WEBVTT - Microsoft and Alphabet's AI Struggle, Musk's Pay Package 0:00:01.560 --> 0:00:04.880 From the Heart where Innovations of Money and Power Collie 0:00:05.120 --> 0:00:09.840 in Silicon Valley, NBN. This is Bloomberg Technology with Caroline 0:00:09.920 --> 0:00:10.680 Hyde and Ed. 0:00:10.720 --> 0:00:27.560 Ludlow and Plaine Hyde at Bloomberg's World headquarters in New York. 0:00:28.000 --> 0:00:31.800 And I'm Ed Lovelow in San Francis. This is Bloomberg Technology. 0:00:31.400 --> 0:00:35.720 Coming up, Microsoft, Alphabet amdo they struggle to meet high 0:00:35.800 --> 0:00:37.280 AI expectations? 0:00:37.479 --> 0:00:39.080 Will break down the earning supports and. 0:00:39.080 --> 0:00:42.000 Discuss just how these big tech chants can prove themselves 0:00:42.080 --> 0:00:42.640 down the road. 0:00:44.040 --> 0:00:47.479 Plus the fifty five billion dollar question, should Musk's payday 0:00:47.800 --> 0:00:48.360 go away? 0:00:48.440 --> 0:00:49.000 At Delaware? 0:00:49.040 --> 0:00:53.240 Judge thinks so and as voided the Tesla's CEOs compensation package. 0:00:53.360 --> 0:00:56.920 We speak to the lawyer that beat Musk in court and. 0:00:56.880 --> 0:00:59.640 The heads of five of the largest social media platforms 0:01:00.120 --> 0:01:03.600 for Congress today testifying about what their companies are doing 0:01:03.840 --> 0:01:05.640 to keep kids safe online. 0:01:05.840 --> 0:01:06.720 We're live from DC. 0:01:07.040 --> 0:01:10.319 Later in the hour, the three big AI names have 0:01:10.440 --> 0:01:13.679 reported their earnings. Get right to AMD it is concerned 0:01:13.720 --> 0:01:16.479 about their outlook for the current period and a lack 0:01:16.520 --> 0:01:19.480 of rebound in end markets and echo from what we 0:01:19.560 --> 0:01:22.000 heard with Intel, and at the same time, their AI 0:01:22.120 --> 0:01:25.120 accelerator the MI three hundred ramps really well in the 0:01:25.200 --> 0:01:28.160 quarter gone, and they exceeded that guidance they'd given us 0:01:28.160 --> 0:01:30.480 that there will be a four hundred million dollar contribution 0:01:30.560 --> 0:01:33.800 to revenues from the three hundred. So what's going on here? 0:01:33.800 --> 0:01:36.560 Because the stock is down. Later today we will speak 0:01:36.600 --> 0:01:39.480 to Lisa Sue, the CEO AMD, and work out what 0:01:39.520 --> 0:01:40.160 the AI. 0:01:39.959 --> 0:01:40.640 Story is here. 0:01:40.720 --> 0:01:43.880 Similarly with Alphabet parent of Google, the markets zeroed in 0:01:43.880 --> 0:01:46.600 on the miss in the core search business, but also 0:01:46.640 --> 0:01:50.880 a worry about margins. Interesting because the cloud outperformed. If 0:01:50.880 --> 0:01:53.080 you look at operating in club for the cloud in 0:01:53.120 --> 0:01:55.840 the quarter gone, double what the street was looking for. 0:01:56.000 --> 0:01:57.960 And when I spoke to Ruth pro actually said very 0:01:57.960 --> 0:02:01.280 matter of factly, there is a contryution from generative AI 0:02:01.600 --> 0:02:03.880 to what's happening in cloud, as well as our efforts 0:02:03.960 --> 0:02:04.800 to cut costs. 0:02:05.240 --> 0:02:06.800 Perhaps the winner of the three. 0:02:07.120 --> 0:02:11.200 Microsoft growth in the Azure unit thirty percent year on year, 0:02:11.360 --> 0:02:15.639 up sequentially from the prior quarter. A six percent contribution 0:02:16.040 --> 0:02:19.040 to growth in cloud from AI, according to the CFO 0:02:19.440 --> 0:02:22.360 Amy Hood in an interview at Bloomberg. But we're down 0:02:22.440 --> 0:02:25.400 one point two percent. This was a high high bar quarter. 0:02:25.760 --> 0:02:28.280 We knew what Microsoft had invested. We wanted to see 0:02:28.320 --> 0:02:31.040 evidence that we got a boost in sales on software 0:02:31.200 --> 0:02:33.760 and a boost in sales on cloud, and we got that, 0:02:34.120 --> 0:02:36.560 but the market had very high expectations. 0:02:36.600 --> 0:02:39.200 Caroline, I mean to have cloud revenues up twenty four 0:02:39.240 --> 0:02:41.320 percent year on year, and that's still not meet those 0:02:41.400 --> 0:02:44.080 lofty goals. Let's just talk to an investor in really 0:02:44.120 --> 0:02:47.079 what her reaction is, Iako Yashioka, where police of Say 0:02:47.160 --> 0:02:50.440 joins our senior portfolio consultant Wealth Enhancement Group holding both 0:02:50.480 --> 0:02:53.720 Google and Microsoft, among many other names, and I go, 0:02:54.960 --> 0:02:58.360 the overall feeling is that these companies delivered, but not 0:02:58.880 --> 0:03:01.960 enough to meet the anticipation. Do you think let's talk 0:03:01.960 --> 0:03:05.400 about Microsoft first and foremost that detail. We got the 0:03:05.440 --> 0:03:08.440 six percent increase in revenue because of AI. Was it 0:03:08.480 --> 0:03:10.360 just that she wasn't able to paint it forward for 0:03:10.400 --> 0:03:12.040 this coming quarter that disappointed? 0:03:13.440 --> 0:03:16.160 I don't necessarily think so, and thanks again for having 0:03:16.240 --> 0:03:21.280 me today. You know, these stocks were up substantially year 0:03:21.320 --> 0:03:25.040 to date, up over eight percent. You know, Microsoft itself 0:03:25.160 --> 0:03:29.480 was up over our near seventies percent on a trailing 0:03:29.480 --> 0:03:33.480 twelve month basis. So expectations have been by sort of 0:03:33.520 --> 0:03:36.880 going into this quarter. And you know, for Microsoft they 0:03:36.920 --> 0:03:40.120 were able to at least quantify the impact of AI 0:03:40.960 --> 0:03:45.760 on the growth of cloud, unlike Alphabet or Google, which 0:03:45.800 --> 0:03:48.040 I think is part of the differential here in terms 0:03:48.040 --> 0:03:50.920 of why the stocks are behaving as they are. 0:03:51.280 --> 0:03:55.640 Yeah, Alphabet less detail on really what contribution AI will have, 0:03:55.760 --> 0:03:59.320 particularly on search IAGA. What about the capital expenditure that 0:03:59.360 --> 0:04:01.320 both companies are having to give it the moment, the 0:04:01.400 --> 0:04:04.280 investment to bring about the AI process. 0:04:04.400 --> 0:04:05.200 Is it too much? 0:04:06.720 --> 0:04:08.680 I don't know if it's too much, it is definitely 0:04:08.680 --> 0:04:11.840 what is needed. I mean, Nvidia has talked about the 0:04:11.880 --> 0:04:16.640 pricing of their chips in both Alphabet and Microsoft talked 0:04:16.640 --> 0:04:21.080 about cappex increasing substantially in twenty twenty four relative to 0:04:21.120 --> 0:04:23.599 twenty twenty three, and so that will be an extra 0:04:23.680 --> 0:04:27.760 spend by both of these into data centers and servers, 0:04:28.160 --> 0:04:32.840 and that's going to help build out the infrastructure in 0:04:32.880 --> 0:04:36.400 which AI and all the applications can be built on. 0:04:38.400 --> 0:04:42.040 Erco Dan Ives at Webbush has this note out that 0:04:42.120 --> 0:04:45.360 Setia and Adella delivered a masterpiece that should be hung 0:04:45.480 --> 0:04:48.159 up in the loover. The stock is down one point 0:04:48.160 --> 0:04:52.240 two percent. Expectations were high as I went on about earlier. 0:04:52.240 --> 0:04:54.120 I guess the question from someone like you that holds 0:04:54.120 --> 0:04:57.920 a decent chunk of Microsoft shares is did you see 0:04:58.080 --> 0:05:01.760 enough in the financial to keep buying into the stock 0:05:02.080 --> 0:05:04.320 long term and believe in the AI story? 0:05:06.040 --> 0:05:09.239 I think in the near term, and you know, we can. 0:05:09.360 --> 0:05:11.720 We obviously expected a little bit of a pullback. 0:05:11.760 --> 0:05:12.520 As I said, the. 0:05:12.480 --> 0:05:17.200 Stocks really reflected a lot of high expectations, and so 0:05:17.640 --> 0:05:21.160 you know, with any pullback there is an opportunity. I 0:05:21.240 --> 0:05:24.440 think it would be nice to have the stock pullback 0:05:24.520 --> 0:05:27.200 additionally in order to have you know. 0:05:27.279 --> 0:05:28.279 New entry points. 0:05:29.000 --> 0:05:31.359 And you know, for most people, I think Microsoft is 0:05:31.880 --> 0:05:34.560 already at core position, So we just have to let 0:05:34.560 --> 0:05:37.080 the dust settle on the stock, at least in the 0:05:37.120 --> 0:05:38.760 near term. 0:05:39.480 --> 0:05:42.080 Alphabet pairent of Google is down severely, and we're trying 0:05:42.120 --> 0:05:45.800 to understand what the focus is here. Initially it seemed 0:05:45.800 --> 0:05:48.719 like the anxiety was the core search business. Then people 0:05:48.760 --> 0:05:51.560 started talking about margins. But if you take into account 0:05:51.760 --> 0:05:55.159 the one time charge from headcount reduction and cost margins 0:05:55.200 --> 0:05:58.120 look a bit better. And on an operating income basis, 0:05:58.160 --> 0:06:01.000 the clouds did great. You know, they're saying, well, we 0:06:01.080 --> 0:06:03.880 think jenn Ai is contributing here. Why are they not 0:06:03.920 --> 0:06:05.640 getting credit for that cloud story? 0:06:06.839 --> 0:06:07.119 Sure? 0:06:07.160 --> 0:06:11.000 And you know they focused on operating income efficiencies over 0:06:11.000 --> 0:06:12.839 the last year, and I think that's been a great 0:06:12.880 --> 0:06:17.440 story for Alphabet, and you know, they've delivered on those promises. 0:06:17.760 --> 0:06:21.080 I think the issue with Alphabet is really just getting 0:06:21.080 --> 0:06:24.960 out there and telling the story and quantifying the impact 0:06:25.040 --> 0:06:28.440 of AI into the cloud. I mean, and you know, 0:06:28.839 --> 0:06:33.039 Microsoft talked about how there was a six percent contribution 0:06:33.640 --> 0:06:36.520 and despite the spend that they are doing in order 0:06:36.560 --> 0:06:39.960 to broaden out that infrastructure, they also saw some leverage 0:06:40.000 --> 0:06:43.360 in their operating income there. So we'd love to see 0:06:43.400 --> 0:06:46.920 more detail from Alphabet in terms of how that's going 0:06:46.960 --> 0:06:50.160 to come about. Perhaps we'll get that once they launched 0:06:50.760 --> 0:06:54.560 Gemini Ultra later this year, which will you know, really 0:06:55.040 --> 0:06:59.279 impact Alphabet's Google Cloud division. 0:07:00.640 --> 0:07:04.479 The k Senior portfolio consultant at Wealth Enhancement. Great to 0:07:04.480 --> 0:07:06.520 have you on the show. Across so many earnings. 0:07:06.560 --> 0:07:06.919 Thank you. 0:07:06.960 --> 0:07:09.920 The next earnings on the doc is a MD let's 0:07:09.920 --> 0:07:12.640 break down those results with Pierre Faragu, heads up the 0:07:12.640 --> 0:07:16.320 Global Technology Infrastructure Research team at New Street Research. 0:07:16.360 --> 0:07:17.800 Per great to see you. 0:07:17.800 --> 0:07:21.520 You know, for me, the story on AMD is which 0:07:21.600 --> 0:07:24.520 is more concerning or important to the market, right the 0:07:24.640 --> 0:07:27.720 outlook for the current period, which makes us worried about 0:07:28.000 --> 0:07:31.200 broad end markets or the progress they made on mi 0:07:31.280 --> 0:07:33.640 I three hundred, because they showed a lot of progress. 0:07:33.640 --> 0:07:34.480 Where's your head at? 0:07:36.360 --> 0:07:39.760 Well, if you look at the stoke over like let's 0:07:39.800 --> 0:07:43.400 say a two three year horizon, very clearly, the way 0:07:43.480 --> 0:07:45.520 we get it is as a CPU business is going 0:07:45.560 --> 0:07:49.040 to stabilize until he's coming back. That market is going 0:07:49.080 --> 0:07:52.080 to balance sowood and really aimed. You managed to build 0:07:52.120 --> 0:07:55.240 over the last five years of very sustainable challenge acquisition, 0:07:55.360 --> 0:07:57.440 so not much is going to happen, but it's. 0:07:57.280 --> 0:07:58.800 A very strong, very solid base. 0:07:59.600 --> 0:08:05.080 Then, like the embedded part of the business, exiling start 0:08:05.120 --> 0:08:08.000 of the business is very cyclical, and it's going down 0:08:08.080 --> 0:08:09.680 at the moment, it's three coming down. 0:08:09.720 --> 0:08:12.000 It hasn't reached the track yet, but the truff. 0:08:11.840 --> 0:08:14.200 Is in line of sight, and then you have this 0:08:14.440 --> 0:08:16.440 amazing opportunity in AI. 0:08:17.800 --> 0:08:19.600 The way I read the situation today. 0:08:19.360 --> 0:08:24.360 Is that MD is the only alternative to MVDR with 0:08:24.560 --> 0:08:29.960 like a relatively general purpose, very similar GPU architecture, which 0:08:30.000 --> 0:08:33.280 means that for all these people who number one find 0:08:33.280 --> 0:08:35.760 it difficult to get enough Nvidia ships and number two 0:08:36.160 --> 0:08:39.280 want to have an alternative supplier MD with the MI 0:08:39.320 --> 0:08:42.679 I three hundred is probably a no brainer, and that 0:08:42.800 --> 0:08:47.920 ramp is fascinating. And so we're talking MD potentially being 0:08:48.440 --> 0:08:50.520 if m did a three point five or four billion 0:08:50.600 --> 0:08:53.520 dollars of GPU revenues this year, that mean at the 0:08:53.559 --> 0:08:55.240 end of the year they will get five maybe six 0:08:55.320 --> 0:08:57.839 billion dollars of front ray for the thing to become 0:08:57.840 --> 0:09:01.640 what Nvida was like what eighteen months ago, maybe yes, 0:09:01.720 --> 0:09:04.880 eighteen months ago, in just a year, that's fascinating. 0:09:05.160 --> 0:09:07.240 I mean, Pierre, you got a two hundred and twenty 0:09:07.280 --> 0:09:10.000 five dollars price target, you got a buy recommendation. I mean, 0:09:10.040 --> 0:09:11.920 what therefore is the catalyst to get us from one 0:09:11.960 --> 0:09:14.280 hundred and sixty five to that two to five? Is 0:09:14.360 --> 0:09:18.800 it articulation from Lisa to how they're going to end 0:09:18.880 --> 0:09:20.560 up seeing the rewards of the AI. 0:09:22.000 --> 0:09:24.360 That's a great question. Let me give you first what 0:09:24.640 --> 0:09:25.920 I look look at. 0:09:26.160 --> 0:09:29.840 My only question on Nvidia on a sorry on AMD 0:09:30.440 --> 0:09:33.880 is execution. Does m I three hundred get into the 0:09:33.960 --> 0:09:38.760 hand of clients and do these clients find it reasonably 0:09:38.800 --> 0:09:42.199 easy because it's never easy to rent that new architecture 0:09:43.240 --> 0:09:49.120 along with with Nvidia, and if that happens, then it's 0:09:49.200 --> 0:09:55.480 like my price is actually probably far too you know, cautious. 0:09:56.160 --> 0:09:57.720 So that's the way we look at it. So between 0:09:57.760 --> 0:09:59.319 now and the end of this year, I want to 0:09:59.360 --> 0:10:02.320 hear feedback from in the clients. I want to see 0:10:02.360 --> 0:10:06.280 volumes ramping and people being like, yes, we are not 0:10:06.360 --> 0:10:08.200 using so much of the gypis, we're going to continue 0:10:08.160 --> 0:10:10.600 to use them. How the street looks at it is 0:10:10.640 --> 0:10:13.080 a bit different. I think there is an elemental earnings 0:10:13.120 --> 0:10:17.600 momentum and of course on that from that perspective, embedded 0:10:17.760 --> 0:10:22.320 is still you know, with gaming in the down cycle, 0:10:22.480 --> 0:10:26.400 CPU is uncertain, and of course everybody understands the obside 0:10:26.440 --> 0:10:30.600 on GPU. When people start putting up expectations that don't 0:10:30.640 --> 0:10:34.280 really that are not like on solid drown and when 0:10:34.320 --> 0:10:37.040 expectations are too high, even if he talks about something 0:10:37.080 --> 0:10:39.280 fascinating happening this year, there is a bit of a 0:10:39.320 --> 0:10:40.400 technical disappointment. 0:10:40.440 --> 0:10:42.679 And that's the reason why the stucky is today. 0:10:43.800 --> 0:10:46.560 Pierre, in terms of what you still want to hear. 0:10:46.600 --> 0:10:49.040 And I would never ask you to do my job 0:10:49.120 --> 0:10:50.920 for me, but I am going to speak to Lisa 0:10:51.000 --> 0:10:54.320 Sue a little later on this morning, what is the 0:10:54.440 --> 0:10:57.760 question that's not been answered in this earning cycle? 0:10:57.880 --> 0:10:58.880 What would you ask her? 0:11:00.880 --> 0:11:01.120 First? 0:11:01.320 --> 0:11:06.240 Say hello for me and the question the question I 0:11:06.240 --> 0:11:12.960 would ask her at this at this stage is when 0:11:13.440 --> 0:11:16.760 do you think you will have like a very strong 0:11:16.920 --> 0:11:22.320 visibility on whether your clients are comfortable ramping for the 0:11:22.360 --> 0:11:27.360 long run, for the long term I three hundred along Nvidia. 0:11:27.800 --> 0:11:31.200 It's like it's very too early to say does she 0:11:31.240 --> 0:11:33.959 need six months to have confidences that, does she need 0:11:33.960 --> 0:11:34.280 a year? 0:11:34.440 --> 0:11:35.160 And not too sure. 0:11:36.800 --> 0:11:40.079 We really appreciate you, yeah, yeah, giving you a few 0:11:40.080 --> 0:11:42.880 little hints for ED. A little bit later with Lisa 0:11:42.880 --> 0:11:45.439 Soup Pierre Faragu, we thank you so much. New Street 0:11:45.440 --> 0:11:49.000 Research Global Tech Infrastructure need coming up, Well, we're going 0:11:49.080 --> 0:11:50.920 to be discussing in on masks fifty five billion dollar 0:11:51.000 --> 0:11:54.280 pay package that is struck down by Delaware judge. Next, 0:11:54.280 --> 0:11:56.800 we'll speak with one of those key lawyers representing the 0:11:56.800 --> 0:12:08.840 shareholder who challenge the conversation and one elol Musk's fifty 0:12:08.960 --> 0:12:11.400 five billion dollar Tesla pay package that. 0:12:11.440 --> 0:12:13.520 Has been struck down by judge and Delaware. 0:12:13.640 --> 0:12:17.760 That's after shareholder Richard Tanetta challenged it as excessive that 0:12:17.800 --> 0:12:20.120 the ruling leaves the fortune of the world's richest man 0:12:20.200 --> 0:12:21.200 now kind of up in the air. 0:12:21.400 --> 0:12:25.040 He'll only be the third world's richest person. Cry cry. 0:12:25.400 --> 0:12:28.240 Joining us now for more is Bloomberg's Max Traffkin, And 0:12:28.360 --> 0:12:30.880 of course one of the lawyers for Richard Tanetta, this 0:12:31.080 --> 0:12:35.520 Greg Ferrallo. He's from Bernstein, Littowitz Berger and Grossman. Bloomberg 0:12:35.720 --> 0:12:38.360 reached out to Musk and his lawyer Evanchesla, but we 0:12:38.400 --> 0:12:40.280 have not received a response thus far. 0:12:40.320 --> 0:12:41.400 But Greg, I turned to you. 0:12:42.240 --> 0:12:44.960 This was a long, hard fought case, and I think 0:12:45.000 --> 0:12:48.120 actually the judge said, look, the defense tried very hard, 0:12:48.160 --> 0:12:50.200 but it was the most an impossible task. 0:12:51.080 --> 0:12:52.600 Will you expect and appeals? 0:12:52.640 --> 0:12:54.440 Now, do you think that the board will go back 0:12:54.440 --> 0:12:56.880 and just try to restructure some sort of payment for Alon? 0:12:57.000 --> 0:12:59.040 Wouldn't surprise me at all if we saw an appeal 0:13:00.120 --> 0:13:02.760 Delware practice. There is a direct appeal to the Delaware 0:13:02.800 --> 0:13:05.760 Supreme Court, which is the final word on matters like this, 0:13:05.920 --> 0:13:07.720 So it's likely there'll be an appeal. 0:13:08.000 --> 0:13:11.120 And Max from Elon inc your expertise of all things, 0:13:11.200 --> 0:13:16.040 I mean, he has been avidly against Delaware. More broadly 0:13:16.480 --> 0:13:20.079 and clearly, there has been concerns about from Elon himself 0:13:20.400 --> 0:13:22.120 a lack of control of his own company. 0:13:22.160 --> 0:13:23.760 Now what do you think happens after this payper? 0:13:23.840 --> 0:13:26.360 I mean, this is a huge development, not just because 0:13:26.360 --> 0:13:28.120 of the amount of money that is at stake in 0:13:28.160 --> 0:13:30.360 these options. The value of the options I've seen, you know, 0:13:30.480 --> 0:13:32.920 figures as high as fifty billion reported of course he 0:13:32.960 --> 0:13:37.120 hasn't exercised them yet, but also because this kind of 0:13:37.160 --> 0:13:39.160 throws not just Tesla in the chaos. They have to 0:13:39.160 --> 0:13:41.840 figure out a way to try to retain Elon Musk. 0:13:41.880 --> 0:13:44.000 He's already been sort of making these kind of veiled 0:13:44.040 --> 0:13:46.960 threats that he might be doing AI research outside of 0:13:46.960 --> 0:13:49.520 the company if he doesn't get a bigger pay package. 0:13:50.200 --> 0:13:51.640 And then at the same time you have all his 0:13:51.720 --> 0:13:53.920 other companies, which of course depend on his financing. And 0:13:53.960 --> 0:13:56.960 we remember one of the kind of one of the 0:13:56.960 --> 0:13:59.720 reasons he wanted all this money supposedly was to pay 0:13:59.760 --> 0:14:00.640 for is you. 0:14:00.559 --> 0:14:03.440 Know, Mars explorations. You have to ask where every where 0:14:03.480 --> 0:14:04.199 all of this goes. 0:14:04.400 --> 0:14:06.680 Last thing I'll say is this is another big loss 0:14:06.720 --> 0:14:10.000 on Della. Remember Delaware forced him to buy Twitter for 0:14:10.000 --> 0:14:12.079 forty four billion dollars. So now even for the world's 0:14:12.120 --> 0:14:15.120 richest man. Forty four billion, fifty billion. That's starting to 0:14:15.160 --> 0:14:15.600 add up. 0:14:17.480 --> 0:14:19.880 Greg, good morning. It's ed in San Francisco. 0:14:19.960 --> 0:14:23.040 As far as I can tell, you and your clients 0:14:23.120 --> 0:14:25.480 are the only ones to actually ever take a look 0:14:25.480 --> 0:14:29.680 at the compensation package. So as a starting point, Greg, 0:14:30.040 --> 0:14:33.360 what was it in the first place that worried you 0:14:33.640 --> 0:14:37.200 or that you thought was unusual about the package that 0:14:37.280 --> 0:14:39.120 caused you and your clients to look. 0:14:39.720 --> 0:14:42.200 You know, I have to say that I have a 0:14:42.240 --> 0:14:47.880 hard time articulating fifty five billion dollars. I often misspeak 0:14:47.920 --> 0:14:52.160 and say fifty five million dollars. Fifty five billion dollars 0:14:52.160 --> 0:14:55.400 are such a large pay package that it basically skewed 0:14:55.840 --> 0:15:02.080 dramatically upward the entire data set for the compensation consulting industry. 0:15:02.720 --> 0:15:03.320 I think we. 0:15:03.320 --> 0:15:05.640 Put out a press release yesterday referring to it as 0:15:05.640 --> 0:15:10.760 a gargantuan package. Let me start by saying it was 0:15:10.800 --> 0:15:14.480 so large that we looked at it specifically because no 0:15:14.520 --> 0:15:17.360 one had ever tried to come this close. And oh, 0:15:17.400 --> 0:15:19.680 by the way, when you look at the nearest comparable, 0:15:20.040 --> 0:15:22.560 it's Elon's prior pay package. 0:15:23.200 --> 0:15:26.520 Okay, but Greg, here's the thing. It may be the 0:15:26.520 --> 0:15:30.360 biggest compensation package in history. But there are a really 0:15:30.440 --> 0:15:33.920 large body of Tesla investors out there that say, so what. 0:15:34.880 --> 0:15:38.000 Seventy three percent of those investors voted in favor of 0:15:38.040 --> 0:15:41.040 the package in twenty eighteen when it was awarded, And 0:15:41.080 --> 0:15:42.960 there are is a big body of people out there, Greg, 0:15:42.960 --> 0:15:44.680 I hope you don't mind me saying that, are pretty 0:15:44.720 --> 0:15:47.600 mad at you and your client who had Tesla shareholders, 0:15:47.760 --> 0:15:50.960 because they say, look at the share performance of Tesla 0:15:51.400 --> 0:15:54.920 since that package was awarded. Look at Tesla's position as 0:15:54.960 --> 0:15:58.520 the market incumbent in evs and their growth globally and 0:15:58.600 --> 0:16:01.320 other products. Why does it matter? 0:16:03.160 --> 0:16:08.040 Well, you know, there's this idea in efficient capital markets 0:16:08.320 --> 0:16:11.080 that shareholders ought to have a say in things like this, 0:16:11.280 --> 0:16:14.320 and this package was in fact put to shareholders, but 0:16:14.360 --> 0:16:16.480 it was put to shareholders on approxy that the court 0:16:16.520 --> 0:16:21.240 found to be materially misleading in several respects. And look, 0:16:21.280 --> 0:16:24.760 the bottom line is, capital markets don't work if you 0:16:24.840 --> 0:16:29.880 don't tell stockholders material facts when asking them to take action. 0:16:30.280 --> 0:16:31.800 And that's exactly what happened here. 0:16:32.920 --> 0:16:35.760 Max. This puts into question the board. 0:16:36.080 --> 0:16:39.680 In particular, the accusations from many an investor is that 0:16:39.800 --> 0:16:42.400 there is no pushback, and the judge articulated there was 0:16:42.440 --> 0:16:45.120 at no point any sort of questioning that this pay 0:16:45.200 --> 0:16:48.320 package was ever perhaps successive. What does it mean for 0:16:48.360 --> 0:16:49.400 the board of Tesla. 0:16:49.320 --> 0:16:50.760 Well, it's not clear to me. 0:16:51.360 --> 0:16:54.120 You know, it's as Ed is kind of hinting at 0:16:54.360 --> 0:16:57.400 many Tesla shareholders were aware that the Tesla boarder of 0:16:57.440 --> 0:16:59.920 directors was essentially a rubber stamp. 0:17:00.200 --> 0:17:02.400 You have a lot of people who are very. 0:17:02.240 --> 0:17:04.480 Close friends with Elon, and I think one of the 0:17:04.520 --> 0:17:06.760 reasons he lost his case is because you had nominally 0:17:06.800 --> 0:17:09.560 independent directors who were going on vacation with him, and 0:17:09.600 --> 0:17:13.120 we had clearly had a close relationship with Now that's 0:17:13.200 --> 0:17:16.240 kind of like how Elon Musk has done business and 0:17:16.560 --> 0:17:17.000 by Elon. 0:17:17.320 --> 0:17:18.360 What's so I think. 0:17:18.200 --> 0:17:22.119 Difficult about this going forward is that that's kind of 0:17:22.160 --> 0:17:24.360 been If you asked Elon Musk, like, what is your playbook? 0:17:24.400 --> 0:17:25.800 How have you been able to achieve so much? 0:17:25.840 --> 0:17:27.479 He would say, well, it's because I have a you know, 0:17:27.600 --> 0:17:29.440 I've been able to do essentially whatever I want to do. 0:17:29.640 --> 0:17:32.040 And again, as I said earlier, he's been asking for 0:17:32.119 --> 0:17:34.800 even more control from where he got so I don't 0:17:34.880 --> 0:17:36.240 know where that goes. 0:17:36.359 --> 0:17:39.679 I do think there is some piece. 0:17:39.440 --> 0:17:42.560 Of risk that probably didn't exist yesterday that Elon Musk 0:17:42.560 --> 0:17:45.280 could either threaten to or even And again I think 0:17:45.320 --> 0:17:47.600 this is a far off possibility to decide to walk 0:17:47.640 --> 0:17:48.399 away from Tesla. 0:17:48.600 --> 0:17:51.480 I mean, this is why the share price is somewhat underpression, 0:17:51.600 --> 0:17:55.520 not massive, Moss Gregg. But the articulation from the judge was, 0:17:56.080 --> 0:17:58.320 at no point did it seem that this fifty five 0:17:58.359 --> 0:18:02.640 billion or these options awarded was necessary to keep Elon motivated. 0:18:03.560 --> 0:18:07.320 But then to that end, why not recompense the leader, 0:18:07.440 --> 0:18:10.000 a founder with such a significant upside if he's going 0:18:10.040 --> 0:18:11.080 to deliver for shareholders. 0:18:11.160 --> 0:18:13.639 Well, the judgemente the point I think very coachingly, and 0:18:13.680 --> 0:18:18.480 that is, I believe his net worth increased in increments 0:18:18.480 --> 0:18:22.920 of ten billion dollars based on the stock he already 0:18:22.960 --> 0:18:26.600 held without this pay package, for each increment that was 0:18:26.760 --> 0:18:30.000 identified in this pay package. And so I think the 0:18:30.080 --> 0:18:33.000 judges point of view was, if you look at other 0:18:33.640 --> 0:18:39.040 successful founders, Bezos, Zuckerberg, others, they don't take pay packages, 0:18:39.119 --> 0:18:42.520 or they don't take any material pay package. They rely 0:18:42.920 --> 0:18:46.720 on driving value for their shareholders in their own underlying stock. 0:18:47.760 --> 0:18:51.440 Mister Musk had the opportunity to increase his net worth 0:18:51.480 --> 0:18:55.040 by almost one hundred billion dollars. I have to stop 0:18:55.080 --> 0:18:57.520 and make sure I get the b right. One hundred 0:18:57.520 --> 0:19:00.720 billion dollars if he accomplished what he set out to 0:19:00.720 --> 0:19:04.479 accomplish under this pay package without getting a single option. 0:19:06.160 --> 0:19:09.560 And at the end of the day, this is a 0:19:09.600 --> 0:19:13.920 car company, it's not a space exploration company, and it's 0:19:14.000 --> 0:19:17.160 a public company, and public companies live by different rules 0:19:17.160 --> 0:19:18.120 than private companies. 0:19:20.520 --> 0:19:22.679 If you're watching us live now on Bloomberg Television and 0:19:22.720 --> 0:19:25.480 you're eternal subscriber, you can send questions to us via 0:19:25.520 --> 0:19:28.760 ib greg I told our audience on social media you 0:19:28.760 --> 0:19:30.840 were coming on and that there were lots of questions. 0:19:30.960 --> 0:19:33.679 I think the most common is is just a want 0:19:33.760 --> 0:19:37.159 for deeper understanding of what the pathway forward is, so 0:19:37.200 --> 0:19:40.240 you talk with Caroline about a likely appeal. I think 0:19:40.400 --> 0:19:43.720 my understanding from sources is that's likely as well. But 0:19:43.960 --> 0:19:46.439 the other thing is that this current board, which is 0:19:46.440 --> 0:19:49.200 different to what it was in twenty eighteen, could put 0:19:49.200 --> 0:19:53.240 together a new compensation plan and then take it to 0:19:53.320 --> 0:19:57.560 shareholders to be ratified. How involved do you think you 0:19:57.640 --> 0:20:01.720 will be with your client? How involved you think Kathleen J. 0:20:01.880 --> 0:20:04.920 McCormick will be in that process if it's all. 0:20:05.200 --> 0:20:08.280 Well, the simple answer to that is that's a question 0:20:08.440 --> 0:20:11.119 for the board to determine in the first instance, and 0:20:11.200 --> 0:20:16.119 assuming it fulfills its fiduciary duties and uses ordinary and 0:20:16.200 --> 0:20:19.520 reasonable means to arrive at a result, my guess is 0:20:19.600 --> 0:20:22.200 I won't be involved at all, And my guess as 0:20:22.200 --> 0:20:24.720 well as the judge won't be involved at all if 0:20:24.720 --> 0:20:28.919 the Board comes out with a package which either facially 0:20:29.080 --> 0:20:36.840 is ridiculous, gargantuan, or otherwise raises concerns from a fiduciary perspective. 0:20:37.320 --> 0:20:42.080 I suspect you'll see my firm and I involved as well. 0:20:41.160 --> 0:20:42.960 Right Max, There's so much to discuss here. I guess 0:20:42.960 --> 0:20:45.080 the board could also say, well, here's another fifty five 0:20:45.119 --> 0:20:47.879 billion dollar package. Looks different, same number. 0:20:48.320 --> 0:20:49.760 I mean, one thing I'm curious about. 0:20:49.800 --> 0:20:52.640 You know, musk Overnight was sort of threatening to leave 0:20:52.720 --> 0:20:57.080 Delaware and to reincorporate in Texas. I believe or you know, 0:20:57.240 --> 0:20:59.919 I think X he moved from Delaware in a. 0:21:01.040 --> 0:21:02.720 Is that a re Can he do that? 0:21:02.840 --> 0:21:06.920