WEBVTT - S&P's Kessler Sees Lots More Growth, Upside To Facebook (Audio)

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<v Speaker 1>Broadcasting live to New York, Bloomberg eleven Rio to Washington,

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<v Speaker 1>d C. Bloom to Boston, Bloomberg twelve hundred to San Francisco,

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<v Speaker 1>Bloomberg nine to the countries, Jus Exam General one and

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<v Speaker 1>around the globe the Bloomberg Radio Plus Appen Bloomberg dot Don.

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<v Speaker 1>This is taking stock. Coming up on taking stock, will

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<v Speaker 1>take stock of Facebook. The stock is up more than

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<v Speaker 1>in the past year, and today it holds its annual

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<v Speaker 1>shareholder meeting. One of the issues class C stock. This

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<v Speaker 1>was well. It was proposed back in April, designed to

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<v Speaker 1>give Facebook currency for acquisitions and not dilute Mark Zuckerberg's

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<v Speaker 1>control of the company. We'll get more details. We'll also

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<v Speaker 1>find out what kind of future Peter Teal has Facebook

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<v Speaker 1>in his in his back pocket or in Mark Zuckerberg's

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<v Speaker 1>All that in a whole lot more coming up when

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<v Speaker 1>we take a look at Facebook now. Charlie Pellets coming up.

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<v Speaker 1>He's gonna business and I thank you, Kathleen, thank you him.

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<v Speaker 1>We're brought to you by Brooks Brothers. Big event there

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<v Speaker 1>to shop the entire collection or to find the location

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<v Speaker 1>closest to you. Facebook shareholders have re elected all eight

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<v Speaker 1>members of the Social Networks Board, including Peter til the

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<v Speaker 1>investor backing a controversy controversial lawsuit against Hawker. At the

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<v Speaker 1>company's annual shareholders meeting, Investors also approved the creation of

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<v Speaker 1>non voting shares that would allow co founder Mark Zuckerberg

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<v Speaker 1>to sell or give away much of his Facebook stock

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<v Speaker 1>while retaining control of the company. Facebook shares are up

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<v Speaker 1>now by five tenths of one percent, up sixty cents

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<v Speaker 1>to one thirteen sixty two. Equities are advancing s and

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<v Speaker 1>P five hundred, indecks, jumping the most in four weeks

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<v Speaker 1>after the latest polls show Europe show the UK campaign

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<v Speaker 1>to remain in the European Union is gaining ground before

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<v Speaker 1>Thursday's referendum. Investors also looking ahead to the start of

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<v Speaker 1>tomorrow's to day FED testimony. Right now, the SMP up

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<v Speaker 1>sixteen at two thousand and eighty seventy, gain of eight

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<v Speaker 1>tenths of one percent. NAS snack up forty six to

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<v Speaker 1>forty eight forty six, a gain of one percent down.

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<v Speaker 1>Industrials up one hundred seventy two points, a gain of

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<v Speaker 1>one percent. Gold down three thirty ounce to twelve ninety

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<v Speaker 1>want to drop of two tenths of one percent. Crude

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<v Speaker 1>oil West Texas Intermediate of a dollar twenty two a

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<v Speaker 1>barrel forty nine twenty for w t I that is

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<v Speaker 1>a gain of two and a half percent. Tenure down

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<v Speaker 1>sixteen thirty seconds that yield one point six six percent,

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<v Speaker 1>and the three thirty two on Wall Street. Now, let's

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<v Speaker 1>take a look at other news from around the world.

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<v Speaker 1>Thank you, Charlie from the Bloomberg News Room. I'm Jill Schneider.

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<v Speaker 1>This news update is brought to you by the deep

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<v Speaker 1>jeep dealer today. A big shake up today in Donald

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<v Speaker 1>Trump's campaign. Corey Lewandowski is out as Trump's campaign manager.

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<v Speaker 1>Lewandowski says he's not sure why he was fired, but

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<v Speaker 1>he understands those killings are on the suspect and on

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<v Speaker 1>the suspect alone. In my mind, all that will be

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<v Speaker 1>investigated by our officers acted heroically and did as they

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<v Speaker 1>were trained in an unbelievable circumstances and did a phenomenal job.

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<v Speaker 1>The FBI today released the transcripts from nine calls between

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<v Speaker 1>the Orlando nightclub shooter and police. Orlando Police Chief John

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<v Speaker 1>Mina says officials are still investigating to determine whether some

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<v Speaker 1>victims were shot by police. Those killings are on the

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<v Speaker 1>suspect and on the suspect alone. In my mind, all

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<v Speaker 1>that will be investigated by our officers acted heroically and

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<v Speaker 1>did as they were trained in an unbelievable circumstances and

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<v Speaker 1>did a phenomenal job. People were killed in the nightclub attack.

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<v Speaker 1>Former US House Speaker Dennis Hastert will report to a

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<v Speaker 1>federal prison in south eastern Minnesota this week. The seventy

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<v Speaker 1>four year old was sentenced to fifteen months behind bars

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<v Speaker 1>in a hush money case. A special naturalization ceremony is

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<v Speaker 1>being held in Central Park tonight in honor of World

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<v Speaker 1>Refugee Day. Twenty people hailing from twelve different countries will

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<v Speaker 1>be sworn in as new Americans. Most of them are

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<v Speaker 1>refugees or asylum seekers. Global News twenty four hours a day,

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<v Speaker 1>powered by our journalists in more than one hundred fifty

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<v Speaker 1>news bureaus around the world. From the Bloomberg News Room,

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<v Speaker 1>I'm Jill Schneider, Charlie, and we thank you it again.

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<v Speaker 1>Recapping stocks high SMP five hundred in decks of sixteen

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<v Speaker 1>now to two thousand eighty seven, a gain of eight

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<v Speaker 1>tenths of one percent. I'm Charlie Pebblett, and that's a

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<v Speaker 1>Bloomberg business flash. You're listening to taking stock with Bill

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<v Speaker 1>Box at Katholeen Hayes on Bloomberg Radio. It is good

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<v Speaker 1>to be king, or at least co founder of Facebook

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<v Speaker 1>Mark Zuckerberg. At the company's annual shareholders meeting today, investor

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<v Speaker 1>approved the creation of non voting shares that allow him

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<v Speaker 1>to sell or give away much of his Facebook stock

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<v Speaker 1>while retaining control of the company. This is key, That's

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<v Speaker 1>why Mark Zuckerberg repos proposed this just a couple of

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<v Speaker 1>months ago. Shareholds also re elected all eight members of

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<v Speaker 1>the Social Networks Board, including Peter Thiel, the investor backing

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<v Speaker 1>a controversial lawsuit against Gawker. Johnny us now is Scott Kessler,

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<v Speaker 1>Deputy head of equity research at SMP Global Market Intelligence

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<v Speaker 1>Here in New York, City, Welcome back, Scott Bank, Kathleen

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<v Speaker 1>so Um not too surprising. I guess that the shareholders

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<v Speaker 1>backed this creation of non voting shares that will help

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<v Speaker 1>Mark Zuckerberg stay at the helm no matter what. A

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<v Speaker 1>vote of confidence in Mark Zuckerberg. Yeah, I mean, I

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<v Speaker 1>think one of the mottos to today's shareholder meeting could

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<v Speaker 1>be you know and Mark, we trust, right. I mean,

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<v Speaker 1>I think when you consider the fact that this company

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<v Speaker 1>came public over four years ago, and they made it

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<v Speaker 1>pretty clear that UM it would be a controlled company,

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<v Speaker 1>which essentially means that Mark Zuckerberg UM was controlling a

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<v Speaker 1>lot that went on at the company, from decision making

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<v Speaker 1>to capital allocation to all in between. And honestly, initially

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<v Speaker 1>there were substantial questions about corporate governance and whether or

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<v Speaker 1>not Mark Zuckerberg, as you may recall, was kind of

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<v Speaker 1>up to the challenge. He was wearing hoodies to UM

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<v Speaker 1>the road show meetings and no showing and other important gatherings,

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<v Speaker 1>at least according to unconfirmed reports. And meanwhile, I think

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<v Speaker 1>it's fair to say that over the last four years

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<v Speaker 1>he's really emerged as one of the pre eminent CEOs

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<v Speaker 1>on the planet. Scott what about investing in Facebook shares

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<v Speaker 1>at thirteen dollars a pop, so PAM. What's interesting about

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<v Speaker 1>Facebook is that stock hasn't done all that well for

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<v Speaker 1>the last couple of weeks. Obviously, it did tremendously well

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<v Speaker 1>last year, and I think here to date it's still outperforming.

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<v Speaker 1>But I think there's been some consolidation over the last

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<v Speaker 1>one call it UM a couple of weeks, I think,

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<v Speaker 1>largely for a couple of reasons. So first, I think

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<v Speaker 1>there were some concerns about this shareholder meeting and what

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<v Speaker 1>could potentially come out of it. The other thing is,

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<v Speaker 1>I think books are increasingly concerned about UM competition. It

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<v Speaker 1>seems like there's a lot of talk about Snapchat and

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<v Speaker 1>whether Snapchat is let's say, taking some users and engagement

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<v Speaker 1>away from if not Facebook, then perhaps definitely Instagram. And

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<v Speaker 1>then I think last it seems like a lot of

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<v Speaker 1>people believe that all the good news is out on

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<v Speaker 1>Facebook and all the investors who could buy are already

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<v Speaker 1>in the shares. We have to uh disagree with those

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<v Speaker 1>notions to a large extent. We think there's a lot

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<v Speaker 1>more upside. The stock is trading at thirty two times

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<v Speaker 1>our estimate for this year's earnings, and we're looking for

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<v Speaker 1>growth of more than that in revenues next year. What

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<v Speaker 1>that means, in our opinion is that you've got a

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<v Speaker 1>unique combination of growth and value. We like the stock.

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<v Speaker 1>We have a buy opinion or twelve mont target price

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<v Speaker 1>is hundred and fifty dollars. Okay, Peter teal he gets

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<v Speaker 1>to stay on the board now. Of course, he is

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<v Speaker 1>the co founder of PayPal, along with Max Levchen and

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<v Speaker 1>Elon Musk. He serves its first CEO. He was the

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<v Speaker 1>first outside investor in Facebook, with a ten point two

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<v Speaker 1>percent stake, acquired in two thousand four for five thousand dollars.

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<v Speaker 1>Way to go, Peter teal Right. I mean he's a

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<v Speaker 1>very successful investor, he's a billionaire. Uh, he's got this

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<v Speaker 1>controversial secret funding of a lawsuit against Gawker. He's staying

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<v Speaker 1>on the board because he's so close to Mark Zuckerberg.

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<v Speaker 1>What what? Or on the other hand, why was it controversial?

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<v Speaker 1>Why shouldn't he stay on the board. Well, look, I

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<v Speaker 1>mean this is obviously an issue that's not going to

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<v Speaker 1>go away so quickly. I think there are a lot

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<v Speaker 1>of questions to be asked and answered. Get However, I

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<v Speaker 1>think it's fair to say that, Look, Peter Teel, as

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<v Speaker 1>you pointed out, has been a visionary and very successful

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<v Speaker 1>UM investor and operator when it comes to Silicon Valley.

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<v Speaker 1>You mentioned PayPal, um at a very um beneficial exit

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<v Speaker 1>to eBay right after the company came public. Clearly, when

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<v Speaker 1>you're one of the first investors in Facebook, as you referenced,

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<v Speaker 1>I think he was the first outside investor in the

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<v Speaker 1>company UM. I think there are a lot of reasons

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<v Speaker 1>to have future Teal on the board. On the other hand,

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<v Speaker 1>there are obviously questions about this, and I guess we'll

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<v Speaker 1>wait and see what further details come up related to

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<v Speaker 1>this issue. I think the fact remains so that Facebook

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<v Speaker 1>looks at this in the context of Facebook Peter Teel's

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<v Speaker 1>contributions as a board member, and if what he did

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<v Speaker 1>or what he will do will kind of adversely affect

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<v Speaker 1>what he's able to contribute, And I think the answer

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<v Speaker 1>to that question appears to be no. And I think that, Look,

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<v Speaker 1>Facebook's board is very strong, and I think it makes

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<v Speaker 1>sense that it continues as it was. Scott, just quickly,

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<v Speaker 1>if you can tell us they're gonna be three classes

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<v Speaker 1>of stock if you happen to own a Class A

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<v Speaker 1>or Class B shares. What's gonna happen. You're gonna get

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<v Speaker 1>some C shares too. Yeah, I think what's gonna happen

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<v Speaker 1>PIM is somewhat similar to what happened with UM what

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<v Speaker 1>now known as what now is known as Alphabet, where

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<v Speaker 1>you had a situation where you had one class of

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<v Speaker 1>stock and that class will probably continue, and then you're

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<v Speaker 1>gonna have another class of stock that won't have voting shares,

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<v Speaker 1>and essentially you might see the equivalent of an adjustment

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<v Speaker 1>in the existing share price. So the bottom line is,

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<v Speaker 1>the full details are not out on that because obviously

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<v Speaker 1>we see the shareholder approval. I think it has to

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<v Speaker 1>go through some other UM kind of UM minister ministerial issues,

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<v Speaker 1>and so we'll wait and see. But not a big

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<v Speaker 1>change as far as I'm concerned. Scott Kessler, thank you

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<v Speaker 1>very much. He is the deputy head of Equity research

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<v Speaker 1>for SMP Global Market Intelligence. Speaking about Facebook shares, a

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<v Speaker 1>Facebook of fifty five cents right now, thirteen dollars and

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<v Speaker 1>fifty seven cents for Facebook. You're listening to taking stock

0:10:53.520 --> 0:11:04.160
<v Speaker 1>on Blueberg radio. Markets around the world, from stocks to

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<v Speaker 1>bonds to currencies, and commandies bracing for the Brexit vote

0:11:08.040 --> 0:11:11.360
<v Speaker 1>on Thursday. Dougs Yoka from Kovark Capital, we'll talk to

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<v Speaker 1>us about that on Luobrig Radio