Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily jay I'm Emily Jang in San Francisco, and this
Speaker 1: is Bloomberg Technology. Coming up in the next hour, Twitter's
Speaker 1: board mounts a poison pill defense against Elon Musk, while
Speaker 1: Musk continues to chaunt them, pointing out that without Jack Dorsey,
Speaker 1: Twitter's board members collectively own almost no shares and if
Speaker 1: his bid succeeds, they won't get a salary. Will have
Speaker 1: all the details as he hints at a hostile takeover. Plus,
Speaker 1: we'll get an inside look at Rivan's factory in Illinois
Speaker 1: and see how the ev maker is trying to combat
Speaker 1: the chip crisis. Later this hour, and it's expected to
Speaker 1: be the busiest wedding season in decades, we'll chat with
Speaker 1: the CEO of Rent the Runway about how all those
Speaker 1: IDUs could mean big business for the fashion platform. Now
Speaker 1: to our top story over the weekend, he sent just
Speaker 1: a tweet with three words love me tender. He could
Speaker 1: have been listening to the iconic Elvis Presley song, or
Speaker 1: could it be a cryptic reference to a potential tender
Speaker 1: offer to Twitter shareholders for control of the company. Friday,
Speaker 1: Twitter's board chose the poison pill defense, adopting a provision
Speaker 1: that would make it harder for Musk to acquire more
Speaker 1: shares and ultimately dilute his steak. Bloomberg's at Ludlow here
Speaker 1: to break it all down. At a lot going on here?
Speaker 1: What's the late twists and turns. It's interesting because the
Speaker 1: seven and a half percent game we saw on Twitter
Speaker 1: shares Monday is the biggest jumps in Tabril fourth, when
Speaker 1: Elon Musk's steak in Twitter was first disclosed. You remember
Speaker 1: it jump on that occasion. The broad psychology around this
Speaker 1: is that we're moving towards an outcome that would be
Speaker 1: more favorable for shareholders. See you talk about the poison
Speaker 1: pill defense. Twitter can issue you shares that investors can
Speaker 1: buy at a discount apart from Musk, anyone trying to
Speaker 1: acquire a state greater than fifteen percent in the company.
Speaker 1: Here's the thing coming me ins my Bloomberg terminal. This
Speaker 1: is the other side of the debate. We're trading at
Speaker 1: around forty five dollars a share. That's the blue line,
Speaker 1: or forty dollars to share I say that's the white line,
Speaker 1: the blue line is the average, and this twelve month
Speaker 1: price target, which is even lower, and that green dot
Speaker 1: on the right hand side of the screen is the
Speaker 1: fifty four dollars twenty cents per share offer that Musk
Speaker 1: currently has on the table, and the thinking is this
Speaker 1: could be lobal. Musk has been tweeting for three days
Speaker 1: about how Twitter's board has a duty to the shareholders
Speaker 1: to consider his bid a f juiciery duty. But the
Speaker 1: other side of that debate is they have a fiduciary
Speaker 1: duty to get the best possible offer for them. We're
Speaker 1: so far away from seventy three dollars a share, which
Speaker 1: is the fifty two week high on the stock, so
Speaker 1: some consideration. Final point two names top of the list
Speaker 1: for fidelity platform right now. Retail investors are buying into
Speaker 1: Tesla and Twitter, and it's in tressing because how many
Speaker 1: tweets has must send in the last few days. And
Speaker 1: some of the school to thow out there is that
Speaker 1: he's trying to get momentum behind a movement, just like
Speaker 1: he's on Tesla getting retail investors on board. Is he
Speaker 1: trying to get those retail investors on board with Twitter
Speaker 1: as well, and all right, thank you. The question now becomes,
Speaker 1: could Musk team up with someone else to make this
Speaker 1: Twitter dream a reality? Bloomberg Intelligence suggests Musk could partner
Speaker 1: with Oracle, for example, in a private equity consourtium that
Speaker 1: includes Toma Bravo to combat Twitter's poison pill, while raising
Speaker 1: the bid ten to fift to about fifty billion dollars.
Speaker 1: The Wall Street Journal is reporting Apollo Globals also considering
Speaker 1: joining in. Bloomberg's Max Chafkin joins us. Now, Max, if
Speaker 1: Ela Musk really wants to do this, what does he
Speaker 1: have to pull off? What does he have to pull
Speaker 1: together in this moment? Well, you have a couple of issues,
Speaker 1: one of which is that, you know, Elon Musk because
Speaker 1: this huge Twitter following, obviously he's able to move markets.
Speaker 1: On the other hand, in order to kind of pull
Speaker 1: together some sort of consortium, you're gonna have to convince
Speaker 1: a bunch of other rich guys, whether it's uh, you know,
Speaker 1: Larry Ellison or whoever, that they want to sign up
Speaker 1: for this wild ride. And pretty much, you know. One
Speaker 1: of the ways that Elon Musk has distinguished himself, of course,
Speaker 1: is by by being the most risk happy of anyone.
Speaker 1: So it's it's a little bit hard to imagine who
Speaker 1: comes together in that consortium and if they're really willing
Speaker 1: to go for it. Now, As someone who's interviewed Elon
Speaker 1: Musk many times over the last couple of decades, masks,
Speaker 1: what's your sense of how serious he is about this
Speaker 1: and marshaling the amount of capital that he would need
Speaker 1: to pull this off? And or do you think he's
Speaker 1: just messing with investors? Well? I think with Musk, you know,
Speaker 1: it's always a little bit of both. Right. If anyone
Speaker 1: watched this, uh, the interview that he did last week
Speaker 1: at the TED conference, you know, you saw that he
Speaker 1: hadn't really thought through a bunch of the kind of
Speaker 1: crucial aspects of what this transaction would be. On the
Speaker 1: other hand, Elon Musk is an incredible marketer. He somebody
Speaker 1: who likes to kind of go where the trends are
Speaker 1: pushing him. So you could sort of see a situation
Speaker 1: where he almost, I don't want to say accidentally, you know,
Speaker 1: winds up owning Twitter, but but where he kind of
Speaker 1: gets carried away by events. And I think, you know,
Speaker 1: if you're a Testlas shareholder, probably the best thing that
Speaker 1: could happen here would be for Musk to not be
Speaker 1: able to buy Twitter, but be able to have just
Speaker 1: a huge, you know, cultural, you know moment, and and
Speaker 1: not get blamed when the deal falls apart elon Musk
Speaker 1: potentially ending up owning Twitter by accident, that's an interesting thought.
Speaker 1: Bloomberg's Max Chafkin as always good to have you. Many
Speaker 1: questions remain about how exactly Musk wants to change Twitter
Speaker 1: if he acquires it, but he's made it clear he
Speaker 1: wants it to look it sound more like a free
Speaker 1: speech town square. Here's what he had to say during
Speaker 1: a Ted talk last week. I think it's very important
Speaker 1: for that would be an inclusive arena for free speech
Speaker 1: where well, yeah, so yeah, um, Twitter has become kind
Speaker 1: of the de facto town square. Um so uh. It's
Speaker 1: just really important that people have the both, uh, the
Speaker 1: reality and the perception, uh, that they are able to
Speaker 1: speak freely within the bounds of the low. To discuss,
Speaker 1: we're joined by Teddy Goff, co founder and partner at Precision,
Speaker 1: a leading strategy and marketing agency, also the former digital
Speaker 1: campaign manager for President Obama. So, Teddy, do you think
Speaker 1: this is a fight over free speech or is it
Speaker 1: something else. Well, I think it's largely a fight over power.
Speaker 1: What I mean by that is, you know, everybody understands
Speaker 1: this is not exactly a matter of free speech in
Speaker 1: the sense that nobody's being thrown into prison for anything
Speaker 1: that they tweet. You know. The important thing I think
Speaker 1: to keep in mind is Twitter and all the social
Speaker 1: platforms are driven by algorithms that determine the likelihood of
Speaker 1: of U seeing this or that post when you log in.
Speaker 1: And the question of who control who writes those algorithms, um,
Speaker 1: you know, is really consequential. So it's not a matter
Speaker 1: so much of um, you know, free speech. Most people
Speaker 1: have the right to tweet whatever it is that they want.
Speaker 1: It's a question of, um, you know, which which tweets
Speaker 1: and posts get out algorithmic promotion and wind up in
Speaker 1: the feeds of millions of people, and which one s don't.
Speaker 1: And I think the view of Musk and obviously this
Speaker 1: is sort of validated by the fact that Donald Trump
Speaker 1: got kicked off Twitter. That's sort of appointed supports his
Speaker 1: point is that these algorithms are written in a way
Speaker 1: that you know, sort of effectively censored conservatives, even those
Speaker 1: who aren't literally kicked off the platform feel that they
Speaker 1: are sort of shadow band or or that there's a
Speaker 1: thumb on the scale preventing their virality. And so I
Speaker 1: think the question how these things are written? Do we
Speaker 1: have transparency into the way these things are written? And
Speaker 1: ultimately you know which tweets you know go viral, which
Speaker 1: one s don't is hugely consequential, and I think that's
Speaker 1: what this is really about. There's also the question of
Speaker 1: whether a free speech to square can really exist on
Speaker 1: the Internet or anywhere. Reneed the rest of the Stanford
Speaker 1: Internet Observatory wrote in The Atlantic, the public square metaphor
Speaker 1: places wholly unrealistic expectations on what social media is or
Speaker 1: should be. It may simply be that when networks grow
Speaker 1: past a certain size, they become unmanageable. I mean, do
Speaker 1: you think Twitter has ever really been a public town square? Well, no,
Speaker 1: because of this reason of algorithms. You know, in a
Speaker 1: public down square, um, you can shout whatever it is
Speaker 1: you want to shout, and the people around you are
Speaker 1: going to hear it. On Twitter, the whole you know,
Speaker 1: mechanic of the of the platform, the whole idea of
Speaker 1: it is your tweet can go out to millions of
Speaker 1: people who didn't make the choice of following you, you know,
Speaker 1: just because um, you know, it gets it starts taking off,
Speaker 1: and then the algorithm boost situ into feeds all around
Speaker 1: the world. So it's really sort of fundamentally unlike a
Speaker 1: town um square, where you know, you're sort of um,
Speaker 1: your reach is sort of limited by the volume of
Speaker 1: your voice. UM. You know, that's obviously not the case
Speaker 1: on Twitter. I do agree that these these platforms have
Speaker 1: all become sort of ungovernable if you just look at
Speaker 1: the um, you know, the empirical reality. Both Democrats and
Speaker 1: Republicans are livid at Twitter. The Republicans are livid that
Speaker 1: Trump and some of his allies got booted. The Democrats
Speaker 1: think that Twitter is the reason Trump and some of
Speaker 1: his allies moved from the fringe to the political mainstream
Speaker 1: in the first place. The same debate obviously happens you know,
Speaker 1: arguably even more um caustically over Facebook. So you know,
Speaker 1: I I think that these platforms play a huge role
Speaker 1: in the discourse of the country. UM. Twitter especially to
Speaker 1: a weird degree, because even though it's smaller than Facebook
Speaker 1: by numbers, it has a disproportionate share of journalists spending
Speaker 1: all day there, and so things sort of make their
Speaker 1: way from Twitter into the nightly news and the local
Speaker 1: news and the daily papers all around the country. And um,
Speaker 1: it is obviously the case that these these questions are
Speaker 1: fundamentally political, and um, you know, the way that these
Speaker 1: platforms have have navigated these questions as obviously uh alienated
Speaker 1: both sides. So the question is, you know, should if
Speaker 1: if if, as you say, Twitter is ungovernable or maybe ungovernable,
Speaker 1: then then then what should happens? You know, it's a
Speaker 1: private company, is the Elon is Elon Musk the answer?
Speaker 1: And if if not Elon Musk, is it? Is it
Speaker 1: a public utility? Is it? Is it something else? Um,
Speaker 1: I personally think it's probably not Elon Musk. You know,
Speaker 1: there's been a lot of um, a lot of people
Speaker 1: mainly Elon Musk, you know, sort of allies and supportae
Speaker 1: of the past couple of days saying hey, look at
Speaker 1: for instance, Bloomberg, look at the Washington Post. The Washington
Speaker 1: Post was bought by Jeff Bezos. There's a really critical
Speaker 1: difference between the Bloomberg Washington Post model and we love
Speaker 1: what Elon Musk is proposing, you know, UM, Bloomberg and
Speaker 1: and bezos don't march into the editorial boards editorial board
Speaker 1: rooms at at at Bloomberg Media and at the Washington
Speaker 1: Post and demanded change in coverage. They pledge not to UM.
Speaker 1: Musk is sort of doing the opposite. He has essentially
Speaker 1: pledged to alter the way that information is shared. And
Speaker 1: this NATed on on Twitter. So there is a question
Speaker 1: of media consolidation. He's obviously not the first billionaire to
Speaker 1: get into the media ownership game, but he's the first
Speaker 1: at least in this you know, sort of cohort to
Speaker 1: do so with an express agenda behind that. And that
Speaker 1: agenda is not UM the sustainment of media or you know,
Speaker 1: public information. It's a it's got a political bent to it.
Speaker 1: So you know, whether Twitter and these other platforms ought
Speaker 1: to be UM regulated as public utilities or not UM
Speaker 1: I think, you know, to me, it's concerning that one individual,
Speaker 1: by the way, it could be a you know, you know,
Speaker 1: I'm a democratic, could be a Democrat want individual to
Speaker 1: take over one of these companies with an express purpose
Speaker 1: of UM changing the way that the group terms of
Speaker 1: service and the algorithm works. Which again is ultimately about
Speaker 1: who controls the discourse and are you know these sort
Speaker 1: of fringe uh physicians able to be disseminated in mainstream
Speaker 1: to millions and millions of people and what that does
Speaker 1: to our politics. So he's basically got an agenda in
Speaker 1: that sense. Um. I think his agenda is uh. It
Speaker 1: might be aligned with the economic incentives of the board
Speaker 1: of the shareholders, but it's probably aligned with the public
Speaker 1: did well. It remains to be seen exactly what his
Speaker 1: agenda is. Teddy Goff, co founder and partner at Precision Strategy,
Speaker 1: is always good to have you back here on the show.
Speaker 1: Coming up, Elon Musk hinting at a hospital. It's hostile takeover,
Speaker 1: but what will really happen. We're gonna have a conversation
Speaker 1: with Stanford professor Curtis mill helped about why this particular
Speaker 1: takeover attempt might matter more than the many others that
Speaker 1: have come before it. This is Bloomberg. Elon Musk set
Speaker 1: he made his best and final offer for Twitter last
Speaker 1: week at forty three billion dollars, but is now hinting
Speaker 1: at a hostile takeover that would involve a tender offer
Speaker 1: backed by other susters I want to bring in Curtis
Speaker 1: mill helped Stanford Law School professor and senior fellow for
Speaker 1: a broader view of this and talk about what's particularly
Speaker 1: notable about this potentially hostile takeover. Professor Millpop, thank you
Speaker 1: so much for joining us. You have studied hostele takeovers
Speaker 1: all over the world. What makes how this is evolving
Speaker 1: here different from what you've seen before? Well, I think
Speaker 1: in terms of the the actual offer itself there, this
Speaker 1: is so far playing out according to a standard playbook
Speaker 1: in the United States of an unsolicited bid for a
Speaker 1: public company followed by the target company's management adopting defensive
Speaker 1: measure of the poison pill. So so far, nothing so
Speaker 1: so special. But when you think about the company that
Speaker 1: is the target here, a social media company, I think
Speaker 1: this is quite unique and it really picks up on
Speaker 1: the conversation you are having with your previous guests about
Speaker 1: who gets to control public discourse in the form of
Speaker 1: these these platforms, and so I think that's very distinct
Speaker 1: of many social media companies and other tech companies have
Speaker 1: adopted dual class capitalization structures, meaning that the founders retained
Speaker 1: control of the enterprise by ownership of stock with super
Speaker 1: voting rights. Twitter did not do that, and now we're
Speaker 1: seeing one of the potential consequences of an unsolicited bid
Speaker 1: for the company. Switch raises a lot of very fascinating
Speaker 1: new new questions that we haven't seen before. It's interesting,
Speaker 1: given how criticized the dual class share structure has been
Speaker 1: at Facebook at Google in terms of potentially giving those
Speaker 1: founders too much power, how likely is it that Twitter's
Speaker 1: poison pill defense will actually work well? So the board
Speaker 1: is instituted the poison pill without shi Older approval, which
Speaker 1: is of course the beauty of the poison pill for
Speaker 1: for US managers. Unlike defensive measures in other parts to
Speaker 1: the world and the uk A in Europe or in Japan,
Speaker 1: where shareholders would have to approve the defensive measure, in
Speaker 1: the United States it's not required, but they will have
Speaker 1: to answer ultimately to the shareholders. They cannot simply sit
Speaker 1: behind the poison pill. They're going to have to justify
Speaker 1: why not letting elon must tender offer go forward is
Speaker 1: in the best interests of the corporation and it's UH
Speaker 1: and its shareholders. But I think that this may lend
Speaker 1: momentum to the movement toward adoption of dual class capitalization structures.
Speaker 1: There already is considerable momentum around this. Many of the
Speaker 1: I p o s in recent years have been founder
Speaker 1: control dual class UH structures. And I think that other
Speaker 1: founders out there who are coming through the through the
Speaker 1: pipeline are going to be looking at this and asking
Speaker 1: themselves whether they want to someday be faced with the
Speaker 1: situation that that the Twitter board is and probably concluding no,
Speaker 1: we we did not. So I think this is going
Speaker 1: to lend, you know, momentum to the controversy over dual
Speaker 1: class talk and the question whether is this actually in
Speaker 1: the best interests of society because these founders can be
Speaker 1: um insulated from short term market pressures, or does this
Speaker 1: just reinforce having a small number of extraordinarily wealthy people
Speaker 1: controlling these incredibly important and powerful platforms. We're looking at
Speaker 1: a graph here of the amount of followers that Musk
Speaker 1: has on Twitter, about a third of the daily active
Speaker 1: users on Twitter overall, a third a third of Twitter's
Speaker 1: daily active users. You know, how does that change the
Speaker 1: equation here quickly? Does that make this you know, UH
Speaker 1: more unfair or gosh, I don't know what the word is,
Speaker 1: but there's something different. Well, I think, just going back
Speaker 1: to the conversation you have with the previous guests, we
Speaker 1: have this anomalous situation which we live in a capitalist society.
Speaker 1: This is a pro for profit firm. The board of
Speaker 1: directors of Twitter is charged with doing what's in the
Speaker 1: best financial interests of the shareholders. And yet we have
Speaker 1: a corporation that is enormously powerful and influential in public
Speaker 1: discourse and in political discourse, uh specifically. So that's a
Speaker 1: very unique situation, and I think that the way this
Speaker 1: plays out is going to have ramifications in Washington, of
Speaker 1: course and elsewhere, because this is not just a garden dry,
Speaker 1: hostile takeover. Curtis Mill helped Stanford Law School professor, thank
Speaker 1: you so much for sharing your perspective with us. Today
Speaker 1: shares a riv and lower today, the electric vehicle maker
Speaker 1: has been hampered by the global chip crisis, but is
Speaker 1: trying to ramp out put Bloomberg's at Ludlow toward Rivan's
Speaker 1: factory in Illinois, with the company's CEO productions ramping up
Speaker 1: here in normal Illinois at Rivan three point three million
Speaker 1: square for e V factory. The company's building three different
Speaker 1: electric vehicles, and it's not easy going. Our biggest challenge
Speaker 1: today really resides around the supply chain. It's a small
Speaker 1: subset of the components in our vehicle, which we do
Speaker 1: have on a constrained basis, and it's limiting the overall
Speaker 1: output for production. A big part of the problem a
Speaker 1: lack of semiconductors. The plant is split up with two
Speaker 1: separate body lines and two separate general assembly lines. One
Speaker 1: fork is dedicated to consumer products. Rivan is focused on
Speaker 1: its battery electric pickup called our one T, but it's
Speaker 1: also working on small volumes of the R one S SUV.
Speaker 1: The other body in general assembly lines are building two
Speaker 1: versions of an electric delivery van for Amazon. But the
Speaker 1: ability to share the core technology backbone between those battery
Speaker 1: pack drive units, network architecture, e SU topology, the electronic stack,
Speaker 1: the perception stack really is what fueled the ability to
Speaker 1: go quickly. We got a behind the scenes look at
Speaker 1: the plant where workers were alongside hundreds of highly automated
Speaker 1: robotic arms. Sheet metal, steel and aluminum is brought in
Speaker 1: as coils. Massive industrial stamps generating huge force shape the
Speaker 1: metal into panels that fitness specific product. The body shop
Speaker 1: fuses all of the panels and structural parts together using
Speaker 1: advanced welding techniques. Then it's to a high tech paint
Speaker 1: shop where multiple coats are applied. Next, we're off to
Speaker 1: general assembly, where the top hat or body is married
Speaker 1: with the skateboard, which includes the motors, battery pack, and telematics.
Speaker 1: Moving along the line, everything from doors and windshields to
Speaker 1: the steering wheel and entertainment systems are added. After final
Speaker 1: tweaks and quality checks, it's off to the lot to
Speaker 1: await delivery. Rivim forecasts it will build twenty five th
Speaker 1: dvs this year across the two consumer models and ten
Speaker 1: thousand vans for Amazon. It built little more than t
Speaker 1: v s in Q one. Despite the challenges, the production
Speaker 1: rate is improving. It's incredibly exciting to see records being
Speaker 1: set in terms of the output or the production rate.
Speaker 1: Things said almost on a daily basis. To meet that
Speaker 1: demand long term, Rivian plans a second five billion dollar
Speaker 1: plant in Georgia and hopes lessons learned in Illinois will
Speaker 1: help it hit the ground running. Ed Ludlow Bloomberg News
Speaker 1: in normal Illinois are Ed Ludlow there well Gladet University
Speaker 1: an Educational Institution for the Deaf and Heart of Hearing
Speaker 1: is getting the commencement speech of its dreams. Apple CEO
Speaker 1: Tim Cook has agreed to deliver the speech after a
Speaker 1: student invited him via Twitter. In American sign language, he
Speaker 1: describes how blown away students across campus were by Apple's
Speaker 1: original movie Coda. Cook will speak at Gladet on Friday.
Speaker 1: Welcome back to Bloomberg Technology. I'm emily changing in San Francisco.
Speaker 1: Let's get back to our top story. Elon Musk trying
Speaker 1: to buy Twitter, the world's richest man. Twee in his
Speaker 1: latest salvo that if he successfully acquired Twitter, the board
Speaker 1: salary would be zero dollars. For more on the most
Speaker 1: recent twist and turns are at Ludlow back with us,
Speaker 1: and that's not all. Yeah, it's it's an interesting tweet
Speaker 1: to make. And he's been digging at this idea about
Speaker 1: fiduciary duty that Twitter's board has to present his offer
Speaker 1: to existing shareholders. By the way, we're looking again at
Speaker 1: that seven and a half cent gain on Monday, biggest
Speaker 1: jump since April four, when Mosques stake in Twitter the
Speaker 1: original state was first disclosed. And it's interesting because he's
Speaker 1: trying to make this about being the right thing in
Speaker 1: the interest of shareholders. And his additional point is the
Speaker 1: board in not passing on that offer a and not
Speaker 1: fulfilling their fiduciary duty. But also they don't have the
Speaker 1: same vested interest as shareholders. Why he keeps poking at
Speaker 1: the number of shares or the volume of shares that
Speaker 1: Twitter's board has. If you strip out Jack Dorsey, who
Speaker 1: steps down from the board anyway later this year's he's
Speaker 1: saying that they can't have economic interests the line with
Speaker 1: shareholders because they own a negligible amount of stock. And
Speaker 1: luckily for you have I had a few hours of
Speaker 1: free time today, so we crunch the numbers. Thank you, ed,
Speaker 1: And this is the point, right, These are negligible volumes
Speaker 1: of shares that each board member has. Most of the
Speaker 1: board members on Twitter's board are paid a salary for
Speaker 1: what is essentially a part time job. It ranges from
Speaker 1: say two hundred thousand, three hundred thousand dollars, and they
Speaker 1: have negligible amounts of shares. Even in the case, for example,
Speaker 1: let's pick out Omid Cordistani has four thousand shares, that's
Speaker 1: only zero point zero point zero point zero two of
Speaker 1: the flow, and so he keeps hammering home this idea,
Speaker 1: do what's in the best interest of shareholders, and his
Speaker 1: main argument appears to be because they don't hold that
Speaker 1: much stock on the board, they're not aligned with those interests, right,
Speaker 1: And of course they it's still got Jack Dorsey on
Speaker 1: the board. Who's got it been out almost a three
Speaker 1: percent stick. But that's only un till may thank you.
Speaker 1: I want to continue this conversation about Twitter's board and
Speaker 1: what the board could do to stop our potential takeover
Speaker 1: by Elon Musk, and what Musk needs to do if
Speaker 1: he's really serious. I'm joined out by Andy Freeman, co
Speaker 1: had of the Shareholder Activism practice at Olshan from Uloski. Any.
Speaker 1: First of all, how much does it matter that Twitter's
Speaker 1: board members without Jack Dorsey don't collectively own a large
Speaker 1: number of shares? Is that unusual? Yeah, Hiamily, thanks for
Speaker 1: having me on. You know, it's it's not too unusual.
Speaker 1: And that line of arguing is just quite frankly, not
Speaker 1: going to get Musk very far. The board is protected
Speaker 1: by the Broadly Way and the differential aspects of Delaware's
Speaker 1: Business Judgment Rule UM so going forward with a fiduciary
Speaker 1: duty based argument, when you have a company and a
Speaker 1: board like Twitters, which I view is you know, highly defended,
Speaker 1: the it's a staunch defensive profile. You have a company here,
Speaker 1: and I look at a hundred or so public companies
Speaker 1: a year to assess the pathway to a hostile bid.
Speaker 1: You know, looking at Twitter, they have a classified board
Speaker 1: structure in place. Yes, they're looking to potentially declassified, but
Speaker 1: that's a three to three year out plan. Uh So
Speaker 1: for now they're they're protected in the way that they
Speaker 1: only have one third, roughly one third of their board
Speaker 1: up for election this year, and in fact that number
Speaker 1: this year is just two directors out of the what
Speaker 1: will be a ten member board. You need majority control
Speaker 1: to uh forced through a hostile bid like Musk's here
Speaker 1: and um, when you think about Twitter's profile again, shareholders
Speaker 1: can't call special meetings, they can't act by consent, they
Speaker 1: can't remove directors without cause. He needs to somehow find
Speaker 1: a way to give shareholders a voice. We've been hearing
Speaker 1: that through his Twitter feed over the past several days,
Speaker 1: and you know, there it's starts saying he doesn't have
Speaker 1: a pathway. He has a strategy here, and we'll see
Speaker 1: if he employs it. So let's talk about that. If
Speaker 1: he really wants to get this done. If Elon Musk
Speaker 1: really wants to get this done, what does he need
Speaker 1: to do? In my view, it's it's a one two
Speaker 1: punch strategy. He launches a hostile tender offer, and knowing
Speaker 1: Musk his pension for four twenty cannabis jokes, why not
Speaker 1: Wednesday for twenty launching off normal tender offer and combine
Speaker 1: that simultaneously with launching a proxy strategy. And it's a
Speaker 1: little bit of an out of the box strategy. But
Speaker 1: Musk is an out of the box guy. Uh. It's
Speaker 1: called a withhold proxy fight. And what he would do
Speaker 1: He missed the vote on nominating for this year. Uh,
Speaker 1: that ship sailed late in late February. So those two candidates,
Speaker 1: he can't nominate for those seats himself. What he can
Speaker 1: do is run a full blown proxy fight seeking to
Speaker 1: ensure that those two directors do not get a majority
Speaker 1: of the votes cast at the annual meeting. Importantly, what
Speaker 1: it does is it gives him a platform for a
Speaker 1: shareholder referendum on his offer. He uses those two directors
Speaker 1: who would be in the what I call the firing
Speaker 1: line in terms of Igan Durban and Patrick Pischett and
Speaker 1: puts the full weight of the pressure on their election
Speaker 1: in order to try to prevent them from from receiving
Speaker 1: the votes they need to be elected, and that would
Speaker 1: be the way that shareholders can have a voice. So
Speaker 1: how likely is it that he can pull off a
Speaker 1: one two punch or would this require more punches than
Speaker 1: Elon Musk has hands. It's it's gonna look the board,
Speaker 1: the way the board is situated and the way it's
Speaker 1: heavily guarded, the way I see kind of to give
Speaker 1: it a Star Wars analogy, the board right now is
Speaker 1: sitting there at like the Death Star with the force
Speaker 1: field protection of it's it's heavily defended. If the board
Speaker 1: wants to sit back and just say no and do
Speaker 1: a resistant, robust strategy for twelve to fourteen months, they
Speaker 1: can do just that. But that's not to say must
Speaker 1: can't mount pressure and he can do it through this
Speaker 1: withhold strategy. But that's just a small bite at the
Speaker 1: apple in my view. The really big bite at the
Speaker 1: apple comes next year at the annual meeting. Even though
Speaker 1: the facto majority control won't be up. What you do,
Speaker 1: have our four directors out of the ten up in
Speaker 1: with two of them being biggas Uh, the CEO and
Speaker 1: the chairman, so you can get effective control in three.
Speaker 1: I know it's nobody really wants to wait that long.
Speaker 1: But what you do is you start to You start
Speaker 1: to chip away at them. You keep the pressure on.
Speaker 1: You run the proxy fight this year. You try to
Speaker 1: build and mobilize a the withhold strategy to reject the
Speaker 1: two directors this year. And you see where that gets you.
Speaker 1: Maybe it's enough to move the needle and the board
Speaker 1: sees the writing on the wall and know that they're
Speaker 1: going to face the music soon enough. All right, love
Speaker 1: all the metaphors from the gloves to the death star.
Speaker 1: Andy Freeman, co ed of the share Older Actives in
Speaker 1: practice at Ocean from Wolowski, thank you so much. As
Speaker 1: we were talking, the trial date was set for those
Speaker 1: Tesla investors suing over go private tweet that Elon musk
Speaker 1: Uh sent all those years ago, still making ways. That
Speaker 1: trial now set for January sevent so early next year,
Speaker 1: come up, will we see a crypto based social network
Speaker 1: or is it too early? We're gonna talk about that
Speaker 1: and much more with Mercedes Bent of Light Speed Venture
Speaker 1: Partners well discuss all things consumer, crypto, n f T
Speaker 1: S and more. And that is next. This is Bloomberg
Speaker 1: Crypto market swings continuous. Bitcoin drops to its lowest level
Speaker 1: in more than a month, along with other digital assets tumbling.
Speaker 1: Our crypto contributortional I Bossic here with more snale. How
Speaker 1: long is this going to keep up? It's a great
Speaker 1: question here because we did see cryptocurrencies drop. We saw
Speaker 1: Bitcoin dropped about thirty eight thousand, five hundred and eighty
Speaker 1: at some point today. But at the other hand, we
Speaker 1: are seeing it rebound. We have it now above forty
Speaker 1: almost forty one thousand, really volatile here, Emily. But the
Speaker 1: question here is twofold one. What is going to be
Speaker 1: the next catalyst to help push bitcoin higher because right
Speaker 1: now it is staying within this tight range. And the
Speaker 1: second question is kind of get much lower. You do
Speaker 1: have some strategists like at twenty two V research that
Speaker 1: these you can get significantly lower down to the thirty levels.
Speaker 1: So the question is who is right? And the question
Speaker 1: is also to what extent does this depend on other factors?
Speaker 1: As risk aversion starts to be more volatile and broader markets. Alright, Shnali,
Speaker 1: thanks so much. Stay with us as we move onto
Speaker 1: our next topic, and that is crypto communication. That is
Speaker 1: the subject of musk discussion with Elon Musk trying to
Speaker 1: buy Twitter to to to talk about that and more.
Speaker 1: I want to bring in Mercedes Bent partner at light
Speaker 1: Speed Venture Partners and Mercedes. As we know, there's a
Speaker 1: huge crypto community on Twitter, and I'm curious what you
Speaker 1: think Musk sort of butting in here, potentially even making
Speaker 1: a hostile takeover or attempting a hostile takeover, what having
Speaker 1: Musk more involved in Twitter could mean for the crypto community.
Speaker 1: The crypto community is extremely fond of Elon Musk, and
Speaker 1: he in some ways I think is lead agent amongst
Speaker 1: the believer crowd, and I think that if he were
Speaker 1: to become more involved in the community. I certainly think
Speaker 1: there's been a lot of speculation around whether that would
Speaker 1: mean a more decentralized messaging platform, whether the you know,
Speaker 1: a centralized entity is necessarily the best. There's a lot
Speaker 1: of talk about what type of speech would be allowed. Um,
Speaker 1: but I believe the crypto enthusiasts to be extremely, extremely happy.
Speaker 1: So much of the conversation has been around cryptocurrencies and
Speaker 1: payments and the economy and assets and investing. Twitter does
Speaker 1: allow for some of this through the Lightning network. How
Speaker 1: then does social media and commerce start to merge. I
Speaker 1: think this is one of the big areas that has
Speaker 1: been not fully realized yet in the crypto space, is
Speaker 1: a social network that is entirely crypto neated. And I
Speaker 1: think there's a couple of different ways that it could
Speaker 1: come about. I think, as as you're mentioning messaging, if
Speaker 1: we think about a crypto native messaging solution, whether that
Speaker 1: is um happenings through an existing messaging network or sport,
Speaker 1: there's a lot of really interesting players saying, hey, how
Speaker 1: do you message somebody who has a wallet that you
Speaker 1: can see there's really interesting stuff in it. You know,
Speaker 1: you might share some affinities or identities, but you don't
Speaker 1: have no way to contact them. So there needs to
Speaker 1: be a core messaging infra layer of both the application
Speaker 1: and infra layer to to kind of solve this. Mercedes,
Speaker 1: talk to us about what's happening on the consumer front
Speaker 1: when it comes to cryptocurrency. Obviously, we hear so much
Speaker 1: about n F t s, and for so many people
Speaker 1: it's just should I buy bitcoin or not? What do
Speaker 1: you think are the main trends They're really going to
Speaker 1: define the consumer side of the market this year. I
Speaker 1: think one of the really big areas that there was
Speaker 1: a lot of talk about last year but continues to
Speaker 1: be this year is DOW tooling DOWS to centralize. Autonomous
Speaker 1: organizations are a new type of entity where people form
Speaker 1: around an interest or a purpose. There's the Ukrainian Down,
Speaker 1: there's the Climate Dows, there's DOWS focused on sports where
Speaker 1: investors in down like companies that are not fully dows,
Speaker 1: the companies like fan controlled football as well. And we
Speaker 1: think that these organization types are going to be a
Speaker 1: really popular way for people to collectively organize and vote
Speaker 1: and act together on the interest area that they care about.
Speaker 1: And so I think that DOWS and really need right
Speaker 1: now a discovery layer and an aggregation layer to say, hey,
Speaker 1: here's all these interest areas you might have. You can
Speaker 1: find them and participate in these communities with tokens and
Speaker 1: actually put your money where you're about this. So I
Speaker 1: think next you know, we might see dows replacing even
Speaker 1: Facebook groups in the future. Yeah, it's fascinating. I mean,
Speaker 1: what other applications of dows do you see really taking
Speaker 1: off in the next year. We've seen fundraising for Ukraine,
Speaker 1: we've seen investing, we've seen investing in n f t s.
Speaker 1: But what's the next phase. It's a great question. I
Speaker 1: wish I had the crystal ball. I think that we're
Speaker 1: going to continue to see people say, hey, you're invested,
Speaker 1: We're interested in doing this collective action. It might be
Speaker 1: investment clubs. This is a big one that we're seeing
Speaker 1: companies like Syndicate and are, you know, putting together groups
Speaker 1: and saying you can invest together. It might be I mean,
Speaker 1: I'm a venture capitalist, but it might also be an
Speaker 1: alternative to funding. Think about angel list and other crowdfunding networks.
Speaker 1: That one is a really big one that I think
Speaker 1: is going to be on the rise later this year.
Speaker 1: Mercedes has been so much to watch partner at light
Speaker 1: Speed Venture Partners. Thank you for joining us along with
Speaker 1: Lumberg Shinali Bask We're on the cost of one of
Speaker 1: the busiest wedding seasons in forty years. As life continued
Speaker 1: to return to normal post pandemic, fashion rental platform rent
Speaker 1: the Runway posted its fourth quarter earnings last week, and
Speaker 1: while they saw revenue grow more than from last year,
Speaker 1: the company is still reported in that loss that but
Speaker 1: it was narrow were than expected. Joining me now, CEO,
Speaker 1: Jen him Engen, great to have you back with us. Look,
Speaker 1: you know you've been telling the story since Rent the
Speaker 1: Runway went public and unfortunately it seems like many investors
Speaker 1: aren't buying it. You have shares down more than sevent
Speaker 1: um since the I p O. Why do you think
Speaker 1: that still is? Well? First of all, we're so proud
Speaker 1: of our Q four results. We beat on the top
Speaker 1: line in the bottom line, and I think one for
Speaker 1: your really one for us showed the resilience of our
Speaker 1: business model through a year that was anything but normal.
Speaker 1: And now we're entering into one of the best macro
Speaker 1: environments ever for Rental and we're excited to have the
Speaker 1: investor community watch us grow. So let's talk about the
Speaker 1: boon for weddings this year. What kind of an impact
Speaker 1: do you think that will have on the business. It
Speaker 1: really drives cost efficient customer acquisition for us. So we've
Speaker 1: seen that people come to Rent the Runway because have
Speaker 1: an upcoming event and then we're able to give them
Speaker 1: an incredible experience and convert them into kind of an
Speaker 1: everyday subscriber. So what it does is that the growth
Speaker 1: this year and events builds our business not only for
Speaker 1: two and we gave guidance oft revenue growth for this year,
Speaker 1: but it also builds our customer funnel for years to come.
Speaker 1: So this is just incredible for our business all around.
Speaker 1: That said, you still got investors out there who think
Speaker 1: costs are are are still too high, that it's going
Speaker 1: to be difficult to turn a profit. You say, rent
Speaker 1: the runway will be profitable. What is the strategy? So
Speaker 1: we in our last investor call addressed profitability. We can
Speaker 1: get to profitability with the cash that we currently have.
Speaker 1: We gave the number of average subscribers three thousand subscribers
Speaker 1: were at positive free cash flow. We're managing the business
Speaker 1: to that positive free cash flow. We gave a target
Speaker 1: that we're gonna be a just e bit of profitable
Speaker 1: within the next three to five quarters. And as you
Speaker 1: can see, our gross margins are just a even of
Speaker 1: margins and our free cash flow margins have been growing
Speaker 1: quarter of a quarter and as revenue has been growing
Speaker 1: and kind of returning to the business we have incredible
Speaker 1: operating leverage because this is a business with a lot
Speaker 1: of fixed costs. We've built that offe space for a
Speaker 1: subscriber base that can be much larger, and you'll see
Speaker 1: it be much larger this year. So here's the question,
Speaker 1: is address for you know, five weddings this year enough
Speaker 1: to convert those users into long term paying subscribers. Well
Speaker 1: fift of our subscribers are former customers, so we've done
Speaker 1: a great job historically at converting those one time renders
Speaker 1: into subscribers. We're doing an even more sophisticated job this
Speaker 1: year at positioning subscription from the get go as a
Speaker 1: cost efficient way to get dressed for multiple events, because
Speaker 1: we know that it's not just the two point six
Speaker 1: million weddings. That means two point six million rehearsaled inner
Speaker 1: and bachelorette parties and Sunday brunches and honeymoons and gallas.
Speaker 1: So we're really trying to leverage this momentum in the
Speaker 1: macro environment to show people that there's a better way.
Speaker 1: And then remember that the cost of clothing has gone
Speaker 1: up year over the year, which means the value proposition
Speaker 1: of renting becomes even higher. But could this boon and
Speaker 1: weddings be temporary? What happens next year? What are the
Speaker 1: trends next year if it's not um a wedding bonanza. Well,
Speaker 1: our business, you know, is built on way more than
Speaker 1: just parties. So seventent of how people rent is for
Speaker 1: their everyday life, for going to work, for casual occasions.
Speaker 1: All rent the Runway needs in order to grow is
Speaker 1: an environment where we're not sheltered at home. So we're
Speaker 1: so encouraged by the macro environment where people are just
Speaker 1: returning to normal, and that means they're returning to rent
Speaker 1: the runway. What weddings are this year are just an
Speaker 1: accelerant that will bring millions of new customer awareness into
Speaker 1: the brand and we're then able to convert them again
Speaker 1: for many years to come. So how are our conversations
Speaker 1: with investors going? You know, now that you have to
Speaker 1: answer to these public market investors instead of venture capitalists.
Speaker 1: What do you think it is that they still don't
Speaker 1: appreciate about the story? Well, I think that we've had
Speaker 1: a lot less time to educate the investor market than
Speaker 1: we did in the private markets. Remember we only went
Speaker 1: public in Q four, and I think that this year
Speaker 1: is going to be a year where we can show
Speaker 1: progression in all of our margins, which can we can
Speaker 1: show very strong revenue growth this year. We've given strong
Speaker 1: guidance against Q one and against the full year, and
Speaker 1: I think that it's all about building a track record.
Speaker 1: We don't expect things to change overnight. We want people
Speaker 1: to watch us, to be engaged with this brand, and
Speaker 1: we're really excited to show people what we can do.
Speaker 1: So do you think that share price is going to
Speaker 1: turn around? I think it will all right. Paid the
Speaker 1: picture for the next year, we say equation and the
Speaker 1: macro environment that we're facing. I mean the picture for
Speaker 1: the next year is that we're going to have a
Speaker 1: revenue base that enables us to drive the business towards
Speaker 1: adjusted the bit of profitability. We're going to continue to
Speaker 1: make the right choices to build a business for the
Speaker 1: long term, which means increasing our subscriber engagement, which drives
Speaker 1: higher our crew over time, which brings customers into the brand.
Speaker 1: We're making it easier to find clothing that fits you
Speaker 1: that you love. So I think that this is really
Speaker 1: the beginning of the next chapter of our business and
Speaker 1: really excited to outline for investors, this very clear path
Speaker 1: to profitability that we have, all right, Jennifer Hyman, CEO
Speaker 1: of Rent the Runway, thank you as always for stopping by.
Speaker 1: And that does it for this edition of Bloomberg Technology.
Speaker 1: Stay with us all week when we break now Big
Speaker 1: Tech Earnings kicking off with Netflix tomorrow andres Wanston, TransUnion
Speaker 1: Senior Vice President will be joining us to discuss. And
Speaker 1: don't forget to check out our new podcasts. You can
Speaker 1: find it on the terminal, Apple, Spotify, wherever you get
Speaker 1: your podcasts. I'm Emily Changing in San Francisco. This is
Speaker 1: Blueberg