Speaker 1: From the heart of where innovation, money and power. CALLI
Speaker 1: in Silicon Valley and Beyon this is Bloomberg Technology with
Speaker 1: Emily Jay. I'm Caroline Hyde in New York for Emily
Speaker 1: Chang and this has been big technology coming up. In
Speaker 1: the next hour, Musk Walks and Twitter at Tanks will
Speaker 1: bringing the latest on the legal battle ahead and what
Speaker 1: the future of the fully four billion dollar Twitter deal
Speaker 1: actually looks like. Plus a slash in valuation for one
Speaker 1: of the Europe's most high profile startups, Klarner, being valued
Speaker 1: now at just six seven billion dollars, down from forty
Speaker 1: five point six billion just one year ago. We talked
Speaker 1: to an investor in the company and a primetime shopping
Speaker 1: event Amazon kicking off It's Today Shopping Extravaganza on Tuesday.
Speaker 1: How Prime Day could help Amazon's third quarter online sales game. Meanwhile,
Speaker 1: let's get back to the scene being set for a
Speaker 1: just suseruptive legal battle over the future of Twitter, shares
Speaker 1: of the social media platform falling after Elon Musk walked
Speaker 1: away from his forty four billion dollar deal to buy
Speaker 1: the company. Muscoweges look at Twitter misrepresented user data. Twitter
Speaker 1: plans to assume us too close transaction, but most cut,
Speaker 1: Wagner joins us, and just ahead of our conversation. Cut,
Speaker 1: of course, we understand from a lawyer for Twitter, and
Speaker 1: it is always the lawyers that went in this. It
Speaker 1: wouldn't be said Twitter's lawyers saying that Musk's termination is
Speaker 1: invalid and wrongful, and he says that Twitter has breached
Speaker 1: no obligations. Where are you at with this? Yeah, we're
Speaker 1: getting to the fun part of the uh, you know
Speaker 1: deal where all the lawyers are just going to start
Speaker 1: sending each other letters back and forth and we're going
Speaker 1: to have to pass through all this legally is but
Speaker 1: you're right now Twitter's turn. Right. On Friday, we were talking, Caroline,
Speaker 1: you and I were live on air and when we
Speaker 1: were reading, you know, this letter from Elon Musk's lawyers
Speaker 1: basically saying, Hey, Twitter, you violated this agreement. Now Twitter
Speaker 1: has filed its response and is basically saying the opposite.
Speaker 1: You know, we have a held our version of the agreement,
Speaker 1: or are part of the agreement, and it's you who
Speaker 1: has been misleading or who has you know, violated, right,
Speaker 1: And so we're clearly headed to a court here, and
Speaker 1: both sides are going to get to argue their case.
Speaker 1: But at least for right now, the lawyers are starting to,
Speaker 1: you know, put their their respective arguments out into the universe.
Speaker 1: And what is some of the theories being held as
Speaker 1: to how could how it could turn out, who could
Speaker 1: win out. It's not just going to be a one
Speaker 1: billion dollar termination feel it feels no. I I would
Speaker 1: be shocked if that's the ultimate result. I would imagine
Speaker 1: that we're going to end up somewhere in the middle. Right.
Speaker 1: I think there's two kind of dramatic outcomes that could
Speaker 1: come from this legal battle. The one is actually what
Speaker 1: you just said, that you know, a court rules in
Speaker 1: favor of Elon Musk and that he pays termination fee
Speaker 1: and walks away. The other is that they rule in
Speaker 1: favor of Twitter and they forced Elon Musk to spend
Speaker 1: forty four billion dollars to buy a company he doesn't
Speaker 1: want to buy. Now, Alternatively, I think these two sides
Speaker 1: could settle somewhere in the middle. That to me seems
Speaker 1: like the most likely scenario, right. But in that in
Speaker 1: that case, there's infinite number of outcomes here, so we
Speaker 1: don't know exactly where they're going to end up. I
Speaker 1: think like infinite amount of outcomes to pass. Kurt Wagner again,
Speaker 1: thank you so much for audio expertise on that Friday,
Speaker 1: and for expertise again today as we continue to follow
Speaker 1: it's pretty toward story. Let's get more analysis for you.
Speaker 1: Let's bringing Mahenya Avico, who covers the company and well,
Speaker 1: as we're saying an infinite amount of outcomes here mark
Speaker 1: but from a fundamental basis, without the forty four billion
Speaker 1: dollar offer, what is Twitter worth? It's probably not too
Speaker 1: far off from where we trade. If the deal was
Speaker 1: decided tomorrow was off, probably come off a couple of percent.
Speaker 1: But there's some markers in the market. You can look
Speaker 1: at the multiples that pinterest, UH and Snapchat trade at
Speaker 1: and uh, you know, maybe there's a little bit of
Speaker 1: downside to the kind of high twenties and thirty dollar
Speaker 1: range something like that, but it's not it's not much
Speaker 1: more dramatic than that. The difference here is, by the way,
Speaker 1: you know, we've kind of forgotten this and all this.
Speaker 1: The noise is that Twitter is a good asset generated
Speaker 1: five billion and advertising dollars last year. Advertisers are obviously
Speaker 1: cognizant of and willing to tolerate the body issue UH,
Speaker 1: and the company generated positive free cash flow margins for
Speaker 1: several years, you know, prior to the COVID crisis. So
Speaker 1: it's a business that's had you reasonable scale, decent growth. UM.
Speaker 1: It's underperformed major peers like Google and UH and Facebook,
Speaker 1: but those were always unfair comparisons. It's a decent asset. UH. Recently,
Speaker 1: it's probably been somewhat impaired by all the uncertainty over
Speaker 1: this deal, and then going forward, it's probably somewhat impaired
Speaker 1: by the recession that's taking out growth from almost all
Speaker 1: Internet ad assets. Does it become impaired by advertisers walking
Speaker 1: away because of boats as it seems that Karnelo Musk
Speaker 1: is trying to argue, I don't know it, Carolina, It's possible.
Speaker 1: I've run surveys on Twitter for ten years, advertiser surveys
Speaker 1: on Twitter for almost ten years. It's never come up
Speaker 1: as an issue. I've never we actually had a channel
Speaker 1: check or a discussion with an advertiser that said I
Speaker 1: can buy ads on Facebook, but I can't do it
Speaker 1: on Twitter because of the bots issue. I've never heard
Speaker 1: that UH, that there are bots, that there are clip
Speaker 1: farms in social media. I think that's well understood. It's
Speaker 1: part of the you know, it's part of the peril
Speaker 1: of these these industries and these companies and Twitter and
Speaker 1: Pinterest and Google and Facebook. I've always had to fight
Speaker 1: back against these box farms. It's just part of the
Speaker 1: part of doing business. People run bots for political reasons,
Speaker 1: they run them for commercial reasons, but it's always been
Speaker 1: a factor. I don't think it's been an issue for
Speaker 1: advertisers over the last couple of years. I think that
Speaker 1: five billion and ad revenue that Twitter got last year
Speaker 1: they got they they earned it, and I think uh
Speaker 1: and advertisers weren't put off by the fact that there
Speaker 1: were bots on the platform. Has been any upside to
Speaker 1: this whole fiasco for Twitter? I'm struggling, Caroline. I think
Speaker 1: there's been no upside. So all you've done is um
Speaker 1: created a lot of dysfunction within the company. They've lost
Speaker 1: some of their top employees. Uh, there's probably been some
Speaker 1: demoralization of employees because you know, Musk has come out
Speaker 1: and said that there were too many people working there.
Speaker 1: How would you feel if somebody was going to buy
Speaker 1: your company started off by saying there are too many
Speaker 1: employees at the company. So I just think that what's
Speaker 1: happened is very unfortunate. And um I thought Musk had
Speaker 1: a lot of interesting ideas of ways to improve Twitter
Speaker 1: and maybe this law come out and maybe maybe we
Speaker 1: will get some sort of resolution that a reduced deal size.
Speaker 1: But I my guess is that the worst case scenario
Speaker 1: is going to come through, which is that this is
Speaker 1: going to go through the courts for some time, There'll
Speaker 1: be some sort of breakup fee, and then Twitter is
Speaker 1: going to have to rebuild a little bit, and that's
Speaker 1: probably gonna be a year from now. Uh, And it's
Speaker 1: very unfortunate. I think what's transpired here of the last
Speaker 1: couple of months for investors, as all well said, we
Speaker 1: thank you Mark Mahaney, and maybe trying to find the
Speaker 1: fundamentals and what is in general and a non fundamental
Speaker 1: story at the moment a bit of a dramatic reversal
Speaker 1: for one of Europe's most high profile startups, Klana Bank,
Speaker 1: valuation being slashed to just six point seven billion dollars
Speaker 1: in its latest funding round. We understand that's down from
Speaker 1: from one point one fully five billion in June one.
Speaker 1: The Swedish by now pay later. Giant has been burning
Speaker 1: through hundreds of millions of dollars of course as a startup,
Speaker 1: and joining us to discuss when next and how we
Speaker 1: continue to see talent sort of recompense in this market. Andrew,
Speaker 1: one of Manhattan Venture Partners, Andrew, it's really great to
Speaker 1: have you on, and of course Klarner one of your
Speaker 1: numerous members of your portfolio. And I'm interested is to
Speaker 1: what happens in these environments, how much how painful it
Speaker 1: is for the executives leading the business and the people
Speaker 1: have invested. Yeah, so thanks so much for having me, Caroline.
Speaker 1: So I will say that at Manhattan's Partners, where we
Speaker 1: invest in growth and leak siege companies, much like Clarner
Speaker 1: while they're really hitting the peak trajectory of their business,
Speaker 1: is that we still believe that extraordinary companies backed by
Speaker 1: the investor the best investors, will deliver these types of
Speaker 1: outside returns. And so even though Clarina has seen the
Speaker 1: valuation compressed, we believe in their long term prospects very
Speaker 1: much so. And I think that they're deploying a number
Speaker 1: of strategies to keep the existing employee base and executive
Speaker 1: base retained. Yeah, because talk to us, I mean you're
Speaker 1: you're someone who thinks a lot about well, liquidity in
Speaker 1: the secondary market, and a lot of that. Often these
Speaker 1: big valuations and moments of exit, which are currently the
Speaker 1: rules of shot to a certain extent, all because it's
Speaker 1: about talent management. It's about ensuring that they're able to
Speaker 1: take some money out have a liquidity event. How hard
Speaker 1: has that become at the moment? Well, for the best
Speaker 1: companies in this world, there's always going to be demand, right,
Speaker 1: So I think that that's something that we always measure
Speaker 1: when we evaluate companies, whether it's on a primary basis
Speaker 1: or on a secondary basis. And when it comes to Clarina,
Speaker 1: there's always been a really healthy volume of activity in
Speaker 1: the business, and investors are really excited about the prospect
Speaker 1: of where they're growing because that's the right now. They
Speaker 1: are the market leader across all geographies in the buy now,
Speaker 1: pay later space and growing much further than just that
Speaker 1: nature of its business. And so I would say the
Speaker 1: prospects of the secondary market continue to get rather exciting
Speaker 1: and have created some really unique opportunities to buy into
Speaker 1: the business or dollar cost average across both businesses like
Speaker 1: Varna and others, what do you wanted to see from
Speaker 1: the leadership Etcana But the leadership of audio companies that
Speaker 1: you can't have been backing and some that of couls
Speaker 1: have seen exus themselves, but some that continue to grow
Speaker 1: in this environment, how do you want them to be
Speaker 1: focused more and all profit in this environment? Absolutely so,
Speaker 1: I do say across the board that we're really focusing
Speaker 1: on seeing our companies invest in that profitability and increase
Speaker 1: their margins so that they can get above the line,
Speaker 1: right and at least be in the single digit profitability
Speaker 1: margins where Clarina has sit for the last fourteen years
Speaker 1: of its business, if not longer. Right. So, Clarina is
Speaker 1: an exceptional example of a company who knows how to
Speaker 1: increase its profitability and control it overall. Though for other
Speaker 1: businesses across our portfolio and others in the venture landscape,
Speaker 1: it's that we might want to turn down the not
Speaker 1: the dial bit on sales and marketing spend and really
Speaker 1: increase that profit margin, which is really a level of
Speaker 1: just baking in those levers, right, saying hey, maybe we
Speaker 1: don't need to spend so much on Facebook ads or
Speaker 1: LinkedIn ads this quarter, or maybe hey we don't need
Speaker 1: to put as much money into creating a new layer
Speaker 1: of product roadmap and instead just focus on the products
Speaker 1: that deliver, right and focus on the customers who are
Speaker 1: there versus creating new innovative products just as a way
Speaker 1: to be uh unique in their product market fit direction.
Speaker 1: How about products that had seem a real winner in
Speaker 1: terms of acquisition of new customers? Certainly I think of
Speaker 1: Revolute another European pin up in terms of little success
Speaker 1: story in the fintech world, and they really had doubled
Speaker 1: down on offering crypto for example, to bring in new uses.
Speaker 1: But with the fallout and value and there as well
Speaker 1: are you'd like me to see products moved away from
Speaker 1: once you think they'll remain committed to them. I think
Speaker 1: that what they'll stop doing is just delivering on new products, right.
Speaker 1: I think as we look at companies like Clarna and
Speaker 1: like Revolute, is that they want to shift away from
Speaker 1: the core focus that they've been you know, honed in on.
Speaker 1: For Clarina, it's by now pay later, for example, and
Speaker 1: instead focus on creating volume from their existing user base,
Speaker 1: which is something we are really excited about. Right. I
Speaker 1: think generally companies like Clara realize where their public comps sit,
Speaker 1: and they want to ensure that they're creating their own
Speaker 1: market position away from those public comps and seeing that
Speaker 1: their growth can continue while just honing in on the
Speaker 1: products that have always been proven to be successful for
Speaker 1: these companies, right, And so I really love how Sebastian
Speaker 1: the CEO of Larna today said on Twitter that what
Speaker 1: doesn't kill you make you stronger, because it's a it's
Speaker 1: a business that I think generally understands exactly where their
Speaker 1: mindset could be to keep honing in on the products
Speaker 1: that win. And with this new capital and fusion for Karna,
Speaker 1: it's really going to allow them to keep that expansion
Speaker 1: growing across the United States, which is something where their
Speaker 1: public compa firm has predominantly had a dominant force. But Klarna,
Speaker 1: as we know, is just growing so much more faster
Speaker 1: at a three you know, annual growth rate relative to
Speaker 1: them as a calm. So we have a lot of
Speaker 1: hope there from real perspective, how long does this sort
Speaker 1: of quattening down and the private markets evaluations last four
Speaker 1: And I'm not saying every business is affected by I
Speaker 1: think your INFLEXI port of course, which is a company
Speaker 1: that's well really ramping up because this is supply chain
Speaker 1: disaster out there and they're a company that can help.
Speaker 1: But there are areas like Instacom, which this is an
Speaker 1: inflationary environment. How old does that persisty think? Andrea, Yeah,
Speaker 1: so I would say right now, we really need to
Speaker 1: see what the results of the first half of the
Speaker 1: year look like across all businesses. Right I think we're
Speaker 1: just closing the books on Q two UM and going
Speaker 1: into Q three, and generally where the reflection of the
Speaker 1: market is going to sit is what companies will be
Speaker 1: ready to go out go public going into Q three
Speaker 1: and ideally the months of September, October and anything before
Speaker 1: the Thanksgiving holiday for the US companies, That's where I
Speaker 1: would see there might be a shifting sentiment. But what's
Speaker 1: happening is companies like instacart Up for example, are following
Speaker 1: the registration statement. They're using really broad based language just
Speaker 1: to describe what kind of statement UM and company they're
Speaker 1: going to be as a public company and determine whether
Speaker 1: that's right to go out. So these companies are choosing
Speaker 1: when to go out based on where the market will be,
Speaker 1: but at least they're ready to do so if it
Speaker 1: opens up. Andrew Wong, thank you so much for your time.
Speaker 1: Manhattan Ventures Partners, Stay well their Nashville Mimi coming up
Speaker 1: an exclusive interview with the u S Comma Sex Straight
Speaker 1: Gena Romando. Stay for the springbak U S Secretary of Commerce,
Speaker 1: Gina Romando. But he's legislation that would appropriate fifty billion
Speaker 1: dollars for domestic semi conductor manufacturing will pause. Congress should
Speaker 1: make exclusively I'm blame that. Take a listen. Yes it
Speaker 1: will happen. It's taking much too long, and what's at
Speaker 1: stake is our national security, even beyond the economy. You know,
Speaker 1: every piece of military equipment requires chips. If you talk
Speaker 1: to the heads of national defense contractors as I have done,
Speaker 1: or senior ranking officials in the Department of Defense, they're
Speaker 1: all very worried about the delay. But yes, it will
Speaker 1: get done. This is at this point in the negotiation. Unfortunately,
Speaker 1: politicians look for leverage, and while it isn't right to
Speaker 1: play politics with national security, that's what I think is happening.
Speaker 1: In the past two weeks, we we made huge progress.
Speaker 1: We were closing out issues, finding compromise. So I think
Speaker 1: everyone just needs to come back today, get back to work,
Speaker 1: and commit themselves to getting it done in the next
Speaker 1: few weeks. Let me ask you what difference it makes
Speaker 1: whether it gets done today or six months to day.
Speaker 1: What decisions are being made perhaps by companies such as,
Speaker 1: for example, the groundbreaking out in Columbus, What decisions make
Speaker 1: that may not be reversible down the road. Well, what
Speaker 1: you say is exactly right. Chip companies are making decisions now,
Speaker 1: literally right now, because they need to meet demand of
Speaker 1: their biggest customers, in which means they have to start
Speaker 1: getting cement in the ground on new facilities this summer,
Speaker 1: in this fall, you know, earlier today. So Global Foundaries
Speaker 1: has made a choice to expand in France not the
Speaker 1: United States. You know, that's a loss. You just mentioned Intel,
Speaker 1: who is saying perhaps they'll slow down their Ohio expansion
Speaker 1: in favor of Germany. And the reason is because these
Speaker 1: big companies are hearing from their customers that they need
Speaker 1: confidence that the you know, the companies will be able
Speaker 1: to hit them, you know, supply to them. Seven chip
Speaker 1: demand is projected to be through the roof, and so
Speaker 1: these suppliers, whether it's Intel, Microme, Texas instruments, they need
Speaker 1: to fulfill for their customers. They want to be in
Speaker 1: the US. But if the choices are not you know,
Speaker 1: not fulfilling their customer demand or doing this in France, Germany, Singapore,
Speaker 1: Japan who who are already providing subsidies today, they're gonna
Speaker 1: leave America and do that. And so that is the risk.
Speaker 1: And that's why today, Members of Congress, get back into
Speaker 1: d C, get back, do your job. Don't let America
Speaker 1: lose out. Should we be expecting an announcement from the
Speaker 1: President before he departs for the Middle East this week
Speaker 1: on tariffs, on easing the tariffs that are currently applied
Speaker 1: to a number of Chinese goods, because that ahead of
Speaker 1: the CPI number Wednesday, will be something I think a
Speaker 1: lot of people would look for. I'm not sure. I
Speaker 1: don't I don't know guy the precise timing. I can
Speaker 1: tell you that we his team are an active you know,
Speaker 1: discussions with him, uh something we're talking about every day,
Speaker 1: and he is doing you know, he's doing his job,
Speaker 1: which is to say, looking at all the different factors.
Speaker 1: You will see a decision I think very soon. Whether
Speaker 1: it's whether it's before he takes off this week, I'm
Speaker 1: not sure. Just to pursue the China issue for a
Speaker 1: moment of Secretary, the tariffs are one thing, that's one
Speaker 1: part of a much more complex mosaic here. We talked
Speaker 1: about tariffs in terms of inflation. You've already said that's
Speaker 1: not going to have that big effect on that. But
Speaker 1: what about the larger term relationship with China? And let
Speaker 1: me be specific about this in terms of specifics and
Speaker 1: tariffs being taken off or not. Is it possible it
Speaker 1: could be bilateral? Is it possible China could actually give
Speaker 1: some of the United States to try to reformulate our
Speaker 1: trade relations. Uh, certainly that is possible. And you raise
Speaker 1: an excellent point, which is, you know, part of the
Speaker 1: discussion that one of the things the President is thinking about,
Speaker 1: which is to say, if we're going to do this,
Speaker 1: know what can they do on their side of the equations.
Speaker 1: So while I can't say for sure, certainly that is possible,
Speaker 1: and by the way, if it doesn't happen immediately, it's
Speaker 1: something that we will continue to pursue just in the
Speaker 1: interest of you know, as you say, fairness, if we're
Speaker 1: lifting care offs, what are they going to do? US
Speaker 1: Commerce Secretary Gina Romando, there with our own David Weston
Speaker 1: and Guy Johnson. This is Bloomberg Technology. I'm Caroline Hyde
Speaker 1: in Family Chang. Let's get to a Bloomberg scoop EV
Speaker 1: maker Ribvian. It's cutting its workforce by five after a
Speaker 1: hot growth streak, according to sources and Rivian shares they
Speaker 1: closed down six and our percent on Monday, and that's,
Speaker 1: of course, was following the report from our one Ed Ludlow.
Speaker 1: You help break the story, tell us a bit about
Speaker 1: where the job cuts are gonna be coming from. Ed. Yes.
Speaker 1: So it's important to note that sources say these are
Speaker 1: non manufacturing roles, right. These are not the men and
Speaker 1: women on the assembly minds actually building the evs. They're
Speaker 1: kind of back office roles, supportive roles. And Rivian's one
Speaker 1: of these startups that raised a lot of money before
Speaker 1: going public, raised a lot of money when it went public,
Speaker 1: and they were just able to grow so quickly. They've
Speaker 1: kind of doubled head counter fourteen thousand employees in the
Speaker 1: last year alone. And in some of those areas kind
Speaker 1: of support and sillery areas, they just grew too fast
Speaker 1: to to too big size. They have duplicates in a
Speaker 1: lot of Roles. So with the macro pictures such as
Speaker 1: it is, they're kind of trimming the fat, embracing for
Speaker 1: a sort of less solid global economy overall. Do you
Speaker 1: think that this is a case of having overheard, This
Speaker 1: is a case of just reorientation. This is a case
Speaker 1: of just trying to meet the economy where it is.
Speaker 1: Rivian's interesting because it's supply con strain. In other words,
Speaker 1: the demand their evs is so great that they can't
Speaker 1: possibly keep up with it. They can't build the evs
Speaker 1: fast enough. They do have a lot of cash, seventeen
Speaker 1: billion dollars on a balance sheet, but I get the
Speaker 1: sense from insiders also investors that that seven team billion dollars,
Speaker 1: a lot of it's already accounted for. Right They're going
Speaker 1: to build this second factory in Georgia to the tune
Speaker 1: of five billion. There's also all the R and D
Speaker 1: costs for the next generation of cars. And even though
Speaker 1: the CFO, Clim mcdonna is really inexperience, she's a formal
Speaker 1: Wall Street banker, she's very disciplined, and I get the
Speaker 1: sense that they're looking to preserve cash as best they
Speaker 1: can and kind of make it go a long way,
Speaker 1: So it's kind of all of the aforementioned things that
Speaker 1: you put very briefly. Of course, you were looking just
Speaker 1: last week and how Rivian was well getting snapped up
Speaker 1: at some valley at least in the photos. Yeah, yes,
Speaker 1: so r J. Scaring the CEO, was kind of the
Speaker 1: hot ticket. Every everywhere I looked, A J. Scaringer was
Speaker 1: there and somebody wanted to talk to him. They brought
Speaker 1: some evs with them in R N, S, S U,
Speaker 1: V and and R Once he pick up to some
Speaker 1: valley and you had all these attendees kind of crowding
Speaker 1: around the car look at it. But I'm told that
Speaker 1: on the Thursday night, Tim Cook, the CEO Apple, actually
Speaker 1: borrowed one of the pickup trucks with a gang of
Speaker 1: people and went into town for dinner. Which is interesting because,
Speaker 1: as we've reported at Bloomberg, Apples looking at its own
Speaker 1: EV potentially, and you know, in the world of tech,
Speaker 1: it's interesting to see who's looking at who, and who's
Speaker 1: spending time with who. Indeed, on a small world it
Speaker 1: is over there and Ludlowe looking at everyone and when
Speaker 1: they're up to we thank you so much, our evy
Speaker 1: expert there and meanwhile, well, let's get back to it.
Speaker 1: The key story of the day is Twitter and shares
Speaker 1: tumble Monday, after Elon Musk walked away, of course, on Friday,
Speaker 1: from his fully four billion dollar deal to buy the company,
Speaker 1: setting the scene for what is going to be a
Speaker 1: pretty disruptive legal battle. Our next guest says, well, Twitter
Speaker 1: as well positioned legally blues Pats. Musk is looking for
Speaker 1: any excuse to get out of this deal, joining us
Speaker 1: as Anne Lipton Chulean University Associate Professor in Business Law
Speaker 1: and Associate Dean for faculty research. Wonderful and to have
Speaker 1: you with us and your expertise, And are there many
Speaker 1: legal grounds for you know, master stand on here? It
Speaker 1: doesn't appeal. I mean, obviously I don't know. I don't
Speaker 1: know what she might have developed. Escort proceedings continue. But
Speaker 1: if he's based on what's been stated publicly, he's off
Speaker 1: heard a number of grounds to argue that Twitter has
Speaker 1: breached its obligations and therefore he's entitled to walk away,
Speaker 1: and so far they really just don't seem that substantial.
Speaker 1: So he claims that Twitter misled him about the spam
Speaker 1: on the platform. That's what's getting all the headlines, but
Speaker 1: he's not offered much evidence that it did mislead him.
Speaker 1: And even if it did, even if the spam counts
Speaker 1: were wrong, that's actually not a basis for walking away
Speaker 1: from a merger. He would have to show not only
Speaker 1: that they were wrong, but that they were dramatically wrong
Speaker 1: and we're having some kind of long term effect on
Speaker 1: Twitter's finances, and that kind of showing just it hasn't
Speaker 1: been made. There's no evidence that that's the case. Um. Yeah,
Speaker 1: So each one of his grounds just they don't see
Speaker 1: that substantial. Talk to us about the legal precedent here,
Speaker 1: because if they rule in Twitter's favor, what happens, I mean,
Speaker 1: can they really force someone to buy a company? And
Speaker 1: then what occurs? Well, that's exactly the issue. I mean,
Speaker 1: I think that most people, at least watching from the outside,
Speaker 1: think that Twitter is a very strong case. The question
Speaker 1: is what happens after Twitter has found correct then then
Speaker 1: what do we do? Well, they signed a contract and
Speaker 1: the contract basically says that there are two possibilities. One
Speaker 1: possibility is specific performance, meaning Musk is ordered by the
Speaker 1: court to follow through with his obligations and actually acquire Twitter,
Speaker 1: and the other is that must pay a breakup fee
Speaker 1: of a billion dollars. Obviously, Twitter would much rather he
Speaker 1: buy the company because he's prompsed to pay forty four billion,
Speaker 1: and that's bigger than one billion. So the question is
Speaker 1: whether a court can and will really order Musk to
Speaker 1: go through and buy the company. And Delaware has done that.
Speaker 1: There have been several occasions in the past where buyers
Speaker 1: got cold feet and they wanted to walk away, and
Speaker 1: Afford said note and ordered that they actually go through
Speaker 1: and buy. But this case is much bigger. It's a
Speaker 1: much bigger dollar figure on the deal, and it's a
Speaker 1: company that has this huge social footprint, and there's a
Speaker 1: real question as to whether a court will think it's
Speaker 1: appropriate to force an unwilling buyer to buy a company
Speaker 1: that's so important socially over his own objections. But then
Speaker 1: the alternative at this contractually it's just a billion dollars,
Speaker 1: which doesn't seem right. Yeah, And and to that end,
Speaker 1: how much to the judges the lawyers involved have to
Speaker 1: paint a picture of what has been lost for Twitter
Speaker 1: financially as well, because fundamentally, obviously the picture has changed
Speaker 1: since he first made the offer, and we all understand that,
Speaker 1: and some would hypothesize that this is all just a
Speaker 1: way in which to renegotiate the terms of the deal
Speaker 1: rather than walk away entirely. But this is also you know,
Speaker 1: they've lost Keith talent. How can you assign monterreally value
Speaker 1: to that. Well, that's exactly why UH parties contract to
Speaker 1: say there should be specific performance, meaning that must have
Speaker 1: must have to go through with it, because you can't
Speaker 1: put a dollar figure very easily on it. So that's
Speaker 1: why Twitter and must agree to Originally that the proper
Speaker 1: remedy would be to order him to close, because there's
Speaker 1: no way exactly to put a dollar figure on it,
Speaker 1: and even if Twitter were to try, it would run
Speaker 1: into the fact that they've already agreed that if it
Speaker 1: has to be a dollar figure, a billion is the
Speaker 1: mostly and get So it's really kind of complicated whether
Speaker 1: the court is willing to order specific performance. If it's not,
Speaker 1: is it going to be stuck with a billion dollar cap?
Speaker 1: But will it actually try to assess the amount of
Speaker 1: damage to Twitter, which could be much higher? And of
Speaker 1: course I feel like this is going to go down
Speaker 1: in the history books but also the legal the legal
Speaker 1: education books of what we've now learned. We all knew
Speaker 1: this wasn't from day one an extraordinary offer, an extraordinary deal,
Speaker 1: and and a very extraordinary person at the top sort
Speaker 1: of leading and driving this. From your perspective, does anything change?
Speaker 1: Do you think this makes companies act in a different
Speaker 1: way when they have become a target? Wells Elon Musk
Speaker 1: is so singular. I mean nothing about this deal unfolded
Speaker 1: the way deals normally do. Um, this sort of overnight
Speaker 1: purchase where he was pressuring the company on Twitter and
Speaker 1: it was signed almost immediately. I mean, if there's any
Speaker 1: lesson here, it's that if you have sort of an
Speaker 1: erratic fire, to be a little bit more careful, at
Speaker 1: least in the drafting of the merger agreement, which is
Speaker 1: not always very tightly drafted. But I mean a billion
Speaker 1: dollar damages to have maybe they shouldn't have included that
Speaker 1: part um. But I'm not sure how many lessons there
Speaker 1: are for the future, because I'm not sure how many
Speaker 1: impulsive buys of a forty for forty four billion dollars
Speaker 1: of a public company you ordinarily see. I mean, it's
Speaker 1: the the oddity of the purchase and well and the
Speaker 1: impression that must gave that he was buying it not
Speaker 1: for financial reasons but simply because he wanted it personally.
Speaker 1: That make this so extraordinary and so hard to figure
Speaker 1: out what the next steps are. And of course everyone
Speaker 1: equips oh the only winners of the lawyers. Um, well,
Speaker 1: we'll certainly do pretty well. Um if I think Musk
Speaker 1: will pretty much whin if he gets to walk away
Speaker 1: from this for a billion dollars and nothing more. I mean,
Speaker 1: because you know, he signed an agreement and created this
Speaker 1: chaos for this company. And if the only thing he
Speaker 1: has to pay, I mean, for me, a billion dollars
Speaker 1: will be quite a bit a green Land. Musk gets
Speaker 1: you know, what's under his couch and so um, so
Speaker 1: he I think would make up pretty well if that's
Speaker 1: all that he had to play. Um. Otherwise he ends
Speaker 1: up with a company hand lifton extraordinary times. You put
Speaker 1: it also eloquently for us. We thank you, Chilean University
Speaker 1: Associate professor in Business Law and Associate dean for faculty research.
Speaker 1: We think of adjoining coming up crypto when it could
Speaker 1: be facing another tumble. But does this actually mean that
Speaker 1: the regulation for digital assets is more important than ever?
Speaker 1: Chris and Smith Blockchain Association with us. This is Blomberg.
Speaker 1: Let's talk about today's crypto report Wall Street. Some of
Speaker 1: them are expecting the crypto crash to get a whole
Speaker 1: lot worse now. Bitcoin is likely to drop to ten dollars.
Speaker 1: That's according to about of a mixture of Wall Street
Speaker 1: and retail investors who responded to the latest Bloomberg m
Speaker 1: Live Pulse survey. Joining us out to debate and also
Speaker 1: where next for policymaking? Is christ Smith, executive director of
Speaker 1: Blockchain Association, and please say, as always it's Shinnani Bassa
Speaker 1: as well from Bloomberg and Kristen. I want to get
Speaker 1: your take first and foremost when we can take what
Speaker 1: we want with a pinch assault to a certain degree
Speaker 1: of where next for prices? But as we see this
Speaker 1: unarguable crypto winter upon us, is it now the time
Speaker 1: to be doubling down on policy making, ensuring that perhaps
Speaker 1: the protection is there as and when maybe we get
Speaker 1: a more intense bout of interest in the space again. No,
Speaker 1: I think you're absolutely right, And there's a big focus
Speaker 1: right now in Washington and trying to figure out the
Speaker 1: rate regulatory framework for cryptocurrencies. It's important to remember that
Speaker 1: there are a lot of policies in place today. The
Speaker 1: un ramps and our ramps are regulated for anting money
Speaker 1: lendering purposes. There's sanctions requirements, there are securities laws that
Speaker 1: apply in certain instances. But what we really need is
Speaker 1: a fresh look at the regulatory space. We need to
Speaker 1: figure out a framework for stable coins, We need to
Speaker 1: figure out a framework for regulating the spot markets. And
Speaker 1: I think the events that have happened in the market
Speaker 1: in the in the past few weeks and months have
Speaker 1: really focused policy maker attention on trying to figure out
Speaker 1: a path forward, a path forward, and especially as you
Speaker 1: look at who has claimed the assets at the end
Speaker 1: of the day in the event of bankruptcys or other
Speaker 1: forms of unwinding, how to regulators start to make sure
Speaker 1: that it is indeed the consumers that are protected instead
Speaker 1: of the investors in these companies, and what types of
Speaker 1: attentions does that create moving forward? Well, listen, I think
Speaker 1: this is the first time we've seen a couple of
Speaker 1: the um larger companies in the space go bankrupt where
Speaker 1: there's actually questions about customer assets. So I think that
Speaker 1: there are some space places in bankruptcy law that we
Speaker 1: need to look at this. But I think we're importantly though,
Speaker 1: we need to have a regulatory home for the types
Speaker 1: of organ you know, these types of entities that are
Speaker 1: doing consumer lending. UM. We have not seen in the
Speaker 1: past very many crypto native organizations be able to get
Speaker 1: bank charters. UM. I think we need to have a
Speaker 1: discussion about how can we open it up so that
Speaker 1: when you're dealing with customer deposits, that there is some
Speaker 1: sort of regulatory framework in place. You know, you're really
Speaker 1: tied in with both the regulators, the lawmakers, and the
Speaker 1: companies themselves. Realistically, we've been waiting years and there has
Speaker 1: been very little movement on that front. So realistically, how
Speaker 1: soon can you see it now that you're seeing customers
Speaker 1: retail investors lose hundreds of millions of dollars. Well, I
Speaker 1: think if you look at um kind of the overall timeline,
Speaker 1: the key moment for getting this done is going to
Speaker 1: be three. I think that most regulators have done everything
Speaker 1: they can within uh, the the authority that they already
Speaker 1: have to provide guidance in the space, not all of them,
Speaker 1: but most of them. UM. But what the sort of
Speaker 1: consensus is we really need a new framework, one that
Speaker 1: Congress has to put in the law of the legislation.
Speaker 1: And we've been very excited to see proposals like the
Speaker 1: Lemus deil a brand proposal and others that are trying
Speaker 1: to look at these questions in a thoughtful and comprehensive way.
Speaker 1: I think the political reality is we're not going to
Speaker 1: see very much traction uh this year because the election
Speaker 1: is coming up. There's only a few um legislative weeks left,
Speaker 1: and something of this magnitude just simply isn't going to move.
Speaker 1: But what we're doing at the Blockchain Association is with
Speaker 1: our members are meeting every single week to go deep
Speaker 1: on a different topic and and finally sort of coalesced
Speaker 1: around what we think we can live with as an
Speaker 1: industry and so that we can come to the table
Speaker 1: with solutions. So I think there's a lot of work,
Speaker 1: a lot of discussion, definitely a lot of legal bills,
Speaker 1: I can tell you that much, UH, and we're really
Speaker 1: working hard to try to bring actionable solutions to the table,
Speaker 1: and I think is going to be there. This all
Speaker 1: comes to other what about all the jurisdictions? Is Europe
Speaker 1: leading way in some way? There are other regional driving
Speaker 1: forces that all needing the pack of US as the US. Yeah, No,
Speaker 1: Europe made quite a bit of UM. I guess you
Speaker 1: could call it progress. UH. Last month they passed a
Speaker 1: sort of a more comprehensive look that impacts legislation that
Speaker 1: UM looks at both stable coins as well as UH
Speaker 1: spot markets and things of that nature. I don't think
Speaker 1: the way that they've landed on UM their policies are ideal,
Speaker 1: but they have moved forward, and I think that's another
Speaker 1: factor that will put more pressure on the US Congress
Speaker 1: in order for them to move forward with with a
Speaker 1: more comprehensive legislative solution. How hard is it for regulators
Speaker 1: to really either make customers whole or keep track of
Speaker 1: client funds when so many companies are deciding to domicile elsewhere.
Speaker 1: Dubai is becoming a huge hub for crypto firms Hong Kong,
Speaker 1: the Muhammas. Even so, how then do customers in the
Speaker 1: US stay protected? Well, customers in the US should be
Speaker 1: operating with US based entities that are licensed to operate
Speaker 1: here in the US. UM. You know, you there is
Speaker 1: technology where you can get around any sort of uh
Speaker 1: you know, geo fencing that's put into place, and we've
Speaker 1: seen quite a bit of this actually in the derivatives
Speaker 1: market because there is demand in the US for more
Speaker 1: access to derivatives and the only way to get around
Speaker 1: that is to use a VPN and go to some
Speaker 1: overseas exchange. So I think actually having better clear rules
Speaker 1: of the road here at the US will keep consumers
Speaker 1: protected here um And and you know, make sure that
Speaker 1: the companies here in the US that are offering these
Speaker 1: services have the ability to do to meet the demand
Speaker 1: that their customers, um, you know, the services that they want,
Speaker 1: and and do that in a way that's much much safer.
Speaker 1: Christ And have the companies have you been discussing with companies?
Speaker 1: So the moral obligations going forward as well, they might
Speaker 1: not be legal obligations, but many will say, look, this
Speaker 1: pushed towards saying it was democratization. This further around this
Speaker 1: FOMO feeling around advertising, particularly at the peak when we're
Speaker 1: all looking at, you know, adverts that having to be
Speaker 1: around the Super Bowl. Have there been lessons learned there
Speaker 1: and there's there as an element of self regulation going
Speaker 1: forward that they don't get themselves into this sort of
Speaker 1: situation again where yes, you can read the small print,
Speaker 1: but really they should have been more transparent than there
Speaker 1: is an fd I C protection and the like. Yeah,
Speaker 1: I know, it's interesting. It's the D five protocols itself,
Speaker 1: the true decentralized finance that didn't break. And even with
Speaker 1: vast changes and prices and a tremendous amount of market
Speaker 1: activity going on, the DFI protocols themselves, they continued to operate. Right,
Speaker 1: that's just software. Where we run into trouble is situations
Speaker 1: where we have centralized entities that are taking possession of
Speaker 1: other funds UM and also where we've had lending that's
Speaker 1: gone on in a way that's levered, you know, multiple
Speaker 1: times over. But that's really been where the problems UM
Speaker 1: have have been. And so I think that what we
Speaker 1: have to do is look at how do we put
Speaker 1: regulation on those centralized entities UM and what are their obligations.
Speaker 1: But the underlying technology, these software driven D five platforms, uh,
Speaker 1: those continued to work just fine, and in fact, you know,
Speaker 1: even in a tremendous amount of stress, they all continue
Speaker 1: to perform. One other thing I would point out though,
Speaker 1: is that the industry itself is swooping in to make
Speaker 1: sure that customers are harmed as little as possible. Um,
Speaker 1: we've seen Sam Bankman created f t X, who's coming
Speaker 1: and been a backstop to many of these companies. I mean,
Speaker 1: I've been joking, we don't need Uncle Sam because we
Speaker 1: have Uncle Sam freed. Um. That is obviously not sustainable,
Speaker 1: but it's very much, you know, sort of like JPMorgan back,
Speaker 1: you know in nineteen seven, that's saying, hey, we don't
Speaker 1: we see the bigger picture and we want to get
Speaker 1: through this turbulent time so we can get on the
Speaker 1: holding all of the services that we think are going
Speaker 1: to improve so many lives. We thank you so much,
Speaker 1: Christin Smith and Blockchain Association along of course or their
Speaker 1: own Shinali Bassak on all things crypto. Meanwhile, let's get
Speaker 1: some breaking news because it was one of the biggest
Speaker 1: SPACs of course, special purpose acquisition companies tonteen Holdings. It
Speaker 1: was of course Bill Ackman's Pershing Square tonteen Holdings. It's
Speaker 1: going to return that four billion dollars of money and
Speaker 1: raised the capital to shareholders, the CEO, Bill Ackman is
Speaker 1: telling us in a letter to its shareholders at the moment,
Speaker 1: and of course this is after they failed to find
Speaker 1: an acquisition to take out. So clock is taking for
Speaker 1: many of these SPACs and many of them still without
Speaker 1: an acquisition. In the field. Amazon Prime Day it's this week,
Speaker 1: which means the Internet was going to be a frenzy
Speaker 1: over limited time deals and exclusive prime member only prices
Speaker 1: joining us. Now what to expect spend Spencer Soaper who
Speaker 1: covers Amazon, And of course it's a difficult time. Inflation
Speaker 1: is real. Is it going to be more expensive? We
Speaker 1: still gonna be able to get the deals that we
Speaker 1: used to. That's a great question. You have this conflict, right,
Speaker 1: so you have it should be a great day for
Speaker 1: sale because so many shoppers are trying to fight inflation
Speaker 1: by looking for deals. But then you know merchants and
Speaker 1: brands and manufacturers, they're all dealing with rising plusts as well,
Speaker 1: so they don't want to offer step discounts because they
Speaker 1: want to be worried the profit margins. So it's gonna
Speaker 1: attract a lot of people. They're going to spend a
Speaker 1: lot of money e marketers estimating up about sevent but
Speaker 1: they're probably not going to get as much as as
Speaker 1: much with their money as as they'd like to. Yeah,
Speaker 1: we're all sort of used to that we spending the
Speaker 1: same amount, but we're getting less and less with it.
Speaker 1: To that end, how much are they managing to bring
Speaker 1: people in more into the actual Prime overall offering. They've
Speaker 1: obviously been doing some interesting offerings purchasing, you know, grob
Speaker 1: Hub was the latest one that we understand they're gonna
Speaker 1: be teaming with. How much some people committed to this,
Speaker 1: that's a really great question, and we're definitely seeing signs
Speaker 1: that that Amazon is finally hitting the ceiling in the
Speaker 1: in the US Prime membership or some numbers that came
Speaker 1: out this week that they they are about a hundred
Speaker 1: and seventy two million Prime members, you know, so that
Speaker 1: could include multiple people under one subscription and a household,
Speaker 1: but a hundred and seventy two million members in the
Speaker 1: US as of June thirty, which is unchanged from January. Now.
Speaker 1: Granted they added thirty million and twenty and thirty million
Speaker 1: and one, so they saw this huge leak during the pandemic.
Speaker 1: But there's definitely signs that it's you know, leveling off,
Speaker 1: and we'll see if it starts fading, if people start
Speaker 1: looking to cut their budgets in the in the face
Speaker 1: of inflation. Yeah, just to that end, do you think
Speaker 1: Amazon is priming it pun the pun, It's prepping itself
Speaker 1: basically to become even more necessary in this time of
Speaker 1: inflation pressure, or is a subscription that we're all more
Speaker 1: likely to cut. Well, the uh, they definitely want to
Speaker 1: be absolutely necessary, and that's why they keep building things
Speaker 1: in on it, like video and that sort of thing,
Speaker 1: so that as you're looking at your budget, you'll think, well,
Speaker 1: do we really need Amazon Prime for the delivery? But
Speaker 1: you know what, we watch the video too, or we
Speaker 1: get these other perks as well. Now now they're through
Speaker 1: in Republic you mentioned, you know, they're just trying to
Speaker 1: pile things on to make it um uh, you know,
Speaker 1: as compelling as possible as people are looking to put
Speaker 1: things out of their out of their budget. But granted
Speaker 1: they just raised it about twenty bucks hundred three nine
Speaker 1: dollars a year, some people might be be thinking it's
Speaker 1: time to cut Amazon loose. We all keep reflecting on
Speaker 1: our budgets and seeing what's the most integral kind of
Speaker 1: depends on the programming as well. I'm sure bloom expenses,
Speaker 1: sof I're going to be bringing us, well, what the
Speaker 1: hottest deal is apparent. According to my producer, it's makeup
Speaker 1: rushes solution with Collagen. Who knew that does it? For
Speaker 1: this edition of Bloomberg Technology Tomorrow exclusive with jes Lee,
Speaker 1: partner at Sekoya Capital, her advice to find us on
Speaker 1: how to navigate the current market conditions. You do not
Speaker 1: want to miss it, and don't forget to check out
Speaker 1: our podcast. You can find it on the terminal as
Speaker 1: well as online on apples. Qualify an i heeart from
Speaker 1: New York. This is a Bloomberg