect all of the uncertainty and the nervousness that investors have about assets like this. So yeah, there's absolutely no doubt that this needs to combine, needs to be part of some bigger umbrella, maybe Discovery. If the Netflix deal goes through and they actually spin it out.
- [32:01]
Carol Massar
That's what I was.
- [32:05]
Geetha Ranganathan
A lot of fear.
- [32:06]
Carol Massar
Well, you know, part of. Yeah, I mean does that something like that maybe happen then Gita and just got about 20 seconds.
- [32:13]
Geetha Ranganathan
Yeah. If Warner Brothers Discovery kind of keeps pushing on this Netflix deal, you know, one of the things they're really hoping for is then that they do, you know, that they are able to kind of spin out that TV network business and then of course that then becomes a major roll up vehicle for, you know, versa and for other table network owners.
- [32:32]
Carol Massar
Amazing. As always, a must read research on the Bloomberg Terminal. Geetha, thank you so much. Geetha Ranganathan, she's Bloomberg Intelligence Senior Media analyst.
- [32:40]
Barry Ritholtz
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