Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Speaker 1: Week Daily reporting from the magazine that helps global leaders
Speaker 1: stay ahead with insight on the people, companies, and trends
Speaker 1: shaping today's complex economy. Plus global business finance and tech
Speaker 1: news as it happens. The Bloomberg Business Week Daily Podcast
Speaker 1: with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2: Well, let's see what Max Chafkin has to say Bloomberg
Speaker 2: business Week Senior Report. He's also co host of the
Speaker 2: Everybody's Business podcast, author of the contrarian Peter tele and
Speaker 2: Silicon Valley's Pursuit of Power. He joins us right here
Speaker 2: in our Bloomberg Interactive Brokers studio. This is Peter Teal's company.
Speaker 2: What are you making of this? It sounds like just Gangbusters.
Speaker 3: Yeah, I mean this is a company where you have
Speaker 3: a couple of trends working in its favor. One is,
Speaker 3: and we heard it mentioned earlier, aivolunteer is marketing itself
Speaker 3: as like essentially a way for big companies to incorporate
Speaker 3: artificial intelligence in their workflows. That's obviously something lots and
Speaker 3: lots of companies are spending huge sums of money. On
Speaker 3: the other thing is this is a big defense contractor
Speaker 3: and it happens to be and you mentioned Peter Teele's
Speaker 3: name earlier. He's co founder of the company. You know,
Speaker 3: it is a it is a company that is very
Speaker 3: close to the Trump administration. So so it's both a
Speaker 3: company that is sort of well positioned to in its
Speaker 3: government business at least in the US, and well positioned
Speaker 3: in its commercial business.
Speaker 4: You've seen in revenue grow now.
Speaker 3: I think what what you see skeptical analysts say, and
Speaker 3: this is a company where there's a bit of a
Speaker 3: divide between how professionals see it and the kind of
Speaker 3: masses you know, who are who are trading, you know,
Speaker 3: on platforms like Robinhood. I think a lot of a
Speaker 3: lot of analysts feel like this stock is wildly overvalued.
Speaker 3: You're talking about you know, even at four billion dollars
Speaker 3: of anual revenue, it's not a huge amount of money
Speaker 3: for a company that's worth like a half a trillion
Speaker 3: dollar in terms of market cap. But for now, you know,
Speaker 3: the market likes it. This has become you know, it's
Speaker 3: almost a cliche to say, but it is a meme stock.
Speaker 5: It is.
Speaker 3: It is a company that has a real business but
Speaker 3: also a company. It's interesting, has this very very you know,
Speaker 3: dedicated following.
Speaker 6: Why would you call it a memestock. I mean, you
Speaker 6: kind of answered the question right then, you said as
Speaker 6: a dedicated following. But this is a company that has
Speaker 6: an increase in revenue of sixty three percent. Analyst on
Speaker 6: average estimated one point zho nine billion dollars in terms
Speaker 6: of revenue increase went to one point one eight billion
Speaker 6: dollars average projection of one point one to nine billion
Speaker 6: dollars for sales for the current quarter that the company
Speaker 6: says it'll come in at one point three three billion.
Speaker 6: There's some real numbers here that I think critics would say, Okay,
Speaker 6: well memestocks don't have those kind I mean, it's.
Speaker 3: Different from like, haha, this is totally a joke. That's
Speaker 3: not what I'm saying at all. What I'm saying is
Speaker 3: that the demand for this stock is happening at the
Speaker 3: retail level, just like Tesla Motors where you see you know, that,
Speaker 3: which is another stock with similarly like very elevated private
Speaker 3: The price earnings ratio on this company is huge, It's
Speaker 3: really really high.
Speaker 2: Six hundred and ninety one the forward pt F forward
Speaker 2: pe excuse me, it's.
Speaker 7: Three hundred and twenty.
Speaker 2: I mean, like what you said before about how much
Speaker 2: in revenues and what the market cap is, it's going
Speaker 2: to take a lot of growth.
Speaker 6: Over and ocet for multiple qu dspe ratio is sixty
Speaker 6: point five seay, yeah, even.
Speaker 3: For a tech company, even for a high growth tech company.
Speaker 3: We're talking about a very very very expensive stock. And
Speaker 3: that you know, that stock either reflects the kind of
Speaker 3: new dynamics that that certain equities are trading it where
Speaker 3: where where if.
Speaker 4: There's demand on social media?
Speaker 3: And the Bloomberg story that was published gets into some
Speaker 3: of this, you know, investor Alex Karp, the CEO of Palenteer,
Speaker 3: is this kind of almost like a cult like figure,
Speaker 3: a cultural figure. Certainly shareholders call him Daddy Carp, you know,
Speaker 3: and he has he has these antics right like it's
Speaker 3: he is this kind of larger than life figure. There
Speaker 3: is also a business story. It's not like it's totally
Speaker 3: just hot air, right. The idea is that artificial intelligence
Speaker 3: is becoming more and more important.
Speaker 4: Palenteer is positioned, well.
Speaker 7: What exactly do they do?
Speaker 3: They build software that essentially makes it easier for companies
Speaker 3: to organize their data and.
Speaker 4: So and make decisions.
Speaker 3: Now, the thing you've probably most people have probably heard
Speaker 3: most about with Palenteer is the military and intelligence agencies
Speaker 3: incorporated software in their sort of in like searching out
Speaker 3: terrorist cells and that sort of thing. Now, there's a
Speaker 3: lot of debate about just how sort of automated this is,
Speaker 3: how important it is, but it is a piece of
Speaker 3: software that is being used in more and more big
Speaker 3: companies to handle data. And that's a valuable thing because like,
Speaker 3: once the software is being used by a given entity,
Speaker 3: it's kind of hard to take it out. It's kind
Speaker 3: of same dynamics that protect lots of of sellers of
Speaker 3: enterprise software max.
Speaker 6: This is a company that was founded back in two
Speaker 6: thousand and four. Facebook was also founded back in two
Speaker 6: thousand and four. I think a lot of people would
Speaker 6: say this was kind of a late bloomer for a
Speaker 6: lot of years, it kind of just like got by
Speaker 6: until then suddenly it was on everybody's radar. Why was
Speaker 6: it so slow to grow?
Speaker 3: Well, I mean it took them a very long time
Speaker 3: to figure out a product, and the company was founded
Speaker 3: essentially with the idea of providing you know, intelligence gathering
Speaker 3: software to the military, adapting some of the security tools
Speaker 3: that Peter Teel and his co founders had used at
Speaker 3: PayPal and applying in other areas. That was the pitch.
Speaker 3: It took them a really long time to find a
Speaker 3: customer base, but once they did, and as they've been
Speaker 3: able to kind of build a brand and take the
Speaker 3: company public and benefit from some of these trends that
Speaker 3: I'm talking about, these cultural trends, it's really it's gone
Speaker 3: gone very very well.
Speaker 7: You know, it's interesting too.
Speaker 2: And I'm looking at the FA page on the Bloomberg
Speaker 2: So at the end of last year, about almost fifty
Speaker 2: five percent of their revenue was government and then about
Speaker 2: forty five percent was commercial. And I'm just thinking they
Speaker 2: compete with right like Microsoft, Amazon, Google, and then some
Speaker 2: of these data specialist companies out there, whether it's Snowflake
Speaker 2: and others. I mean, is there somebody who could ultimately,
Speaker 2: you know, take over their business? I mean, do they
Speaker 2: really own their niche?
Speaker 3: No, there are other there are other players in this space.
Speaker 3: I think a lot also a lot of the companies,
Speaker 3: a lot of those competitors companies are buying both palenter
Speaker 3: at Microsoft it's not like you're buying one it at
Speaker 3: the ex sense of the other. I mean, you know,
Speaker 3: Palenteer is i think very recently got into some litigation
Speaker 3: with a copycat product. There are other companies that are
Speaker 3: attempting to offer sort of similar kind of like data
Speaker 3: integration services. We've also seen critics over the years sort
Speaker 3: of say like this company, this is actually a consulting company.
Speaker 8: Kind of masquerading.
Speaker 3: There's some there's there's a lot of debate over just
Speaker 3: how how how much it is like a product company
Speaker 3: and should be valued that way, although of course, like
Speaker 3: on Wall Street or sorry, on the stock market, that
Speaker 3: debate is long gone because it's being traded, you know,
Speaker 3: at multiples that are much higher than even some very
Speaker 3: very successful software companies.
Speaker 6: How big of a deal is it that this administration
Speaker 6: has or members of this administration have been aligned at
Speaker 6: least philosophically with leadership at Palatineer.
Speaker 3: If you if you listen to Palenteer, they're going to say, no,
Speaker 3: this is not political. That where people the government is
Speaker 3: just choosing.
Speaker 4: Our product because it's the best product.
Speaker 3: I think if you look historically, the last Trump administration
Speaker 3: was an incredible time for Palenteer.
Speaker 7: The company grew a lot, it.
Speaker 3: Managed to go public, won lots and lots of contracts,
Speaker 3: including taking some contracts from some other big tech companies.
Speaker 3: And if you look at what has happened over the
Speaker 3: past whatever it is, ten months of the Trump administration,
Speaker 3: it's great for Palenteer.
Speaker 7: You had this dough.
Speaker 3: I mean, obviously the Doje effort, we haven't heard.
Speaker 4: Much about it.
Speaker 3: But the idea of building these databases that are better
Speaker 3: going to integrate information across different agencies, that is like
Speaker 3: right up Pallenteers Alley, and you know you're seeing Alex
Speaker 3: carb show up at the White House, show up at
Speaker 3: these dinners. They are punching above their weight in terms
Speaker 3: of influence.
Speaker 2: We should point out though, shares of Palenteer now down
Speaker 2: about a quarter of a percent here in the aftermarket,
Speaker 2: so they've definitely pulled off their highs of this session.
Speaker 7: Hey Max, thank you so much.
Speaker 6: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 6: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five.
Speaker 3: Yes.
Speaker 1: During this listen on Applecarplay and Android Otto with the
Speaker 1: Bloomberg Business app or watch us live on YouTube.
Speaker 7: Let's do it. Megan Horneman has to say she's back
Speaker 7: with us.
Speaker 2: She's chief investment officer in Verden's Capital Advisors, from has
Speaker 2: more than four billion in assets under management. Once again
Speaker 2: with us from Hunt Valley, Maryland. Megan, good to have
Speaker 2: you here. It has been quite a bounce back from
Speaker 2: the lows back in early April. How do you describe
Speaker 2: the market environment right now?
Speaker 9: I think there's a lot of over optimism about several things.
Speaker 9: We did get the FED the cut rates, and that's
Speaker 9: what really you know, the markets we're focusing on Prior
Speaker 9: to September. We got the Fed cutting rates. We got
Speaker 9: two of them this year. The jury is still kind
Speaker 9: of out for the December number. But we also have
Speaker 9: seen some thawing in the trading tension since that you
Speaker 9: know April tiff, I guess tariff tiff, and now you
Speaker 9: have the AI taking back over again. So you have
Speaker 9: this momentum trade that's driving these markets higher into the
Speaker 9: year end.
Speaker 10: Here.
Speaker 9: Worried about valuations, absolutely, we are very worried specifically from
Speaker 9: the mag seven the technology. These are all looking a
Speaker 9: little bit bubble like. I'm not saying this is a
Speaker 9: dot com bubble, but there is the risk here for
Speaker 9: some valuation correction. Keep in mind that these valuations have
Speaker 9: driven higher on this, you know, pricing and perfection, the
Speaker 9: perfect soft landing of the economy, the perfect I'm fixed
Speaker 9: to inflation and the FED coming in and easing policy.
Speaker 9: This is something that's really up in the air into
Speaker 9: twenty twenty six. That there is no certainty, and I
Speaker 9: think the FED is pretty clear about that when they
Speaker 9: mentioned that the December meeting is not a foregone conclusion.
Speaker 2: Megan, you say, it's not akin to the Internet bubble,
Speaker 2: but it does bubble like.
Speaker 7: But it looks bubble like. But why do you say that?
Speaker 3: Is it?
Speaker 2: You know what we always hear as well, Wait, there's
Speaker 2: companies that actually have revenues and earnings, and I get that.
Speaker 2: But the company that I feel like is the nucleus
Speaker 2: of this AI trade Open AI. We have yet to
Speaker 2: really see their books, right, It's a privately held company.
Speaker 7: They're tying up with everybody. There's this massive spend.
Speaker 2: It's hard not to feel like this is a bit
Speaker 2: heady and wonder where it all ends.
Speaker 8: Yeah, you said it exactly. There's not a lot of clarity.
Speaker 9: This is what we're seeing is just more this euphoria
Speaker 9: around this changing technology. And we completely believe in that.
Speaker 9: And AI is going to change the way we do
Speaker 9: a lot of things. It's going to make a lot
Speaker 9: of things, a lot of things efficient. But we've seen
Speaker 9: this before in other market bubble type of situations where
Speaker 9: the markets just have this overly optimistic view. You can
Speaker 9: even go back to some of the times when people said, oh,
Speaker 9: home prices will never go down. I heard that and
Speaker 9: the EITO nine crisis. So good, good.
Speaker 2: Well, the one thing I want to ask you about
Speaker 2: with the AI trade, and like I said, there are
Speaker 2: companies and we know with the hyperscalers where we see
Speaker 2: an ROI and we were just talking with our own man,
Speaker 2: Deep Singh about some of the numbers that we see.
Speaker 2: I think it was specifically was it in Google and
Speaker 2: so on? So we do see payoffs. But having said that,
Speaker 2: the other thing we were just talking with a member
Speaker 2: of the Google and Alphabet team is about jobs that
Speaker 2: could be lost, whether it's encoding in other places. If
Speaker 2: we have an economy where a lot of people are
Speaker 2: put out of work and there's a dislocation, be it
Speaker 2: for a year, two years, five, five year, seven years,
Speaker 2: who knows, maybe a generation.
Speaker 7: That's got to be a problem.
Speaker 9: No, I think, But we're not as negative on what
Speaker 9: AI can do to the job market as some people are.
Speaker 8: Let's keep in mind that some jobs will.
Speaker 9: Be replaced by AI, and these may be some.
Speaker 8: Clerical type of jobs.
Speaker 9: But then if you look at a lot of other
Speaker 9: areas in this market, in the labor market, some of
Speaker 9: these jobs may just get better at productivity, efficiency will just.
Speaker 8: Improve by the use of AI.
Speaker 9: So I'm not ready to say that this is a
Speaker 9: really detrimental thing to the labor market going forward. I
Speaker 9: think that it can actually help improve quite a bit.
Speaker 6: Okay, So how do you advise clients to, I mean,
Speaker 6: what to do in this bubble like environment that we're in.
Speaker 6: Sit on their hands and do nothing, or move a
Speaker 6: little bit away from some of these MAG seven companies?
Speaker 4: Yeah?
Speaker 8: Absolutely. First of all, look at your allocation.
Speaker 9: Are you overweighted to these MAG seven to these growth sectors,
Speaker 9: because keep in mind, just the market movement may have
Speaker 9: you allocated to this a lot more than you should be,
Speaker 9: So rebalance. And I know that may seem kind of boring,
Speaker 9: but it's the end of the year. Rebalance portfolios where
Speaker 9: you think is necessary, where it's overrun. The growth technology names,
Speaker 9: these are the most at risk. So any of these
Speaker 9: big high flyers that you've seen this year, those with
Speaker 9: really high multiples, these are the ones that we would
Speaker 9: start reducing. Make sure that you're more diversified than just
Speaker 9: holding on to those.
Speaker 8: Because what we have seen in.
Speaker 9: Historical pullbacks or corrections in the market that sometimes when
Speaker 9: there's a valuation correction, the biggest winners are the ones
Speaker 9: that get sold because they're just turns. It turns into
Speaker 9: this indiscriminate selling where you're selling all the winners.
Speaker 8: So be very careful there. Make sure that your portfolios.
Speaker 9: Balance where you want to be and don't be overweighted
Speaker 9: a substantial amount to these growth and technology large cap names.
Speaker 2: And then yet, having said that, those large cap tech
Speaker 2: names are the ones that continue to you know, provide
Speaker 2: you know, you see the growth top and bottom line
Speaker 2: over and over again.
Speaker 7: It's kind of interesting that everybody's.
Speaker 2: Like, wait time to back off, and then we see
Speaker 2: once again another quarter or another year where that's where
Speaker 2: the momentum is. So how do you be smart about
Speaker 2: not just chasing maybe games that won't happen or realizing
Speaker 2: the reality of our world is a big tech world
Speaker 2: and you look at those companies and they are part
Speaker 2: of really almost all of our lives in a big way.
Speaker 9: Yeah, just be careful of what you're paying the price
Speaker 9: that you're paying for these names. Are you paying for
Speaker 9: earnings that are now two years forward? And that's what
Speaker 9: we see. When you look at the S and P
Speaker 9: five hundred, which is primarily your mag seven stocks, you
Speaker 9: can see that earnings estimate's going on to twenty twenty seven.
Speaker 8: You put a reasonable valuation on that.
Speaker 9: There's really not much upside if you're looking at the
Speaker 9: fair value the SAP five hundred, and that's in twenty
Speaker 9: twenty seven. So just be very careful what level of
Speaker 9: earnings you're paying for and how far out because there
Speaker 9: is a lot of uncertainty between now in twenty twenty seven,
Speaker 9: so be careful paying up for that momentum.
Speaker 6: You're happy with earnings thus far?
Speaker 9: Thus far, yes, earnings have been great, but let's also
Speaker 9: keep in mind that earnings tend to beat off the
Speaker 9: estimates between three and five percent every earning season. I'm
Speaker 9: more concerned about what we see for next year and
Speaker 9: then now that we are starting to get some of
Speaker 9: those estimates for twenty seven, what are people looking at
Speaker 9: going forward?
Speaker 2: What do you think is the biggest risk in a
Speaker 2: week where we have the Supreme Court taking up a
Speaker 2: case against President Trump's tariffs, if that gets undone, what would.
Speaker 7: That mean for financial markets?
Speaker 9: I think the markets are looking for any kind of
Speaker 9: news because we don't really have the economic data obviously
Speaker 9: with the government shut down, so they're looking for any catalyst,
Speaker 9: whether it's to the upside or downside. Unfortunately, we think
Speaker 9: there's more downside risks in the near term.
Speaker 2: But if that tariff gets undone, what would that mean
Speaker 2: for financial market? It's just got about twenty seconds, I.
Speaker 9: Think, just just volatility instability, because then we've all got
Speaker 9: to go back and kind of reprice what the teriff
Speaker 9: expectations may be. So and then what will the Trump
Speaker 9: administration do. What's the next lever that they may have
Speaker 9: to pull in order to get the terror through.
Speaker 2: It'd be kind of messy, that's for sure, all right, Megan,
Speaker 2: thanks so much.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five eastering. Listen
Speaker 1: on Apple Karplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 6: Ryan Gould is Bloomberg News USIPO and Deal's reporter. Red
Speaker 6: Brown is Bloomberg News Consumer Reporter. They both join us
Speaker 6: here in the Bloomberg Interactive Broker's studio. Kenview surging as
Speaker 6: much as twenty percent earlier in the session, Kimberly Clark
Speaker 6: following as much as fourteen and a half percent earlier
Speaker 6: in the session, now down just fourteen percent, but still
Speaker 6: investors are sending the message. When I heard this news
Speaker 6: this morning, I'm thinking of myself, where did this come from? Well,
Speaker 6: we're on the call, We're on our editorial call, and
Speaker 6: I'm saying, who wants to deal with the litigation that
Speaker 6: tail and all could potentially see as a result of
Speaker 6: being front and center in this These comments that President
Speaker 6: Trump and RFK said at the White House earlier this year,
Speaker 6: read ken View is not just talent, al zertech listing,
Speaker 6: band aid, nutrient GENA and more. But what's the litigation
Speaker 6: risk here for Kimberly Clark.
Speaker 5: It's obviously it's hard to say right now, Like this
Speaker 5: is a very fast moving story when it comes to Tiland,
Speaker 5: like we have just that one lawsuit right now in Texas.
Speaker 5: There's been some asks, some some some petitions, some some
Speaker 5: consumer petitions to have label changed on Thailand as well.
Speaker 5: But I think what you're getting in the reaction in
Speaker 5: Kimberly Clark shares today do kind of underline that that
Speaker 5: is what is on people's mind, right, is this legal risk?
Speaker 5: There is there is a there's an argument you made
Speaker 5: that like ken View is a really great property, like
Speaker 5: tim you just named off all of those like Marquee brands, right,
Speaker 5: so you know, I think there's a kind of a
Speaker 5: consensus among the analysts that this is probably a long
Speaker 5: term play, like potentially maybe getting a really good deal
Speaker 5: here considering how like how poorly can your shares have
Speaker 5: done so far this year. That's not just the legal risk,
Speaker 5: it's also just kind of bad performance as well, but
Speaker 5: remains to be seen. I guess on this legal risk question, we.
Speaker 6: Should remind everybody this is the consumer products division of
Speaker 6: Johnson and Johnson. It was spun off back in twenty
Speaker 6: twenty three. Shares have struggled this year. There's the Bayer
Speaker 6: Monsanto situation that one analyst brought up Carol earlier today
Speaker 6: read in company writing that vital knowledge is Adam chris
Speaker 6: A fully said that there could be concerned about whether
Speaker 6: the Kleenex maker is getting itself into a Bayer Monsanto situation,
Speaker 6: referring to Bayer's acquisition of Monsanto back in twenty eighteen,
Speaker 6: which laid in the German pharmaceutical company with legal costs.
Speaker 7: Could it would have?
Speaker 4: Should?
Speaker 7: I like, we have to guess. I guess see how
Speaker 7: it like plays out.
Speaker 2: Ultimately we should point out shares of ken View down
Speaker 2: twenty three percent year to date.
Speaker 7: Ryan, come on in on this.
Speaker 2: I mean they are paying a forty six premium to
Speaker 2: ken VU's closing price on Friday. Mind you, this share
Speaker 2: has been the share price has been beaten up a
Speaker 2: little bit.
Speaker 7: What's the thinking?
Speaker 2: What are you hearing from bankers about why this has
Speaker 2: come together and why now?
Speaker 10: Well, just on the Bio Monsanto piece, I think you
Speaker 10: know it's something that we're also hearing this morning. I
Speaker 10: think it depending on who you speak to. I think
Speaker 10: on the Kenview side, there's a view that you could
Speaker 10: in no way make that comparison. These are very very
Speaker 10: different types of companies. I think you know, we were
Speaker 10: just talking about the litigation risk, but at the same
Speaker 10: time either it was really interesting and I think Mike
Speaker 10: Sue the Sea of Kimberly was out this morning saying
Speaker 10: that in the statement that the world's foremost scientific or medical,
Speaker 10: regulatory and legal experts had kind of concluded that you know,
Speaker 10: this is something you need to go for I need
Speaker 10: to go on the record saying such things so publicly,
Speaker 10: I think is one thing. But the other piece of
Speaker 10: this is that you know, there's a massive dispute within
Speaker 10: ken view as to what the actual liability is, and
Speaker 10: so depending on who you speak to, I think there's
Speaker 10: a view that there could actually be no liability at all,
Speaker 10: which you know that's going to be for a court
Speaker 10: to decide and maybe not for me to speculate, Tom.
Speaker 10: But that's what this comes down to, which is why
Speaker 10: I think you can have people come out and say
Speaker 10: things like, you know, this is a generational value creation.
Speaker 2: Opportunity, but they're talking about it that there is potentially
Speaker 2: a liability issue.
Speaker 7: The folks that can view.
Speaker 10: Yeah, oh no, for sure. And I think there's you know,
Speaker 10: a company people I was speaking to who kind of
Speaker 10: said that they would probably take the under on you
Speaker 10: know exactly how much market cap CANVU has lost in
Speaker 10: this whole debacle vis a vis the liability that they'll
Speaker 10: end up with. That's one view, but you know, you
Speaker 10: could also say the flip side right, because who knows
Speaker 10: how this is going to turn out, and you know,
Speaker 10: this could be a case study in an HPS h
Speaker 10: at HPS in a few years time.
Speaker 2: So we should point out that can view at it
Speaker 2: ties up almost twenty percent in today's session, as much
Speaker 2: as seventeen dollars and eighteen cents a share. Here read
Speaker 2: read come back in on this because I do wonder
Speaker 2: is there anybody else who might come in and say
Speaker 2: we're interested or not.
Speaker 5: Necessarily I haven't heard anything on that. I'd be interested
Speaker 5: what Ryan has to say on that bit. But like
Speaker 5: there was a lot of interest in the company, like
Speaker 5: like I said, like it is Marquee Brands Thailand will
Speaker 5: probably chief among them, despite some of these these risks
Speaker 5: that they did that are overhanging that that unit. But
Speaker 5: you know, the company has has all of the pieces
Speaker 5: to do well for the long term, and I think
Speaker 5: that is why there is the conviction that this is
Speaker 5: has good long term potential. And then just on the
Speaker 5: legal issue there. You know, Les Ryan makes a point
Speaker 5: like they have the top scientists going in and speaking
Speaker 5: with them in the room, like this is not a
Speaker 5: this is not a surprise that this issue is kind
Speaker 5: of going on in the background.
Speaker 10: So I think what I would say just in the
Speaker 10: dynamics of this and charity your question on whether we'll
Speaker 10: see an intelo or not. You know, take the fact
Speaker 10: that this had not one, but two, but actually three
Speaker 10: activists in the stock you know, Starboard chief among them.
Speaker 10: July fourteenth this year, the company announced to replace them
Speaker 10: to the CEO, replaced the CEO and then said they
Speaker 10: were going to explore strategical al tentatives doing that at
Speaker 10: the same time as having a hedge fund hotel in
Speaker 10: your stock. We kind of make this point in the
Speaker 10: deal's news statter today. I think the process was very robust,
Speaker 10: and so, you know, there were definitely multiple parties around
Speaker 10: this situation.
Speaker 6: Kimberly Clark known for Diaper's, toilet plate, paper clean X.
Speaker 6: They also have ingredients like you know, and like some
Speaker 6: of the brands are like Scott Cottonell, Viva and more, Huggies,
Speaker 6: ken View known for of course tail and all, but
Speaker 6: also Motrin, band Aid, Benadryl, Decotin. I'm just trying to
Speaker 6: think of like this, you know, quote unquote synergies which
Speaker 6: oftentimes mean job cuts, but there's some back end stuff,
Speaker 6: there's some distribution stuff. But how do these brands come together?
Speaker 1: Ryan?
Speaker 10: I think that's a really interesting question because I asked
Speaker 10: someone this morning who is around this deal? You know
Speaker 10: exactly how are you defining the synergies? I mean, is
Speaker 10: it cost? Is it strictly cutting cost? I think Ken,
Speaker 10: do you sees this as you know, they see a
Speaker 10: massive upside and keeping the brands together. I know that
Speaker 10: there was interest in my Sterin for instance, on its own,
Speaker 10: and I think there were other pieces where you could
Speaker 10: say there was a stand up buyer. But I think
Speaker 10: as you think about this combined company, Yeah, I think
Speaker 10: it's probably a location factor. It's a supply chain factor,
Speaker 10: and I think it's about concentration of suppliers as well.
Speaker 10: Uh and so yes, paper, you know paper is you
Speaker 10: know they hit the kimity clock is also making Phoenix.
Speaker 10: But you know Hockey's has that that's solvency obsorpancy pay
Speaker 10: perfect with two.
Speaker 2: So yeah, I would think the shelf space is kind
Speaker 2: of similar, but it's good to have some different products
Speaker 2: right to kind of fill our shelves.
Speaker 4: Definitely, definitely.
Speaker 5: I think one of the during the investors presentation today,
Speaker 5: one of the things that I found most like convincing
Speaker 5: was this like regional discussion, like I don't I don't
Speaker 5: know if if Kimberly Clark has a great like presence
Speaker 5: in India, And that was one of the points that
Speaker 5: the com both CEOs made during the call. As an
Speaker 5: example they used at the potential synergies is that, like
Speaker 5: you know, ken View has like one point three million
Speaker 5: I think if that's the I think that's the correct
Speaker 5: number of distribution points within the country. And like we
Speaker 5: all know that India is a fantastic you know market
Speaker 5: to be in with the potential growth there, and it
Speaker 5: doesn't seem like that's right where kimberly Clark has presence.
Speaker 5: Yet another example they use with Singapore. I believe again
Speaker 5: ken you has doesn't have like a smoking cessation business
Speaker 5: there yet where then you know, Kimberly Clark has a
Speaker 5: robust supply chain there, so like Kene exactly exactly, So
Speaker 5: there's there's there's the potential there to just kind of
Speaker 5: use those existing distribution channels and you know, potentially increase
Speaker 5: the marketing around some of these new products that Kimberly
Speaker 5: Clark is picking up.
Speaker 2: It's kind of fascinating in a world where we spend
Speaker 2: so much time talking about, you know, the AI build
Speaker 2: out in data centers read that, it's just these are
Speaker 2: products that we all use, right and no matter what,
Speaker 2: we're going to use them, good times, bad times. We
Speaker 2: might trade down a little bit, but these are things
Speaker 2: that we use all the time.
Speaker 5: Yeah, yeah, No, It's a great point and I think
Speaker 5: probably is kind of underlining a little bit of the
Speaker 5: conviction here from Kimberly Clark.
Speaker 10: I think, did I come into this year thinking that
Speaker 10: Kimberly Clark acquiring ken View would be the fourth largest
Speaker 10: EM and a probably not the fourth largest in this year?
Speaker 10: Is it's pretty announced this year. I mean, you've got
Speaker 10: opening Ion VideA, which we have Bloomberg Classifiers as a deal.
Speaker 10: You could sort of make two ways about that, but
Speaker 10: Norfolk Southern by being acquired by Union Pacific second, and
Speaker 10: then you've got Electronic Card has been taken out by
Speaker 10: the Saudis. And then this so some of the times
Speaker 10: maybe I don't know.
Speaker 7: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 7: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five East during
Speaker 1: listen on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 1: or watch us live on YouTube.
Speaker 6: Their next guest a player in the industry. The company
Speaker 6: reporting earnings later this week. Adam Goldstein is founder and
Speaker 6: CEO of Archer Aviation. It's the six point seven billion
Speaker 6: dollar market cap aerospace company that trades under the ticker
Speaker 6: ac HR. He joins us from San Jose, California. Archer
Speaker 6: designing and developing electric vertical takeoff and landing aircraft evitalls
Speaker 6: for use in urban air mobility networks. When are Carol
Speaker 6: and I going to take one of these to Newark Airport.
Speaker 6: We're flying out tomorrow. We're both taking cabs.
Speaker 4: Well, it's great to be here.
Speaker 11: The industry is actually, you know, as you said, it's
Speaker 11: been around for a while and it's getting pretty mature.
Speaker 11: So the good news is that in June of this year,
Speaker 11: President Trump issued an executive order that will mandate really
Speaker 11: the speed of these being brought to market. So by
Speaker 11: next June you should expect to be seeing these aircrafts
Speaker 11: flying in and around the big urban cities. Five cities
Speaker 11: are getting announced. They'll be announced in January. It will
Speaker 11: be flying in June, and so that's when you'll start
Speaker 11: to see him flying around in the US.
Speaker 6: Flying in June without passengers.
Speaker 11: They'll start piloted with just no passengers, and the goals to
Speaker 11: ramp operations there through the certification process.
Speaker 6: So go back to my original question, which is really
Speaker 6: when we will be using these as easily as we
Speaker 6: can hail a cab using uber lyft.
Speaker 4: Yeah, it's hard to say.
Speaker 11: It's really you know, the company's job to build the
Speaker 11: safe airplanes and then the FA's job to certify.
Speaker 4: So our hope is soon after that.
Speaker 11: Three at a time, when we're showing that these aircrafts
Speaker 11: are safe, we're showing that there's a really good consumer experience,
Speaker 11: and overall we've gotten a lot of you know, buying
Speaker 11: from community acceptance.
Speaker 6: Are you having active conversations with FA right now, yes.
Speaker 4: So there's constantly active conversations.
Speaker 11: Of course, the government shutdown, you know, kind of created
Speaker 11: some slowdowns with that, but the conversations continue and it's
Speaker 11: been ongoing for a very long time. We have long
Speaker 11: standing relationships there and the programs are very very well established.
Speaker 11: This is a priority of the administration. That's what the
Speaker 11: executive order in June was all about. And so this
Speaker 11: is one of those programs that I think does get
Speaker 11: a lot more attention. We kind of punch above our
Speaker 11: weight as an industry, and so you know, they've been
Speaker 11: very good to us.
Speaker 2: So what is your definition, Adam of commercial operations and
Speaker 2: exactly when do they start meaning revenue generating passenger flights.
Speaker 7: I just want to clarify.
Speaker 11: So Archer has two sides of the business. We have
Speaker 11: a civil business which is moving around in a defense
Speaker 11: side of the business. On the civil side of the business,
Speaker 11: we have a two pronged approach. There's an international strategy
Speaker 11: and a domestic strategy. On the international side, we've been
Speaker 11: working very closely with the UAE and the UAE government. Specifically,
Speaker 11: the largest helicopter operator in the Middle East is called
Speaker 11: Abu Dhabi Aviation, which we've partnered with and has acquired aircraft.
Speaker 11: So we've already started to receive dollars from that. We'll
Speaker 11: start to recognize revenue in a first quarter of next year,
Speaker 11: and so that's when you'll start to see some of
Speaker 11: those numbers come in. It'll be very small though to start,
Speaker 11: and then we'll ramp that over time. On the defense
Speaker 11: side of things, the contracts have to be announced and
Speaker 11: so that still hasn't happened yet. There's a lot of talk,
Speaker 11: and I think the programs are starting to firm up,
Speaker 11: and there's a lot of excitement around KNEW what they
Speaker 11: call autonomous and atriadable aircraft, but those programs have yet
Speaker 11: to be announced. We're hopeful that those will be announced soon.
Speaker 2: So my understanding too, going back to the stuff you're
Speaker 2: doing in Abu Dhabi, so that launch was the first
Speaker 2: correct of your company's Launch Edition program and was supposed
Speaker 2: to be kind of the playbook for Ethiopian airlines and
Speaker 2: in Indonesia.
Speaker 7: So lessons learned so far, and how is it among
Speaker 7: those lessons being learned changing the future?
Speaker 11: Yeah, those are great questions. Launching in the UAE or
Speaker 11: really just the broader GCC has provided a lot of
Speaker 11: lessons around weather and so of course it's very hot there.
Speaker 11: There's a lot of kind of harsh conditions with a
Speaker 11: lot of sand in the air. So We've learned a
Speaker 11: lot about how to keep these aircrafts cool and very
Speaker 11: very hot weather, not just the interiors for consumers, but
Speaker 11: actually like the safety of the aircraft. So that testing,
Speaker 11: I think has been hugely helpful. And so you start
Speaker 11: in one of the harsher environments, you can work our
Speaker 11: way to some of the more mild environments like here
Speaker 11: in California, and so that's provided a lot of the
Speaker 11: sort of base layer lessons for operating in really difficult conditions.
Speaker 11: But the goal is really to just continue to get reps,
Speaker 11: learn figure out how these aircrafts will we'll get to market.
Speaker 11: The good news is they're all based around safety, and
Speaker 11: so multiple sets of propellers providing multiple sets of redundancy.
Speaker 11: So I think we can deliver a really high quality,
Speaker 11: safe product.
Speaker 6: From an infrastructure perspective, Carol mentioned that we have to
Speaker 6: have infrastructure in the right place. I'm wondering if there
Speaker 6: are cities in the US that work right now or
Speaker 6: do not work for this type of technology.
Speaker 4: Yeah.
Speaker 11: Well, I've had my site set on Los Angeles as
Speaker 11: sort of the best city I think in the US
Speaker 11: for this platform. There's so much traffic in Los Angeles,
Speaker 11: there are over five million daily trips that take greater
Speaker 11: than an hour by car going less than twenty miles
Speaker 11: in Los Angeles, so an incredible city to offer this
Speaker 11: type of platform. So last year we announced the LA Network,
Speaker 11: which really starts to show the different points of interest.
Speaker 11: So partnerships with Sofi Stadium, with Woodland Hills, with USC Coliseum,
Speaker 11: so places where there already is existing infrastructure, all reports
Speaker 11: that are there, and we'll start building that network up.
Speaker 11: Of course, we have the Olympics coming in Los Angeles
Speaker 11: in twenty twenty eight, where we're going to be increasing
Speaker 11: the infrastructure that gets built in and around the games,
Speaker 11: and Archer was announced as the exclusive air taxi provider
Speaker 11: for that event. So Los Angeles is a perfect city
Speaker 11: to go launch this, but of course there's other great
Speaker 11: cities like New York, Miami and San Francisco and I
Speaker 11: think will be also a great place for us to launch.
Speaker 11: So pretty much anywhere they use helicopter will be great
Speaker 11: for this product.
Speaker 2: So exclusively your taxi partner for the Olympics out in
Speaker 2: Los Angeles, so that means you're going to actually be
Speaker 2: flying folks around.
Speaker 4: That is certainly the goal.
Speaker 11: So the goals to move VIPs, dignitaries, fans in and
Speaker 11: around the games. We have been partnering very closely with
Speaker 11: LA twenty eight to do that. I'm confident and that
Speaker 11: goal will be able to get there. It's a super
Speaker 11: exciting time for the industry. That's actually a goal that
Speaker 11: was set out by the FAA back in twenty twenty two,
Speaker 11: so they coined the term Innovate twenty eight, which was
Speaker 11: the first city where you'll see these aircraft used in
Speaker 11: mass will be at the LA twenty eight Games. So
Speaker 11: that's an alignment that the goals were put out there
Speaker 11: a while ago, and we hope to deliver against that.
Speaker 2: Do you feel at all that investors, though, are feeling
Speaker 2: a little bit of fatigue from kind of the repeated
Speaker 2: delays in the start of revenue generating passenger flights. Stocks
Speaker 2: up about seven percent year date, but you look at
Speaker 2: the chart over the last year, it's like a rough EKG.
Speaker 2: It's a little tricky. So I'm just wondering, are you
Speaker 2: feeling like investors. I think it was back in twenty
Speaker 2: twenty one that you guys slated the launch of a
Speaker 2: taxi launch service in Miami in LA by twenty twenty four.
Speaker 7: So I get it.
Speaker 2: You want to get it right, you want it to
Speaker 2: be safe. But do you feel like your investors are
Speaker 2: getting a little antsy? Just got about thirty seconds and
Speaker 2: then we.
Speaker 7: Take a break and come back and talk a little
Speaker 7: bit more.
Speaker 11: I would say it's actually quite the contrary, And that's
Speaker 11: not just an archer statement.
Speaker 4: I think that's an industry statement.
Speaker 11: So one of our peers and one of my good friends,
Speaker 11: Kyle Clark, is ipoing his company called Beta here. I
Speaker 11: think it's supposed to price this week, and from what
Speaker 11: I've heard is the thing is massively oversubscribed. There's tons
Speaker 11: of demands, So I think there is a ton of
Speaker 11: interest in the ebtall space. I think the investors are
Speaker 11: very excited about the progress that we have. Then I
Speaker 11: think that'll continue.
Speaker 4: To pay off.
Speaker 2: Hey, one thing I want to know, Adam is progress
Speaker 2: on Pilot's certific Where are you guys on that?
Speaker 11: So the certification process is a long one, and this
Speaker 11: is actually the first new category in a very long time,
Speaker 11: first new category in sixty years at the FAA.
Speaker 4: So it's a new process really for everybody. And there's
Speaker 4: two sides. You have to figure out the rules.
Speaker 11: Which they call policy and then mix that against the execution,
Speaker 11: so showing that the aircrafts are safe against that policy.
Speaker 4: So we're deep into the policy.
Speaker 11: Side, nearly done with that, and then starting to work
Speaker 11: on the execution side of that as well. So the
Speaker 11: goal is to grind through that. But what I think
Speaker 11: the sort of the better proof points rather than trying
Speaker 11: to understand this kind of black box certification process, will
Speaker 11: be the executive order from President Trump where we'll start
Speaker 11: to see these aircrafts flying next summer in around these cities.
Speaker 11: That's really the point where we can help gain the
Speaker 11: consumer confidence, consumer awareness of what we're doing and ultimately
Speaker 11: showcase these aircrafts are safe in and around urban environments.
Speaker 6: Adam, we're in a world where we're trying to remove
Speaker 6: humans from the equation, whether they're uber lyft drivers with
Speaker 6: Waimo and Tesla's cybercabs or with other elements and like
Speaker 6: you know, warehouses with robots and Amazon. Do you envision
Speaker 6: a future where Archer does not have pilots.
Speaker 11: Well, we are deep also in the autonomy process in
Speaker 11: aviation as well. There are lots of autonomous solutions that exist.
Speaker 11: In fact, we've flow in the aircraft's autonomously many times.
Speaker 11: That being said, I think the difficulty in aviation is
Speaker 11: in and around the regulation, and in and around how
Speaker 11: the aircraft will operate with the existing environments. So how
Speaker 11: will airtraft control communicate with these aircrafts and their autonomous
Speaker 11: how will they land with the given infrastructure? So I
Speaker 11: do think we will get there. I think they will
Speaker 11: start out piloted and then work their way into the
Speaker 11: autonomy stack. I do think it's new companies like Archer
Speaker 11: that will actually invent those autonomy stacks and really try
Speaker 11: to create the network that's necessary to deploy autonomous aircrafts.
Speaker 11: But still more to come on that.
Speaker 2: All right, and look forward to hearing more from you
Speaker 2: in the future. Adam, Thanks so much.
Speaker 1: This is the Bloomberg Business Week Daily podcast, available on
Speaker 1: apple Spot and anywhere else you get your podcasts. Listen
Speaker 1: live weekday afternoons from two to five pm Eastern on
Speaker 1: Bloomberg dot Com, the iHeartRadio app, tune In, and the
Speaker 1: Bloomberg Business App. You can also watch us live every
Speaker 1: weekday on YouTube and always on the Bloomberg terminal