Speaker 1: This is Bloomberg Business Week with Carol Masser on Bloomberg Radio.
Speaker 1: You are listening to Bloomberg Business Week. I'm Carol Masser
Speaker 1: and our Bloomberg Interactive Broker Studio story on the Bloomberg
Speaker 1: Today about how animal spirits are famously running wild across
Speaker 1: Wall Street. Uh, we crunch the numbers. First day return
Speaker 1: for I p O s averaging forty percent this year
Speaker 1: of the highest ever other than according to one s
Speaker 1: trip At. On top of that, SPACs, the special purpose
Speaker 1: to Acquisition vehicles. Uh, those blank champ companies, they have
Speaker 1: raised over sixty billion dollars this year. If that's more
Speaker 1: than the previous decade combined. So let's look at both
Speaker 1: of those markets and see what that tells us. Excuse me?
Speaker 1: Joining us is Steve excuse me, Steve cake Bread. He's
Speaker 1: CFO of the publicly held digital media technology company Yest.
Speaker 1: He's former CFO of Pandora, former president in chief Strategy
Speaker 1: off At, the chief strategy at Salesforce. Excuse me. Also
Speaker 1: author of the IPL playbook and Insider's Guide and Taking
Speaker 1: your Company Public and how to do it right? And Steve,
Speaker 1: that's what I get for stuffing my mouth with a
Speaker 1: cookie just before we go on air. So my apologies. Um.
Speaker 1: Steve joins us out on the phone from Wyoming. Nice
Speaker 1: to have you here with us. Steve. It has been
Speaker 1: a crazy year when you look at the markets, and
Speaker 1: we talked about great year for the market's not so
Speaker 1: great for humans earlier on air. What do you make
Speaker 1: the IPO market? Let's start there. Yeah, Carol, thank you
Speaker 1: very much for having me on today. Yet I PEO market,
Speaker 1: as you said, starts to return to early days where
Speaker 1: I pos are important, and I think it's exciting because
Speaker 1: it's a big part of how wealth is created in
Speaker 1: this country, and particularly for individuals, but also for institutions.
Speaker 1: So I'm excited to see the market come back, and
Speaker 1: hopefully we'll get others and I know is long enough
Speaker 1: to be strong as well. Yeah. Did it like surprise
Speaker 1: you though? In a year that was just you know,
Speaker 1: off the charts on so many levels, and you know,
Speaker 1: the personal impact, the health impact of course of COVID,
Speaker 1: the economic impact, but yet to see such a strong
Speaker 1: I p O market. Yeah, that's a great observation. You
Speaker 1: would have thought with macroeconomics and all the issues that
Speaker 1: we had, we had elections, too, But I also think
Speaker 1: it talks to the strength of the capital markets and
Speaker 1: where companies that are growing and aspiring to get bigger
Speaker 1: and continue to grow, the access to capital in the
Speaker 1: public markets is the easiest and most efficient way to
Speaker 1: get there. And you also have different ways to get
Speaker 1: capital through debt operings, convertible operings, and the I p
Speaker 1: o s and SPACs and direct listing as you mentioned.
Speaker 1: So I think what businesses started to see is it's
Speaker 1: time to get into the market and get access to
Speaker 1: the capital because it's always there despite the heavy lift
Speaker 1: or load on pandemics and macro economics. Well what do
Speaker 1: you make the Yeah, God, I have so many questions
Speaker 1: for you. Um, is it at all akin to the
Speaker 1: I p O market that we saw back in two
Speaker 1: thousand to me, having you know, covered business news in
Speaker 1: the markets at that point, I think it's very different
Speaker 1: in terms of the companies that we're seeing come to
Speaker 1: market versus today. I also feel like we have a
Speaker 1: market that kind of smacks you down pretty quickly if
Speaker 1: you're not legit. Are there's problems? Yeah? No, I agree
Speaker 1: with that. I don't think this is the thousand entries
Speaker 1: here where companies were coming to market a little too early,
Speaker 1: or people didn't understand the business model. I think one
Speaker 1: of the big things about this market is you're right,
Speaker 1: people are bringing real businesses. People do understand business models,
Speaker 1: and the investors can look into those and look beyond
Speaker 1: just what the macroeconomics are of a company, as long
Speaker 1: as they understand the long term business model. So yeah,
Speaker 1: I feel this is very different. I think the market
Speaker 1: is also looking for growth opportunities, as you guys discussed
Speaker 1: on your show numerous times, and there is a change
Speaker 1: in innovation going on, so that's how new businesses get
Speaker 1: into the market with I d O s. Well, what
Speaker 1: do you make of door dash and Airbnb this year?
Speaker 1: And we've had a lot of analysis about who ultimately
Speaker 1: is the longer play here. Something gets door Dash because
Speaker 1: they're so established in the marketplace when it comes to
Speaker 1: all the online ordering. Airbnb will see whether people cantinue
Speaker 1: to use it once life gets back to normal. How
Speaker 1: do you see it? Yeah, that's a great question. I
Speaker 1: think some of the larger I p o s like
Speaker 1: geor Dash and Airbnb one is they probably should have
Speaker 1: gone out earlier because people didn't get to participate in
Speaker 1: some of their growth. But now that they're out, people
Speaker 1: are saying, hey, I use these every day, I want
Speaker 1: to invest in them. I think there's a little bit
Speaker 1: of prop than the retail or individual investor side, as
Speaker 1: people are learning, particularly individuals that haven't been in the
Speaker 1: market for all that long. Remember they exhbit for a
Speaker 1: while it was mostly institutional, So I think you're seeing
Speaker 1: a lot of individual investors learning how to invest in companies.
Speaker 1: And clearly one of the ways to do that is
Speaker 1: invest in the company that you use. And certainly all
Speaker 1: of us have used some type of food delivery service,
Speaker 1: and a lot of people were using Airbnb and the
Speaker 1: similar companies or companies to get out of the city.
Speaker 1: So I think it's investors investing in what they do
Speaker 1: and use. I'm a big stand of Starbucks, so I
Speaker 1: invest in Starbucks right right, It's like the old Peter
Speaker 1: Lynch model going way back when, right, just you know,
Speaker 1: invest in things you really really understand or that you use.
Speaker 1: It's why you know, it's interesting And maybe I'm going
Speaker 1: in a little bit of a different direction. But all
Speaker 1: of the fan stocks and we constantly have conversations about overvaluation,
Speaker 1: and I'm not trying to pump them up anymore than
Speaker 1: they have. But I use Amazon a lot, and when
Speaker 1: I go to buy something, it's usually the first place
Speaker 1: I look. Yeah, exactly. I think you you know, one
Speaker 1: of the investment strategies is to go where you go,
Speaker 1: and like you said, you use Amazon, you investor if
Speaker 1: you use some other service, you go there because you're
Speaker 1: supporting the company. You know what the company is doing.
Speaker 1: You also know what how good or how bad their
Speaker 1: service might be. So I think that's individual investors. I
Speaker 1: think that's really important to invest in where you spend
Speaker 1: your money day to day. Well, And in terms of transparency,
Speaker 1: I do think like we Work was a bit of
Speaker 1: a lesson, right and as much as there was so
Speaker 1: much excitement over it and so much talk about it,
Speaker 1: and ultimately, you know, the emperor has no clothes on,
Speaker 1: like we we got to see kind of what was
Speaker 1: really going on. And there is something about I feel
Speaker 1: like in this marketplace that there is a certain level
Speaker 1: of transparency that comes to light fairly quickly, quickly with
Speaker 1: quotations marks on it because because we know a lot
Speaker 1: of money when in do we Work before it all
Speaker 1: came out right, well, I think That's one of the
Speaker 1: reasons why. And you know I talk a lot about
Speaker 1: to venture capital and entrepreneurs, get your company out public
Speaker 1: earlier because that discipline, that governance, the transparencies that come
Speaker 1: for being public also help your company to be more
Speaker 1: operationally efficient inside. And I think race is the value
Speaker 1: line of the company inside, so people understand what they
Speaker 1: have to do in that transparency does so large degree
Speaker 1: show up earlier if you go public earlier. Well that's interesting, Steve,
Speaker 1: that you say that because there's so much money out there,
Speaker 1: and we do see whether it's an Airbnb or Jordish,
Speaker 1: they are able to stay private for a lot longer
Speaker 1: because they are able to do multiple funding rounds. Um
Speaker 1: is that a good or bad thing? Got about thirty seconds,
Speaker 1: and then we'll take a break and we'll come back
Speaker 1: and talk some more. Well, it's a good thing that
Speaker 1: I also think it's a bad thing because I think
Speaker 1: you leave individual investors behind because the prices that go
Speaker 1: out are too high. Stop think getting in. I do
Speaker 1: wonder is there a point when it comes to SPACs
Speaker 1: that we're all of a sudden saying, Okay, we've hit
Speaker 1: a peak here. How do you see it's Steve. Yeah,
Speaker 1: well that's a good question, Carol. You know what old
Speaker 1: is new, right, because you've been around one time. Yeah,
Speaker 1: And there's been a ton of money raised into SPACs
Speaker 1: and the blank check companies this past year, so and
Speaker 1: you know, it really gets down to how you want
Speaker 1: to take or what you need in your company to
Speaker 1: get a public because at the end of the day, SPACs,
Speaker 1: correct luciens and other things do end up being public.
Speaker 1: I do think that one has to be careful because
Speaker 1: there's a lot of different people that lead these spacts
Speaker 1: and you have to make sure their investment uh, if
Speaker 1: you will, standards are high enough to meet your investor needs.
Speaker 1: And then also it's really question are there really enough
Speaker 1: companies out there to be bought with that type of
Speaker 1: money at this point. So we'll see how that plays out.
Speaker 1: Everybody has a two year window and the clock's chicken
Speaker 1: when you go raise that money, so we'll see what happened. Well,
Speaker 1: this is what I wonder, Steve. I mean, there is
Speaker 1: so much money out there. And we talked about this
Speaker 1: a little bit more, you know earlier about these I
Speaker 1: p O company companies that ultimately I p O They've
Speaker 1: been around for a few years, so we've gotten used
Speaker 1: to them, we've heard about them, we've gotten to see
Speaker 1: kind of them grow their business and and understand their
Speaker 1: financials better. But I do wonder when there's so much
Speaker 1: money chasing, maybe when they're you know, too few deals,
Speaker 1: you know, ultimately what kind of instability or you know,
Speaker 1: a skewed equation that we ultimately get in the marketplace. Yeah, no,
Speaker 1: that's a great question. We've seen the run ups in
Speaker 1: the companies we talked about, you know, do Arab, NB
Speaker 1: and others, and I think that's where investors have to
Speaker 1: be a little bit cautious. You can pay too much
Speaker 1: for something and you can wait for the vision because
Speaker 1: you're investing in the longer term vision. So the question
Speaker 1: is how much you're paying today for that longer to
Speaker 1: vision and how long is it going to take to
Speaker 1: achieve that result. So, yeah, there's a lot of money
Speaker 1: chasing this, and I think individual investors just need to
Speaker 1: be cautious about what they're doing with their money they
Speaker 1: invest in these I mean, why does someone like soft
Speaker 1: Bank that has a lot of money do a spack
Speaker 1: And I should point out that the head of the
Speaker 1: Vision Fund originally revealed plans for the spack uh in
Speaker 1: an interview they did with Bloomberg News at the Milken
Speaker 1: Institute Virtual Conference back in October. So we knew this
Speaker 1: was coming. But why do they need to do this?
Speaker 1: I mean, same thing with hedge fund investor. I mean,
Speaker 1: is it just because it's a great vehicle to make
Speaker 1: some fast money. I don't know. Well, it's a great
Speaker 1: vehicle to make money potentially, but I do think it's
Speaker 1: because there's an open market or open window here for
Speaker 1: boats like soft Bank and other hedge funds to go
Speaker 1: raise money. Because remember raising money as job one here
Speaker 1: and right now, it's easy to raise money, low interest rates,
Speaker 1: a lot of confusion in the marketplace. So I view
Speaker 1: the SPACs and the hedge funds and STP Bank doing
Speaker 1: this is just another vehicle for them to raise money
Speaker 1: as opposed to go out and look for limited partners
Speaker 1: or other individual investors to get into their funds. Hey,
Speaker 1: one thing I want to ask you a big picture.
Speaker 1: You were get a lot of different well known companies
Speaker 1: look at this market of seeing the ups and downs
Speaker 1: in terms of cycles. You know, I mentioned at the
Speaker 1: kick at the beginning of our interview about a story
Speaker 1: that's running on Bloomberg about the animal spirits running, you know,
Speaker 1: wild across the streets. So we've got great market for
Speaker 1: financial markets, but it's not been a great year for humans.
Speaker 1: I mean, we have just incredible inequities and just the gaps.
Speaker 1: What will potentially be the consequences of all of that. Yeah,
Speaker 1: you know, that's a great question. And when I talk
Speaker 1: to people and in institution and investors, I think there's
Speaker 1: a disconnect between what the markets doing and quite frankly,
Speaker 1: what our neighbors are suffering through here. And you know,
Speaker 1: my families in a in a business that depends on
Speaker 1: the restaurant business, and boy, when you don't have that
Speaker 1: type of markets, it's tough to run these businesses. You say, So,
Speaker 1: I think we need to be cautious because although there's
Speaker 1: euphoria around the vaccine, there's a lot of unknowns coming
Speaker 1: from that. And I think I kind of look at
Speaker 1: this as it's gonna be a tough market for the
Speaker 1: next couple of years, simply because there's so many people
Speaker 1: out of work and we need to get those people
Speaker 1: back to jobs and back to work to have a
Speaker 1: really robust economy. Yeah, exactly, And there needs to be
Speaker 1: you know, more of that wealth distribution that we've talked about.
Speaker 1: All right, last note, a little bit of a lighter note,
Speaker 1: but I hope it's lighter because I don't know how
Speaker 1: it's been going. But you are also the co owner
Speaker 1: and founder of Cake Bread Sellers in Napa Valley. How
Speaker 1: has that been going? Well? I'm going to give my
Speaker 1: credit to my parents. They sounded it. I just got
Speaker 1: to work there and enjoy the experience and obviously taste
Speaker 1: of wine. But um, yeah, the wineries, you know, like
Speaker 1: I said, in Napa Valley with the openings and closings
Speaker 1: that the state has put on them. Most of usselves
Speaker 1: of restaurants, and the restaurant business obviously is in difficult
Speaker 1: shape right now. But I think everybody is trying to
Speaker 1: keep their workforce employed because that's job one, and you
Speaker 1: change how you do business. We do a lot more
Speaker 1: internet sales. I will say that. You know, online purchases
Speaker 1: of wines of all ilk are probably doing pretty well
Speaker 1: these days. I know I'm always online trying to buy
Speaker 1: more wine. Yeah, you know, just to get you through
Speaker 1: the day. But you know it's a struggle. I mean,
Speaker 1: if you have a family business, a small business, something
Speaker 1: that depends on walking people. It's really tough right now.
Speaker 1: We're very cognisant of that, and like I said, our
Speaker 1: number one goal is to keep our workforce employed because
Speaker 1: we know that when things come back, it's going to
Speaker 1: be really hard to hire good people back. Yeah, exactly. Well,
Speaker 1: I wish you well with your team and certainly personally
Speaker 1: throughout the holiday. Steve, Thank you so much. Really enjoyed
Speaker 1: this conversation. Steve kate Bred he's a CEO of y X,
Speaker 1: joining us on the phone from Wyoming. As I mentioned,
Speaker 1: he's also the author of the IPO Playbook and Insider's
Speaker 1: Guide on taking your company public and how to do
Speaker 1: it right. Uh. He knows how to do it because
Speaker 1: he was with these companies, whether it's Pandora, also Salesforce,
Speaker 1: a bunch of these companies where he was with them
Speaker 1: before they went public. So really knows all of this firsthand.
Speaker 1: So great to talk about the IPO market, to talk
Speaker 1: about SPACs,