WEBVTT - Beyond Meat Reports Describe Dirty Conditions 0:00:01.800 --> 0:00:04.440 This is Bloomberg Business Week. I'm Karl Masser and I'm 0:00:04.440 --> 0:00:07.280 Bloomberg Quick Takes Tim Stanovk. We're here every day bringing 0:00:07.280 --> 0:00:09.799 you the latest news from the world of business and finance, 0:00:09.840 --> 0:00:13.640 plus technology, politics, economics, all parnessing the power of Business 0:00:13.640 --> 0:00:17.119 Week reporters and editors, not to mention our journalists and 0:00:17.120 --> 0:00:19.600 analyst in more than one and twenty countries. You can 0:00:19.640 --> 0:00:23.200 download Bloomberg Business Week on iTunes, SoundCloud, or Bloomberg dot com. 0:00:23.400 --> 0:00:25.120 You can also listen to our radio show at two 0:00:25.160 --> 0:00:27.840 pm Eastern Time on Bloomberg Radio or watch us on 0:00:27.880 --> 0:00:31.440 YouTube and now also on Bloomberg Quick Take. So we've 0:00:31.440 --> 0:00:34.600 been keeping a watch on shares of Beyond Meat because 0:00:34.600 --> 0:00:37.559 we've seen some selling pressure again today in fact at 0:00:37.560 --> 0:00:39.760 their lows down as much as nine percent or just 0:00:39.840 --> 0:00:43.360 shy of that still down about five percent as we speak, 0:00:43.479 --> 0:00:45.280 and the Stuck. If I take a look at what 0:00:45.320 --> 0:00:49.240 it's doing, it is down, Tim so far Ino, we 0:00:49.560 --> 0:00:52.640 got Dina Shanker with us. She's consumer reporter for Bloomberg News. 0:00:52.680 --> 0:00:55.720 She covers Beyond Meat and other foe meat companies for 0:00:55.880 --> 0:00:58.800 Bloomberg News. She wanted to get her on the program 0:00:58.800 --> 0:01:00.920 because she had a deep dive that came out yesterday 0:01:00.960 --> 0:01:05.000 morning into uh A, dirty conditions at a key plant. 0:01:05.000 --> 0:01:08.440 It's a facility in Pennsylvania, and it illustrates the alt 0:01:08.480 --> 0:01:12.160 meat makers ongoing difficulties. Dina Shanker joins us now via 0:01:12.240 --> 0:01:15.560 zoom from New York City. Dina, according to these reports, 0:01:16.000 --> 0:01:19.720 what was found at that plant in Pennsylvania, Hi, thank 0:01:19.760 --> 0:01:22.440 you guys so much for having me on UM. Basically, 0:01:22.560 --> 0:01:27.480 what we saw from photos and internal documents was a 0:01:27.720 --> 0:01:32.800 plant that was just not operating safely or um following 0:01:32.920 --> 0:01:36.920 basic h health and safety measures. UM. We saw a 0:01:36.920 --> 0:01:40.759 lot of mold, both on ingredient containers and on the walls. 0:01:40.880 --> 0:01:43.320 I mean, these pictures, Dina, are pretty shocking that are 0:01:43.360 --> 0:01:47.640 included in the piece. Yeah, I mean they are. They 0:01:47.640 --> 0:01:50.559 are because I don't think that any of us want 0:01:50.640 --> 0:01:53.920 to see a food plant that looks like this. UM. 0:01:53.960 --> 0:01:56.320 You know, there are things in these pictures that many 0:01:56.320 --> 0:01:59.040 of us might not even notice as bad practice. But UM, 0:01:59.080 --> 0:02:01.960 for example, you have a picture that shows, um, a 0:02:02.160 --> 0:02:07.040 trolley car turned over into a large funnel um type 0:02:07.120 --> 0:02:10.320 of shape of machine, and we don't we can look 0:02:10.320 --> 0:02:12.560 at that, we can say that that doesn't look right 0:02:12.560 --> 0:02:15.600 to me, we can't necessarily say why or exactly what's 0:02:15.600 --> 0:02:18.560 wrong with it. But um, the experts actually not only 0:02:18.600 --> 0:02:21.080 pointed out that which they said, um is dangerous for 0:02:21.080 --> 0:02:24.679 the people involved. They said it's contaminated or there's room 0:02:24.760 --> 0:02:27.240 for contamination, because you never want something with wheels on 0:02:27.280 --> 0:02:30.400 the floor to be UM that close to your food 0:02:30.680 --> 0:02:35.880 production services. But if you look at that picture, yeah, right, um, 0:02:36.440 --> 0:02:38.160 But if you look at that picture, you'll also see, 0:02:38.280 --> 0:02:40.960 UM to the left, there's a bucket on a machine. 0:02:41.040 --> 0:02:42.960 And that was actually a point. We don't even mention 0:02:43.000 --> 0:02:46.720 this in the story, but the experts also noticed that bucket. Um, 0:02:46.720 --> 0:02:48.080 it's cut off in the photo, and they said that 0:02:48.160 --> 0:02:50.400 bucket shouldn't be on a machine. And there's a hammer 0:02:50.400 --> 0:02:52.520 on a machine. They said, those things shouldn't be on 0:02:52.600 --> 0:02:55.160 those machines that they're supposed to be messy. And we 0:02:55.240 --> 0:02:58.120 got just for everybody's watching on YouTube quick take you 0:02:58.120 --> 0:03:01.280 can actually see what Dina is talking about. Do you know, 0:03:01.280 --> 0:03:04.160 I gotta say mold right like with it my basement, 0:03:04.200 --> 0:03:06.240 like it starts to freak it out, you freak out, 0:03:06.240 --> 0:03:07.880 and you just take care of it because it can 0:03:07.919 --> 0:03:12.000 be dangerous. But mold growth takes a while, right, So 0:03:12.040 --> 0:03:14.600 it's not like, oops, we just missed it. It It just happened. 0:03:14.720 --> 0:03:17.840 This stuff takes a while to develop, that's right. And 0:03:17.880 --> 0:03:20.840 we see the mold on ingredients containers, but we also 0:03:20.840 --> 0:03:24.520 see it on the wall. Um, I'm one photo on 0:03:24.560 --> 0:03:28.400 a wall and it's uh, that's exactly right. It doesn't 0:03:28.680 --> 0:03:31.119 mean that this one day, at this one moment in time, 0:03:31.240 --> 0:03:35.200 somebody happened to capture a bad situation. It means that 0:03:35.200 --> 0:03:37.280 that situation has been like that for a little while 0:03:37.400 --> 0:03:38.880 in order for that to happen. Do you know where 0:03:38.880 --> 0:03:42.960 did these photos come from? From a former employee who 0:03:43.160 --> 0:03:45.680 worked in the plant and was really concerned about the 0:03:45.720 --> 0:03:48.360 conditions in it and what it beyond me tell you. 0:03:48.640 --> 0:03:52.000 In response to inquiries related to these photos and what 0:03:52.120 --> 0:03:55.280 it showed at allegedly happening at the plant, UM, they 0:03:55.320 --> 0:03:59.560 said that the Pennsylvania Department of Agriculture UM found no 0:03:59.640 --> 0:04:03.360 instant says of nonconformance with regulations during their inspection. They 0:04:03.360 --> 0:04:06.880 said that they go above and beyond industry and regulatory 0:04:06.880 --> 0:04:10.320 standards of their food safety protocol. They mentioned audits which 0:04:10.360 --> 0:04:14.200 gives them very high ratings. They did not comment specifically 0:04:14.280 --> 0:04:17.080 on the documents or the conditions we described to them 0:04:17.080 --> 0:04:19.200 from the photos. One thing that emerged to me in 0:04:19.440 --> 0:04:21.919 terms of reading your piece was sort of this pattern 0:04:21.960 --> 0:04:25.120 of I don't I don't want to ascribe intent to this, 0:04:25.200 --> 0:04:28.599 but I was pretty surprised to see that basic paperwork 0:04:29.160 --> 0:04:31.599 and fees hadn't been paid to the state, like a 0:04:31.640 --> 0:04:34.880 thirty dollar fee I recall, Yeah, yeah, the thirty five 0:04:35.240 --> 0:04:37.760 registration fee. That's right. What does that illustrate to you 0:04:39.279 --> 0:04:45.680 that they're they're not following basic good practices? But to me, 0:04:46.040 --> 0:04:50.080 I wonder who's in charge and where are they? And um, 0:04:50.160 --> 0:04:53.799 why is this such a pervasive problem in this plant? 0:04:53.839 --> 0:04:55.720 I mean, I have a lot more photos that we 0:04:55.760 --> 0:04:59.200 didn't include, so it goes way beyond um. And you 0:04:59.200 --> 0:05:01.720 know four four aograph and you point out for anybody 0:05:01.720 --> 0:05:04.200 who's listening at this point. Internal reports also show that 0:05:04.279 --> 0:05:07.440 some contaminated products made it through to consumers. So ultimately 0:05:07.480 --> 0:05:09.440 did a lot get out to consumers? What do we know? 0:05:09.520 --> 0:05:13.080 And I am curious when it comes to beyond meat facilities, 0:05:13.440 --> 0:05:15.760 this Pennsylvania one, how important is it in terms of 0:05:15.800 --> 0:05:21.000 overall production? So, um, I'll in order in terms of 0:05:21.000 --> 0:05:24.760 what reached consumers, what we know is that from the 0:05:24.800 --> 0:05:28.719 documents that we're sharing UM that UH some would in 0:05:29.120 --> 0:05:32.640 two UH separate A and W burgers at two different 0:05:32.640 --> 0:05:37.159 restaurants was found by consumers UM and UH that a 0:05:37.200 --> 0:05:41.640 metal link was found in a bag of Duncan sausage patties. UM. 0:05:42.880 --> 0:05:46.720 And there's also there was recently a recall from Costco 0:05:46.920 --> 0:05:50.520 in Canada because of wood found in the products. UM. 0:05:50.880 --> 0:05:55.599 That's what we have documents of from from reporting this story. UM. 0:05:55.640 --> 0:05:58.640 In terms of the role of this plant plays in 0:05:58.680 --> 0:06:01.880 the company, it's actually a very important one because the 0:06:02.000 --> 0:06:04.559 company doesn't have a lot of its own real estate 0:06:04.920 --> 0:06:08.680 in the US. They have UM two sister sites in Columbia, 0:06:08.720 --> 0:06:12.080 Missouri and this plant, and the plan had been UM 0:06:12.160 --> 0:06:16.880 for this plant to be upgraded and expanded. UM. The 0:06:16.920 --> 0:06:19.960 company had been planning on doubling the size of this 0:06:20.040 --> 0:06:23.960 plant UM as recently as this summer. There were expectations 0:06:23.960 --> 0:06:27.320 that that would happen. So this was certainly an important 0:06:27.360 --> 0:06:29.839 I mean, this is an important location for this company. 0:06:30.000 --> 0:06:32.000 Most of its manufacturing in the US is done by 0:06:32.279 --> 0:06:35.760 co manufacturers. They make their their raw material UM sort 0:06:35.800 --> 0:06:39.120 of like their secret sauce kind of ingredients at their 0:06:39.839 --> 0:06:43.240 Columbia Facilities, Dennis Shankar Consumer Report at Bloomberg News. Check 0:06:43.240 --> 0:06:45.719 out more just head to Bloomberg dot com. Thank you, Dina. 0:06:45.839 --> 0:06:49.680 This is Bloomberg. You're listening to Bloomberg Business Week with 0:06:49.760 --> 0:06:54.559 Carol Masser and Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. 0:06:55.040 --> 0:06:57.440 I gotta tell you the conversations we are having behind 0:06:57.440 --> 0:06:59.560 the scenes right now when it comes to all things crypto, 0:06:59.839 --> 0:07:01.480 and I feel like crypto is this bucket where we 0:07:01.520 --> 0:07:04.960 throw everything in and not all crypto elements are the same, 0:07:05.040 --> 0:07:07.359 but it's just trying to stay on top of it 0:07:07.400 --> 0:07:08.719 and makes sense of it. We should have some of 0:07:08.720 --> 0:07:10.880 those conversations behind the scenes have we should have them 0:07:10.920 --> 0:07:13.200 on air. So let's do that. Let's bring in Katie Gryfel, 0:07:13.240 --> 0:07:15.600 Blomberg New Senior Markets reporter, co host of Crypto I 0:07:15.680 --> 0:07:18.480 r L on Bloomberg Quicktake and Bloomberg TV. She is 0:07:18.560 --> 0:07:20.640 here in studio and we know one of the big 0:07:20.680 --> 0:07:23.600 stories today was what the bankruptcy here and getting underway 0:07:23.600 --> 0:07:27.040 for f t X first day motions. And what's unusual 0:07:27.160 --> 0:07:29.680 is that it took this long to have this hearing 0:07:29.760 --> 0:07:31.760 usually happens so much quicker. I mean, when did f 0:07:31.760 --> 0:07:33.760 t X file for bankruptcy. It feels like a literal 0:07:33.880 --> 0:07:37.000 year ago, two weeks ago, so an unusual amount of 0:07:37.000 --> 0:07:40.640 time there. I mean, there was a lot sort through. 0:07:40.680 --> 0:07:43.880 It seems like one of the key takeaways was the 0:07:43.960 --> 0:07:48.240 record keeping process, which we already knew it was pretty lax. 0:07:48.320 --> 0:07:52.160 I mean John j Right, the third uh was the 0:07:52.200 --> 0:07:55.160 new CEO at f t X, of course, was involved 0:07:55.160 --> 0:07:58.920 in the liquidation of Enron. He I mean, was pretty 0:07:58.960 --> 0:08:01.600 blunt that it was pretty much non existent. But that 0:08:01.640 --> 0:08:04.520 was a consistent theme today too, that there's really not 0:08:05.360 --> 0:08:07.400 a lot of records to go by, and when you're 0:08:07.400 --> 0:08:10.240 trying to sort out more than a million creditors, that's 0:08:10.240 --> 0:08:13.600 going to be a very long process. Uh, And we do, 0:08:13.840 --> 0:08:16.800 I mean, someone knows who the top fifty creditors are. 0:08:16.920 --> 0:08:19.600 We don't know who they are because the names were redacted. 0:08:19.600 --> 0:08:23.040 And that's something that was discussed uh a lot today 0:08:23.080 --> 0:08:25.360 as well. The ft X is set to me back 0:08:25.400 --> 0:08:28.640 in court, but not until January. So what happens between 0:08:28.640 --> 0:08:30.880 now and then, Katie, Well, there is supposed to be 0:08:30.960 --> 0:08:33.240 a second hearing on the issue of the fact that 0:08:33.280 --> 0:08:36.280 the names were redacted on December six teh Tim and 0:08:36.280 --> 0:08:38.320 I were talking about this yesterday with Stephen Church. Hopefully 0:08:38.360 --> 0:08:40.640 you weren't listening, Carol because you were off, but it's 0:08:41.679 --> 0:08:46.199 really you were still really unusual that the names would 0:08:46.200 --> 0:08:50.560 be redacted in this case. At least two groups of 0:08:50.559 --> 0:08:53.880 of the creditors sent lawyers to this hearing to support 0:08:53.960 --> 0:08:57.360 the request to keep their identity secret for now. One 0:08:57.400 --> 0:09:00.040 of those groups was representing members who were among the 0:09:00.080 --> 0:09:04.680 top fifty biggest. So the judge overruled objections from US 0:09:04.720 --> 0:09:07.680 trust the US Trustee who is requesting that we you know, 0:09:07.679 --> 0:09:10.040 know who these names are for now, so they're going 0:09:10.120 --> 0:09:11.880 to remain secret. I mean this to me then speaks 0:09:11.920 --> 0:09:14.680 to the contagion impact, right, like, yeah, this is what 0:09:14.679 --> 0:09:16.559 we're trying to figure out how far this goes? Certainly 0:09:16.600 --> 0:09:18.960 within the crypto universe. It doesn't feel like it's hit 0:09:19.040 --> 0:09:22.079 certainly the rest of the asset class that is kind 0:09:22.120 --> 0:09:24.480 of our world on a general, a general basis. But 0:09:24.559 --> 0:09:28.280 I mean, that's what do we know about how much 0:09:28.320 --> 0:09:30.760 further this goes? Well, that's one of the reasons why 0:09:30.800 --> 0:09:33.920 people want to know who are the top creditors here? 0:09:33.960 --> 0:09:36.959 I mean, who had the most exposure we know some 0:09:37.240 --> 0:09:39.320 of you know who might be on the list by 0:09:39.360 --> 0:09:43.040 their own admission, for example, Gemini, Galaxy, a few other 0:09:43.120 --> 0:09:45.720 names have come out and talked about their own exposure 0:09:45.720 --> 0:09:47.679 to f t X. But when you're trying to map 0:09:47.760 --> 0:09:50.280 where to look for the contagion, you would want to 0:09:50.320 --> 0:09:53.440 see this list. What about the names that are out 0:09:53.480 --> 0:09:56.079 there that feel like we're going to talk to Kathy 0:09:56.080 --> 0:09:58.600 wood about this, and she's been buying coin Base, she's 0:09:58.600 --> 0:10:02.880 been buying grace Scale. I think there are questions about, 0:10:03.200 --> 0:10:07.720 you know, are these untouched or not. It's a great question. 0:10:07.800 --> 0:10:11.040 Coin based coin bas is an interesting one because coin Base, 0:10:11.120 --> 0:10:14.320 I mean, it's a u S publicly listed company. It 0:10:14.360 --> 0:10:17.600 falls under the purview of the SEC. From everything that 0:10:17.640 --> 0:10:20.240 we can see right now, it was untouched by this 0:10:20.679 --> 0:10:23.679 FTX blow up. But at the same time, I mean, 0:10:23.679 --> 0:10:26.160 the stock has just been obliterated, which is probably why 0:10:26.200 --> 0:10:28.840 Cathy is looking into it. She likes to buy the discounts. 0:10:28.880 --> 0:10:32.280 But if you think about the future of the crypto industry, 0:10:32.320 --> 0:10:35.360 it feels like there's been a lot of love lost 0:10:35.440 --> 0:10:38.920 for centralized exchanges such as coin Base. You've seen a 0:10:38.920 --> 0:10:44.360 lot of movement into decentralized exchanges back into decentralized finance, 0:10:44.400 --> 0:10:48.480 into these cold wallets. So if that's the future for crypto, 0:10:48.559 --> 0:10:52.000 this sort of like deglobalization of the industry, I don't 0:10:52.040 --> 0:10:53.760 know how coin base fits in there, right. I want 0:10:53.760 --> 0:10:56.320 to go back to the exposure question, Katie, because why 0:10:56.320 --> 0:10:59.400 are we hearing now that companies are struggling as a 0:10:59.400 --> 0:11:02.520 result of the contagion from f t X, when a 0:11:02.600 --> 0:11:05.760 mere two weeks ago they were kind of talking about, Oh, 0:11:05.760 --> 0:11:07.800 we'll be fine. I think it had to work its 0:11:07.800 --> 0:11:10.680 way through the daisy chain, like they were so sorry 0:11:10.679 --> 0:11:14.160 to interrupted. Does that mean that they weren't directly connected 0:11:14.200 --> 0:11:16.800 to f t X, but a fall in digital asset 0:11:16.840 --> 0:11:19.760 prices has led them to have some sort of issue. 0:11:20.240 --> 0:11:22.720 I mean, I'm sure that that's the case. Obviously the 0:11:22.760 --> 0:11:25.040 lines have gone down as a result, not as much 0:11:25.080 --> 0:11:26.520 as you might have expected if you're talking about the 0:11:26.520 --> 0:11:30.400 present bitcoin um, but that is one of the forms 0:11:30.400 --> 0:11:33.000 that contagion can take. Maybe it's not a direct impact. 0:11:33.120 --> 0:11:36.000 Maybe you weren't a counterparty to f t X, but 0:11:36.679 --> 0:11:39.680 you're probably counterparty to someone who was a counterparty. And 0:11:39.760 --> 0:11:41.720 something that I've been thinking a lot about the crypto 0:11:41.760 --> 0:11:44.520 industry in the last few days, is that so many 0:11:44.520 --> 0:11:49.199 functions are concentrated in these one companies. It's not unusual 0:11:49.280 --> 0:11:52.360 for a crypto company to be in exchange, a broker, 0:11:52.400 --> 0:11:55.439 a custodian. The list goes on. Those are all separate 0:11:55.440 --> 0:11:58.040 functions and trad five. So go to Digital Currency Group, 0:11:58.040 --> 0:12:01.320 Barry silver It's like, you know, so they right UM, 0:12:01.640 --> 0:12:04.160 gray Scale Bitcoin to trust is. I think they're the 0:12:04.240 --> 0:12:08.640 largest shareholder in that UM. I think they own about 0:12:08.640 --> 0:12:11.080 ten percent of gray Scale. And then you think about 0:12:12.920 --> 0:12:17.160 they also own the cryptobroker Genesis right, which was affiliated 0:12:17.160 --> 0:12:20.200 with Alameda, And I guess, like, what do we know 0:12:20.320 --> 0:12:23.880 about Silburton his world and the tentacles and where they go? 0:12:24.400 --> 0:12:27.000 We I would love to know more about. I'm not 0:12:27.040 --> 0:12:29.360 putting my fingers and anything's wrong, but I just feel 0:12:29.360 --> 0:12:32.240 like it's once again that equation akin to what we 0:12:32.280 --> 0:12:34.200 saw with that. And we know that Genesis, which again 0:12:34.240 --> 0:12:37.920 falls under his empire, is searching for fresh funding right now. 0:12:37.960 --> 0:12:41.079 Ber News had a fantastic scoop yesterday that they need 0:12:41.120 --> 0:12:45.240 fresh funding or bankruptcies in the offing. Barry Silbert also 0:12:45.280 --> 0:12:48.400 owns gray Scale. Like you said, the DCG Digital Currency 0:12:48.400 --> 0:12:51.120 Group is the largest shareholder in the Bitcoin Trust. So 0:12:51.160 --> 0:12:53.760 even though gray scale from all that we know, is 0:12:53.840 --> 0:12:57.240 fine here, their largest shareholder might come under some pressure 0:12:57.240 --> 0:13:01.240 of Genesis, which is also in the empire false bankruptcy. Okay, 0:13:01.280 --> 0:13:03.720 so what could be the next hues to drop in 0:13:03.760 --> 0:13:07.679 thirty seconds? I would watch Genesis. That's what everyone's looking 0:13:07.720 --> 0:13:12.960 for now. I mean, it's hard to overstate Barry Silbert's reach. Yeah, 0:13:13.160 --> 0:13:16.560 it is interesting these these singular individuals, right who we 0:13:16.600 --> 0:13:18.839 look to kind of as a north star. And again 0:13:18.880 --> 0:13:21.360 I'm not saying anybody, I mean, at least Barry Silbert. 0:13:21.360 --> 0:13:22.840 We don't know anything that has gone wrong, but it's 0:13:22.840 --> 0:13:27.120 just interesting these singular individuals and how wide and vast 0:13:27.160 --> 0:13:30.800 their reach was in different verticals within the crypto world. Exactly. 0:13:30.920 --> 0:13:34.880 So Okay, creedy, Katie, thank you. Sorry, it's just you 0:13:34.920 --> 0:13:37.240 know that kind of I've been called worse, Katie grypheld 0:13:37.240 --> 0:13:39.320 Bloomberg New Senior Markets report of co host of Crypto 0:13:39.360 --> 0:13:41.440 I R. L and our go to when it comes 0:13:41.480 --> 0:13:44.520 to the crypto universe, joining us in studio. This is Bloomberg. 0:13:45.240 --> 0:13:49.280 This is Bloomberg Business Week with Carol Masser and Bloomberg 0:13:49.360 --> 0:13:53.240 Quick Takes, Tim Stenovic on Bloomberg Radio. There's a lot 0:13:53.240 --> 0:13:55.440 in the spotlight today, Crypto of course, Twitter and Ellen. 0:13:55.520 --> 0:13:58.040 That's a given. And then there is always, I feel like, 0:13:58.040 --> 0:13:59.959 in the background as of late, the private equity where 0:14:00.200 --> 0:14:02.040 which is no doubt about it in the sights of 0:14:02.080 --> 0:14:05.240 Washington and an array of regulators. Leon Island writes all 0:14:05.280 --> 0:14:07.640 about it. She's anti trust reporter for Bloomberg Near. She 0:14:07.679 --> 0:14:10.880 joins us right now from our studio in Washington. Check 0:14:10.880 --> 0:14:12.600 out her story. It's on the Bloomberg terminal and at 0:14:12.600 --> 0:14:15.280 Bloomberg dot com. Slash A business Week. Joe Weber is 0:14:15.280 --> 0:14:17.600 the editor of Bloomberg Business Week. He's with us right 0:14:17.600 --> 0:14:20.880 now in the Bloomberg Interactive Brokers studio. Jolia wrote this 0:14:20.880 --> 0:14:24.400 story with Todd Shields as well. And I gotta tell you, Um, 0:14:24.440 --> 0:14:27.040 I thought, you know, with carried interest being safe after 0:14:27.680 --> 0:14:30.960 almost dying a few months ago thanks to a couple 0:14:31.000 --> 0:14:34.160 of senators on the Democratic side, Um, what else is 0:14:34.280 --> 0:14:38.280 in the crosshairs of of Oh, maybe everything about it? Um, 0:14:38.800 --> 0:14:42.280 everything about yeah, yeah exactly so, So that's right. I 0:14:42.320 --> 0:14:45.000 think carried interest has been the thing that people who 0:14:45.000 --> 0:14:49.080 have long associated with the private equity industry. UM and 0:14:49.880 --> 0:14:52.240 it has come up many times, and it kind of 0:14:52.280 --> 0:14:56.160 gets kicked around and then kick kicked down. And what's 0:14:56.200 --> 0:15:01.840 interesting now is about the Biden administration and regulators throughout 0:15:01.920 --> 0:15:05.280 agencies that are starting to kind of like pinch these 0:15:05.280 --> 0:15:09.640 places that private equity doesn't like to get pinched, and 0:15:09.760 --> 0:15:13.160 that has It's not like a direct thing. Biden isn't 0:15:13.280 --> 0:15:16.280 quoted saying that he's coming for the industry, but it's 0:15:16.320 --> 0:15:19.520 sort if you read between the lines, there's clearly something 0:15:19.600 --> 0:15:23.360 happening here. So so Leah tell us more. Yeah, So 0:15:23.600 --> 0:15:26.520 there are quite a few regulators here in Washington who 0:15:26.760 --> 0:15:29.280 sort of set their sights on private equity. The SEC 0:15:29.680 --> 0:15:32.880 has proposed a new rules about disclosure UM and the 0:15:32.960 --> 0:15:36.080 antitrust regulators, that's the Justice Department and the Federal Trade 0:15:36.120 --> 0:15:38.360 Commission have both made some noise about how they have 0:15:38.440 --> 0:15:42.320 concerns here. The Justice Department opened the surprise probe a 0:15:42.360 --> 0:15:44.760 month or so ago into what are called the interlocking 0:15:44.800 --> 0:15:48.760 Directorate's that's where UM a company or a person sits 0:15:48.760 --> 0:15:52.360 on the board of two competitors. And after the analysis probe, 0:15:52.440 --> 0:15:56.560 tom A Brava directors stepped down from two different public companies. 0:15:56.800 --> 0:16:00.440 They've also sent out, you know, notes to a couple 0:16:00.480 --> 0:16:05.440 other major private equity folks like Apollo and Blackstone, raising 0:16:05.440 --> 0:16:08.240 some concerns about some of their holdings. And then the 0:16:08.600 --> 0:16:12.000 sort of centerpiece of our story was about this deal 0:16:12.080 --> 0:16:16.200 between Standard General, which is a hedge fund, and tag Now, 0:16:16.240 --> 0:16:18.960 which is the broadcast stations that were spun out of 0:16:18.960 --> 0:16:22.040 gannett Um. But the sort of interesting piece about the 0:16:22.080 --> 0:16:25.400 steal is that it's backed by Apollo, and so that 0:16:25.480 --> 0:16:28.280 aspect has sort of put it under the microscope with 0:16:28.280 --> 0:16:31.720 both telecom regulators and the Justice Department, who need to 0:16:31.720 --> 0:16:35.640 clear the deal before I can go through. So Leah, 0:16:35.960 --> 0:16:39.200 talk a little bit about the idea of transparency here, 0:16:39.200 --> 0:16:42.800 because this is an industry that you know inherently as private, right, Well, 0:16:42.840 --> 0:16:45.280 I was gonna say, they don't call it private equity exactly. 0:16:45.400 --> 0:16:48.240 So I'm wondering what you're hearing from the industry because 0:16:48.240 --> 0:16:50.960 you quote some folks who represent the industry about what 0:16:51.000 --> 0:16:53.360 they think about this, and look, there's politics here too, 0:16:53.360 --> 0:16:57.080 and you think of prominent donors as well. Yet they're 0:16:57.120 --> 0:16:59.240 not that happy about this, I'll put it that way. 0:17:00.760 --> 0:17:04.600 You know, they think that they're doing good, they're investing 0:17:04.600 --> 0:17:07.840 in lots of companies. Um, none of these, as Joe said, 0:17:07.840 --> 0:17:09.639 none of these are sort of direct attacks. You're not 0:17:09.680 --> 0:17:12.240 hearing Joe Biden say anything about private equity. But these 0:17:12.280 --> 0:17:15.199 are sort of his people within the administration giving them 0:17:15.240 --> 0:17:17.119 a little bit of a poke at some of the 0:17:17.160 --> 0:17:19.320 things that they've done for a long period of time. 0:17:19.359 --> 0:17:22.040 I mean, sitting on the boards of various companies is 0:17:22.080 --> 0:17:24.399 something that has gone on for for quite a while. 0:17:24.520 --> 0:17:27.520 But um, the Justice Department noted, you know, this law 0:17:27.560 --> 0:17:30.199 has existed since nineteen fourteen. Just because you guys have 0:17:30.280 --> 0:17:32.680 done it for the past couple of decades doesn't necessarily 0:17:32.720 --> 0:17:35.520 mean it's legal. Leo, what's the what's the truth about 0:17:35.520 --> 0:17:37.800 private equity? Or is it a little bit of everything? 0:17:38.200 --> 0:17:41.320 Meaning that they sometimes come in provide the funding when 0:17:41.400 --> 0:17:44.680 others don't want to touch something. Sometimes it's distressed assets 0:17:44.720 --> 0:17:47.439 or what have you. The other flip side is, you know, 0:17:47.560 --> 0:17:50.359 a lot of cost cutting, a quick way of like 0:17:50.440 --> 0:17:53.960 within a what a two or three year a little 0:17:53.960 --> 0:17:56.359 bit of a little bit of debt, you know, and 0:17:56.480 --> 0:17:58.719 spit it out and make some money. So what's the 0:17:58.720 --> 0:18:01.560 truth when it comes to private equity? I mean, that's 0:18:01.560 --> 0:18:03.600 a little bit of a complicated question. I'll just say 0:18:03.640 --> 0:18:07.240 that the ones that um the regulators are concerned about, 0:18:07.280 --> 0:18:10.200 they say, you know, there's not one size fits all here. 0:18:10.240 --> 0:18:12.720 There there are some some good things that private equity 0:18:12.720 --> 0:18:15.000 can do, but the ones that really raise their concerns 0:18:15.080 --> 0:18:17.159 or sort of what we might call a strip and flip, 0:18:17.400 --> 0:18:19.160 you know, where you come in, you load it down 0:18:19.160 --> 0:18:20.720 with dad, and then you sell it off and it's 0:18:20.720 --> 0:18:22.359 not going to do as well. The other ones that 0:18:22.400 --> 0:18:24.800 they're really concerned with are are roll ups, right, So 0:18:25.200 --> 0:18:27.760 you might buy one company and then you start adding 0:18:27.760 --> 0:18:29.480 on more and more and more companies, and some of 0:18:29.480 --> 0:18:31.520 these are small, so it might not have come to 0:18:31.520 --> 0:18:34.359 the attention of regulators that they're sort of amassing this 0:18:34.520 --> 0:18:37.240 dominant player in the market. Okay, so what are some 0:18:37.280 --> 0:18:41.080 of the latest volleys because and talk cut through the 0:18:41.160 --> 0:18:43.800 agencies that are kind of nipping here and which ones 0:18:43.840 --> 0:18:47.160 are you guys watching in DC? Yeah, so I primarily 0:18:47.600 --> 0:18:49.760 look focus a lot on the Justice Department and the 0:18:49.800 --> 0:18:52.440 Federal Trade Commission. The Justice Department is the one that's 0:18:52.480 --> 0:18:56.320 doing this probe into interlocking directorate's as they're called, and 0:18:56.359 --> 0:18:59.840 also it's looking at the Standard General TEGNA merger the 0:19:00.119 --> 0:19:05.480 FTC is a consumer prottection in anti trust UM regulator eight. 0:19:05.600 --> 0:19:09.320 UM has raised a little bit of concerns about private 0:19:09.359 --> 0:19:11.520 equity and the healthcare space. You know, there have been 0:19:12.119 --> 0:19:15.760 some articles in the press about how maybe when private 0:19:15.800 --> 0:19:19.760 equity invests in healthcare that the health outcomes aren't as good. UM. 0:19:19.800 --> 0:19:22.879 This is looking particularly at things like nursing homes. UM 0:19:22.880 --> 0:19:27.000 the FTC actually had a settlement earlier this year with 0:19:27.240 --> 0:19:30.439 um J a b UM over it rolling up a 0:19:30.480 --> 0:19:34.560 bunch of emergency veterinary clinics. They were concerned that they 0:19:34.640 --> 0:19:38.160 had UM sort of bought three different emergency bet clinics 0:19:38.240 --> 0:19:40.760 rolled them up into one, and maybe that was increasing prices. 0:19:40.880 --> 0:19:44.080 When you know, your dog accidentally swallows your shoe or something, 0:19:44.600 --> 0:19:47.400 so uh, you know, these are the sort of things 0:19:48.760 --> 0:19:54.600 you're speaking from experience, Jill Alia, before we let you go, 0:19:54.920 --> 0:19:58.000 I'm curious how this is rippling into fundraising, And it's 0:19:58.040 --> 0:20:00.679 probably difficult to make a connection at this point because 0:20:01.080 --> 0:20:03.879 this stuff kind of takes years to work through a system. 0:20:03.880 --> 0:20:06.600 But when you talk to your sources about going out 0:20:06.600 --> 0:20:09.920 and raising money from LPs, what are gps telling you 0:20:10.280 --> 0:20:13.160 about whether or not it's more difficult because of potential 0:20:13.200 --> 0:20:17.359 regulatory scrutiny. I mean, that's definitely something that you have 0:20:17.440 --> 0:20:20.040 to pay attention to now, you know, this is this 0:20:20.080 --> 0:20:22.080 is the sort of thing that has to be thought 0:20:22.119 --> 0:20:26.320 about when you're doing a deal, whether the the review 0:20:26.400 --> 0:20:29.760 might be extended. In the standard General Tegna case, they 0:20:29.800 --> 0:20:32.359 had hoped that this deal would get review within nine months, 0:20:32.400 --> 0:20:35.879 and they had added this provision called ticking fees. So 0:20:35.960 --> 0:20:39.160 the longer the review takes, the more money they're actually 0:20:39.160 --> 0:20:42.200 going to have to pay to Techno shareholders. So they're 0:20:42.240 --> 0:20:44.960 not that happy about the fact that regulators are lengthening 0:20:45.880 --> 0:20:47.639 this deal since it means that they're going to have 0:20:47.680 --> 0:20:52.240 to pay more. I'm really curious what's going to be 0:20:52.280 --> 0:20:54.560 the next turn of the screw that that is going 0:20:54.600 --> 0:20:58.119 to make private equity you know, call their call their 0:20:58.160 --> 0:21:02.600 local lobbyists. Well, I mean, the Justice Department is continuing 0:21:02.640 --> 0:21:06.439 to investigate the Interlocking Directorate's issue and also, you know, 0:21:06.520 --> 0:21:10.280 just whether having private equity owners is changing the incentives 0:21:10.560 --> 0:21:14.080