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- [00:01]
Narrator/Voiceover
What if data didn't sit still?
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What if intelligence moved with us, not
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buried in reports, but activated in real time?
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Where lives are being shaped, where decisions are being made.
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It all starts with a Where is the potential? Totality turns data into clarity, intelligence into insight, insight into action. Because when intelligence moves, we all move forward. Intelligence beyond Bounds the thing about AI for business?
- [00:33]
IBM Representative
It may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slashed repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.
- [00:59]
Chase Bank Representative
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- [01:46]
Podcast Announcer
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 Radio.
- [02:16]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Just a warning to everybody, we're going to get a little technical, but Maggie's going to help us understand what jailbreaking is and what's at stake when it comes to anthropic fable 5 and mythos. Anthropic executives planning to meet with Trump administration officials on Monday to discuss an unprecedented US Government directive barring foreign access to the company's most advanced AI models. That's according to a person familiar with the matter. For more, we're joined by Maggie Eastland, Bloomberg News tech reporter. She's based in Washington, D.C. it's where she joins us from right now. So Maggie, I said this would get a little technical because I think we should just start off by explaining the Fable 5 relationship to mythos and what has the government right now so concerned and why Anthropic is pushing back on this?
- [02:59]
Maggie Eastland (Bloomberg News Tech Reporter)
Yeah, absolutely. It definitely helps to sort of get some definitions down to start. So, Mythos, that was released in April by Anthropic. It's their latest model, but it was not released to the public because the company was too worried that it had a lot of cyber capabilities and it could be used for cyber attacks. So it was only released to a limited group of government and business partners to sort of help those partners shore up their own cybersecurity efforts. What happened last week was Anthropic actually released a version of that model with some added safeguards to the public. So that's what we call Fable 5, and that's sort of what started this whole situation between the government and Anthropic. So a few days after that public release, the government sent Anthropic a letter that was an export control directive that essentially blocked anyone who was a foreign national from even accessing that Fable 5 or that Mythos 5 model. So, in effect, Anthropic was forced to immediately disable those. Those models, especially since they have foreign nationals who are employees. So this affects their employees. It affects their customers. All of a sudden, they. They're only able to provide these models to US Citizens, and they don't even have a way currently of sort of a know your customer standard in terms of, you know, where those people reside who are using their models.
- [04:22]
Host 1 (likely a Bloomberg Businessweek Daily Host)
I'm glad you said that, because I'm. I'm opening Claude from Anthropic right now on my phone. I don't pay for it, but I. But I have it. I can use it. I. I had the ability to use Fable 5 if I paid for it, but now it says currently unavailable. It also advertises that it's for your. Your toughest challenges. But Claude has no idea where I live in terms of, like, what my nationality is, so they just have to disable it because they don't have those, know, your customer guardrails in place.
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Maggie Eastland (Bloomberg News Tech Reporter)
Exactly. It would definitely take some time to develop those. There could be some privacy concerns from folks in Washington. It certainly wasn't something that they could do on very short notice. And they were. They were sent this letter on at a pretty quick turnaround. And so, you know, know, as we've reported, Anthropic executives are now in Washington, D.C. they're meeting with the Commerce Department today. We'll see what comes of that. They're. They're trying to work through this. The concern here, I should point out, and Anthropic has said this in their statement. They believe that the government is concerned about a jailbreak. Now, there's not necessarily one definition for what that is, but typically it means that users who are using Fable might be able to prompt it in a certain way so that they're able to access those cyber advanced capabilities that they're not supposed to access. So Microsoft was involved in surfacing this vulnerability and that's certainly going to be dominating the conversation in terms of just trying to figure out if this is something Anthropic could fix, if they could potentially fix it with more of these know your customer standards. So that's what's going on right now. And we'll have to see if they're able to work this out and somehow remove that export control.
- [06:06]
Host 2 (likely a Bloomberg Businessweek Daily Host)
So on one hand, you know, Maggie, it seems like the White House, the Trump administration, is actually very keen to what could possibly happen and is staying ahead of the game. It almost sounds like, like who is leading kind of the strategy and the process when it comes to the White House and like it sounds like the expertise is there, Is that correct? Because I feel like with social media, we felt like maybe everybody didn't quite understand everything that was going on. And so there's been some consequences as a result. But it does sound like the team at the White House and the administration is kind of on top of things. Is that fair?
- [06:48]
Maggie Eastland (Bloomberg News Tech Reporter)
Yeah, I think a few things, like at the principal level, after Mythos was released in April, you did kind of see this full government response. You know, Susie Wiles, Trump's chief of staff, got involved, Scott Bessant, the Treasury Secretary, Sean Carncros, the director of the National Cyber efforts. So you saw a lot of actors coming together very quickly to essentially write an executive order to make sure that the government could have early access to these cyber capable models, including Mythos. So this cyber use case kind of like scared everyone, woke everyone up across the Trump administration. But what we're seeing now is a little bit more confusion, I guess. And it's unclear exactly what the policy is because that executive order, in the process of writing it, there was some internal policy debate over whether this should be a mandatory regime or a voluntary one. And ultimately what you saw in that executive order in early June was a completely voluntary situation where AI model companies on, you know, on their own terms would offer their models to the government and the government would sort of review, review them, help them ensure that everything was safe. At the same time, the government would be able to make sure that critical infrastructure and its own Data was protected from potential cyber attacks. And this was all going to be sort of a kumbaya voluntary thing. And I guess the lack of clarity now is what we're seeing is it's really no longer voluntary for Anthropic. In this case, when push came to shove, the company was, was doing something that the government didn't like and then ultimately found a tool to sort of compel it into paying more attention to this jailbreak. So that's definitely casting some uncertainty onto the whole industry because Anthropic is not the only one sort of operating under this voluntary situation. And it seems that potentially it's, it's more voluntary, but a looming threat of, you know, you could be compelled to do something if, if the government decides to do that.
- [08:53]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Maggie, I, I'm curious. The folks you talk to who are observers of this type of technology and understand tech policy, do any of them say that. That we're missing the mark here? That. Because what, what I think about is the, the constant refrain, which is like the wor you're using right now, the worst version of AI that that will be available. You have all these companies here in the US that are working on this. You have all these companies in China that are working on this. And here we are talking about some model that a year from now is going to look like pretty basic and simple. If the last three years are, you know, any indication of how quickly this technology moves, are we just missing the mark here by focusing on this one thing? Yeah, yeah.
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Maggie Eastland (Bloomberg News Tech Reporter)
I mean, I think there's been a lot of criticism, both like in the cybersecurity community and in the AI policy community to this decision. I think the main criticism is, is just that it's a bit incoherent. Right. Sort of like this is probably the worst thing for AI model companies is like regulatory uncertainty because this was done through essentially a letter, so it's not public. And Anthropic has said that it wasn't even clear exactly why this was done. They, they only found out later that is their position. They found out later that the government was worried about this vulnerability. So certainly some folks have said that the Trump administration is missing the mark because, you know, if they wanted to do a more regulatory approach, they should make that clear. Right. Because that would be the best thing for the markets is to have just a clear signal in terms of what the regulation was going to be or if they were going to take sort of the pro innovation, laissez faire approach, then sort of doing something like this in A last minute export control blocking all foreign access is certainly not aligned with that. So I think the main criticism right now is just the lack of coherence, which is probably the worst thing for the market even compared to a more clear regulatory policy.
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Chase Bank Representative
Yeah.
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Host 2 (likely a Bloomberg Businessweek Daily Host)
And it does wonder, you know, as you guys, you and the team in your reporting, Maggie, say after decades of disseminating cutting edge US Technology around the world as a diplomatic and economic tool, Washington is now moving in the opposite direction. And you do wonder, is it not just a Trump administration shift, but maybe something that on both sides of the political aisle there's been a pulling back because it's safe to say there was certainly, you know, the continuation of Trump's first term policies when it came to China on certain things and technology in the Biden administration. So you do wonder if this is something more significant going on.
- [11:26]
Maggie Eastland (Bloomberg News Tech Reporter)
Yeah, there's definitely this unique tension with artificial intelligence in particular where folks in Washington are concerned that actually, you know, disseminating this technology might be sort of at odds with actually preventing foreign actors like China and Russia from accessing it. You know, the US Adversaries, the people that they don't want to access it. So this is kind of a unique tension. And it's been, you know, currently as we're seeing, it's sort of leaning in the direction of safety, which is certainly not what we would have expected from the Trump administration at the start of the president's term. But I think it's, you know, it's one thing to say that you want to have, you know, a light touch approach. It's another to actually be sort of confronted with these cyber vulnerabilities as folks like Scott Bessant have been, and then to sort of figure it out on the fly.
- [12:20]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Right.
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Host 2 (likely a Bloomberg Businessweek Daily Host)
And you have to wonder about, especially as a lot of these companies are getting ready to do some maybe mega cap IPOs, what does it mean for their business going forward? Some great reporting, Maggie. Thank you so much. We really appreciate it. Maggie Eastland, she's Bloomberg News tech reporter. She's based in the nation's capital. Our Bloomberg News Bureau in Washington, D.C. stay with us.
- [12:39]
Host 1 (likely a Bloomberg Businessweek Daily Host)
More from Bloomberg Businessweek Daily Coming up after this.
- [12:46]
Narrator/Voiceover
What if data didn't sit still?
- [12:48]
What if intelligence moved with us, not
- [12:51]
buried in reports, but activated in real
- [12:54]
time, where lives are being shaped, where
- [12:57]
decisions are being made. It all starts with the question, where is the potential? Totality turns data into clarity, intelligence into insight, insight into action. Because when intelligence moves, we all move forward. Totality, intelligence beyond bounds.
- [13:16]
IBM Representative
The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced cost by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business.
- [13:44]
Public Ad Narrator
IBM Support for the show comes from Public Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts? Yep. High yield cash? Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage Services by Public Investing member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor crypto services by ZeroHash all investing involves risk of loss. See complete disclosures@public.com disclosures.
- [14:45]
Podcast Announcer
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.
- [14:59]
Host 2 (likely a Bloomberg Businessweek Daily Host)
It's interesting. We're obviously watching the war and we just kind of covered all of that in terms of the market enthusiasm that's playing out. Also playing out is again, we're focusing on what is the world's largest ipo. We're talking about Space X successful launch on Friday. We continue to see the stock shooting higher today, shares jumping in their second day of trading, adding to gains following a blockbuster debut that instantly vaulted this company into the ranks of the world's most valuable public companies. Now keep in mind the offering syndicate for the IPO included several lead underwriters, including JPMorgan Chase. The list, to be fair, though, of all the banks involved reads like a who's who of Wall Street's biggest and best known banks.
- [15:38]
Host 1 (likely a Bloomberg Businessweek Daily Host)
We got a great couple of voices joining us with an inside look at how all of this played out and continues to play out at this point. Bailey Lipschultz is Bloomberg News IPO reporter David Bower joins us too. Head of Equity Capital Markets Americas over at JP Morgan Chase. They both join us here in the Bloomberg Businessweek studio. Dave, good to see you. Bailey, I feel like we usual.
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Bailey Lipschultz (Bloomberg News IPO Reporter)
Yeah, yeah, I badge in, I badge out.
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Host 1 (likely a Bloomberg Businessweek Daily Host)
We are always, we are always seeing you. And we're lucky. SpaceX, of course, the largest IPO ever. I'm just curious from your view, how you think market participants right now, Dave, should be looking at this in the context, not just of other potential IPOs in the future, but, but really in the context of everything we're seeing out there right now. The talk of people taking money from other assets, selling that, getting into Space X. Just your view?
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Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Yeah, I think, I mean, first of all, for somebody in the ECM world, what a time to be alive. Like, these are, these are great times for the markets. And I think unlike other cycles we've seen where IPO issuance has been extremely active, you have a real catalyst forming the investment thesis behind this. This is the reindustrialization of America. We're creating new ecosystems, new economies. I mean, you think about what space could become, what I could become. These are, these are investment theses that many people haven't been able to invest behind before. And so I think seeing that this euphoria in the IPO market is warranted
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Host 2 (likely a Bloomberg Businessweek Daily Host)
and appropriate, what's the signal to the market and market participants specifically?
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Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
I think right now you're seeing that the IPO worked and you saw Friday a very strong trading with the Stock Finishing up 19% from the IPO price. And I think today you see broader markets rallying on the, on the news with, with, you know, Iran peace treaty, and you're seeing just more enthusiasm coming in.
- [17:19]
Host 2 (likely a Bloomberg Businessweek Daily Host)
So I think SpaceX up another 15% today.
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Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Exactly. So I think it's all, it's all systems go to make a, you know, pun intended for Space X. But I think if there was any hesitancy of, you know, should I continue to buy up 20%, I think the answer is yes. And if you look long enough, there's a, you know, this is a business that could be generationally transformational.
- [17:36]
Bailey Lipschultz (Bloomberg News IPO Reporter)
But thinking about the generational transformation, Dave, when I look at the pipeline or the kind of group of companies that could be coming public, they don't look like SpaceX. When you're meeting with people, maybe your former employer KKR, talking about something in their portfolio, a number of other private equity firms, what are they looking at? Obviously this is a big one for IPO buyers, but does that translate to someone who owns, say, software companies or other companies in other industries?
- [18:02]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Look, the, the mega IPOs are getting the headlines right now, but there's been a very active and very accommodative equity market in general throughout this year. And putting space X aside, new issuance volumes are up almost 2x this time from last year. And the vast preponderance of that has been other sectors. And we've seen health care coming back, we've seen biotech issuance coming, we're seeing industrial energy. So the markets are working all those
- [18:32]
Bailey Lipschultz (Bloomberg News IPO Reporter)
themes still off of AI in some capacity. If the bottleneck is power and I'm a power company, then I at least have an AI pitch. Because when I look at AirTalk to folks, it's kind of like your TAM is either infinite because you have AI behind it or it's zero because your software. And the worry is that your kind of total market could be at risk. How do you think about kind of other industries and how that fits into that?
- [18:52]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Yeah, look, I don't think the market is shut out for certain issuers. I think it does come down to price and having the right starting point in the public markets. And I think there is a bid for those other businesses. You know, you mentioned sponsor backed businesses. It's a good time to, you know what I would say? Get the puck on the ice, start it. And you know, we always say when we're advising our clients and our issuers, proof points in the public market are worth even more than in the private market. And so getting out there, starting it and you can see how, you know, your valuation can expand as you perform, you can get your share price to a level that you might be more interested in selling app but getting, you know, getting started can be helpful.
- [19:31]
Host 1 (likely a Bloomberg Businessweek Daily Host)
What is it about this moment right now, Dave, that is compelling so many of these companies not just to go public, but also to look into going public. And I am going back to sort of the, the companies that when they do go public will become mega cap companies.
- [19:43]
Host 2 (likely a Bloomberg Businessweek Daily Host)
And just to tag on to what Tim saying, opportunistic or fundamentally based, I
- [19:48]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
think, I think this is a more fundamental based market. And you look back to 2021, which felt a little bit more technical, like rates were zero and so therefore equities were attractive. And yet a very different dynamic that drove that. I think this is much more of a fundamental, I think the market is looking at what the next three to five years could be and you know, potentially looking past some of the near term volatility. And it's not saying they're ignoring downside risk, but I think Saying there are certain businesses right now that are very much worth investing in. There's a whole slate of new issuance that is, is different than the portfolio I've had in the past. And I'm going to take that opportunity to invest in it.
- [20:23]
Host 2 (likely a Bloomberg Businessweek Daily Host)
I am thinking though about those mega IPOs, be it anthropic or open air. Should we make any assumptions about their market reception just because of what happened with Space X?
- [20:33]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
I think, I mean, Space X is an end of one of itself from the fact that no one else is doing space at this scale, at this velocity.
- [20:42]
Host 2 (likely a Bloomberg Businessweek Daily Host)
But it's an AI play.
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Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
But it is an AI play. But where I was going with that is I do think, I mean, this bodes if you're anthropic and open AI, you're, you're applauding that this type of market reception happened. And you know, the size of the deal getting done, having a trade as well as it did, to me that that gives even more confidence that the next wave could get done in a very positive way.
- [21:01]
Bailey Lipschultz (Bloomberg News IPO Reporter)
Well, when we look at what the next few months can look like, back to the broadening out, is I still the flavor of the day? If we look at some of the reports that are out there in sk, Hynix or other large companies in the air space looking to tap the market like Carol was mentioning, because of these tailwinds and kind of, what does that mean for this July, this August class?
- [21:21]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Yeah, look, I think we're going to have a very active summer. Even, even the Space X period of time, you know, a lot of people thought coming in we'd have a dearth of issuance and you'd have a real quiet period. We did $10 billion of equity capital outside of Space X last week. And so, you know, the market was still working. There were still a ton of deals getting done. I think this CapEx cycle, to your point of AI, people still want to invest on it and that's across equity debt. You know, all the facets of capital here. And so the public markets are helping that, but it's also the private capital markets as well. We're seeing capital formation in almost every corner of the capital markets.
- [21:55]
Bailey Lipschultz (Bloomberg News IPO Reporter)
You oversee ecm. I come back to the point that Google Alphabet, however you want to call them, raised close to $90 billion across a suite of products. Is that something we should expect from all these hyperscalers who need capital to attack the equity market? And is there any risk that that gets oversaturated?
- [22:13]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
I think the speed at which Google is able to Raise in the public markets shows the depth and the capacity for the capital markets. And I think as long as companies are showing an ROI and a good use of proceeds to raise that equity capital, the markets will be there for them.
- [22:28]
Host 2 (likely a Bloomberg Businessweek Daily Host)
How do we know when it becomes uncomfortable, crazy, exuberant, frothy, frothy.
- [22:36]
Bailey Lipschultz (Bloomberg News IPO Reporter)
Well, think back to 20 and 21 at what? It's easy now to say that these were companies that were advantageous, but in the moment, did it feel that way?
- [22:43]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
I go back to when you look at fundamentals and you look at valuations, we're not terribly stretched and we're not at a, you know, a new point in time. And you go back and you look at, you know, for example, software valuations in 2021, those were hitting new highs and they were hitting kind of new records of where the market was trading that we're not seeing that writ large in the public market.
- [23:03]
Host 2 (likely a Bloomberg Businessweek Daily Host)
SpaceX isn't profitable.
- [23:04]
Host 1 (likely a Bloomberg Businessweek Daily Host)
No, it's not, but it's. And it's being valued on a sales multiple for 2025 sales and that. And I think that some people have come and sat here and said, you know, it's starting to feel like, you know, when we're valuing IPOs on sales multiples, it started to feel a little bit like the dot com boom. Why is this time different?
- [23:21]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Well, one, I think, I think that's unique. One, Space X, I think, is its own animal. And I think when you're thinking about the space economy, you have to look at that in a very way. I don't think you're seeing the rest of the market being valued aggressively on a sales multiple or other metrics where people are trying to extend and get comfortable with it. I think these are based more on fundamentals. It's based on growth right now. And people are seeing where the capital being laid today has a return in the future. And I think you can pull that forward and that's what's going on.
- [23:47]
Host 2 (likely a Bloomberg Businessweek Daily Host)
But the circular financing doesn't worry you guys or what are the.
- [23:50]
Maggie Eastland (Bloomberg News Tech Reporter)
What's the.
- [23:51]
Host 2 (likely a Bloomberg Businessweek Daily Host)
We have this conversation a lot. Are we stupid to have that conversation about a company that seems to buy from another part of its property or invests in a chip maker because they need to, like, you know what I'm saying? What's the conversation you guys have about that circular financing?
- [24:08]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
What keeps me sleeping well at night about this is the fact that we're having the conversation. And I think if people are acknowledging it, we're talking about it, you're dissecting it. You're diligencing it. I think this cycle has room to continue and to grow. I think it's the unknown risks, not less the known risks that I think could derail the cycle.
- [24:28]
Bailey Lipschultz (Bloomberg News IPO Reporter)
And when we look at this market, is there a risk and kind of just thinking about the difference between a hyperscaler who is historically been the best cash flow cows in the history of mankind, they can at least turn off spending. How do you think about companies that are spending and need to spend but don't have hundreds of billions of dollars annually or biannually in terms of free cash flow?
- [24:49]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Yeah, look, I think you have to look at the, the fundamentals of the contracts, what is contracted from the demand bill that they have today and get comfortable that what they're investing in right now has the right economics to yield the return in three or five years. And I think you're right. They might not have the free cash flow spigot today, but you look at what is contracted and what could be come to fruition in a high quality way in the next two to three years, you can bridge to that free cash flow.
- [25:20]
Host 2 (likely a Bloomberg Businessweek Daily Host)
We got 30 seconds left here. You've been covering this market. What do you want to ask Dave?
- [25:24]
Bailey Lipschultz (Bloomberg News IPO Reporter)
Do we see more private equity IPOs in the second half or is that still an area broadly speaking, that session go?
- [25:31]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
I think definitively yes. I think the market would be accommodative for that. And our backlog suggests that we will have a number of those in the
- [25:40]
Bailey Lipschultz (Bloomberg News IPO Reporter)
second half in about 10 seconds. How much does debt leverage or how much does leverage ratios matter for those companies?
- [25:46]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
It matters, I think. I think you want to get it to a comfortable starting point. But I think for good free cash flow stories with solid predictable revenue and growth, the market get comfortable.
- [25:56]
Host 2 (likely a Bloomberg Businessweek Daily Host)
So welcome to our regular weekly segment. We'll see you both.
- [25:59]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Thank you.
- [26:00]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Billy Lipschelz, of course, Bloomberg News IPO reporter Dave Bauer, head of Equity Capital Markets Americas over at JPMorgan Chase.
- [26:07]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Stay with us. More from Bloomberg Businessweek Daily coming up after this.
- [26:15]
Public Ad Narrator
Support for the show comes from public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti. Retirement accounts. Yep. High yield cash. Yes. Again, they even have direct indexing. Public has modern design powerful tools and customer support that actually helps. Go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market and paid for by Public Holdings Brokerage Services by Public Investing Member FINRA SIPC Advisory Services by Public Advisors SEC Registered Advisor Crypto Services by ZeroHash All Invest involves risk of loss. See complete disclosures@public.com disclosures running a small
- [27:14]
Chase Bank Representative
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- [28:14]
IBM Representative
Reynolds here from Mint Mobile. I don't know if you knew this, but anyone can get the same Premium Wireless for $15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you to Mint Mobile today. I'm told it's super easy to do@mintmobile.com
- [28:31]
Narrator/Voiceover
Switch upfront payment of $45 for 3 month plan equivalent to $15 per month required intro rate first 3 months only, then full price plan options available, taxes and fees extra.
- [28:42]
Podcast Announcer
See full terms@mintmobile.com 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 Bloomberg Business app or watch us live on YouTube.
- [28:58]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Hey, speaking of sports, maybe that's one of the reasons that Fox is buying roku at a $22 billion value in this push for streaming video. As we just mentioned, shares of Fox fell 17% on this news. Shares of Roku for much of the day were little change. They ended up closing today, just down by about 2% on the day today. But a lot of this was Priced in earlier this week.
- [29:20]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Keep in mind, Roku on Friday, when it started to leak out, on Friday, when on air, that Stock was up 20% in the trade. So a lot of the news was already, I think it's safe to say, factored in.
- [29:33]
Host 1 (likely a Bloomberg Businessweek Daily Host)
I want to bring in Geetha Ranganathan, Bloomberg Intelligence Senior Media Analyst. She joins us from Princeton, New Jersey. Geetha, what is Fox going to do with Roku?
- [29:43]
Narrator/Voiceover
So, Tim, they're promising that they're going to keep Roku as is. So really what Fox is buying here is distribution. They own the content. They own some of the best live content in terms of access to sports properties, in terms of their news coverage with the Fox News Channel. But what they really don't have is that distribution network. And that is really hurting them because they have huge exposure to the linear TV ecosystem where really nobody is really staying there anymore. Everybody has kind of migrated away from the linear TV ecosystem and continues to migrate away from there to streaming. And so they want to go where the action is and they want to go where the money is and where the eyeballs are. And that's really what they're getting with Roku. And so far they're promising that they're going to keep operating it just as it is right now.
- [30:31]
Host 2 (likely a Bloomberg Businessweek Daily Host)
What about Fox one? What about Tubi?
- [30:34]
Narrator/Voiceover
Again, we'll continue to operate as is, but, you know, again, we don't know how things change. Obviously they're saying things that need to be said because Roku does partner with everybody in the ecosystem. And I think some people are worried that maybe, you know, Roku has always kind of been known as this neutral platform, right?
- [30:53]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Switzerland, the Switzerland of the streaming box. That was something they saw, like me as a consumer tech reporter, like 15 years ago, you know, as Chrome was, Google was coming out the Chromecast, as Amazon was coming out with its streaming stick. They were like, hey, we got no skin in this game. We work equally well with everybody.
- [31:12]
Narrator/Voiceover
Yeah, exactly. And so, you know, this is a little bit of a head scratcher in terms of how all of that neutrality is going to work. But, you know, from what Fox management has said so far, they said they're going to keep operating the platform as it is. Of course, we have to see how, you know, the other content companies feel about it. I mean, this is kind of letting the Fox into the henhouse, if you will pardon the pun. But that's really what it feels like a little bit. But we'll have to. We'll have to see.
- [31:42]
Host 2 (likely a Bloomberg Businessweek Daily Host)
So does a deal like this mean Somebody else, I always like, wonder about that. Does anybody else have to do something or. No, this is really Fox playing catch up to some extent.
- [31:50]
Narrator/Voiceover
So Fox. Yes, yes. So Fox stayed away from all of those expensive streaming wars when everybody was going crazy and launching, you know, A plus channel, Disney plus, Paramount plus, you know, Peacock, all of the streaming platforms. Fox was the one that kind of very famously stayed away from all of that and said, and actually, in. In hindsight, that was the smart move to make because all of those companies lost billions, if not tens of billions of dollars on making those very, very expensive forays into streaming. And it all ultimately came down to profits. And so at the end, Fox actually ended up looking. Looking like a winner in many ways because they hadn't lost that much of money. But I think the one of definitely weighed on investors mind and generally weighed on sentiment has been that Fox has really heavy exposure to the linear TV ecosystem. One that, you know, they really needed to kind of reset their narrative. And the Roku acquisition helps them do that. So right now they get 90% of their revenue from linear TV, only about 10% from digital. This move immediately helps them get close to about 35% of their revenue from digital. But more importantly, it really helps them kind of be there at the center of it all right? They're in on all types of action with streaming, whether it's advertising and whether it's subscriptions. So anybody who gets a subscription through a Roku box, you know, Fox is going to be able to participate in those economics and that matters.
- [33:17]
Host 1 (likely a Bloomberg Businessweek Daily Host)
That was my family on Saturday night when we wanted to watch this final game of the Knicks and Spurs. We spent 30 or 35 bucks on ESPN and we bought it through Roku. So I don't know, who knows? I wonder what this means. I mean, what's. So this is company like in the early days of streaming. Anthony Wood is the CEO, the founder of the company. He like invented the way to get streaming to the biggest TV in your home. This guy's like legendary when it comes to streaming. This started out as like an experiment at Netflix to try to get Netflix on the biggest screen. Are there any antitrust issues here? Because it is such a big gatekeeper.
- [33:56]
Narrator/Voiceover
Yeah, they are a huge gatekeeper. And one can argue that, yes, this, with this deal that, you know, Fox does kind of become this vertically integrated platform, remember, they will get access to 100 million global streaming households. And, you know, we're talking almost close to about 70 million, you know, U.S. broadband households. That's a pretty sizable number that's half of, you know, basically U.S. broadband households. But you know, the one thing that, that we have to keep in mind is the Murdochs are really cozy with, you know, the current administration, with the Trump. And you know, in this environment we've, we've kind of seen those friendships actually go a long way. So maybe they get, they don't go through so much of scrutiny. But obviously there is always that, that chance that there might be some regulatory watch as well.
- [34:43]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Was Roku worth 22 billion?
- [34:47]
Narrator/Voiceover
We actually think it might be worth more. And I say that because, you know, it just, if you just look at the growth profile of this company, Carol, it's been amazing. So the way they have been really honing in on some of their under monetized assets. So they've refreshed their home screen and this is the first time that they're doing this. This is their biggest product refresh in about 10 years. And what it really helps them do is kind of become like this Netflix landing page. So you know that the Netflix landing page is very much like how you can make or break careers, right? You can make or break a show. You can, you know, content just pops up there and that's it. Everybody's talking about that. That's, that's the subject of all the water cooler conversations. And so Roku is very much now trying to be that Netflix homepage. So you can really see them. They've rolled out the new homepage to about 20% of their, of their base. It's going to be rolled out to the rest of their users. But it's all really about elevating the content. Right. And, and people are willing to pay for this prime inventory and we're seeing that actually in the numbers. So if you just look at Fox or any traditional media company, right. We're kind of, you know, if you get flattish revenue growth, that's a big deal. Roku's platform revenue is expected to grow about 21% this year. 21%?
- [36:08]
IBM Representative
Yeah.
- [36:09]
Narrator/Voiceover
So that is, that is a big, that's impressive.
- [36:11]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Geeta, thank you so much. Geeta Ranganathan. She is Bloomberg Intelligence Senior Media Analyst joining us from our offices in Princeton, New Jersey.
- [36:21]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Stay with us. More from Bloomberg businessweek Daily coming up after this.
- [36:29]
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- [37:42]
Chase Bank Representative
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- [38:40]
IBM Representative
Reynolds here for Mint Mobile. I don't know if you knew this, but anyone can get the same Premium Wireless for $15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you to Mint Mobile today. I'm told it's super easy to do@mintmobile.com
- [38:58]
Narrator/Voiceover
Switch upfront payment of $45 for 3 month plan equivalent to $15 per month Required intro rate first 3 months only then full price, taxes and fees extra
- [39:08]
Podcast Announcer
fee full terms@mint mobile.com youm'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.
- [39:24]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Carol for, for so long we've had people come into this studio that also the other iteration of our Bloomberg Interactive Broker studio where Charlie is, yes, holding down the fort. And one of their main propositions was these were wealth managers. And one of their, their main things was like there are fewer and fewer companies are going public. There's less public stock out there because companies are buying back shares. We are increasingly getting into alternatives because there are fewer public companies out there.
- [39:53]
IBM Representative
Right.
- [39:54]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Because we need to put money to work.
- [39:56]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Yeah.
- [39:56]
Host 2 (likely a Bloomberg Businessweek Daily Host)
To invest.
- [39:57]
Host 1 (likely a Bloomberg Businessweek Daily Host)
And that's been one of the most defining like elements of the equity market over the past couple of decades. So writes Carmen Reineke, Bloomberg News stocks reporter. She's among the authors of today's Big Take it is one of the most read stories on the Bloomberg Terminal. She joins us here in the Bloomberg Interactive Brokers studio. Suddenly there's a lot of value. Well, I don't want to use the word value because I don't want to get people, you know, thinking value versus growth. But there's a lot out there for investors to buy. What's, what did your analysis that you did along with Lu Wang find?
- [40:29]
Narrator/Voiceover
So basically there's been sort of a switch in like expansion and contraction of the market. So over the last few decades, we've seen companies really aggressively buy back shares. Right. So sort of shrinking the overall pool of stocks available and giving a lot of support to investors along the way. This year, however, with all these new IPOs that are coming down the pipe, I mean we just saw record from SpaceX. We'll hopefully see Anthropic and OpenAI by the end of the year. And we've seen equity issuances from companies like Alphabet. The, you know, the number of stocks or things available to trade in the market is expanding to the tune. I think it's 1.5 trillion of stock added to the US equity market over the next two years. That's from JP Morgan Chase and Company.
- [41:14]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Is this just cyclical though, where, you know, at a certain point when, when these companies see value in buying back their shares, they're going to, they're going to gobble them up again?
- [41:24]
Narrator/Voiceover
I think there are a lot of factors that kind of go into it. One of it is, yeah, a lot of these companies, especially in the technology space, have these huge balance sheets. There were, you know, not other places, I guess that they were wanting to deploy capital. So buying back shares was a great way to return some of that value to shareholders. Now they have these huge spending needs because of AI, you know, building out the data centers and all the other technology that they need to use it. And so they want to be spending money and raising money to spend on those things. So the part of it is that. And then I think on the flip side, you know, this is something that's sort of similar to what we saw in the 1990s, sort of around the, like the dot com boom and bubble bursting. So I think there is some cyclicality there as well. Although people are optimistic obviously very, very careful to necessarily compare them too much or say that this time isn't different. If we're talking about a bubble, is
- [42:16]
Host 2 (likely a Bloomberg Businessweek Daily Host)
there any worry that there won't be enough investors to buy all the stock that's issued?
- [42:21]
Narrator/Voiceover
That's definitely a concern. So I mean we had a really great sort of run out of the gate with Space X, which definitely assuaged some fears that there wouldn't be enough investor demand or that the market would have trouble sort of digesting this large of an issue.
- [42:36]
Host 2 (likely a Bloomberg Businessweek Daily Host)
I wish shocked how well it all went down on Friday. I was shocked.
- [42:40]
Narrator/Voiceover
I was too. I mean, I think everyone was sort of braced for a lot more issues and it went very smoothly. And even today we had a second great day of trading. There's clearly a lot of demand there. But as we get through the summer, the next couple of months of the year, the lock lockups are going to start to expire. So a lot more of SpaceX stock is going to come into the market. Its float right now is quite low. And at the same time you're going to be getting, you know, the other IPOs, anthropic OpenAI and I mean we could see other companies also issuing secondary offerings or see just, you know, this pool of, in the equity market grow even more. So that is, I think, a concern hanging over the market for the, you know, the rest of the year probably, if not more.
- [43:21]
Host 1 (likely a Bloomberg Businessweek Daily Host)
I'm glad you just reminded everybody that it's only the second day of trading for SpaceX because I mean even, even a company like Cerebras. Right, yeah. You know, how much did we talk about this company the first few days of trading? And it did hit a high on May 14, so exactly a month ago of $311 a share. It's down to $218 a share right now. And I don't know what the lockup structure is and who was able to sell and when they were able to sell. But you're right, I mean, two days of trading for a new company doesn't necessarily make the history.
- [43:51]
Narrator/Voiceover
No, it doesn't. And it's even hard to necessarily call it a trend. So obviously it's a stock that we're watching very closely over the next few days, weeks, months, years.
- [44:01]
One.
- [44:01]
Host 1 (likely a Bloomberg Businessweek Daily Host)
One thing that I want to talk about in your piece is this idea of companies staying private for longer and again, years. We heard that companies would stay private for longer because. For a few reasons. One, quarterly earnings. We love them as reporters and getting to talk about this stuff.
- [44:18]
Host 2 (likely a Bloomberg Businessweek Daily Host)
But it makes it tricky for companies. It's a drag to grow their business, right?
- [44:21]
IBM Representative
Yeah.
- [44:22]
Host 1 (likely a Bloomberg Businessweek Daily Host)
I mean, they're, you know, they're marking a market every second of every trading day. It's not an easy thing to have happen. And it's great for liquidity and if they want to raise money. But oftentimes you can raise a lot of money in the private market and stay. Look, I mean, SpaceX is from 2002, a company is.
- [44:37]
Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
Right, old.
- [44:38]
Host 1 (likely a Bloomberg Businessweek Daily Host)
That's an older company than Facebook, right?
- [44:40]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Exactly.
- [44:41]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Yeah. So it showed that it could be private for a long period of time. Does this get companies off the sidelines? You mentioned Anthropic and OpenAI, but other
- [44:48]
Narrator/Voiceover
than those, I think we'll see. So something I've heard from a lot of investors is that SpaceX kind of opened the IPO window. We've definitely seen, you know, fewer than normal, I think, IPOs since the SPAC craze of 2021. And so this hopefully kicks off a period of a lot more companies coming to the public markets, not just these huge mega cap technology companies, but one sort of across, you know, the wide range of sectors and sizes available in the market. And that would be a really good thing for investors. The other thing that I, I hear from sources is that they worry a little bit about all of this value being created in the private market. That, I mean, it really leaves the public market out. And in some cases, some argue that it can inflate these valuations without sort of giving everyone a chance to be weighing in, which is, you know, basically what the public stock market is doing.
- [45:37]
Host 2 (likely a Bloomberg Businessweek Daily Host)
It's also a reminder, you know, of how expensive it is for this build.
- [45:42]
Podcast Announcer
Right.
- [45:42]
Host 2 (likely a Bloomberg Businessweek Daily Host)
In terms of AI. And it also is a reminder that when you really need a ton of cash, Right, the capital markets or the. Or the public market is really where you go ultimately.
- [45:52]
Maggie Eastland (Bloomberg News Tech Reporter)
Yeah.
- [45:52]
Narrator/Voiceover
And offering equity, like doing these offerings has become Cheaper in some aspects than debt. So it makes sense that these companies would be looking to, to go to the equity markets. And I mean they're doing both. Right. But it makes sense that they'd be specifically wanting to tap equity markets.
- [46:12]
Host 2 (likely a Bloomberg Businessweek Daily Host)
I just think it's fascinating.
- [46:13]
Host 1 (likely a Bloomberg Businessweek Daily Host)
Secondaries. Is that what you're going to say?
- [46:14]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Secondaries? But also just how it's debt, it's equity.
- [46:18]
Host 1 (likely a Bloomberg Businessweek Daily Host)
You're just seeing the all the throw everything at the wall approach of raising capital.
- [46:22]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Just reaching out to every bucket that's there in terms of raising money and capital for this build. And I guess it's just something we'll watch really carefully because you look at was it the Nvidia video today? Right. And three times oversubscribed, like that was a debt raise. That was a debt raise. But it's just you see the investor interest and we certainly saw it with SpaceX and we'll see what else. Which is essentially an AI play, right?
- [46:49]
Narrator/Voiceover
It is and it isn't. This is something I've been asking people a lot about as well, and I think there's a little bit of tension out there. I mean, certainly the market seems to be valuing it as an AI company as much as a space company, but I've definitely heard some sources say, you know, their AI offering is so much behind the others.
- [47:07]
Host 2 (likely a Bloomberg Businessweek Daily Host)
Yeah, it's got to deliver, right before
- [47:09]
Podcast Announcer
Carmen Reinecke, this is the Bloomberg businessweek 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.
- [47:43]
IBM Representative
Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop with Mint. You can get premium wireless for just $15 a month. Of course, if you enjoy overpaying. No judgements, but that's weird. Okay, one judgment. Anyway, give it a try. @mintmobile.com Switch upfront payment of $45 for
- [48:05]
Narrator/Voiceover
3 month plan, equivalent to $15 per month Required intro rate first 3 months only, then full price plan options available, taxes and fees extra. See full terms@mintmobile.com hey everyone, it's Kel Penn.
- [48:15]
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Dave Bauer (Head of Equity Capital Markets Americas, JPMorgan Chase)
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