Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
Speaker 1: along with essential market moving news. Kind the Bloomberg Markets
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. So we have a severe
Speaker 1: debates going on right now about whether children should be
Speaker 1: going back to school and the full what's good for them,
Speaker 1: what's not so good for them, what they'll be missing
Speaker 1: out on if they do go back, what they'll be
Speaker 1: missing out on if they don't go back. One person
Speaker 1: right at the center of this is Randy wine Garden,
Speaker 1: and Randy has been literally fielding questions and trying to
Speaker 1: figure out what to do for all of the teachers
Speaker 1: and the support staff of the American Federation of Teachers,
Speaker 1: the largest union in the country. So Randy, thanks for
Speaker 1: joining us. And I'm curious where your members stand right now.
Speaker 1: Is it different and different rights of the country or
Speaker 1: is there one sort of the united voice on what
Speaker 1: should happen. So it's different in different parts of the country. Um,
Speaker 1: the president's actions in July made things a gazillion times
Speaker 1: worse because he made what should be a really important
Speaker 1: public health issue into a political one and completely polarized
Speaker 1: it and angered everyone because of his lack of diligence
Speaker 1: and responsiveness to actually handling the virus. So this is
Speaker 1: so right now, we have a mess on our hands.
Speaker 1: At the end of June, my membership I pulled them
Speaker 1: said that if we could get the safety safeguards that
Speaker 1: c d C had originally and still maintained or necessary,
Speaker 1: seventy percent of them said that they were comfortable going
Speaker 1: into public schools um and and instead of starting remotely,
Speaker 1: starting the year in school because they know, just like
Speaker 1: parents know how important it is for kids to have
Speaker 1: life instruction and to be in person. We have to
Speaker 1: combat the social isolation that kids have. We have to
Speaker 1: make sure that kids are fed, We have to deal
Speaker 1: with kids well being, so parents and teachers are aligned
Speaker 1: on that. What's happened since the end of June is
Speaker 1: that we've seen a virus surge, particularly in the South
Speaker 1: and the Southwest, and Congress has refused or failed. The
Speaker 1: Senate has failed to act on the resources that are
Speaker 1: absolutely necessary to get these safeguards into place at the
Speaker 1: same time as we're about to start schools. So you
Speaker 1: have this huge sense of um, adda anxiety and and
Speaker 1: um and a sense of mistrust that what is needed
Speaker 1: to make school safe for kids and for their teachers
Speaker 1: will actually happen. That's why you've seen districts who actually
Speaker 1: wanted to start in a hybrid. And I'll talk about
Speaker 1: that in a sect if you want me to have
Speaker 1: kind of moved back to starting remotely because they don't
Speaker 1: have They see the cases in their areas spiking. They
Speaker 1: don't have the testing and the tracing, and they don't
Speaker 1: have the equipment, the ventilation systems, the mass, the cleaning,
Speaker 1: or even the space to actually make a hybrid a
Speaker 1: blended model work. So it's a mess right now, and
Speaker 1: and it was far less of a mess in June
Speaker 1: when we thought we were going to get the funding
Speaker 1: from the Heroes Act, and before the President um and
Speaker 1: and Secretary Divorce started with their threats and their demands
Speaker 1: without a plan and without resources. So, Randy, speaking of
Speaker 1: Secretary Divorce, have you spoken to her. Do you get
Speaker 1: a sense that she understands the views of America's teachers, Well,
Speaker 1: she doesn't understand the views of America's teachers and or
Speaker 1: America's parents. Frankly, I haven't spoken to Secretary Divance since
Speaker 1: I invited her to come to a school with me
Speaker 1: in Ohio and we spent a day together, and she
Speaker 1: promised that she wanted to meet, she wanted to do
Speaker 1: different things. We haven't heard from her since. The only
Speaker 1: time I heard from her is I got a note
Speaker 1: congratulating me on getting married to my partner, um to
Speaker 1: my partner, and and and I you know, and so
Speaker 1: that we have not heard from her. All of what
Speaker 1: she's doing is political. She she hasn't. But what's worse
Speaker 1: than us not heard hearing from her? Every Republican or
Speaker 1: Democratic secretary of education in a circumstance like this, Margaret Spellings,
Speaker 1: Arnie Duncan, John King, Rod Page what they would have done.
Speaker 1: They were brought together, um the stakeholders to figure out
Speaker 1: how to actually have guidance for how to end last
Speaker 1: school year and then how to have guidance for how
Speaker 1: to start this year, not as a mandate, but how
Speaker 1: to have guidance and instead of us doing the this
Speaker 1: is what it costs. We thought it cost about a
Speaker 1: hundred and sixteen billion dollars twenty three hundred dollars per
Speaker 1: student UM the district, the district administrators thought a cost
Speaker 1: about eleven d dollars per student. Why are we the
Speaker 1: ones who are saying this is what the PPE wal cost,
Speaker 1: this is what the cleaning will cost, this is what
Speaker 1: the ventilation systems will cost. And both the superintendents and
Speaker 1: we put these figures out in May. We put our
Speaker 1: first UM guidance out in April, and so so you
Speaker 1: hear the frustration of my voice, because teachers know it's
Speaker 1: important for kids. But what's happened is that the can
Speaker 1: has been kicked down and down and down the road
Speaker 1: where the you know, administration is still pretending the virus
Speaker 1: doesn't exist. And so it's now left the teachers and
Speaker 1: parents to figure out child care, to figure out schooling
Speaker 1: without the resources. It's just wrong. And that's why you're
Speaker 1: seeing so many people go to remote Yes, and many
Speaker 1: teachers are parents themselves and are in the exact same
Speaker 1: boat as all of the other parents of the kids
Speaker 1: they teach. RANDI, what do you say to parents that
Speaker 1: are frustrated with teachers, because many parents want to send
Speaker 1: their kids back to school as well, because they need
Speaker 1: to go and work. They haven't been working. Who knows
Speaker 1: what Congress is going to come up with, the future
Speaker 1: is very uncertain. And you know, parents are also, you know,
Speaker 1: to a large extent, very worried about jobs. Yes, no,
Speaker 1: and I completely I've taught I've spoken to many parents, um,
Speaker 1: who are in this terrible predicament, and and this should
Speaker 1: be something that their employers should actually be working with
Speaker 1: us and trying to deal with these situations. It shouldn't,
Speaker 1: It shouldn't. So so so we need to work together,
Speaker 1: teachers and parents and need to work together. And what's
Speaker 1: happened now is that as we have engaged with parents
Speaker 1: more and more and tried to figure out how to
Speaker 1: deal with childcare, how to deal with these this terrible dilemma,
Speaker 1: parents are starting to say to us more and more, Look,
Speaker 1: we don't want our kids to be sick either, and
Speaker 1: so ultimately we need to work together on making sure
Speaker 1: that kids and teachers don't get sick and don't start
Speaker 1: by opening schools prematurely like they did in Israel. Don't
Speaker 1: start a new epidemic. And so even Dr Burke's this weekend,
Speaker 1: because of the science said, um that you know, if
Speaker 1: you have high caseload and active community spread. We are
Speaker 1: asking people to distance learn at this moment so we
Speaker 1: can get this epidemic under control. So I you know,
Speaker 1: so we have been pushing very hard to have the
Speaker 1: child care and we've also done the kind of thing. Hey, Randy,
Speaker 1: thank you so much for joining us and sharing this
Speaker 1: important information. Randy Wine Garton, President of the American Federation
Speaker 1: of Teachers, are really really critical issue in this country.
Speaker 1: As schools start to open up here for the false semester,
Speaker 1: the question is how to do it safely. There is
Speaker 1: no federal guidance here, so it's left up to the
Speaker 1: local municipalities. All right, Yesterday, around midday or shortly after midday,
Speaker 1: we got headlines crossing that Argentina had agreed in principle
Speaker 1: to a deal with its creditors in order to take
Speaker 1: that country out of default status. It's third default happening
Speaker 1: a few months ago in this decade nine default. Overall,
Speaker 1: Let's bring in somebody who knows a lot more about
Speaker 1: Argentina's economy, our chief Emerging markets credit strategist, Damian Sassour
Speaker 1: so Daman. Yesterday I was talking with one of the creditors.
Speaker 1: In fact, to Argentina who said that the deal was
Speaker 1: about fifty five cents on the dollar, depending on where
Speaker 1: you were on the curve. How does that compare with
Speaker 1: other restructuring deals. Well, I saw that interview with Robert
Speaker 1: Koenigsberger of Grammarcy, who's an old hand when it comes
Speaker 1: to em sovereign distressed UH situations, Bonnie, and you know,
Speaker 1: there's no question about it. This is something that was
Speaker 1: much needed, much expected, quite frankly, but really all eyes
Speaker 1: now focused on the i m F because while sixty
Speaker 1: five billion dollars in dollar denominated, WILL dollar and Euro
Speaker 1: denominated hard currency debt has now been or is now
Speaker 1: being restructured as we speak, there's still another call at
Speaker 1: fifty three billion of hard currency UM i F I
Speaker 1: UM debt payments that need to go through. And when
Speaker 1: I say i IF, I'm talking about international finance institutions
Speaker 1: of which the i m F is one, and they
Speaker 1: are the biggest creditor accounting for roughly forty five billion
Speaker 1: dollars of Argentina hard currency debt that must come do.
Speaker 1: Repayments start start in the third quarter of one and
Speaker 1: total roughly fifty three billion THO. So that's a lot
Speaker 1: of money that Argentina needs to repay in the next
Speaker 1: five years, and obviously we need to see that get
Speaker 1: pushed back. All right, So what is the posture of
Speaker 1: the i m F now d me and given that
Speaker 1: we've seen this deal for another big tronch of debt, well,
Speaker 1: I mean, Christelina Grgovo runs the IMF has has been
Speaker 1: very supportive of this restructuring. I mean, I obviously expect
Speaker 1: the IMF to tow the line and basically agree to
Speaker 1: something that works for the sovereign. But you know whether
Speaker 1: or not. You know, IBIRD, which is a part of
Speaker 1: the World Bank, the Internet, the Interamerican Development Bank. I
Speaker 1: mean again, these are other institutional financial institutions that have
Speaker 1: billions and billions of dollars owed to them by Argentina.
Speaker 1: So you know, I think they all have to come together,
Speaker 1: they have to agree to something, and I expect that's
Speaker 1: where you know, the focus is going to shift for
Speaker 1: most reading agencies and most sovereign creditors over the near term.
Speaker 1: Pole Yeah, the i m F is often credited for
Speaker 1: just being that a little bit too hard line on
Speaker 1: some of these countries that just aren't able to pay
Speaker 1: and and just you know, really imposing the strictest of conditions.
Speaker 1: How much leeway does the I MF have with Argentina,
Speaker 1: or rather vice versa, how much leeway does the Argentina
Speaker 1: economy have. Well, the I m F has really made
Speaker 1: its bed, so to speak, lonny with regard to Argentina.
Speaker 1: They are I mean, that's that most of their balance sheet.
Speaker 1: I mean, it's their biggest um, it's their biggest loan. Basically,
Speaker 1: it's it's they have, you know, the biggest exposure to Argentina.
Speaker 1: So they need to get that righted because it really
Speaker 1: will mark whether or not the I m F is
Speaker 1: successful going forward at you know, I won't say bailing out,
Speaker 1: but assisting you know, frontier sovereign nations as they you know,
Speaker 1: as they seek to kind of grow and emerge from
Speaker 1: you know, the coronavirus. So you know, I think, look,
Speaker 1: you know, from where we sit right now, obviously those
Speaker 1: discussions are going to take place. I expect them to
Speaker 1: go over rather well. But the real challenge for Argentina
Speaker 1: is getting locals confident in the Argentine pay so and
Speaker 1: right now, that disconnect between where the PASO is treating,
Speaker 1: at least officially and where it's trading in the black
Speaker 1: market is just so very great, and a huge devaluation
Speaker 1: is probably in store for the Argentine past. So and
Speaker 1: and look, you know that's that's something that is widely expected.
Speaker 1: But you know, whether or not Argentina can emerge and
Speaker 1: restore confidence in its own currency and get the economy
Speaker 1: growing again remains to be seen. So Damian, what does
Speaker 1: this deal mean for maybe some some of Argentina's neighbors
Speaker 1: in Latin America? Is this any kind of template for
Speaker 1: others that might need some relief? Well, I mean, what
Speaker 1: kind of goes under under the radar here is that?
Speaker 1: You know, this week we've also seen Ecuador agreed to
Speaker 1: terms with its restructuring right that seventeen point four billion
Speaker 1: dollars in debt that you know Ecuador owes too hard
Speaker 1: currency creditors abroad, you know Lenning Marino, you know, you know,
Speaker 1: they did a really really good job. I have to
Speaker 1: be honest, this is the I mean, Ecuador is a
Speaker 1: surreal defaulter as well, and this is one of the
Speaker 1: fastest restructurings that i've I've pretty much ever seen, you
Speaker 1: know writ large. So you know, I think I think
Speaker 1: most creditors are you know, coming to terms of the
Speaker 1: fact that this is the very challenging time they need
Speaker 1: to kind of uh, you know, they made their own
Speaker 1: bed right, they have to take a little bit of
Speaker 1: a hickey also. But you know, as as you see
Speaker 1: from you know, the note in the New York Times
Speaker 1: this morning from Richard Kaschell, who's you know, you're at
Speaker 1: Black Rock and was very much involved in all these
Speaker 1: negotiations through to the end. You know, they have stakeholder
Speaker 1: interest in mine. They have to worry about their own
Speaker 1: fiduciaries and their own fiduciary responsibility when negotiating on behalf
Speaker 1: of them, and so you know, these things tend to
Speaker 1: kind of get drawn out. What I'm just absolutely amazed
Speaker 1: about is how quickly some of these deals are getting
Speaker 1: done and what this expense. But beyond two police and
Speaker 1: you know, Sri Lanka's now having parliamentary elections, they're in trouble.
Speaker 1: They were downgraded to single B minus. So you know,
Speaker 1: there's plenty of frontier sovereigns and Goala Nigeria that come
Speaker 1: to mind that are all hurting all of approach the
Speaker 1: I m F for assistance and look, you know we're
Speaker 1: going to see in the next in the non too
Speaker 1: distant future, how many of them can emerge from this.
Speaker 1: On the on the other side, just briefly, Damian, we're
Speaker 1: seeing Argentina's bonds rise to I mean, how soon can
Speaker 1: Argentina go back to the capital markets literally nothing has
Speaker 1: changed about the underlying economy. Yeah, I mean, you have
Speaker 1: hit right on the spot exactly what I'm thinking. I mean,
Speaker 1: I think a lot of creditors, specifically you know, US
Speaker 1: institutions like pension funds and Commond foundations, it doesn't matter
Speaker 1: whether or not Argentina's permitted back into the US capital markets.
Speaker 1: I think many of them have gotten so fed up
Speaker 1: with losses that they had to incur due to and
Speaker 1: sting in Argentine debt that it's just going to be
Speaker 1: very difficult for them. I mean, I know a handful
Speaker 1: of them that built into their own policy statements that
Speaker 1: they you know, yes, we'll invest in emerging market dollar debt,
Speaker 1: but we will not invest in debt issued by Argentina.
Speaker 1: And that's a real problem to get, you know. So,
Speaker 1: so whether or not they're allowed back to the US
Speaker 1: market to to to to take on more debt, Okay, fine,
Speaker 1: they can do that, but who's gonna buy it? Right, Bonnie,
Speaker 1: I think that's where you're going with this, And I
Speaker 1: think that's the real risk. You know, when you have
Speaker 1: these type of situations and now industries have wised up,
Speaker 1: it's gonna be very difficult to get them back on board.
Speaker 1: The one thing I'll say is that investors have very
Speaker 1: short term memories. You know, when things start to get
Speaker 1: right and and and and you know, and and the
Speaker 1: risk on mentality resumes. Damian sasare thanks so much as
Speaker 1: always giving us the latest on all things emerging markets.
Speaker 1: Staming sassare chief Emerging Markets credit staategists for Bloomberg Intelligence.
Speaker 1: UH debt restruction deal getting done in Argentina, I m
Speaker 1: F is next. What are they going to do there?
Speaker 1: And what does that mean for the emerging markets overall?
Speaker 1: We'll keep on top of that. We had some media
Speaker 1: companies some numbers last night, led by the Walt Disney Company,
Speaker 1: some good numbers, some good streaming numbers or stocks of eleven. Today.
Speaker 1: Fox also reported numbers better than expected for their stocks
Speaker 1: that off about the five or six percent this morning.
Speaker 1: So tail uh to two sides of the coin. We
Speaker 1: want to chat about that. And there's nobody better than
Speaker 1: our good friend Tuna a Mobi. He has been covering
Speaker 1: this industry forever. He's an industry analyst at cf R
Speaker 1: A Research. And for those of you that have seen
Speaker 1: Tuna on television, I can tell you he is the
Speaker 1: best dressed man on Wall Street. Tuna, thanks so much
Speaker 1: for joining us here. Let's start with Disney this stock.
Speaker 1: I mean, I looked at the numbers last night, and
Speaker 1: the costs associated with COVID registered extraordinary close to four
Speaker 1: billion dollars. You have the stocks up ten percent? What
Speaker 1: what did the investors really like? Good morning, Paul, and
Speaker 1: thanks for having me. UM So I started Disney. Um
Speaker 1: earnings was actually UM a lot of interest in um
Speaker 1: not get some information? UM the same parts we knew
Speaker 1: going in was gonna take the major hit from the
Speaker 1: COVID nineteen shot down. UM. But the surprise there was
Speaker 1: actually Media Networks, which had a one billion dollar swing
Speaker 1: in operating income, primarily due to the programming cause deferrals
Speaker 1: with the shutdown of production in Hollywood as well as
Speaker 1: the sports Life sports. But all in all, I thought, UM,
Speaker 1: it was a really um interesting quarter for a direct consumer.
Speaker 1: As you know, Paul. That's where the company has been
Speaker 1: pivoting for quite some time, now, surpassing hundred million UM
Speaker 1: aggregate subscribers between ESPN Plus, Disney Plus, and Hulu. But
Speaker 1: more importantly, the launch of the International Star branded direct
Speaker 1: consumer offering. I think, really, um, you know, puts Disney
Speaker 1: in a very very good position, uh to consolidate its
Speaker 1: gains um and also the Mulan. I'm sure we'll get
Speaker 1: to that shortly. I think Disney, um, more than anyone
Speaker 1: else in Hollywood, has been trying to use the COVID
Speaker 1: nineteen lockdown to reinvent somebody traditional distribution windows. So now
Speaker 1: Disney Plus serving as a major premier outlet for some
Speaker 1: of its marquee uh you know, titles. So all in all,
Speaker 1: we are, um, you know, quite optimistic. The shares are
Speaker 1: up um rightly, so I think when you look to
Speaker 1: the other side of this pandemic, Paul, with a strong
Speaker 1: balance sheet and now almost twenty three billion dollars in liquidity, UM,
Speaker 1: I think no companying arguably in the media spaces better
Speaker 1: position to navigate this pandemic, uh like Disney. Yeah, and
Speaker 1: you're referring, we should say to the live action Mulan,
Speaker 1: which is going to go straight to Disney plus and
Speaker 1: maybe take it. You know, thirty buckser so away from
Speaker 1: movie theaters for the window that it normally will have
Speaker 1: gone to movie theaters first in. So that's all great
Speaker 1: for Walt Disney, but compare it with something like a Comcast.
Speaker 1: Why is Disney performing so much better in the market
Speaker 1: and Comcast is announcing all these layoffs and so on,
Speaker 1: and and really operations are very similar in both cases, right,
Speaker 1: It's all about the portfolio of assets. And also I
Speaker 1: think in this environment, number one, we think Disney's balance
Speaker 1: sheet is superior. UM. But also being a pure content provider.
Speaker 1: Remember coming into this uh you know COVID nineteen, UM,
Speaker 1: you know, Disney had with the Fox acquisition, UM, you know,
Speaker 1: really placed itself in a very enviable position in terms
Speaker 1: of the franchise pipeline acquired in organic franchises. So while
Speaker 1: Comcast is also getting some tail winds from on the
Speaker 1: broadband business and the residential broadband, UM, it's been much
Speaker 1: more UH susceptible. I think, UM to some other areas
Speaker 1: like um, you know, advertising, etcetera. But Disney, I think, UM,
Speaker 1: when when this uh theme parks rebound as we think
Speaker 1: they will. Uh. There's indications of penop demand. ESPN while
Speaker 1: has been adversely affected by the cancelation of Life Sports.
Speaker 1: Now that Life Sports are coming back gradually, UM, we
Speaker 1: think will be uh you know, as best positioned as
Speaker 1: any platform to to benefit from from that. But more importantly,
Speaker 1: I think the major distinction Vney, to your question I
Speaker 1: would draw, is a direct to consumer. That's really what
Speaker 1: separates uh, you know, Disney from Comcast in the eyes
Speaker 1: of investors, and that's a huge opportunity in front of
Speaker 1: the company, especially with the Star branded platform that they
Speaker 1: are going to be launching internationally. I might also add
Speaker 1: that they are shutting down twenties some channels internationally. It
Speaker 1: took a five billion dollar impayment charge, which underscores the
Speaker 1: strategic shift for Disney from linear to to direct to consumer.
Speaker 1: That's where I think a huge chunk of the value
Speaker 1: is going to come from the catalysts. So, you know,
Speaker 1: what's the company saying about their theme parks. It's such
Speaker 1: an important part of their business. It's been such a
Speaker 1: solid contributor to UH earnings growth for the company for years.
Speaker 1: They invest a tremendous amount of money into that business
Speaker 1: with great returns. I'm thinking about the five billion dollars
Speaker 1: to open Shanghai Disney most recently. Do they believe that
Speaker 1: on the other side of this pandemic, that people are
Speaker 1: going to cram themselves into these parks and you know,
Speaker 1: and and stand in line like we've become accustomed to
Speaker 1: other parks, that they think that it's gonna come back
Speaker 1: to normal. Paul, I think that scenario, frankly is at
Speaker 1: least several years out. Even in the best of times,
Speaker 1: when you're coming out of recession, uh team, parks typically
Speaker 1: takes several years to recover. But in the case of
Speaker 1: Disney now they're in the middle of its phased reopening.
Speaker 1: All these parks not going exactly as smoothly as you
Speaker 1: you might hope, especially with the COVID nineteen resurgence across
Speaker 1: various states in the US, and as you know, they
Speaker 1: had to shut down Hong Kong again after the initial reopening.
Speaker 1: But having said that, I think we take some comfort
Speaker 1: in the fact that you know, Shanghai has been um
Speaker 1: you know, coming along. I think their philosophy and running
Speaker 1: the see parks right now is just to maintain a
Speaker 1: positive um you know, contribution margin. So to the extent
Speaker 1: that the revenues are outweighing the variable costs, I think
Speaker 1: they can justify keeping those parks open, even that limited capacity, UM,
Speaker 1: just to cover some of the fixed overheads. But that
Speaker 1: being said, I think it's in parks probably will be
Speaker 1: one of the last to recover. But when they do, UM,
Speaker 1: there's every indication that they're going to be you know,
Speaker 1: get back to UM you know, normalized attendance levels. Whether
Speaker 1: that takes three to five years, you know, who knows,
Speaker 1: but they just came up the peak attendance in two
Speaker 1: thousand nineteen. So it's kind of going to be a
Speaker 1: gradual process from here, depending on what happens with the resurgence. Basically,
Speaker 1: you know, do you anticipate layoffs and maybe even you know,
Speaker 1: action on the part of the world's employees. At some point,
Speaker 1: they've already come off of massive layoffs Vannio already um
Speaker 1: I frankly, at this point, UM, I don't know, you know,
Speaker 1: how much more that they can you know, much more room.
Speaker 1: What they've done is that actually they've recalled a lot
Speaker 1: of those theme parks UM attend the staff that were
Speaker 1: laid off, So they're actually in the process of rehiring
Speaker 1: some of those followed employees. But I think when you
Speaker 1: look at June quarter when its theme parks had almost
Speaker 1: like three billion dollar hit from COVID, uh, you know,
Speaker 1: that's to us is the trough um, you know, So
Speaker 1: even the worst case scenario when the parks have to
Speaker 1: close again with the surgeon COVID night, and we don't
Speaker 1: expect that what they just went through this last quarter
Speaker 1: is going to recur by any stretch. So we we
Speaker 1: think they're in a pretty good shape to continue to
Speaker 1: build on what theyre I have Tuna a mobi. Thank you.
Speaker 1: It's always just an absolute pleasure to speak to. Tuna
Speaker 1: is a complete expert and everything that is media media
Speaker 1: related thanks to you know, companies that you may or
Speaker 1: may not have heard of. Telegog about the voe Go
Speaker 1: it was an eighteen and a half billion dollar deals,
Speaker 1: so a really massive deal. Jonathan Palmer is senior healthcare
Speaker 1: analyst for Bloomberg Intelligence. Jonathan Welcome tell us how this
Speaker 1: deal came about, on what these two companies actually do.
Speaker 1: I mean, I guess we can we can guess in
Speaker 1: the case of Teledoc, that's fair. Monny for having me on.
Speaker 1: So both of these companies play in the healthcare I
Speaker 1: T space and really in the telehealth and virtual care markets. Um,
Speaker 1: they're slightly different in you know, telehealth or teledoc focus
Speaker 1: is really on episodic care, where uh Vongo has focused
Speaker 1: on chronic care for things like diabetes and cardio. And
Speaker 1: so the the addition here are these two companies the merger,
Speaker 1: you know, I think what they vision is that, you know,
Speaker 1: more and more healthcare is going to move to this
Speaker 1: virtual world. And while Teledoc had a strong presence in
Speaker 1: you know, uh treating something like your kids get sick
Speaker 1: or you get the flu, whereas Vongo is focused on
Speaker 1: the long term, you know, treating an illness that you
Speaker 1: might have for the rest of your life. Marrying those
Speaker 1: two together makes a more powerful treatment option for patients
Speaker 1: and doctors. This comes at a big cost, doesn't at Jonathan,
Speaker 1: I'm looking at Lavongo stock and back in March it was,
Speaker 1: you know, called it twenty two bucks a share. Here
Speaker 1: it is trading today a hundred and thirty four dollars,
Speaker 1: so it's had a huge run. And then I look
Speaker 1: at Teledoc in the stocks shares are down about fourteen
Speaker 1: percent here, So did they overpay? That's a great question.
Speaker 1: I mean, there's there's certainly uh fair argument to be
Speaker 1: made that you know, this is the peak of telehealth
Speaker 1: and healthcare I T in terms of multiples. You know,
Speaker 1: we've seen this massive run up from the pandemic, you know,
Speaker 1: as you mentioned, lavangoes up you know, maybe five or
Speaker 1: six times from a p O price last year. Tele
Speaker 1: Doc similarly up five or six times. The market's telling you,
Speaker 1: with the stock down, that they don't particularly love this deal.
Speaker 1: I think it's true from the perspective of teledocs management
Speaker 1: and that they're using stock ninety percent of stock to
Speaker 1: pay for this deal, so they might be signaling that
Speaker 1: they thought even their stock was overvalued. Here. Are there competitors?
Speaker 1: Is there the possibility that somebody else will jump in
Speaker 1: or that this will make for a new competitor to
Speaker 1: some of the others. There's competitors all across this healthcare
Speaker 1: I T landscape, and and they're in various stages. Tele
Speaker 1: Doc is the most well known public company in this space,
Speaker 1: but we saw a telehealth back come out last week.
Speaker 1: There's other private companies like am Well in this space.
Speaker 1: And you know, I wouldn't put it past the big
Speaker 1: insurers like United Health, you know, as these trends gained
Speaker 1: traction to just move more aggressively in this space. So
Speaker 1: I think it's a little bit of a land grab
Speaker 1: right now in the world of healthcare. I t in
Speaker 1: particularly in virtual care. So the marriage here these two
Speaker 1: makes a lot of sense to grab scale while while
Speaker 1: the getting is good, Jonathan gives a sense of what
Speaker 1: the trends were before the pandemic in telehealth. To be
Speaker 1: honest with you, from my perspective, I never even considered
Speaker 1: it for myself. Now I'm thinking, why wouldn't I do it? So,
Speaker 1: what what were the trends before this pandemic and how
Speaker 1: do you think that the trends will play out going forward?
Speaker 1: Question Paul, And So, I think we've seen the change
Speaker 1: in terms of the adoptment of telehealth, and really the
Speaker 1: pandemic has caused a lot of people to look at
Speaker 1: this option very differently. You know, before the crisis, a
Speaker 1: lot of people had this option in their health plan,
Speaker 1: but on average and Teleducts book of business, maybe ten
Speaker 1: percent of their members actually used it. We've seen that
Speaker 1: double over the last couple of months, So maybe that
Speaker 1: a ten percent moving using it in any given months
Speaker 1: of the members. And I think they're going to continue
Speaker 1: to push that adoption curve so that people are utilizing
Speaker 1: the service more and more. And so I don't know
Speaker 1: where the peak utilization is, but I certainly think there's
Speaker 1: an argument that you made that it's far far higher
Speaker 1: than the historical ten percent, and you know, moving well
Speaker 1: north of that going forward. What else can we look
Speaker 1: to in terms of innovation? Is there anything coming down
Speaker 1: the pike to anything in terms of the way vaccines
Speaker 1: are delivered or you know, anything like respirators or PTE
Speaker 1: or anything like that coming down the pike from any
Speaker 1: of these companies. Well, in the healthcare I T landscape,
Speaker 1: you know, they're looking to utilize all the latest tools
Speaker 1: and technologies and and one of the things I didn't
Speaker 1: mentioned in in this deal is that Lavongo has a
Speaker 1: very strong presence in AI and they uti utilize an
Speaker 1: AI engine to drive a lot of their care And
Speaker 1: so I think there's a lot of adoption of of
Speaker 1: these newer technologies like machine learning, AI, etcetera into healthcare
Speaker 1: treatment plans. And so we're seeing that across the spectrum.
Speaker 1: You know, as as we think about the vaccine, vaccines
Speaker 1: and the response to COVID, We've seen a lot of
Speaker 1: technology move forward pretty quickly in the area of diagnostics, vaccines,
Speaker 1: um the treatment, whether they're in the bodies or repurposing
Speaker 1: old drugs. There's a lot of smart people in the
Speaker 1: world of healthcare, you know, looking at this problem um,
Speaker 1: but it's it's hard to point to one particular technology
Speaker 1: per se that's going to be a game changer for
Speaker 1: the crisis. Hey, Jonathan, thanks so much for joining us.
Speaker 1: We appreciated Jonathan Palmer, Senior Healthcare analyst for Bloomberg Intelligence. Bonnie,
Speaker 1: when I see an m A deal across the tape,
Speaker 1: I go right to the m A function and see
Speaker 1: who the investment bankers are. And on this deal, it
Speaker 1: was Lizard for the Acquirer and Morgan Stanley for the Targets,
Speaker 1: as some of the blue chip investment banks still work
Speaker 1: in the healthcare space. Thanks for listening to Bloomberg Markets podcast.
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
Speaker 1: or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm
Speaker 1: on Twitter at Bonnie Quinn and Paul Sweeney. I'm on
Speaker 1: Twitter at pt Sweeney. Before the podcast, you can always
Speaker 1: catch us worldwide at Bloomberg Radio