WEBVTT - Elon Musk vs SF Mayor and the FTX Warning Signs 0:00:13.480 --> 0:00:16.000 I'm Caroline High the Bloomberg's World headquarters in New York 0:00:16.440 --> 0:00:19.639 and then ed Ludlow in San Francisco. This is Bloomberg Technology. 0:00:19.800 --> 0:00:23.440 Elon Mask feuding with the San Francisco mayor after makeshift 0:00:23.440 --> 0:00:26.880 bedrooms in the office is a city violation, but Silicon 0:00:26.960 --> 0:00:30.200 Valley giants and notorious for sleeping pods, bean bags other 0:00:30.240 --> 0:00:35.519 company setups. We discussed precedents and priorities and f t 0:00:35.800 --> 0:00:38.400 X warning signs. How did the company win over so 0:00:38.440 --> 0:00:42.000 many venture catalysts and investors. We discussed due diligence and 0:00:42.040 --> 0:00:44.879 the venture capital outlook. We see the insights Brian Lee 0:00:45.159 --> 0:00:48.600 and Microsoft meets the FTC on its activision deal after 0:00:48.600 --> 0:00:51.800 striking a call of duty agreement with Nintendo and Microsoft 0:00:51.840 --> 0:00:55.120 doesn't own call of duty. Yeah, we get to grips 0:00:55.120 --> 0:00:58.360 of gaming. But first, who else but elon Mark is 0:00:58.400 --> 0:01:02.240 currently sparring with the city of Francisco after Twitter turns 0:01:02.320 --> 0:01:05.920 sun space at the company's headquarters and to make shift bedrooms, 0:01:05.959 --> 0:01:08.280 which it turns out as a possible violation of the 0:01:08.280 --> 0:01:12.720 city's building codes. Fra is here with more. We know 0:01:12.800 --> 0:01:14.440 that he likes to tustle. We know that he likes 0:01:14.440 --> 0:01:16.840 to Tussele on Twitter, but in particular does he have 0:01:16.840 --> 0:01:18.600 a like to stand on here? How much of a 0:01:18.680 --> 0:01:22.360 focus is this for the city. Well, you know, as 0:01:22.440 --> 0:01:24.720 the city has said they need to look into any 0:01:24.760 --> 0:01:27.720 complaints that come forth, and there has been a complaint 0:01:27.760 --> 0:01:30.720 about the Twitter offices, the fact that they're they're putting 0:01:30.760 --> 0:01:35.840 beds and armchairs into various conference rooms, which I guess 0:01:35.880 --> 0:01:38.120 they have room floor because a lot of employees have 0:01:38.240 --> 0:01:41.360 been cut or laid off, but it is it is 0:01:41.400 --> 0:01:44.840 sort of unusual to expect employees to sleep with the 0:01:44.920 --> 0:01:50.640 office in an actual furnished bedroom. I mean, despite the 0:01:50.640 --> 0:01:54.400 culture we're speaking about with sleeping bags and knap pods. Yeah, 0:01:54.480 --> 0:01:56.760 I mean talk to us though more generally about the 0:01:56.800 --> 0:01:59.680 balance the lack thereof for tech workers at the moment 0:01:59.680 --> 0:02:02.920 in Sam Francisco, all people having to sleep on the floor. 0:02:03.360 --> 0:02:05.800 Is this something that happens at Lodgers is very focused 0:02:05.840 --> 0:02:09.080 on really and elam lass culture? Well, you you see 0:02:09.080 --> 0:02:11.880 this all the time at startups, right and even even 0:02:11.919 --> 0:02:15.440 in early high growth companies. I remember um talking to 0:02:15.680 --> 0:02:18.760 employees at Snapchat a few years ago about how they'd 0:02:18.800 --> 0:02:22.560 they'd turned some bedrooms and they too maybe did a 0:02:22.600 --> 0:02:26.239 code violation in the opposite direction, turning from some residential 0:02:26.240 --> 0:02:32.120 housing in bedrooms in Venice, California into offices. Um so, 0:02:32.120 --> 0:02:35.920 so I think that, um it's not unheard of. What 0:02:36.040 --> 0:02:39.119 I think we're seeing here is the pendulum swing from 0:02:39.200 --> 0:02:42.880 being really in the favor of workers, giving workers flexibility, 0:02:42.960 --> 0:02:45.240 letting them work from anywhere, letting them work from home, 0:02:45.560 --> 0:02:48.560 to this period where we're seeing this big spate of 0:02:48.639 --> 0:02:52.560 tech layoffs and people concern for their jobs and in 0:02:52.600 --> 0:02:56.320 the future of their employment and willing to do, you know, 0:02:56.320 --> 0:02:59.160 sort of whatever it takes to prove to the employer 0:02:59.200 --> 0:03:01.600 that they are hard workers. And so the power is 0:03:01.639 --> 0:03:04.280 really shifting back to the employer right now in this 0:03:04.360 --> 0:03:10.000 economic stress time. We reported in this pace that Musque 0:03:10.639 --> 0:03:13.480 is making these sleeping arrangements available not just for existing 0:03:13.520 --> 0:03:15.840 Twitter staff, but some of the other workers from his 0:03:15.880 --> 0:03:18.920 other companies that he's brought in to do that. And 0:03:18.919 --> 0:03:22.359 we've reported in recent weeks that at first it was 0:03:22.440 --> 0:03:24.360 you've got to come back to the office forty hours, 0:03:24.520 --> 0:03:26.800 Then it was some of you be working eighty hours. 0:03:27.160 --> 0:03:30.480 What's going on inside Market Street office of Twitter? Right now, 0:03:30.680 --> 0:03:32.720 everyone's got to be on the tent floor. Dad you've 0:03:32.720 --> 0:03:34.960 gotta you've gotta show up. If you're as a programmer 0:03:35.080 --> 0:03:38.520 or a designer, you better be there creating this environment 0:03:38.760 --> 0:03:42.920 of collaboration, of brainstorming. I think Must really wants to 0:03:42.960 --> 0:03:47.360 feel momentum from employees. Meanwhile, these are the employees that 0:03:47.400 --> 0:03:51.920 were recruited based on this promise of work from anywhere forever. Um. 0:03:52.080 --> 0:03:54.840 It's sort it was really a pioneer even before COVID 0:03:55.240 --> 0:03:59.320 in this idea that employees could could really be productive 0:03:59.440 --> 0:04:02.240 from from any where. They could log into the internet, 0:04:02.360 --> 0:04:07.200 and Jack Dorsey himself loved to occasionally work remotely as 0:04:07.280 --> 0:04:10.480 just a completely flipped culture. UM. And I think one 0:04:10.520 --> 0:04:13.080 thing we need to be UM maybe a little concerned 0:04:13.080 --> 0:04:16.600 about here um or at least on the watch for 0:04:17.120 --> 0:04:19.720 does Twitter actually end up staying in San Francisco, Because 0:04:19.720 --> 0:04:24.320 we've seen the future of of Musk spats with governments, 0:04:24.400 --> 0:04:28.840 you know, the most prominent example being moving Tessa's headquarters 0:04:28.960 --> 0:04:32.200 from Palo Alto to Austin, Texas. I want to think 0:04:32.200 --> 0:04:34.760 about what Elon Musk actually said in his tweet. He 0:04:34.880 --> 0:04:39.200 essentially accuses San Francisco's mayor London Breed of being too 0:04:39.240 --> 0:04:42.440 focused on this issue, not enough on the Fentinel crisis 0:04:42.480 --> 0:04:45.760 is an example, and that's what he referenced. We had 0:04:45.760 --> 0:04:48.240 the San Francisco District Attorney in our office for about 0:04:48.240 --> 0:04:50.640 an hour last week getting a sense of the priorities 0:04:50.640 --> 0:04:54.560 in this city. Where does San Francisco revival, if you 0:04:54.600 --> 0:04:56.560 want to call it that sit right now? Well, I 0:04:56.560 --> 0:04:59.000 think that there's a lot of a lot of hope 0:04:59.040 --> 0:05:02.960 for a different set of circumstances under the new District Attorney, 0:05:03.200 --> 0:05:07.000 But it's not all on on her um. There is 0:05:07.760 --> 0:05:11.039 a lot of of bringing energy back into the city 0:05:11.040 --> 0:05:14.640 that needs to occur, and you know, the layoffs at 0:05:14.680 --> 0:05:18.839 Twitter probably haven't completely helped that. Right as he's he's 0:05:18.839 --> 0:05:20.560 trying to get people to come back into the office, 0:05:20.640 --> 0:05:22.760 there are also probably a lot of San Francisco based 0:05:23.080 --> 0:05:26.640 workers who who no longer have jobs on Twitter um, 0:05:26.680 --> 0:05:29.080 alongside a lot of other layoffs that we've seen at 0:05:29.160 --> 0:05:32.600 at San Francisco based companies such as as Salesforce. So 0:05:32.839 --> 0:05:35.560 I do think it's going to be a long road um. 0:05:35.600 --> 0:05:38.560 But I think Twitter, of all companies, is is right 0:05:38.600 --> 0:05:40.920 in the middle of one of the more crime written 0:05:41.040 --> 0:05:43.719 parts of the city and could be feeling any changes 0:05:43.760 --> 0:05:47.640 more dramatically Blue, Sarah fro thank you very much. Let's 0:05:47.640 --> 0:05:50.159 get to an update on the trial of Pharaon NOSS 0:05:50.200 --> 0:05:55.200 former president ramash Sonny Bawani, which is still underway. Bloomberg's 0:05:55.200 --> 0:05:57.320 Peter Bloomberg, who is one of our league webits, is 0:05:57.400 --> 0:06:00.480 following this case and joins us with the lay tists. 0:06:01.240 --> 0:06:04.520 You know, we've been waiting for this since July. What 0:06:04.720 --> 0:06:08.000 is it that we're waiting for. We're waiting on the 0:06:08.160 --> 0:06:12.560 judge to compose a sentence. Paulani was convicted of fraud, 0:06:13.200 --> 0:06:16.000 and the judge has to decide whether he'll get a 0:06:16.040 --> 0:06:20.680 prison term and if so, how long. And given it 0:06:20.800 --> 0:06:24.559 was more than eleven years for one Elizabeth Holmes, many 0:06:24.560 --> 0:06:30.080 are expecting what hire Peter Well somewhere around the same 0:06:30.120 --> 0:06:32.800 amount of time. It could be somewhat less, or it 0:06:32.839 --> 0:06:37.440 could be somewhat more. But the prosecutors have made the 0:06:37.480 --> 0:06:46.040 case that they are equally ah culpable for defrauding investors 0:06:47.000 --> 0:06:51.760 and that Paul Wanni, in addition, uh was was convicted 0:06:51.800 --> 0:06:57.719 of defrauding patients. Caroline and I both remember the moment 0:06:58.000 --> 0:07:01.560 that the sentencing was part us for Elizabeth Holmes herself 0:07:02.200 --> 0:07:05.640 just a little more than eleven years um at the 0:07:05.720 --> 0:07:08.839 lower end of the range that the prosecutors and the 0:07:08.920 --> 0:07:13.640 judge had kind of discussed. That was severe too many, 0:07:13.920 --> 0:07:15.960 But there are all others that are saying, actually, in 0:07:16.000 --> 0:07:19.800 Bowani's case it could be even more severe. Well it 0:07:19.920 --> 0:07:24.160 could because as I mentioned, he was convicted of additional 0:07:24.320 --> 0:07:28.280 counts that she was acquitted of. And also we're waiting 0:07:28.320 --> 0:07:31.640 on the on on the judge to to to indicate 0:07:32.080 --> 0:07:37.040 whether he may think that Bowani was somehow more responsible 0:07:37.120 --> 0:07:41.320 because he's older and more experienced, he had run a 0:07:41.360 --> 0:07:44.559 software company in Silicon Valley prior to taking this job, 0:07:44.640 --> 0:07:48.480 whereas she was nineteen year old nineteen years old when 0:07:48.480 --> 0:07:51.880 she dropped out of Stanford, and so she was was 0:07:52.040 --> 0:07:54.880 the younger, less experienced of the two. And then the 0:07:54.920 --> 0:07:58.520 other wild card, of course is that during her trial 0:07:59.040 --> 0:08:04.200 she accused him of abusing her during their romantic relationship, 0:08:04.920 --> 0:08:11.000 sexual and psychological abuse, which he of course wasn't a 0:08:11.040 --> 0:08:13.680 witness in that case and didn't get to speak to it, 0:08:14.000 --> 0:08:17.560 and it didn't come up in his own trial. Uh So, 0:08:18.200 --> 0:08:21.679 if the judge has any conclusions in his own mind 0:08:21.760 --> 0:08:28.320 about whether Bowani somehow manipulated homes or treated her badly. 0:08:28.840 --> 0:08:32.520 That could also factor into the sentence, of course, this 0:08:32.760 --> 0:08:34.959 being key one that many are looking at in terms 0:08:35.000 --> 0:08:37.559 of precedence setting as well. Peter Bloomberg, it's gonna be 0:08:37.640 --> 0:08:39.520 there with all the latest. We thank you so much. 0:08:39.720 --> 0:08:42.160 We await those headlines. Mean while coming up so much 0:08:42.200 --> 0:08:44.560 more to discuss in terms of the future of VC investments. 0:08:44.600 --> 0:08:46.880 In fact, um, we know they're on truck for a 0:08:46.960 --> 0:08:49.720 sharp drop, perhaps the sharpest in more than two decades 0:08:49.760 --> 0:08:51.599 this year. But what is the effect of f t 0:08:51.800 --> 0:09:04.839 X in particular, Blomberg, let's talk about venture capital investments 0:09:05.600 --> 0:09:07.760 not too hot right now. In fact, they're about to 0:09:07.760 --> 0:09:10.720 see their stepest drop in more than two decades, even 0:09:10.760 --> 0:09:13.080 surpassing the decline of the dot com crash and of 0:09:13.120 --> 0:09:16.040 course of the financial crisis and Ludlow bring us up 0:09:16.080 --> 0:09:19.640 to speed whether the details, Yeah, it's interesting. A data 0:09:19.679 --> 0:09:24.720 set published by Preaking on Wednesday six billion dollars deployed 0:09:24.760 --> 0:09:29.000 by venture capitalists globally in the first eleven months two 0:09:29.000 --> 0:09:31.040 but on a year on year basis, that's a drop 0:09:31.280 --> 0:09:34.800 of more than which is a big change. Right you 0:09:34.960 --> 0:09:38.400 think about sort of the energy in these markets. You 0:09:38.440 --> 0:09:41.920 have to go back, as you said, well close to 0:09:41.960 --> 0:09:45.440 two thousand years, following the dot com bubble, also following 0:09:45.440 --> 0:09:48.520 the two thousand and eight financial crisis, and this is 0:09:48.559 --> 0:09:51.400 the biggest drop since then. You know, it's an interesting environment, 0:09:51.520 --> 0:09:56.080 higher rates, putting a premium on capitol, down rounds and 0:09:56.160 --> 0:10:00.000 markdowns in terms of valuations, and sort of skittishness, nervousness 0:10:00.000 --> 0:10:02.160 the global economy. What was really interesting for me with 0:10:02.240 --> 0:10:04.960 two other data points Carrow, China in the US. In 0:10:05.080 --> 0:10:09.079 China the value of deals down and in the US down. 0:10:10.080 --> 0:10:13.080 Those are two kind of leading VC markets as well. 0:10:13.240 --> 0:10:16.199 So it's a confluence of factors. But we're coming from 0:10:16.200 --> 0:10:18.640 a high base in one and it's not been a 0:10:18.640 --> 0:10:22.320 great year. One was extraordinary, We're going to remember. And 0:10:22.320 --> 0:10:25.280 the comparison is being made by none other than Brian Lee. 0:10:25.320 --> 0:10:27.480 Were really pleased to welcome him. Now. Has got great data, 0:10:27.559 --> 0:10:29.920 great statistics, and great context for us because of course, 0:10:29.920 --> 0:10:32.520 the senior vice president of see the Insights Intelligence Unit, 0:10:32.679 --> 0:10:36.400 you do phenomenal work just crunching the data and understanding 0:10:36.400 --> 0:10:38.920 the mood change here. Just talked to us Brian about 0:10:38.960 --> 0:10:43.280 where we're coming down from in terms of and overall, 0:10:44.000 --> 0:10:49.720 whether there's demise sort of folds into yes. Certainly. I 0:10:49.760 --> 0:10:54.040 think when we talked about one against almost any measure, 0:10:54.160 --> 0:10:56.880 it was a record year not only in terms of 0:10:56.880 --> 0:10:59.280 the amount of funding going to private companies, but the 0:10:59.360 --> 0:11:02.120 number of you as they were actually done. So we 0:11:02.120 --> 0:11:04.600 were moving out a pace of almost a hundred companies 0:11:04.640 --> 0:11:09.880 being funded every day, um and hunt to day. So 0:11:10.480 --> 0:11:14.800 what we saw was as a byproduct, was enormous inflated 0:11:14.840 --> 0:11:18.360 valuations that we were seeing from companies not only in 0:11:18.400 --> 0:11:21.440 the crypto space or in other kind of interesting areas, 0:11:21.440 --> 0:11:26.040 but telehealth, sustainability, tech, etcetera. UM. In a lot of ways, 0:11:26.080 --> 0:11:30.240 it felt like there were there was too much money chasing, 0:11:31.200 --> 0:11:33.200 despite the fact that it was so many deals, too 0:11:33.320 --> 0:11:37.960 few deals, and there in lies so many issues that now, 0:11:38.040 --> 0:11:41.880 of course the main focus is one of FTX. All 0:11:41.960 --> 0:11:45.080 of these concerns sort of become emblematic in their demise. 0:11:45.160 --> 0:11:47.920 The fact that we've seen basically a lack of due diligence, 0:11:48.280 --> 0:11:52.880 money just flying after particular investments, particular companies that blew 0:11:52.960 --> 0:11:56.160 up the valuation is just extraordinary propensity. But also also 0:11:56.200 --> 0:11:59.360 interesting about the ft X situation, perhaps the cooling effect 0:11:59.480 --> 0:12:03.000 it's full from Grace is having on the rest of 0:12:03.000 --> 0:12:06.800 the VC market is that it too spawned other startups, 0:12:06.840 --> 0:12:09.559 It too made investments. Just talked us about the work 0:12:09.600 --> 0:12:12.319 you've done and how sprawling ft X is own funding 0:12:12.400 --> 0:12:16.000 and funding in other companies walls. Yeah, So we were 0:12:16.080 --> 0:12:19.120 learning more every day about the web of investments from 0:12:19.120 --> 0:12:22.400 not only Sam Bankman freed themselves, but f t X Ventures, 0:12:22.400 --> 0:12:26.120 Alameda Research Ventures and their related entities. I think what 0:12:26.200 --> 0:12:29.800 we've known is that collectively they've made hundreds of investments 0:12:29.800 --> 0:12:33.200 in private companies across a wide variety of markets, including 0:12:33.240 --> 0:12:37.560 crypto exchanges, defy n f t s, and blockchain infrastructure, 0:12:37.600 --> 0:12:39.880 just to name a few. What we found in our 0:12:39.880 --> 0:12:43.000 research is that when we looked across the portfolio of companies, 0:12:43.360 --> 0:12:47.000 about three quarters of those investments where an early stage companies. 0:12:47.559 --> 0:12:49.800 I think what makes this a little bit thorny is 0:12:49.840 --> 0:12:52.040 that each of these investments will now have to be 0:12:52.120 --> 0:12:55.360 properly valued and disposed of as we moved through the 0:12:55.400 --> 0:12:58.720 bankruptcy process. And this presents a lot of challenges for 0:12:58.760 --> 0:13:02.079 companies that took money from f t x's venture arms 0:13:02.160 --> 0:13:05.640 for a couple of reasons. So number one, obviously thinking 0:13:05.679 --> 0:13:08.520 about the reputational hit that that f t X has 0:13:08.559 --> 0:13:12.679 had on the crypto industry, but also the broader valuation 0:13:12.720 --> 0:13:16.120 declines that we've seen across the past year, it's entirely 0:13:16.240 --> 0:13:19.679 likely that we'll see equity stakes being sold at a 0:13:19.720 --> 0:13:24.439 substantial discount, probably as much as or more. Um So, 0:13:24.800 --> 0:13:28.559 these types of events and this event, this event in bankruptcy, 0:13:28.640 --> 0:13:33.280 will trigger a revision of each company's valuation, creating potential 0:13:33.320 --> 0:13:36.160 issues for them as they attempt to raise additional capital. 0:13:36.600 --> 0:13:39.600 And so it's going to be a very difficult process 0:13:39.640 --> 0:13:42.679 for some of these companies as they think about how 0:13:42.720 --> 0:13:45.360 do we move forward, how do we raise additional capital 0:13:45.640 --> 0:13:49.120 at the valuation that we now have um I also 0:13:49.160 --> 0:13:52.400 mentioned just very quickly, uh that we are also assuming 0:13:52.400 --> 0:13:54.760 that a lot of these equity stakes are cash. What 0:13:54.880 --> 0:13:57.920 we've seen from some of the data that that that 0:13:58.040 --> 0:14:02.160 recently came out is that some companies were funded with tokens, 0:14:02.200 --> 0:14:04.720 and so obviously that would decrease the value of the 0:14:04.760 --> 0:14:10.200 equity state tremendously as the tokens themselves are drastically marked down. Brian, 0:14:10.240 --> 0:14:12.480 there's also the other side of the equation. I think 0:14:12.480 --> 0:14:15.160 we can bring up some of the names that invested 0:14:15.200 --> 0:14:18.040 in f t X in and Sam Bankman, Freed and 0:14:18.080 --> 0:14:21.600 many of those high profile names had to mark down 0:14:21.640 --> 0:14:24.440 the value of their states to zero, you know, from 0:14:24.480 --> 0:14:27.240 from various bars. The question I have for you is 0:14:27.240 --> 0:14:30.920 about due diligence. How can some of these reputable firms 0:14:31.720 --> 0:14:35.880 have made these decisions and come up with this result. Yeah. 0:14:36.000 --> 0:14:38.280 I mean, while I can't weigh obviously on the specifics 0:14:38.320 --> 0:14:41.280 of a particular VCS dude diligence process, I think it's 0:14:41.320 --> 0:14:43.760 safe to say that at least the basic level of 0:14:43.800 --> 0:14:47.040 due diligences was done here, which would have included things 0:14:47.080 --> 0:14:51.800 like financials, but also information related to governance protocols. So 0:14:51.840 --> 0:14:54.360 that said, I think there's two things that I'd say here. First, 0:14:55.000 --> 0:14:58.200 if there was fraud, which we believe that there is, 0:14:58.240 --> 0:15:01.800 if fraud was indeed perpetry, it's entirely possible that there 0:15:01.800 --> 0:15:05.720 were a number of misrepresentations by Sam Bankman, Freed and 0:15:05.800 --> 0:15:11.520 other executives during due diligence that muddied the evaluation process. Second, 0:15:11.680 --> 0:15:14.760 while every investor in these companies presumably did do their 0:15:14.760 --> 0:15:18.200 own due diligence, the demand for deals and this sense 0:15:18.200 --> 0:15:21.160 of fomo that we got in one, especially in the 0:15:21.200 --> 0:15:25.560 crypto space, definitely affected not only deal terms and valuations, 0:15:25.880 --> 0:15:30.840 but also likely increase the risk appetite for many. So 0:15:31.400 --> 0:15:34.600 you want to point out very quickly, Brian, if I may, that, 0:15:34.720 --> 0:15:38.160 of course no charges have been brought against Sam Bankman 0:15:38.240 --> 0:15:40.640 freed yet for fraud. I want to ask you really 0:15:40.680 --> 0:15:42.440 quickly before we run out of time, what does this 0:15:42.560 --> 0:15:46.760 do evaluations and interest from private markets in this space 0:15:46.800 --> 0:15:51.080 going forward? Yeah, so we clearly think that valuations already 0:15:51.160 --> 0:15:53.720 have been on a downward slope. So from Q one 0:15:53.880 --> 0:15:57.080 two thousand twenty two on, we've been seeing some pretty 0:15:57.120 --> 0:16:02.320 remarkable declines in terms of funding. We think that FTX 0:16:03.200 --> 0:16:06.040 is only going to compound some of the skittishness that 0:16:06.080 --> 0:16:08.840 I think that we're seeing from vcs, especially in this area. 0:16:09.440 --> 0:16:12.000 That being said, a lot of these companies hasn't mentioned 0:16:12.000 --> 0:16:15.200 earlier or early stage companies, and so as a result, 0:16:15.640 --> 0:16:18.840 their evaluations might not be hit as hard as well. 0:16:19.680 --> 0:16:21.960 You'll see sort of differences in some of those spaces, 0:16:21.960 --> 0:16:25.480 so crypto exchanges of course, but in blockchain infrastructure and 0:16:25.560 --> 0:16:28.360 those sorts of their areas you probably won't see as 0:16:28.440 --> 0:16:33.400 big of a hit directly attributable to f TX. Brian Lee, 0:16:33.600 --> 0:16:37.520 Senior Vice President, of see the Insights Intelligent Unit Thank 0:16:37.560 --> 0:16:42.160 you Now. Layoffs are accelerating across tech companies. Adobe has 0:16:42.200 --> 0:16:46.040 just scrapped about one hundred jobs concentrated in sales. Some 0:16:46.120 --> 0:16:48.280 of the employees who lost their jobs were given the 0:16:48.280 --> 0:16:51.640 opportunity to find positions elsewhere in the company. That's, according 0:16:51.880 --> 0:16:56.080 to sources, also Planned, saying it dismissed two hundred sixty staffers, 0:16:56.120 --> 0:17:00.600 around twenty of its employees, citing changing matt or economic 0:17:00.600 --> 0:17:03.440 conditions and the company needing to rein in costs. The 0:17:03.440 --> 0:17:06.840 tech industry has been slashing jobs at a pace nearing 0:17:06.880 --> 0:17:09.920 the early days of the COVID nineteen pandemic. In November, 0:17:09.960 --> 0:17:13.199 the sector announced more than fifty thousand cuts, for a 0:17:13.240 --> 0:17:25.400 total of eighty thousand or so this year. Time now 0:17:25.480 --> 0:17:28.400 for our top tech calls, starting with, of Course, Carl 0:17:28.440 --> 0:17:31.960 Varner shares sinking after Webbish analyst Seth bash and cut 0:17:32.000 --> 0:17:35.800 the online car used retailer to underperform from neutral as 0:17:35.840 --> 0:17:39.920 follows a Bloomberg report that Cavana's largest creditors, including Apollo 0:17:39.920 --> 0:17:44.240 Global and Pacific Investment Managers, signed a pact binding them 0:17:44.240 --> 0:17:47.200 to act together in negotiations with the company. The move 0:17:47.600 --> 0:17:50.400 is meant to prevent the credit of fighting each other 0:17:50.600 --> 0:17:55.160 in debt restructure negotiations, which Basham views negatively, saying investors 0:17:55.160 --> 0:17:58.760 see a high probability of default and sticking with cars. 0:17:58.840 --> 0:18:02.159 Tesla may need to make additional price cuts in China 0:18:02.359 --> 0:18:05.120 in the coming year to stimulate demand, which could put 0:18:05.160 --> 0:18:09.160 more pressure on automotive gross margins. That's according to Bernstein. 0:18:09.200 --> 0:18:12.480 Tesla shares were down Wednesday as it offers further incentives 0:18:12.640 --> 0:18:16.680 to Chinese customers in an effort to boost sales, and finally, 0:18:16.800 --> 0:18:20.200 online travel stocks fell Wednesday, the space to be avoided 0:18:20.200 --> 0:18:23.960 by investors heading into three according to Wolf Research and 0:18:23.960 --> 0:18:26.880 a note to clients. On Wednesday, the firm cut its 0:18:26.920 --> 0:18:31.560 view to overall sector from overall underweight from market wait. 0:18:31.840 --> 0:18:37.160 This following an expected downturn in demand. Carrow, Oh poor, 0:18:37.200 --> 0:18:39.360 all airlines. Are you getting on a flight anytime soon? 0:18:39.400 --> 0:18:43.080 In I might be getting a flight across the Atlantic soon. 0:18:43.680 --> 0:18:46.679 But you know, I got the stronger dollar. I got 0:18:46.760 --> 0:18:49.040 that stronger dollar on my side, which is rare in 0:18:49.040 --> 0:18:53.000 my lifetime, as you know, yes, exactly, and now it 0:18:53.119 --> 0:18:54.640 is rather nice when you go back to the UK. 0:18:54.800 --> 0:18:57.480 But all in all, it is just this constant pressure 0:18:57.520 --> 0:19:00.840 on some of these with these were the beating up 0:19:01.000 --> 0:19:03.720 companies during the pandemic, then came back and now back 0:19:03.800 --> 0:19:05.920 under pressure. But really does feel some of the economic 0:19:05.920 --> 0:19:08.320 headwinds are so pressing at the moment, particularly when it 0:19:08.359 --> 0:19:11.360 comes to valuations in technology. Yeah, they had a bright 0:19:11.400 --> 0:19:13.840 spot coming out of pandemic. Everyone was eager to travel, 0:19:14.040 --> 0:19:16.240 but then the economic reality here and you can look 0:19:16.280 --> 0:19:19.000 for a deal online, but it's not always there. So 0:19:19.200 --> 0:19:21.240 key to keep an up to speed when some of 0:19:21.280 --> 0:19:23.800 these analyst ratings and these companies and indeed some of 0:19:23.840 --> 0:19:33.560 the share price falls that we see. Welcome back to 0:19:33.600 --> 0:19:35.719 Blooberg Technology. I'm Caroline Hide in New York and I'm 0:19:35.760 --> 0:19:38.240 alongside Ed Lullow out in San Francisco, and we have 0:19:38.320 --> 0:19:41.480 got to talk gaming now, because Microsoft executives were actually 0:19:41.520 --> 0:19:44.680 meeting with FDC chair Lena Kahan to discuss the details 0:19:44.680 --> 0:19:48.080 of that activision Blizzard merger well call at sixty nine 0:19:48.080 --> 0:19:52.960 billion dollar deal and Microsoft Nintendo meanwhile agreeing to a 0:19:53.080 --> 0:19:55.600 ten year deal to bring Call of Duty to the 0:19:55.680 --> 0:19:58.880 Nintendo universe. All of that is trying to assuage any 0:19:58.920 --> 0:20:01.359 concerns around that's seen nine billion dollar deal and of 0:20:01.400 --> 0:20:04.040 course the agreement itself depends on if Microsoft is actually 0:20:04.080 --> 0:20:06.919 able to close that's say, seen nine billion dollar acquisition. 0:20:07.280 --> 0:20:10.879 He discussed all of it. Leon, Nilan and Leah just 0:20:10.920 --> 0:20:14.280 talked to us Lena Khan in a room Microsoft executives. 0:20:14.960 --> 0:20:18.480 How much convincing do they need to do to get 0:20:18.480 --> 0:20:22.160 this through? Yeah? Well, Lena Khan has been a pretty 0:20:22.560 --> 0:20:24.720 aggressive any trust enforce her since she was named to 0:20:24.760 --> 0:20:29.359 the post last summer um. The FTC under her already 0:20:29.400 --> 0:20:32.400 brought a suit against Meta Platforms over a pretty small 0:20:32.480 --> 0:20:36.040 virtual reality deal, but one that the FTC was concerned 0:20:36.080 --> 0:20:41.080 would give Meta a real leg up in virtual reality 0:20:41.119 --> 0:20:44.119 and allow the social network to sort of dominate that. 0:20:44.200 --> 0:20:47.080 So they have a lot of concerns about the big 0:20:47.119 --> 0:20:51.920 tech giants sort of using acquisitions to get a leg 0:20:52.040 --> 0:20:55.440 up or become dominant. Is sort of emerging markets UM 0:20:55.520 --> 0:20:58.199 and Microsoft one of the big reasons it said it 0:20:58.200 --> 0:21:01.040 needs us steals because it thinks to fetus cloud gaming 0:21:01.720 --> 0:21:05.159 UM and cross platform giving I e. You know, you 0:21:05.160 --> 0:21:09.399 don't necessarily need to buy these fancy consoles from Microsoft 0:21:09.440 --> 0:21:11.600 or a PlayStation or Nintendo. You might be able to, 0:21:12.119 --> 0:21:14.360 you know, access all the same games either on your 0:21:14.359 --> 0:21:17.679 computer or your phone and mobile device. So um, I 0:21:17.680 --> 0:21:19.280 think there's gonna be a lot of concern from the 0:21:19.359 --> 0:21:24.000 FTC about whether this gives Microsoft too much power. I 0:21:24.040 --> 0:21:26.280 think I'm right in saying that. In recent days, Lena 0:21:26.359 --> 0:21:31.240 Khan commented that there's a misconception the FTC is anti deal. 0:21:31.760 --> 0:21:35.000 It was also interesting last night lear too look at 0:21:35.000 --> 0:21:37.720 the Bloomberg terminal and look at our reporting this meeting 0:21:37.800 --> 0:21:40.200 is happening, and then the headline about a ten year 0:21:40.200 --> 0:21:45.200 deal with Nintendo for a a product they don't yet own, 0:21:45.320 --> 0:21:47.679 Call of Duty. And these are the kind of things 0:21:47.760 --> 0:21:51.240 that that Lena Kahn wants to see Microsoft doing if 0:21:51.240 --> 0:21:54.240 they're to have a chance for this deal to go through. Yeah. 0:21:54.280 --> 0:21:56.840 Microsoft has actually outlined a bunch of things that they're 0:21:56.880 --> 0:21:59.880 doing to try and like placate the FTC. They enter 0:22:00.400 --> 0:22:03.639 UM a union neutrality agreement with the c w A 0:22:03.960 --> 0:22:07.800 over potential concerns related to labor. They also announced that 0:22:07.800 --> 0:22:11.080 they were no longer going to require employees to sign 0:22:11.400 --> 0:22:15.000 UM non computer and nondisclosure agreements related to any like 0:22:15.119 --> 0:22:19.240 sexual harassment or sexual assault allegations, again trying to suage 0:22:19.280 --> 0:22:22.919 some of the FTCs stated concerns about non competes, So 0:22:23.000 --> 0:22:25.560 I'm not surprised at all actually that they announced that, 0:22:25.640 --> 0:22:27.320 like right before they were going to come here to 0:22:27.359 --> 0:22:29.800 Washington to sort of meet with her. The important thing 0:22:29.800 --> 0:22:33.720 about the Nintendo agreement they signed or announced yesterday is 0:22:33.760 --> 0:22:36.240 it only applies to the console. If Nintendo was going 0:22:36.280 --> 0:22:39.520 to offer one of these subscription services, they wouldn't necessarily 0:22:39.520 --> 0:22:42.639 get access to these games. Well said, and also I 0:22:42.680 --> 0:22:44.800 want to sort of shine a light on who they 0:22:44.800 --> 0:22:47.720 haven't struck a deal with MIA and that being Sony. 0:22:47.800 --> 0:22:50.399 And there was a great quote coming from Phil Spence, 0:22:50.480 --> 0:22:53.960 of course, man who manages the Xbox part of the business, 0:22:54.200 --> 0:22:56.560 and he's really saying that there's been one game industry bunches, 0:22:56.640 --> 0:22:59.080 but that's really been raising all the objections, and that 0:22:59.280 --> 0:23:01.960 is Sony. And he thinks actually, basically they're spending all 0:23:02.000 --> 0:23:04.400 their time talking to regulators and not trying to get 0:23:04.400 --> 0:23:08.000 a deal done. Truth in that. There is certainly some 0:23:08.040 --> 0:23:11.200 truth in that. I mean, Brazil is the only regulatory 0:23:11.320 --> 0:23:14.399 agency that is so far given um a verdict on 0:23:14.440 --> 0:23:18.000 the deal. Sony was the major complainant there. The uk 0:23:18.040 --> 0:23:20.080 c m A has a very public process, so a 0:23:20.080 --> 0:23:23.960 lot of the filings that go through that are made public, 0:23:24.000 --> 0:23:26.800 and Sony has been again the main complainant. They're they're 0:23:26.880 --> 0:23:31.560 very concerned about what having Activision's library of games will 0:23:31.560 --> 0:23:35.439 make Microsoft a much more appealing gaming platform than PlayStation. 0:23:36.359 --> 0:23:38.400