Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Business.
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Speaker 1: tech news. The Bloomberg Business Week podcast with Carol Messer
Speaker 1: and Tim Stenebeck from Bloomberg Radio.
Speaker 2: We've got to check out the worst performer in the
Speaker 2: S and P five hundred, and that would be super
Speaker 2: Micro Computer shares absolutely cratering after Ernst and Young resigned
Speaker 2: as the auditor ceting concerns about the company's governance and transparency.
Speaker 2: We got with us Caroline Hye. She's co host of
Speaker 2: Bloomberg Technology on Bloomberg TV eleven Wall Street Time each day.
Speaker 2: She joins us here in the Bloomberg BusinessWeek studio. Bailey
Speaker 2: Lipschultz also with us. He's Bloomberg News equities reporter. He
Speaker 2: joins us from our Chicago bureau. Caroline, I want to
Speaker 2: start with you because I want to remind everyone, or
Speaker 2: I want you to remind everyone how we got here
Speaker 2: today with super Micro, because it's not the first time
Speaker 2: that smci's accounting practices have been under scrutiny.
Speaker 3: No, that was in twenty twenty. In fact, if you
Speaker 3: look back as to when the last time the shares
Speaker 3: fell as much as they have today, well that was
Speaker 3: back in twenty eighteen, when a Business Week report was
Speaker 3: out that they'd been had seen their motherboards and their
Speaker 3: servers hacked by the Chinese. They're not unaccustomed to controversy,
Speaker 3: shall we say. But twenty twenty was when they actually
Speaker 3: paid a fine seventeen million dollar penalty to end the
Speaker 3: investigation of the SEC into concerns about accounting. At that point,
Speaker 3: it was alleged that they'd been basically seeing their revenue
Speaker 3: come in faster than naturally it had been. Now we
Speaker 3: fast forward, and now it seems to be that we
Speaker 3: go back two months in August, we get the Hindenburg
Speaker 3: report that is citing in particular an ex employee who
Speaker 3: worries about accounting. Again, Hindenburg puts out a short report
Speaker 3: saying that we're worried about the accounting red flags. They
Speaker 3: call it the stock tumbles. Then we get a DOJ
Speaker 3: reports of a DOJ investigation into all of this. And
Speaker 3: now finally Ey not wanting their name to be associated
Speaker 3: with these financial reports. I mean, that is the last
Speaker 3: thing you ever want to hear about an accounting firm
Speaker 3: involved in a company that you have, Chaz and.
Speaker 4: Yeah, pretty us stunning culmination of that timeline here. Shares
Speaker 4: currently down about thirty two percent right now.
Speaker 5: And Billy Lipschel's cone in on the.
Speaker 4: Fact that Nate Anderson, of course of Hindenburn Research, he
Speaker 4: must be having a pretty good day today.
Speaker 2: He must be having a good day, Kitty.
Speaker 6: He's having really a good few years, depending what timeframe
Speaker 6: you want to use, whether you go back to the
Speaker 6: Nicola fraud that he called out or a number of
Speaker 6: his other big time hits. When you look at the
Speaker 6: report from Hindenburg really kind of laying out those red
Speaker 6: flags to Caro's point, But the big thing is that
Speaker 6: was the day before they delayed their ten K filing,
Speaker 6: So it has been a flurry of issues for the company.
Speaker 6: And I know this is a name that Hindenburger in
Speaker 6: a number of other investors both on the long end
Speaker 6: short side, have been keeping a close eye on. Again,
Speaker 6: just given the ascent, the rapid ascent that we saw
Speaker 6: over the last few years and what we've seen really
Speaker 6: play out even back since March when it hit its
Speaker 6: all time high, baily.
Speaker 2: Hard to answer counterfactule here, But you know, Katie and
Speaker 2: I were kind of talking about this ahead of the
Speaker 2: interview when we were preparing for this, in the idea
Speaker 2: that shorts certainly play an important role here, even though
Speaker 2: they're heavily criticized. Do you think we'd be talking about
Speaker 2: this or do you think Ey would have resigned today
Speaker 2: had that Hindenberg report not come out?
Speaker 6: I think it's impossible to note tim But when you
Speaker 6: look at it just chronologically, Hindenberger report comes out, the
Speaker 6: next day, they come back and say, all right, we're
Speaker 6: going to delay our filings because we need a little
Speaker 6: bit more time to go through them.
Speaker 2: Fast forward a month to Caro's point.
Speaker 6: Then you have the reports of the DOJ in query
Speaker 6: and investigation, and now ultimately Ey resigning, and you look
Speaker 6: at the letter that Ey wrote. Whether or not Hindenburg
Speaker 6: kick started this, I think can be debated, But if
Speaker 6: you look at the kind of outlay and how those
Speaker 6: events have played out, whether it was a short report
Speaker 6: or whether this would have eventually gotten out, it does
Speaker 6: seem at least on the margin to point towards Nate
Speaker 6: Anderson's we're actually kickstarting what we've seen play out.
Speaker 2: Carolyn, remind us where SMCI is in the chip ecosystem here,
Speaker 2: because I mean, whenever talk about these companies, I feel
Speaker 2: like I need some sort of like whiteboard that where
Speaker 2: they play me both is TSMC.
Speaker 3: Well, just think of them as encapsulating in video. They
Speaker 3: basically take the Invidia chips, they circulate them in metal,
Speaker 3: and they help install your server into your data center.
Speaker 3: So ultimately a lot of companies and clients go to
Speaker 3: a super Micro rather than directly to an Nvidia to
Speaker 3: get all of their computes sorted out. They're in the
Speaker 3: same lane as Dell. And that is why we're seeing
Speaker 3: Dell shoot higher today because analysts saying that this is
Speaker 3: their moment to take market share from the likes of
Speaker 3: super Micro. And to Bailey's point, this is why it
Speaker 3: hit an all time high earlier this year. This is
Speaker 3: why we saw the shares at one point up fourfold
Speaker 3: because they were integral to this whole AI Darling, Searge
Speaker 3: and now well we're only up about what's I think,
Speaker 3: sixteen percent year to date if you're looking at it,
Speaker 3: and ultimately, with to see them trying to fight against
Speaker 3: this narrative, we've got to go and make clear that
Speaker 3: the company is saying it doesn't expect the issues will
Speaker 3: lead to a revision and previously issued financials, and they
Speaker 3: have begun to look for another auditor. But the share
Speaker 3: price tells at all. And if you're looking at certain things,
Speaker 3: we're down thirty two percent, with the lowest since January
Speaker 3: the eighteenth of twenty twenty fourth who basically erased all
Speaker 3: of this ye's games.
Speaker 4: Yeah, big time and great point on Dell. You take
Speaker 4: a look at shares right now, up about seven point
Speaker 4: seven percent, and Bailly, you think about, of course, this
Speaker 4: enormous I'm not gonna call it a bubble, but all
Speaker 4: of this enthusiasm around some of these AI names, obviously
Speaker 4: that's CATENIV for some of these short sellers. I want
Speaker 4: to talk a little bit about Luhman because we're talking
Speaker 4: about this great year that Nate Anderson is having over
Speaker 4: at Hindenburg Research.
Speaker 5: Then you think about Luhman.
Speaker 4: Of course you had who was It was Caersdale who
Speaker 4: took a short position in Luhmen a couple months ago.
Speaker 4: And Luhman has really defied that. They just signed another
Speaker 4: partnership today with AWS. The shares have done incredible over
Speaker 4: the past couple months. So even if you have some
Speaker 4: of these big run ups, I guess it just speaks
Speaker 4: to how difficult a business short selling is.
Speaker 2: Exactly, Katie.
Speaker 6: But the one thing to keep in mind, and this
Speaker 6: is kind of the hot debate around short sellers, is
Speaker 6: we don't know when these active as short sellers actually
Speaker 6: cover their positions, and we don't know whether they're taking
Speaker 6: out and betting against the company via put options and
Speaker 6: set about right shorting the stocks.
Speaker 2: So it's hard to be.
Speaker 6: Able to say whether or not, even with a super
Speaker 6: micrown mind, Handenberg actually maximized their potential return because for
Speaker 6: all intentsive purposes, they could have covered immediately after and
Speaker 6: that would not be disclosed. But to your point with Luman,
Speaker 6: with a company like Symbotic, with all of these other
Speaker 6: AI flavors, if you will, that have drawn the ire
Speaker 6: of short sellers, whether they're quiet investors betting against a company,
Speaker 6: or activists who come out with these lengthy reports with
Speaker 6: a number of allegations, it does speak back to to
Speaker 6: your point, the difficulty for the long term short seller
Speaker 6: to be successful, because if you go back just a
Speaker 6: little while ago, you look at a company like Herbal Life,
Speaker 6: that actman versus Icon narrative and how that played out,
Speaker 6: and you kind of can ascribe that, at least at
Speaker 6: some level to a number of these other companies that
Speaker 6: have drawn scrutiny of those activists.
Speaker 3: Someone's shorlting this stock, though it's twenty percent of the
Speaker 3: outside float, is currently shulted. Someone out there is still
Speaker 3: wedding against it head.
Speaker 4: And they're probably feeling pretty good today. It is a
Speaker 4: good reminder though that who knows, of course, is Hindenberg.
Speaker 5: Is still in this stock.
Speaker 4: But Carolin, when it comes to super Micro, you know,
Speaker 4: as you mentioned, this timeline of these sort of accounting
Speaker 4: questions goes back to at least twenty twenty.
Speaker 5: What is next for this story? What should we keep
Speaker 5: an eye on from here?
Speaker 4: Because I don't know, you think about the reputational damage
Speaker 4: that this company is going.
Speaker 5: Through right now, it seems like a rocky road ahead.
Speaker 3: November fifth, same day as then, is when they're coming
Speaker 3: out with an updated business report. So ultimately it can't
Speaker 3: be their financials because they're delaying their financials, but they
Speaker 3: are going to come to the market to their investors
Speaker 3: and give an update on November the fifth, So all
Speaker 3: eyes on that, all eyes on whether they get another accountant.
Speaker 5: They're trying to bury that news with the election.
Speaker 3: Would you dare say such thing, Katie?
Speaker 2: I know, let's not forget that this company was added
Speaker 2: to the S and P five hundred this year, so
Speaker 2: you know, which is a very prestigious thing, and you know,
Speaker 2: it gets into it.
Speaker 3: Was delisted previously, so that on its old accounting issues.
Speaker 3: And actually that is something that's being brought up again
Speaker 3: by analysts. I think Wujinhome over Bloomberg Intelligence is saying, look,
Speaker 3: they need to focus on great corporate governance. We may
Speaker 3: require a leadership change. And they're also saying, look, maybe
Speaker 3: we will start to see an issue of delisting once again.
Speaker 2: That's what I'm wondering if those folks over at S
Speaker 2: and P are having like second guesses about adding it
Speaker 2: to the S.
Speaker 5: And P three nineteen billion dollar valuation.
Speaker 2: Still even after today. Yeah, all right, a big thank
Speaker 2: you to Caroline Hydeen Bailey Lipsheltz.
Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Tim Steneveek on Bloomberg Radio and tele.
Speaker 2: It is Bloomberg Business Week. That's Katie greifeld in for
Speaker 2: Carol Nasser this afternoon. As we mentioned earlier, as slew
Speaker 2: of economic data today showed that the economy expanded at
Speaker 2: a robust pace in the third quarter. Inflation adjusted GDP
Speaker 2: increased at a two point eight percent annualized rate. A
Speaker 2: big part of that has to do with small business.
Speaker 2: The US Chamber of Commerce reminding us that small businesses
Speaker 2: are responsible for employing close to half of the workers
Speaker 2: in the US and they represent more than forty percent
Speaker 2: of GDP. Needless to say, super important to our economy.
Speaker 2: For a temperature check of small business, we welcome back
Speaker 2: Sharon Miller. She's president and co head of Business Banking
Speaker 2: at Bank of America. She joins us from San Antonio.
Speaker 2: Always good to check in with you, Sharon. You guys
Speaker 2: do this report over at Bank of America about small business.
Speaker 2: You get into the demographic details of how small business
Speaker 2: owners are feeling, how they're doing, what they see coming
Speaker 2: up ahead. Looking through the data, seems to me people
Speaker 2: are pretty optimistic right now.
Speaker 7: They are mean, they did maintain a very positive outlook.
Speaker 7: I mean, as we surveyed the clients, seventy eight percent
Speaker 7: told us that they expect their revenue to increase over
Speaker 7: the next twelve months. So to me, that is a
Speaker 7: good sign and there is a positive sentiment out there.
Speaker 4: And Sharon I also thought it was interesting that, you know,
Speaker 4: within this positive sentiment you think about what is still
Speaker 4: an issue, and topics such as inflation, such as supply
Speaker 4: chain issues come up, and especially with supply chain chains.
Speaker 4: We still talk about inflation all the time, but supply
Speaker 4: chain issues. It's a good reminder that a lot of
Speaker 4: small business owners are still struggling with that.
Speaker 7: They are I mean, inflation does remain the number one
Speaker 7: concern in our survey of small business owners at baut
Speaker 7: nine and ten told us that they saw inflation as
Speaker 7: an issue for their business. Your right, supply chain does
Speaker 7: pop up there, although it has gone down in the
Speaker 7: list of concerns, but there are still concerns around supply chain.
Speaker 7: And I'd also say to the political environment that came
Speaker 7: in number two, which makes sense. We're in the middle
Speaker 7: of an election year, and in fact, next week, you know,
Speaker 7: we will know the election results and so from there
Speaker 7: we normally see this. I mean, we've been doing this
Speaker 7: survey over ten years and every election cycle there seems
Speaker 7: to be you know, concern and then post that regardless
Speaker 7: of who wins, there's certainty and people seem to move
Speaker 7: on with their business.
Speaker 2: So I mentioned that there's really interesting demographic information in
Speaker 2: the survey. You guys break it down. You look at
Speaker 2: Black and Latino business owners, you look at women business owners.
Speaker 2: How do business owners vary based on their demographic data.
Speaker 7: Well, I mean when we talk about women business owners,
Speaker 7: for example, I mean they are implementing expansion strategies at
Speaker 7: a high rate, with sixty five percent focusing on growing
Speaker 7: their customer base. When you talk about Hispanic Latino business owners,
Speaker 7: their confidence in the economy despite labor shortages, encourage to
Speaker 7: obtain funding. In fact, ninety four percent of Hispanic Latinos
Speaker 7: survey respondents told us that they expect to obtain funding
Speaker 7: for their business to grow. And so, you know, there
Speaker 7: are some differences, but certainly there's definitely some optimism out there,
Speaker 7: especially in Hispanic Latino communities and also Black African American communities.
Speaker 4: And there's also optimism in local economies. One of the
Speaker 4: takeaways that I found interesting was that sixty six percent
Speaker 4: that their local economy will improve, compared to sixty percent
Speaker 4: believing that the national economy will improve. Those numbers are
Speaker 4: fairly close sixty six to sixty percent, but still an
Speaker 4: interesting difference there it is.
Speaker 7: And I think, you know, as you think about smaller businesses,
Speaker 7: and I heard as we let into this segment, just
Speaker 7: thinking about how important small business is to the US economy.
Speaker 7: But generally speaking, I mean, small businesses are in our
Speaker 7: local communities and so you know, they're very close to
Speaker 7: their local communities. I think it's important that we support
Speaker 7: small businesses. And when you think about, you know, what
Speaker 7: they have more control over. I do think that we
Speaker 7: tend to see more optimism in local economies and in
Speaker 7: their own ability to grow their business than maybe that
Speaker 7: they think about the national or the worldwide landscape.
Speaker 4: And Sharon put some of these numbers into historical context
Speaker 4: for us, like you said, you know, you've been doing
Speaker 4: the survey for about ten years. Now, how do the
Speaker 4: numbers this year compared to the past several years.
Speaker 7: Well, we've seen, you know, I think that the revenue expectations,
Speaker 7: I mean, business owners in general are more optimistic, and
Speaker 7: this year we did find a slight uptick as you
Speaker 7: think about their plans for hiring. In fact, over half
Speaker 7: plan to hire over the next twelve months, which is
Speaker 7: an increase. Despite labor shortages, despite finding the right skilled labor,
Speaker 7: people are still hiring for their business. They are expanding
Speaker 7: and those numbers have increased, and so you know, we
Speaker 7: have seen an uptick in the optimism of business owners
Speaker 7: and I do think that this year's report is really
Speaker 7: a good sign for the next twelve months to come.
Speaker 2: Sharon Miller, President, co head of Business Banking at Bank
Speaker 2: of America, joining us from San Antonio. A lot of
Speaker 2: optimism coming out of that survey.
Speaker 4: A lot of optimism. Yeah, definitely interesting to hear about
Speaker 4: some of the nitty gritty, especially I really love the
Speaker 4: point on the local economy versus the national economy.
Speaker 1: You're listening to the Bloomberg Business Week podcast. Can't Us
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Speaker 2: Well, full disclosure. People who know me, you know I
Speaker 2: ride bikes a lot.
Speaker 5: You certainly do.
Speaker 2: I'm a big swift too. Zwift is well known among
Speaker 2: cyclists as a way to train or compete when it's
Speaker 2: too cold or rainy to go on your bike outside,
Speaker 2: or if you want to get a quick workout. In
Speaker 2: the Appcnnect, cyclists riding their bikes inside to real time
Speaker 2: races and virtual worlds through a mobile device, a computer
Speaker 2: or an Apple TV. Think about it like kind of
Speaker 2: like gaming with your bike. The company is raised six
Speaker 2: hundred and twenty million dollars from backers including KKR, Premiere Holdings,
Speaker 2: Amazon's Alexa Fund, and more, giving it a market value
Speaker 2: of more than a billion dollars. We've got with us
Speaker 2: Eric min the co founder and CEO of Swift. He
Speaker 2: joins us here in the Bloomberg Interactive Broker's studio. Welcome,
Speaker 2: How are you?
Speaker 8: Yeah?
Speaker 2: Good, thank you for having me. Good to have you back.
Speaker 2: A lot has happened since you last joined us on Bloomberg, Katie.
Speaker 2: I don't know if you saw this, we got to
Speaker 2: do this virtual ride together.
Speaker 5: No, I remember it well. It was pretty cool. Yeah,
Speaker 5: I thought you were going to wear the outfit.
Speaker 2: I'm not wearing.
Speaker 5: You got your helmet over there.
Speaker 2: I got to helmet here. Don't need that for Swift.
Speaker 2: But there's a lot has happened. There was a there
Speaker 2: was a round of layoffs earlier this year a big
Speaker 2: hardware pivot, but I think you being back as sole
Speaker 2: CEO of the company is sort of among the biggest news.
Speaker 2: Give us an update. How's the business going.
Speaker 8: The business is doing really well. I mean it's it's
Speaker 8: it's doing better than we expected. We've had some change
Speaker 8: earlier this year and we've pivoted, and really the focus
Speaker 8: for the business has been really around like what can
Speaker 8: we do to supercharge our community, I think, which is
Speaker 8: the most valuable asset that we have. So we are
Speaker 8: a leaner team and we're finding that we're moving faster.
Speaker 8: Of course we're doing less, but we're you know, we
Speaker 8: get to focus on the things that I think we'll
Speaker 8: really move the needle for us. So the business is
Speaker 8: doing great, and you know, we launched new hardware this
Speaker 8: year and it's it's surprisingly doing very very well, and
Speaker 8: you know, over the next few months is really the
Speaker 8: height of our season.
Speaker 2: I do want to explain to people who might not
Speaker 2: know what Swift is. When Eric says new hardware, we're
Speaker 2: talking about an actual like bike that Zwift has released.
Speaker 2: It's called the Swift Ride smart bike, and typically the
Speaker 2: way that people use Swift as they hook up their
Speaker 2: own bike to what's called a virtual or what's called
Speaker 2: a trainer, and one that can be hooked up to
Speaker 2: a virtual world using Bluetooth or another type of connection.
Speaker 2: So instead of using or you're using a you're still
Speaker 2: using a trainer with the smart bike. But what's the
Speaker 2: idea behind a thirteen hundred dollars bike?
Speaker 8: Yeah, I mean the price point is an important one.
Speaker 8: It's probably less than half or third of what you
Speaker 8: would typically pay for a smart bike, So we've i
Speaker 8: think innovated on price. We've also developed and designed it
Speaker 8: in a way that you can leverage existing hardwad that
Speaker 8: you've already invested in. So what you have is essentially
Speaker 8: a bike frame that slides onto a trainer that you
Speaker 8: probably already purchased. The other piece of innovation that we
Speaker 8: pushed about a year ago is what we call the ziftcog.
Speaker 8: And you know, for non cyclis, it's very complicated to understand,
Speaker 8: like what kind of gears you need to put on
Speaker 8: these trainers.
Speaker 2: We got rid of all that.
Speaker 8: With a single cog, and then what we layered on
Speaker 8: top of that is a a little device that can
Speaker 8: control and create the gears virtually. And you know, Our
Speaker 8: goal is to of course bring down the cost of
Speaker 8: the hardware to get onto is with, but also just
Speaker 8: to simplify the onborne experience, and that is how we
Speaker 8: open up the market. All our studies have suggested that
Speaker 8: those are the two drivers for holding us back from
Speaker 8: growing even more.
Speaker 4: Well, let's talk a little bit more about your business.
Speaker 4: I assume you make money off of a subscription based
Speaker 4: sort of membership. There Where are you when it comes
Speaker 4: to membership. I think the last time you guys spoke,
Speaker 4: you said around a million members. How has that number changed?
Speaker 8: We're over a million. I think the pandemic that wonders
Speaker 8: for us. It also had it was a double edged
Speaker 8: sword because you know, of course, like many companies, we
Speaker 8: thought the growth would continue forever. But what we're finding
Speaker 8: today is that it's these these are we're growing. We're
Speaker 8: certainly growing on a number of different levels, both revenue
Speaker 8: and and subscribers. But I think, you know, to double
Speaker 8: your business like we did during the pandemic is just
Speaker 8: an unrealistic expectation. So we've adjusted our business to that.
Speaker 2: One thing that you've also done within the last year
Speaker 2: is actually increased prices. I believe since the first time
Speaker 2: since twenty seventeen, So for years it costs about fifteen
Speaker 2: bucks a month. Now it's twenty dollars per month. If
Speaker 2: not an annual membership, that's a monthly membership. How did
Speaker 2: members respond? What has churn been like?
Speaker 8: Well, you know, I don't think anyone likes price increases,
Speaker 8: let's be honest, right, But I think I certainly we
Speaker 8: feel very good about it. The value that we offer
Speaker 8: to our community at twenty dollars a month and two
Speaker 8: hundred for the year, is is really good value given
Speaker 8: you know, all the other products that are out there
Speaker 8: and the experiences that we offer. But you know, look,
Speaker 8: things have gotten more expensive since since twenty seventeen. We've
Speaker 8: not raised the prices, and I remember reading from community
Speaker 8: members saying, hey, you should have just increased prices incrementally. Well,
Speaker 8: we would have actually collected more revenues had you done that.
Speaker 8: But we felt that the timing was right for us
Speaker 8: to increase the price. And I think the customers have
Speaker 8: largely voted with their wallets.
Speaker 2: Any more price shikes on the horizon.
Speaker 8: Look, you know, things, I would never say that there
Speaker 8: will never be future price hikes, you know, I think
Speaker 8: the five dollars move on a relative basis is big.
Speaker 8: If we do have future price PRIs I think we
Speaker 8: should do it more incrementally, like I see from Netflix
Speaker 8: almost every year.
Speaker 4: Well, i'd love to talk about, you know what went
Speaker 4: into that, Like Tim mentioned first price sikes since twenty seventeen,
Speaker 4: what did that decision.
Speaker 5: Try look like?
Speaker 4: Because you think about everything that's happened since twenty seventeen,
Speaker 4: it's exhausting and it's been a really strange economic moment.
Speaker 8: Well, we delayed and delayed our price increase, and I
Speaker 8: we've done this twice before. Every time we've done a
Speaker 8: price increase. The you know how we feel about it
Speaker 8: is we should have done it much earlier. And you know, look,
Speaker 8: things do get more expensive. Our costs have gone up,
Speaker 8: and we haven't passed that on to our customers. The
Speaker 8: product is vastly improved since twenty seventeen, So we feel
Speaker 8: really good about it and we stand behind it when
Speaker 8: we you know, we were committed to making that change.
Speaker 2: Yeah, that's actually one thing that I that I haven't
Speaker 2: talked about the heads of display the world. There's been
Speaker 2: a lot of changes to the gaming environment since I
Speaker 2: started swifting, which was during the pandemic. Personally, I don't
Speaker 2: see myself. That's the main way I actually ride and
Speaker 2: get exercised because I have two little kids and going
Speaker 2: on a five hour bike ride on a Saturday like
Speaker 2: I used to do.
Speaker 5: Your wife isn't into that.
Speaker 2: She's just not feasible right now. So swift is where
Speaker 2: I do it. You run a lot here I do.
Speaker 2: Are you a Strava person? No, okay, that's interesting, she's
Speaker 2: a garment person.
Speaker 5: I feel like I killed a line of questioning. You
Speaker 5: were about to go.
Speaker 2: That's fine, I'm going to turn this way. I'll talk
Speaker 2: about it. You did. One thing I noticed recently with
Speaker 2: Strava is that an AI sort of integration that they're
Speaker 2: experimenting with. How are you using AI? You recently launched
Speaker 2: for me recently virtual Ride Partners, which I find a
Speaker 2: really helpful thing for me. So this is like a
Speaker 2: pacer that will kind of go at a specific speed
Speaker 2: that you can keep up with, and it's really helpful
Speaker 2: for training and for riding. How are you thinking about AI?
Speaker 8: So we already use AI in our engineering development, so
Speaker 8: that's already been happening. I think in terms of how
Speaker 8: we can expose these types of technology for consumer related features.
Speaker 8: We're absolutely thinking about that, and the two obvious places
Speaker 8: will be the conversational you know AI experience that you know,
Speaker 8: for example, Strava is doing, and I think that's going
Speaker 8: to be table stakes for many many products. You know,
Speaker 8: it's not going to be something you know, so innovative,
Speaker 8: we have to offer it. And I think the other
Speaker 8: opportunity for us and others is just using machine learning
Speaker 8: to to figure out exactly what to offer in terms
Speaker 8: of content and when and with whom. That I think
Speaker 8: is the next innovation.
Speaker 2: That's more like an Instagram timeline approach, where it like
Speaker 2: serves you what you think you are yes.
Speaker 8: Yes, yes, And I think you know it can factor
Speaker 8: into you know, your usage behavior, who your friends are,
Speaker 8: when you know, what kind of events you like, what
Speaker 8: kind of fitness you have today, and we can serve
Speaker 8: up the right content at the right time. I think
Speaker 8: that that is innovation that no one has really you know,
Speaker 8: produced yet, but that's an exciting opportunity for us.
Speaker 4: What about AI and coaching, I asked, because I think
Speaker 4: about myself, you know, my world revolves around me, and
Speaker 4: the thing that I miss about college is having a
Speaker 4: coach and I was part of a running club, but
Speaker 4: it was just too much, so I sort of like
Speaker 4: making up my own training plans. I could see a
Speaker 4: lot of value in having an AI coach be able
Speaker 4: to see your stats, see what you're doing, and suggest workouts.
Speaker 8: Let's face it, if you can afford it, you'd rather
Speaker 8: have a human coach right right, because they will motivate
Speaker 8: you more than any any tool that you have in
Speaker 8: front of you. But I think the two pieces that
Speaker 8: I just mentioned to you, which is like a conversation
Speaker 8: about how you did with your workout, and then the
Speaker 8: AI to tell you exactly what you should recommend next,
Speaker 8: those two pieces should in theory represent you know, a
Speaker 8: replacement for an expensive coach, and that I think is
Speaker 8: a solution for you know, the ninety five percent of
Speaker 8: the customer base. Yeah, the five percent should and will
Speaker 8: continue to invest in, you know, human coaches.
Speaker 2: Two hundred to two hundred and fifty dollars three hundred
Speaker 2: dollars a month more by the way, for a coach,
Speaker 2: a coach that you've never met. And just like puts,
Speaker 2: you know thatts in.
Speaker 4: Swift and so I mean I just I you know,
Speaker 4: I'm not like I'm not going to the Olympics.
Speaker 2: You did go to the Olympics.
Speaker 5: There, I did not.
Speaker 4: I didn't compete at I'm devastated to say. It feels
Speaker 4: like a steep bill for my ambitions.
Speaker 2: Eric, I'm wondering about competition here because you guys were
Speaker 2: pretty much the only game in town for a while
Speaker 2: with what you did. At least Copy Trainer was around before.
Speaker 2: But just this week, Training Peaks bought Indie Vello and
Speaker 2: now they have Training Peaks Virtual. I remember before I
Speaker 2: joined Strava, I used Training Peaks and I quit Training
Speaker 2: Peaks during the pandemic to go to Swift excuse me,
Speaker 2: not Strava. How are you thinking about competition right now.
Speaker 8: Well, we have a lot of competition. It's not surprising
Speaker 8: and we've had it all along. I think the Training
Speaker 8: Peaks and indievelop makes absolute sense for Training Peaks. I mean,
Speaker 8: we are partners with many different training platforms that are
Speaker 8: out there. We launched something called the Training API, and
Speaker 8: we've onboarded multiple training apps. So we continue to will
Speaker 8: continue to be a platform where coaches and these coaching
Speaker 8: apps can push activities and event you know, activities where
Speaker 8: you can actually do the event on swift, so that
Speaker 8: won't change. It'll be really and I don't know the
Speaker 8: strategy behind training peaks and what they'll do with in
Speaker 8: development doesn't really change what we need to focus on
Speaker 8: and our focus is really to do everything to continue
Speaker 8: to add value and features for a community. That's really
Speaker 8: the important asset that we have.
Speaker 4: Wellt's talk a little bit more about the future. This
Speaker 4: is something I love to ask private companies. Are you
Speaker 4: thinking about IPO? Would you be open to either acquiring
Speaker 4: a business or being acquired? What are you thinking about
Speaker 4: along those lines?
Speaker 8: I think we should always look at opportunities to acquire merge.
Speaker 8: Those are opportunities we should be looking at all the time.
Speaker 8: In terms of you know, you know, what is our
Speaker 8: end goal in terms of like a liquidity event, I
Speaker 8: think that just will take some time. But I think
Speaker 8: we all have aspirations of being a public listic company.
Speaker 8: Whether that happens you know, in three years or five years,
Speaker 8: I don't know whether you know, we do that alone
Speaker 8: or we do it with with others. You know, these
Speaker 8: are all I think things time will only tell and
Speaker 8: how that unfolds. But absolutely our board, my co founders,
Speaker 8: my management team, and investors have big aspirations for this business,
Speaker 8: so that hasn't changed. It's just timing, is everything right.
Speaker 2: I mentioned that you raised more than six hundred million
Speaker 2: dollars since inception. Last time you and I spoke, you
Speaker 2: said you didn't need to raise money in the near future. Yeah,
Speaker 2: how's the cash balance looking right now?
Speaker 8: We're very fortunate. We we we didn't spend all that capital,
Speaker 8: so we have a pretty strong balance sheet. I don't
Speaker 8: think we need to raise any more capital. That's helpful,
Speaker 8: and that gives us ever ever, I just don't yeah ever,
Speaker 8: which is great. It gives us a lot of optionality.
Speaker 8: But you know, look, having just a lot of cash
Speaker 8: doesn't help either. We need to deploy it and smartly,
Speaker 8: and we need to think of how we can leverage
Speaker 8: that to build a business.
Speaker 2: Last question, how do you you know the cycling business?
Speaker 2: There's a ceiling there. There are only so many people
Speaker 2: who want to be riding bikes in their basement. How
Speaker 2: do you get people like Katie?
Speaker 8: Well, first you have to get rid of the basement
Speaker 8: or the garage thing. And that's why we launched the ride.
Speaker 8: It's beautiful, it's in white. We deliberately picked white instead
Speaker 8: of black because in our testing it resonated really well
Speaker 8: with the with women.
Speaker 2: It's interesting.
Speaker 8: Yeah, and I think you know, we're not just going
Speaker 8: after cyclists. We're going after people who want to exercise
Speaker 8: and who want to get fit and cycling the indoor
Speaker 8: bike and cycling in general happens to be just a
Speaker 8: great activity. You can do it for a long time.
Speaker 8: It's low impact, and you have access with your hands,
Speaker 8: and you can get engaged with an experience like Swift,
Speaker 8: So it's not just for cyclist. We hope that the
Speaker 8: bike really opens up the addressable.
Speaker 2: Market for us. Eric Min always good to see you.
Speaker 8: Yeah, thank you for coming.
Speaker 2: By when you're in New York. Really appreciated. Eric Min
Speaker 2: is the co founder and CEO of Swift. He joins
Speaker 2: us here in the Bloomberg Interactive Brokers studio. All right, Well,
Speaker 2: one person who didn't expect to be talking to the
Speaker 2: CEO of Swift when she came on our program today
Speaker 2: is Amanda Robello. She's head of Extrackers Sales over at
Speaker 2: US on Shores over at DWS Group. She normally focuses
Speaker 2: on China, but I found out from Eric that you're
Speaker 2: actually a swifter too.
Speaker 9: I'm gonna convert Katie.
Speaker 2: Oh yeah, yeah, it's for women as well.
Speaker 9: It's fantastic and I definitely had some really wonderful experiences
Speaker 9: during the pandemic. I was already into cycling. It helped
Speaker 9: me train for a ride from London to Paris when
Speaker 9: I was sure shut time. So yeah, I'm all for it.
Speaker 5: That is so cool.
Speaker 2: You never know who you're going to meet in the
Speaker 2: green room, you.
Speaker 5: Never know, the interactive broker studio, you never know.
Speaker 2: You never know. Amanda, Let's talk a little bit about
Speaker 2: what's going on in China. You were on with us,
Speaker 2: or I should say with Carol and Barry at future
Speaker 2: Proof back in September, and a lot has changed in
Speaker 2: terms of how investors are thinking about China, how the
Speaker 2: Chinese government is using stimulus money or not using stimulus
Speaker 2: money to stimulate different parts of the economy. What's your
Speaker 2: view on investing in China right now.
Speaker 9: Yeah, it's incredible the tailwinds that we've seen in China
Speaker 9: over the past couple of weeks. So we've actually been
Speaker 9: very fortunate to see one point six billion dollars worth
Speaker 9: of AUM go into our asher ETF It's kind of
Speaker 9: a price discovery tool in the market for lack of
Speaker 9: like a decent future basically. But what's interesting is that
Speaker 9: we haven't just seen fast money you go into the ETF.
Speaker 9: Really it's down to the fact that you know, I
Speaker 9: think in the year we did see some of the
Speaker 9: wire houses, for example, maybe neutralize their bullish tone on China.
Speaker 9: The Chinese government has been very aware and has continued,
Speaker 9: you know, over the past decade with things like the
Speaker 9: Connect program to while it doesn't really need foreign investment,
Speaker 9: you know, to try and stimulate that a little bit more.
Speaker 9: And so in light of the fact that they have
Speaker 9: been like outflows internationally for internationally from Chinese equities, you know,
Speaker 9: very aware of maybe some of the cynicisms that they
Speaker 9: have been amongst Western investors in China. We all know
Speaker 9: that the GDP growth rate had beforehand been six point
Speaker 9: five percent. That was reduced down to five percent, and
Speaker 9: there were some concerns about whether the five percent was achievable.
Speaker 9: So these stimulus measures are very much about confirming to
Speaker 9: the market that that is feasible. That started off about
Speaker 9: three weeks ago at the you know, prior to the
Speaker 9: Golden Week where we had cuts on the reserve requirement
Speaker 9: ratio and then also the seven days repo rate as well.
Speaker 9: And so what that did was that freed up about
Speaker 9: one trillion new one of bank capital. What's been really
Speaker 9: interesting is that that's not just been about corporate lending
Speaker 9: for example, or you know, commercial real estate lending. It's
Speaker 9: also trickled down to the retail market. And so what
Speaker 9: you've seen then is that mortgage rates ended up being
Speaker 9: cut typically by around fifty basis points or so, and
Speaker 9: that had freed up about one hundred and fifty billion
Speaker 9: U one for the retail investor ultimately spend.
Speaker 4: So, well, let's talk a little bit about China in
Speaker 4: the context of the US election.
Speaker 5: Yeah, just six days away.
Speaker 2: Uh, the countdown.
Speaker 5: I know, I've been counting down since like forty seven days.
Speaker 2: So yeah, for some reason, this week just seems really long.
Speaker 6: It does.
Speaker 9: It's only Wednesday.
Speaker 4: It does feel like a long week. Next week is
Speaker 4: going to feel long as well. And you think about,
Speaker 4: of course, these two parties. It's pretty you know, across
Speaker 4: the aisle, this sort of haarkish tone on China, and
Speaker 4: from the perspective of the Western investor coming into the
Speaker 4: Chinese market, I wonder how that factors in.
Speaker 9: Yeah, it's super interesting because you know, especially always in
Speaker 9: these weeks in the run up to election, you start
Speaker 9: to see these kind of dichotomized views basically. And what's
Speaker 9: been really interesting about China. You would think, you know,
Speaker 9: if we were speaking six months ago, that you know,
Speaker 9: being long China might be a more pro Harris kind
Speaker 9: of stance, and then you know, being short China would
Speaker 9: be more a pro Trump stance. But in reality, actually
Speaker 9: we've not seen too much wavering in terms of those
Speaker 9: flows that we've been seeing, which which is surprising. Touchwood
Speaker 9: that continues over the next few days. But I think
Speaker 9: that even you know, Trump came out with this comment
Speaker 9: about you know that she respects him because he knows
Speaker 9: he's crazy kind of right, So either way, it was
Speaker 9: like a positive tone really on China, his words, not yours.
Speaker 2: Yes, Yeah, So I was thinking about this recently because
Speaker 2: Elon Musk has turned into this figure in the Republican Party,
Speaker 2: especially over the last few weeks. Yeah, giving so much
Speaker 2: money to the Superpack doing the sweepstakes in Pennsylvania, and
Speaker 2: he has a unique relationship with China because of Tesla's
Speaker 2: operations in China. Yeah, and I find that sort of
Speaker 2: adding to the story of him and Trump being kind
Speaker 2: of strange bedfellows because Elon has to stay on China's
Speaker 2: good side, and I'm wondering if having him as a
Speaker 2: voice close to the former president and perhaps future president
Speaker 2: might be a bullish sign for China.
Speaker 9: I think that what Mask kind of understands is that,
Speaker 9: you know, in the past year, basically we've seen like
Speaker 9: sanctions not just from the US but also from Europe
Speaker 9: as well in terms of Chinese goods, and so most
Speaker 9: likely understands that if China's antagonized, there could be like
Speaker 9: further sanctions on like selling US evs into China, which
Speaker 9: is still a big market. Right. We talk about declining population,
Speaker 9: but it's still over a billion, right, still three times
Speaker 9: bigger than in the US. That's still a lot of
Speaker 9: consumers that you know are a target market. I think
Speaker 9: then perhaps supplicate this a little bit. We do have
Speaker 9: like some conversations with clients about thinking about DMX China.
Speaker 9: We've been speaking a lot about EMX China, and so
Speaker 9: we are very aware of the fact that a lot
Speaker 9: of US equity names, a lot of DEVELOPM market global
Speaker 9: equity names have this intrinsic link to revenues from China too,
Speaker 9: you know, supply chains from China which Musk is reliant on.
Speaker 9: And so if you do have this very strong view
Speaker 9: tim of like, you know what, if the pipe gets
Speaker 9: cut right, then CRTC is probably our best solution for that.
Speaker 4: When it comes to investing in China though, you know,
Speaker 4: I think about twenty twenty two and the narrative there
Speaker 4: was that you were going to have this fantastic reopening
Speaker 4: in China. It's going to lift their markets, their risk assets.
Speaker 4: It did not turn out that way. You take a
Speaker 4: look at what the CSI three hundred did in twenty
Speaker 4: twenty two, down nearly twenty eight percent, down down another
Speaker 4: fourteen teen percent in twenty twenty three, and I just
Speaker 4: when it comes to investors, do they feel burned by
Speaker 4: that experience? Do they feel shy about that experience because
Speaker 4: you just saw a massive inflows into Chinese ETFs that year,
Speaker 4: and then it took a long time to see the
Speaker 4: flows start coming in in this current episode of optimism.
Speaker 9: Yeah, that's absolutely a fair comment. We did see short
Speaker 9: positions earlier on in the year, but what's been fantastic
Speaker 9: to see is that actually the CSI three hundred year
Speaker 9: to date is up fifteen percent, and actually from the
Speaker 9: lows of February it's up thirty percent. So we do
Speaker 9: see that the market is having conviction in the Chinese
Speaker 9: economy again, at least bringing it back to a neutral
Speaker 9: position rather than an overweight position.
Speaker 4: And just quickly here, we don't have much time left,
Speaker 4: but I do want to broaden out. I do want
Speaker 4: to talk a little bit about the bond market because
Speaker 4: I'm taking a look at your notes. You make the
Speaker 4: case for high yield bond. What is the case for
Speaker 4: high yield bonds?
Speaker 9: Yeah, so we know that the FOMC is meeting next week,
Speaker 9: we will have an invasion of what's going to happen
Speaker 9: in the direction of travel five percent, That kind of
Speaker 9: five handle became like, you know, the norm for us
Speaker 9: for a little while, right in terms of yield in
Speaker 9: portfolios just from having a cash allocation, and so clearly
Speaker 9: that's not you know, reliable anymore. And so what we
Speaker 9: see with investors on the insurance side, on the pension
Speaker 9: fund side in particular where there's liability management to consider,
Speaker 9: but also within retail searching for income is moving down
Speaker 9: the credit spectrum and we do actually think that high
Speaker 9: quality high yield makes sense just in light of the
Speaker 9: fact that you've basically seen a harving of default rates
Speaker 9: over the last eighteen months.
Speaker 5: High quality, high yield, It's no naximorantem.
Speaker 2: Okay, I'll take it. There you go, Amanda Rabello, thanks
Speaker 2: for stopping by, Thank you for having me. Good to
Speaker 2: see you. Amanda's head of X Trackers Sales US on
Speaker 2: shore over at DWS Groups. She joins us here in
Speaker 2: the Bloomberg Interactive Brokers Studio.
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