Speaker 1: From Marhart where Innovation, Money and power.
Speaker 2: Collie in Silicon Valley, NBN.
Speaker 3: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 4: I'm Caroline Hein of Bloomberg's World headquarters in New York,
Speaker 4: and I'm Ed Ludlow in San Francisco.
Speaker 5: This is Bloomberg Technology.
Speaker 4: Coming up Disney's fight against activist Nelson pelts Well. It
Speaker 4: steps up as it has a win of support of
Speaker 4: Value Act Capital for its board nominees. Will break down
Speaker 4: the latest.
Speaker 5: Plus Bitcoin reversed his course and wipes out gains from
Speaker 5: this year as uncertainty lingers around the SEC's ETF decision.
Speaker 5: More details ahead, and is.
Speaker 4: Twenty twenty four the year US China tensions finally hit Apple.
Speaker 5: Yeah, We're going to dig into that big time later
Speaker 5: in the show. The kind of main story on the
Speaker 5: public equity side is Disney. Disney CEO Bob Iger has
Speaker 5: secured the support of activist Value Act, who will back
Speaker 5: Disney's proposals for the board. At the same time, a
Speaker 5: very small activist head from Blackwell's Capital has some other
Speaker 5: proposals for board nominees, but is in line with bob Iger.
Speaker 5: That support important because Bob Iger is trying to ward
Speaker 5: off Nelson Peltz and Tree and Capital, another activist who
Speaker 5: have not been happy with Disney's business performance over the
Speaker 5: last two years. The stock essentially flat. You can see
Speaker 5: the kind of volatility in trading throughout Wednesday's session. Let's
Speaker 5: get down into detail, bringing Bloomberg's Lucas Shaw, who leads
Speaker 5: our screen time coverage. I guess, Lucas, what is the
Speaker 5: need to know here of this morning's developments and statements.
Speaker 6: Well, it's further proof that I guess, let's start with
Speaker 6: it's a really unusual situation to have a company of
Speaker 6: this magnitude with all these different activists investors swirling and agitating.
Speaker 6: But there's been some questions as to what exactly Nelson
Speaker 6: Pelts wants and what they're seeking from Disney, because it
Speaker 6: seems like Disney has been doing a lot of the
Speaker 6: things that they.
Speaker 5: Have advocated for.
Speaker 6: And then the appearance of Value Act and now this
Speaker 6: third entity gives some ballast to Bob Iger ahead of
Speaker 6: the shareholder meeting later this year and would seem to
Speaker 6: put him in pretty good position. And so I just
Speaker 6: think it gives Iger a vote confidence.
Speaker 4: So remind us Nelson Peltz wants himself on the board
Speaker 4: and a former executive of Disney. Meanwhile, Value Act and
Speaker 4: Disney itself want who exactly.
Speaker 6: Well, yeah, Nelson Peltz wants Jay Rissulo, who was the
Speaker 6: CFO under Bob Iger a long time ago and once
Speaker 6: was thought to be a potential successor. Bob Iger ended
Speaker 6: up sort of anointing Tom Staggs as a successor. Instead,
Speaker 6: Tom Staggs didn't end up succeeding Bob Biker because Bob
Speaker 6: Biker didn't want to go anywhere. But unlike Jay Rasulo,
Speaker 6: who clearly has an act to grind with Eiger Stags
Speaker 6: and his counterpart Kevin Mayer, who has also been you know,
Speaker 6: at one point in time thought he might succeed, have
Speaker 6: been happy to advise Bob a little bit.
Speaker 5: Kevin mayor more.
Speaker 6: So, you know, Bob is basically saying, let me do
Speaker 6: what I'm doing because we have a plan. We've already
Speaker 6: added some board members recently who are sort of or
Speaker 6: are proposing board members who are going to join, and
Speaker 6: so he thinks that his candidates are just fine. That
Speaker 6: includes I believe Gorman from Morgan Stanley and then someone
Speaker 6: who used to run Sky.
Speaker 4: We keep an eye on the cummings and goings. When
Speaker 4: it comes to personal Lucas Shaw does it so brilliantly
Speaker 4: for us.
Speaker 1: We thank him.
Speaker 4: Meanwhile, listen to the intricacies of ultimately what this means
Speaker 4: from a business case, a Disney evaluation case, and I'm
Speaker 4: more broadly how it fits into the consolidation we anticipate
Speaker 4: within media for twenty twenty four. Keithan Raganaffon is with
Speaker 4: us from Lumbag Intelligence and ethern Just already, Lucas made
Speaker 4: that point that a lot of the work that Bobag
Speaker 4: has been doing seems to be in line with where
Speaker 4: activist investors are wanted. What eight thousand jobs eliminated, seven
Speaker 4: and a half billion dollars of costs removed, What more
Speaker 4: could investors want right now?
Speaker 3: Yeah, I mean he has done a lot of the
Speaker 3: things obviously that the activist investors have wanted. And you're
Speaker 3: absolutely right in terms of cost cuts, in terms of
Speaker 3: right sizing content expenses. You know, they've brought down content
Speaker 3: expenses from about thirty billion dollars to twenty seven billion
Speaker 3: to now twenty five billion. And I think the biggest
Speaker 3: takeaway caroline from the latest earnings call was that they're
Speaker 3: getting their free cash flow back to pre pandemic levels,
Speaker 3: so free cash flow for twenty twenty four expected to
Speaker 3: be eight billion dollars. They're also restoring the dividends, so
Speaker 3: there's obviously a lot that they're doing. But I think
Speaker 3: there is still some frustration with Disney's management because we
Speaker 3: do know that Bob Eyeger last year had spoken about
Speaker 3: how the linear TV assets are in secular decline, and
Speaker 3: he had kind of spoken about, you know, how the
Speaker 3: future for those are very bleak, but we've not really
Speaker 3: seen any concrete action from.
Speaker 1: Him in terms of what he's going to.
Speaker 3: Do with those assets, and I think that's leading to
Speaker 3: a little bit of frustration. Plus, of course, you have
Speaker 3: the studio. We've had a whole string of misfires, you know,
Speaker 3: whether it's the latest Marvel's movie, are just not kind
Speaker 3: of living up to what we expect from Disney, and
Speaker 3: so they obviously have to do a lot of work
Speaker 3: on that front as well. But we have to remember,
Speaker 3: I mean, these things are going to take change takes time.
Speaker 3: It's not going to happen overnight. But you're absolutely right,
Speaker 3: bar Biger is definitely I think the right person to
Speaker 3: do it. There's a lot of confidence, but again it
Speaker 3: is going to take a while.
Speaker 4: Blackwell's saying exactly that in the statement. As the statement,
Speaker 4: shareholders deserve the opportunity to continue to really support Disney's
Speaker 4: turnaround and transformation onto Bobiger.
Speaker 1: Meanwhile, though Nelson Pelt.
Speaker 4: Says one of the issues he has is compensation, misalignment,
Speaker 4: governance and succession, which she says have been issues that
Speaker 4: played the company for decades.
Speaker 1: What more could be done on those three? Do you think? Yeah?
Speaker 3: I think you know, succession obviously has been this constant
Speaker 3: pain point for bar Biger, but you know, he's obviously
Speaker 3: he's brought in. The CFO was a lingering issue. They
Speaker 3: obviously have Hugh Johnston now in, and they have a
Speaker 3: whole slew of board members.
Speaker 1: That they just actually brought to the board.
Speaker 3: I mean, Lucas just pointed out Jeremy Derek from Sky
Speaker 3: who has a very rich experience in terms of content distribution,
Speaker 3: content creation. And then of course you have James Gorman,
Speaker 3: who's a real heavyweight, so they obviously can get a
Speaker 3: lot of perspective there. So again I think they have
Speaker 3: all of the things in place. We have to really
Speaker 3: see what they do in terms of strategic direction for
Speaker 3: a few of their assets, especially ESPN and then the
Speaker 3: outstanding ownership issue with Hulu.
Speaker 5: A Gita. This is the value act fsis on Disney.
Speaker 5: They basically state Disney's the world's leading entertainment company. They
Speaker 5: talk about the IP, they talk about the park's business,
Speaker 5: and they say in the state in this morning, as
Speaker 5: legacy technologies transition to digital platforms, we believe Disney can
Speaker 5: lead the media industry forward. Does Bloomberg Intelligence share value
Speaker 5: acts thesis around Disney?
Speaker 3: Absolutely, Disney has the best in class brands.
Speaker 1: There is no doubt about that.
Speaker 3: Yes, we have seen a little bit of underperformances I
Speaker 3: just spoke about in terms of, you know, the studio side,
Speaker 3: but they absolutely have all of the levers in place.
Speaker 3: I mean, you look at the media assets they have,
Speaker 3: you know, fantastic properties, whether it's Marvel, whether it's Pixar,
Speaker 3: you know, whether it's Star Wars. They have all of
Speaker 3: the franchises that people love. And then of course you
Speaker 3: have the parks business, which has been performing extremely well.
Speaker 3: I just don't think they're getting enough credit for it.
Speaker 5: So the question is what happens next right, Blackwells has
Speaker 5: some different board proposals. Value Act is backing Disney's proposals
Speaker 5: for the board. There will be a shareholder meeting. If
Speaker 5: you sort of gain planned and modeled the scenario where
Speaker 5: Nelson Peltz is appeased, I think we said that, well, yeah,
Speaker 5: last year in wee Caroline appeasing. Else does he get
Speaker 5: a peace based on the reporting you've read this morning, Yeah,
Speaker 5: it's going.
Speaker 3: To be I think he's going to fight really hard.
Speaker 3: I mean this, this is going to be a really
Speaker 3: contentious fight I think between Pelts and Disney. He obviously
Speaker 3: does definitely want to put himself on the board. He
Speaker 3: definitely wants to see Jay Rizzulu on the board. I
Speaker 3: don't think Disney kind of needs that distraction right now.
Speaker 3: It really is going to come down to what I
Speaker 3: think Bob Eigert. He's obviously been shoring up his defenses
Speaker 3: with the Value Act news, with the Black Worlds news.
Speaker 1: It's going to come down to, you.
Speaker 3: Know, if he can announce something, if there are any
Speaker 3: near term catalysts in terms of strategic initiatives that can
Speaker 3: kind of really appease Nelson Pelts, whether they can come
Speaker 3: up with something on the linear TV side, you know,
Speaker 3: in terms of plans for those linear TV assets, or
Speaker 3: if there is some kind of announcement with respect to ESPN.
Speaker 3: You know, we know that they've been kind of searching
Speaker 3: for that strategic partner, you know, one of the one
Speaker 3: of the big digital players, or maybe even the leagues themselves.
Speaker 1: US talks have really not got anywhere.
Speaker 3: So again, anything comes up on that front, I think
Speaker 3: it really does kind of reintegrate the star price a little.
Speaker 5: Bit, agetha Ang and Nathan with really detailed analysis from
Speaker 5: Bloomberg Intelligence. So what Lucas Shaw called a highly unusual
Speaker 5: situation with activist investors sticking with activist investors and number
Speaker 5: store another story with tracking gambling group en Tain named
Speaker 5: the CEO of activist investor Eminence Capital to its board.
Speaker 5: A shareholder has been pushing to improve the British company's performance. Eminence,
Speaker 5: which holds enchained shares, has been critical of the company's
Speaker 5: deal making approach and suggested they could explore divesting some
Speaker 5: or all of its stake in the US betting joint
Speaker 5: venture bet MGM, which it co owns with MGM Resorts.
Speaker 4: Let's talk about China US because one key American company.
Speaker 4: It's kind of been able to navigate the rocky relationship
Speaker 4: between Washington and Beijing and it's been Apple, but mounting
Speaker 4: tensions between the two superpowers they're making things ever more
Speaker 4: complicated for the company and Bloomberg Businesswee coconomist Max Traffkin
Speaker 4: has a story out just about this.
Speaker 1: Ultimately, what has changed.
Speaker 4: There seems to be two key issues at stake that
Speaker 4: are going to make Apple's life difficult.
Speaker 5: Yeah, absolutely so the two issues. Number one is competition.
Speaker 7: So Huawei, which you know, the big Chinese telecom manufacturer
Speaker 7: for years, was hobbled by these export controls instituted under
Speaker 7: Donald Trump, maintained by Joe Biden. And early last year,
Speaker 7: you know, they came out with a new phone, the
Speaker 7: Mate sixty Pro, which has a chip that is pretty
Speaker 7: close to the state of the art. It's really the
Speaker 7: first phone in a couple of years that's come close
Speaker 7: to the iPhone, you know, potentially competitive. And then the
Speaker 7: other hand, you have restrictions, so you have the government
Speaker 7: preventing people in China from bringing phones into the workplaces
Speaker 7: of state back companies, and these two things together are
Speaker 7: a real problem for Apple because you have the government
Speaker 7: telling people not to use it, and then all of
Speaker 7: a sudden, some real genuine competition presenting itself.
Speaker 5: Max. This is a chart that shows the sort of
Speaker 5: breakdown of revenues by geography on a course lee basis,
Speaker 5: and I think back to November on the Earnings School,
Speaker 5: where China rule was soft and the narrative from executives
Speaker 5: was this was simply to do with Mac and iPad
Speaker 5: because there were no new macs or iPads. But the
Speaker 5: caveat that Apple tried to put in there, that green
Speaker 5: bar on the right hand side being propped up by
Speaker 5: a record for iPhone sales in Greater China in your piece,
Speaker 5: which you tied to win twenty twenty four, the year
Speaker 5: US China tensions finally trip up Apple. Is it the
Speaker 5: iPhone specifically that is the battleground here or is it
Speaker 5: the whole business over in China? I mean, certainly the
Speaker 5: whole business.
Speaker 7: And we should just take a few steps back and say,
Speaker 7: you know, Apple is completely intertwined with China. You know,
Speaker 7: it relies on China for its supply chain, and it's
Speaker 7: also as that chart you're showing shows a substantial part
Speaker 7: of the sort of consumer facing business the growth of
Speaker 7: the Chinese market has been very good to Apple. But
Speaker 7: we're talking about Apple, you know, the iPhone dominates and
Speaker 7: it matters a lot here and again these are sort
Speaker 7: of faint signals that we started to see last year.
Speaker 7: But we tried to analysts the first of all, growth
Speaker 7: in Huawei's sales, and they're expecting at least some pain
Speaker 7: for Apple and China. But again it's not clear how much,
Speaker 7: because Chinese consumers still you know, love this company, still
Speaker 7: love the iPhone and have still been buying it. I mean,
Speaker 7: as we wrote in the story, there were you know,
Speaker 7: lines at Apple stores in December even as these restrictions
Speaker 7: were being reported by Bloomberg and others.
Speaker 4: It's an interesting test of Tim Cook in particular, right
Speaker 4: because he was the supply chain guy before he became
Speaker 4: the CEO. And in many ways, yeah, they're eyeing India,
Speaker 4: but they haven't stepped away from China.
Speaker 1: Well.
Speaker 7: Part of the problem that Apple has here is they
Speaker 7: are a major employer in China, so this is this
Speaker 7: is a political issue in China. China does not want
Speaker 7: them to necessarily diversify their supply chain, while Apple at
Speaker 7: the same time, you know, would very much like to
Speaker 7: not be totally dependent on this on a country, where
Speaker 7: as we saw during COVID as well as the demonstrations
Speaker 7: in front of these iPhone factories in twenty twenty two,
Speaker 7: you know that comes with risks, so you sort of
Speaker 7: have a push and pull, and some people have seen
Speaker 7: these restrictions that the government has been putting on iPhones
Speaker 7: as sort of a message from China saying, you know,
Speaker 7: don't you know, you don't want to move out of
Speaker 7: this country too much because because that could create problems
Speaker 7: for the local markets.
Speaker 5: So it's kind of a delicate balance.
Speaker 7: But the one thing that Apple has going for it
Speaker 7: again are these devices that even though even if they
Speaker 7: have competition, they are still genuinely loved by consumers, and
Speaker 7: when you look at the chips and so on, you know,
Speaker 7: still ahead of what the domestic manufacturers are producing.
Speaker 5: All right. Thanks to Bloomberg's Max Chafkin, who's latest in
Speaker 5: Business Week is a must read, check it out on
Speaker 5: the year ahead for Apple in China. Sticking with China.
Speaker 5: In an effort to take a softer tone on the
Speaker 5: gaming industry, China has reportedly fired the top official of
Speaker 5: the gaming watchdog agency Bloomberg's Henry Ren is in London
Speaker 5: with more. This happened overnight US time, and it's kind
Speaker 5: of a walk back on what were strong regulations that
Speaker 5: rocked equity markets at the time.
Speaker 8: Yes, indeed, so two media reports in the cay that's
Speaker 8: so fund shooting, who's heads of the China's publishing unit
Speaker 8: of the Publicity Department would depart from his role. So
Speaker 8: just to cavet here because there's no official Chinese government
Speaker 8: statement saying that from Shushing would depart or being fired
Speaker 8: from his role. However, this does seem that the China's
Speaker 8: gaming regulator is softening it stands toward the video game sector.
Speaker 8: Just remember in late December, the gaming regulator published a
Speaker 8: sweeping set of curbs limiting Chinese players playing time as
Speaker 8: well as spending on video games and those who were
Speaker 8: badly received by the market. We've been seeing a drop
Speaker 8: in industry build weathers such as Tansen as well as Natti's,
Speaker 8: as well as other smaller video games stocks in China
Speaker 8: in late December.
Speaker 4: Whiplash, I think is the takeaway for now, Henry Reren,
Speaker 4: We thank you so much for the latest done what
Speaker 4: seems to be a changing of sentiment when it comes
Speaker 4: to gaming, at least for the interest. Meanwhile, coming up,
Speaker 4: we're good to all things A and cybersecurity or how
Speaker 4: strike CEOs go for joining us Storgekat stick with us
Speaker 4: for it as somebody meg technology.
Speaker 5: Okay, it's time for talking tech and first st up.
Speaker 5: Samsung is leaning into AI is the key to unlocking
Speaker 5: greater sales this year. The smartphone maker plans to launch
Speaker 5: its next flagship device on January seventeenth, and the teaser
Speaker 5: to the launch promises that quote Galaxy AI is coming.
Speaker 5: And SpaceX launched its first six satellites capable of offering
Speaker 5: mobile phone services, with t Mobile operating like a cell
Speaker 5: tower in space. The Starlink satellites work with users existing phones,
Speaker 5: rather than using specialized equipment to bring connectivity to remote areas. Plus,
Speaker 5: Atos is in talks to sell it's big data and
Speaker 5: cybersecurity business to Airbus for as much as one point
Speaker 5: eight billion euros that's about two billion US dollars. This
Speaker 5: is the French tech company faces hefty debt repayments at
Speaker 5: our shares fell following the news Carrott.
Speaker 1: Yeah, let's stick.
Speaker 4: On the area of cybersecurity and really what it means
Speaker 4: for twenty twenty four, some of the risks, maybe some
Speaker 4: of the reads. CrowdStrike CEO George Kurtz joins us now
Speaker 4: to really spell out what you're seeing on the ground
Speaker 4: at the moment. George, we were all thinking about artificial
Speaker 4: intelligence as not only a threat in terms of cyber
Speaker 4: but also defense too. How are you seeing generative AI
Speaker 4: come into your playbook at CrowdStrike.
Speaker 1: Well, well, we think about AI.
Speaker 9: That certainly was the hot topic of twenty twenty three,
Speaker 9: and as you mentioned, it certainly is and can and
Speaker 9: will be used for the farest purposes by the adversaries.
Speaker 9: But when you think about companies like CrowdStrike, it really
Speaker 9: is a key.
Speaker 5: Part of our success Going forwards.
Speaker 9: We spend a lot of time on something we called
Speaker 9: Sharovit ai, which is our generative AI play in terms
Speaker 9: of help customers really protect themselves and leverage the collective
Speaker 9: knowledge of CrowdStrike. But more than just a chatbot, actually
Speaker 9: do work on behalf of our customers using our technology.
Speaker 9: So we think it's a game changer, something that can
Speaker 9: take eight hours of work and turn it into ten
Speaker 9: minutes and work for a security analyst, and we think
Speaker 9: we're going to get better outcomes for our customers. So
Speaker 9: we're really excited about it and it's a big part
Speaker 9: of our playbook going forward.
Speaker 4: And keeping humans in the loop. When it comes to
Speaker 4: Charlotte AI, I'm interested in whether you can pinpoint any
Speaker 4: real areas where generative AI has made a real impact
Speaker 4: in terms of cyber threats.
Speaker 1: What have you actually seen.
Speaker 9: Well, there is this concept of dark AI, and that
Speaker 9: is you can think about using something like chat GBT
Speaker 9: without rails right fraud GBT as an example, is some
Speaker 9: technologies that are out there where you can essentially leverage
Speaker 9: AI to create things like phishing emails, to research vulnerabilities,
Speaker 9: to meet sort of the creation of cyber crime campaigns.
Speaker 5: So what it really does, though.
Speaker 9: And if you think about generative AI and what it's
Speaker 9: done for everyone else, is it takes this collective knowledge
Speaker 9: and sort of makes it available to the masses. So
Speaker 9: the challenging part that we have now is it makes
Speaker 9: cyber attacks even more available to maybe folks who don't
Speaker 9: have all of the knowledge book can actually ask a
Speaker 9: generative AI technology to do something on its behalf. So
Speaker 9: cybercram is going to be even more and more prevalent
Speaker 9: than it is today, George.
Speaker 5: Twelve months ago, almost to the day, you and I
Speaker 5: sat down in Las Vegas at CES and what transpired
Speaker 5: over the course of twenty twenty three were large scale attacks.
Speaker 5: I think you guys call them big game hunting in
Speaker 5: your tracking of these kind of scales of attacks and
Speaker 5: going into twenty twenty four, that's continued. What are the
Speaker 5: reasons behind that? Why are you seeing a research and
Speaker 5: continuation of the wide scale attack.
Speaker 9: Well, it's j old adage. You know, you can go
Speaker 9: where the money is, right, there's a lot of money
Speaker 9: in these cyber attacks because the adversaries have been so
Speaker 9: successful in being able to ransom and get paid. And
Speaker 9: when we think about what we saw over the last year,
Speaker 9: and you and I talked about a year ago, you're
Speaker 9: spot on at CES. It was really the fact that
Speaker 9: we saw this this sort of double extortion, which was
Speaker 9: the adversary could encrypt all the data and basically pay
Speaker 9: it on encrypted or if organizations which they have gotten
Speaker 9: better and they backed up their data and.
Speaker 5: Restored it, they would take a copy of it and
Speaker 5: then they would then leak at that.
Speaker 9: So that was the extortion piece, right, So we saw
Speaker 9: a lot of that in twenty twenty three, and now
Speaker 9: I think it's the triple threat we're seeing now the
Speaker 9: SEC rules coming in, and in fact we've seen adversaries
Speaker 9: not only encrypt but also go to the SEC as
Speaker 9: a way to get companies to pay quicker because of
Speaker 9: the four day rule they have in terms of reporting.
Speaker 9: So now it really opens up the aperture for the adversaries.
Speaker 5: CrowdStrike CEO George Kurtz, It's a great way to kick
Speaker 5: off twenty twenty four, though I would say the conversation
Speaker 5: around cyber and the threat hasn't stopped at any point.
Speaker 5: Karen and I two days into the new year. Thank
Speaker 5: you so much for your time. Caroline did a great job.
Speaker 5: At the top of the show. You're also talking about
Speaker 5: bitcoin volatility in the session. It would be foolish to
Speaker 5: say there is a clear causal link or catalyst, because
Speaker 5: there is a lot of news reports out there. All told, Cara,
Speaker 5: I think what we're doing is taking stock of where
Speaker 5: we are or are not with bitcoin ETF applications and
Speaker 5: the decisions that the regulators will.
Speaker 4: Or will not take precisely and headline risk and head
Speaker 4: of that someone to help break us down whether this
Speaker 4: volatility is to be expected.
Speaker 1: Fuddy Able Alfa's with us head of research for Copper.
Speaker 4: Now that's a custodian and digital assets, and you in
Speaker 4: particular focus on markets on rockchain based finance market infrastructure. So, Fuddy,
Speaker 4: should we anticipate this sort of volatility into a key
Speaker 4: date like January tenth, when indeed we all feel the
Speaker 4: SEC has to make some view on a couple of
Speaker 4: ETFs and therefore maybe all of the ETFs.
Speaker 2: You know what, it's an interesting question about time. If
Speaker 2: we were talking about this a year or two ago,
Speaker 2: we'd be wondering whether an ETF would ever be approved.
Speaker 2: Now we're talking about when will it be approved? So
Speaker 2: we're a lot closer to a very important moment in
Speaker 2: cryptocurrency's history. When it's going to happen isn't really that important.
Speaker 2: We know that it will happen. We know that black
Speaker 2: Rock has a very great track record in getting their
Speaker 2: ETF for applications approved, so there's not really much worry
Speaker 2: about it getting approved at this point. But when is
Speaker 2: going to be something that markets are going to look
Speaker 2: at and it's going to cause a little bit of volatility,
Speaker 2: and for trader that's great they want volatility. For the
Speaker 2: long term investors who want to actually buy the ETF,
Speaker 2: they're going to just hang on a little bit at all.
Speaker 5: A fady Caroline and I always say on this program,
Speaker 5: bitcoin is our risk asset of choice, and sometimes it
Speaker 5: moves in close correlation with equities, sometimes it doesn't. But
Speaker 5: you do note that there is some volatility in selling
Speaker 5: in markets broadly, particularly on higher or stretch valuation tech stocks.
Speaker 5: How much of this is just going into the new year,
Speaker 5: new market's fresh perspective.
Speaker 2: You know what you mentioned NASDAC, And if we were
Speaker 2: looking at this again a couple of years ago, we're
Speaker 2: going to say that bitcoin's now trading again like a
Speaker 2: tech stock. And actually, if you look at on a
Speaker 2: weekly basis, the correlation with the S and P five
Speaker 2: hundred is at its highest since May twenty twenty three.
Speaker 2: So the correlations are still there, but Bitcoin isn't going
Speaker 2: drastically down as we've seen with the NASDAC over the
Speaker 2: past couple of days into the new year. So Bitcoin's
Speaker 2: actually doing quite well, even if it's been seen a
Speaker 2: little bit of volatility today on the back of some
Speaker 2: not so vetted news.
Speaker 5: Yeah, I think I know what you're referencing and fatty
Speaker 5: I would say this to our audience, this is less
Speaker 5: than scientific. But I've seen posts on x other blogs
Speaker 5: that make the argument that actually bitcoin currently is not
Speaker 5: pricing in a roadmap for approve on Bitcoin ETF are
Speaker 5: you able to make that argument that the price of bitcoin,
Speaker 5: even the surge of recent weeks, could not reflect that
Speaker 5: that potential outcome.
Speaker 2: I think we're still at a state of a little
Speaker 2: bit of gambling in crypto markets. There's still a lot
Speaker 2: of leverage in the system. If you look at potential
Speaker 2: cash and carry trades, if someone wants to take a
Speaker 2: near risk free return, you're looking at fifteen twenty percent.
Speaker 2: But the reality is is for you to take advantage
Speaker 2: of that, you need to buy the spot market, put
Speaker 2: it in under custody, tradeed on global market, and take
Speaker 2: advantage of that yield. The reality is what happens when
Speaker 2: these liquidations occur is that people will have to go
Speaker 2: back in buy more bitcoin and do the same process
Speaker 2: all over again. So it's sort of the self fulfilling cycle.
Speaker 2: Especially when we go into a positive cycle with bitcoin,
Speaker 2: it feeds off each other, and it does the same
Speaker 2: when we go in a negative cycle. That's all.
Speaker 4: There's been this sort of flurry of activity and awful
Speaker 4: lot of box ticking needed to be done with the SEC.
Speaker 4: Think of companies talking about their authorized participants that are
Speaker 4: involved and be able to create redeem the shares within
Speaker 4: the ETF. You've got, I've got a bit of a
Speaker 4: rush for people to have overall the clear language that
Speaker 4: the SEC is wanting to see as well when it
Speaker 4: comes to cash any creation. So if we don't get
Speaker 4: all the box ticking necessary, and if the SEC doesn't
Speaker 4: want to make a king maker out of just one
Speaker 4: or two ETF, so we do hold out, we don't
Speaker 4: see something by January the tenth, Will we fade this rally?
Speaker 1: Do we have to fade this rally?
Speaker 2: We could see bitcoin drop as well. Yes, it's not
Speaker 2: inconceivable to see that bitcoin can drop to thirty seven thousand.
Speaker 2: A lot of analysts that look out outside the traditional
Speaker 2: markets and they look at the blockchain activity are arguing
Speaker 2: that we could see a correction to thirty seven thousand,
Speaker 2: maybe lower. If you ask me, if I look at
Speaker 2: sort of a revision to the mean, you could even
Speaker 2: argue that it could go to twenty seven thousand. But Ultimately,
Speaker 2: when we're talking about the ETF approval, we're talking about
Speaker 2: long term investors who are going to company because they
Speaker 2: don't want to manage the security of their digital assets,
Speaker 2: and so at that point it's a completely different arguments.
Speaker 2: It's inevitably going to go up. So the idea that
Speaker 2: an ETF is going to either make or break Bitcoin
Speaker 2: in the next six months is a little bit wrong.
Speaker 2: We need to look at who the ETF is really
Speaker 2: going to be addressing as a market, rather than investors
Speaker 2: and traders who thrive on the volatility that we're seeing.
Speaker 4: Today, yeah, and using strategies and have been doing that
Speaker 4: for a few years when.
Speaker 1: Their liquidity is there. Faddy, I'm interested is to, therefore,
Speaker 1: have you.
Speaker 4: Quantified what sort of scale of money you think will
Speaker 4: come in as and when a spot bitcoin ETF has approved,
Speaker 4: what sort of inflows you anticipate in.
Speaker 2: I don't really have a number for you, to be
Speaker 2: honest with you. I think it's a narrative that cryptocurrency
Speaker 2: markets have really sort of latched onto as something positive
Speaker 2: as a catalyst after a couple of years of really
Speaker 2: difficult things happening within the market. But what is really
Speaker 2: going to happen is that we're going to see larger
Speaker 2: investors understand that buying a bitcoin ETF is going to
Speaker 2: be a lot more expensive than actually taking custody of
Speaker 2: their own assets, and the opportunities on a twenty four
Speaker 2: to seven day, round the clock around the year markets
Speaker 2: are going to be a lot more lucrative than buying
Speaker 2: something that's traded on a US based exchange only, or
Speaker 2: any any sort of exchange traded products that's sort of
Speaker 2: locked into traditional hours. We're entering a very different financial
Speaker 2: market infrastructure, and I think bitcoins the start of investors
Speaker 2: understanding that digital assets offer a lot more interesting opportunities.
Speaker 5: Fatty, your analysis is referenced in the main bitcoin story
Speaker 5: on the Bloomberg town and or blimbag dot com this morning.
Speaker 5: You're listed as head of research. But copper is a
Speaker 5: crypto custodian, so I just I went down the rabbit hole.
Speaker 5: Coinbase is also a crypto custodian. Explain the competition in
Speaker 5: that market and what it is.
Speaker 2: I think we're addressing very different markets. So coinbase is
Speaker 2: a crypto custodian, but I think it also addresses a
Speaker 2: much more retail focused audience's and it's done great. I
Speaker 2: think I don't think the crypto industry would actually be
Speaker 2: where we're at without the initiative that coin base has
Speaker 2: put forward. Digital asset custodians such as Copper are focused
Speaker 2: more on financial market infrastructure and real world digital assets
Speaker 2: and removing and mitigating the counterparty risks that we've seen
Speaker 2: on exchanges, perhaps not coin based on other exchanges that
Speaker 2: are not so reputable that have been hacked, whereas you
Speaker 2: use investors would use Copper to mitigate their counterparty risk
Speaker 2: and still be able to trade on all these exchanges.
Speaker 2: I think that's the main difference between companies such as coppers,
Speaker 2: who's focused primarily on financial market infrastructure and custody and
Speaker 2: being able to provide the tools, and Coinbase, which has
Speaker 2: a much more not retail focused, primarily retail focused outfit,
Speaker 2: but it's just a different kind of offering to the clients.
Speaker 5: All right, Faddy Aba, well for Copper, great to have
Speaker 5: you on the program. Bling their tat thank you for
Speaker 5: your time. Now coming out here on the show, we're
Speaker 5: going to talk about the state of the venture capital
Speaker 5: industry in twenty twenty four with Rebecca Lynn from Canvas Ventures.
Speaker 5: That's coming up next. This is Bloomberg Technology.
Speaker 4: In December it was open view in Boston, and now
Speaker 4: another VC firm is shutting down. This a solo GP
Speaker 4: Countdown Capital. It's an early stage investor focused on aerospace
Speaker 4: and defense startups. Founder j Mallick posted on exit despite
Speaker 4: delivering strong performance, he believes the future of industrial VC
Speaker 4: favors larger firms, and his firm is shutting down just
Speaker 4: sixteen months after closing a new fifteen million dollar investment fund.
Speaker 5: Then let's keep it with it. Let's talk about what
Speaker 5: this means for the future. Some funds were started, some
Speaker 5: funds closed, drop off in activity. Will we see consolidation
Speaker 5: in the space? I want to bring in Rebecca Lynn,
Speaker 5: co founder general partner of Canvas Ventures with me here
Speaker 5: on SAT in San Francisco. I've been looking at this
Speaker 5: chart VC backed public listing values. Historically twenty twenty one,
Speaker 5: a lot was going on across the SPAC space in particular,
Speaker 5: but also just traditional listings. The market closed in twenty
Speaker 5: twenty two. Carolina and I got a little bit excited
Speaker 5: towards the end of twenty twenty three, and we're trying
Speaker 5: to work out what happens in twenty twenty four, and
Speaker 5: I bring the chart up because you've been at this
Speaker 5: ten to fifteen years. Series B is your sweet spot.
Speaker 5: There must be loads of portfolio companies that have matured
Speaker 5: since investment, and you're wondering, how do I get out?
Speaker 1: Yes, yes, exactly. I think.
Speaker 10: In venture what I learned really really is you don't
Speaker 10: time the market. What you do is you build really
Speaker 10: profitable companies built on fundamentals. And it's one of the
Speaker 10: problems we've seen over the last ten years for this
Speaker 10: focus on hypergrowth and unicorn status. It's really not what
Speaker 10: creates these very profitable, long enduring public companies. And so
Speaker 10: I don't think the answer is, you know, how do
Speaker 10: you get out? It's how do you create a profitable
Speaker 10: company that has options and opportunities when the windows open.
Speaker 10: And when you look at the big hits we've had,
Speaker 10: including doc Simity, Lending Club and others, they were actually
Speaker 10: profitable and growing years before they went public. And so
Speaker 10: as a company, you really want to control your own destiny,
Speaker 10: and you do that by a core focus on the
Speaker 10: fundamentals and the path profitability.
Speaker 5: If you look at the Pitchbook data for twenty twenty three,
Speaker 5: last year looks like we'll hit one hundred and fifty
Speaker 5: billion A venture funding to drop off. But one of
Speaker 5: the kind of artificial bright spots, forgive the wording, was
Speaker 5: artificial intelligence, right, there was a lot of activity large rounds,
Speaker 5: even at series A debut rounds.
Speaker 10: Right.
Speaker 5: Is that enough to carry momentum over into twenty twenty
Speaker 5: fours that now ended.
Speaker 10: I think that will continue to some extent, So a
Speaker 10: couple things. So, yes, it was a huge drop off
Speaker 10: last year. It was fifty percent down from the year before,
Speaker 10: and we haven't seen that low of a number since
Speaker 10: twenty fifteen. Just to sort of, you know, emphasize how
Speaker 10: much of a drop off we felt last year.
Speaker 1: And with AI what you.
Speaker 10: Saw as you saw one in every four dollars was
Speaker 10: invested in the AI space. I think we'll continue to
Speaker 10: see that. But I also think there's going to be
Speaker 10: a real day of reckoning too for AI in companies
Speaker 10: that are wanting to that need to find profitable business models,
Speaker 10: and we're seeing that, you know, the big companies Google, Facebook, Amazon,
Speaker 10: all struggling but how to really make AI profitable and
Speaker 10: how to how to work those business models right, and
Speaker 10: to that.
Speaker 4: Point when you're thinking about the checks to write, and
Speaker 4: I think of an exit that you have had case Text.
Speaker 4: I mean, we're seeing more and more legal AI companies
Speaker 4: come to the foe. We're about to interview another one
Speaker 4: actually just had a funding round. Are they going to
Speaker 4: be able to operate independently? Have they got enough of
Speaker 4: the data that is rich and bespoke to them to
Speaker 4: fight off ultimately open ai or Microsoft or Google just
Speaker 4: being able to replicate it themselves.
Speaker 10: Yeah, And I think that's a great question in terms of,
Speaker 10: you know, what it really takes for an AI company
Speaker 10: to succeed.
Speaker 5: So we've had a front row seat in AI.
Speaker 10: Since we invested in Siri, you know, back in sort
Speaker 10: of the first round of this, right, case Text was
Speaker 10: a really unique situation. Case Tex had been operating for
Speaker 10: about ten years in the space with ten thousand unique
Speaker 10: clients and all the data behind that, and so they
Speaker 10: had access to the large language models for you probably
Speaker 10: six or seven years, and had been working with it
Speaker 10: for a decade. And we're really one of the very
Speaker 10: first people in the sandbox for open ai because of that.
Speaker 10: So I would say not all legal startups are the same,
Speaker 10: and case Text was very unique because they had this
Speaker 10: large customer base and the data with that. So I
Speaker 10: guess the answer is maybe, But I would be fairly
Speaker 10: concerned starting a company right now in a space without
Speaker 10: having a unique customer base and you know, proprietary data
Speaker 10: and going up against the Googles and the facebooks and
Speaker 10: the Amazon's Rebecca.
Speaker 4: We came into this conversation with you talking about count
Speaker 4: and down capital. We had another this was a solo GP,
Speaker 4: but another venture capital firm in.
Speaker 1: And of itself shutting up shop. Is that going to
Speaker 1: happen as well?
Speaker 4: Can you speak to your own industry being forced to
Speaker 4: consolidate or coming to wind down, not just the portfolio
Speaker 4: companies that you've.
Speaker 1: Backed, right, absolutely.
Speaker 10: So it's been really interesting over the past, you know,
Speaker 10: fifteen years since I've been in venture. This environment looks
Speaker 10: very much like the environment in which I entered in
Speaker 10: two thousand and eight. We launched our fund when leaving
Speaker 10: Crash pretty much that very same week, and it's a
Speaker 10: great time to invest in companies. When it comes to
Speaker 10: venture capital firms, there are three times more venture capital
Speaker 10: firms today in existence than when I started in two
Speaker 10: thousand and eight. There are about one thousand firms at
Speaker 10: that point in time, and there's approaching three thousand firms
Speaker 10: right now. And what we have seen in every industry
Speaker 10: cycle is that venture is a s local industry. It
Speaker 10: ebbs and flows, it sort of peaks every ten or
Speaker 10: so years, and what we see from that is we
Speaker 10: do see consolidation in every cycle. But what that creates
Speaker 10: are amazing firms like Benchmark and Redpoint where sort of
Speaker 10: the best of you know, partners and other firms joined
Speaker 10: together and form new firms. And so we'll see a
Speaker 10: lot more of that, I believe in the upcoming year
Speaker 10: or two, and that's an exciting thing for venture overall.
Speaker 5: We just have thirty seconds left. What's the big sort
Speaker 5: of thematic area you're focused on for twenty twenty four?
Speaker 10: Big thematic area for twenty twenty four, I really think,
Speaker 10: you know, healthcare remains an untapped opportunity, and especially in
Speaker 10: applications for AI. It's uniquely suited for AI because there's
Speaker 10: a lot of money going into it. People are spending
Speaker 10: a lot of money to solve these problems in healthcare,
Speaker 10: and I think it's a really rich area for an
Speaker 10: application of AI.
Speaker 5: Rebecca Lynn, co founder and general partner of Chemas, ventures.
Speaker 4: Robin Ai, it's a maker of contract management software, says
Speaker 4: it's raised twenty six million dollars in a Series B
Speaker 4: funding round by.
Speaker 1: Singapore's Temasek Holdings.
Speaker 4: Here to talk more about this the impact of AI
Speaker 4: on the legal industry more broadly is robin ai CEO
Speaker 4: Richard Robinson. Richard, great to have you on the show.
Speaker 4: And look, I mean, what less than twelve months? I
Speaker 4: think it's only ten months since your Series A. Was
Speaker 4: this opportunistic? Why did you have to go and raise
Speaker 4: the funds?
Speaker 11: Yeah, like you said, it was opportunistic. We're seeing a
Speaker 11: once inner generation shift away from traditional SaaS tools to AI,
Speaker 11: and so in light of lots of demand and a
Speaker 11: need to really expand out our indefference, we took the
Speaker 11: opportunity to think about raising more capital.
Speaker 5: This Singapore angle his really interesting and so Temasek is
Speaker 5: leading the round. But you guys also plan to open
Speaker 5: a presence in Singapore. Why.
Speaker 11: Well, we want to be a global business. We think
Speaker 11: that the last generation of fundamental technology like the Internet
Speaker 11: gave rise to massive global businesses like Google and Facebook,
Speaker 11: and we think that AI is going to usher in
Speaker 11: another generation of companies of that size. And scale, and
Speaker 11: so we want to be global. We've always been significantly ambitious.
Speaker 11: We've got customers in Asia and so we wanted to
Speaker 11: expand that presence and made Perfect Centers a partner.
Speaker 4: You talk about this shift of SaaS to AI, and
Speaker 4: basically you're a co pilot concept that you bring AI
Speaker 4: sort of too standard office software. And in fact, this
Speaker 4: particular copilot that you're announcing and been using is free
Speaker 4: on Microsoft Word add ons, if I'm correct. So with
Speaker 4: the customers, you already have PepsiCo, PwC, You've got a
Speaker 4: lot of key names. What where's your revenue generation coming from?
Speaker 4: Why do these VC names want in on the round?
Speaker 5: Yeah?
Speaker 11: I think primarily our revenue comes from big companies. We
Speaker 11: sell to in house legal teams because we want to
Speaker 11: help companies go faster. So our customers are the Fortune
Speaker 11: five hundred, the world's biggest primate equity funds that people
Speaker 11: who do transactions. And I think what's got investors excited
Speaker 11: is Number one, they see that AI is changing the
Speaker 11: whole industry. You have that in your last segment. The
Speaker 11: legal industry is going to change and it's going to
Speaker 11: be transformed by AI. But number two they're seeing a
Speaker 11: startup that has real traction with really discerning customers, and
Speaker 11: that means that we could build something quite defensible.
Speaker 3: Here.
Speaker 5: We've been showing video of how robin ai works as
Speaker 5: a sort of contract drafting assistant or and Karen makes
Speaker 5: a really important point. It's an add in into Microsoft word.
Speaker 5: But Microsoft is doing a lot with its own copilot
Speaker 5: right in terms of productivity tool. Are you worried about
Speaker 5: the kind of design of the system here that Microsoft
Speaker 5: is offering something similar?
Speaker 11: Not really Microsoft's product is you're right similar, But it's
Speaker 11: really a general tool. It's designed to do everything a
Speaker 11: little bit like Microsoft. It's a generic tool. And the
Speaker 11: legal industry is going to be worth a trillion dollars
Speaker 11: next year. It is one of the biggest industries on
Speaker 11: the planet, and I think it needs its own bespoke
Speaker 11: AI system that understands legal documents, understands lawyer's workflows, understands
Speaker 11: the law, and so the Microsoft copepole it's not going
Speaker 11: to do that.
Speaker 5: It's catering to.
Speaker 11: A much wider audience. We're really this the best in
Speaker 11: the world at legal AI, and I think that's going
Speaker 11: to be its own race that requires its.
Speaker 5: Own focus Robin AI CEO Richard Robinson, there's a law
Speaker 5: school graduate the idea of automating drafts in the legal context.
Speaker 5: I know a few people in my world that would
Speaker 5: be very interested in that. We're grateful for you for
Speaker 5: your time. Both.
Speaker 1: No, what great conversation ed. Meanwhile, look, I mean we're
Speaker 1: back to it.
Speaker 4: Conversations in twenty twenty four focused on AI, focused on cyber,
Speaker 4: focused the course on well maybe some of the valuations
Speaker 4: were saying as well, that does it for this addition
Speaker 4: of Lilybow Technology.
Speaker 5: Yeah, there's an element of deja vu. But recap on
Speaker 5: the podcast wherever you get yours, Apple, Spotify, iHeart, and
Speaker 5: Bloomberg from SF in New York. This is Bloomberg