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A
Coca Cola for the big, for the small, the short and the tall. Peacemakers, risk takers for the optimists, pessimists for long distance love for introverts and extroverts, the thinkers and the doers for old friends and new Coca Cola for everyone. Pick up some Coca Cola at a store near you. Warner Brothers is for sale. We look at the Hollywood heavy hitters in the market to buy it. Novo Nordisk pulls the plug on the potential next frontier of its weight loss drug and the one trillion dollar club. The companies that have hit that market cap milestone, we break it down for Monday, November 24th. It's Blue Markets Daily and I'm Ann Ber. More market details to come. But first, the Trillion Dollar Club, the elite group of public companies whose market caps have hit 12 zeros. While Eli Lilly became the first health care company to join the club on Friday and has been trading there again today. A major moment for the pharmaceutical giant behind GLP1, Zepp, Bounder, Manjaro, as well as historical milestone treatments such as Prozac and and the polio vaccine. Well, I was curious to see who else has made it over time, even for just 15 minutes of trillion Dollar Club fame. And so I took a look to see who else is a member of the storied club. Now the story of the trillion dollar company is overwhelmingly the story of the most successful of the big tech names. Apple led the way, becoming the first US company to cross the trillion dollar line in 2018. Now fueled by the continued global dominance of the iPhone and its ecosystem of services. Apple has repeated highs and today has a market cap of over 4 trillion chips feature heavily too in the trillion dollar club, of course represented by each of Nvidia, Broadcom and Taiwan semiconductor manufacturing company tsmc. Then there's a set that I call the Internet as utility players who are ubiquitous, dominating different parts of our lives online. Amongst this group, there's Microsoft, which joined the club in April 2019. Growth of its enterprise cloud computing platform Azure has kept it there with Microsoft's market cap today around 3.5tr. Then there's Alphabet, parent company of Google and the backbone of the Internet today at a $3.8 trillion market cap. And Amazon crossed that magic mark in 2018 briefly, but closed below the threshold the same day, so it didn't really count. It wasn't until February 4, 2020 that Amazon stock value actually maintained its value above that trillion dollar threshold. And today it's of course at 2.4 trillion. Well then there's Meta, which first joined the Trillion dollar club in 2021 while it was still known as Facebook. It dropped out until going back in early in 2024. And then we've got Tesla, which has bopped in and bopped out, though today it is in fact in with about a $1.4 trillion market cap. Now we can't forget about traditional industries that have been in the club too. And that includes a state owned oil giant, Saudi Aramco, frequently in the club, reminding us that despite the global shift towards renewables, oil remains a colossal force in the world economy. Warren Buffett's holding company Berkshire Hathaway also recently joined, proving that value investing and in fact holding cash still has the power to build a behemoth and break into the elite. And Walmart hasn't made it in there yet, but is often considered a candidate. Well, if we adjust for inflation, the Trillion Dollar club gained some remarkable historical members as well. For example, Standard Oil, which was broken up in 1911 due to antitrust laws, would have easily surpassed that trillion dollar mark in today's money. And even more dramatically, the Dutch EAS company, which was a global trading power in the 17th century, a controversial one, is often cited by financial historians as having an inflation adjusted peak valuation that would today translate to over $7 trillion, making it arguably the most valuable in dollar terms company ever. Well, we're going to keep watching because like I said, lots of contenders like Walmart keep inching up towards that magic moment and never quite gets there. But they're pretty close. Well, coming up, Netflix has put in a bid to buy Warner Brothers. Is the streamer looking for theater releases or simply driving up the price for rivals? But First Brew Markets daily is sponsored by Public and before the show our producer John was going through the features on Public to try to decide which one to talk about today.
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That's right. There are so many features and I didn't know where to start. But of course I'm always looking to get interest on my money. I discovered you can access industry leading yields with Public suite of fixed income products.
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A
Full disclosures in Podcast Description well, last Thursday marked the deadline for first round offers to purchase Warner Brothers Discovery and the process has had Hollywood abuzz. The markets are watching to see what a tie up could mean to the future of streaming cable movies and theaters. So many of those items are under attack, quite frankly threatened digital others seeing a resurgence in this push for experiences. While Discovery Networks purchased Warner Brothers just three and a half years ago, and for some context, the company took on a bunch of debt. It's had poor content performance and as a result, the company had been looking to split itself up next year, spinning off the cable companies from the studio and streaming business. But just last month the company announced it was putting itself up for sale after Paramount made an unsolicited bid for the company in its entirety. So we're going to take a quick look at some of the proposals that came in. The bid deadline was due and John said, are we going to talk about it? I said let's just wait because some of these details I bet you will leak after that deadline has passed. And some of them have in fact made their way out to the public domain. So let's go through the highlights on some of them. John that's right.
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B
And there are some things that have changed from the conventional thinking going into Thursday. So just to review the formal offers, there was one submitted by the streaming behemoth Netflix and Comcast submitted an offer and that's the parent company of M. Universal and the Peacock streamer and then of course Paramount, which includes a movie studio, the CBS network and the Paramount plus streamer. And the thinking is that each of these companies could benefit from scaling by, by acquiring Warner Brothers Discovery to compete with the likes of Disney, which is huge, or the tech media players like.
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A
Google's YouTube v. It's interesting trying to compete on both fronts, like the old world, like Disney, and then with the the new world players, the digitally native YouTube, which by the way blows away the streamers when it comes to the amount of time that we are all spending watching YouTube compared to actually downloading content on other platforms. Well, Hollywood is debating which company that it thinks stands to benefit the most from a deal. And the market's doing the same thing too because just because it might be good from a Hollywood perspective, which has different motivations which we're going to get into, including preserving culture, preserving, preserving pedigree and history. Whereas the markets are looking at sort of cold hard math in many cases. We're going to try to see which one those constituents think may make the best sense for Warner Brothers as of now. So let's start with Netflix, right? This is the company that has the most money to spend. Reported a $3 billion operating profit last quarter. A market cap much bigger than the rival bidders. So let's just talk about what that market cap is. Netflix has a market cap of $450 billion.
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B
Half the way to that trillion dollar club, half the.
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A
Thank you. Exactly halfway. And Warner Brothers Discovery, which is the target here, has a $56 billion market cap. Right. So Netflix at 450 looking to buy potentially all or part of Warner Brothers discovery at 56 billion. Paramount has a $17 billion market cap. So smaller, that would be the minnow swallowing the whale if it took on the whole thing. Comcast has $100 billion market cap. And then just to put that in comparison with Disney, which is not rumored to be bidding, but just as a data point, Disney at $185 billion market cap. So the smallest by a Paramount at 17 billion. Netflix by a long shot, the biggest at 450 billion. It's. I've actually not seen such a range and potential bitter size sizes like this before, to be honest with you, John, Netflix would be purchasing a hundred years of IP, 100 years of the Warner Brothers catalog. And the kinds of content that would be streamed on the site if a deal were to happen, would include Harry Potter, Friends, DC Comics. And the concern is that Netflix would run future movies on its streaming service so we could all watch everything in the luxury of our home rather than having theatrical releases. And I just remember, I can't remember which movie it was, but I think was it Wonder Woman, which did not get a theatrical release. Do you remember this? And all of the stars were furious that they did not have a chance to walk the red car.
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B
That's right. It was during COVID 19.
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A
That's right.
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And not just walk the red carpet. A lot of these artists and actors have compensation built into the back end where they can get a percentage of box office take. And so when there's no box office take, it really is a different agreement than they settled on.
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A
Really controversial. It's funny that that really stuck in my mind because I remember there being such an uproar about it. Well, Netflix's co chief executive Ted Sarando said on the company's earnings call last month, quote, our strategy is to give our members exclusive first run movies on Netflix, which seemed to be a nice way of saying, no, we're not about theatrical releases. But it looks like there may be a bit of a change in attitude.
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B
Well, that is what you might think if you read all the headlines. Specifically Netflix's Warner Brothers bid include theater releases. And on that news, there was some relief in Hollywood shares in AMC and Cinemark. The theaters were up 2 to 3% on that announcement. But if you look closer, Netflix said it would honor outstanding contractual agreements. So the movies that are already in Warner's pipeline, they're not signaling that Netflix in the future, if they were to purchase the studio, would put those movies out. And so Michael o', Leary, the CEO of Cinema United, and that's the theater exhibition trade group, said, quote, netflix's apparent agreement to abide by existing contractual obligations that they might inherit says nothing about a meaningful commitment to theatrical exhibition.
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A
Interesting. We have seen Netflix though, didn't they take K Pop out to theaters recently? So they do see the value of it.
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They put it out for about two weeks. They might put it out, but it seems like they are not in that business.
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A
Got it. Well, some analysts believe that Netflix actually might be doing something extremely Machiavellian here and that this is all tactics and this is all pun intended theater. And some analysts are arguing that Netflix is just doing its due diligence. It's making the right moves. It's sort of lobbying in statements and letting all the speculation to build up that it's going to make a serious run at buying Warner Brothers. And the reason they think that Netflix might be doing this is to drive up the price for the company that does ultimately end up purchasing Warner Brothers. And as a result seeing Arrival deplete some of its cash to go do a deal, leaving Netflix even better positioned with its near term cash flow to think about making the most immediate near term hit.
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B
Sure, they're competing.
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Cheeky stuff. One way or another. Well, let's talk about Comcast, John, because that would be a totally different investment thesis if Comcast goes for this.
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Exactly. And this is what Comcast would be looking for. It has a mid tier streamer in Peacock. It's doing sort of well, but it's not competing that well. And so if you could combine it with HBO Max, that would really be a buoy to that streaming service. And then there's potential synergies between Universal and Warner Brothers Studios. Two big historic movie theater studios could come together and then Comcast could incorporate Warner Brothers IP into its theme park. You can imagine Batman at Universal Studios Orlando. So there's a lot of synergy if that were to go that way.
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A
Yeah. And by the way, just again, to pull it back to Disney, the one thing that Disney has just done so incredibly well is monetizing its IP across many different fronts. Not just the movies, not just on its own streamer, but also turning them into rides in their theme parks and on their cruise ships, using it them as characters there too. Also a move, by the way, that Netflix is starting to do. Netflix moving into taking some of its key characters and its key series and turning those into experiences and pop up stores as well.
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B
Yeah, you can go to a Stranger Things exhibit.
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A
Yes, exactly. So everyone's looking for a way to make that move. And again, Warner Brothers IP really is very strong stuff. Well, there has been an update on Comcast bid. There was speculation that Comcast, which is spinning off its cable channels into a new company, would purchase Discoveries cable assets and then add them to that being spun out package. But sources now say that the Comcast bid is only for Warner Brothers studio and streaming doesn't seem to see the need to double down on cable and legacy assets right at the moment is trying to get rid of them. Well, the, the last bidder that we're going to touch on is also the first bidder in many respects that's Paramount Skydance. So again, if you go back in time over the last couple of months, Paramount had made three previous offers to buy the entirety of Warner Brothers Discovery to the point that actually the board of Warner Brothers Discovery, this is my interpretation of what happened ultimately had to say, look, we have a fiduciary obligation, a duty to our shareholders keeps coming and knocking on our door to try and buy us. We've got to open this up to a competitive process and put ourselves up for auction. Which is effectively now what's happened. Now many see Paramount Skydance as a good fit for the deal. It's the company that recently merged under CEO David Ellison, who is Larry Ellison's son. And like Comcast, the Paramount and Warner Studios could mesh and the Paramount plus streaming service could be bolstered by HBO Max's content. Now again, just to think about the numbers here and again to this idea of the minnows swallowing the whale. Paramount market cap $17 billion Warner Brothers discoveries today $56 billion raises the question of how on earth would Paramount afford this? And this goes back to dad. It's the financial backing of Oracle's Ellison family. Larry Ellison also has a very good relationship with President Trump, as we know could help with any regulatory hurdles that could be involved here. Although it's hard to imagine that there would be regulatory hurdles. I mean, I think environment there would be. But just one person's view. It feels like there is a deal to be Done here amongst this cast of characters.
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B
There is reporting, though, if there was one of the three, if one had to choose the easiest path through regulation. Comcast CEO Brian Roberts is not on the Inn at the White House. Trump called him a disgrace of broadcasting.
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A
Why did he say that, do you mean?
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Well, you know, they're the company that owns and operates MSNBC, or what was known as msnbc. And so with the antithesis that might be seen there.
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A
Right.
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B
They're no friends of the White House.
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Got it? Well, M and A hopes are also the only thing, frankly, that has made Warner stock move as of late. Shares are up nearly 90% since mid September. It was reported that Paramount was bidding for. The company has sort of been limping along prior to that. Let's take a look at where it is today, actually, right today, Warner brothers.
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Is at $24 a share. And the most recent unsolicited Paramount offer that you mentioned was $23.50. So about in the same neighborhood.
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A
Yeah.
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CEO David Zaslav said that he would like to see a deal in the $30 per share range, which would value the company at $70 billion. And so, Anne, if you were on the Warner Brother Discoveries board.
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Yeah.
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B
How would you view these computing officers?
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What would I do? So it's so interesting when boards are thinking about bids like this. So if you're on the board of a company and the company puts itself up for sale as a board member, you really have to think about what's best for the shareholder. And the way in which you weigh that often is in terms of you want the maximum valuation possible, because your job is to maximize value for your shareholders. But you've also got to take into account the risk of that happening or not happening. And if it doesn't happen, if you take a bet that you're going to accept an offer at a sky high valuation, but there's a real chance it doesn't go ahead. It's really disruptive. These processes are incredibly distracting and time consuming and disruptive because you've got the CEOs, you've got your leaders constantly spending their time with the potential buyers presenting the business, talking about what the art of the possible is, trying to help the potential buyers think about what kind of synergy doing all the math or the number crunching. And then behind the senior leaders making those presentations, you've got armies of people doing the analysis, gathering the information, doing the fact finding for them. So it really, you're mobilizing such an enormous amount of energy and you're Trying to do it in a confidential way. So you've got secrecy weighed with efficacy. So it's an enormous, enormous undertaking. And of course these all public companies with lots of employees and there's lots of pressure on this deal, so there's just a ton of scrutiny. So I would be thinking about a couple of things in that context. Not only, as I said, what is the actual price that is being offered? I associate with risk, with carving the business up versus someone buying it in its entirety. Now there's this often this expression, the sum of the parts is greater than the whole. Which is why at the beginning Warner Brothers Discovery said it had wanted to split itself up. Right? That was the way in which the CEO was saying, this will get us the maximum value because you can get, get one bidder most excited to buy each and every piece. And that's how you drum up interest and get the juices flowing. But the risk of that is you alienate someone who would have bought you whole, right? They decided life's too short and off they go. Or you end up doing a series of deals, each of which has a risk of happening or not happening. And this protracted period of this kind of distraction I'm talking about ends up just going on and on and on. And it means you can end up taking your eye off the ball of your day to day operations and then if any of these deals bust, then you kind of maybe sell down the line. But after a period of having distracted yourself. So this very complicated, P.S. insanely expensive stuff somewhere, lots of lawyers and accountants and bankers are making enormous fees off of this entire process.
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B
Fascinating. And just some context. Shares in Comcast down 29% year to date. Netflix up 17% year to date. Paramount Skydance up 47% year to date. And Warner Brothers, which is stock that I owned when it was really low. Yeah, stayed low. It's up 117% year to date based on what you were talking about. All that M and a chatter.
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A
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A
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- [19:04]
B
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- [19:32]
A
Well, you've done really well. So before we move on from this, though, I've got, I have a question for you now, John, which is, you know, many of you listening may not know this, but producer John John Croteau has an incredible background in entertainment. I don't think everyone knows about it. So I have a question for you, which is I want to know, as an entertainment veteran, who do you feel sort of most spiritually aligned with in terms of these bidders? So not the money, but the feeling. And before you answer the question, give us 30 seconds on your life in Hollywood.
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Okay. My life in Hollywood started here in New York. I started working at Late Night with Conan o'. Brien.
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A
Love it.
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And that show became the Tonight show with Conan o' Brien in Los Angeles. And there I worked on the Comcast Universal lot.
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A
There we go.
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B
So I got to be on that lot and then that show moved over to the Warner Brothers lot. And so I was there for 13 years with Conan on the Warner Brothers lot. And that's such a special place to be. The Friends fountain is there.
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A
Oh, fantastic.
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B
And the Gilmore Girls town square is there. I mean, a lot of fun to just walk around. And so that part of nostalgia and it's been there for 100 years, all the famous movies there. I think that the Paramount bid might be best for Hollywood.
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A
Interesting.
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B
It might save the most jobs. It might mean more movies being released. There's been talk that David Ellison really is into movies, that he cares about movies and about Hollywood and Los Angeles. And so I think that his bid without knowing everything might be the most positive for the industry.
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A
I would say, too, if you're backed by family money or private capital, as opposed to just raising money that may dilute your shareholders, you do get more permission, actually to sort of follow your passion in a much more emotional way, something like this, than you do when you're just accountable to the capital that you've taken from shareholders. So it's also a different, different dynamic. But guess you didn't all know that about John. It's just such a so brilliant to hear you talk about it. And you should see he's smiling in the corner as he reminisces about it. Let's take a quick break and when we come back, we'll take a quick peek behind the curtain of my appearance today on the Fox Business Network just to talk about what it's like to go and chat markets on other channels.
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B
All right. And I'm going to turn the tables a little bit on you. I turned on Fox Business Network earlier today and I saw you and so I wanted to ask you a couple questions about what it's like to appear on there. First off, why don't you tell us what show you were on?
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A
Yes, I was on Charles Payne's show. It was at 2 o' clock and just as some background, I actually go on TV quite a lot. So I go on Bloomberg Television. I go on the BBC at midnight really just because I think my grandmother would find it interesting to see me on telly in the beat in the UK at 5am over in London. I've been on CBS, I've been on CNBC, I've been on CNN. So I've really been on every network across all of the parts of the business news sort of community when it comes to folks watching markets news.
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B
And I'm sure it's different in different places, totally different. But watching today's experience, how much preparation do you have about what they want to talk about or what you want to talk about? Do you go in and say I have a point of view on this one thing today.
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A
So it depends. So for some of the TV shows I go on, they will ask me in advance, they say can you please come on this time on this day? And I, I say yes. And it really means I'm at the mercy of the news cycle. It literally means I could be walking onto set. This is live television. There's no pre recording at all. I'm about to walk on and down to the wire, down to the minute the camera is on me. I may not know exactly what it is I'm going to talk about and something may break live and I have to react to that. I'll always have something prepared because I'm in the markets all day every day. I'm on boards, I'm investing public and private. So there's always something fun to talk about. It's why I love having this show here, Brew Markets, because I get the chance to sort of COVID all this. There other times when a producer at one of the networks will call me and say, look, we've got something coming up on trade wars, for example, or the UK and the US has just struck a new trade deal. And we particularly want to hear from you because you represent sort of both sides of that equation. You've done business in the UK and you're doing business here. What does this mean? What does it mean for the different industries? Do you think it's actually going to move the needle? Of course the answer is yes for the UK and probably not a lot for the United States. I know who's the. Who's got the leverage in that one. And so in that case, I would go with a strong point of view that has been perhaps, perhaps formulated over time, because I would only say yes to the appearance if I felt I had something to add on that particular topic.
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B
And this is kind of in the weeds, but do you bring your own charts? I see they put up charts during your appearance and I think like, oh.
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A
Is I don't bring my own charts. I don't bring my own charts. I will tell them in advance what I think could perhaps be interesting visuals. But we do that here too sometimes on the show. We'll occasionally have visuals which we'll talk about in advance. But no, I don't go with bundles of paper under my arm. With one exception. With one exception. Exception. I did do an appearance on Bloomberg tv and there was an analyst, a particular bank, who I really, really respect. And this analyst had just put out a research report on one particular tech name. And I started reading this research report and I couldn't get through the first two pages because it was so jargonized and so full of acronyms and so full of just blah, blah, blah. And I remember pulling it out in the middle of this live TV segment and saying, this is the sign of a bubble when you've got really excellent research analysts writing stuff that no one can understand. And I read out a paragraph, Look, I have very few skills in life, but I'm fluent in the English language. And this is incomprehensible. And this to me is a bad sign. We were all dying with laughter. Like, we had a lot of fun with it. That's the one time I actually pulled out a chart or a prop during a real TV segment.
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B
I've learned that about you.
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A
I do like paper that you're good.
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B
At if something doesn't make sense, whereas I look at it and I say, this doesn't make sense, you go. Well, there might be a reason. It doesn't make sense.
- [25:11]
A
Exactly. Never think it's you. Like, this is one of the things I always say, curiosity and going back to first place principles. And one of the reasons people ask me why do I enjoy podcasting, or why do I enjoy going on tv, or why do I enjoy talking to students or to groups of people who perhaps don't have a background in finance or business? Here's the reason I love it. Very little of this is rocket science, and I think we're just made to feel like it's this mysterious thing, this sort of strange subject matter that only really expert people can unpack. And I actually truly, truly believe that pretty much anyone can unpack this. But it is my job as a communicator. It's my job as someone who's trying to bring these ideas into the public arena. It's my job to explain it, and it's the job of a research analyst to explain it. And it's the job of someone writing a research paper to explain it. And if someone still can't understand it, either I'm doing a bad job of explaining it, or something is truly inexplicable and that you need to keep your eye out for. That's my take on that.
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B
That's great.
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A
Well, that's it, folks. It's 4pm on the east Coast. There's the closing bell. The market's wrapping up for the day and we don't a ticker tape, but we will throw it over instead to our human ticker. Our producer, John.
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B
That's right. We saw a major tech rebound today with The S&P 500 finishing up one and a half percent. The Dow was up 4.10 of a percent and the NASDAQ up 2 and 7.10 of a percent for the day. A quick market headline. Shares in Novo Nordisk dropped as much as 12% after the Danish drug maker announced that the Alzheimer's trials of its oral semi glutide drug failed to help slow the progression of that disease. In a video post, Novo CEO said, we always knew that there would be a low likelihood of success, but it was important to determine if semi glutide could take one of the medicine's most challenging frontiers.
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A
Really disappointing news, not just from a market perspective on that, but just so many people, so many families are affected by Alzheimer's. I think a lot of people were really hoping that that would be a better outcome. Just a final thought, I do want to touch on Gemini because we can't close the show without acknowledging what's been huge news. Gemini, which is Alphabet sort of version of chat GPT, leapfrogging in terms of the capabilities and qualities OpenAI's, you know, Hallmark model just thing I one thing I wanted to raise, and we'll come back to it, is I couldn't help but think, what does this mean in real money terms for the market? And one of the things sprung to mind, lots of public companies have signed agreements to integrate Chat GPT into their products and applications. Microsoft has integrated the underlying GPT models across its product suite, from its Bing search engine to its Microsoft 365 applications like Word and Excel. Intuit has been incorporating some OpenAI capabilities into its own tax products. For example, Instacart has incorporated Chat GPT into its app for a search engine feature called Ask Instacart. Now these companies are paying OpenAI real money for the privilege of those integrations. I could not help but think, if it turns out that Gemini is so much better, which something even Mark Benioff, the CEO of Salesforce, said he's not going back, what does it mean for all these companies who've already paid out a whole bunch of money to open AI or signed up to do so to integrate Chat GPT when they now know it may not be the superior product? Going to keep watching this one. I'm going to be looking out for numbers to put around it. That's it for today's Brew Markets Daily.
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B
Brew Markets Daily is hosted by Ann Berry and produced by John Croteau, Tarkab Delatif and Emily Millig. Our technical director is Uchena Waoghu, Brittany Dotako is our audio engineer and the president of Morning Brew Inc. Is Devin Emery.
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A
Wake up tomorrow with the Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. I'll also be back here tomorrow with Brew Markets, same time, same place in the run up to Thanksgiving.