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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,

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Speaker 1: along with essential market moving news. Kind the Bloomberg Markets

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Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot com. So we have a severe

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Speaker 1: debates going on right now about whether children should be

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Speaker 1: going back to school and the full what's good for them,

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Speaker 1: what's not so good for them, what they'll be missing

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Speaker 1: out on if they do go back, what they'll be

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Speaker 1: missing out on if they don't go back. One person

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Speaker 1: right at the center of this is Randy wine Garden,

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Speaker 1: and Randy has been literally fielding questions and trying to

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Speaker 1: figure out what to do for all of the teachers

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Speaker 1: and the support staff of the American Federation of Teachers,

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Speaker 1: the largest union in the country. So Randy, thanks for

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Speaker 1: joining us. And I'm curious where your members stand right now.

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Speaker 1: Is it different and different rights of the country or

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Speaker 1: is there one sort of the united voice on what

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Speaker 1: should happen. So it's different in different parts of the country. Um,

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Speaker 1: the president's actions in July made things a gazillion times

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Speaker 1: worse because he made what should be a really important

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Speaker 1: public health issue into a political one and completely polarized

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Speaker 1: it and angered everyone because of his lack of diligence

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Speaker 1: and responsiveness to actually handling the virus. So this is

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Speaker 1: so right now, we have a mess on our hands.

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Speaker 1: At the end of June, my membership I pulled them

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Speaker 1: said that if we could get the safety safeguards that

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Speaker 1: c d C had originally and still maintained or necessary,

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Speaker 1: seventy percent of them said that they were comfortable going

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Speaker 1: into public schools um and and instead of starting remotely,

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Speaker 1: starting the year in school because they know, just like

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Speaker 1: parents know how important it is for kids to have

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Speaker 1: life instruction and to be in person. We have to

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Speaker 1: combat the social isolation that kids have. We have to

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Speaker 1: make sure that kids are fed, We have to deal

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Speaker 1: with kids well being, so parents and teachers are aligned

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Speaker 1: on that. What's happened since the end of June is

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Speaker 1: that we've seen a virus surge, particularly in the South

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Speaker 1: and the Southwest, and Congress has refused or failed. The

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Speaker 1: Senate has failed to act on the resources that are

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Speaker 1: absolutely necessary to get these safeguards into place at the

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Speaker 1: same time as we're about to start schools. So you

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Speaker 1: have this huge sense of um, adda anxiety and and

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Speaker 1: um and a sense of mistrust that what is needed

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Speaker 1: to make school safe for kids and for their teachers

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Speaker 1: will actually happen. That's why you've seen districts who actually

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Speaker 1: wanted to start in a hybrid. And I'll talk about

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Speaker 1: that in a sect if you want me to have

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Speaker 1: kind of moved back to starting remotely because they don't

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Speaker 1: have They see the cases in their areas spiking. They

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Speaker 1: don't have the testing and the tracing, and they don't

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Speaker 1: have the equipment, the ventilation systems, the mass, the cleaning,

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Speaker 1: or even the space to actually make a hybrid a

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Speaker 1: blended model work. So it's a mess right now, and

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Speaker 1: and it was far less of a mess in June

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Speaker 1: when we thought we were going to get the funding

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Speaker 1: from the Heroes Act, and before the President um and

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Speaker 1: and Secretary Divorce started with their threats and their demands

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Speaker 1: without a plan and without resources. So, Randy, speaking of

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Speaker 1: Secretary Divorce, have you spoken to her. Do you get

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Speaker 1: a sense that she understands the views of America's teachers, Well,

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Speaker 1: she doesn't understand the views of America's teachers and or

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Speaker 1: America's parents. Frankly, I haven't spoken to Secretary Divance since

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Speaker 1: I invited her to come to a school with me

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Speaker 1: in Ohio and we spent a day together, and she

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Speaker 1: promised that she wanted to meet, she wanted to do

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Speaker 1: different things. We haven't heard from her since. The only

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Speaker 1: time I heard from her is I got a note

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Speaker 1: congratulating me on getting married to my partner, um to

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Speaker 1: my partner, and and and I you know, and so

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Speaker 1: that we have not heard from her. All of what

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Speaker 1: she's doing is political. She she hasn't. But what's worse

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Speaker 1: than us not heard hearing from her? Every Republican or

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Speaker 1: Democratic secretary of education in a circumstance like this, Margaret Spellings,

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Speaker 1: Arnie Duncan, John King, Rod Page what they would have done.

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Speaker 1: They were brought together, um the stakeholders to figure out

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Speaker 1: how to actually have guidance for how to end last

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Speaker 1: school year and then how to have guidance for how

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Speaker 1: to start this year, not as a mandate, but how

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Speaker 1: to have guidance and instead of us doing the this

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Speaker 1: is what it costs. We thought it cost about a

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Speaker 1: hundred and sixteen billion dollars twenty three hundred dollars per

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Speaker 1: student UM the district, the district administrators thought a cost

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Speaker 1: about eleven d dollars per student. Why are we the

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Speaker 1: ones who are saying this is what the PPE wal cost,

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Speaker 1: this is what the cleaning will cost, this is what

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Speaker 1: the ventilation systems will cost. And both the superintendents and

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Speaker 1: we put these figures out in May. We put our

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Speaker 1: first UM guidance out in April, and so so you

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Speaker 1: hear the frustration of my voice, because teachers know it's

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Speaker 1: important for kids. But what's happened is that the can

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Speaker 1: has been kicked down and down and down the road

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Speaker 1: where the you know, administration is still pretending the virus

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Speaker 1: doesn't exist. And so it's now left the teachers and

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Speaker 1: parents to figure out child care, to figure out schooling

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Speaker 1: without the resources. It's just wrong. And that's why you're

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Speaker 1: seeing so many people go to remote Yes, and many

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Speaker 1: teachers are parents themselves and are in the exact same

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Speaker 1: boat as all of the other parents of the kids

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Speaker 1: they teach. RANDI, what do you say to parents that

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Speaker 1: are frustrated with teachers, because many parents want to send

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Speaker 1: their kids back to school as well, because they need

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Speaker 1: to go and work. They haven't been working. Who knows

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Speaker 1: what Congress is going to come up with, the future

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Speaker 1: is very uncertain. And you know, parents are also, you know,

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Speaker 1: to a large extent, very worried about jobs. Yes, no,

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Speaker 1: and I completely I've taught I've spoken to many parents, um,

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Speaker 1: who are in this terrible predicament, and and this should

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Speaker 1: be something that their employers should actually be working with

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Speaker 1: us and trying to deal with these situations. It shouldn't,

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Speaker 1: It shouldn't. So so so we need to work together,

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Speaker 1: teachers and parents and need to work together. And what's

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Speaker 1: happened now is that as we have engaged with parents

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Speaker 1: more and more and tried to figure out how to

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Speaker 1: deal with childcare, how to deal with these this terrible dilemma,

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Speaker 1: parents are starting to say to us more and more, Look,

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Speaker 1: we don't want our kids to be sick either, and

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Speaker 1: so ultimately we need to work together on making sure

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Speaker 1: that kids and teachers don't get sick and don't start

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Speaker 1: by opening schools prematurely like they did in Israel. Don't

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Speaker 1: start a new epidemic. And so even Dr Burke's this weekend,

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Speaker 1: because of the science said, um that you know, if

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Speaker 1: you have high caseload and active community spread. We are

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Speaker 1: asking people to distance learn at this moment so we

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Speaker 1: can get this epidemic under control. So I you know,

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Speaker 1: so we have been pushing very hard to have the

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Speaker 1: child care and we've also done the kind of thing. Hey, Randy,

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Speaker 1: thank you so much for joining us and sharing this

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Speaker 1: important information. Randy Wine Garton, President of the American Federation

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Speaker 1: of Teachers, are really really critical issue in this country.

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Speaker 1: As schools start to open up here for the false semester,

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Speaker 1: the question is how to do it safely. There is

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Speaker 1: no federal guidance here, so it's left up to the

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Speaker 1: local municipalities. All right, Yesterday, around midday or shortly after midday,

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Speaker 1: we got headlines crossing that Argentina had agreed in principle

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Speaker 1: to a deal with its creditors in order to take

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Speaker 1: that country out of default status. It's third default happening

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Speaker 1: a few months ago in this decade nine default. Overall,

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Speaker 1: Let's bring in somebody who knows a lot more about

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Speaker 1: Argentina's economy, our chief Emerging markets credit strategist, Damian Sassour

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Speaker 1: so Daman. Yesterday I was talking with one of the creditors.

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Speaker 1: In fact, to Argentina who said that the deal was

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Speaker 1: about fifty five cents on the dollar, depending on where

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Speaker 1: you were on the curve. How does that compare with

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Speaker 1: other restructuring deals. Well, I saw that interview with Robert

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Speaker 1: Koenigsberger of Grammarcy, who's an old hand when it comes

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Speaker 1: to em sovereign distressed UH situations, Bonnie, and you know,

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Speaker 1: there's no question about it. This is something that was

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Speaker 1: much needed, much expected, quite frankly, but really all eyes

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Speaker 1: now focused on the i m F because while sixty

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Speaker 1: five billion dollars in dollar denominated, WILL dollar and Euro

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Speaker 1: denominated hard currency debt has now been or is now

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Speaker 1: being restructured as we speak, there's still another call at

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Speaker 1: fifty three billion of hard currency UM i F I

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Speaker 1: UM debt payments that need to go through. And when

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Speaker 1: I say i IF, I'm talking about international finance institutions

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Speaker 1: of which the i m F is one, and they

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Speaker 1: are the biggest creditor accounting for roughly forty five billion

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Speaker 1: dollars of Argentina hard currency debt that must come do.

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Speaker 1: Repayments start start in the third quarter of one and

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Speaker 1: total roughly fifty three billion THO. So that's a lot

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Speaker 1: of money that Argentina needs to repay in the next

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Speaker 1: five years, and obviously we need to see that get

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Speaker 1: pushed back. All right, So what is the posture of

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Speaker 1: the i m F now d me and given that

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Speaker 1: we've seen this deal for another big tronch of debt, well,

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Speaker 1: I mean, Christelina Grgovo runs the IMF has has been

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Speaker 1: very supportive of this restructuring. I mean, I obviously expect

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Speaker 1: the IMF to tow the line and basically agree to

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Speaker 1: something that works for the sovereign. But you know whether

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Speaker 1: or not. You know, IBIRD, which is a part of

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Speaker 1: the World Bank, the Internet, the Interamerican Development Bank. I

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Speaker 1: mean again, these are other institutional financial institutions that have

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Speaker 1: billions and billions of dollars owed to them by Argentina.

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Speaker 1: So you know, I think they all have to come together,

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Speaker 1: they have to agree to something, and I expect that's

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Speaker 1: where you know, the focus is going to shift for

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Speaker 1: most reading agencies and most sovereign creditors over the near term.

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Speaker 1: Pole Yeah, the i m F is often credited for

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Speaker 1: just being that a little bit too hard line on

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Speaker 1: some of these countries that just aren't able to pay

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Speaker 1: and and just you know, really imposing the strictest of conditions.

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Speaker 1: How much leeway does the I MF have with Argentina,

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Speaker 1: or rather vice versa, how much leeway does the Argentina

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Speaker 1: economy have. Well, the I m F has really made

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Speaker 1: its bed, so to speak, lonny with regard to Argentina.

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Speaker 1: They are I mean, that's that most of their balance sheet.

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Speaker 1: I mean, it's their biggest um, it's their biggest loan. Basically,

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Speaker 1: it's it's they have, you know, the biggest exposure to Argentina.

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Speaker 1: So they need to get that righted because it really

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Speaker 1: will mark whether or not the I m F is

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Speaker 1: successful going forward at you know, I won't say bailing out,

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Speaker 1: but assisting you know, frontier sovereign nations as they you know,

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Speaker 1: as they seek to kind of grow and emerge from

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Speaker 1: you know, the coronavirus. So you know, I think, look,

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Speaker 1: you know, from where we sit right now, obviously those

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Speaker 1: discussions are going to take place. I expect them to

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Speaker 1: go over rather well. But the real challenge for Argentina

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Speaker 1: is getting locals confident in the Argentine pay so and

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Speaker 1: right now, that disconnect between where the PASO is treating,

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Speaker 1: at least officially and where it's trading in the black

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Speaker 1: market is just so very great, and a huge devaluation

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Speaker 1: is probably in store for the Argentine past. So and

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Speaker 1: and look, you know that's that's something that is widely expected.

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Speaker 1: But you know, whether or not Argentina can emerge and

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Speaker 1: restore confidence in its own currency and get the economy

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Speaker 1: growing again remains to be seen. So Damian, what does

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Speaker 1: this deal mean for maybe some some of Argentina's neighbors

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Speaker 1: in Latin America? Is this any kind of template for

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Speaker 1: others that might need some relief? Well, I mean, what

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Speaker 1: kind of goes under under the radar here is that?

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Speaker 1: You know, this week we've also seen Ecuador agreed to

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Speaker 1: terms with its restructuring right that seventeen point four billion

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Speaker 1: dollars in debt that you know Ecuador owes too hard

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Speaker 1: currency creditors abroad, you know Lenning Marino, you know, you know,

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Speaker 1: they did a really really good job. I have to

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Speaker 1: be honest, this is the I mean, Ecuador is a

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Speaker 1: surreal defaulter as well, and this is one of the

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Speaker 1: fastest restructurings that i've I've pretty much ever seen, you

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Speaker 1: know writ large. So you know, I think I think

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Speaker 1: most creditors are you know, coming to terms of the

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Speaker 1: fact that this is the very challenging time they need

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Speaker 1: to kind of uh, you know, they made their own

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Speaker 1: bed right, they have to take a little bit of

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Speaker 1: a hickey also. But you know, as as you see

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Speaker 1: from you know, the note in the New York Times

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Speaker 1: this morning from Richard Kaschell, who's you know, you're at

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Speaker 1: Black Rock and was very much involved in all these

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Speaker 1: negotiations through to the end. You know, they have stakeholder

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Speaker 1: interest in mine. They have to worry about their own

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Speaker 1: fiduciaries and their own fiduciary responsibility when negotiating on behalf

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Speaker 1: of them, and so you know, these things tend to

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Speaker 1: kind of get drawn out. What I'm just absolutely amazed

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Speaker 1: about is how quickly some of these deals are getting

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Speaker 1: done and what this expense. But beyond two police and

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Speaker 1: you know, Sri Lanka's now having parliamentary elections, they're in trouble.

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Speaker 1: They were downgraded to single B minus. So you know,

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Speaker 1: there's plenty of frontier sovereigns and Goala Nigeria that come

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Speaker 1: to mind that are all hurting all of approach the

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Speaker 1: I m F for assistance and look, you know we're

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Speaker 1: going to see in the next in the non too

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Speaker 1: distant future, how many of them can emerge from this.

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Speaker 1: On the on the other side, just briefly, Damian, we're

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Speaker 1: seeing Argentina's bonds rise to I mean, how soon can

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Speaker 1: Argentina go back to the capital markets literally nothing has

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Speaker 1: changed about the underlying economy. Yeah, I mean, you have

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Speaker 1: hit right on the spot exactly what I'm thinking. I mean,

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Speaker 1: I think a lot of creditors, specifically you know, US

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Speaker 1: institutions like pension funds and Commond foundations, it doesn't matter

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Speaker 1: whether or not Argentina's permitted back into the US capital markets.

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Speaker 1: I think many of them have gotten so fed up

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Speaker 1: with losses that they had to incur due to and

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Speaker 1: sting in Argentine debt that it's just going to be

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Speaker 1: very difficult for them. I mean, I know a handful

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Speaker 1: of them that built into their own policy statements that

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Speaker 1: they you know, yes, we'll invest in emerging market dollar debt,

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Speaker 1: but we will not invest in debt issued by Argentina.

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Speaker 1: And that's a real problem to get, you know. So,

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Speaker 1: so whether or not they're allowed back to the US

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Speaker 1: market to to to to take on more debt, Okay, fine,

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Speaker 1: they can do that, but who's gonna buy it? Right, Bonnie,

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Speaker 1: I think that's where you're going with this, And I

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Speaker 1: think that's the real risk. You know, when you have

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Speaker 1: these type of situations and now industries have wised up,

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Speaker 1: it's gonna be very difficult to get them back on board.

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Speaker 1: The one thing I'll say is that investors have very

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Speaker 1: short term memories. You know, when things start to get

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Speaker 1: right and and and and you know, and and the

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Speaker 1: risk on mentality resumes. Damian sasare thanks so much as

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Speaker 1: always giving us the latest on all things emerging markets.

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Speaker 1: Staming sassare chief Emerging Markets credit staategists for Bloomberg Intelligence.

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Speaker 1: UH debt restruction deal getting done in Argentina, I m

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Speaker 1: F is next. What are they going to do there?

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Speaker 1: And what does that mean for the emerging markets overall?

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Speaker 1: We'll keep on top of that. We had some media

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Speaker 1: companies some numbers last night, led by the Walt Disney Company,

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Speaker 1: some good numbers, some good streaming numbers or stocks of eleven. Today.

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Speaker 1: Fox also reported numbers better than expected for their stocks

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Speaker 1: that off about the five or six percent this morning.

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Speaker 1: So tail uh to two sides of the coin. We

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Speaker 1: want to chat about that. And there's nobody better than

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Speaker 1: our good friend Tuna a Mobi. He has been covering

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Speaker 1: this industry forever. He's an industry analyst at cf R

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Speaker 1: A Research. And for those of you that have seen

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Speaker 1: Tuna on television, I can tell you he is the

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Speaker 1: best dressed man on Wall Street. Tuna, thanks so much

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Speaker 1: for joining us here. Let's start with Disney this stock.

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Speaker 1: I mean, I looked at the numbers last night, and

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Speaker 1: the costs associated with COVID registered extraordinary close to four

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Speaker 1: billion dollars. You have the stocks up ten percent? What

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Speaker 1: what did the investors really like? Good morning, Paul, and

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Speaker 1: thanks for having me. UM So I started Disney. Um

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Speaker 1: earnings was actually UM a lot of interest in um

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Speaker 1: not get some information? UM the same parts we knew

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Speaker 1: going in was gonna take the major hit from the

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Speaker 1: COVID nineteen shot down. UM. But the surprise there was

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Speaker 1: actually Media Networks, which had a one billion dollar swing

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Speaker 1: in operating income, primarily due to the programming cause deferrals

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Speaker 1: with the shutdown of production in Hollywood as well as

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Speaker 1: the sports Life sports. But all in all, I thought, UM,

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Speaker 1: it was a really um interesting quarter for a direct consumer.

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Speaker 1: As you know, Paul. That's where the company has been

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Speaker 1: pivoting for quite some time, now, surpassing hundred million UM

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Speaker 1: aggregate subscribers between ESPN Plus, Disney Plus, and Hulu. But

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Speaker 1: more importantly, the launch of the International Star branded direct

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Speaker 1: consumer offering. I think, really, um, you know, puts Disney

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Speaker 1: in a very very good position, uh to consolidate its

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Speaker 1: gains um and also the Mulan. I'm sure we'll get

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Speaker 1: to that shortly. I think Disney, um, more than anyone

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Speaker 1: else in Hollywood, has been trying to use the COVID

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Speaker 1: nineteen lockdown to reinvent somebody traditional distribution windows. So now

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Speaker 1: Disney Plus serving as a major premier outlet for some

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Speaker 1: of its marquee uh you know, titles. So all in all,

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Speaker 1: we are, um, you know, quite optimistic. The shares are

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Speaker 1: up um rightly, so I think when you look to

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Speaker 1: the other side of this pandemic, Paul, with a strong

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Speaker 1: balance sheet and now almost twenty three billion dollars in liquidity, UM,

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Speaker 1: I think no companying arguably in the media spaces better

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Speaker 1: position to navigate this pandemic, uh like Disney. Yeah, and

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Speaker 1: you're referring, we should say to the live action Mulan,

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Speaker 1: which is going to go straight to Disney plus and

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Speaker 1: maybe take it. You know, thirty buckser so away from

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Speaker 1: movie theaters for the window that it normally will have

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Speaker 1: gone to movie theaters first in. So that's all great

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Speaker 1: for Walt Disney, but compare it with something like a Comcast.

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Speaker 1: Why is Disney performing so much better in the market

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Speaker 1: and Comcast is announcing all these layoffs and so on,

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Speaker 1: and and really operations are very similar in both cases, right,

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Speaker 1: It's all about the portfolio of assets. And also I

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Speaker 1: think in this environment, number one, we think Disney's balance

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Speaker 1: sheet is superior. UM. But also being a pure content provider.

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Speaker 1: Remember coming into this uh you know COVID nineteen, UM,

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Speaker 1: you know, Disney had with the Fox acquisition, UM, you know,

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Speaker 1: really placed itself in a very enviable position in terms

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Speaker 1: of the franchise pipeline acquired in organic franchises. So while

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Speaker 1: Comcast is also getting some tail winds from on the

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Speaker 1: broadband business and the residential broadband, UM, it's been much

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Speaker 1: more UH susceptible. I think, UM to some other areas

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Speaker 1: like um, you know, advertising, etcetera. But Disney, I think, UM,

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Speaker 1: when when this uh theme parks rebound as we think

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Speaker 1: they will. Uh. There's indications of penop demand. ESPN while

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Speaker 1: has been adversely affected by the cancelation of Life Sports.

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Speaker 1: Now that Life Sports are coming back gradually, UM, we

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Speaker 1: think will be uh you know, as best positioned as

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Speaker 1: any platform to to benefit from from that. But more importantly,

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Speaker 1: I think the major distinction Vney, to your question I

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Speaker 1: would draw, is a direct to consumer. That's really what

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Speaker 1: separates uh, you know, Disney from Comcast in the eyes

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Speaker 1: of investors, and that's a huge opportunity in front of

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Speaker 1: the company, especially with the Star branded platform that they

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Speaker 1: are going to be launching internationally. I might also add

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Speaker 1: that they are shutting down twenties some channels internationally. It

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Speaker 1: took a five billion dollar impayment charge, which underscores the

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Speaker 1: strategic shift for Disney from linear to to direct to consumer.

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Speaker 1: That's where I think a huge chunk of the value

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Speaker 1: is going to come from the catalysts. So, you know,

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Speaker 1: what's the company saying about their theme parks. It's such

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Speaker 1: an important part of their business. It's been such a

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Speaker 1: solid contributor to UH earnings growth for the company for years.

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Speaker 1: They invest a tremendous amount of money into that business

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Speaker 1: with great returns. I'm thinking about the five billion dollars

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Speaker 1: to open Shanghai Disney most recently. Do they believe that

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Speaker 1: on the other side of this pandemic, that people are

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Speaker 1: going to cram themselves into these parks and you know,

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Speaker 1: and and stand in line like we've become accustomed to

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Speaker 1: other parks, that they think that it's gonna come back

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Speaker 1: to normal. Paul, I think that scenario, frankly is at

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Speaker 1: least several years out. Even in the best of times,

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Speaker 1: when you're coming out of recession, uh team, parks typically

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Speaker 1: takes several years to recover. But in the case of

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Speaker 1: Disney now they're in the middle of its phased reopening.

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Speaker 1: All these parks not going exactly as smoothly as you

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Speaker 1: you might hope, especially with the COVID nineteen resurgence across

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Speaker 1: various states in the US, and as you know, they

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Speaker 1: had to shut down Hong Kong again after the initial reopening.

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Speaker 1: But having said that, I think we take some comfort

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Speaker 1: in the fact that you know, Shanghai has been um

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Speaker 1: you know, coming along. I think their philosophy and running

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Speaker 1: the see parks right now is just to maintain a

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Speaker 1: positive um you know, contribution margin. So to the extent

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Speaker 1: that the revenues are outweighing the variable costs, I think

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Speaker 1: they can justify keeping those parks open, even that limited capacity, UM,

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Speaker 1: just to cover some of the fixed overheads. But that

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Speaker 1: being said, I think it's in parks probably will be

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Speaker 1: one of the last to recover. But when they do, UM,

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Speaker 1: there's every indication that they're going to be you know,

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Speaker 1: get back to UM you know, normalized attendance levels. Whether

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Speaker 1: that takes three to five years, you know, who knows,

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Speaker 1: but they just came up the peak attendance in two

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Speaker 1: thousand nineteen. So it's kind of going to be a

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Speaker 1: gradual process from here, depending on what happens with the resurgence. Basically,

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Speaker 1: you know, do you anticipate layoffs and maybe even you know,

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Speaker 1: action on the part of the world's employees. At some point,

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Speaker 1: they've already come off of massive layoffs Vannio already um

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Speaker 1: I frankly, at this point, UM, I don't know, you know,

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Speaker 1: how much more that they can you know, much more room.

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Speaker 1: What they've done is that actually they've recalled a lot

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Speaker 1: of those theme parks UM attend the staff that were

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Speaker 1: laid off, So they're actually in the process of rehiring

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Speaker 1: some of those followed employees. But I think when you

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Speaker 1: look at June quarter when its theme parks had almost

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Speaker 1: like three billion dollar hit from COVID, uh, you know,

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Speaker 1: that's to us is the trough um, you know, So

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Speaker 1: even the worst case scenario when the parks have to

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Speaker 1: close again with the surgeon COVID night, and we don't

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Speaker 1: expect that what they just went through this last quarter

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Speaker 1: is going to recur by any stretch. So we we

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Speaker 1: think they're in a pretty good shape to continue to

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Speaker 1: build on what theyre I have Tuna a mobi. Thank you.

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Speaker 1: It's always just an absolute pleasure to speak to. Tuna

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Speaker 1: is a complete expert and everything that is media media

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Speaker 1: related thanks to you know, companies that you may or

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Speaker 1: may not have heard of. Telegog about the voe Go

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Speaker 1: it was an eighteen and a half billion dollar deals,

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Speaker 1: so a really massive deal. Jonathan Palmer is senior healthcare

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Speaker 1: analyst for Bloomberg Intelligence. Jonathan Welcome tell us how this

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Speaker 1: deal came about, on what these two companies actually do.

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Speaker 1: I mean, I guess we can we can guess in

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Speaker 1: the case of Teledoc, that's fair. Monny for having me on.

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Speaker 1: So both of these companies play in the healthcare I

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Speaker 1: T space and really in the telehealth and virtual care markets. Um,

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Speaker 1: they're slightly different in you know, telehealth or teledoc focus

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Speaker 1: is really on episodic care, where uh Vongo has focused

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Speaker 1: on chronic care for things like diabetes and cardio. And

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Speaker 1: so the the addition here are these two companies the merger,

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Speaker 1: you know, I think what they vision is that, you know,

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Speaker 1: more and more healthcare is going to move to this

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00:23:45,000 --> 00:23:48,320
Speaker 1: virtual world. And while Teledoc had a strong presence in

430
00:23:48,440 --> 00:23:52,320
Speaker 1: you know, uh treating something like your kids get sick

431
00:23:52,400 --> 00:23:56,480
Speaker 1: or you get the flu, whereas Vongo is focused on

432
00:23:56,520 --> 00:23:58,840
Speaker 1: the long term, you know, treating an illness that you

433
00:23:58,920 --> 00:24:01,320
Speaker 1: might have for the rest of your life. Marrying those

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00:24:01,359 --> 00:24:05,320
Speaker 1: two together makes a more powerful treatment option for patients

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00:24:05,320 --> 00:24:08,719
Speaker 1: and doctors. This comes at a big cost, doesn't at Jonathan,

436
00:24:08,720 --> 00:24:11,240
Speaker 1: I'm looking at Lavongo stock and back in March it was,

437
00:24:11,280 --> 00:24:12,920
Speaker 1: you know, called it twenty two bucks a share. Here

438
00:24:12,920 --> 00:24:15,120
Speaker 1: it is trading today a hundred and thirty four dollars,

439
00:24:15,400 --> 00:24:16,800
Speaker 1: so it's had a huge run. And then I look

440
00:24:16,800 --> 00:24:19,840
Speaker 1: at Teledoc in the stocks shares are down about fourteen

441
00:24:19,880 --> 00:24:23,480
Speaker 1: percent here, So did they overpay? That's a great question.

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00:24:23,520 --> 00:24:26,720
Speaker 1: I mean, there's there's certainly uh fair argument to be

443
00:24:26,800 --> 00:24:30,240
Speaker 1: made that you know, this is the peak of telehealth

444
00:24:30,280 --> 00:24:33,919
Speaker 1: and healthcare I T in terms of multiples. You know,

445
00:24:34,000 --> 00:24:36,840
Speaker 1: we've seen this massive run up from the pandemic, you know,

446
00:24:37,240 --> 00:24:40,080
Speaker 1: as you mentioned, lavangoes up you know, maybe five or

447
00:24:40,119 --> 00:24:42,320
Speaker 1: six times from a p O price last year. Tele

448
00:24:42,400 --> 00:24:45,920
Speaker 1: Doc similarly up five or six times. The market's telling you,

449
00:24:46,080 --> 00:24:49,520
Speaker 1: with the stock down, that they don't particularly love this deal.

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00:24:50,040 --> 00:24:52,880
Speaker 1: I think it's true from the perspective of teledocs management

451
00:24:52,920 --> 00:24:55,960
Speaker 1: and that they're using stock ninety percent of stock to

452
00:24:56,000 --> 00:24:58,760
Speaker 1: pay for this deal, so they might be signaling that

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00:24:58,800 --> 00:25:03,399
Speaker 1: they thought even their stock was overvalued. Here. Are there competitors?

454
00:25:03,720 --> 00:25:06,320
Speaker 1: Is there the possibility that somebody else will jump in

455
00:25:06,440 --> 00:25:09,800
Speaker 1: or that this will make for a new competitor to

456
00:25:09,880 --> 00:25:14,800
Speaker 1: some of the others. There's competitors all across this healthcare

457
00:25:14,840 --> 00:25:18,320
Speaker 1: I T landscape, and and they're in various stages. Tele

458
00:25:18,440 --> 00:25:21,439
Speaker 1: Doc is the most well known public company in this space,

459
00:25:21,480 --> 00:25:24,840
Speaker 1: but we saw a telehealth back come out last week.

460
00:25:24,920 --> 00:25:27,760
Speaker 1: There's other private companies like am Well in this space.

461
00:25:28,359 --> 00:25:30,000
Speaker 1: And you know, I wouldn't put it past the big

462
00:25:30,000 --> 00:25:33,680
Speaker 1: insurers like United Health, you know, as these trends gained

463
00:25:33,720 --> 00:25:37,119
Speaker 1: traction to just move more aggressively in this space. So

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00:25:37,160 --> 00:25:39,119
Speaker 1: I think it's a little bit of a land grab

465
00:25:39,200 --> 00:25:41,119
Speaker 1: right now in the world of healthcare. I t in

466
00:25:41,160 --> 00:25:45,120
Speaker 1: particularly in virtual care. So the marriage here these two

467
00:25:45,160 --> 00:25:47,520
Speaker 1: makes a lot of sense to grab scale while while

468
00:25:47,520 --> 00:25:50,280
Speaker 1: the getting is good, Jonathan gives a sense of what

469
00:25:50,320 --> 00:25:53,840
Speaker 1: the trends were before the pandemic in telehealth. To be

470
00:25:53,920 --> 00:25:56,720
Speaker 1: honest with you, from my perspective, I never even considered

471
00:25:56,760 --> 00:26:00,040
Speaker 1: it for myself. Now I'm thinking, why wouldn't I do it? So,

472
00:26:00,119 --> 00:26:02,960
Speaker 1: what what were the trends before this pandemic and how

473
00:26:02,960 --> 00:26:04,600
Speaker 1: do you think that the trends will play out going forward?

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00:26:06,040 --> 00:26:08,560
Speaker 1: Question Paul, And So, I think we've seen the change

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00:26:08,600 --> 00:26:11,960
Speaker 1: in terms of the adoptment of telehealth, and really the

476
00:26:12,000 --> 00:26:14,320
Speaker 1: pandemic has caused a lot of people to look at

477
00:26:14,320 --> 00:26:18,239
Speaker 1: this option very differently. You know, before the crisis, a

478
00:26:18,240 --> 00:26:21,200
Speaker 1: lot of people had this option in their health plan,

479
00:26:21,880 --> 00:26:24,560
Speaker 1: but on average and Teleducts book of business, maybe ten

480
00:26:24,640 --> 00:26:27,919
Speaker 1: percent of their members actually used it. We've seen that

481
00:26:28,160 --> 00:26:31,359
Speaker 1: double over the last couple of months, So maybe that

482
00:26:31,440 --> 00:26:33,919
Speaker 1: a ten percent moving using it in any given months

483
00:26:34,560 --> 00:26:36,600
Speaker 1: of the members. And I think they're going to continue

484
00:26:36,640 --> 00:26:39,440
Speaker 1: to push that adoption curve so that people are utilizing

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00:26:39,480 --> 00:26:42,399
Speaker 1: the service more and more. And so I don't know

486
00:26:42,440 --> 00:26:46,400
Speaker 1: where the peak utilization is, but I certainly think there's

487
00:26:46,440 --> 00:26:48,800
Speaker 1: an argument that you made that it's far far higher

488
00:26:48,840 --> 00:26:51,920
Speaker 1: than the historical ten percent, and you know, moving well

489
00:26:51,960 --> 00:26:56,280
Speaker 1: north of that going forward. What else can we look

490
00:26:56,520 --> 00:26:59,480
Speaker 1: to in terms of innovation? Is there anything coming down

491
00:26:59,480 --> 00:27:03,240
Speaker 1: the pike to anything in terms of the way vaccines

492
00:27:03,240 --> 00:27:09,639
Speaker 1: are delivered or you know, anything like respirators or PTE

493
00:27:09,920 --> 00:27:11,840
Speaker 1: or anything like that coming down the pike from any

494
00:27:11,920 --> 00:27:16,120
Speaker 1: of these companies. Well, in the healthcare I T landscape,

495
00:27:16,440 --> 00:27:19,240
Speaker 1: you know, they're looking to utilize all the latest tools

496
00:27:19,280 --> 00:27:21,600
Speaker 1: and technologies and and one of the things I didn't

497
00:27:21,600 --> 00:27:24,879
Speaker 1: mentioned in in this deal is that Lavongo has a

498
00:27:24,960 --> 00:27:28,000
Speaker 1: very strong presence in AI and they uti utilize an

499
00:27:28,000 --> 00:27:30,159
Speaker 1: AI engine to drive a lot of their care And

500
00:27:30,200 --> 00:27:32,520
Speaker 1: so I think there's a lot of adoption of of

501
00:27:32,560 --> 00:27:37,720
Speaker 1: these newer technologies like machine learning, AI, etcetera into healthcare

502
00:27:37,760 --> 00:27:42,320
Speaker 1: treatment plans. And so we're seeing that across the spectrum.

503
00:27:42,359 --> 00:27:45,399
Speaker 1: You know, as as we think about the vaccine, vaccines

504
00:27:45,480 --> 00:27:48,240
Speaker 1: and the response to COVID, We've seen a lot of

505
00:27:48,240 --> 00:27:54,320
Speaker 1: technology move forward pretty quickly in the area of diagnostics, vaccines,

506
00:27:55,400 --> 00:27:58,480
Speaker 1: um the treatment, whether they're in the bodies or repurposing

507
00:27:58,480 --> 00:28:00,800
Speaker 1: old drugs. There's a lot of smart people in the

508
00:28:00,800 --> 00:28:03,840
Speaker 1: world of healthcare, you know, looking at this problem um,

509
00:28:03,840 --> 00:28:06,440
Speaker 1: but it's it's hard to point to one particular technology

510
00:28:06,560 --> 00:28:08,399
Speaker 1: per se that's going to be a game changer for

511
00:28:08,480 --> 00:28:10,959
Speaker 1: the crisis. Hey, Jonathan, thanks so much for joining us.

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00:28:10,960 --> 00:28:14,720
Speaker 1: We appreciated Jonathan Palmer, Senior Healthcare analyst for Bloomberg Intelligence. Bonnie,

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00:28:14,720 --> 00:28:16,240
Speaker 1: when I see an m A deal across the tape,

514
00:28:16,400 --> 00:28:18,320
Speaker 1: I go right to the m A function and see

515
00:28:18,320 --> 00:28:20,800
Speaker 1: who the investment bankers are. And on this deal, it

516
00:28:20,880 --> 00:28:24,360
Speaker 1: was Lizard for the Acquirer and Morgan Stanley for the Targets,

517
00:28:24,359 --> 00:28:26,480
Speaker 1: as some of the blue chip investment banks still work

518
00:28:26,520 --> 00:28:31,520
Speaker 1: in the healthcare space. Thanks for listening to Bloomberg Markets podcast.

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00:28:31,680 --> 00:28:35,080
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts

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00:28:35,200 --> 00:28:38,720
Speaker 1: or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm

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00:28:38,760 --> 00:28:41,480
Speaker 1: on Twitter at Bonnie Quinn and Paul Sweeney. I'm on

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00:28:41,480 --> 00:28:44,440
Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always

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00:28:44,440 --> 00:28:46,320
Speaker 1: catch us worldwide at Bloomberg Radio