Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business
Speaker 1: Wait inside from the reporters and editors who bring you
Speaker 1: America's most trusted business magazine, plus gloom Ol Business, finance
Speaker 1: and tech news. The Bloomberg Business Week Podcast with Carol
Speaker 1: Messer and Tim Stenebek from Bloomberg Radio.
Speaker 2: Decker ZK. It's definitely on our minds today. We said
Speaker 2: we've got a theme of China this hour, and we're
Speaker 2: going to continue with that. Shares of Zeker Intelligent Technology Holding,
Speaker 2: the high end electric car brand under Jilly Holding Group,
Speaker 2: rising as much as forty percent after an expanded initial
Speaker 2: public offering. That's the biggest US listing by a China
Speaker 2: based company since twenty twenty one. And we're looking at
Speaker 2: Zecer up right now, Tim Jashi of thirty three percent.
Speaker 3: Okay, so let's get to our roundtable, because we got
Speaker 3: a great one. We got Amy Or with us. She's
Speaker 3: Bloomberg News Equity capital market supporter. You know when we
Speaker 3: see her in our studio IPOs.
Speaker 2: Also with those last year.
Speaker 3: She's you know, she's been busy with this one, also
Speaker 3: with us as Bloomberg Intelligence, Global Autos and industrials research
Speaker 3: analysts Steve Man, Steve, I do want to start with
Speaker 3: you because this is an IPO, but it's also a
Speaker 3: story about the auto industry, and especially comes at a
Speaker 3: really interesting time given that demand for electric vehicles, especially
Speaker 3: here in the US but also globally is not what
Speaker 3: a lot of investors and a lot of analysts thought
Speaker 3: it would be in twenty twenty four. Talk to us
Speaker 3: about the timing of this company coming to market against
Speaker 3: these headwinds.
Speaker 4: Yeah, it is very interesting, very interesting. If you look
Speaker 4: at Neil x, pung Li Auto, all three are Chinese
Speaker 4: automakers listening to us, they've you know, they've been down
Speaker 4: twenty seven to forty five percent year to day, So
Speaker 4: the timing doesn't seems very timely. But I think globally
Speaker 4: auto sales are down, especially in Europe in the US,
Speaker 4: but the Chinese are still doing all Hey, in the
Speaker 4: last couple of months, sales have gone up. And I think,
Speaker 4: I think Zeker, you know, they don't. I don't think
Speaker 4: I have plans to sell in the US, maybe in Europe,
Speaker 4: but this is going to help build brand cachet for
Speaker 4: the brand locally in their home market.
Speaker 2: All Right, We're going to dig into that little bit
Speaker 2: more because it sounds like they're gunning for Tesla because
Speaker 2: it's a little bit more of a higher end play.
Speaker 2: But hang on for a second. I do want to
Speaker 2: bring in Amy or who follows the IPO market for us. Amy,
Speaker 2: as we mentioned out of the gate Strong showing, how
Speaker 2: would you characterize this and get into that Jeli has
Speaker 2: indicated that it is going to subscribe to more than
Speaker 2: ninety percent of the stock, so they're going to own
Speaker 2: a lot of it. It sounds so put it all
Speaker 2: in perspective for us well.
Speaker 5: So to start off with, I would say that this
Speaker 5: is one of those deals that we've been waiting for
Speaker 5: a very long time because a is ev Ipo, but
Speaker 5: is also a Chinese company of sizeable size that we
Speaker 5: haven't seen in a very long time. And so it's
Speaker 5: great that it's going up. And as you mentioned, ninety
Speaker 5: percent of it, it was already sold like before it
Speaker 5: actually started the road show, So which is good to
Speaker 5: actually provide a good base and foundation for the stock
Speaker 5: to go up at a time when, like Steve was
Speaker 5: mentioning that ev is not actually particularly kind of doing
Speaker 5: well across.
Speaker 2: The But does it show that Jilie was a little
Speaker 2: am I saying it right too. We had some debate
Speaker 2: Jill Jillie, Jillie, Okay, we want to make sure we've
Speaker 2: got it correct because there was a little bit of
Speaker 2: a debate in the newsroom. But is it assigned to that?
Speaker 2: Jillie was a little concerned about maybe the interest amid
Speaker 2: kind of the broader EV backdrop.
Speaker 5: To be honest, I would say that just IPOs as
Speaker 5: a whole has been kind of choppy, and then particularly EV.
Speaker 5: And then given that at the time of the pricing
Speaker 5: it was only five point two billion in market cap
Speaker 5: and then now it's went up to around seven billion or.
Speaker 2: So billion they were talking about a year a.
Speaker 5: Far away from that. I'm sure there were conservatism right there,
Speaker 5: just to make sure that there is a good base
Speaker 5: that it was not like three or even below. So
Speaker 5: definitely there is a bit of that, and probably also
Speaker 5: Jilly wants to continue to hold a little bit more
Speaker 5: of that looking at the future growth of the company.
Speaker 5: Especially we're talking about this is the high end side
Speaker 5: of the market. It's not the math market that we've seen.
Speaker 5: Bradbrick has reported before that there were some headwinds there
Speaker 5: as well, so, yeah, and how to go beyond the
Speaker 5: Europe market and beyond the Chinese market, going to Europe
Speaker 5: and other places as well.
Speaker 3: So Steve, talk a little bit about that, because it's
Speaker 3: kind of the perfect segue to what you cover as
Speaker 3: Bloomberg Intelligence Global Autos and Industrial Research analysts. What exactly
Speaker 3: are the vehicles that are being offered. Carol did allude
Speaker 3: to the idea that they do compete with Tesla, but
Speaker 3: but paint a picture of this company for a lot
Speaker 3: of people I think listening and watching right now who
Speaker 3: have probably never before today heard of this company.
Speaker 4: Yeah, Zeeker is born out of jil the It's you know,
Speaker 4: it's it's one. It's the parent company Dredge and Gil.
Speaker 4: You know, it's it's related to the one seven to
Speaker 4: five HK that's listed in Hong Hong. I mean a
Speaker 4: lot of They offer two vehicles right now. One is
Speaker 4: an SUV. One is to sit there. It's a pure
Speaker 4: battery ev It's selling at around thirty seven to forty
Speaker 4: thousand US dollars in China. That's about the same price
Speaker 4: as the Model three and Model Y over there. I
Speaker 4: think what's really unique about Zeker and a lot of
Speaker 4: the Chinese brands over there is there can They're all
Speaker 4: called considered smart cars okay, with great connectivity apps that
Speaker 4: resonate with the consumers. Very different consumer base over there.
Speaker 4: So I think they're going to try to export that
Speaker 4: that type of UH offering to the globe. And I
Speaker 4: think listing the shares here it's gonna it's gonna help
Speaker 4: bring the brand cachet not only in China, but it's
Speaker 4: gonna get the name out there on a global basis.
Speaker 3: Hey, Steve, people here Zili and they think, I think
Speaker 3: Volvo here in the US, then maybe they hear Volvo,
Speaker 3: they think cole Star, which is, you know, an EV
Speaker 3: that is sold here in the US, a pretty high
Speaker 3: performing lie.
Speaker 2: I was in a cool Star out on the West Coast.
Speaker 3: Pretty cool. What's the Polestar relationship with Zeker, Like, how
Speaker 3: can we think about it like a corollary?
Speaker 4: Yeah, that's a good question. I think if I think
Speaker 4: a lot of the design cues that's UH that's in
Speaker 4: the Zeker, A lot of technology within the Zeker brand,
Speaker 4: e V brand it's actually shared between JE, between Polestar,
Speaker 4: uh And and Vovo. And there's actually another another brand
Speaker 4: called Lincoln co that's it's not available. I else swear
Speaker 4: only in China. And uh so all all those companies
Speaker 4: are actually related. Zeker's actually Zeker's R and D headquarters
Speaker 4: actually is in Gothenburg, Sweden.
Speaker 2: Hey, listen, one more in the company than I want
Speaker 2: to go back to amy. But I do think about
Speaker 2: the Chinese EV market. How crowded, Steve, is it getting?
Speaker 4: Oh, it's very crowded. It's a hyper competitive market. As
Speaker 4: you probably heard, deep discountings happening, been happening in the
Speaker 4: last year and a half. Uh And it's it's it's
Speaker 4: it's interesting because the auto industry, the EV makers, the
Speaker 4: Chinese event makers, are very much vertically integrated over there,
Speaker 4: so they they mine the lithium, they make the batteries
Speaker 4: and then as well as the software, quite different than
Speaker 4: how it works here. And I think in the earlier
Speaker 4: segment you talked about tariffs in the US, and that's
Speaker 4: it's really necessary that the US put these policies in
Speaker 4: place because to compete effective with the Chinese. Uh, the
Speaker 4: auto industry needs to be vertically much more vertically integrated.
Speaker 4: The supply chain needs to be much more vertically integrated
Speaker 4: than it is now. To really compete effectively with the
Speaker 4: Chinese really important.
Speaker 2: You mentioned the price cuts though, Chinese best selling car
Speaker 2: maker Buid slashing prices across much of its lineup this year,
Speaker 2: so that is certainly the backdrop there. Amy come on
Speaker 2: back in an IPO market out at Milkin. We talked
Speaker 2: with the M and A guys. They think it's starting
Speaker 2: to come and you know, come a little bit more activity.
Speaker 2: The significance of this one actually doing well out of
Speaker 2: the gate, is it something particular that it's Chinese, that
Speaker 2: it's an ev maker, or is it just kind of
Speaker 2: good to just see an issue come out and actually
Speaker 2: do well in its first day of trading.
Speaker 5: Definitely, we just want any ipo to trade well at
Speaker 5: this point I kind of feel. But then, like as
Speaker 5: a Chinese IPO, I would say that the biggest hurdle
Speaker 5: is not for a Chinese company to actually do well.
Speaker 5: It's really about whether Chinese government is going to really
Speaker 5: release the kind of flood of Chinese companies waiting to
Speaker 5: actually get listed here and is there a lot just waiting? Definitely,
Speaker 5: And essentially Chinese companies used to actually form the bulk
Speaker 5: of US listings as well. And also the fact that
Speaker 5: I think reut is, if I remember correctly reported this
Speaker 5: earlier this morning, that she is actually going for London
Speaker 5: as well. So essentially, these are the kind of headwinds
Speaker 5: political headwinds that we're feeling that is going to hamper
Speaker 5: the kind of Chinese companies coming to the US.
Speaker 3: So what are you watching in the next few weeks,
Speaker 3: in the next few months as an indication from the
Speaker 3: Chinese government from the way that investors receive Zeeker, that
Speaker 3: might indicate that we could see more IPOs from China
Speaker 3: listed companies.
Speaker 5: Steve mentioned that this company technically is not headquartered in China,
Speaker 5: but it's got very strong ties with China that we
Speaker 5: always kind of see it as a Chinese company per se.
Speaker 5: But there are also quite a few like I think
Speaker 5: san Is in the same bucket as well, Bite Dance
Speaker 5: in the same bucket as well, that they're headquartered elsewhere,
Speaker 5: but then we generally just see them as Chinese companies.
Speaker 5: But I don't feel that there is a yeah, a
Speaker 5: floodgate being opened right now is still kind of yeah, trickle,
Speaker 5: it's on a date case my case basis.
Speaker 2: Hey, Steve, just twenty five seconds here, Joe Matthew tried
Speaker 2: to push this the official over at Zeker about Chinese
Speaker 2: government involvement in this in this company in Zeker, what
Speaker 2: do we know and forgive me just got about twenty
Speaker 2: five seconds.
Speaker 4: Yeah, it's actually a private company, Julie. So I mean
Speaker 4: there's yeah, always giving subsidies. Yeah, so you know, there
Speaker 4: are some ties, but it's a private company, all right.
Speaker 2: Gonna leave it on that note. Guys, thanks, We came
Speaker 2: at it from different sides, so so appreciate it. Steve
Speaker 2: Mann out there at our Bloomberg Intelligence headquarters in Princeton,
Speaker 2: New Jersey, Steve is global Autos and industrials research analysts.
Speaker 2: And then right here in our studio, our Amy or
Speaker 2: equity capital markets reporter, as we said, watching the IPO
Speaker 2: market this as we see Zeker shares, they're uptim roughly
Speaker 2: about thirty three percent.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 1: live weekday afternoons from two to five pm Eastern Listen
Speaker 1: on Apple car Play and then brout Auto with a
Speaker 1: Bloomberg Business ACP, or watch us live on YouTube.
Speaker 2: As we talked about earlier our Bloomberg exclusive about President
Speaker 2: Biden getting ready to hit hard on China EV's with
Speaker 2: tariffs as soon as next week. That's according to folks
Speaker 2: familiar at the Wall Street Journal doing some reporting on
Speaker 2: this as well, saying those tariffs could quadruple. So it's
Speaker 2: one of our big stories certainly on this Friday.
Speaker 3: Yeah, Bloomberg News reporting today that China is losing its
Speaker 3: luster is a top country to invest in a sperm
Speaker 3: seek to avoid geopolitical risks and turn to Southeast Asia
Speaker 3: and Europe, according to a survey by the European Union
Speaker 3: Chamber of Commerce in China. So we thought we'd get
Speaker 3: a perspective from Ben Harberg. He's founder in portfolio manager
Speaker 3: at Core Values Alpha. He joins us where it is
Speaker 3: very early in the morning in Beijing, the Core Values
Speaker 3: Alpha Great China Growth ETF. It's got about eight million
Speaker 3: dollars in total assets. It's ked about six percent so
Speaker 3: far here to date.
Speaker 2: Normal people would be asleep. I'm just going to put
Speaker 2: that out there, Ben. Anyway, we appreciate you getting up.
Speaker 2: It is hard to get your head and hands around
Speaker 2: if you will, China being investible investible today, especially on
Speaker 2: a day like today where you've got a very successful
Speaker 2: Chinese ev MA ipoing here in the United States, and
Speaker 2: then you've got, of course, what seems to be more
Speaker 2: tariffs coming on that market, pushed back on Chinese made
Speaker 2: goods coming to the United States, if you will. So,
Speaker 2: having said that, why is China investible in your view?
Speaker 2: Because it looks like, you know, there isn't a lot
Speaker 2: of investor interest, I think you.
Speaker 6: Have to separate the tariffs from the realities on the
Speaker 6: ground and the scale and growth of Chinese businesses and
Speaker 6: the demand.
Speaker 7: Of Chinese consumers.
Speaker 6: So, if anything, the tariffs are the direct result of
Speaker 6: the success of Chinese companies. If I were the Biden administration,
Speaker 6: I'd also be looking to bolster American auto industry support,
Speaker 6: if that's domestic subsidies in the United States or hitting
Speaker 6: hard on Chinese exports because because they're falling behind, the
Speaker 6: Americans simply don't have that kind of vertical integration that
Speaker 6: the Chinese evs and the kind of the case study
Speaker 6: that we're talking about have. And so the net result
Speaker 6: of all that is I think that that actually belies
Speaker 6: a really strong Chinese market a significant threat to incumbent
Speaker 6: interests across a lot of the key verticals. One would
Speaker 6: say that, for instance, a lot of the pushback against
Speaker 6: the likes of Tencent or TikTok is again driven by
Speaker 6: that by you know, the success it's had against incumbents
Speaker 6: like Meta or Snap or others. So I wouldn't look
Speaker 6: too too deeply into tariffs to explain the challenges facing
Speaker 6: the Chinese market, only that they might ultimately scare away
Speaker 6: some investors who see that type of headline risk.
Speaker 3: Then, is that the way that this is presented in
Speaker 3: Chinese media? Is it the way that that you view
Speaker 3: it within China? That these tariffs and the reaction that
Speaker 3: lawmakers here in the US have to TikTok parent Byte
Speaker 3: Dance is the result of success of those companies.
Speaker 7: I think they do.
Speaker 6: I think they perceived that. I mean, and you know,
Speaker 6: there was leaked internal audio from you know, the likes
Speaker 6: of Mark Zuckerberg, who was just simply stunned by the
Speaker 6: success of TikTok against his platform and even tried to
Speaker 6: create a replica and named Last So that just absolutely
Speaker 6: got demolished by it.
Speaker 3: And we're going to see this across all verticals.
Speaker 6: It's not just electric vehicles, it's not just a social
Speaker 6: media and short form video. The likes of Shean and
Speaker 6: Tembu are penetrating deeply into American fast fashion brands, American
Speaker 6: online incumbents like Amazon, or even offline retailers like a
Speaker 6: Dollar General, and so I think that necessitates action from
Speaker 6: the US side to protect those incumbent industries. But it
Speaker 6: says nothing about the success of those Chinese business where
Speaker 6: I think are doing very well in their own right.
Speaker 6: And China, as you know, builds companies that are built
Speaker 6: for that digital native population, that next generation of consumers,
Speaker 6: and that's why the likes of TikTok and Shean are
Speaker 6: doing so well against their American incumbents, which are more
Speaker 6: built for folks like us that went through this longer
Speaker 6: retail online evolution.
Speaker 2: So Ben talk to us about the core values alpha
Speaker 2: Great China Growth. Atf It's got about eight million dollars
Speaker 2: in total assets. It's up about six percent year to date.
Speaker 2: So is the idea of the fund and the opportunity
Speaker 2: that you're betting on Chinese domestic growth and those Chinese
Speaker 2: companies that sell domestically or is it the Chinese company
Speaker 2: that sells to the rest of the world.
Speaker 1: So we do both.
Speaker 6: We see huge continued demand from the Chinese domestic consumer,
Speaker 6: and so we're investing in that kind of what we'd
Speaker 6: call kind of down consumption, downgrade and re shoring of
Speaker 6: domestic behavior. And so that includes domestic brands, so domestic
Speaker 6: cosmetics brands, domestic quick service restaurants, domestic FMCG brands, but
Speaker 6: also that includes domestic travel and other things that are
Speaker 6: benefiting from people staying home rather than going abroad. Then
Speaker 6: of course we invest in those cross border players, both
Speaker 6: that are integrated on the hardware side, like the voids
Speaker 6: of the world, as well as those that I mentioned previously,
Speaker 6: the likes of Temu and their parent company, Pinduo Duo,
Speaker 6: which is doing incredibly well well.
Speaker 2: But tell me about okay, so tell me about your
Speaker 2: cap raise. Your fundraising eight million dollars in assets does
Speaker 2: seem like a lot of money under management, So talk
Speaker 2: to me. You know, we talked last time in February.
Speaker 2: What kind of flow are you getting in terms of assets,
Speaker 2: because it does feel like investors are pretty tentative still.
Speaker 6: So again, you know, our background is on the private side,
Speaker 6: where we manage over two billion dollars, so certainly fry
Speaker 6: our standards. This is a small AUM as well. I
Speaker 6: think it is largely different by American sentiment towards China
Speaker 6: and particularly global sentiment of folks that would invest in ETFs.
Speaker 6: And I think we're starting to now see that our
Speaker 6: etf uh, you know, for one of the months of
Speaker 6: this already beat the SMP. It's beating all the other
Speaker 6: kind of China ETFs since it's since it's launched as well,
Speaker 6: and so but we've still got to see that kind
Speaker 6: of investor sentiment toward and towards China. And I think
Speaker 6: that's less about geopolitics and more about returns. If I
Speaker 6: was an investor to day, I would have kept my
Speaker 6: money closer to home because the Nasdaq and NYC have
Speaker 6: been ripping, and there's no reason not to continue to
Speaker 6: keep to do that because all the geopolitical noise is,
Speaker 6: you know, is irrelevant if the if the if, the
Speaker 6: returns are there. And so our belief is that as
Speaker 6: we're starting to see these markets botton me and you
Speaker 6: finally saw a lot of that capital was flowing to
Speaker 6: Japan and else, we're finally coming back into China, coming
Speaker 6: back into Hong Kong. I think that rising title lift
Speaker 6: all boats, and then we really like our head to
Speaker 6: head chances against the other Chinese TF because we're actively managed,
Speaker 6: and we also try to filter out, you know, geopolitical
Speaker 6: risk or threats to American national security.
Speaker 3: Hey, Ben, China. Carol just mentioned the idea that China,
Speaker 3: you know, quote unquote uninvestible. It's a question that we've
Speaker 3: been asking for a couple of years now, since a
Speaker 3: prominent bank brought it up a few years ago, and
Speaker 3: even at Milkin this year one of the panels, one
Speaker 3: of the panelists was asked, I think it was the
Speaker 3: CEO of Capitol Group was asked, if China is uninvestable
Speaker 3: right now? What would you say to somebody who argues
Speaker 3: with you and says, you know what, given the geopolitical concerns,
Speaker 3: given the domestic concerns, given what's happening with the government there,
Speaker 3: I don't believe that China's investible. What would you say
Speaker 3: to that person?
Speaker 6: The numbers would tell you that's not the case, right,
Speaker 6: So the numbers would tell you that China is growing
Speaker 6: at about double the pace of the United States. If
Speaker 6: you're interested to know their emerging markets, let's say Southeast Asia,
Speaker 6: which you guys mentioned earlier on the program. China is
Speaker 6: the process of urbanizing people from rural communities and second
Speaker 6: third tier cities. The first tier cities that urbanization alone
Speaker 6: and generate a customer base that's two times the size
Speaker 6: of Indonesia.
Speaker 3: Ben, sorry, I want to jump in real quick because
Speaker 3: we only have thirty seconds left. Does that growth number
Speaker 3: even matter if the government can intervene at the drop
Speaker 3: of a hat.
Speaker 6: The government had made changes over the last few years
Speaker 6: that were more to defend against what they believed were
Speaker 6: antitrust or other monopolistic actions by large Chinese technology companies.
Speaker 6: But overall, the Chinese government is still very much growth
Speaker 6: friendly and has now turned all of its attention on
Speaker 6: improving global investor companies in its public markets.
Speaker 2: All right, we're going to leave it there. Hey listen,
Speaker 2: thanks so much, and again thanks. We know it's three
Speaker 2: hours there in China, so we appreciate you getting up
Speaker 2: for us. Ben Harberg, founder and portfolio manager at Core
Speaker 2: Values Alpha, joining us from Beijing. As we mentioned, the
Speaker 2: Core Values Alpha Great China Growth ETF about eight million
Speaker 2: in total assets. It's up about six percent so far
Speaker 2: here in twenty twenty four.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Listen live
Speaker 1: each weekday starting at two PM Eastern not Applecar Play
Speaker 1: and Android Auto with the Bloomberg Business App. You can
Speaker 1: also listen live on Amazon Alexa from our flagship New
Speaker 1: York station Just Say Alexa playing Bloomberg eleven Thirty's the
Speaker 1: Jersey's Fun and where You're Headborner.
Speaker 7: The Jersey Bounce Well.
Speaker 3: New Jersey is known for a lot of things. I
Speaker 3: think it's fair to say the best tomatoes in the
Speaker 3: nation is that true.
Speaker 2: Horse farms, incredible beaches, great public education in some areas.
Speaker 3: Bruce Springsteen, and I was born there the Jersey Shore.
Speaker 3: I was born there, Bell Labs and a lot of
Speaker 3: stuff Ferrel Master's home stage.
Speaker 2: Yes, indeed.
Speaker 3: Our next guest, though, wants to make it known for
Speaker 3: even more, including the Hall of the East as well
Speaker 3: as an exemplar for clean energy. We got with us
Speaker 3: Tim Sullivan, CEO of the New Jersey Economic Development Authority,
Speaker 3: also known as NJEDA. It's the agency responsible for driving
Speaker 3: economic growth and development and to create jobs in the
Speaker 3: Garden State. Tim here in the Bloomberg Interactive at Brokers Studio. Welcome,
Speaker 3: how are you.
Speaker 7: I'm doing great? Thanks much for having me over. Well,
Speaker 7: thanks for.
Speaker 2: Joining us here, And we should say just full disclosure.
Speaker 2: You actually worked with Mike Bloomberg.
Speaker 7: Right four is a better word for it. He was
Speaker 7: the mayor and I was on the staff. But yeah,
Speaker 7: it was a great career highlight to be part of
Speaker 7: the mayor's team.
Speaker 3: So from city Hall in New York to Connecticut, then
Speaker 3: to the state of New Jersey, back.
Speaker 7: To my home state. When Governor Murphy became governor, I
Speaker 7: got elected in late twenty seventeen, I got a chance
Speaker 7: to come home and work for the home team.
Speaker 3: Yeah, so talk to us about not just the biggest
Speaker 3: challenge when it comes to economic development, but what you
Speaker 3: see as the biggest opportunity for the state of New
Speaker 3: Jersey when it comes to economic development.
Speaker 7: Yeah, we see Governor Murphy sees huge opportunities in front
Speaker 7: of us. You mentioned a couple in the intro film
Speaker 7: and TV for sure, clean Energy and Officer wind Ai
Speaker 7: and what that means for New Jersey and what that
Speaker 7: means for the world. Those are three, you know, huge
Speaker 7: opportunities that we're attacking pretty agressively.
Speaker 2: I think it's really interesting. You know, New Jersey has
Speaker 2: also been known, you know, a big time for the
Speaker 2: pharmaceutical industry. But I do feel like a reboot is
Speaker 2: kind of needed and necessary. Tell us how you see it,
Speaker 2: Give us the backdrop of what's been going on in
Speaker 2: terms of economic development in New Jersey and kind of
Speaker 2: what needs to be doing, how you're hoping to change it.
Speaker 7: Yeah, one of the big priorities for Governor Murphy's is
Speaker 7: economic diversification. So you know, farm and life sciences is
Speaker 7: still a huge calling card for us. We're home to
Speaker 7: a huge concentration of you know, global headquarters and US
Speaker 7: headquarters for big multinational farming companies, and we've seen a
Speaker 7: huge continued surge in that industry. But we want to
Speaker 7: diversify as well. So film and TV is a great
Speaker 7: example of that. You know, the motion picture camera was
Speaker 7: invented by Thomas Edison in New Jersey. Fort Lee was
Speaker 7: Hollywood before there was Hollywood. We're trying to win it
Speaker 7: back and we're not alone in that journey. So Netflix
Speaker 7: is committed to building a billion dollar production facility in
Speaker 7: Mammoth County at the Old Fort Mammoth. We just announced
Speaker 7: plans to see another major facility built in bay Own.
Speaker 7: There's a bye A developer that's going to build a
Speaker 7: prouct called eighteen eighty eight Studios. Eighteen eighty eight was
Speaker 7: when Thomas Edison invented the motion picture camera. Y, so
Speaker 7: it's a bit of a nod to our history. And
Speaker 7: then in the southward of rep by Newark Airport is
Speaker 7: another product by Lionsgate to develop a world class studio
Speaker 7: as well. So we're on the cusp of something big.
Speaker 3: Joe was just a Newark Airport earlier this morning, so real, Yeah,
Speaker 3: me too.
Speaker 2: It was a little quiet.
Speaker 7: It was a little quiet.
Speaker 3: There's not a quient when I was there. There's actually
Speaker 3: a lot of traffic coming into the city when I
Speaker 3: came in.
Speaker 2: Well, it's because everybody was going to work, Yes, exactly, tim.
Speaker 2: One thing I want to ask, what is taken that
Speaker 2: I have done. I remember early in my career doing
Speaker 2: a piece about does it really pay to develop kind
Speaker 2: of movie entertainment that industry because the tax breaks that
Speaker 2: are often necessary to bring the business in tell us
Speaker 2: about the business model there.
Speaker 7: Yeah, we see huge upside here. It does absolutely require
Speaker 7: upfront investment. You know, we have a tax credit program
Speaker 7: that Governor Murphy brought back, which we think is most
Speaker 7: combination of the most competitive and most progressive. So it
Speaker 7: does things like in awards and rewards, diversity both in
Speaker 7: front of them behind the camera, but the returns we
Speaker 7: see on the job side, So you know we're going
Speaker 7: to see and particularly our incentive program in the sonthing,
Speaker 7: Governor Murphy's spent a lot of time making sure we're
Speaker 7: emphasizing is encouraging brick and mortar construction because that's how
Speaker 7: you're going to get development of facilities that are going
Speaker 7: to be full all the time. So Netflix is going
Speaker 7: to is going to build this billion dollar facility. They're
Speaker 7: going to keep that thing hum and that means lots
Speaker 7: of permanent jobs, not in front of the camera.
Speaker 2: It's a case of bringing a movie in for six
Speaker 2: months and then having them gone correct.
Speaker 7: Those are permanent careers. And that's not just you know
Speaker 7: that's in film production, but that's in hair and makeup,
Speaker 7: that's in craft services, that's in carpentry and electric electrician
Speaker 7: work and all that overwhelmingly union jobs as well. So
Speaker 7: we see huge upside there.
Speaker 3: How do you make sure that it's not a race
Speaker 3: to the bottom, because you're competing with not just New York,
Speaker 3: which is so close and also very well known when
Speaker 3: it comes to entertainment, you have big stuff happening in
Speaker 3: Queens and Brooklyn right now when it comes to this
Speaker 3: type of stuff Silver Cup Studios for example, and then
Speaker 3: also in Canada, which is just a huge place for
Speaker 3: filming movies and TV shows right now. How do you
Speaker 3: make sure that you know the incentives that you're offering
Speaker 3: in the long run are actually beneficial rather than taxing
Speaker 3: New Jersey.
Speaker 7: Yeah, Again, the returns we think we're going to see
Speaker 7: are significant on the job side. So again, the permanent
Speaker 7: jobs that we hope to see be built and the
Speaker 7: construction jobs we'll see in the development these facilities as well.
Speaker 7: We also see an opportunity to take share from other.
Speaker 3: Places, but those jobs don't necessarily lead to economic development
Speaker 3: if nobody comes and uses those studios. Oh sure, yeah, no,
Speaker 3: we think that's what I mean, Like you're you're competing
Speaker 3: for every moment there.
Speaker 7: Absolutely, But that's why, you know, having a partnership with
Speaker 7: someone like Netflix who is going to build and develop
Speaker 7: their own studio and personally going to keep it fill
Speaker 7: full with their own stuff, and they're you know, they're
Speaker 7: certainly a partner we're thrilled to be betting on because
Speaker 7: they're we think they're you know, one of, if not
Speaker 7: the leaders of the streaming kind of revolution and the
Speaker 7: winners of the streaming wars and all that. And so
Speaker 7: we see huge, huge, permanent job creation opportunities. And then
Speaker 7: also you know there's you know, we will continue to
Speaker 7: have to you know, be on our front foot and
Speaker 7: be competitive on the tax credit side. Our program. One
Speaker 7: of the things that's important about our program is it's
Speaker 7: on the books until twenty thirty nine. So from a
Speaker 7: predictability perspective, if you're putting on the TV side, if
Speaker 7: you're a show runner and you hope to do four
Speaker 7: or five, six, seven, eight, nine, tens seasons, which they're
Speaker 7: all hoping for, our program will be there for them.
Speaker 2: So they so they understand they have till twenty thirty
Speaker 2: nine that they get those benefits.
Speaker 7: Yeah. Absolutely, And it's an important part of our of
Speaker 7: our marketing.
Speaker 2: How quickly do the benefits though, Okay, so there's the
Speaker 2: benefit outlay, how quickly does the kind of payback come
Speaker 2: to the state of New Jersey.
Speaker 7: PAYDA happens almost right away. It's one of the exciting
Speaker 7: things about you know, film and TV. You know, you
Speaker 7: have a movie, even if it is just coming for
Speaker 7: a couple of months to shoot. You know, there's a
Speaker 7: movie shooting right now. That's a pretty high profile movie
Speaker 7: that's shooting all throughout the state. They're they're spending a
Speaker 7: lot of money. They eat a lot of pizza, They
Speaker 7: do a lot of dry cleaning. Which movie is this,
Speaker 7: It's called a Complete Unknown. Timothy Shallon is in it.
Speaker 7: It's a Bob Dylan bio.
Speaker 3: Yeah, they're also filly in New York.
Speaker 7: They film a bit of a New York city. If
Speaker 7: it's not that we're competitive, but it's more in Jersey
Speaker 7: than New York.
Speaker 2: We're competitive, always competitive.
Speaker 7: We're really competitive.
Speaker 2: Who really owns the statue?
Speaker 7: Let's just like talk to actual liberty. Is a Jersey girl.
Speaker 7: I know, I know, you can have an emotional argument
Speaker 7: some other way, but she lives in New Jersey.
Speaker 3: You can't see you can't see this, Yes, you can't
Speaker 3: in favor of it. A Jersey card, I know, but
Speaker 3: it's like I got, you know, two I'm surrounded by
Speaker 3: two New.
Speaker 7: Jersey people right here.
Speaker 2: So and a California guy. Let's talk about alternative energy,
Speaker 2: renewable renewables coming back from milk and another big theme
Speaker 2: and a lot of it has to do with artificial intelligence.
Speaker 2: All the data centers that are going to be needed
Speaker 2: to do all of that really kind of amped up
Speaker 2: computing necessary for AI machine learning, if you will, a
Speaker 2: lot of investments going into the data centers. But tell
Speaker 2: us what the strategy is for New Jersey.
Speaker 7: Well, around energy. You know, our biggest initiative is offshore wind.
Speaker 7: New Jersey has a huge opportunity and the Governor murphya
Speaker 7: set the most aggressive target for offshore winded option in
Speaker 7: America in New Jersey. So we're going to hope to
Speaker 7: or plan to generate eleven giga wats of power from
Speaker 7: off of our shores. That's enough to fuel or power
Speaker 7: every home in most businesses in New Jersey. So it's
Speaker 7: a huge incremental energy generation framework. And we're right now
Speaker 7: net importers for every home and business enough power too.
Speaker 7: How long does it take until that we hit that
Speaker 7: goal p Twenty three somewhere in that range the goals
Speaker 7: twenty thirty five, okay, and so that that's contingent on
Speaker 7: you know, the development of lots of wind farms over
Speaker 7: the next decade or two. Governor Murphy has provided all
Speaker 7: the resources we think these companies need to build these farms,
Speaker 7: these wind farms as including things like building import in
Speaker 7: South Jersey to support the development of it.
Speaker 3: What happens if former President Trump wins in November to
Speaker 3: the state's ambitions when it comes to wind, And here's
Speaker 3: why I ask our own gender Lui's got a story
Speaker 3: out today about wind farmers bracing for Trump's next salvo
Speaker 3: as he visits the New Jersey Shore formn President Trump's
Speaker 3: vocal disdain for wind farms is another worry for developers
Speaker 3: who faced high costs and supply chain woes. President Trump
Speaker 3: is going FORGM. President Trump is going to hold a
Speaker 3: rally on the beach in Wildwood, New Jersey this weekend,
Speaker 3: a state that's become the frontline for fights over the
Speaker 3: future of offshore wind.
Speaker 7: It'd be hard to argue that it will be helpful
Speaker 7: to the to the wind industry, you know. That being said,
Speaker 7: I think one of the things that we're encouraged by
Speaker 7: as we think about the future offshore wind is the
Speaker 7: is the folks who are investing in Officer Wind are
Speaker 7: actually the big global energy players. So we have a
Speaker 7: wind farm that's poised to start construction soon that's backed.
Speaker 7: It's called Atlantic shores. It's back, it's half owned by Shell. Right,
Speaker 7: that is not a fly by night concern, nor is
Speaker 7: it someone who's it's committed to clean energy.
Speaker 2: Yeah, it's got its permits, it's all ready to go.
Speaker 7: It has a few more permits to get through that
Speaker 7: those will hopefully happen this year. And so you know,
Speaker 7: there's a huge amount of capital that wants to invest
Speaker 7: in offshore wind, and generally speaking, I think the country
Speaker 7: has not failed to figure out ways to harness energy
Speaker 7: that's been out there. This is an industry that's has
Speaker 7: been through fits and starts. It'll be through go through
Speaker 7: more fits and starts, but we think the thirty fifty
Speaker 7: year trajectory of this industry and the sector is too
Speaker 7: important Strategically. Again, we're talking about controlling our energy future,
Speaker 7: not just as a state, but as a country. We're
Speaker 7: talking about tons of manufacturing jobs, talking about renewable energy
Speaker 7: and clean energy. There's too many reasons to care about this.
Speaker 7: So certainly, one of the reasons I think our administration
Speaker 7: is a big fan of the Biden administration approach on
Speaker 7: this is that he's all in on wind. You know,
Speaker 7: we'll see what happens in November. But it's an industry
Speaker 7: that has been through challenges, and like any new industry
Speaker 7: that's capital intensive, regulatorially complex, it's going to go through
Speaker 7: fits and starts. But we think the long term opportunity
Speaker 7: for New Jersey, for the Northeast as far down as
Speaker 7: Virginia and the Carolina is by the way, we're also
Speaker 7: pursuing offshore wind is too big.
Speaker 2: So could be some you know, starts and stops if
Speaker 2: we see someone else in the White House or a
Speaker 2: different if a turnover. But having said that, you're saying
Speaker 2: the long, longer term trends are in place. So even
Speaker 2: if there's a slow in permitting for wind farms in
Speaker 2: New Jersey, you're saying tim that longer term, that that's
Speaker 2: the push you can see it happening.
Speaker 5: Yeah.
Speaker 7: Again, I think the rationale for energy independence, for the
Speaker 7: emissions framework, for the job creation and economic development impact,
Speaker 7: it's too big. There's too many there's too many reasons
Speaker 7: to like offshore wind to turn our back on it
Speaker 7: long term. And some of these wind farms that were
Speaker 7: just approved in New Jersey about six months ago are
Speaker 7: as far as forty miles off the shore. So unless
Speaker 7: you have access to the Hubble telescope. You cannot see
Speaker 7: that from the from the shore.
Speaker 2: I'm a sailor and for the first time of off
Speaker 2: of Long Island sound coming up like on Block Island,
Speaker 2: like to see them. I really haven't seen them in
Speaker 2: the past, and it was kind of interesting. I mean,
Speaker 2: they're they're way off shore and it's kind of interesting.
Speaker 7: But they were they spinning.
Speaker 2: They were spinning. I didn't get that close. Yeah, you
Speaker 2: want to get something so from a distance, but it
Speaker 2: was like, what is that? Then you realize that those
Speaker 2: are wind farms out there and you're listen. I am
Speaker 2: full of transparency. I'm all in unclean energy.
Speaker 4: Hey.
Speaker 3: One thing that I wanted to ask you about, Tim
Speaker 3: was congestion pricing, because it's a huge topic here in
Speaker 3: New York City. If you don't if you walk, uh,
Speaker 3: not too far from here, you'll actually see the infrastructure
Speaker 3: in place to charge commuters who come from it come
Speaker 3: into the city in certain parts of it each day.
Speaker 3: When that program is launched later this year, how do
Speaker 3: you think about that from a New Jersey economic development perspective?
Speaker 3: Because the governor has made no secret about his opposition
Speaker 3: to it, Does it affect your world at all.
Speaker 7: Yeah, I think, you know, those comments mostly the Governor Murphy,
Speaker 7: who's who's not been shy about his take on this.
Speaker 7: There's some there's an actively a gation underway that is
Speaker 7: not a good thing for me to comment on. Yeah,
Speaker 7: I think it's certainly, you know, it changes the framework
Speaker 7: of you know, how people think. If it's gets more
Speaker 7: expensive to go somewhere and do something, it gets harder
Speaker 7: to do it usually, And so you know, if you're
Speaker 7: a business in New York City that's thinking about you know,
Speaker 7: it's customers, it's suppliers, it's trucks. You know, we think
Speaker 7: it makes New Jersey all the more attractive. That's interesting,
Speaker 7: we you know, So I think it's you know, we'll
Speaker 7: see how this all plays out. But again, I think
Speaker 7: the Governor has also been clear he does not oppose
Speaker 7: congestion pricing, you know, in all, in any form. And
Speaker 7: I think the way this was gone about has met
Speaker 7: with some concern from from him and from our administration.
Speaker 7: But you know, he's not a hell no on all
Speaker 7: and congestion pricing. But I think the way this has
Speaker 7: been proposed, you know, we think is detrimental to New
Speaker 7: Jersey from a health and other perspective, other perspectives. But yeah,
Speaker 7: I think it's certainly. I don't think it's going to
Speaker 7: be a revolutionary impact on the economic development framework. But
Speaker 7: then the competition between the usually friendly competition between you know,
Speaker 7: New York and New Jersey and the tri state area.
Speaker 7: But it's it's certainly probably it's a it's a pebble
Speaker 7: on the stone on the scale on our side.
Speaker 2: We started, you know, and we talked a little bit
Speaker 2: about you know, healthcare, pharmaceuticals. It's been such a backbone
Speaker 2: I feel like, or an important part uh in terms
Speaker 2: of New Jersey when it comes to business development. What's
Speaker 2: new on that front and what are you seeing, whether
Speaker 2: it's AI again coming back from Milkin and people talking
Speaker 2: about artificial intelligence, how it impacts things like drug development.
Speaker 2: So I'm just curious what you're seeing on that front.
Speaker 7: The arm momentum in life sciences is really good. Probably
Speaker 7: the best example of that is ken View, who just
Speaker 7: spin off, split spin off, was spun off or split.
Speaker 2: Off Friday, you can say anything.
Speaker 7: They just were separated out what the right word is
Speaker 7: from Johnson and Johnson. But they did a global search
Speaker 7: where they're gonna put their headquarters. They chose Summit, New Jersey.
Speaker 7: We just did a groundbreaking for that new facility that
Speaker 7: they're going to develop out there. So that's a good
Speaker 7: example of momentum. So band Aids and Listerine and isn't
Speaker 7: going anywhere from New Jersey. And then we've also seen
Speaker 7: you know, companies like ASI out of Japan have made
Speaker 7: big commitments to New Jersey. Gilead out of the West
Speaker 7: Coast is built its East Coast headquarters in New Jersey.
Speaker 7: So not just the you know Merks and Jay and
Speaker 7: Jays of the world, which we're thrilled to have continue
Speaker 7: to be headquartered in Jersey, but lots of new companies
Speaker 7: choosing New Jersey.
Speaker 2: Okay, you know where I'm going to go. We got
Speaker 2: thirty thirty forty seconds. So Tim, you're a tax payer
Speaker 2: in New Jersey. I'm a tax payer in New Jersey.
Speaker 2: Any of these that are they going to pay for
Speaker 2: themselves or am I going to be looking at paying
Speaker 2: more taxes?
Speaker 7: Yeah? You know, we think the one of the keys
Speaker 7: I think to our long term success in the state
Speaker 7: is growing in the pie and grow You're having more
Speaker 7: revenue you know coming into the state, more jobs, more employment,
Speaker 7: so that you know, it only provides either the resources
Speaker 7: to invest in things we need to invest in, because
Speaker 7: we've we're still catching up from a period of under
Speaker 7: investment before Governor Murphy was governors and things. Yeah, and
Speaker 7: things like infrastructure in our schools and our pension system.
Speaker 7: We catch up to do their on the fiscal side,
Speaker 7: so I think we'll continue to plow forward on growing
Speaker 7: as best we can.
Speaker 3: Are the taxes high? Are the taxes high?
Speaker 2: They have come pretty high for me, Tim, this was great.
Speaker 2: We really covered a lot. Thank you so much. It
Speaker 2: was interesting. Tim Sullivan, chief Executive Officer of the New
Speaker 2: Jersey Economic Development Authority, joining us here in our Bloomberg
Speaker 2: Interactive Brokers studio. You are listening in watching Bloomberg Business Week.
Speaker 2: I'm Carol Masser along with Tim Stanevik, and this is Bloomberg.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Can't just
Speaker 1: live weekday afternoons from two to five pm Eastern Listen
Speaker 1: on Apple car Play and Androut Auto with a Bloomberg
Speaker 1: Business act or watch us live on YouTube.
Speaker 2: Oh that's right. Everybody check the calendar man, because Mother's
Speaker 2: Day this weekend.
Speaker 3: I know it's no I didn't forget. I'm actually traveling
Speaker 3: this weekend, are you?
Speaker 1: Yeah?
Speaker 2: Oh yeah, away?
Speaker 3: Yeah, I'm going away.
Speaker 2: I'm going to Are you going to spend time with Mom? No,
Speaker 2: I'm not. Are you actually going to go spend time.
Speaker 1: With my wife? No, I'm not.
Speaker 7: It's bad.
Speaker 2: It's very, very bad. Christina. We got to help him out.
Speaker 3: Actually, I was actually, as I was burying this segment,
Speaker 3: I was like, is it too late for me to
Speaker 3: call Christina and get some flowers?
Speaker 1: Shift to Brooklyn.
Speaker 7: I don't know, I don't think it all right.
Speaker 2: Christina Stemble is back with us. She's found her in
Speaker 2: ceo farm Girl Flowers. She joins us from it looks
Speaker 2: like gorgeous where you are, gig Harbor, Washington, just outside
Speaker 2: of Seattle. So good to have you back with us.
Speaker 2: It is the super Bowl of the flower industry. Tell
Speaker 2: us how important. Just remind our folks how important this
Speaker 2: day is for you guys.
Speaker 8: Yes, thanks for having me back. Carroll and Tim and
Speaker 8: Tim we got to talk after this. No, Mom, we
Speaker 8: did just all out fifteen minutes ago. I might build
Speaker 8: to make an exception, but this is our definitely our
Speaker 8: super Bowl. We like to call it of our year.
Speaker 8: We do more revenue and more profit in this month
Speaker 8: than any other month of the year by a significant amount.
Speaker 8: You know, I think I talked about Valentine's Day with you.
Speaker 8: We do Mother's Days, you know, even more important than
Speaker 8: Valentine's Day, which really surprises people. We do usually double
Speaker 8: the revenue, but significantly somemost three to four times more
Speaker 8: in profit than Valentine's Day because flowers are you know,
Speaker 8: better priced around Mother's Day because it's not winter and
Speaker 8: there's less storms for redeliveries and things like that.
Speaker 3: You less to get the flowers, But the prices are
Speaker 3: the same for consumers or is there a little bit
Speaker 3: of wiggle room.
Speaker 8: Yeah, there's a little wiggle room. We can get more
Speaker 8: varieties now so we can offer different price points. So
Speaker 8: some flowers like pa andies are still super high priced.
Speaker 8: We pay usually double before Mother's Day what we'll pay
Speaker 8: after Mother's Day for the same stems one week makes
Speaker 8: a huge difference, so buying demand right at its best.
Speaker 6: But we can hear.
Speaker 2: Pa andies your favorite flower totally.
Speaker 8: Yeah night. We pulled our consumers. Ninety two percent of
Speaker 8: them say peonies are their favorite flowers.
Speaker 2: I used to grow them, my mom, my grandmother, Like,
Speaker 2: they're just incredible flowers. I have a statistic for everybody.
Speaker 2: Consumers are expected to spend three point two billion dollars
Speaker 2: in flowers, while spending on greeting cards is expected to
Speaker 2: reach one point one billion. More money is spent from
Speaker 2: moms on Mother's Day than dad's on Father's Day. That's
Speaker 2: a lot.
Speaker 3: Sounds good to me, Christina.
Speaker 2: Fine, what we love is you kind of make the
Speaker 2: sausage for us a little bit, you know, or tell
Speaker 2: us what's involved in the flower business. It's not so easy.
Speaker 2: It looks so beautiful you get flowers. You're like, that
Speaker 2: was easy. It's not as easy though.
Speaker 9: No.
Speaker 8: Parish ability is so hard. I wish I would have
Speaker 8: known that back in twenty ten when I started farm Girl.
Speaker 8: It's so much harder. I wish, you know. I constantly
Speaker 8: talk about I wish we sold sweaters, so we could
Speaker 8: even put them on sale in June, but we can't.
Speaker 8: We have to We have to guess a full year
Speaker 8: in advance on what consumer spending is going to be
Speaker 8: the next year. And as you're just talking about, you know,
Speaker 8: the markets right now, we have no idea what environmental
Speaker 8: conditions we'll be in coming into play. You know, this year,
Speaker 8: most strict consumer businesses are really hurting, and so we're
Speaker 8: you know trying to figure out like what should our
Speaker 8: goal be, what should our productions be, But we have
Speaker 8: to do that so far in advance. So for this year,
Speaker 8: we were playing it safe. And thankfully, because we're bootstrapped,
Speaker 8: we can do that. We don't have to show you know,
Speaker 8: huge growth numbers for our investors and board. So I'm
Speaker 8: so great, so thankful and grateful for that. So we
Speaker 8: were just you know, I was gonna went into this
Speaker 8: holiday just saying, if we have a flat holiday, I
Speaker 8: said this to my team, if we have flat holiday,
Speaker 8: I'm gonna count that as successful. And we did have
Speaker 8: a better holiday than last year. So we're definitely counting
Speaker 8: our blessings right now. But it is such a risk.
Speaker 8: We always like we're standing at like a craps table
Speaker 8: rolling dice when we're putting in those pa andy orders,
Speaker 8: you know, nine months in advance sometimes to you know,
Speaker 8: we don't know how mother nature is going to react.
Speaker 8: This year actually was the first year and twenty years
Speaker 8: that we had domestic paeonies in time for Mother's Day.
Speaker 3: Why is that just because of the warm weather we've had.
Speaker 8: Yes, Yeah, because with the warm weather it made them
Speaker 8: pop earlier. Usually they come on with the week after
Speaker 8: Mother's Day. But that definitely threw wrenching things because domestic
Speaker 8: peenies are better than shipping them in from Europe and
Speaker 8: other locations, but we'd already placed orders further away. So
Speaker 8: then it's trying to figure out, like, how can we
Speaker 8: also incorporate some domestic penies and since we can get
Speaker 8: them this year, very last minutes, how do.
Speaker 3: You compete with the bigger players on this Christina? Because
Speaker 3: let's say, you know, it's is one hundred Flowers having
Speaker 3: the same challenges that you have for example, or are
Speaker 3: they able to mitigate it more because of their scale.
Speaker 2: Both.
Speaker 8: I think they have some of the same challenges that
Speaker 8: are you know, mother nature related or shipping partner related.
Speaker 8: We you know, I talked to our competitors often, and
Speaker 8: you know, we complain about, you know, the shipping delays
Speaker 8: and things like that that we're all trying to figure
Speaker 8: out last minute together, you know, Like you know, for
Speaker 8: our companies, that's we're not unique in that way. They
Speaker 8: one one hundred Flowers also has those same issues. You know,
Speaker 8: they don't have their own planes delivering other flowers, but
Speaker 8: they do have better you know, buying power than us,
Speaker 8: so I'm sure their flower costs are significantly cheaper than us,
Speaker 8: and they get probably first right refusal on a lot
Speaker 8: of them as well. So we don't, you know, we'll
Speaker 8: never be able to compete unless we're you know, doing
Speaker 8: hundreds and hundreds of millions of dollars. I think they
Speaker 8: did two point one six billion company wide last year,
Speaker 8: so we're not that scale, but with some of the
Speaker 8: same issues and some different ones well, And I also do.
Speaker 2: Think about, you know, I'm curious. I want to get
Speaker 2: your take on how the consumer's doing because I do
Speaker 2: think when it's something like Mother's Day, like we don't
Speaker 2: scamp typically, but I do wonder. But sometimes there are
Speaker 2: years that are tougher and you're like, I'm still going
Speaker 2: to do something, but maybe not as much. So give
Speaker 2: us an idea of what you're seeing in consumer buying
Speaker 2: trends for the holiday, maybe more broadly as well.
Speaker 8: Yeah, we have found over many years of research on this,
Speaker 8: that people spend more on their lovers than their mothers,
Speaker 8: so they actually spend way more on Valentine's Day than
Speaker 8: they do Mother's Day, maybe because they're buying for two
Speaker 8: of them. You know, they might buying for a mother
Speaker 8: in law and a mother. So we typically dower some
Speaker 8: lower price point options for Mother's Day more so than
Speaker 8: we do for Valentine's Day. And we thought that would
Speaker 8: be the case this this holiday. We you know, thought
Speaker 8: that people would be going because the economic climate right now.
Speaker 8: We thought that lower priced options would be the first
Speaker 8: to go. But we were wrong that way. We had
Speaker 8: a lot more people spending more than we anticipated this holiday.
Speaker 8: That was great but also bad because we didn't plan
Speaker 8: for that. So we had a lot more smaller options
Speaker 8: that were available on our site later, while the bigger
Speaker 8: ones sold out quickly.
Speaker 3: Wow, that's really interesting to hear.
Speaker 2: Yeah, right, because right if something changes last minute, you've
Speaker 2: already had your orders in, Right, you can't just like
Speaker 2: call up I don't know Costco and say hey I
Speaker 2: need right Like, that's not how it works in your business.
Speaker 8: Yeah, we're very flexible. So that's something that we are
Speaker 8: different than the big guys. We're more adaptable than any
Speaker 8: other company. I think at our scale in Flowers, we're
Speaker 8: told that by our partners, and we all use kind
Speaker 8: of the same partners.
Speaker 2: We can we change things quickly.
Speaker 8: Well, sometimes, if you know, one of our partners will
Speaker 8: cause one of our farms or costs and say that
Speaker 8: they have, you know, a huge flush of something, will
Speaker 8: be like, Okay, no problem, we'll take a photo of
Speaker 8: it that day with our cell phone, we'll put it
Speaker 8: on the site, and we'll be selling it by tomorrow.
Speaker 8: Where our bigger competitors plan way further out than we
Speaker 8: do and can't kind of adapt to that. So I
Speaker 8: really like that about our company. We try to stay
Speaker 8: agile that way.
Speaker 3: Hey, Christina, one of the things that we love just
Speaker 3: about talking to you is how candid you are when
Speaker 3: it comes to not just the successes that you've had,
Speaker 3: but also the challenges that you had, especially through COVID
Speaker 3: and what you saw post COVID as well. So just
Speaker 3: give us an update on how the company is doing
Speaker 3: and how you guys are doing.
Speaker 5: Nice.
Speaker 8: Yeah, yeah, I just tell you straight.
Speaker 2: I think it's our most saying that they consider a
Speaker 2: flat year success.
Speaker 8: You know, I went into this year with our team
Speaker 8: knowing it was going to be a hard year, and
Speaker 8: it has been. It's definitely been more challenging, you know,
Speaker 8: so I kept our expectations really low, like flat, will
Speaker 8: be happy if we do flat to last year. Really
Speaker 8: focus on profitability. Everybody's kind of gotten into the game of,
Speaker 8: you know, having to over discount everything and then they
Speaker 8: lose money. And a lot of our competitors I think
Speaker 8: might be in that boat a little bit, spending too
Speaker 8: much on marketing, marketing dollars. Oh, it's cost so much
Speaker 8: to acquire a customer now. So we've just decided, like
Speaker 8: I said earlier, we can do this because I don't
Speaker 8: have to report into a board or investors that we're
Speaker 8: just going to stay small. If we need to stay
Speaker 8: flat to last year. We'll even go down if we
Speaker 8: need to from last year, although thankfully we haven't had
Speaker 8: to do that yet this year. But really focus on
Speaker 8: making that bottom line on the spreadsheet black so we
Speaker 8: can stay in this long long term. So you know,
Speaker 8: if we need to be smaller for the next you know,
Speaker 8: two or three years until the economy comes back, we
Speaker 8: can do that and make it through.
Speaker 2: All right. Do I have to send you flowers soon
Speaker 2: because you're gonna maybe sell or you just still still
Speaker 2: going alone?
Speaker 8: Probably still going alone. I did think. You know, I
Speaker 8: never thought i'd be fourteen years in still talking flower
Speaker 8: business because I thought I would have sold my ten
Speaker 8: to raise your ten.
Speaker 5: Yeah.
Speaker 8: Yeah, but I've changed my mindset a lot. I think
Speaker 8: that that we don't talk enough about, you know, being
Speaker 8: a long term sustainable business and that's a success, and
Speaker 8: so changed my mindset to be that we can provide
Speaker 8: great jobs, tax dollars, things like that.
Speaker 2: I got to tell you, I did an interview with
Speaker 2: the administrator of the Small Business Administration is about Guzman
Speaker 2: at Milkin, and we just one of the big things
Speaker 2: we talked about was viability of small businesses. It's tough.
Speaker 2: So fourteen years in counting, you should feel pretty good
Speaker 2: about that. So always great to check in with you.
Speaker 2: Happy Mother's Day or ahead of Happy Mother's Day. Yeah,
Speaker 2: good stuff, Christina, Thank you so much. Christina Stanbele, founder
Speaker 2: and CEO farm Girl Flowers. I always like talking with Yeah.
Speaker 3: And reminder everybody get the Mother's day stuff done.
Speaker 2: Reminder then later.
Speaker 1: Brother journal. How about you let me drive?
Speaker 7: Oh no, no, no, no, who's.
Speaker 6: Honey?
Speaker 7: Please gravels.
Speaker 9: Let's make I want to drive.
Speaker 3: It's a good question.
Speaker 7: Good this is the drive to the globe. Do think
Speaker 7: well by around on Bluemberg.
Speaker 2: Radio, right, TikTok everybody, not like Tim and I are
Speaker 2: counting or anything. But we've got about eighteen wait, eighteen
Speaker 2: eighteen minutes left till we wrap up the trading day.
Speaker 1: That's maths for you.
Speaker 2: That it's been a packed week, a good week. Feel
Speaker 2: like we've really picked up on some trends. Whether it's
Speaker 2: in the technology world, they're the investment world. So let's
Speaker 2: get to it because it's a great backdrop for us
Speaker 2: to dig into it all. With Alan Zaffron, founding partner
Speaker 2: and co CEO at i EQ Capital, joining us from
Speaker 2: Foster City, California, just south of San Francisco, we were
Speaker 2: just there.
Speaker 4: Yeah.
Speaker 3: We really hot day yesterday, Alan, kind of unseasonably warm
Speaker 3: in your neck of the woods. How is it today?
Speaker 9: Loving it today? Sunny and warm? It's it's fantastic.
Speaker 7: Couldn't be better.
Speaker 9: Why we pay the high taxes out here?
Speaker 3: Yeah, I was gonna say, sounds like a day that
Speaker 3: ends in Why in California? Carol pays high taxes in
Speaker 3: New Jersey but doesn't have the same weather.
Speaker 4: That's weird.
Speaker 2: Yeah, it's a little kicky January February.
Speaker 3: Still kind of now a month that's months that end
Speaker 3: and why yeah.
Speaker 7: All right?
Speaker 2: So what do you make of the month of May?
Speaker 2: Here we are it used to be what sell and
Speaker 2: may go away? And maybe I don't know, it hasn't
Speaker 2: happened yet, but we are seeing some upward momentum on
Speaker 2: the equity side of things here in May. Does it
Speaker 2: stick for you?
Speaker 9: Alan it sticks for me as long as interest rates
Speaker 9: don't get too high. And I don't know where the
Speaker 9: trigger is. Maybe it's a ten year yield over five percent,
Speaker 9: But I think what's happened it's fascinating this year. Everyone's
Speaker 9: been worried about the Fed's getting cut rates, cut rates,
Speaker 9: so it won't cut rates. Oh my gosh, I have
Speaker 9: to reprice my models. But stocks keep going up anyway,
Speaker 9: And I think the lesson learned is the economy isn't
Speaker 9: as interest rates sensitive as it used to be, and
Speaker 9: there was so much money thrown at corporations and individuals
Speaker 9: through COVID that it has a lot of pent up
Speaker 9: cash on the sidelines, ready to buy any asset at
Speaker 9: any drop. And that's I think been the story, and
Speaker 9: I think it's going to stick through the balance of
Speaker 9: this year. Unless we get rate shocks meaningfully higher, I
Speaker 9: think that we are going to keep working this way,
Speaker 9: grinding our way higher.
Speaker 2: All right, so meaningful higher, like you said, up above
Speaker 2: five percent? I think you said on the ten year.
Speaker 2: Was that what you said, because it's interesting coming back
Speaker 2: from Milk, and most folks were like, you know, if
Speaker 2: we go up a little bit, if we go down
Speaker 2: a little bit in terms of what the Fed does,
Speaker 2: it's really not going to impact my investment decision. So
Speaker 2: it has to be something more than that in your view.
Speaker 9: Well, it does. Let's just take the economy. Okay, on
Speaker 9: an in interest rate sensitivity front, any company or individual
Speaker 9: who could refinance their balance sheet did when rates were
Speaker 9: really low through COVID. So as a fact, forty percent
Speaker 9: of homeowners in America do not have a mortgage, and
Speaker 9: ninety five percent of the mortgages are thirty year fixed.
Speaker 9: So the notion that rates going up is going to
Speaker 9: impair people's ability to pay their mortgage is kind of flawed.
Speaker 9: And a lot of the purchases today are software, it's intangibles,
Speaker 9: it's not it's not capital leases tied to equipment. So
Speaker 9: this notion that interest rates are driving behavior. It's not
Speaker 9: nearly the way it used to be long ago. And
Speaker 9: then you take into account everybody has already refinanced, and
Speaker 9: there's still a tremendous amount of money sitting in CDs
Speaker 9: and treasury bills and money market funds, all sitting and
Speaker 9: waiting on acid drops to make purchases of assets. So
Speaker 9: no matter where you're talking, stocks, bonds, even real estate
Speaker 9: buyers are ready to buy when and if they fill,
Speaker 9: the prices are at attractive points of purchase. And that's
Speaker 9: why I think we're in this funny situation that we
Speaker 9: can watch the FED all we want. I don't know
Speaker 9: if it matters that.
Speaker 3: Much, Heyll. And one thing I wanted to talk to
Speaker 3: you about that was really interesting in the notes that
Speaker 3: you sent to us ahead of time. Thanks as always
Speaker 3: for doing that, is you're bullish when it comes to
Speaker 3: private equity right now, and I think that's a little
Speaker 3: bit contrarian, especially when it comes to some of the
Speaker 3: articles that we've seen about private equity and a higher
Speaker 3: rate environment. We have a Bloomberg opinion piece. It's a video,
Speaker 3: it's great by a near Casar that's just out this week,
Speaker 3: and it's all about the concerns of private equity and
Speaker 3: a high rate environment, the idea that there are many
Speaker 3: deals to be had, there aren't many businesses to be bought.
Speaker 3: The leverage that was typically used in a low interest
Speaker 3: rate environment is so much more difficult to do nowadays.
Speaker 3: Why do you think private equity is an opportunity for
Speaker 3: you and your clients?
Speaker 9: Well, of course it begins on your starting point. But
Speaker 9: now if you're in a world where the interest rates
Speaker 9: at which we're starting to place valuations on businesses are higher,
Speaker 9: that means the discount rate which I used to discount
Speaker 9: future cash flows and pushing it back to a present
Speaker 9: price creates the purchase price to be more attractive or lower.
Speaker 9: And so I think that a couple with the fact
Speaker 9: that bank lendings less available than it used to be,
Speaker 9: the demise of First Republic Banks, Silicon Valley Bank, and others,
Speaker 9: has it made it more difficult for business owners to
Speaker 9: get conventional borrowing. I think there are opportunities for craftful
Speaker 9: individuals that work at private cotyfirms who can actually source
Speaker 9: access to buying ownership stakes in private companies for the
Speaker 9: right price. There are some incredibly attractive businesses and in
Speaker 9: the absence of conventional bank lending, their equity isn't quite
Speaker 9: as expensive role as to debt as at once was.
Speaker 9: So I think it's an interesting time to be a
Speaker 9: buyer of private companies.
Speaker 2: Well, that's what you know. It's interesting At MILK and
Speaker 2: we talked about that the buyers and sellers in terms
Speaker 2: of price are coming much closer together, and that that's
Speaker 2: been a big disconnect and kind of really the sellers
Speaker 2: are having a reality check of like, Okay, here's what
Speaker 2: we really need to do to maybe have some kind
Speaker 2: of deal actually happen. Having said that, when I think
Speaker 2: about the broader investing landscape, why is kind of focusing
Speaker 2: on the PE area so important to you? Is it
Speaker 2: because you think there's going to be IPOs? Like why
Speaker 2: more broadly, why is that so important in terms of
Speaker 2: the broader investment landscape.
Speaker 9: Well, I just think in the big picture, private equity
Speaker 9: is one of many different arrays in which to be invested.
Speaker 9: So you should always be incredibly well diversified cash bond
Speaker 9: stocks publicly, let alone potentially if you're qualified purchaser or
Speaker 9: an a credited investor, getting some private equity exposure or
Speaker 9: other forms of risk public equities have historically generated higher
Speaker 9: returns than public equities, but it's come along with greater volatility,
Speaker 9: and there's a greater degree of risk that you end
Speaker 9: up in the right private equity fund. So you've got
Speaker 9: to be careful about that. But if you think you
Speaker 9: have access to the right manager and you have a
Speaker 9: long enough time frame for investment horizon, now it's not
Speaker 9: a bad time to be beginning to look at that
Speaker 9: as a potential asset class. To put a small question
Speaker 9: for campies.
Speaker 2: Credit investors, yeah exactly, although they all pe private credit
Speaker 2: as well, would love to kind of maybe even open
Speaker 2: it up more widely.
Speaker 3: I think you talked a little bit about that at
Speaker 3: Milk Yeah, yeah, and we talked about that before, Carolynton.
Speaker 9: We actually think private credit is a very attractive asset
Speaker 9: class because private credit is generally priced as a floating
Speaker 9: rate plus a spread. So today's floating rate, right, the
Speaker 9: structured overnight finance rate is where the Fed funds basically
Speaker 9: is at five and a half percent. If you throw
Speaker 9: another seven percent on top of that in order to
Speaker 9: get Alan making loans at twelve percent.
Speaker 2: What do you make of the kind of wall of
Speaker 2: debt corporate debt that's going to be facing the markets
Speaker 2: probably starting you know, obviously next year and then out
Speaker 2: into twenty twenty six and so on and so forth.
Speaker 2: The implications of that, especially as companies private equity or
Speaker 2: other you know, potentially have to refinance that debt at
Speaker 2: much higher rates, do you anticipate a wave of defaults?
Speaker 2: And just got about thirty seconds left here.
Speaker 9: I think we'll have a slightly elevated amount of the faults.
Speaker 9: But I think managers that are proven, were well in
Speaker 9: advance could identify the companies that have those debt maturities
Speaker 9: that they'll have to be refinanced. And if you're sitting
Speaker 9: things like private credit, which are floating rate short term loans,
Speaker 9: they don't face the debt problems that fixed rate corporate
Speaker 9: borrowers faced.
Speaker 2: All right, kind of leave it on that note, Hey, listen,
Speaker 2: thank you so much. Alan really appreci Allen Zaffron, founding
Speaker 2: partner and co CEO at IQ Capital joining us of
Speaker 2: course there from Foster City, California, said Foster It sounds
Speaker 2: pretty gorgeous there, California.
Speaker 1: This is the Bloomberg Business Week podcast, available on Apple, Spotify,
Speaker 1: and anywhere else you get your podcasts. Listen live weekday
Speaker 1: afternoons from two to five pm Eastern on Bloomberg dot Com,
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal