WEBVTT - SoFi Shares Surge and Amazon Cancels iRobot Deal 0:00:01.560 --> 0:00:05.880 From Marhard. We're Innovation, Money and Power Collie in Silicon 0:00:05.960 --> 0:00:06.880 Vallet NBN. 0:00:07.200 --> 0:00:11.240 This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. 0:00:24.560 --> 0:00:26.840 I'm Caroline head of Bloomberg's world headquarters in New. 0:00:26.800 --> 0:00:29.680 York, and I'm Ed Lovelow in San Francisco. This has 0:00:29.680 --> 0:00:30.680 been Bag Technology. 0:00:30.920 --> 0:00:34.040 So FI shares are surging after posting its first have 0:00:34.159 --> 0:00:37.200 a profit. Our conversation with the CEO, Anthony Noto that's 0:00:37.200 --> 0:00:37.680 coming up. 0:00:38.440 --> 0:00:41.560 Plus shares of I Robots slump as the Amazon deal 0:00:41.680 --> 0:00:45.120 is scrapped and the CEO steps down, details on why 0:00:45.120 --> 0:00:47.879 the acquisition was terminated, and a. 0:00:47.920 --> 0:00:50.720 Real sign that tech companies are throwing their hats into 0:00:50.760 --> 0:00:52.919 the twenty twenty four IPO market revival ring. 0:00:53.320 --> 0:00:55.120 We talk about reddits public. 0:00:54.840 --> 0:00:58.200 Market plans and its potential valuation, but first we'll let's 0:00:58.240 --> 0:01:00.480 check in on the companies that are already public and 0:01:00.480 --> 0:01:03.400 where they're trading, because right now we are waiting on 0:01:03.480 --> 0:01:06.480 so much economic data of a Federal Reserve rate decision, 0:01:06.520 --> 0:01:08.319 of course, whether we'll be selling more debt here in. 0:01:08.240 --> 0:01:09.040 The United States. 0:01:09.120 --> 0:01:10.760 There is a lot to digest, not to mention the 0:01:10.800 --> 0:01:13.520 ten trillion dollar valuation of companies that are be coming 0:01:13.520 --> 0:01:16.119 out with their earnings this week, so we pause, we wait, 0:01:16.120 --> 0:01:18.199 We see then awst that basically up only about ten points. 0:01:18.280 --> 0:01:20.640 We're seeing the tenure yields actually just falling down about 0:01:20.640 --> 0:01:23.160 three basis point. It's interesting as we do anticipate the 0:01:23.319 --> 0:01:25.559 overall treasury to be signaling that they will be issuing 0:01:25.640 --> 0:01:27.520 yet more debt, but we are down by some three 0:01:27.520 --> 0:01:30.039 basis points. So a little bit about purchasing. Now, remember 0:01:30.080 --> 0:01:32.399 this is a mid yet more geopolitical tension. Maybe there's 0:01:32.440 --> 0:01:34.400 a flight to some sort of safety, as we see 0:01:34.400 --> 0:01:36.480 actually oil on the downside by a percentage point. We 0:01:36.480 --> 0:01:39.959 have been tracking higher after those concerns of increased tensions 0:01:40.000 --> 0:01:41.800 in the Middle East, not to mention, of course US 0:01:41.840 --> 0:01:44.360 personnel being killed over in Jordan. Were focus in on 0:01:44.400 --> 0:01:46.760 what's happening in geopolitics, but we move on what's happening 0:01:47.000 --> 0:01:49.680 in one key risk Asseler choice here at the technology show, we. 0:01:49.640 --> 0:01:51.000 See a little bit of a spike higher in the 0:01:51.040 --> 0:01:51.720 world a bitcoin. 0:01:51.840 --> 0:01:53.800 We're up about one point six percent forty two thousand 0:01:54.000 --> 0:01:54.600 tround and sixty eight. 0:01:54.640 --> 0:01:56.720 We are clawing our way back ed after what has 0:01:56.800 --> 0:01:57.400 been a bit. 0:01:57.240 --> 0:01:59.320 Of a sell off post of course, the Bitcoin Spot 0:01:59.320 --> 0:02:00.480 ETF coming in fruition. 0:02:00.520 --> 0:02:01.600 What have you got on the micro. 0:02:01.480 --> 0:02:04.880 Though, the big text story of the day is Amazon 0:02:05.040 --> 0:02:09.560 walking away and scrapping its acquisition of iRobot. Treading water 0:02:09.600 --> 0:02:11.560 on Amazon shares because I think we knew this was 0:02:11.600 --> 0:02:14.320 coming right based on all the reporting of late but 0:02:14.360 --> 0:02:17.280 I Robot is down significantly because adding to the fact 0:02:17.600 --> 0:02:19.520 that Amazon has walked away, and this is a case 0:02:19.560 --> 0:02:23.040 of Amazon jumping before it was pushed by EU regulators, 0:02:23.560 --> 0:02:28.239 I Roboteo Colin Angle is stepping down and they're cutting jobs. 0:02:28.440 --> 0:02:30.240 This is a pretty big situation. We're going to go 0:02:30.240 --> 0:02:32.880 to Brussels later in the hour speak to our reporter there, 0:02:32.919 --> 0:02:35.280 and then we'll go to Seattle and get the Amazon 0:02:35.320 --> 0:02:38.560 side of this story halfway through the show as well. 0:02:38.800 --> 0:02:41.160 Keep watch on this and as I said Amazon shares, 0:02:41.160 --> 0:02:43.600 look at the kind of muted reaction, we think that 0:02:43.680 --> 0:02:46.280 this was coming. The other big mover to the upside 0:02:46.360 --> 0:02:48.440 is in the earnings context, and that is so FI 0:02:48.800 --> 0:02:51.160 actually on track for its biggest jump since late July, 0:02:51.320 --> 0:02:55.480 first week of August. Why profitability for the first time 0:02:55.800 --> 0:02:58.799 on a net income basis. This is the milestone that 0:02:58.840 --> 0:03:00.960 the street was looking for. There's a lot going on 0:03:00.960 --> 0:03:03.560 on the technology side of sofar's business and a lot 0:03:03.600 --> 0:03:05.959 going on on the lending side and finance side of 0:03:05.960 --> 0:03:06.880 its business as well. 0:03:06.960 --> 0:03:07.840 Who do we speak to? 0:03:08.160 --> 0:03:11.760 The CEO Anthony Notto joins us now and Antie. We've 0:03:11.760 --> 0:03:15.359 been through this process psychologically that first profit with a 0:03:15.440 --> 0:03:19.480 number of companies before. What were the main contributing factors 0:03:19.480 --> 0:03:22.280 to you, guys hitting profitability on a net income basis? 0:03:22.520 --> 0:03:25.279 And how confident can the street be that you continue 0:03:25.600 --> 0:03:28.120 on this arc of increasing profitability and. 0:03:28.240 --> 0:03:29.520 Thank you for having me on. 0:03:29.680 --> 0:03:32.600 The main contributors to the profitability is that we finally 0:03:32.680 --> 0:03:36.080 reached the scale in our non lending businesses that they 0:03:36.080 --> 0:03:37.040 are now profitable. 0:03:37.080 --> 0:03:39.120 And so we have three profitable segments. 0:03:39.560 --> 0:03:42.960 When I joined the company six years ago, we're primarily 0:03:43.000 --> 0:03:43.520 a lender. 0:03:44.080 --> 0:03:45.720 That's a very profitable business for us. 0:03:46.200 --> 0:03:49.440 We've entered the technology platform services business where we enable 0:03:49.480 --> 0:03:52.600 one hundred and forty million accounts throughout the United States 0:03:52.640 --> 0:03:55.440 and lat Am to do payment processing as well as 0:03:55.440 --> 0:03:58.600 core banking technologies and a number of other financial services 0:03:58.640 --> 0:04:01.520 technologies that we use at SO, but we also sell 0:04:01.560 --> 0:04:04.240 to others. And then our third segment is our financial 0:04:04.280 --> 0:04:07.720 services segment, which consists of products like Sofi Money, which 0:04:07.760 --> 0:04:10.080 is a checking the SAME's account, so Fi invests, so 0:04:10.160 --> 0:04:15.080 Fi credit card, Sofi Protectors's insurance. Those businesses required a 0:04:15.120 --> 0:04:18.080 significan amount investment over the last six years. But we've 0:04:18.120 --> 0:04:20.840 now reached the point where they're forty percent of our 0:04:20.839 --> 0:04:23.800 revenue in the fourth quarter compared to lending at sixty percent, 0:04:24.240 --> 0:04:27.440 and they're profitable. And so that inflection point hit this quarter, 0:04:27.680 --> 0:04:30.440 and as we go into twenty twenty four, we believe 0:04:30.480 --> 0:04:33.440 the businesses will be fifty percent lending, fifty percent tech 0:04:33.440 --> 0:04:36.720 platform of financial services, and with all three being profitable, 0:04:36.760 --> 0:04:38.279 the profitability is sustainable. 0:04:38.440 --> 0:04:40.760 I'm trying to understand that guidance. So you're basically saying 0:04:40.800 --> 0:04:44.599 fifty percent compound annual growth on the financial services business 0:04:44.680 --> 0:04:47.599 over kind of this pretty wide window twenty twenty three 0:04:47.680 --> 0:04:51.080 through twenty twenty six. What gives you the confidence that 0:04:51.160 --> 0:04:54.760 you can see that far into the future in terms 0:04:54.760 --> 0:04:56.520 of how your company will grow that segment? 0:04:57.360 --> 0:05:00.200 Sure, just to clarify for viewers, I always suggest that 0:05:00.240 --> 0:05:02.599 will have fifty percent of our revenue from lending in 0:05:02.640 --> 0:05:05.480 twenty twenty four and fifty percent of our revenue from 0:05:05.560 --> 0:05:09.280 the two other divisions combined the technology platform segment and 0:05:09.320 --> 0:05:11.800 the financial services segment. In terms of our longer term 0:05:11.839 --> 0:05:15.599 revenue growth outlook, we are forecasting seventy five percent growth 0:05:15.600 --> 0:05:19.120 in the fincial services segment in twenty twenty four and 0:05:19.400 --> 0:05:22.440 twenty percent growth in the tech platform. From the twenty 0:05:22.600 --> 0:05:26.359 twenty three through twenty twenty six time period, technology platform 0:05:26.400 --> 0:05:30.040 will come down to fifty percent and sorry, technology platform 0:05:30.120 --> 0:05:32.560 will be mid twenties and the fincial services segment will 0:05:32.560 --> 0:05:33.640 come down to fifty percent. 0:05:33.960 --> 0:05:35.159 And the reason we could see. 0:05:34.960 --> 0:05:38.160 That is because we understand our customer acquisition costs, how 0:05:38.240 --> 0:05:41.160 much we spend on marketing, and that drives the adoption 0:05:41.240 --> 0:05:43.360 of the products and then they monetize at a rate 0:05:43.400 --> 0:05:45.359 that we've seen over the last couple of years, and 0:05:45.400 --> 0:05:47.919 so they're pretty strong meeting indicators of what the future 0:05:47.960 --> 0:05:49.400 brings from a growth perspective. 0:05:49.880 --> 0:05:51.960 One thing, of course, on your call, that you made 0:05:51.960 --> 0:05:55.000 clear to analysis. Let's face it, no economist has got 0:05:55.000 --> 0:05:57.320 this economy right in the last couple of years. 0:05:57.480 --> 0:05:59.520 How do you feel about the macroeconomy. 0:05:58.920 --> 0:06:04.280 Anthony, Yeah, we're very conservative about the macro outlooks. Specifically, 0:06:04.800 --> 0:06:06.560 I don't believe it will be the case that we 0:06:06.560 --> 0:06:09.680 could have six rate cuts, which is what the forward curve. 0:06:09.480 --> 0:06:11.039 Shows, and a strong economy. 0:06:11.320 --> 0:06:13.240 I think if we actually get the six rate cuts, 0:06:13.240 --> 0:06:16.800 it's because we're likely with unemployment above five percent and 0:06:16.920 --> 0:06:20.039 likely with contracting GDP. I think it's more likely that 0:06:20.040 --> 0:06:23.279 we'll have fewer cuts and maybe a stable economy. But 0:06:23.400 --> 0:06:27.559 coming into October, many market pundits we're talking about higher 0:06:27.560 --> 0:06:30.640 for longer. Ninety days later, they're talking about six rate cuts. 0:06:30.880 --> 0:06:33.320 It's such a bifurcation of views. It's really hard to 0:06:33.400 --> 0:06:36.240 know what the real outlook is. And so we're taking 0:06:36.240 --> 0:06:38.720 a very conservative view, and we can do that given 0:06:38.720 --> 0:06:41.880 the diversification that we have on the lending business and with. 0:06:41.880 --> 0:06:42.680 The other businesses. 0:06:42.720 --> 0:06:45.960 So we're going into next year with tighter credit and 0:06:46.000 --> 0:06:51.120 also lower expectations. In fact, we're really just forecasting maintaining 0:06:51.160 --> 0:06:54.560 our revenue and lending, not growing it, and the other 0:06:54.600 --> 0:06:56.560 business is driving the growth that I mentioned. 0:06:57.080 --> 0:06:59.760 And with that sort of growth, you still have that 0:06:59.800 --> 0:07:02.479 go all of a thirty percent return on equity, You 0:07:02.520 --> 0:07:04.160 still have that goal of being in the top ten 0:07:04.200 --> 0:07:06.799 in terms of financial institutions here in the United States. 0:07:07.120 --> 0:07:09.720 What gets you there in terms of your underlying investments 0:07:09.760 --> 0:07:12.040 that you now need to make company sure. 0:07:12.320 --> 0:07:14.480 In twenty twenty three, we were able to grow our 0:07:14.520 --> 0:07:17.480 revenue thirty five percent. We just hit our long term 0:07:17.520 --> 0:07:20.120 EBIDAD margin of thirty percent, which is what's required to 0:07:20.120 --> 0:07:22.840 get to the return on equity of thirty percent. Now 0:07:22.840 --> 0:07:25.240 we just have to scale the EBADAD dollars against our 0:07:25.240 --> 0:07:26.080 book value. 0:07:26.360 --> 0:07:27.760 We grew tamsible. 0:07:27.360 --> 0:07:29.920 Book value by more than three hundred and forty million 0:07:29.960 --> 0:07:32.160 dollars this year, and we're looking to grow it even 0:07:32.200 --> 0:07:34.679 faster next year at three hundred million to five hundred million, 0:07:35.040 --> 0:07:37.200 and so the profitability of the business is there. Now, 0:07:37.200 --> 0:07:40.000 it's about just scaling the revenue, which will scale the 0:07:40.080 --> 0:07:43.320 returns on equity to that thirty percent level that you mentioned. 0:07:44.040 --> 0:07:46.280 We've been in these businesses now for four to six 0:07:46.360 --> 0:07:49.120 years and we have pretty good leading indicators of what 0:07:49.160 --> 0:07:51.200 it takes to drive their growth. And that's what's giving 0:07:51.280 --> 0:07:52.840 us the confidence in our forward outlook. 0:07:54.240 --> 0:07:57.760 Anthony, our colleague Paid Smith on the Fintech team is 0:07:57.800 --> 0:08:00.320 talking about your technology business. Our colleagues at the Bomberg 0:08:00.400 --> 0:08:03.320 Intelligence they're talking about your technology business. This is the 0:08:03.320 --> 0:08:07.000 Bloomberg Technology Show. What are we talking about when we 0:08:07.040 --> 0:08:09.360 say that so far is a tech company, what is 0:08:09.400 --> 0:08:10.640 the strength that you have there? 0:08:11.640 --> 0:08:13.880 Sure, obviously we have to build our own technology. 0:08:14.000 --> 0:08:17.640 We're a financial services company with no physical locations and 0:08:17.680 --> 0:08:19.800 so the only way our products are delivered is through 0:08:19.840 --> 0:08:24.000 the mobile app or desktop services. So by definition we 0:08:24.120 --> 0:08:27.080 have to have technology to do that. In addition, we 0:08:27.200 --> 0:08:29.840 have to have processing capabilities and operating systems. 0:08:30.400 --> 0:08:31.680 We use for processing. 0:08:31.720 --> 0:08:34.640 A company that we bought, Galileo, back in twenty twenty. 0:08:35.000 --> 0:08:37.600 Galileo is powering about one hundred and forty million accounts 0:08:37.640 --> 0:08:40.360 in the United States to do payment processing on debit 0:08:40.360 --> 0:08:45.160 in ahrails. But also it's developed a whole suite of 0:08:45.240 --> 0:08:48.880 APIs that allows a developer to tap into those APIs 0:08:48.880 --> 0:08:52.080 and build account opening or a direct deposit or two 0:08:52.160 --> 0:08:56.040 day early paycheck or payment risk platform. In addition to that, 0:08:56.160 --> 0:08:59.439 we have a technology platform that's a core banking technology 0:08:59.440 --> 0:09:03.280 called Technical. It's really the operating system for products. It's 0:09:03.320 --> 0:09:06.240 a multi product platform. We use it for so far 0:09:06.360 --> 0:09:09.280 by now pay later. Those are the two main products 0:09:09.320 --> 0:09:11.679 that we sell to third parties, and as I mentioned, 0:09:11.960 --> 0:09:13.959 servicing about one hundred and forty million accounts in the 0:09:14.080 --> 0:09:15.360 United States and lat am. 0:09:15.200 --> 0:09:18.280 Today, Anthony, I think we've got to talk about the 0:09:18.520 --> 0:09:21.280 share reaction. Right your gains are holding at around twenty 0:09:21.320 --> 0:09:25.480 three percent. You know I talked about that psychological, psychological 0:09:25.920 --> 0:09:30.000 milestone of net income profit. But do you finally feel 0:09:30.040 --> 0:09:32.000 like you're getting some credit Because you've been talking about 0:09:32.040 --> 0:09:34.280 this plan for a little while, I have a sense 0:09:34.320 --> 0:09:36.600 of deja vus. We're talking about the same things now 0:09:36.600 --> 0:09:39.040 as the two previous times you've been on the show. 0:09:40.480 --> 0:09:43.360 Sure, I think that the inflection point in this quarter 0:09:43.520 --> 0:09:46.280 is one hitting our long term margins of eb adout 0:09:46.280 --> 0:09:48.839 thirty percent, so that gives people a longer term view 0:09:48.840 --> 0:09:52.560 on what our profitability could be. Second is forty percent 0:09:52.600 --> 0:09:55.960 of our revenue came from the technology platform business as 0:09:56.000 --> 0:09:59.240 well as the financial services business, which means sixty percent 0:09:59.320 --> 0:10:02.000 came from Monday, and so as we go into twenty 0:10:02.080 --> 0:10:03.920 twenty four, we're calling for that split to. 0:10:03.880 --> 0:10:04.640 Be fifty to fifty. 0:10:04.640 --> 0:10:07.200 As I mentioned, that's also an inflection point. People been 0:10:07.240 --> 0:10:09.320 waiting for that for a while. And so while there's 0:10:09.360 --> 0:10:12.960 a lot of talk and debate about the loans and 0:10:13.000 --> 0:10:17.240 fair market value accounting versus cost accounting, the reality is 0:10:17.280 --> 0:10:19.640 that our business is much more than that, and we're 0:10:19.679 --> 0:10:23.599 starting to get the perspective from investors about that broader diversification. 0:10:24.120 --> 0:10:25.320 And it's not by accident. 0:10:25.440 --> 0:10:27.839 We embarked on a strategy to be a one stop 0:10:27.880 --> 0:10:30.880 shop six years ago for all your financial services needs. 0:10:31.120 --> 0:10:31.880 Our mission is to. 0:10:31.840 --> 0:10:34.120 Help people achieve financial independence, which means we have to 0:10:34.120 --> 0:10:35.800 help them get their money right, and we can't just 0:10:35.840 --> 0:10:40.000 do that in one product. We have to do across borrowing, saving, spending, investing, 0:10:40.000 --> 0:10:42.560 and protecting. And what you're seeing in our results is 0:10:42.600 --> 0:10:46.679 that strategy playing out in diversified revenue and high profitability 0:10:46.720 --> 0:10:47.440 six years later. 0:10:48.000 --> 0:10:50.000 Interestingly, not in crypto anymore. 0:10:50.280 --> 0:10:53.840 But interestingly, what I'm taken with on a daylight today 0:10:53.840 --> 0:10:57.240 where we see the Amazon I robot merger have to 0:10:57.280 --> 0:10:59.840 be put on ice. With your background as someone who 0:11:00.040 --> 0:11:02.920 help lead the overall investment man King offering over at 0:11:02.920 --> 0:11:05.320 GOLM and Saxon kN to TMPT when you're thinking of 0:11:05.320 --> 0:11:08.040 your own acquisition strategy. Can deals get done at the 0:11:08.040 --> 0:11:10.640 moment in the world of Tear Company, I. 0:11:10.559 --> 0:11:12.760 Think they can get done. We're not focused on doing 0:11:12.760 --> 0:11:14.800 deals that so far. We're focused on our strategy and 0:11:14.840 --> 0:11:17.920 executing organic growth. We feel like we've reached the point 0:11:17.960 --> 0:11:21.560 now where it's ours for the taking, and the opportunity 0:11:21.559 --> 0:11:23.440 for us to be the winner. That takes most is 0:11:23.480 --> 0:11:27.040 completely up to our execution. But more broadly, I do 0:11:27.040 --> 0:11:30.040 believe there's still M and A that will happen across 0:11:30.080 --> 0:11:33.320 both technology and financial services. I think financial service is 0:11:33.320 --> 0:11:35.640 probably a little bit more challenged because of the regulatory 0:11:35.640 --> 0:11:37.640 backdrop than technology is per se. 0:11:37.960 --> 0:11:39.040 But deals are getting done. 0:11:39.040 --> 0:11:41.400 They're just harder to get done, and they're going to courts, 0:11:41.440 --> 0:11:44.360 But in court people are winning. I think what you've 0:11:44.360 --> 0:11:47.079 seen at some of the breakups is really about business performance, 0:11:47.200 --> 0:11:51.920 not about regulation, and businesses underperforming relative to expectations and 0:11:52.000 --> 0:11:54.840 therefore buyers being able to get out of those deals. 0:11:55.080 --> 0:11:57.960 Nothing like some bars remorse, but for now, we really 0:11:58.000 --> 0:12:00.440 appreciate the time that you spent talking us, your own 0:12:00.520 --> 0:12:03.480 numbers and your focus. Anthony NOTO so far, CEO, We 0:12:03.559 --> 0:12:03.920 thank you. 0:12:12.840 --> 0:12:16.000 Amazon has scrapped its plan one point four billion dollar 0:12:16.080 --> 0:12:20.760 acquisition of I Robot after clashing with European union regulators 0:12:20.960 --> 0:12:23.720 who had threatened to block the deal. I Robot announced 0:12:23.720 --> 0:12:27.520 that CEO Colin Ango would also be stepping down as 0:12:27.559 --> 0:12:30.720 the company implements a restructuring plan that will result in 0:12:30.760 --> 0:12:33.080 three hundred and fifty jobs being cut. Here with the 0:12:33.160 --> 0:12:37.559 latest is Bloomberg. Sam Stulton out in Brussels and Sam, 0:12:37.640 --> 0:12:39.440 you know, earlier in the show we kind of framed 0:12:39.440 --> 0:12:42.960 this is Amazon jumping before they were pushed, because we 0:12:43.080 --> 0:12:46.760 know that the Commission was looking at this very closely 0:12:47.440 --> 0:12:51.160 and probably would have blocked the deal. What did Amazon 0:12:51.200 --> 0:12:52.760 outline in their regulatory filing? 0:12:53.840 --> 0:12:56.240 Hi ed, well, good to join you here from Brussels 0:12:56.360 --> 0:12:59.800 this afternoon. Yes, indeed, we were just days away from 0:12:59.800 --> 0:13:03.680 a potential European Union veto over this one point four 0:13:04.000 --> 0:13:08.240 billion dollar acquisition from Amazon. The news was really that 0:13:08.320 --> 0:13:12.480 last week Amazon had held a meeting with EU Commission 0:13:12.600 --> 0:13:16.120 officials and the EU had signaled that it was its 0:13:16.200 --> 0:13:19.800 intention to block the deal. There was a deadline of 0:13:20.679 --> 0:13:23.280 February fourteenth for the EU to come to a decision. 0:13:23.280 --> 0:13:25.760 But Amazon seems to have jumped the gun now and 0:13:25.800 --> 0:13:29.240 decided that it's not worth risking that negative publicity from 0:13:29.280 --> 0:13:32.920 the European Commission and it's withdrawn from the acquisition. 0:13:33.559 --> 0:13:36.959 And of course we've heard from Margaret Vestia before about 0:13:37.080 --> 0:13:40.160 concerns surrounding Big M and A deals, about where they 0:13:40.160 --> 0:13:41.600 take it. She just take a listen to what she 0:13:41.679 --> 0:13:43.000 told the show a few weeks ago. 0:13:43.920 --> 0:13:49.040 In any merger, it is so that if we have concerns, 0:13:49.240 --> 0:13:53.720 it is for the businesses either to address these concerns 0:13:53.760 --> 0:13:57.120 by debunking them or by addressing them by coming up 0:13:57.160 --> 0:14:01.000 with remedies that will solve the problem. If a companies 0:14:01.040 --> 0:14:03.920 say we will not come up with remedies, well, then 0:14:04.000 --> 0:14:07.080 of course we expect that they have good arguments that 0:14:07.120 --> 0:14:11.480 our concerns should not be sustained, and we are still 0:14:11.520 --> 0:14:15.960 in the process of assessing our concerns compared to a 0:14:16.080 --> 0:14:18.600 situation where we do not have a remedy to the 0:14:18.640 --> 0:14:20.720 concerns that we have drawn up. 0:14:21.600 --> 0:14:23.960 Sam, it was interesting. We were just talking to Anthony Notto. 0:14:24.360 --> 0:14:26.440 He used to be the head of TMT Investment Man 0:14:26.480 --> 0:14:27.680 can co head over at Goldman. 0:14:27.720 --> 0:14:29.560 He's now, of course CEO are so far, but. 0:14:29.520 --> 0:14:32.400 He was saying, look, deals that aren't getting done are 0:14:32.440 --> 0:14:34.680 largely because there's buyers remorse. It's not so much that 0:14:34.760 --> 0:14:37.800 deals can't get done from your perspective in the Brussels, 0:14:37.840 --> 0:14:38.840 do you think that's true. 0:14:39.640 --> 0:14:42.040 Yeah, I think to a certain extent absolutely. I mean 0:14:42.080 --> 0:14:44.480 in cases such as Amazon I rode, but the European 0:14:44.520 --> 0:14:47.920 Commission really needed something almost symbolic to say that it 0:14:47.960 --> 0:14:50.200 could rub a stampless deal and give it the green lights, 0:14:50.480 --> 0:14:52.600 and as we heard from Maghareet de Vestaga just said, 0:14:52.680 --> 0:14:55.680 it clearly wanted some sort of a remedy to be 0:14:55.760 --> 0:14:59.280 filed in this case. The deadline for that remedy passed 0:14:59.280 --> 0:15:02.120 a couple of weeks, and Amazon in fact offered nothing 0:15:02.800 --> 0:15:06.120 to appease those original concerns from the European Commission when 0:15:06.120 --> 0:15:09.720 it said back in November that this deal could result 0:15:10.040 --> 0:15:13.520 in a distortion of competitions on the market for robot 0:15:13.760 --> 0:15:17.360 vacuum cleaners and also result in higher prices for consumers. 0:15:17.400 --> 0:15:20.760 So Amazon decided not to come forward with an olive 0:15:20.800 --> 0:15:23.080 branch or any form of concession in this case, and 0:15:23.120 --> 0:15:26.440 really from that point on the deal was dooms. Now 0:15:26.480 --> 0:15:30.240 going forward, it creates a lot of uncertainty in the 0:15:30.280 --> 0:15:34.520 boardrooms regarding these large technology mergers. This isn't the first 0:15:34.560 --> 0:15:39.280 time that companies have withdrawn from a potential deal after 0:15:39.640 --> 0:15:44.400 getting intense regulatory scrutiny. You may recall recently that Adobe 0:15:44.720 --> 0:15:48.360 walked away from their twenty billion dollar merger with Figma 0:15:48.600 --> 0:15:52.760 after getting similar scrutiny over that deal, and indeed they 0:15:52.800 --> 0:15:56.320 had to pay a one billion dollar walkaway fee in 0:15:56.320 --> 0:15:59.960 that case. For this time, Amazon's fee is a bit cheap. 0:16:00.120 --> 0:16:04.200 It's just ninety four million dollars, but I'm sure it's 0:16:04.200 --> 0:16:06.040 not lunch money at least. 0:16:06.400 --> 0:16:08.680 And certainly not for a company like Hi Robot that 0:16:08.720 --> 0:16:10.760 now is having to lay off three hundred and fifty 0:16:10.800 --> 0:16:13.240 people thirty percent of the workforce. And the CEO he 0:16:13.400 --> 0:16:16.160 goes Sam, absolutely brilliant to get the update from you, 0:16:16.200 --> 0:16:18.360 Sam Stotton over there in Russell's we thank you me. 0:16:18.400 --> 0:16:19.840 While coming up, well, we're going. 0:16:19.800 --> 0:16:22.200 To dig into companies that, oh maybe are still in 0:16:22.280 --> 0:16:24.360 growth mode and wanting to prove it to the public markets. 0:16:24.400 --> 0:16:26.840 Equity Zen head and market Insights Rihanna Lynch is going 0:16:26.880 --> 0:16:29.200 to be joining us to discuss on what twenty twenty 0:16:29.200 --> 0:16:32.000 four holds and whether Reddit is going to make a debut, 0:16:32.040 --> 0:16:51.120 and and what valuation this is bruly met technology. Could 0:16:51.200 --> 0:16:53.520 twenty twenty four finally be a bit more of a 0:16:53.640 --> 0:16:57.320 year for tech IPOs well look Reddits weighing some feedback 0:16:57.320 --> 0:17:00.640 already from early meetings, with potential investors coming being advised 0:17:00.680 --> 0:17:03.160 to target at least a five billion dollar valuation if 0:17:03.160 --> 0:17:03.800 it goes public. 0:17:04.000 --> 0:17:05.080 That's according to sources. 0:17:05.320 --> 0:17:07.000 Let's bring in someone who's at cutting edge of what 0:17:07.080 --> 0:17:09.320 valuations look like on the secondary market, Equity Zen, head 0:17:09.320 --> 0:17:11.119 of Market Insights, Prean and thench it's great to have 0:17:11.160 --> 0:17:13.000 you with us, Brian, and well, look, this was a 0:17:13.040 --> 0:17:14.960 company that raised money, and I think a ten billion 0:17:15.000 --> 0:17:17.840 dollar valuation going to eke out five billion by some 0:17:17.840 --> 0:17:19.119 of the maths that you're saying. 0:17:19.280 --> 0:17:20.600 It'll be interesting to see. 0:17:20.640 --> 0:17:23.560 I think the key here that we don't have the 0:17:23.640 --> 0:17:27.520 answer to yet is whether or not Reddit is profitable. 0:17:27.680 --> 0:17:30.520 So when they first made plans to go public in 0:17:30.560 --> 0:17:33.879 early twenty twenty two, talking about even a fifteen billion 0:17:33.960 --> 0:17:38.160 dollar valuation, they were not yet profitable. Scrap those plans 0:17:38.200 --> 0:17:40.640 coming to the market again, and I think that's going 0:17:40.680 --> 0:17:43.840 to be the crux for where this valuation plays out. 0:17:43.880 --> 0:17:47.480 When we look at the cohort of tech IPOs in 0:17:47.600 --> 0:17:51.320 late twenty twenty three, so the Klavio, Instacart, arm Group, 0:17:51.520 --> 0:17:55.399 these were all profitable companies and they still had lackluster performance. 0:17:55.480 --> 0:17:58.159 So at a minimum, I would assume that Reddit is 0:17:58.240 --> 0:18:00.440 near profitability, but there's no to be. 0:18:00.440 --> 0:18:03.440 Learned from their s one profitability key Also, perhaps talking 0:18:03.520 --> 0:18:06.080 up artificial intelligence, is that what's going to dictate where 0:18:06.080 --> 0:18:07.920 the companies could come in any sort of window that 0:18:08.000 --> 0:18:09.280 opens in twenty twenty four. 0:18:10.119 --> 0:18:12.920 Yeah, I think any company that can play into the 0:18:13.000 --> 0:18:16.520 AI buzz will obviously use that. Whether that's a marketing 0:18:16.600 --> 0:18:19.240 tactic or a key part of their business. Is you 0:18:19.280 --> 0:18:23.040 know a separate question. I would say, when we're looking 0:18:23.080 --> 0:18:26.760 at Reddit, we're really talking about their advertising business. You know, 0:18:26.880 --> 0:18:30.639 as a core social media platform, they generated over eight 0:18:30.720 --> 0:18:34.840 hundred million dollars in revenue from advertising last year. That's 0:18:34.920 --> 0:18:37.720 up twenty percent from the prior year. But there's a 0:18:37.760 --> 0:18:40.399 lot of competition with TikTok and Meta and others in 0:18:40.440 --> 0:18:43.639 the space. But I would also say that there is 0:18:43.760 --> 0:18:47.680 investor interest for these social media platforms. We haven't seen 0:18:47.720 --> 0:18:51.520 one of them go public since Pinterest back in twenty nineteen, 0:18:51.600 --> 0:18:55.880 and you know, those stocks have really rallied. Pinterest debuted 0:18:55.880 --> 0:18:58.040 at ten million dollars and is now training at a 0:18:58.080 --> 0:19:01.720 twenty five billion dollar valuation, So perhaps they're hoping to 0:19:02.520 --> 0:19:03.919 jump on some of that momentum. 0:19:04.320 --> 0:19:07.560 Brian, how much emphasis do you put on the idea 0:19:07.720 --> 0:19:11.320 if Reddit does this pulls the trigger, It opens up 0:19:11.320 --> 0:19:14.359 a broader IPO window for everyone else that's waiting in 0:19:14.400 --> 0:19:14.879 the wings. 0:19:15.359 --> 0:19:17.800 I think a lot of private companies have been waiting 0:19:17.880 --> 0:19:20.640 for the hero company to come out and have this 0:19:21.200 --> 0:19:25.600 vastly successful IPO and welcome others to follow. Obviously, we 0:19:25.720 --> 0:19:28.920 haven't seen that yet. So the companies that are choosing 0:19:29.000 --> 0:19:31.960 to go public now are taking on a bit of 0:19:31.960 --> 0:19:35.080 a leadership role and hoping to play that part. But 0:19:35.200 --> 0:19:38.000 what we're hearing from the heads of NASE and NASDAC 0:19:38.080 --> 0:19:41.359