WEBVTT - Private Credit, IPOs, and Washington 0:00:00.120 --> 0:00:04.360 Bloomberg is now on your dashboard with Apple CarPlay and 0:00:04.360 --> 0:00:08.160 Android Auto. It gives you access to every Bloomberg podcast, 0:00:08.280 --> 0:00:11.560 live audio feeds from Bloomberg Radio, print stories from Bloomberg 0:00:11.640 --> 0:00:14.920 News in audio form, and the latest headlines of the 0:00:14.920 --> 0:00:18.600 click of a button with Bloomberg News. Now it's free 0:00:18.680 --> 0:00:21.439 with the latest version of the Bloomberg Business App. That's 0:00:21.680 --> 0:00:24.400 the Bloomberg Business App. Get it on your phone in 0:00:24.440 --> 0:00:27.760 the Apple App Store or on Google Play. Just download 0:00:27.800 --> 0:00:30.560 the app, connect your phone to your car and get started. 0:00:30.960 --> 0:00:34.400 And it's all presented by our sponsor, Interactive Brokers. 0:00:35.400 --> 0:00:38.600 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:38.640 --> 0:00:39.760 my co host Matt Miller. 0:00:40.200 --> 0:00:44.279 Every business day we bring you interviews from CEOs, market pros, 0:00:44.320 --> 0:00:48.160 and Bloomberg experts, along with essential market movin news. 0:00:48.720 --> 0:00:51.839 I'm the Bloomberg Markets Podcast called Apple Podcasts or wherever 0:00:51.960 --> 0:00:55.080 you listen to podcasts, and at Bloomberg dot com slash podcast. 0:00:55.400 --> 0:00:58.000 All right, private credit. You know, we love this topic. 0:00:58.720 --> 0:01:00.160 It's a big growing mark. 0:01:00.800 --> 0:01:02.640 One and a half around one and a half trillion. 0:01:02.400 --> 0:01:04.720 Oh my goodness, and you know it's just been growing. 0:01:04.920 --> 0:01:07.720 I've been calling out that having seen a bunch of 0:01:07.720 --> 0:01:10.080 credit blobs back in my day. There's going to be something. 0:01:10.080 --> 0:01:13.160 There's no regulation of this market. Something's going to go wrong. 0:01:13.200 --> 0:01:14.959 And I keep saying it, but it keeps growing. And 0:01:15.000 --> 0:01:16.880 I'll tell you what. Pretty much everything we know about 0:01:16.880 --> 0:01:20.200 the credit private credit business, we learned from Randy Schumer. 0:01:20.280 --> 0:01:22.840 He's a coet of Senior Lending, a Churchill Asset Management 0:01:22.880 --> 0:01:23.520 here in New York. 0:01:23.840 --> 0:01:27.000 Randy, you said ninety yep, I have work to do, 0:01:27.360 --> 0:01:28.280 yes exactly. 0:01:28.400 --> 0:01:29.720 I'm just I don't want to put all the blame 0:01:29.760 --> 0:01:33.200 on you, but talk to us about the growth of 0:01:33.240 --> 0:01:36.080 this business. Is private credit business has been such a 0:01:36.080 --> 0:01:38.319 big growth story on Wall Street really since the end 0:01:38.360 --> 0:01:41.520 of the Great Financial Crisis? How concerned are you about 0:01:41.520 --> 0:01:45.240 the development of this market? Should investors and should regulators 0:01:45.240 --> 0:01:45.840 be concerned? 0:01:46.319 --> 0:01:48.840 And Jess is now part of the private credit policse Yes, 0:01:48.880 --> 0:01:51.600 she is. Well, the timing of this is great. Thanks 0:01:51.640 --> 0:01:55.200 for having me on because what's happening is that And 0:01:55.280 --> 0:01:58.000 I talked to someone on a podcast that we're doing 0:01:58.080 --> 0:02:01.160 recently that's coming out I think this week about that 0:02:01.240 --> 0:02:04.560 exact question. Why are people so concerned and why is 0:02:04.600 --> 0:02:07.400 this viewed as a bubble as opposed to natural growth 0:02:07.760 --> 0:02:11.000 of moving loans from the public banking sector into the 0:02:11.040 --> 0:02:14.119 non regulated, which is what the regulators wanted. And he said, 0:02:14.160 --> 0:02:17.160 because it's new, it feels new. It's not public. These 0:02:17.200 --> 0:02:21.360 loans are not traded. These are middle market companies. And 0:02:21.560 --> 0:02:24.600 part of that is just getting educated in the asset claus. 0:02:24.600 --> 0:02:26.800 You guys have been doing a great job in doing 0:02:26.800 --> 0:02:28.400 that and helping me get the word out. I think 0:02:28.480 --> 0:02:31.720 Mark Rowan Apaula pointed out the fact that it's really 0:02:31.800 --> 0:02:34.280 investor education, and the more education there is, the better 0:02:34.639 --> 0:02:37.320 that we look. But the fact of the matter is 0:02:37.320 --> 0:02:41.120 that this is actually a natural evolution away from traded 0:02:41.160 --> 0:02:44.280 assets where the banks were considered to be not healthy 0:02:44.280 --> 0:02:47.400 holders of these loans, and so the private credit market 0:02:47.680 --> 0:02:51.400 has responded to the immense amount of appetite because of 0:02:51.560 --> 0:02:55.120 so much of market volatility, these loans are untraded and 0:02:55.520 --> 0:02:58.240 I liquid loans, as opposed to being a negative, are 0:02:58.320 --> 0:03:01.520 viewed as being positive to a lot of investors, institutional 0:03:01.520 --> 0:03:07.720 investors who are looking to allocate to non traded, non volatile, 0:03:07.919 --> 0:03:11.239 less correlated assets. So the reason that the asset class 0:03:11.240 --> 0:03:14.840 has grown so much is because the investors are looking 0:03:14.880 --> 0:03:17.880 for alternatives to the sixty forty correlation, you know, the 0:03:17.919 --> 0:03:18.959 allocation model. 0:03:18.760 --> 0:03:19.560 That we talked about. 0:03:20.680 --> 0:03:22.360 And at the end of the day, these are middle 0:03:22.400 --> 0:03:27.280 market loans. These are low risk, relatively low levered, fully 0:03:27.320 --> 0:03:31.760 secured with financial covenants, and so think of private credit 0:03:31.919 --> 0:03:35.880 as middle market lending for grownups. Okay, it's very stable 0:03:36.000 --> 0:03:41.400 lending that is being now packaged in multiple funds, very 0:03:41.440 --> 0:03:46.920 diverse investor base across many, many, now thousands of investors 0:03:46.960 --> 0:03:49.960 who are investing in this asset class, who have experience 0:03:50.160 --> 0:03:54.320 in other complicated asset classes such as real estate and 0:03:54.640 --> 0:03:58.520 private credit and public equities and fixed income, and so 0:03:58.840 --> 0:04:01.480 it's actually meeting a demand and the demand is growing 0:04:01.520 --> 0:04:05.200 as more investors realize what an opportunity and benefit it is. 0:04:05.680 --> 0:04:09.160 What is your investment approach for private credit, specifically for 0:04:09.240 --> 0:04:11.400 your clients, what do you advise them to do and 0:04:11.440 --> 0:04:12.640 how to have that exposure. 0:04:12.840 --> 0:04:13.360 Yeah. 0:04:13.440 --> 0:04:16.080 So we're also very fortunate to be owned by a 0:04:16.240 --> 0:04:20.200 very large entity called TIAA, which is their holding company, 0:04:20.240 --> 0:04:23.960 right or Neuvene, which is a trillion dollar asset manager, 0:04:24.680 --> 0:04:28.240 and they have hundreds of billions of dollars in fixed 0:04:28.240 --> 0:04:31.240 income and public equities and real estate and municipal bonds, 0:04:31.680 --> 0:04:34.400 and what their investors are looking at the same thing 0:04:34.440 --> 0:04:37.880 as our investors at Churchill looking for is the stability 0:04:38.440 --> 0:04:41.400 of returns. And so in a normal environment, a senior 0:04:41.440 --> 0:04:44.240 credit we've talked about this will will get you kind 0:04:44.240 --> 0:04:47.640 of a seven percent on leveraged yield in the current environment, 0:04:47.760 --> 0:04:50.440 which is why it's very attractive right now because rates 0:04:50.440 --> 0:04:53.599 are up, they're earning a twelve percent on levered yield, 0:04:53.800 --> 0:04:55.919 and so when they look at the returns of twelve 0:04:55.920 --> 0:05:00.760 percent versus what they're getting in other markets, we're representing 0:05:01.000 --> 0:05:05.240 a lower risk profile and so that's adding to the 0:05:05.360 --> 0:05:08.040 appetite that these investors are looking for now. In our case, 0:05:08.480 --> 0:05:11.920 we can offer them senior debt opportunities, we can offer 0:05:12.000 --> 0:05:14.880 them junior capital, we can offer them private equity. So 0:05:14.920 --> 0:05:17.880 we have a number of asset classes that we're also 0:05:18.000 --> 0:05:22.120 offering our private equity sponsors in terms of their financing options. 0:05:22.120 --> 0:05:27.880 So we're taking the same financing choices that we're giving 0:05:27.880 --> 0:05:32.000 our clients on the financing side to the investors on 0:05:32.040 --> 0:05:35.159 the investing side. And that's what makes the sort of 0:05:35.320 --> 0:05:38.880 nice balance which I think as it investors and frankly, 0:05:39.000 --> 0:05:42.839 the media and regulators get to understand the asset class. 0:05:43.240 --> 0:05:45.760 You know, this is not fast money. This is money 0:05:45.839 --> 0:05:50.360 that investors are focusing long term assets with us long 0:05:50.440 --> 0:05:54.239 term liabilities because these loans don't disappear tomorrow, they're not traded, 0:05:55.080 --> 0:05:57.680 and that kind of stability is really at a premium 0:05:57.760 --> 0:05:58.200 right now. 0:05:58.880 --> 0:06:01.880 Who is a typical investor in one of your funds, 0:06:02.080 --> 0:06:02.760 So yeah, we. 0:06:02.760 --> 0:06:04.920 Don't really have typical investors. We have them from a 0:06:05.000 --> 0:06:10.600 broad array of types of investors. So we have pension plans, 0:06:10.640 --> 0:06:14.239 we have wealth wealth funds, we have sovereign wealth funds, 0:06:14.240 --> 0:06:20.039 we have insurance companies, and essentially, as more and more investors, 0:06:20.080 --> 0:06:24.120 particularly sophisticated investors, are looking at their options in this 0:06:24.640 --> 0:06:28.559 higher for longer world, they're thinking, you know, I need 0:06:28.880 --> 0:06:31.680 a premium yield because I can get five percent on 0:06:31.720 --> 0:06:36.240 treasuries right now, but I also want stability and those 0:06:36.279 --> 0:06:39.839 are the things that are attracting now even further down 0:06:40.040 --> 0:06:43.160 the food chain in terms of family offices and retail. 0:06:43.839 --> 0:06:46.760 And I think as the asset class grows, and we're 0:06:46.760 --> 0:06:51.159 calling it kind of the new paradigms, the as investors 0:06:51.200 --> 0:06:54.279 look at the benefits that private credit is offering and 0:06:54.320 --> 0:06:58.279 they're seeing some very sophisticated players in this market. They're 0:06:58.480 --> 0:07:02.200 they're saying, how can we party paid in this asset class. 0:07:02.440 --> 0:07:04.680 Do you see any red flags that are bubbling up 0:07:04.720 --> 0:07:06.440 in private credit any corners? 0:07:06.640 --> 0:07:08.960 Yeah, Well, the thing that is most I think concerning 0:07:09.000 --> 0:07:11.520 to anybody who has experience in the asset class is 0:07:11.600 --> 0:07:15.320 high interest rates. Because the thing that when you look 0:07:15.360 --> 0:07:18.120 at your portfolio with rates now at five and a 0:07:18.160 --> 0:07:22.200 half percent from a benchmark perspective versus zero a year 0:07:22.240 --> 0:07:27.880 and a half ago, the interest coverage is shrinking across portfolios, 0:07:28.160 --> 0:07:30.960 and so everyone looks at that as a risk, and 0:07:31.000 --> 0:07:32.760 it's a real risk, and so you have to build 0:07:32.760 --> 0:07:37.320 a portfolio that is ready to accept those higher rates. 0:07:37.360 --> 0:07:38.920 And the way we do it is we look at 0:07:39.280 --> 0:07:42.880 very defensive sectors that have high free cash flows that 0:07:43.480 --> 0:07:46.280 are owned by private equity firms who can grow these 0:07:46.320 --> 0:07:50.000 businesses to keep pace not only with where GDP is, 0:07:50.040 --> 0:07:53.840 but also where some of the higher growth sectors in 0:07:54.000 --> 0:07:58.360 areas like healthcare and business services are going. So give 0:07:58.360 --> 0:08:01.640 an example, the average growth in both revenues and IBATA 0:08:01.720 --> 0:08:03.840 in our portfolio right now is about twelve and a 0:08:03.880 --> 0:08:06.840 half percent. So when you look at the GDP which 0:08:06.880 --> 0:08:09.600 is bouncing around two three four percent something like that. 0:08:09.640 --> 0:08:13.240 You're looking at businesses that we think will grow through 0:08:13.280 --> 0:08:16.080 whatever cycle is coming. It looks like probably a soft 0:08:16.160 --> 0:08:19.320 or no landing is going to be expected, but our 0:08:19.320 --> 0:08:22.600 businesses are really faster growing than that. But they also 0:08:22.680 --> 0:08:26.440 tend to be businesses that are market leaders that will 0:08:26.440 --> 0:08:28.720 be able to sustain any kind of downturn even if 0:08:28.720 --> 0:08:29.280 we do have it. 0:08:29.600 --> 0:08:33.520 What's the deal flow you're seeing from your private equity sponsors. 0:08:33.559 --> 0:08:35.720 What's it been like today in this higher interest rate environment. 0:08:35.800 --> 0:08:38.800 We just got the October numbers. We are the most 0:08:39.000 --> 0:08:41.960 as of the end of October, the most active direct 0:08:42.080 --> 0:08:44.199 lender in the market right now in the United States. 0:08:44.760 --> 0:08:47.080 The reason that that's happening is that our private equity 0:08:47.080 --> 0:08:50.160 sponsors continue to have dry powder that they are raising 0:08:50.200 --> 0:08:52.440 in their own funds. They wanted to put it to work. 0:08:52.480 --> 0:08:56.120 They've identified areas of interest, as I mentioned, in these 0:08:56.120 --> 0:08:58.839 defensive sectors that in this current economy are doing well, 0:09:00.000 --> 0:09:02.319 and they realize that next year is probably going to 0:09:02.360 --> 0:09:05.480 be a better year than people think, probably not going 0:09:05.480 --> 0:09:07.680 to have a recession, and so they're trying to vote 0:09:07.679 --> 0:09:11.040 with their feet and they're looking for scaled players like 0:09:11.160 --> 0:09:14.160 Churchill that can write large checks where we have relationships 0:09:14.200 --> 0:09:15.839 and I think I mentioned this last time. We're an 0:09:15.840 --> 0:09:18.520 investor in their funds and so we were sort of 0:09:18.640 --> 0:09:21.960 first in line to be asked to join these deals. 0:09:22.240 --> 0:09:25.240 We still tend to be pretty picky. We probably do 0:09:25.280 --> 0:09:27.240 about five percent of the deals that come in the door. 0:09:27.840 --> 0:09:30.079 So we're looking for it only the best of the best, 0:09:30.320 --> 0:09:33.439 knowing that we don't know what's coming next year. I mean, 0:09:33.520 --> 0:09:35.400 think about where we were two or three years ago 0:09:35.520 --> 0:09:38.280 with COVID and in traits and the good thing. And 0:09:38.280 --> 0:09:41.360 this goes back to this issue a bubble. These middle 0:09:41.360 --> 0:09:44.560 market companies have been tested. They've been tested through low rates, 0:09:44.720 --> 0:09:46.880 they've been tested through high rates, they've been tested through 0:09:46.880 --> 0:09:50.000 low inflation, they've been tested through high inflation. And so 0:09:50.120 --> 0:09:54.679 I think the benefit that needs to be explained more. 0:09:54.720 --> 0:09:58.199 And this is part of this education is why these 0:09:58.240 --> 0:10:01.679 companies actually do well, in some cases even better than 0:10:01.679 --> 0:10:04.160 some of the larger companies, because they tend to be 0:10:04.800 --> 0:10:08.680 in structures that are more conservative, and also with lending 0:10:08.679 --> 0:10:11.680 partners sisters ourselves that are basically built for the long run. 0:10:11.720 --> 0:10:14.400 We're going to work through whatever problem these companies have 0:10:14.520 --> 0:10:17.800 to get to a final resolution. That's a positive one. 0:10:18.120 --> 0:10:20.760 Since your clients have money to use that's sitting on 0:10:20.800 --> 0:10:22.559 the sidelines. What do you think this tells us about 0:10:22.559 --> 0:10:25.960 the direction of the economy. They're willing to take more risk. 0:10:26.120 --> 0:10:29.120 Yeah, well I think that amazingly. It looks like the 0:10:29.160 --> 0:10:32.320 FED is engineered some kind of soft lending. Will see 0:10:32.360 --> 0:10:35.720 what happens. It feels like their language continues to be hawkish. 0:10:35.720 --> 0:10:38.600 They want to keep people on their toes. But if 0:10:38.600 --> 0:10:40.560 that's the case, and I do believe that it is, 0:10:40.600 --> 0:10:44.160 that next year will be a solid, solid year, that 0:10:44.200 --> 0:10:46.080 could be a good thing. Now in general, I do 0:10:46.160 --> 0:10:49.400 believe that inflation will be higher and rates will still 0:10:49.400 --> 0:10:52.400 be higher. But this is kind of the normal that 0:10:52.480 --> 0:10:56.600 we forgot about that hasn't been with us for fifteen years, right, 0:10:56.600 --> 0:10:58.760 You've had zero interest rates for a large part of 0:10:58.760 --> 0:11:01.960 that time. This zero gravity environment we got used to 0:11:02.160 --> 0:11:04.679 all of a sudden. You know, we're like the Apollo 0:11:04.720 --> 0:11:08.640 astronauts that they get you back or anybody from in 0:11:08.760 --> 0:11:11.800 these long space missions, and they can't walk because they're 0:11:11.800 --> 0:11:14.160 not used to the way to gravity. That's kind of 0:11:14.160 --> 0:11:16.400 how we're feeling right now. I think the world is 0:11:16.440 --> 0:11:19.720 not used to having a five percent FED funds rate, 0:11:19.760 --> 0:11:22.920 but in fact that's the average over the last sixty years. 0:11:22.960 --> 0:11:25.000 So I think we're returning to that, which is good 0:11:25.400 --> 0:11:28.920 because when you have zero interest rates, it sort of 0:11:28.960 --> 0:11:32.560 inspires some problematic behavior. But I think this new normal 0:11:32.600 --> 0:11:36.000 is actually very positive for private credit and for investors 0:11:36.000 --> 0:11:36.480 in general. 0:11:36.920 --> 0:11:38.840 Randy, thanks so much for joining us. Really appreciate you 0:11:38.880 --> 0:11:41.520 coming in the studio again. Randy Schummer. He's co head 0:11:41.520 --> 0:11:44.240 of senior Lending and his senior managing director at Churchill 0:11:44.920 --> 0:11:48.200 Asset Management, one of the leading private credit providers in 0:11:48.360 --> 0:11:52.000 the marketplace. And again, it's a business. I'm just looking 0:11:52.040 --> 0:11:54.920 at the some Bloomberg reporting here private credit market has 0:11:55.000 --> 0:11:58.960 roughly tripled in size since two thousand and fifteen. 0:12:00.320 --> 0:12:04.160 You're listening to the Team Ken's live program Bloomberg Markets 0:12:04.200 --> 0:12:07.280 weekdays at ten am eastering on Bloomberg dot com, the 0:12:07.360 --> 0:12:10.520 iHeartRadio app and the Bloomberg Business App, or listen on 0:12:10.559 --> 0:12:12.559 demand wherever you get your podcasts. 0:12:14.559 --> 0:12:17.400 Twenty twenty three was not a great year, kids for 0:12:17.559 --> 0:12:20.200 the IPO market. It was just kind of muted at best. 0:12:20.240 --> 0:12:20.400 Here. 0:12:20.520 --> 0:12:22.320 I guess there was a little bit more hope for 0:12:22.440 --> 0:12:25.280 twenty twenty four. We had some news today Shine the 0:12:25.360 --> 0:12:27.440 China found an online fashion company that won over one 0:12:27.480 --> 0:12:30.320 hundreds of millions of shoppers around the world. Has confidentially 0:12:30.960 --> 0:12:32.680 How confidentially can it be if it's followed to go 0:12:32.760 --> 0:12:34.599 product in the US and welcome be one of the 0:12:34.600 --> 0:12:37.880 biggest IPOs in years. Brian Lynch joins is she's head 0:12:37.880 --> 0:12:41.199 of market insight at Equities in So, Brian, just give 0:12:41.280 --> 0:12:44.360 us a little summation. How was twenty twenty three in 0:12:44.480 --> 0:12:46.840 terms of IPO activity? 0:12:47.480 --> 0:12:50.440 Thanks for having me. Twenty twenty three was certainly an 0:12:50.480 --> 0:12:54.440 extremely quiet year for IPOs. So far, we've seen about 0:12:54.480 --> 0:12:58.200 twenty three billion in IPO proceeds, higher than last year, 0:12:58.280 --> 0:13:01.400 but drastically and lower the the three hundred billion we 0:13:01.440 --> 0:13:04.040 had seen up to this point in twenty twenty one. 0:13:04.320 --> 0:13:07.480 So it's been a quiet year. And the fall cohort 0:13:07.520 --> 0:13:12.439 of IPOs that we did see so Clavio, Instacart, Arm Birkenstock, 0:13:12.720 --> 0:13:15.520 really did not pave the way for others to follow. 0:13:16.040 --> 0:13:18.079 It looks like Birkenstock as of today is the only 0:13:18.120 --> 0:13:20.920 one training above their open price. So it's been a 0:13:20.920 --> 0:13:23.880 tough year for IPOs. Yet there is a lot of 0:13:23.880 --> 0:13:27.559 demand f I pos and there are thousands of unicorn 0:13:27.600 --> 0:13:30.439 companies sitting on the sidelines, you know, figuring out their 0:13:30.480 --> 0:13:30.960 next move. 0:13:31.240 --> 0:13:33.320 What does this mean for twenty twenty four. 0:13:33.400 --> 0:13:36.960 Then yeah, I do think we'll see the market pick 0:13:37.000 --> 0:13:40.640 up in twenty twenty four, you know, both from a 0:13:40.720 --> 0:13:44.400 macro perspective, as you know you talked about a bit earlier, 0:13:44.600 --> 0:13:48.320 we are seeing better macro indicators. We have job growth, 0:13:48.360 --> 0:13:52.360 we have strong GDP, Inflation is cooling. You know, there's 0:13:52.400 --> 0:13:54.720 an end in sight when it comes to rate hikes 0:13:54.800 --> 0:13:57.280 or you know, even rate cuts, So that puts us 0:13:57.320 --> 0:14:01.199 in a better position. And ultimately a lot of these 0:14:01.240 --> 0:14:03.520 companies are feeling a lot of pressure from both early 0:14:03.559 --> 0:14:07.280 investors and shareholders to achieve liquidity. You know, look at 0:14:07.320 --> 0:14:10.040 Read at a company that was rumored today to be 0:14:10.160 --> 0:14:14.000 considering an IPO in twenty twenty four. This is a 0:14:14.040 --> 0:14:16.440 company that was found in two thousand and five, so 0:14:16.640 --> 0:14:19.040 they've been private for eighteen years. There's a lot of 0:14:19.080 --> 0:14:22.880 pend up demand for liquidity, and wild platforms like equity 0:14:22.960 --> 0:14:25.600 Zen can enable some of that liquidity while they're private. 0:14:25.960 --> 0:14:29.600 It really takes a public market exit for vast number 0:14:29.600 --> 0:14:32.760 of investors to have access and you know that wide 0:14:32.760 --> 0:14:35.120 scal liquidity for early shareholders. 0:14:35.880 --> 0:14:38.400 Is Kim kardashing going to save the IPO market? I 0:14:38.480 --> 0:14:41.160 hear she's got a company called Skims, which I'm sure 0:14:41.200 --> 0:14:42.080 John Tucker. 0:14:41.880 --> 0:14:44.440 Is aware of, but oh he do that's wearing at 0:14:44.440 --> 0:14:45.000 this skirf. 0:14:45.200 --> 0:14:49.320 Yeah, talk to us about like, I don't know, what 0:14:49.320 --> 0:14:50.240 do you know about Skims? 0:14:51.440 --> 0:14:55.080 Sure? So Skims kind of bucks the trend of some 0:14:55.120 --> 0:14:58.840 of these other companies. They were just founded in twenty nineteen, 0:14:58.920 --> 0:15:02.840 so a relatively young company valued out of four billion 0:15:02.880 --> 0:15:07.480 dollar valuation over the summer, but they're rapidly growing. They 0:15:07.600 --> 0:15:11.080 obviously have a strong brand name, you know, the connection 0:15:11.160 --> 0:15:14.840 with Kim Kardashian certainly helps. And you know, from what 0:15:14.880 --> 0:15:17.080 I've heard, they have a strong product as well. So 0:15:17.600 --> 0:15:21.320 if they did IPO next year, they would certainly be 0:15:21.440 --> 0:15:24.400 different than a lot of these ten fifteen, almost twenty 0:15:24.440 --> 0:15:26.800 year old companies that we expect to hit the markets. 0:15:27.600 --> 0:15:33.160 What industry groups are doing better at going public at 0:15:33.160 --> 0:15:36.040 this point versus others that are struggling. Is it more 0:15:36.160 --> 0:15:38.880 company specific or is it more industry specific? 0:15:41.120 --> 0:15:45.120 I think it is company specific to some extent. You know, 0:15:45.160 --> 0:15:48.200 there are certain things that any company is going to 0:15:48.280 --> 0:15:51.280 need to exhibit to have a successful IPO. They need 0:15:51.320 --> 0:15:54.840 to be showing profitability, they need to be in growth, 0:15:54.880 --> 0:15:57.880 and they need to have a strong brand that investors 0:15:57.920 --> 0:16:00.840 know and recognize. That being said, a lot of these 0:16:00.840 --> 0:16:04.760 companies this fall showed some of those elements and still 0:16:04.880 --> 0:16:09.040 weren't successful. The industries that we're seeing the most investor 0:16:09.080 --> 0:16:13.080 interest in in the private markets are AI and machine learning, 0:16:13.200 --> 0:16:19.080 so not surprising, information technology so pure tech companies, and fintech. 0:16:19.200 --> 0:16:21.520 So those are the areas we're seeing interest in the 0:16:21.520 --> 0:16:24.920 private markets. When you look at AI and machine learning, 0:16:25.040 --> 0:16:28.240 a lot of these companies are younger companies who are 0:16:28.680 --> 0:16:32.600 less likely to be close to an IPO. So I 0:16:32.600 --> 0:16:35.200 think some of these pure tech companies that have really 0:16:35.200 --> 0:16:38.880 attractive multiples could be the ones, you know that have 0:16:38.960 --> 0:16:40.760 a more successful debut. 0:16:41.080 --> 0:16:43.360 You know, Brian, I wonder what the what are the 0:16:43.400 --> 0:16:47.040 bankers saying as to why they didn't get more done 0:16:47.040 --> 0:16:48.920 in twenty twenty three. Like back in my day, as 0:16:49.000 --> 0:16:51.000 long as this market wasn't crashing, I could push out 0:16:51.280 --> 0:16:54.080 a lot of stuff out the door, particularly from companies 0:16:54.120 --> 0:16:57.160 that are really looking for some liquidity. What are they 0:16:57.200 --> 0:16:59.400 saying here, what kind of market do they need? I mean, 0:16:59.440 --> 0:17:02.280 the S Andp's up sixteen seventeen eighteen percent, even equal 0:17:02.280 --> 0:17:04.479 weighted it's up four or five percent, So it's not 0:17:04.520 --> 0:17:06.200 like the market's down. 0:17:08.400 --> 0:17:11.080 I think you're right. The macro indicators show that we 0:17:11.119 --> 0:17:14.600 are in a pretty good place for companies to exit. 0:17:15.000 --> 0:17:18.000 I think that there's just a lot of trepidation in 0:17:18.040 --> 0:17:22.199 the market given that we haven't seen a blockbuster IPO 0:17:22.359 --> 0:17:26.200 be successful, you know, this year or last year really, 0:17:26.480 --> 0:17:30.200 so it's I think it's more of an investors are nervous. 0:17:30.320 --> 0:17:32.439 They're looking for someone to lead the packing kind of 0:17:32.520 --> 0:17:34.760 tell everyone, Okay, this is going to work out fine, 0:17:34.840 --> 0:17:38.240 and we've yet to really see that. I do think 0:17:38.280 --> 0:17:41.639 once we see one or two really successful IPOs, the 0:17:41.680 --> 0:17:45.080 doors will open more because you know, the macro factors 0:17:45.080 --> 0:17:47.879 are there and it should be a decent market to exit. 0:17:48.280 --> 0:17:51.439 That being said, I think another factor that impacts a 0:17:51.440 --> 0:17:54.120 lot of these companies is that if they raise capital 0:17:54.200 --> 0:17:57.520 in twenty twenty one, it's very unlikely that that valuation 0:17:57.720 --> 0:18:00.639 is still where the market is unless they into it. 0:18:01.000 --> 0:18:03.119 So they're just going to have to accept that the 0:18:03.240 --> 0:18:06.800 IPO at a lower evaluation, you know, if they're trying to. 0:18:06.720 --> 0:18:09.760 Exit, well, Shine could be maybe one of these companies 0:18:09.800 --> 0:18:12.320 because it's I think according to the Wall Street Journal 0:18:12.359 --> 0:18:15.080 reporting Shine, which is it's a Chinese company, so that 0:18:15.119 --> 0:18:16.720 could be an issue for some people. But it's now 0:18:16.760 --> 0:18:20.400 based in Singapore, was valued around sixty six billion dollars 0:18:20.440 --> 0:18:23.080 in a fundraising round in May, and is likely to 0:18:23.119 --> 0:18:25.959 aim for an even higher valuation in an initial public offering, 0:18:26.040 --> 0:18:28.800 So I guess. And it's got Gold and Sachs and 0:18:29.000 --> 0:18:31.520 JP Morgan and Morgan Stanley. So I mean, it seems 0:18:31.560 --> 0:18:34.200 like all the elements are there for Shine. Do we 0:18:34.280 --> 0:18:36.639 have any sense of timing Shine would be early twenty 0:18:36.640 --> 0:18:37.720 four later twenty four. 0:18:39.160 --> 0:18:43.480 Indications look like this would be an early twenty four IPO. 0:18:43.560 --> 0:18:46.000 But this is also a company that has had its 0:18:46.119 --> 0:18:50.040 valuation decrease. They raised capital in twenty twenty two at 0:18:50.040 --> 0:18:54.000 one hundred billion dollar valuation, earlier this year raised again 0:18:54.080 --> 0:18:56.960 at a sixty six billion dollar valuation, and as you said, 0:18:57.119 --> 0:19:00.040 looking at an eighty or ninety billion dollar valuation. So 0:19:00.040 --> 0:19:02.720 they haven't bucked that trend of companies that have had to, 0:19:02.960 --> 0:19:06.320 you know, accept that their twenty twenty one twenty twenty 0:19:06.320 --> 0:19:09.200 two valuation may not be where the market is anymore. 0:19:09.720 --> 0:19:13.120 But to your point, it's a company that has achieved 0:19:13.200 --> 0:19:16.560 twenty three billion dollars in revenue, had its most profitable 0:19:16.600 --> 0:19:19.000 half in the first half of this year. You know, 0:19:19.040 --> 0:19:23.000 it was growing rapidly with new distribution centers in the US, Canada, 0:19:23.480 --> 0:19:28.280 and Europe. They're opening new manufacturing centers in Brazil and India. 0:19:28.359 --> 0:19:31.320 So a lot of growth going on there, but also 0:19:31.359 --> 0:19:36.520 some concerns about their relationship with China, you know, IP infringement, 0:19:36.720 --> 0:19:40.240 labor practices and some other things. So certainly not a 0:19:40.280 --> 0:19:42.159 straight forward story on this one. 0:19:42.359 --> 0:19:44.160 We only have about a minute left. But what other 0:19:44.200 --> 0:19:47.440 companies should we keep on our radar that could potentially 0:19:47.480 --> 0:19:48.560 go public next year? 0:19:49.720 --> 0:19:54.399 Yeah, Reddit's one that we mentioned. They are in comations 0:19:54.800 --> 0:19:58.800 to potentially file next year. They're private for a very 0:19:58.840 --> 0:20:02.080 long time, and really they have solidified themselves as one 0:20:02.080 --> 0:20:05.160 of the leading social media platforms in the US. They 0:20:05.200 --> 0:20:08.840 made you know, a lot of splashy news in the 0:20:08.960 --> 0:20:12.560 error of the meme stocks their subreddits. Wall Street Back 0:20:13.720 --> 0:20:16.560 was really you know, the catalyst for a lot of 0:20:16.560 --> 0:20:19.840 the retail momentum in the stock market. So I think 0:20:19.880 --> 0:20:23.040 they are an important one to watch and see. Geek 0:20:23.119 --> 0:20:27.159 is another one that has confidentially not sorry, not confidentially, 0:20:27.440 --> 0:20:32.040 had filed to go public, hasn't yet, but has grown significantly, 0:20:32.080 --> 0:20:34.480 and we know they're considering an IPO, so we have 0:20:34.560 --> 0:20:35.680 eyes on that one as well. 0:20:36.000 --> 0:20:37.919 All right, well, hopefully twenty four will be be a 0:20:37.920 --> 0:20:39.920 better IPO market than we have more opportunities to talk 0:20:39.920 --> 0:20:44.760 to Brian. Brian Lynch is head of market insight at Equities. 0:20:44.240 --> 0:20:47.360 In you're listening to the tape cans are live program 0:20:47.400 --> 0:20:51.359 Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, 0:20:51.520 --> 0:20:54.240 the tune in app, Bloomberg dot Com, and the Bloomberg 0:20:54.280 --> 0:20:57.360 Business App. You can also listen live on Amazon Alexa 0:20:57.440 --> 0:21:00.760 from our flagship New York station Just say hello, what's playing? 0:21:00.840 --> 0:21:02.159 Bloomberg eleven thirty. 0:21:04.160 --> 0:21:06.639 Just met Paul Sweeny live here on Bloomberg Interactive Broker. 0:21:06.720 --> 0:21:09.359 This is a treat, folks. Neil Hennessy joins us chief 0:21:09.400 --> 0:21:12.679