1 00:00:02,720 --> 00:00:10,520 Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Hello. Hi, welcome to 2 00:00:10,560 --> 00:00:13,440 Speaker 1: The Money Stuff Podcast, your weekly podcast where we talk 3 00:00:13,480 --> 00:00:17,880 Speaker 1: about stuff related to money. I'm Matt Levian and I 4 00:00:17,920 --> 00:00:20,000 Speaker 1: write The Money dot Com for Bloomberg Opinion. 5 00:00:20,520 --> 00:00:23,079 Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and 6 00:00:23,120 --> 00:00:24,640 Speaker 2: an anchor for Bloomberg Television. 7 00:00:35,760 --> 00:00:39,720 Speaker 1: I like Apostle merger fight, but like, yeah, I don't 8 00:00:39,760 --> 00:00:42,640 Speaker 1: like a media deal because everyone pays attention to the 9 00:00:42,680 --> 00:00:47,640 Speaker 1: media deals, and the Warner Brothers merger fight has been 10 00:00:48,560 --> 00:00:51,159 Speaker 1: wall to wall coverage everywhere, including the Money Stuff newsletter, 11 00:00:51,680 --> 00:00:54,320 Speaker 1: and it's like, I don't know, I can't keep up 12 00:00:54,360 --> 00:00:54,520 Speaker 1: with it. 13 00:00:54,640 --> 00:00:56,080 Speaker 2: Yeah, it was going to say, when we were talking 14 00:00:56,120 --> 00:00:58,840 Speaker 2: about topics and I suggested Warner Brothers, it seems like 15 00:00:59,600 --> 00:01:01,480 Speaker 2: you were not psyched, and it's like, I don't know 16 00:01:01,600 --> 00:01:05,360 Speaker 2: your column that you write would suggest differently. I agree 17 00:01:05,360 --> 00:01:09,120 Speaker 2: with you, though I don't really get jazz talking about media, 18 00:01:09,160 --> 00:01:11,880 Speaker 2: and obviously we're covering it on Bloomberg Television as well. 19 00:01:12,280 --> 00:01:16,400 Speaker 2: This one. The fact that it's become this bidding war 20 00:01:16,520 --> 00:01:18,440 Speaker 2: does make it kind of fun and interesting. 21 00:01:18,520 --> 00:01:20,240 Speaker 1: Oh yeah, right, Like I merge your bidding war is 22 00:01:20,240 --> 00:01:23,200 Speaker 1: interesting although it's like a strange bidding war. Yeah, recruiting 23 00:01:23,280 --> 00:01:26,320 Speaker 1: is on like Thursday afternoon, who knows. But basically the 24 00:01:26,319 --> 00:01:28,280 Speaker 1: deal is that on Friday, Warner announced they signed a 25 00:01:28,280 --> 00:01:32,679 Speaker 1: merger agreement with Netflix fair price, let's call it like 26 00:01:32,840 --> 00:01:35,920 Speaker 1: twenty nine or thirty dollars in a mix of cash 27 00:01:36,000 --> 00:01:39,920 Speaker 1: and two different flavors of stock, mostly cash, but a 28 00:01:39,959 --> 00:01:42,040 Speaker 1: fair amount of the value comes from two flavors of stock. 29 00:01:42,319 --> 00:01:45,040 Speaker 1: And then on Monday, Paramot Skydance jumped in with a 30 00:01:45,080 --> 00:01:49,520 Speaker 1: thirty dollars cash tender offer. And one thing that's worried 31 00:01:49,520 --> 00:01:51,560 Speaker 1: about the bidding war is that, like those bids are 32 00:01:51,600 --> 00:01:54,680 Speaker 1: pretty close, and a Warner's board did determine that the 33 00:01:54,680 --> 00:01:57,800 Speaker 1: Netflix bid was higher because they valued some of the 34 00:01:57,840 --> 00:01:59,680 Speaker 1: stock higher. So I think that the bid is our 35 00:01:59,680 --> 00:02:01,760 Speaker 1: thirty one on our thirty two dollars to share. But 36 00:02:01,840 --> 00:02:06,040 Speaker 1: also like they did an auction, they head advisors, they 37 00:02:06,040 --> 00:02:11,320 Speaker 1: took bids, Netflix bid whatever the number, and Paramount bid 38 00:02:11,600 --> 00:02:14,679 Speaker 1: thirty dollars in cash, and Warner looked at that and 39 00:02:14,760 --> 00:02:16,919 Speaker 1: we're like, we're gonna take the Netflix bid because we 40 00:02:16,960 --> 00:02:20,560 Speaker 1: think it's higher. And Paramount went to shareolders with the 41 00:02:20,600 --> 00:02:22,880 Speaker 1: same bid that got rejected. It's like kind of an 42 00:02:22,919 --> 00:02:26,120 Speaker 1: unusual move, Like you normally you raise your bid to 43 00:02:26,280 --> 00:02:28,560 Speaker 1: like to be like, look at how great this bid is. 44 00:02:29,160 --> 00:02:32,360 Speaker 1: And here they're like going with the same bid and 45 00:02:32,600 --> 00:02:36,919 Speaker 1: arguing the value of the stub stock on the Netflix pid. It's, 46 00:02:36,960 --> 00:02:38,839 Speaker 1: I guess, strange way to connect a bidding. More. They've 47 00:02:38,840 --> 00:02:40,520 Speaker 1: also gone on TV. I mean like this is not 48 00:02:40,560 --> 00:02:42,720 Speaker 1: our best and final offer, which is a crazy way 49 00:02:42,720 --> 00:02:45,560 Speaker 1: to connect a shipping more Like, ordinarily you don't negotiate 50 00:02:45,600 --> 00:02:47,840 Speaker 1: against yourself, and if you do negotiate against yourself, you 51 00:02:47,919 --> 00:02:50,120 Speaker 1: do it. You know, You're like like I haven't got 52 00:02:50,120 --> 00:02:51,680 Speaker 1: to raise the bid, but instead they're like, we're not 53 00:02:51,680 --> 00:02:52,840 Speaker 1: going to raise the bid, but this is not our 54 00:02:52,840 --> 00:02:55,240 Speaker 1: best and final offer. Like how could you tender to that? 55 00:02:55,360 --> 00:02:57,359 Speaker 1: How could you be like, okay, you can have it 56 00:02:57,440 --> 00:02:58,800 Speaker 1: for not your best and final offer. 57 00:02:59,120 --> 00:03:03,239 Speaker 2: Well you too that. It's also an interesting strategy since 58 00:03:03,680 --> 00:03:06,959 Speaker 2: they need this to be a friendly situation with Warner 59 00:03:06,960 --> 00:03:07,959 Speaker 2: Brothers as well. 60 00:03:07,840 --> 00:03:10,320 Speaker 1: And they don't like strictly need it, but like they 61 00:03:10,400 --> 00:03:13,120 Speaker 1: kind of need it, like they've conditioned their offer on 62 00:03:13,200 --> 00:03:15,280 Speaker 1: it becoming a friendly Yeah, it's not that weird, Like 63 00:03:15,840 --> 00:03:19,880 Speaker 1: people don't usually do hostile deals all the way through 64 00:03:20,160 --> 00:03:22,480 Speaker 1: in twenty twenty five, you know, like you do a 65 00:03:22,480 --> 00:03:24,280 Speaker 1: hostile deal, the pressure of the board into coming to 66 00:03:24,320 --> 00:03:25,920 Speaker 1: the table with a friendly deal like this is you know, 67 00:03:26,000 --> 00:03:27,919 Speaker 1: this is kind of how Twitter worked out, right, It's 68 00:03:27,960 --> 00:03:31,200 Speaker 1: like a normal playbook. Yeah, but they're not doing a 69 00:03:31,200 --> 00:03:33,880 Speaker 1: pure hostile deal. They're not tendering to share elders and saying, 70 00:03:33,960 --> 00:03:36,080 Speaker 1: you know, give us your shares and we're clothing and 71 00:03:36,240 --> 00:03:38,160 Speaker 1: never mind what the board says. They need the board 72 00:03:38,200 --> 00:03:40,360 Speaker 1: on side, and so it is a negotiation where they 73 00:03:40,360 --> 00:03:44,160 Speaker 1: are like waging a public pressure campaign on the Warner board, 74 00:03:44,160 --> 00:03:46,240 Speaker 1: but they're not just like doing a pure hostile offer. 75 00:03:46,960 --> 00:03:50,520 Speaker 2: So what happens here? I mean, does Netflix now raise 76 00:03:50,600 --> 00:03:51,160 Speaker 2: their bid? 77 00:03:52,000 --> 00:03:54,880 Speaker 1: I don't know who has to move first. Yeah, right now, 78 00:03:55,880 --> 00:04:00,640 Speaker 1: Warner has said they're sticking with the Netflix deal. Paramount 79 00:04:01,200 --> 00:04:03,000 Speaker 1: can close it thunder and it's all just sort of 80 00:04:03,000 --> 00:04:06,240 Speaker 1: like a limbo and you could imagine Netflix just waiting 81 00:04:06,280 --> 00:04:10,640 Speaker 1: it out. But I think given that Paramount has said 82 00:04:10,680 --> 00:04:12,680 Speaker 1: things like this is not our best and planal offer, 83 00:04:12,840 --> 00:04:15,920 Speaker 1: probably the next move is for Paramount to raise. But 84 00:04:15,960 --> 00:04:17,680 Speaker 1: I don't know. I think they're sort of seeing what 85 00:04:17,720 --> 00:04:19,839 Speaker 1: the shaholders said, if all of the shareholders are tendering 86 00:04:19,880 --> 00:04:22,360 Speaker 1: into their offer and like calling up warners bored and 87 00:04:22,400 --> 00:04:26,440 Speaker 1: saying the Paramount deal is so much better, then maybe 88 00:04:26,520 --> 00:04:28,240 Speaker 1: Paramount can get away with it. But it's just hard 89 00:04:28,240 --> 00:04:30,240 Speaker 1: to imagine them paying thirty dollars a share when they 90 00:04:30,320 --> 00:04:32,560 Speaker 1: said they'd pay more. Yeah, so I think they have 91 00:04:32,600 --> 00:04:34,359 Speaker 1: to raise. But then Netflix has there ra is you know, 92 00:04:34,400 --> 00:04:35,520 Speaker 1: it's like and forth. 93 00:04:35,720 --> 00:04:40,080 Speaker 2: There's also the detail that Paramount is for the entirety 94 00:04:40,200 --> 00:04:43,800 Speaker 2: of Warner Brothers Discovery, including the cable networks, whereas the 95 00:04:43,800 --> 00:04:47,599 Speaker 2: Netflix offer is not. It excludes the cable networks including CNN, 96 00:04:47,760 --> 00:04:50,760 Speaker 2: So I mean it also depends on how you value 97 00:04:51,040 --> 00:04:52,039 Speaker 2: the cable networks. 98 00:04:52,200 --> 00:04:54,839 Speaker 1: Yeah, this is why the Netflix deal is of uncertain 99 00:04:54,960 --> 00:04:57,839 Speaker 1: value because like in that deal, the cable networks stay 100 00:04:57,880 --> 00:05:01,039 Speaker 1: with Warner shareolders, which Yeah says is worth about a 101 00:05:01,080 --> 00:05:04,240 Speaker 1: dollar per share, and you know the board thinks it's 102 00:05:04,279 --> 00:05:05,600 Speaker 1: worth three four. 103 00:05:05,800 --> 00:05:09,039 Speaker 2: Yeah, it seems like consensus would say that one dollar 104 00:05:09,120 --> 00:05:11,440 Speaker 2: shares low on the lower end. 105 00:05:12,240 --> 00:05:14,240 Speaker 1: Yeah, Like I think if you add it up, the 106 00:05:14,320 --> 00:05:17,159 Speaker 1: Netflix bit is worth right around thirty dollars, is like 107 00:05:17,200 --> 00:05:19,200 Speaker 1: kind of market consensus and then like the board is 108 00:05:19,200 --> 00:05:21,760 Speaker 1: a little high and Paramoun's a little low, but like 109 00:05:21,800 --> 00:05:24,360 Speaker 1: it's not like vastly more, right, It's like around thirty. 110 00:05:24,480 --> 00:05:28,240 Speaker 2: There's also the Ellison of it all because Paramount is 111 00:05:28,279 --> 00:05:30,520 Speaker 2: a pretty small company. 112 00:05:30,560 --> 00:05:33,080 Speaker 1: It's like it's an LBO. Right, It's like it's like 113 00:05:33,120 --> 00:05:35,200 Speaker 1: there happens to be a Paramount attached to it. But 114 00:05:35,240 --> 00:05:37,800 Speaker 1: like basically it's like we're going to borrow a lot 115 00:05:37,800 --> 00:05:40,919 Speaker 1: of money against the Warner assets. Paramount does not on 116 00:05:40,960 --> 00:05:43,479 Speaker 1: its own have the capacity to raise like, you know, 117 00:05:43,520 --> 00:05:45,760 Speaker 1: fifty billion dollars of debt, right, Yeah, it would raise 118 00:05:45,800 --> 00:05:48,840 Speaker 1: fifty billion dollars a debt against Warner, and then it 119 00:05:48,880 --> 00:05:53,080 Speaker 1: would have a big equity check from you know, they 120 00:05:53,120 --> 00:05:56,159 Speaker 1: have like commitments lined up from Jared Kushner and like 121 00:05:56,200 --> 00:06:00,760 Speaker 1: some Middle Eastern investors. But it seems that owner's board 122 00:06:01,520 --> 00:06:05,680 Speaker 1: expressed uncertainty about the quality of those commitments, and so 123 00:06:05,920 --> 00:06:09,200 Speaker 1: they also have a backstop from Larry Ellison's personal trust 124 00:06:09,680 --> 00:06:11,960 Speaker 1: or like he'll pay the equity check with his PA 125 00:06:12,000 --> 00:06:12,520 Speaker 1: if he has to. 126 00:06:12,839 --> 00:06:15,880 Speaker 2: Yeah, there's been a lot of good succession flavored memes 127 00:06:15,960 --> 00:06:17,560 Speaker 2: on social media about this situation. 128 00:06:17,800 --> 00:06:20,880 Speaker 1: It is very weird to have your dad by several 129 00:06:20,880 --> 00:06:23,000 Speaker 1: companies for you, whatever it's it. 130 00:06:23,200 --> 00:06:24,680 Speaker 2: Is, I think it's cool. 131 00:06:24,880 --> 00:06:26,880 Speaker 1: An expression like, of course my dad would. 132 00:06:26,680 --> 00:06:30,960 Speaker 2: Buy that was an editorial comment by. 133 00:06:30,839 --> 00:06:34,680 Speaker 1: Matt You didn't see the expression. Yeah it's weird. Yeah, 134 00:06:34,839 --> 00:06:37,240 Speaker 1: it's weird to be the CEO of a public copany 135 00:06:38,040 --> 00:06:40,520 Speaker 1: and feel like my company is going to buy this 136 00:06:40,800 --> 00:06:44,040 Speaker 1: prized asset with my dad's tech book. I don't know. 137 00:06:44,960 --> 00:06:48,240 Speaker 2: There's also I mean, so Larry Elson's check book is 138 00:06:48,279 --> 00:06:50,960 Speaker 2: a factor here, but also Larry Ellison's relationship with the 139 00:06:50,960 --> 00:06:51,560 Speaker 2: White House. 140 00:06:52,040 --> 00:06:53,720 Speaker 1: I don't know. I try to write about this too much, 141 00:06:53,720 --> 00:06:56,120 Speaker 1: but it is like the very depressing backdrop to this 142 00:06:56,279 --> 00:06:59,680 Speaker 1: is that like Donald Trump does not like CNM, he 143 00:06:59,720 --> 00:07:03,800 Speaker 1: would like his friends to buy CNN and change it 144 00:07:03,839 --> 00:07:08,440 Speaker 1: to be friendlier to him. And the way merger regulation 145 00:07:08,800 --> 00:07:10,840 Speaker 1: in the United States in twenty twenty five works is 146 00:07:10,880 --> 00:07:14,880 Speaker 1: that to get a merger done, you have to commit 147 00:07:14,920 --> 00:07:17,760 Speaker 1: to making television news friendlier to Donald Trump. 148 00:07:18,040 --> 00:07:19,400 Speaker 2: Yeah, it's really bad. 149 00:07:20,440 --> 00:07:23,240 Speaker 1: Yeah, it's not like, that's not how it used to be. 150 00:07:23,840 --> 00:07:27,080 Speaker 2: I'm trying to find exactly what Trump said on Wednesday 151 00:07:27,520 --> 00:07:28,640 Speaker 2: as it relates to CNN. 152 00:07:28,960 --> 00:07:30,520 Speaker 1: I mean, Trump is he doesn't like CNN. 153 00:07:30,760 --> 00:07:33,040 Speaker 2: Yeah, well he said, like when it comes to a 154 00:07:33,080 --> 00:07:36,040 Speaker 2: potential deal here, I believe he said that CNN needs 155 00:07:36,080 --> 00:07:37,120 Speaker 2: to be included. 156 00:07:37,240 --> 00:07:39,360 Speaker 1: I don't think he really like has been paying attention 157 00:07:39,440 --> 00:07:40,840 Speaker 1: to the mechanics of this merger. 158 00:07:41,040 --> 00:07:43,800 Speaker 2: Yeah, you don't think he's like following along reading money 159 00:07:43,840 --> 00:07:46,160 Speaker 2: stuff and like watching me on Bleep. 160 00:07:48,200 --> 00:07:52,000 Speaker 1: He's watching you on gleen Berger. He's reading money's too. 161 00:07:53,320 --> 00:07:56,240 Speaker 1: I mean he wants changes at CNN, right, and so 162 00:07:56,920 --> 00:08:02,160 Speaker 1: if the Paramount deal, then Paramount will own CNN and 163 00:08:02,200 --> 00:08:05,320 Speaker 1: we'll make it, you know, twenty four hour praise Donald 164 00:08:05,360 --> 00:08:09,240 Speaker 1: Trump network, because like that's a small price to pay 165 00:08:09,280 --> 00:08:11,000 Speaker 1: to get the deal done, right. I mean they're valuing 166 00:08:11,880 --> 00:08:15,000 Speaker 1: They're valuing not CNN. They're valuing the entire cable package, 167 00:08:15,040 --> 00:08:17,800 Speaker 1: including CNN, at like one dollar per share. It's like, yeah, yeah, 168 00:08:17,880 --> 00:08:20,480 Speaker 1: turn CNN into the propaganda channel. Who cares, it's not 169 00:08:20,520 --> 00:08:22,880 Speaker 1: a major part of the business investment. If the Netflix 170 00:08:22,880 --> 00:08:27,040 Speaker 1: still gets done, then CNN will be part of Discovery Global, 171 00:08:27,040 --> 00:08:29,600 Speaker 1: which will be a much smaller, more leveried public company 172 00:08:30,480 --> 00:08:36,400 Speaker 1: run by you know, existing Warner Discovery Management. But is 173 00:08:36,400 --> 00:08:39,480 Speaker 1: that going to be an acquisition target? Jared Kushner by 174 00:08:39,520 --> 00:08:42,840 Speaker 1: that it's not obvious that CNN remains independent and with 175 00:08:42,920 --> 00:08:45,400 Speaker 1: the same editorial posture that it has now even in 176 00:08:45,440 --> 00:08:48,120 Speaker 1: the Netflix deal. Yeah, it just doesn't go to Netflix. 177 00:08:48,400 --> 00:08:50,839 Speaker 1: And by the way, like you know, a lot of 178 00:08:50,840 --> 00:08:53,000 Speaker 1: the reporting on this is that, like Larry Ellison is 179 00:08:53,000 --> 00:08:56,920 Speaker 1: friendlier with Trump, and therefore we'll win, right, And by 180 00:08:57,040 --> 00:08:59,520 Speaker 1: will win, I mean like Trump will tell the Justice 181 00:08:59,559 --> 00:09:01,920 Speaker 1: Department you have to find an anti trust pretext to 182 00:09:02,000 --> 00:09:07,040 Speaker 1: prevent the Netflix deal from closing, and therefore the only 183 00:09:07,040 --> 00:09:08,960 Speaker 1: way to get the deal done is to sell the 184 00:09:08,960 --> 00:09:12,640 Speaker 1: paramam because the Netflix deal can't close. But there's also 185 00:09:12,679 --> 00:09:15,480 Speaker 1: been reporting that Netflix's management have done a good job 186 00:09:15,480 --> 00:09:19,520 Speaker 1: of closing after Trump, Like, is one possible outcome here 187 00:09:19,559 --> 00:09:24,040 Speaker 1: that like Netflix says, fine, fine, we'll buy a CNN 188 00:09:24,080 --> 00:09:26,840 Speaker 1: two and make it into the Trump propaganda channel. Maybe 189 00:09:28,120 --> 00:09:30,880 Speaker 1: change the deal. I should say, Also, like I said, 190 00:09:31,520 --> 00:09:34,720 Speaker 1: it feels like, because like this is so much about 191 00:09:34,800 --> 00:09:37,760 Speaker 1: Trump's feelings about CNN that he could tell the Justice 192 00:09:37,760 --> 00:09:39,720 Speaker 1: Department to find a pretext, to find an antro trust 193 00:09:39,720 --> 00:09:42,840 Speaker 1: reason to start the deal. Separately, everyone thinks they're like 194 00:09:42,840 --> 00:09:45,840 Speaker 1: real assyss problems, Like yeah, it's not like you don't 195 00:09:45,880 --> 00:09:48,000 Speaker 1: need a pretext, like it's a real concern when like 196 00:09:48,040 --> 00:09:51,840 Speaker 1: the biggest streamer buys HPOE And it's also a real 197 00:09:51,880 --> 00:09:53,960 Speaker 1: you know, people in the media industry have real concerns, 198 00:09:54,040 --> 00:09:56,360 Speaker 1: you know, about both, but especially about the idea of 199 00:09:57,120 --> 00:10:00,000 Speaker 1: Netflix taking over like all these iconic films. 200 00:10:00,240 --> 00:10:04,680 Speaker 2: Yeah. No, it's fascinating, I mean relative to most media 201 00:10:04,760 --> 00:10:07,320 Speaker 2: news because we've been discussing the media angle on Bloomberg 202 00:10:07,320 --> 00:10:12,199 Speaker 2: TV heading up into the Netflix deal getting announced. And 203 00:10:12,240 --> 00:10:15,960 Speaker 2: for Netflix, i mean, Netflix is so dominant in streaming, 204 00:10:16,040 --> 00:10:17,920 Speaker 2: you know, talking to analysts about this, they were like, 205 00:10:18,200 --> 00:10:21,400 Speaker 2: this is really a nice to have for Netflix, you know, 206 00:10:21,480 --> 00:10:24,680 Speaker 2: versus paramount. This is more of a need to have. 207 00:10:25,400 --> 00:10:27,760 Speaker 2: So it's an interesting move by Netflix to even pursue this. 208 00:10:27,840 --> 00:10:30,200 Speaker 2: But you think about the anti trust concerns. It's also 209 00:10:30,720 --> 00:10:33,400 Speaker 2: built into the deal that they announced, like they accounted 210 00:10:33,400 --> 00:10:36,400 Speaker 2: for a lot of time to work through all the. 211 00:10:36,320 --> 00:10:38,360 Speaker 1: Different time right, I'm sure you. 212 00:10:38,240 --> 00:10:41,120 Speaker 2: Know whether or not at all. And then well that's 213 00:10:41,200 --> 00:10:48,160 Speaker 2: part of the record breakup fee, rights fee. 214 00:10:49,280 --> 00:10:51,280 Speaker 1: It's like two miks of share you want a deal, 215 00:10:51,280 --> 00:10:51,760 Speaker 1: they get done. 216 00:10:51,960 --> 00:10:56,440 Speaker 2: Yeah, it's a nice consolation prize though, Okay. 217 00:10:56,240 --> 00:10:58,240 Speaker 1: No, Warner Schralder is going to be like, let's take 218 00:10:58,280 --> 00:11:00,320 Speaker 1: the Netflix deal because at least we'll get two bucks 219 00:11:00,320 --> 00:11:02,959 Speaker 1: to share in eighteen months when the deal falls apart. 220 00:11:03,040 --> 00:11:05,960 Speaker 1: Like they want certainty, right, like Netflix, part of their 221 00:11:06,040 --> 00:11:08,000 Speaker 1: job here is to get on sherolders that their deal 222 00:11:08,000 --> 00:11:12,120 Speaker 1: will close and like that's not. Yeah, it's like some 223 00:11:12,240 --> 00:11:15,360 Speaker 1: amount of like you know, economic analysis and some amount 224 00:11:15,360 --> 00:11:17,320 Speaker 1: of like photo ops with Trump. 225 00:11:17,600 --> 00:11:20,840 Speaker 2: Yeah, I do wonder, like just to bring it back 226 00:11:20,880 --> 00:11:23,120 Speaker 2: to the employees, like in a situation where your company 227 00:11:23,200 --> 00:11:25,880 Speaker 2: is in this deal limbo for eighteen months, I have 228 00:11:25,920 --> 00:11:28,920 Speaker 2: to imagine that the company is kind of in suspended animation. 229 00:11:29,080 --> 00:11:31,839 Speaker 2: Like things will get done obviously, but that's a lot 230 00:11:31,840 --> 00:11:33,520 Speaker 2: of uncertainty to hang over there. 231 00:11:33,559 --> 00:11:35,600 Speaker 1: I don't know about suspended animation, but yeah, it's. 232 00:11:35,520 --> 00:11:37,679 Speaker 2: Depressing, slightly dramatic. 233 00:11:38,280 --> 00:11:41,199 Speaker 1: I think if you work in media, you're work in media. 234 00:11:41,360 --> 00:11:43,200 Speaker 1: Like the time between now and eighteen months from now 235 00:11:43,559 --> 00:11:46,280 Speaker 1: is it's a perilous time, whether or not you're at 236 00:11:46,320 --> 00:11:46,920 Speaker 1: Warner Brothers. 237 00:11:47,280 --> 00:12:04,000 Speaker 2: The only sure thing is podcasts. It's true, shall we 238 00:12:04,040 --> 00:12:05,440 Speaker 2: talk about SpaceX? 239 00:12:05,920 --> 00:12:08,920 Speaker 1: Yeah, another eighteen month. Remember it's not eighteen months. It's 240 00:12:08,960 --> 00:12:11,240 Speaker 1: like they wouldn't an ip it's. 241 00:12:11,280 --> 00:12:14,160 Speaker 2: Twenty If it's in twenty twenty six, it will be 242 00:12:15,080 --> 00:12:18,240 Speaker 2: six months fewer than eighteen months. I just remember, you know, 243 00:12:18,280 --> 00:12:20,640 Speaker 2: we spent so much time talking about how private markets 244 00:12:20,640 --> 00:12:23,640 Speaker 2: are the new public markets. But now all these mega 245 00:12:23,800 --> 00:12:27,320 Speaker 2: companies that were the poster child of staying private forever 246 00:12:27,640 --> 00:12:28,880 Speaker 2: potentially coming public. 247 00:12:29,240 --> 00:12:30,559 Speaker 1: Yeah. First of all, it hasn't happened. 248 00:12:30,640 --> 00:12:32,880 Speaker 2: Right, Yeah, it hasn't happened. 249 00:12:32,520 --> 00:12:35,560 Speaker 1: But it's an I don't like, the private markets are 250 00:12:35,600 --> 00:12:41,520 Speaker 1: the new public markets like thesis. I mean, look, I 251 00:12:41,520 --> 00:12:45,800 Speaker 1: have said in my column on this podcast, Yeah you 252 00:12:45,800 --> 00:12:48,600 Speaker 1: can stay private forever, right, and like why not? Why not? 253 00:12:49,240 --> 00:12:55,800 Speaker 1: But if it is the case that SpaceX, Open Air, Anthropic, 254 00:12:56,559 --> 00:13:01,440 Speaker 1: other names go public in twenty twenty six, then that 255 00:13:01,880 --> 00:13:05,240 Speaker 1: might suggest that you count they private forever. But it 256 00:13:05,320 --> 00:13:10,359 Speaker 1: will be like really different from previous I p honly 257 00:13:10,520 --> 00:13:14,920 Speaker 1: ye going public at a one point five trillion dollar valuation, 258 00:13:14,960 --> 00:13:18,040 Speaker 1: which is like the number that SpaceX is banding around. 259 00:13:17,840 --> 00:13:20,720 Speaker 2: Depending on what second you're checking, it's bigger than Tesla. 260 00:13:20,960 --> 00:13:24,400 Speaker 1: Yeah, but like that's not how was used to work 261 00:13:24,920 --> 00:13:28,200 Speaker 1: back when public markets were the public markets. Go public, 262 00:13:28,240 --> 00:13:32,600 Speaker 1: when you were like you know, there was there was 263 00:13:32,679 --> 00:13:35,400 Speaker 1: growth still to come, but like going public at a 264 00:13:35,400 --> 00:13:39,319 Speaker 1: one point tried trillion dollar valuation is like, okay, it's 265 00:13:39,320 --> 00:13:43,160 Speaker 1: wild in two ways. One is that ordinarily you go 266 00:13:43,280 --> 00:13:48,080 Speaker 1: from zero in a garage to one hundred million or 267 00:13:48,080 --> 00:13:49,960 Speaker 1: a billion or a ten billion dollar valuation, and then 268 00:13:50,000 --> 00:13:53,400 Speaker 1: you go a public and then the next leg up 269 00:13:53,440 --> 00:13:57,200 Speaker 1: to like becoming a trillion dollar company, public investors capture, right, 270 00:13:57,559 --> 00:14:02,200 Speaker 1: So public investors can invest not early, but like you know, 271 00:14:02,880 --> 00:14:05,719 Speaker 1: in like the growth trajectory of a company that will 272 00:14:05,760 --> 00:14:08,000 Speaker 1: eventually become large, right, Like that's part of the promise 273 00:14:08,000 --> 00:14:10,400 Speaker 1: of an IPI was like, this is a fairly immature 274 00:14:10,400 --> 00:14:13,000 Speaker 1: company and you can get in not on the ground floor, 275 00:14:13,000 --> 00:14:14,960 Speaker 1: but on like the third floor. You can public get 276 00:14:14,960 --> 00:14:19,000 Speaker 1: a one point five trillion dollar valuation, so much of 277 00:14:19,040 --> 00:14:21,920 Speaker 1: the upside has been captured already, I mean by private 278 00:14:21,960 --> 00:14:22,720 Speaker 1: market investors. 279 00:14:22,880 --> 00:14:25,280 Speaker 2: Maybe you're just thinking small you know, no, I know, 280 00:14:25,320 --> 00:14:25,680 Speaker 2: I hear. 281 00:14:25,600 --> 00:14:28,440 Speaker 1: You, right, Like then this is like every elon musk 282 00:14:28,480 --> 00:14:30,800 Speaker 1: com package, right, Like, well, it's really one hundred trillion 283 00:14:30,800 --> 00:14:32,600 Speaker 1: dollar company, so like going probably at one point. 284 00:14:32,480 --> 00:14:34,160 Speaker 2: Five tracking the final frontier. 285 00:14:35,120 --> 00:14:37,160 Speaker 1: But the other thing, and this is related in the 286 00:14:37,200 --> 00:14:41,760 Speaker 1: SpaceX case, is like if SpaceX goes public next year 287 00:14:41,800 --> 00:14:44,480 Speaker 1: at a one point five trillion dollar valuation. In one sense, 288 00:14:44,520 --> 00:14:46,720 Speaker 1: the private markets have captured most of the upside. In 289 00:14:46,720 --> 00:14:51,320 Speaker 1: another sense, it is not a mature company. Blomberg reported 290 00:14:51,360 --> 00:14:54,400 Speaker 1: that they're expecting twenty two to twenty four billion dollars 291 00:14:54,440 --> 00:14:57,280 Speaker 1: in revenue in twenty twenty six, which is a lot 292 00:14:57,280 --> 00:14:59,680 Speaker 1: of money. It's a big company to go public or whatever. 293 00:14:59,720 --> 00:15:04,840 Speaker 1: But like they can public it at what seventy times revenue? Yeah, 294 00:15:05,440 --> 00:15:09,440 Speaker 1: like that's really big. That is what has happened here 295 00:15:09,480 --> 00:15:11,920 Speaker 1: is not they've grown into an enormous company and then 296 00:15:11,960 --> 00:15:14,560 Speaker 1: gone public at their enormous valuation. What happens is they've 297 00:15:14,840 --> 00:15:17,720 Speaker 1: not grown into an enormous company and they've they're going 298 00:15:17,760 --> 00:15:21,600 Speaker 1: public at a huge valuation that reflects the next ten 299 00:15:21,680 --> 00:15:24,400 Speaker 1: years of growth, which is a crazy thing to do. 300 00:15:24,520 --> 00:15:27,960 Speaker 2: Yeah, well, let's talk about why they potentially need to 301 00:15:28,000 --> 00:15:31,360 Speaker 2: do it, Like why now do they need to do it? 302 00:15:31,400 --> 00:15:32,680 Speaker 2: I mean, you think about some of the things that 303 00:15:32,760 --> 00:15:33,160 Speaker 2: they're going to. 304 00:15:33,160 --> 00:15:35,120 Speaker 1: Build data centers in space, So they need thirty billion 305 00:15:35,160 --> 00:15:36,240 Speaker 1: dollars to build. 306 00:15:36,080 --> 00:15:38,360 Speaker 2: Data centers on the moon, not actually on the moon, just. 307 00:15:38,400 --> 00:15:40,080 Speaker 1: Sustainable data centers. 308 00:15:40,160 --> 00:15:42,920 Speaker 2: Yeah, that's great. It's such a sign of the times. 309 00:15:43,920 --> 00:15:46,800 Speaker 1: Like one theme of the financial markets this year is 310 00:15:46,840 --> 00:15:51,440 Speaker 1: that everyone is building data centers and they have tapped 311 00:15:51,440 --> 00:15:54,360 Speaker 1: every possible source of financing for data centers, and at 312 00:15:54,360 --> 00:15:57,920 Speaker 1: some point, selling thirty billion dollars of SpaceX stock is 313 00:15:58,000 --> 00:16:01,320 Speaker 1: one way away to fill the whole of need for 314 00:16:01,400 --> 00:16:04,080 Speaker 1: building data centers. And so like space I can raise 315 00:16:04,080 --> 00:16:05,720 Speaker 1: a lot of money staying private. And by the way, 316 00:16:05,760 --> 00:16:07,640 Speaker 1: it's like cash flow positive and doesn't need to raise 317 00:16:07,640 --> 00:16:10,520 Speaker 1: a lot of money to shoot rockets into space. But 318 00:16:10,600 --> 00:16:15,520 Speaker 1: the capital expenses are required to build data centers on 319 00:16:15,680 --> 00:16:19,040 Speaker 1: every inch of the Earth, and also in space is 320 00:16:19,120 --> 00:16:22,040 Speaker 1: so enormous that even space like has to go public. Yeah, 321 00:16:22,080 --> 00:16:22,880 Speaker 1: and even open eyes. 322 00:16:22,960 --> 00:16:25,240 Speaker 2: But maybe, well that's the thing, like I feel like, 323 00:16:25,680 --> 00:16:28,680 Speaker 2: you know, when we really do think big and you 324 00:16:28,680 --> 00:16:31,120 Speaker 2: don't really put our thinking caps on in terms of 325 00:16:31,160 --> 00:16:33,600 Speaker 2: how ridiculous things could get, there is a limit to 326 00:16:33,800 --> 00:16:35,400 Speaker 2: how long you can stay private. 327 00:16:35,360 --> 00:16:38,280 Speaker 1: Yeah, right, right, Like one possibility is that, like I've 328 00:16:38,280 --> 00:16:40,400 Speaker 1: been writing about you know, private markets or the new 329 00:16:40,400 --> 00:16:43,160 Speaker 1: public markets for you know, a decade or whatever. And 330 00:16:44,240 --> 00:16:49,880 Speaker 1: that was in the context of the biggest, hottest like 331 00:16:50,160 --> 00:16:54,520 Speaker 1: most sort of household name tech companies were kind of 332 00:16:54,560 --> 00:16:57,480 Speaker 1: at bottom, like capital light consumer tech right, Like, it's 333 00:16:57,520 --> 00:17:00,360 Speaker 1: a lot of Like you wouldn't have said Face had 334 00:17:00,360 --> 00:17:02,560 Speaker 1: a lot of CAPAX needs because it was a website. 335 00:17:02,640 --> 00:17:04,919 Speaker 1: Right now, Facebook has a lot of CAPEX, but like 336 00:17:05,160 --> 00:17:07,520 Speaker 1: for a long time it didn't. You know, Uber is like, yeah, 337 00:17:07,560 --> 00:17:09,720 Speaker 1: we're going to match drivers and writers. We don't have 338 00:17:09,760 --> 00:17:11,760 Speaker 1: to have anything, you know. Yeah, it was a real 339 00:17:11,840 --> 00:17:15,399 Speaker 1: like capital light model. And now in that context it 340 00:17:15,520 --> 00:17:18,800 Speaker 1: was fairly you know, you have capital light and very scalable. 341 00:17:18,880 --> 00:17:22,640 Speaker 1: It's very easy to stay private. You need to spend 342 00:17:22,680 --> 00:17:25,240 Speaker 1: a trillion dollars a year putting data centers on the moon. 343 00:17:25,520 --> 00:17:29,200 Speaker 1: You have to, like, the private markets are really big, 344 00:17:29,240 --> 00:17:30,199 Speaker 1: but they're not big enough for that. 345 00:17:30,320 --> 00:17:32,240 Speaker 2: And even before we get there, like before we get 346 00:17:32,280 --> 00:17:35,399 Speaker 2: to the moon, SpaceX has a lot of rockets to build. 347 00:17:35,440 --> 00:17:35,800 Speaker 2: That's right. 348 00:17:35,840 --> 00:17:38,560 Speaker 1: They're not capital light, and yet they've but they've managed 349 00:17:38,600 --> 00:17:40,600 Speaker 1: the private markets to be large and build a lot 350 00:17:40,600 --> 00:17:41,240 Speaker 1: of rockets. You know. 351 00:17:41,240 --> 00:17:42,919 Speaker 2: The point that has been made is the fact that 352 00:17:43,000 --> 00:17:45,760 Speaker 2: you know, they have been able to raise large amounts 353 00:17:45,800 --> 00:17:50,040 Speaker 2: of money in the private markets. We cover rocket launches 354 00:17:50,040 --> 00:17:52,159 Speaker 2: on Bloomberg TV all the time. A lot of the 355 00:17:52,240 --> 00:17:56,200 Speaker 2: rockets blow up, a lot of the tests fail. If 356 00:17:56,240 --> 00:17:59,920 Speaker 2: SpaceX is a public company, it's going to be really 357 00:18:00,160 --> 00:18:03,240 Speaker 2: interesting to have, you know, a split screen of the 358 00:18:03,359 --> 00:18:07,440 Speaker 2: rocket of a test launch potentially failing and also the stock. 359 00:18:07,600 --> 00:18:09,879 Speaker 1: That's so true, right, Like you know, I write all 360 00:18:09,920 --> 00:18:11,720 Speaker 1: the time that every bad thing that happens to a 361 00:18:11,720 --> 00:18:13,520 Speaker 1: public company of security is for it. But like every 362 00:18:13,520 --> 00:18:15,720 Speaker 1: time a rocket blows up and they it, it's really 363 00:18:16,680 --> 00:18:17,680 Speaker 1: awesome to think about. 364 00:18:17,840 --> 00:18:20,640 Speaker 2: We didn't talk about the wrinkle of Elon Musk potentially 365 00:18:20,640 --> 00:18:22,680 Speaker 2: being the CEO of two public companies too. 366 00:18:22,840 --> 00:18:24,960 Speaker 1: Yeah, but you can do that. I mean whatever the 367 00:18:25,160 --> 00:18:28,720 Speaker 1: er companies, they're big, now, I know. I'm just like, 368 00:18:28,840 --> 00:18:32,639 Speaker 1: I'm I'm I'm curious, like what the dynamic is of 369 00:18:32,840 --> 00:18:35,399 Speaker 1: pricing at one point five trillion dollar IPO because on 370 00:18:35,400 --> 00:18:39,000 Speaker 1: the one hand, it's like so big, right, and it's like, 371 00:18:39,040 --> 00:18:41,000 Speaker 1: you know, like the talk is like they'd raise thirty 372 00:18:41,000 --> 00:18:43,320 Speaker 1: billion dollars. That's the trades, like thirty billion dollars or 373 00:18:43,320 --> 00:18:45,600 Speaker 1: stock good day, right, Like at some level, like you 374 00:18:45,760 --> 00:18:48,640 Speaker 1: just suspend disbelief and you're like, this is not an IPR. 375 00:18:48,800 --> 00:18:50,800 Speaker 1: This is just like an Elon Msk public company that 376 00:18:50,840 --> 00:18:53,320 Speaker 1: happened to not be public and now it's public and 377 00:18:53,359 --> 00:18:55,119 Speaker 1: then like you know, they work it out in a 378 00:18:55,160 --> 00:18:57,640 Speaker 1: couple of days, Like it's not I don't know. There's 379 00:18:57,640 --> 00:19:00,280 Speaker 1: something like when you get to this level of bigness 380 00:19:00,440 --> 00:19:08,199 Speaker 1: and constantly doing tender offers and price transparency, it's like 381 00:19:08,359 --> 00:19:11,400 Speaker 1: no one needs a deck to be introduced to SpaceX. 382 00:19:10,920 --> 00:19:15,320 Speaker 2: Like yeah, it's just like yeah, yeah, the roadshow. 383 00:19:15,080 --> 00:19:18,680 Speaker 1: Owns it in like weird vehicles anyway, it's like it's SpaceX, man. 384 00:19:18,880 --> 00:19:23,280 Speaker 2: Yeah, I hope it does go public because yeah, it's cool. 385 00:19:23,359 --> 00:19:23,960 Speaker 2: That would be fun. 386 00:19:24,040 --> 00:19:25,919 Speaker 1: There was a thing where he tried to take Tesla private, 387 00:19:25,960 --> 00:19:28,359 Speaker 1: right and like he complains about the public markets and 388 00:19:28,400 --> 00:19:32,679 Speaker 1: it'll be interesting to the Yeah, it'll be interesting to 389 00:19:32,720 --> 00:19:37,600 Speaker 1: see what like a public SpaceX looks like. It'd be 390 00:19:37,600 --> 00:19:39,280 Speaker 1: interesting when he gets sued for the fourth time at a. 391 00:19:39,280 --> 00:19:41,200 Speaker 2: Rocket plank, I mean, to be fair, it happens. 392 00:19:41,560 --> 00:19:45,840 Speaker 1: Yeah, I'm not saying that it's actually a securities route 393 00:19:45,840 --> 00:19:47,280 Speaker 1: to blow up a rocket, or that he should be 394 00:19:47,320 --> 00:19:50,120 Speaker 1: sued for blowing up a rocket, and like the investors 395 00:19:50,119 --> 00:19:54,760 Speaker 1: in the current private SpaceX understand that that's part of 396 00:19:55,280 --> 00:19:58,240 Speaker 1: the deal and they don't sue him when he blows 397 00:19:58,280 --> 00:20:16,240 Speaker 1: up a rocket. All that's wrong. Should talking about private 398 00:20:16,280 --> 00:20:20,639 Speaker 1: credits and new public credit. Yeah, there's this fascinating Wall 399 00:20:20,640 --> 00:20:23,960 Speaker 1: Street Journal story this week about how it is harder 400 00:20:24,000 --> 00:20:28,919 Speaker 1: to know how consumers are doing because the way you 401 00:20:29,000 --> 00:20:33,440 Speaker 1: traditionally look at how consumers are doing is bank data, 402 00:20:33,520 --> 00:20:37,280 Speaker 1: credit card data, like bank reports. Banks say things like 403 00:20:37,560 --> 00:20:39,240 Speaker 1: people are charging a lot of money on their credit cards, 404 00:20:39,320 --> 00:20:40,639 Speaker 1: or like we have a lot of delinquencies on our 405 00:20:40,640 --> 00:20:42,160 Speaker 1: credit cards, and you get a sense of like what 406 00:20:42,240 --> 00:20:46,480 Speaker 1: consumer credit looks like and consumer spending, and what is 407 00:20:46,560 --> 00:20:50,880 Speaker 1: happening is that some consumer spending it's like marginal bit's 408 00:20:50,960 --> 00:20:56,400 Speaker 1: real has moved away from credit cards and into other stuff. 409 00:20:57,359 --> 00:21:00,280 Speaker 1: Alternative consumer lending, which I think I shorthand is like 410 00:21:00,359 --> 00:21:02,040 Speaker 1: buy now, pay later, So it's like a firm and 411 00:21:02,240 --> 00:21:05,040 Speaker 1: things like this where it's like you charge something, but 412 00:21:05,080 --> 00:21:06,800 Speaker 1: instead of charging it to a credit card, you charge 413 00:21:06,800 --> 00:21:10,040 Speaker 1: it to a buy now pay letter lender. And the 414 00:21:10,119 --> 00:21:13,560 Speaker 1: money for that doesn't usually come from banks. It comes 415 00:21:13,560 --> 00:21:17,320 Speaker 1: from other people, and there are a variety of lenders, 416 00:21:17,320 --> 00:21:18,840 Speaker 1: but like a lot of it is what you'd call 417 00:21:18,880 --> 00:21:21,760 Speaker 1: private credit. It's like insurance companies and private credit firms 418 00:21:22,080 --> 00:21:24,480 Speaker 1: that are providing their balance sheet to like FinTechs that 419 00:21:25,640 --> 00:21:27,600 Speaker 1: are the front end for these loans, that like make 420 00:21:27,600 --> 00:21:30,679 Speaker 1: the buyout pay letter credit decisions right. And so the 421 00:21:30,720 --> 00:21:32,840 Speaker 1: thing that you're seeing is that instead of banks with 422 00:21:32,880 --> 00:21:36,600 Speaker 1: credit cards providing credit for consumer spending, you have private 423 00:21:36,640 --> 00:21:40,920 Speaker 1: credit providing credit for consumer spending, which is kind of 424 00:21:40,960 --> 00:21:43,600 Speaker 1: a weird development. And also like a thing that I've 425 00:21:43,600 --> 00:21:45,159 Speaker 1: been writing about for a long time now is that 426 00:21:45,200 --> 00:21:47,920 Speaker 1: banking is getting narrow. Private credit is taking over from 427 00:21:47,960 --> 00:21:49,920 Speaker 1: the banks. But like a lot of that has been 428 00:21:49,920 --> 00:21:53,439 Speaker 1: in LBO lending, business lending, data center lending, and now 429 00:21:53,480 --> 00:21:56,240 Speaker 1: it's also in consumer lending. It's sort of an interesting shift. 430 00:21:56,520 --> 00:21:59,359 Speaker 2: Yeah. Absolutely, And you point out, as the Wall Street 431 00:21:59,400 --> 00:22:04,000 Speaker 2: Journal did, this makes data worse, you know, in terms 432 00:22:04,000 --> 00:22:05,080 Speaker 2: of tracking. 433 00:22:05,160 --> 00:22:06,239 Speaker 1: But I don't care that much about that. 434 00:22:06,359 --> 00:22:07,600 Speaker 2: I care a little bit, I guess. 435 00:22:07,960 --> 00:22:10,200 Speaker 1: Yeah. It's like I read about stuff, but I don't 436 00:22:10,640 --> 00:22:12,600 Speaker 1: ever write about like, oh, consumer credit as well. I 437 00:22:13,240 --> 00:22:15,520 Speaker 1: don't care about this data. Other people care about this 438 00:22:15,600 --> 00:22:18,040 Speaker 1: data Like that's bad. But like, I mean, the broader 439 00:22:18,040 --> 00:22:21,240 Speaker 1: point I would make is that the worsening of data 440 00:22:21,480 --> 00:22:25,560 Speaker 1: is because bank regulators collect a lot of data from 441 00:22:25,560 --> 00:22:28,479 Speaker 1: banks and make it public in some form, and so 442 00:22:28,560 --> 00:22:31,400 Speaker 1: you can see stuff about what banks are doing. Also, 443 00:22:31,400 --> 00:22:32,760 Speaker 1: a lot of you know, the big banks are largely 444 00:22:32,800 --> 00:22:35,680 Speaker 1: publicly traded, and so we'll talk about you know, consumer 445 00:22:35,720 --> 00:22:38,800 Speaker 1: credit weakness on their runnings calls. Yeah, private credit is private, 446 00:22:38,840 --> 00:22:42,240 Speaker 1: and so they don't do those earnings calls. I mean, 447 00:22:42,760 --> 00:22:44,960 Speaker 1: there's a publicly traded manager, so you get a little bit, 448 00:22:45,000 --> 00:22:47,919 Speaker 1: but like it's not the same level of interest in that, 449 00:22:48,000 --> 00:22:50,120 Speaker 1: and like they're not reporting to regulators in the same 450 00:22:50,119 --> 00:22:52,360 Speaker 1: way that banks to it. And the point I make 451 00:22:52,440 --> 00:22:54,760 Speaker 1: is that, like the whole point of financial regulation in 452 00:22:54,760 --> 00:22:59,119 Speaker 1: the last twenty years is that the banking funding model 453 00:22:59,200 --> 00:23:04,320 Speaker 1: is systemically important and risky, right, Like banks have runs. 454 00:23:05,000 --> 00:23:08,600 Speaker 1: When there's runs on banks, credit titans, and like the 455 00:23:08,680 --> 00:23:11,680 Speaker 1: economy gets worse. And if you can replace a runnable 456 00:23:11,720 --> 00:23:15,479 Speaker 1: banking system with a long term funded, equity funded private 457 00:23:15,520 --> 00:23:20,320 Speaker 1: credit system, then that is structurally better. And the tradeoff 458 00:23:20,320 --> 00:23:22,600 Speaker 1: for that is that that's less regulated, right, Like that's 459 00:23:22,640 --> 00:23:26,080 Speaker 1: what happens. Like banks are highly regulated because their funding 460 00:23:26,080 --> 00:23:28,200 Speaker 1: model is risky. If you just like have a pot 461 00:23:28,240 --> 00:23:29,760 Speaker 1: of your own money and make loans out of it, 462 00:23:29,760 --> 00:23:34,040 Speaker 1: you're less regulated. And people get nervous about that because 463 00:23:34,040 --> 00:23:36,600 Speaker 1: it's less regulated. But it's like that's the trade off 464 00:23:36,600 --> 00:23:40,960 Speaker 1: that like the regulator is meant to strike mostly is 465 00:23:40,960 --> 00:23:43,680 Speaker 1: that always thinking about it, and it's like a sensible 466 00:23:43,720 --> 00:23:45,399 Speaker 1: trade off, and it just makes people real nervous. 467 00:23:46,359 --> 00:23:48,760 Speaker 2: Well, I mean, does it become more regulated? 468 00:23:48,800 --> 00:23:51,399 Speaker 1: I have to no, man, the people keep talking about it, 469 00:23:51,400 --> 00:23:55,000 Speaker 1: but we're not in an environment that is like gung 470 00:23:55,040 --> 00:23:58,120 Speaker 1: ho and making anything more regulated. That's true, And like 471 00:23:58,240 --> 00:24:01,640 Speaker 1: my point is that it doesn't makes sense. I mean 472 00:24:01,720 --> 00:24:04,480 Speaker 1: whatever makes it. Like there's a reason this stuff is 473 00:24:04,560 --> 00:24:06,959 Speaker 1: less regulated, which is that it is less risky, Like 474 00:24:07,080 --> 00:24:10,199 Speaker 1: just as a baseline funding model is less risky. And 475 00:24:10,280 --> 00:24:13,680 Speaker 1: so when a private credit firm wants to make bad loans, 476 00:24:13,680 --> 00:24:16,280 Speaker 1: it's like, all right, that's your mistake, man, it's your money, right. 477 00:24:16,280 --> 00:24:17,960 Speaker 1: When a bank wants to make bad loans is like, no, no, 478 00:24:18,040 --> 00:24:20,760 Speaker 1: that's the depositors money. That's like taxpayers money, Like we 479 00:24:20,800 --> 00:24:22,800 Speaker 1: need to make sure they don't make bad loans. So 480 00:24:23,400 --> 00:24:26,640 Speaker 1: you know, the regulatory pressure is less. But we'll see. 481 00:24:26,960 --> 00:24:29,280 Speaker 1: But like for now, nothing's getting more regulated. Banks are 482 00:24:29,280 --> 00:24:30,080 Speaker 1: getting less regulated. 483 00:24:30,480 --> 00:24:32,640 Speaker 2: This is a turn. But did you see that piece 484 00:24:32,680 --> 00:24:36,080 Speaker 2: in the Ft about Apollo and it quoted an Apollo 485 00:24:36,119 --> 00:24:40,520 Speaker 2: executive saying we're becoming a bank. It truly sucks. It 486 00:24:40,560 --> 00:24:42,560 Speaker 2: was an unnamed person. It sounds like you didn't see 487 00:24:42,560 --> 00:24:44,520 Speaker 2: this piece. No, it was kind of funny. I'll send 488 00:24:44,520 --> 00:24:47,080 Speaker 2: it to you. Yeah, look, I mean see if you 489 00:24:47,080 --> 00:24:48,879 Speaker 2: were still on Twitter, you would have seen it. 490 00:24:48,920 --> 00:24:52,280 Speaker 1: But there's like a long running history of like banks 491 00:24:52,320 --> 00:24:55,920 Speaker 1: get regulated, things that are not banks move into the business, 492 00:24:56,200 --> 00:25:00,399 Speaker 1: they become big, they move into risky you're in risk 493 00:25:00,440 --> 00:25:03,640 Speaker 1: of your funding models, they blow up, they get built 494 00:25:03,680 --> 00:25:05,520 Speaker 1: up by the fat and they become banks. Right, Like 495 00:25:05,560 --> 00:25:06,879 Speaker 1: that's kind of the story of two thousand and eight, 496 00:25:06,920 --> 00:25:08,280 Speaker 1: Like could that be the story of private credit? 497 00:25:08,320 --> 00:25:10,920 Speaker 2: Like yeah, maybe I'm excited to find out. Truly as 498 00:25:10,920 --> 00:25:13,080 Speaker 2: a consumer of news, Yeah, I. 499 00:25:13,040 --> 00:25:15,199 Speaker 1: Don't have in my mind a picture of what it 500 00:25:15,240 --> 00:25:18,680 Speaker 1: looks like to have like like the crypto crisis in 501 00:25:18,680 --> 00:25:22,320 Speaker 1: twenty twin tiers. It's like truly like a replay of 502 00:25:22,520 --> 00:25:24,320 Speaker 1: two thousand and eight, Right, I don't have a picture 503 00:25:24,359 --> 00:25:26,639 Speaker 1: in my mind of what that looks like in the 504 00:25:26,640 --> 00:25:29,480 Speaker 1: private credit version, Like I don't have a picture of 505 00:25:29,520 --> 00:25:32,240 Speaker 1: like runs on private credit firms, but like it would 506 00:25:32,280 --> 00:25:35,840 Speaker 1: be cool, yeah, well to write about not like for 507 00:25:35,880 --> 00:25:37,320 Speaker 1: the world or whatever. But it would be like an 508 00:25:37,320 --> 00:25:40,120 Speaker 1: interesting development. But I again I can't quite visualize it yet. 509 00:25:40,400 --> 00:25:47,960 Speaker 1: Who will get there? And that was the Money Stuff Podcast. 510 00:25:48,240 --> 00:25:50,359 Speaker 2: I'm Matt Levine and I'm Katie Greifeld. 511 00:25:50,560 --> 00:25:52,720 Speaker 1: You can find my work by subscribing to The Money 512 00:25:52,720 --> 00:25:54,760 Speaker 1: Stuff newsletter on Bloomberg. 513 00:25:54,320 --> 00:25:56,920 Speaker 2: Dot com, and you can find me on Bloomberg TV 514 00:25:57,080 --> 00:26:00,720 Speaker 2: every day on the close between three and five pm. 515 00:26:01,240 --> 00:26:03,280 Speaker 1: We'd love to hear from you. You can send an 516 00:26:03,280 --> 00:26:06,600 Speaker 1: email to Moneypod at Bloomberg dot net, ask us a 517 00:26:06,680 --> 00:26:08,520 Speaker 1: question and we might answer it on the air. 518 00:26:08,880 --> 00:26:11,440 Speaker 2: You can also subscribe to our show wherever you're listening 519 00:26:11,520 --> 00:26:13,400 Speaker 2: right now and leave us a review. It helps more 520 00:26:13,440 --> 00:26:14,280 Speaker 2: people find the show. 521 00:26:15,200 --> 00:26:19,120 Speaker 1: The Money Stuff Podcast is produced by Anamazerakis and Moses Onden. 522 00:26:19,320 --> 00:26:21,560 Speaker 2: Our theme music was composed by Blake Maples. 523 00:26:22,280 --> 00:26:24,639 Speaker 1: Amy Keen is our executive. 524 00:26:24,119 --> 00:26:27,440 Speaker 2: Producer, and Sage Falman is Bloomberg's head of Podcasts. 525 00:26:27,840 --> 00:26:30,320 Speaker 1: Thanks for listening to The Money Stuff Podcast. We'll be 526 00:26:30,359 --> 00:26:32,040 Speaker 1: back next week with more stuff