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- [00:00]
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Ross Gerber
What do you have to lose?
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- [00:33]
Podcast Host
Bloomberg Audio Studios, Podcasts, radio news. Let's bring in Ross Gerber. He has thoughts on both of these companies. He's president CEO of Gerber, Kawasaki wealth and Investment Management. They've got about 4 billion in assets under management. And he's with us from, I bet, Lovely Santa Monica, California. How warm is it by you?
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Ross Gerber
75 and sunny. I'm right next to the beach too, so I don't want to rub it.
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Co-Host
That's enough for us. We're moving on.
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Podcast Host
We're done with you. No, we're so glad to have you here. I know, I know, I know. I'm a sucker for pain here. Hey, what stories. What story is more interesting to you, Ross? Is it Tesla and the possible combination of SpaceX Xi, or is it Disney?
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Ross Gerber
Well, the Disney story is a little bit sad for me because I'm just like, I've owned this company for my whole life and Iger's done a great job sort of refixing the business and getting good movies back in the theaters and such, but they just can't seem to get the momentum going. And the valuation for Disney just makes no sense. It's so cheap relative to what they're willing to pay for Warner Brothers assets, which are garbage compared to Disney. But they just seem like maybe this company needs to be broken up.
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Co-Host
Wow.
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Ross Gerber
That's part of it. That's part of.
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Co-Host
What does that look like? What does that breakup look like, Ross?
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Ross Gerber
Well, see, Josh and Dana are both great executives. So like they have like the fact they have to pick one is the problem because Dana runs entertainment and Josh runs the, the theme parks and all this kind of stuff. And they're just completely different businesses with different skill sets and, and maybe they should be CO CEOs, even though I hate that formula for businesses. It it Disney's just the parts are worth more than the whole. And we've waited for five plus years since the pandemic for them to do something good and they haven't. So it's time for change at Disney and I think it's breaking up the business and spinning off espn.
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Co-Host
Would that be the only thing spun off? It would just ESPN would be.
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Ross Gerber
No, it should be three companies the way I see it.
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Co-Host
What should they be it?
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Ross Gerber
Well, you have theme parks, resorts and experiences. The cruise ships is one and then you have, you know, your streaming business as the other and then you have ESPN sports as the third. Right. So you have entertainment that's non sports and then you have a pure sports play. Would that they just sold 10% to the NFL.
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Co-Host
Would that work with all the cross pollination that happens these days. Like you know, you go on a Disney cruise and the Disney IP is everywhere. You go see a Disney film and if it's a popular film that ends up becoming something that is an attraction at one of the park and resorts. It's supposed to be this virtual cycle that for years worked out really well. Could they still do that as separate companies?
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Ross Gerber
Yes, and I think it still works now that way, you know, but like explain how the sports business really matters when it comes to going, you know, on a cruise. It's nice to have ESPN on the TV there, but there's no relationship really. So I get when you're making a movie, you want it to go through the streamers, but I'm saying keep that all together. And then they license all their IP to the theme parks and resorts anyway. So it would just be an exclusive licensing agreement. I think it's actually quite simple. I think the real issue is extracting value from the very valuable assets and IP that Disney has while everybody's fighting over crappy IP and assets. Like Disney has the best assets in Hollywood. So you know, I don't know, I just don't think they have a future. The market's saying like wait, we don't see this future that you're, you're making for us. Iger is ready to leave. You know, so I actually think this story is pretty interesting because you know, the entertainment business is never going to be the same after this merger goes through. And I don't know what it looks like on the other side.
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Podcast Host
One more company. I just want to ask you one question. No, forgive me, I broke in on you. But I do wonder, you know, Ross, go back a few years and I remember doing this deep dive on Disney and talking with Bob and all the executives and just this whole idea, like Tim said, this cross Pollination. And people were.
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Co-Host
This was before Bob left for the first time.
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Podcast Host
Yeah, right, exactly. And, you know, people talked about the value of espn like that's the value of the company. But it sounds like there is value in a lot of parts today. And hence why you would argue for breaking it up into three. Is that, is that true?
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Ross Gerber
Yeah, I mean, I love the parks and resorts and cruise business. I mean, that business is killing it for them. It's tons of cash flow. Like, people love the cruises. They just launched a few ships. They've got a great business there. I love the streaming business. They finally, I mean, once they get this all under one roof, under Disney Hulu, Disney plus is a. Is a great streamer and a real competitor out there to the other streamers. And then you got espn, which is now like dominating sports again and really has a piece of every major, you know, league out there from a broadcasting perspective. But ESPN financials don't make any sense next to the cruise ship financials because ESPN loses money having these big events, you know, that we all want on espn. And they make money when there are big events. Actually, it's kind of a weird business. So they just don't complement each other. And you saw it in the earnings report, which was generally a very good report for Disney. And the stock gets hammered because when you look at all the moving parts, it's never consistent. And so I just think if they were able to prove that these assets, I think are worth closer to $150 a share and that's what it was trading at, then I'd say, I wouldn't be saying this, but at $100 a share, you got to break up this company and find value for its shareholders. After five years of waiting.
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Co-Host
Okay, Disney down 7.4% at104.43 right now, from in your view, the move to break up a company into separate parts to combine a company and two different companies and to one company. Let's talk a little bit about Elon Musk being in advanced talks to combine Space X with X. This, according to people familiar with the matter. You had a really interesting comment out on social media earlier today. You wrote X was out of money, merged with Xai. Xai out of money, merged with SpaceX. SpaceX out of money, merged with Tesla when they are all out of money. You obviously are not a fan of this idea.
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Ross Gerber
No, you know, it's not that. It's just, first of all, you're saying Elon Musk's in talks with himself. Like, who's he it talks with. I don't think Elon Musk talks to anybody. He's going to do this. So he's going to merge all three companies because he has to and he needs to. Because Tesla has 44 billion on the books and they need the money. And every one of his projects is well out into the future. So I'm not going to tell you whether I think all these ideas are going to work or not work. I don't bet against Elon. I think that's up for the future to determine, you know. But all these businesses are incredibly capital intensive with very, very question profit margins or even viability. Like data centers in space is not a viable business. Let's be real. It's very expensive to build a data center on Earth. Now imagine putting it up in space. Like this is just, we're getting into this level of absurdity. So that's why I put it out there, like, what happens next? So I've got like 18 projects that are incredibly capital intensive. Will people just keep giving Elon Musk money forever? But a lot of it's the same people who, who he's made money for just giving him back the money they've made for the next project. And so that's why I put the dot dot dot it's like, well, what happens when this all comes together? Because that's what's going to happen. It's all going to come together as one. And then what happens to that business looking forward? They'll have to raise money. And so that's what this looks like in my mind as we go out over the next 12 months.
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Podcast Host
As an investor, you have invested in shares of Tesla. You buy and sell. You've done that. We've talked about that a million times. You own Tesla cars. What is it for you that you need?
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Ross Gerber
I own x2. I own x.
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Podcast Host
That's right. Okay, so I'm just curious. So you obviously like what you know a lot of what Elon's doing. You know, what is it that has to happen that makes you say I'm done?
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Ross Gerber
No, please don't say that. I like what Elon's doing. I actually abhor him. Okay. He's doing horrendous things that I don't agree with at all. And I want to make it very, very clear on a personal level. I think his behavior is disgusting, okay? And I think his viewpoints are disgusting and he's destroyed the brand. But he is one of the greatest engineers of our time and he's a great inventor and he gets, he's built a lot of amazing things. So I don't discount that and I'm invested in that. But that said, you know, at some point this all has to come together and actually work. And that's, you know, you know, the big question. So I don't bet against Elon and I am betting, sort of betting for him or I, I, I. Actually what I say is I bet with crazy people sometimes and that's worked for me over my life. And, you know, so I have a certain bet with him and I think he's crazy and maybe he pulls this stuff off, you know.
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Co-Host
Yeah.
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Podcast Host
So you're willing to, to make the bet on Elon. Still just got about 50.
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Ross Gerber
Well, look at the other side of the coin is you have Tim Cook at Apple who won't do anything. This guy is so risk adverse, he's scared to get in the water. You know what I mean? And so, like, Apple's just sitting on the cusp of the AI revolution. Like with Bin is going, who do, who do I pay next? Because I haven't done anything. So, you know, you have Elon on one end of the risk spectrum and you have Tim on the other.
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Podcast Host
We gotta go. Always love talking with you, Ross Gerber.