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Supreme Court Upholds Law That Threatens TikTok Ban · Bloomberg Intelligence

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  Speaker 2: All right, let's go right now to June Grasso, a
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  Speaker 2: Bloomberg legal analyst and host of the Bloomberg Law Show,
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  Speaker 2: joining us on the Supreme Court upholding the law that
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  Speaker 2: threatens us TikTok shutdown.
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  Speaker 3: What do you know?
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  Speaker 4: So this was a unanimous decision, and what basically it
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  Speaker 4: does is it says that national security concerns are more
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  Speaker 4: important than any of the free speech concerns raised by
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  Speaker 4: TikTok or the content creators who appealed at the Supreme Court.
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  Speaker 4: And this is pretty much expected, maybe not that unanimity
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  Speaker 4: of it, but during the oral arguments, justices from across
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  Speaker 4: the ideological spectrum we're questioning whether TikTok really was sort
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  Speaker 4: of safe, whether TikTok, the Chinese parent, might somehow use
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  Speaker 4: the data of millions of Americans and store it, or
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  Speaker 4: use data against Americans, or engage in propaganda campaigns on TikTok.
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  Speaker 4: There were all these huge concerns raised, and there wasn't
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  Speaker 4: that much concern for the free speech rights of the
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  Speaker 4: one hundred and seventy million Americans who are on TikTok,
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  Speaker 4: or TikTok's free speech rights or the content creators free
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  Speaker 4: speech rights. So and it's not unusual, I think, because
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  Speaker 4: usually when there's a case that says national security, it's
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  Speaker 4: like a big red sign to judges saying, well, this
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  Speaker 4: isn't my area.
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  Speaker 5: This is the area for the.
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  Speaker 4: Executive branch or the legislative branch. What do I know
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  Speaker 4: about national security? So it tends to fall by the
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  Speaker 4: wayside in the light of other concerns.
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  Speaker 6: So this was largely expected, as you mentioned. And then
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  Speaker 6: also we should be seeing this action actually been being
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  Speaker 6: taken place on Sunday, if I'm not mistaken. What is
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  Speaker 6: it like in action? Are we seeing the app being
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  Speaker 6: removed from people's phones that are here in the US.
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  Speaker 6: Is there any discussion about what this could look like or.
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  Speaker 5: Is it an unknown?
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  Speaker 4: So what will happen is TikTok, according to what its
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  Speaker 4: attorney said at the Supreme Court, will go dark on
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  Speaker 4: Sunday and the point of this really is to I think,
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  Speaker 4: and I've read other people talking about how it's to
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  Speaker 4: send the message to those one hundred and seventy million
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  Speaker 4: Americans that you're not going to have TikTok anymore. But
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  Speaker 4: actually TikTok can remain. If you have downloaded already, it
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  Speaker 4: will remain on your phone. The problem is not with
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  Speaker 4: what TikTok's going to do so much, but what the
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  Speaker 4: support the companies that support the platform, like Apple and
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  Speaker 4: Oracle and Google.
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  Speaker 5: What are they going to do?
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  Speaker 4: So there is this theory that President Electrump could say,
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  Speaker 4: my Justice Department is not going to enforce this, so
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  Speaker 4: don't worry Apple, don't worry Oracle, We're not going to
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  Speaker 4: force this. But then are they really going to take that?
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  Speaker 4: Are those companies really going to take that as assurance
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  Speaker 4: when the fines would be massive, five thousand dollars per use,
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  Speaker 4: So just imagine what those fines would look like the.
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  Speaker 3: Person with a TikTok right now.
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  Speaker 4: So people I've talked is that they doubt that that
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  Speaker 4: Apple and Oracle would would actually support TikTok, and so
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  Speaker 4: then TikTok would gradually lose people and it would gradually
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  Speaker 4: sort of disappear, but there are other The funny thing
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  Speaker 4: is that a lot of TikTok users calling themselves TikTok refugees,
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  Speaker 4: are going to other platforms now, but a lot of
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  Speaker 4: those platforms are Chinese owned as well.
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  Speaker 2: Yeah right now, exactly so legally for the companies like
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  Speaker 2: you mentioned Oracle and Apple, you can download the app
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  Speaker 2: now until Sunday, you just can't update it anymore. And
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  Speaker 2: that and that's where the issue is. Did they have
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  Speaker 2: a legal standing.
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  Speaker 5: You mean Apple or Yeah, I don't think so.
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  Speaker 4: At least they weren't involved in the in the Supreme
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  Speaker 4: Court as parties in the Supreme Court case, they don't
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  Speaker 4: really have what I would say is legal standing. But
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  Speaker 4: you know, millions of TikTok users might say that they
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  Speaker 4: have legal standing, and they weren't represented at the Supreme Court.
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  Speaker 4: So it wasn't so much a standing issue as just
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  Speaker 4: this national security, you know, concern overweighing everything and also
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  Speaker 4: what's kind of unusual, and this Justice has talked about
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  Speaker 4: how there was secret evidence and we haven't seen the
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  Speaker 4: evidence of that. Apparently some of the senators and the
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  Speaker 4: lawmakers have seen about the dangers of TikTok, And in fact,
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  Speaker 4: the circuit court, the DC appellate court that ruled unanimously
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  Speaker 4: as well to keep the ban in place, didn't even
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  Speaker 4: use that evidence to make its decision.
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  Speaker 5: They just relied on what Congress said.
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  Speaker 4: So it'd be interesting if we ever see that evidence,
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  Speaker 4: if it exists.
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  Speaker 6: So what could actually be done to change this decision?
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  Speaker 6: You mentioned Trump? Are there any other hail mary situations
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  Speaker 6: in terms of the fate of time?
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  Speaker 5: Well, I mean, right now.
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  Speaker 4: The president is Biden still and he has said he's
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  Speaker 4: not going to or it's indicated he's not going to
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  Speaker 4: do anything about TikTok. When Trump is inaugurated, will already
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  Speaker 4: be the band will already be in effect. There is
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  Speaker 4: a question there's a provision in the band that gives
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  Speaker 4: ninety days to a president if TikTok is engaging in
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  Speaker 4: sincere negotiations to sell the platform, if bytedances, and I'm
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  Speaker 4: not quite sure, you know, legally speaking, whether that there
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  Speaker 4: would be an issue about whether it starts to run
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  Speaker 4: with Biden or starts to.
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  Speaker 5: Run with Trump. Once the band's in effect, there's that.
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  Speaker 4: The Washington Post has reported that Trump has suggested he
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  Speaker 4: might issue an executive.
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  Speaker 5: Order to put the ban on hold.
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  Speaker 4: I mean that would be questionable legally, an executive order
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  Speaker 4: like that, but I don't know who would oppose it
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  Speaker 4: at this point. So there are and as I said,
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  Speaker 4: Trump can just say to the Justice Department, don't enforce this.
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  Speaker 4: You know, he spoke with the president of it today
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  Speaker 4: and said they discussed TikTok and nothing more than that.
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  Speaker 5: So you know, we'll see. There are things that can
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  Speaker 5: be done. I mean, Congress could.
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  Speaker 4: Pass another law, and you know, with the weight that
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  Speaker 4: Trump has with Congress, as we've seen from these you know,
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  Speaker 4: hearings and everything else, maybe they could pass another law
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  Speaker 4: and you know, take to take away the ban.
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  Speaker 3: June, we appreciate it.
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  Speaker 2: I know it's always hard to jump in right after
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  Speaker 2: breaking a Supreme Court decision, but we very much appreciate you.
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  Speaker 2: June Grasshow Bloomberg legal analysts and host of the Bloomberg
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  Speaker 2: Law Show. Let's get more on this now with Matthew S. Shettenhelm,
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  Speaker 2: Bloomberg Intelligence media litigation analyst. He is standing by on
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  Speaker 2: this news again the news Supreme Court is now upheld
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  Speaker 2: the law that threatens to shut down TikTok social media
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  Speaker 2: platform in the US as soon as Sunday. All right, Matthew,
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  Speaker 2: were you surprised by the decision from the Supreme Court.
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  Speaker 7: I was not surprised.
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  Speaker 8: The oral argument last Friday was consistent with this. The
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  Speaker 8: question in my mind was really was was this going
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  Speaker 8: to be unanimous? I thought there was a chance TikTok
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  Speaker 8: could could could win a couple justices with Looking quickly
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  Speaker 8: at the opinion here, it looks like the Court wrote
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  Speaker 8: a procureum, a decision for all nine justices. There were
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  Speaker 8: a couple concurring opinions from Justice Soda Mayor and Justice Gorsic,
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  Speaker 8: but both of those they expressed, you know, a different view,
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  Speaker 8: but they went along with the judgment. So this is
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  Speaker 8: a nine to zero loss for TikTok. This is this
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  Speaker 8: is what we expected after the Appellate Court ruled against
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  Speaker 8: TikTok earlier this year.
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  Speaker 7: The Supreme Court is doing.
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  Speaker 8: Exactly what that appellate court said, and so the law
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  Speaker 8: remains in place. The ban takes effect on Sunday.
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  Speaker 6: Well, Matthew, in your note you mentioned that Senate Minority
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  Speaker 6: Leader Chuck Schumer was signing support for a ban extension.
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  Speaker 6: What does it look like now that we've heard that
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  Speaker 6: the Supreme Court will be upholding this ban.
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  Speaker 9: Yeah.
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  Speaker 8: So, so the logical way for this band to go
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  Speaker 8: away is not the President issuing an executive order. The
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  Speaker 8: President can't change federal laws by executive order. What he
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  Speaker 8: can do is convince Congress to change course. And I
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  Speaker 8: think TikTok got its first real good news yesterday when
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  Speaker 8: the Democrats leader in the Senate, Chuck Schumer, came out
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  Speaker 8: and said, look, there's real concerns about TikTok, and we
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  Speaker 8: still need to force a sale, but let's give them
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  Speaker 8: more time. And when you have Chuck Schumer for the
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  Speaker 8: Democrats and President Trump for the Republicans both saying that,
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  Speaker 8: to me, it's a pretty good sign that Congress is
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  Speaker 8: going to find a solution to extend this, to push
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  Speaker 8: it back at the very least. The problem though, is
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  Speaker 8: that the timing here this takes effect on Sunday and
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  Speaker 8: Congress is unless they have unanimous support in the Senate
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  Speaker 8: to do this, I don't think they can do it
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  Speaker 8: very quickly. It takes a matter of days to debate
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  Speaker 8: these provisions, and so that the harder, harder question is
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  Speaker 8: is practically when Congress can get this done with it
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  Speaker 8: with the band looming and set to a take effect
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  Speaker 8: on Sunday.
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  Speaker 2: The other question is who would buy it? Morgan Stanley
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  Speaker 2: actually saying that Amazon could be a good suitor for TikTok.
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  Speaker 2: We heard the Chinese government saying that, well maybe if
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  Speaker 2: they sold it to musk What do you think?
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  Speaker 8: Yeah, the big question is what are they selling? And
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  Speaker 8: will Byte Dance sell anything to me? Because there's real
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  Speaker 8: doubts I think that that Byte Dance would would ever
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  Speaker 8: agree to a sale of the algorithm, or that China
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  Speaker 8: would would would concur with that. And so that's the
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  Speaker 8: first question of what are we even buying here? And
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  Speaker 8: and is that resulting product going to have the secret
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  Speaker 8: sauce that makes TikTok what it is?
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  Speaker 7: And so I find it difficult to.
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  Speaker 8: Speculate about that given you know, we don't know what
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  Speaker 8: what could be for sale here, and there's a real
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  Speaker 8: possibility that that Byte Dances is not going to be
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  Speaker 8: in a position to do a.
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  Speaker 7: Sale at all.
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  Speaker 8: So far there, you know, if they succeed in Congress
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  Speaker 8: in pushing this back, maybe they keep playing hardball and
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  Speaker 8: and not not seriously considering a sale.
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  Speaker 6: Matthew, what does this mean for US competitors. Of course,
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  Speaker 6: we have met us Snapchat. If we think about Instagram reels,
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  Speaker 6: they're all willing to hop in on this situation.
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  Speaker 7: Yeah, it's it's great news.
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  Speaker 8: I mean, right now we are looking at a band
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  Speaker 8: taking effect on Sunday. And if TikTok goes dark, as
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  Speaker 8: TikTok's counsel told the Supreme Court, it would if the
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  Speaker 8: Court did an issue as stay, those.
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  Speaker 7: Users are going to need to go somewhere.
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  Speaker 8: And so it's a it's a great opportunity for for Meta,
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  Speaker 8: for Google, for snap for for those users are going
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  Speaker 8: to need to find a new location. And and so
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  Speaker 8: I do think, as I said, there's a pretty decent
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  Speaker 8: possibility that Congress turns the lights back on and and
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  Speaker 8: and so then maybe they go back. But this is
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  Speaker 8: disruptive and so that creates an opportunity for TikTok's competitors.
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  Speaker 2: Yeah, and also disruptive for all the influencers who are
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  Speaker 2: making money off of TikTok, like small businesses, small businesses,
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  Speaker 2: same thing, all right, Matthew, thanks a lot, Really appreciate you,
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  Speaker 2: Matthew setting Helm. Bloomberg Intelligence senior litigation media analysts will
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  Speaker 2: be watching that.
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  Speaker 3: Are you're Are you a TikToker?
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  Speaker 5: I am you are?
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  Speaker 3: Okay.
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  Speaker 6: I did tell Marker producer that I might sob on
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  Speaker 6: air if I heard about this news.
• 11:28
  Speaker 3: But holding it together, you held, you held for what
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  Speaker 3: would you miss the most? Like I missed the food,
• 11:33
  Speaker 3: the food recipes.
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  Speaker 6: If I'm traveling somewhere, I look up my entire itinerary
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  Speaker 6: through TikTok, people who are on the ground there telling
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  Speaker 6: me what to do.
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  Speaker 3: Huh. And you can't do that through like Instagram.
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  Speaker 6: I don't find that the same search engine capabilities are
• 11:46
  Speaker 6: the same.
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  Speaker 3: So I use TikTok as a search engine.
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  Speaker 6: I do largely. I wrote a story about that for Bloomberg. Actually, wow,
• 11:52
  Speaker 6: I have to send it your way.
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  Speaker 2: I have to think about this. I'm going to ruminate
• 11:55
  Speaker 2: on this possibility, John Techer and I do not do that.
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  Speaker 7: But oh I do.
• 11:59
  Speaker 5: Oh I love the videos.
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  Speaker 3: Oh all, I love catvideos.
• 12:03
  Speaker 5: Of course, I should definitely watch hours.
• 12:05
  Speaker 3: And hours of cavideos.
• 12:07
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• 12:25
  Speaker 2: I got say the market wants to go higher because
• 12:28
  Speaker 2: fast Now just turned around up two percent.
• 12:30
  Speaker 7: After their earnings this morning.
• 12:32
  Speaker 3: Yep, but you mentioned it was down.
• 12:34
  Speaker 2: It just turned I mean, I don't see any necessarily
• 12:36
  Speaker 2: headlines like maybe less badu is than could have feared,
• 12:40
  Speaker 2: or it's getting better is helpful.
• 12:43
  Speaker 8: However, well, they were initially blaming you know, the downturn
• 12:47
  Speaker 8: in manufacturing in the US free they're woes and that
• 12:51
  Speaker 8: hasn't improved.
• 12:52
  Speaker 2: So yeah, no, exactly, that's I mean, like the momentum
• 12:55
  Speaker 2: is we're going to buy some.
• 12:56
  Speaker 6: Stocks today, like all fictors, all eleven major industry groups
• 12:59
  Speaker 6: are in the green right now.
• 13:00
  Speaker 2: Yeah, let's get some more insight on this. I'm Alex Steel,
• 13:03
  Speaker 2: by the way, normal Linda in for Paul Sweeney joining us,
• 13:06
  Speaker 2: one of the best with the internal details of the market.
• 13:09
  Speaker 2: I love guys like this, and I love Steve Steve
• 13:11
  Speaker 2: soasenagas chief Status and Interactive brokers and he joins us
• 13:14
  Speaker 2: now and he looks at all the stuff under the hood,
• 13:16
  Speaker 2: right like who's buying, who's selling, what are they doing
• 13:18
  Speaker 2: what options look like? The whole thing Steve is today
• 13:21
  Speaker 2: just to buy the equity market thing. Is there a
• 13:23
  Speaker 2: theme here for you?
• 13:25
  Speaker 9: Good morning, Alex, and I hope I can live up
• 13:27
  Speaker 9: to that introduction. Thank you so much, so well, but
• 13:32
  Speaker 9: it is pretty much we did sort of wake up
• 13:34
  Speaker 9: with let's let's buy the market. I think we've had
• 13:36
  Speaker 9: a huge change in sentiment this week, and it was
• 13:39
  Speaker 9: largely driven by the bond market. Think about where we
• 13:42
  Speaker 9: were this time last week, when we were selling off
• 13:44
  Speaker 9: hard because the labor economy was too good. But so
• 13:49
  Speaker 9: it's all been about, you know, perceptions about FED rate
• 13:52
  Speaker 9: cuts and FED activity. It did show you that the
• 13:55
  Speaker 9: market at some level cares the stock market, I should
• 13:58
  Speaker 9: say some level cares more about eight cuts that it
• 14:00
  Speaker 9: did about a strong economy. If we if we you know,
• 14:03
  Speaker 9: sold off on a good economic numbers. But once the
• 14:06
  Speaker 9: bond markets stabilized, and you know, when we're up around
• 14:09
  Speaker 9: four seventy or so, now we're back around for sixty
• 14:12
  Speaker 9: a little bit below it on the ten year. That's
• 14:14
  Speaker 9: really helped stock spirits a lot. This morning's numbers you
• 14:18
  Speaker 9: were talking about fast and all industrial production came in
• 14:20
  Speaker 9: way above expectations, as did housing starts. So you know,
• 14:24
  Speaker 9: ultimately a good economy should trump all. You know, no
• 14:28
  Speaker 9: pun intended about inauguration, but certainly and also you know,
• 14:32
  Speaker 9: I just think that that people are back in the
• 14:33
  Speaker 9: buying mode. And you did mention expiration today. You know,
• 14:37
  Speaker 9: we all focus on these new zero DTE options, but
• 14:40
  Speaker 9: it's important to remember that expiration means that everything is
• 14:43
  Speaker 9: a zero DTE option today because they're all expiring today.
• 14:46
  Speaker 6: Well, see, things are looking good, as you just noted.
• 14:48
  Speaker 6: Of course, we ended last year up more than twenty
• 14:51
  Speaker 6: percent and we're seeing us in the green today. But
• 14:54
  Speaker 6: there's also this argument that things are too expensive, valuations
• 14:57
  Speaker 6: are too high. Where do you fit in this idea?
• 15:02
  Speaker 9: Well, norah, I can't argue with the fact that valuations
• 15:06
  Speaker 9: are high, and and really can't say they're not too high.
• 15:09
  Speaker 9: But but too high is very much of a relative statement, right,
• 15:13
  Speaker 9: you know, too high compared to what and it's you know,
• 15:16
  Speaker 9: and certainly there's they're not too high for people to
• 15:19
  Speaker 9: want to pay for them right now. The thing about
• 15:21
  Speaker 9: valuations is over time, they do tend to work as
• 15:25
  Speaker 9: a timing measure. They stink. You can you know, markets,
• 15:28
  Speaker 9: markets could be irrational much longer than you can remain solvent,
• 15:32
  Speaker 9: and so it's very it's important to know that that
• 15:34
  Speaker 9: if you're buying stocks here, you are paying a real
• 15:38
  Speaker 9: premium for their earnings power or in some you know,
• 15:41
  Speaker 9: in some cases you're paying a lot even if they're
• 15:42
  Speaker 9: not paid earning very much. But uh, you know from
• 15:46
  Speaker 9: a timing measure that that can be problematic today, tomorrow,
• 15:50
  Speaker 9: two years from now. It's it's it's it's not. There's nothing.
• 15:53
  Speaker 9: There's no timing component to valuation.
• 15:56
  Speaker 3: So talk to me about funds and positioning.
• 15:58
  Speaker 2: So we got CTAs so trading advisors, they're more trend following.
• 16:02
  Speaker 2: We've got the all controlled funds that reallocate based on
• 16:05
  Speaker 2: where volatility is.
• 16:07
  Speaker 9: Where are those guys, You know, the trend followers are
• 16:11
  Speaker 9: still in place. I think they got shaken out a
• 16:13
  Speaker 9: little bit. But you know, if you're a short term
• 16:16
  Speaker 9: trend follower, certainly you're back in the game today trading
• 16:19
  Speaker 9: from the longside. In terms of volatility, it's been interesting
• 16:23
  Speaker 9: because we have had a fair amount of realized volatility recently.
• 16:27
  Speaker 9: You know, in the last let's say twenty sessions, we've
• 16:30
  Speaker 9: had pretty much nine or so where you've had the
• 16:33
  Speaker 9: S and P five hundred moved one percent or more.
• 16:35
  Speaker 9: So there has been a return of volatility. You wouldn't
• 16:38
  Speaker 9: know that from looking at the vics today, which you know,
• 16:42
  Speaker 9: I like to remind people that, you know, VIX is
• 16:44
  Speaker 9: not strictly a fear good, so it does play one
• 16:46
  Speaker 9: on TV. It is it is the market's best estimate
• 16:49
  Speaker 9: of volatility over the coming thirty days. And we've gone
• 16:52
  Speaker 9: from fairly you know, fairly high anticipation of volatility. You know,
• 16:57
  Speaker 9: we were about twenty one I think, you know, a
• 16:59
  Speaker 9: week ago, and now we have a fifteen handle. I'll
• 17:02
  Speaker 9: argue there's a lot of what I'm going to call
• 17:04
  Speaker 9: known unknowns coming at us in the coming thirty days,
• 17:07
  Speaker 9: whether it's you know, executive orders, whether it's earning season,
• 17:11
  Speaker 9: which which comes into play very strongly. You know, we
• 17:15
  Speaker 9: have a FED meeting in there, even though that meeting
• 17:17
  Speaker 9: is not really an in play FED meeting. So for
• 17:19
  Speaker 9: the market to flip from having a deep respect for
• 17:23
  Speaker 9: volatility to you know, basically you know, being very sanguine
• 17:28
  Speaker 9: about it is an interesting is an interesting turn of
• 17:31
  Speaker 9: events in just a short period of time.
• 17:34
  Speaker 6: Well, we just got cp I and PPI data this
• 17:36
  Speaker 6: week along with some other academic data. How are you
• 17:38
  Speaker 6: really viewing where we stand right now with inflation in
• 17:41
  Speaker 6: the US and how it's impacting US equity markets.
• 17:46
  Speaker 9: Well, I mean, certainly the markets love this number. And
• 17:48
  Speaker 9: again I think that that you know, when you put
• 17:51
  Speaker 9: in perspective the move that we had based on you know,
• 17:54
  Speaker 9: a nice but small beat on monthly cp I and
• 17:59
  Speaker 9: pp I, those are those are okay, and that's you know,
• 18:02
  Speaker 9: we certainly want to see inflation moderate, but you know,
• 18:05
  Speaker 9: we're starting to see commodity prices tick up higher. I know,
• 18:08
  Speaker 9: I know alex is all over commodity prices and we
• 18:10
  Speaker 9: have seen those tick up. And you know, it's nice
• 18:13
  Speaker 9: to look at the core and say, let's exclude food
• 18:15
  Speaker 9: and energy. But ultimately, when you talk about when you
• 18:18
  Speaker 9: talk to people about what constitutes inflation, they're going to
• 18:21
  Speaker 9: tell you about the price of gas and the price
• 18:23
  Speaker 9: of eggs, and you know, and you know, and that's
• 18:26
  Speaker 9: not to say things like you know, lumber and copper
• 18:30
  Speaker 9: and some other things which which have been seeing some
• 18:32
  Speaker 9: steady gains and probably you know, I'm not a commodities analyst,
• 18:37
  Speaker 9: but I can't see that pressure easing too much with
• 18:39
  Speaker 9: the need to build a big piece of Los Angeles
• 18:41
  Speaker 9: back in the coming days.
• 18:42
  Speaker 3: Completely right.
• 18:43
  Speaker 2: I was just talking Matt Miller about that when he
• 18:45
  Speaker 2: was on TV with me yesterday on that you need
• 18:49
  Speaker 2: and that's copper to lumber steal the whole thing.
• 18:53
  Speaker 3: Scott, you totally Steve. Sorry, I always call you Scott.
• 18:57
  Speaker 2: Do that, Steve, you didn't disappoint you totally nailed it. Sasnic,
• 19:02
  Speaker 2: chief strategist at Interactor Brokers, we appreciate you, Thank you
• 19:05
  Speaker 2: so very much.
• 19:08
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 19:11
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• 19:15
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• 19:18
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• 19:22
  Speaker 2: Alex You alongside Marmalinda Paul Sweeni is off today. One
• 19:27
  Speaker 2: of the staples that we've seen in the market and
• 19:30
  Speaker 2: the expectations, just ask any bank CEO, is the unleashing
• 19:34
  Speaker 2: of m and A put in the next Trump era. Right,
• 19:37
  Speaker 2: you got deregulation, lower taxes and lower rates and all
• 19:42
  Speaker 2: of that should trigger some massive m and A. So
• 19:43
  Speaker 2: I wanted to get some understanding of maybe what sectors
• 19:46
  Speaker 2: and what that actually looks like.
• 19:48
  Speaker 3: Joining US now is Kristin Pothier.
• 19:50
  Speaker 2: She is a US sector leader for Life Sciences at
• 19:53
  Speaker 2: KPMG and she joins US now from Boston. So, you
• 19:57
  Speaker 2: guys recently issued the findings of twenty twenty five Healthcare
• 20:01
  Speaker 2: and Life Science's investment Outlook.
• 20:04
  Speaker 3: We've seen like four hundred and ninety two billion.
• 20:07
  Speaker 2: Dollars worth of value so far of M and A
• 20:09
  Speaker 2: in just the last three months.
• 20:11
  Speaker 3: What are you guys expecting?
• 20:13
  Speaker 10: Thank you and thanks Nora and Alex for having me
• 20:16
  Speaker 10: on the line. I am fresh from the twenty twenty
• 20:19
  Speaker 10: five JP Morgan Conference in San Francisco, which is where
• 20:22
  Speaker 10: all the healthcare and life sciences companies come to run
• 20:26
  Speaker 10: across Union Square together and the start the year and
• 20:29
  Speaker 10: do deals. And I would say that the sentiment it
• 20:32
  Speaker 10: is so exciting for life sciences as we go into
• 20:35
  Speaker 10: twenty twenty five. And there's a couple of different reasons
• 20:37
  Speaker 10: for that. First, M and A is back, right, and
• 20:40
  Speaker 10: so when you look at that, and you look at
• 20:41
  Speaker 10: all of the innovation that's needed for pharma to continue
• 20:45
  Speaker 10: to fill their pipelines for precision medicine to be able
• 20:48
  Speaker 10: to come to the brink, for diagnostics companies to recover,
• 20:51
  Speaker 10: for device companies to recover. That is the key to
• 20:54
  Speaker 10: what we're seeing and after a pretty tepid twenty twenty
• 20:57
  Speaker 10: four and some conservatism in twenty twenty four where M
• 21:00
  Speaker 10: and A is back and M and A is exciting
• 21:02
  Speaker 10: within healthcare and life sciences, and then the innovation that
• 21:05
  Speaker 10: it comes with.
• 21:06
  Speaker 6: Well, you mentioned that AI is expected to be a
• 21:09
  Speaker 6: significant driver of life sciences deals this year, but you
• 21:12
  Speaker 6: particularly point out and impact in tools and diagnostics.
• 21:15
  Speaker 5: Can you talk to us a little bit more about that.
• 21:18
  Speaker 10: Absolutely, AI is an ecosystem approach in healthcare and life sciences,
• 21:23
  Speaker 10: So it's not just about what it can do for
• 21:25
  Speaker 10: drug discovery, but it's also about how it can just
• 21:28
  Speaker 10: shuttle a patient from one place to another, whether it
• 21:31
  Speaker 10: be in basic drug discovery, all the way into through
• 21:34
  Speaker 10: till diligence, and all the way in through patient care.
• 21:37
  Speaker 10: And what we're seeing, especially in tools and diagnostics, is
• 21:40
  Speaker 10: those have always been those gatekeepers or those gate openers
• 21:44
  Speaker 10: to our therapeutics, our targeted therapeutics of the future. With
• 21:48
  Speaker 10: AI and AI being able to affect pathology diagnoses and
• 21:53
  Speaker 10: able to affect blood diagnoses. It allows us to more carefully,
• 21:58
  Speaker 10: more efficiently, and more rapidly shuttle patients from one place
• 22:03
  Speaker 10: to another, and it's really coming out to be much
• 22:06
  Speaker 10: more effective than human eye as well. So it's very exciting.
• 22:11
  Speaker 10: It was all over JP Morgan this week, and it
• 22:14
  Speaker 10: will continue to be something that's highly valued and highly
• 22:17
  Speaker 10: a part of the ecosystem healthcareline science.
• 22:20
  Speaker 2: Is what type of M and A do you expect?
• 22:22
  Speaker 2: Are these going to be transformational deals? Are they going
• 22:24
  Speaker 2: to be bolt on deals? What are you guys modeling out?
• 22:29
  Speaker 10: Yeah? Absolutely, and we're seeing a big mix this year.
• 22:32
  Speaker 10: As you can see, there is already several ten plus
• 22:35
  Speaker 10: billion dollar deals that have happened within healthcare and life
• 22:38
  Speaker 10: sciences over the last couple of months. As both our
• 22:41
  Speaker 10: pharmaceutical companies and our device companies really rechange their portfolios
• 22:46
  Speaker 10: and focus on that innovation, we also see a number
• 22:49
  Speaker 10: of bolt on deals because as those portfolios continue to shape,
• 22:53
  Speaker 10: there's going to be areas where a pharma company only
• 22:56
  Speaker 10: needs a certain piece of that innovation puzzle to be
• 22:59
  Speaker 10: able to come in and that's a bolt on deal. Also,
• 23:02
  Speaker 10: what you'll see in life sciences in general is a
• 23:05
  Speaker 10: lot of that innovation isn't coming from our biggest pharmas
• 23:08
  Speaker 10: it's coming from our smaller biotechs, and so therefore, just
• 23:11
  Speaker 10: by nature, those would be smaller deals. In general, you
• 23:14
  Speaker 10: see the volumes continue to go up and the deals
• 23:16
  Speaker 10: continue to be bite size and a little bit bigger
• 23:19
  Speaker 10: than that. But it allows us to be able to
• 23:22
  Speaker 10: have that detailed diligence that goes along with it and
• 23:25
  Speaker 10: be able to really understand what's going on with those portfolios.
• 23:28
  Speaker 6: Kristin, According to your firm's most recent survey, what factors
• 23:31
  Speaker 6: are most likely to impact the deal activity this year?
• 23:34
  Speaker 6: According to what you've heard from respondents.
• 23:37
  Speaker 10: Yeah, the number one is getting the most out of
• 23:40
  Speaker 10: the innovation that's coming through each one of these deals.
• 23:43
  Speaker 10: And what I mean by that is being able to
• 23:46
  Speaker 10: look at the most innovative deal making that's coming through
• 23:51
  Speaker 10: with the diligence that goes along with it. And so
• 23:53
  Speaker 10: that is one aspect of it is pure innovation, What
• 23:57
  Speaker 10: is innovative and what isn't innovative in the space. Second,
• 24:00
  Speaker 10: really is is it going to be able to highlight
• 24:03
  Speaker 10: an entire ecosystem and really be able to factor in
• 24:06
  Speaker 10: not only what the pharma is doing, but what our
• 24:08
  Speaker 10: physicians are doing, what our patients are doing, and what
• 24:11
  Speaker 10: our diagnostics companies are doing as well. That is that
• 24:14
  Speaker 10: second component. And then the final component that is really
• 24:17
  Speaker 10: important here as we think about M and A is valuation,
• 24:21
  Speaker 10: and there is a mix of what both our corporates
• 24:25
  Speaker 10: are thinking about valuation and our pees are thinking about valuation.
• 24:29
  Speaker 10: What we've seen is for our corporates, they are expecting
• 24:33
  Speaker 10: valuations to continue to go up. That's because they've been
• 24:36
  Speaker 10: in this market this entire time. They've been looking at
• 24:38
  Speaker 10: all of these different assets, and the higher the innovation,
• 24:41
  Speaker 10: the more the valuation continues to tick up. Maybe not
• 24:44
  Speaker 10: to the levels expected that we're happening in twenty twenty one,
• 24:47
  Speaker 10: but right around there. Our pes, though, on the other hand,
• 24:50
  Speaker 10: are much more conservative. What they're seeing is from a
• 24:53
  Speaker 10: cell side perspective, if they're going to sell the assets,
• 24:56
  Speaker 10: they have to be able to have valuations that are
• 24:58
  Speaker 10: more realistic. And on the BUI, it could just be
• 25:01
  Speaker 10: because they're very hopeful that the valuations will be a
• 25:04
  Speaker 10: little bit lower so that therefore they can come in
• 25:06
  Speaker 10: and continue to deal make like we've seen in the past.
• 25:09
  Speaker 2: So I love that you brought that up because it's
• 25:11
  Speaker 2: always the bid ask, right, Like that's the tough part
• 25:14
  Speaker 2: of getting M and A done.
• 25:15
  Speaker 3: And I was going to wonder with.
• 25:17
  Speaker 2: Healthcare in particular, like what the catalyst is, right because
• 25:19
  Speaker 2: for banks, we can see the deregulation and the end
• 25:22
  Speaker 2: of Basil three for example, or rolling back capital requirements.
• 25:25
  Speaker 2: That's really going to help some of the regional banks
• 25:27
  Speaker 2: team up together.
• 25:28
  Speaker 6: Right.
• 25:29
  Speaker 2: Healthcare in some ways doesn't have that particular catalyst. So
• 25:32
  Speaker 2: what do you think is going to get that bid
• 25:34
  Speaker 2: ask there?
• 25:36
  Speaker 10: I think that continued comfort in new administration coming in
• 25:40
  Speaker 10: and some of the relaxation of the fears that we
• 25:43
  Speaker 10: had in twenty twenty four going into the election, and
• 25:46
  Speaker 10: even just looking overall at what was happening happening internationally,
• 25:50
  Speaker 10: how we were thinking about innovation and being able to
• 25:52
  Speaker 10: bring access to patients worldwide. As we all get much
• 25:55
  Speaker 10: more comfortable with that space, our clients are saying that
• 25:59
  Speaker 10: that is going to be that catalyst. So being able
• 26:02
  Speaker 10: to come into this new year, and we've seen it
• 26:04
  Speaker 10: at JP Morgan this week, come into this new year,
• 26:07
  Speaker 10: get excited about the innovation that's happening, be able to
• 26:09
  Speaker 10: pay and realistically do that diligence and tick and tie
• 26:13
  Speaker 10: every single piece of the financial, the commercial, the tax
• 26:17
  Speaker 10: and other ramifications of each of these deals and then
• 26:20
  Speaker 10: get them going and moving.
• 26:21
  Speaker 2: Yeah, expectations though definitely high, so we'll see how that
• 26:25
  Speaker 2: works out. Kristin, thanks lot, It was really great to
• 26:27
  Speaker 2: get your perspective. I love that you were fresh off
• 26:28
  Speaker 2: at the JP Morgan Healthcare conference. We were there as well,
• 26:31
  Speaker 2: M and I definitely a focus there. Kristin Pothea joining
• 26:34
  Speaker 2: us from KPMG. She's the US Hector said sector lead
• 26:38
  Speaker 2: for life sciences.
• 26:40
  Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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