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SpaceX Pounces on $60 Billion Cursor Takeover Days After IPO · Bloomberg Intelligence

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  Speaker 2: Lost in all the SpaceX discussion is that they made
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  Speaker 2: it sixty billion dollar mm A trade today and it's like,
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  Speaker 2: you don't even talk about it.
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  Speaker 3: Well, partly because they had indicated before their IPO that
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  Speaker 3: this was something that they acquired the rights for, so
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  Speaker 3: now they've just kind of pulled the trigger on it.
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  Speaker 4: All right, let's talk to somebody.
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  Speaker 2: It's his job to know what's going on with the stuff.
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  Speaker 2: Seth Fiegerman, Bloomberg AI team leader. I didn't know we
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  Speaker 2: had an AI team leader, but we do, and it's.
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  Speaker 5: Set That's awesome.
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  Speaker 6: What is Cursor and why did SpaceX buy it?
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  Speaker 4: Sure? Cursor is one of the leading startups that focuses
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  Speaker 4: on AI codings, basically building AI tools that streamline process
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  Speaker 4: of writing and debugging COG. You know, it's one of
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  Speaker 4: the fastest growing startups in terms of the revenue run rate,
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  Speaker 4: but it also faces a lot of competition with the
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  Speaker 4: likes of Open AI and Anthropic, but it has historically
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  Speaker 4: been quite beloved by coder's in Silicon Valley. I should
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  Speaker 4: say historically this is really, you know, a three or
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  Speaker 4: four year old company that just got bought for sixty
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  Speaker 4: billion dollars. So quick turnaround, quick turnaround.
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  Speaker 3: Indeed, So what does owning Cursor allow SpaceX to do
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  Speaker 3: that it couldn't do before?
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  Speaker 4: Yeah, I mean it's important to step back and think that,
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  Speaker 4: you know, SpaceX merged with or require Elon Musk's AI
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  Speaker 4: venture XAI, and since then has tried to position itself
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  Speaker 4: as not just a rocket play but an AI play.
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  Speaker 4: But today they really haven't made too much of a
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  Speaker 4: dent in the AI landscape, and coging has really been
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  Speaker 4: the most lucrative early market for these AI tools. Are
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  Speaker 4: certain irony there. They're kind of disrupting their own folks
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  Speaker 4: in their own backyard. But I think the bet here
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  Speaker 4: is that bring Cursor in there, bring their talent in there,
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  Speaker 4: and you can help supercharge SpaceX's own efforts to build
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  Speaker 4: a more viable, credible AI product.
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  Speaker 2: All right, I'm asking for all Cursor shareholders shared. Did
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  Speaker 2: I sell my company for one hundred and thirty five
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  Speaker 2: dollars stock or stock today. Do we know the terms?
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  Speaker 4: I'm not sure we know at the moment, but the
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  Speaker 4: deals should close in the third quarter.
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  Speaker 2: I like the sixty billion dollars valuation one hundred and
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  Speaker 2: thirty five dollars stock. Yeah, so I get the upside.
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  Speaker 3: Well, let's see how good Cursor was at negotiating all this, Okay,
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  Speaker 3: I mean.
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  Speaker 2: Do we know how how M and A might figure
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  Speaker 2: into their growth strategies?
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  Speaker 3: Good question? Yeah.
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  Speaker 4: Again, I think like they're trying to position themselves as
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  Speaker 4: more of an AI company, and I think they're doing
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  Speaker 4: that along two problems. One is three deals like this one,
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  Speaker 4: and I would be shocked this is the last time
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  Speaker 4: that we see them pursue an AI company to build
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  Speaker 4: a real, credible and hoas product. The others through these
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  Speaker 4: infrastructure tie ups that they're doing with the likes of
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  Speaker 4: Anthropic and Google kind of using the chips and data
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  Speaker 4: centers that they already have to make money while they
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  Speaker 4: figure out how to build a credible AI product.
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  Speaker 3: SpaceX is using cash an stock to buy Cursor. If
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  Speaker 3: they're going to be buying more com companies, are we
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  Speaker 3: going to see SpaceX. Taking on debt as well, you know,
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  Speaker 3: selling bonds for instance, possible.
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  Speaker 4: But again I think the fact that I just when
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  Speaker 4: Public gives it a leg up on arrivals like Opening
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  Speaker 4: I and Anthropic, as they compete not just for talent
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  Speaker 4: but for acquisitions like this one, they have something they
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  Speaker 4: can offer that other companies can't.
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  Speaker 2: All right, you're you're the AI, dude. Where are we
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  Speaker 2: on that spectrum of let's spend money, spend money, spend
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  Speaker 2: money too. Now let's really see what we're getting in
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  Speaker 2: return for that money.
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  Speaker 4: I think we're still I think we're still in the
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  Speaker 4: spend money spends going. But I will say what we
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  Speaker 4: are starting to see is companies Opening Eye, Anthropic are
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  Speaker 4: thinking about how much they're charging for this stuff across
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  Speaker 4: across different spectrums. That includes sort of getting rid of
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  Speaker 4: this all you can eat model where we just kind
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  Speaker 4: of charge you a flat fee and then you kind
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  Speaker 4: of use as much a as you want. Now they're
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  Speaker 4: starting to charge based on the usage that you do,
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  Speaker 4: or maybe they'll charge more money for premium subscriptions. So
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  Speaker 4: where are we on?
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  Speaker 2: So Anthropic and Opening Eye have also filed confidentially for
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  Speaker 2: fish public ofference do we have any sense it's the
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  Speaker 2: timing frives of those two.
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  Speaker 4: Deals, you know, the most reason that we've reporters that
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  Speaker 4: both were targeting the fall. Now, I should say that
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  Speaker 4: could be fluid, but the fact that SpaceX is doing
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  Speaker 4: so well right now in its early days, but the
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  Speaker 4: fact that they're doing so well probably does open up
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  Speaker 4: an opportunity for those companies to go public then or sooner.
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  Speaker 4: You know, it's always a vibes thing on some level,
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  Speaker 4: and this kind of creates a positive moment to try
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  Speaker 4: to bring it to market sooner.
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  Speaker 3: I go back to that idea that open AI's S
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  Speaker 3: one filing indicated that it wasn't necessarily in a rush
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  Speaker 3: to go public either. You know, it said that there
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  Speaker 3: are things I could do as a private company.
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  Speaker 7: That.
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  Speaker 4: Yeah, I think that they probably were a bit more
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  Speaker 4: explicit on that than Anthropic was. So it's certainly possible
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  Speaker 4: that open ai pushes this. We don't have updated reporting
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  Speaker 4: on that timetable yet, but they certainly indicated that perhaps
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  Speaker 4: they could still do financing on the private market as
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  Speaker 4: opposed to in the tap of the public market. But
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  Speaker 4: at the end of the day, all these companies, including SpaceX,
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  Speaker 4: are spending tens, if not hundreds of billions of dollars
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  Speaker 4: on chips and data centers and talent. You need capital
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  Speaker 4: for that, and public market is a good place for that.
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  Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
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  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 5:16
  Speaker 2: One of my favorite functions on the Bloomberg terminal is
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  Speaker 2: rich go uric h. It's the best accounting for the
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  Speaker 2: wealth of the wealthiest folks out there. The methodology is outstanding,
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  Speaker 2: the data's outstanding. Elon Musk is number one, one point three.
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  Speaker 2: Let's go exact here, one point two seven three trillion dollars.
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  Speaker 6: Number one.
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  Speaker 2: Number two is Larry Page of three hundred and thirteen billions,
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  Speaker 2: which just.
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  Speaker 8: So outpaces everyone else. It's laughable.
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  Speaker 2: You're today He's up six hundred and fifty billion dollars.
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  Speaker 2: That's representing the public markup and value of SpaceX here.
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  Speaker 2: So the question is a trillionaire, I mean, what are
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  Speaker 2: we doing here? What's the impact here Gutha mcconda, he
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  Speaker 2: thinks about this stuff. He's a lecturer at the Yale
• 5:58
  Speaker 2: School of Management and he's the Blomberg Opinion contributor Waltham.
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  Speaker 2: When you think Elon, you think about that wealth and
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  Speaker 2: again number two is three hundred billion and he's at
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  Speaker 2: one point three trillion. Put that in perspective, how do
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  Speaker 2: you think about that?
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  Speaker 9: I mean, just just imagine being the second wealthiest wealthiest
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  Speaker 9: man in the world and thinking, Wow, I'm a trillion
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  Speaker 9: dollars behind.
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  Speaker 6: You got to feel for them, You got to feel
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  Speaker 6: for him. Really, it seems seems awful.
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  Speaker 10: So what does it mean for policy?
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  Speaker 2: What does it mean for influence?
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  Speaker 6: I don't know.
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  Speaker 2: The numbers here are getting just you know, extraordinary.
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  Speaker 9: Yeah, And I think we have to layer in that
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  Speaker 9: the big difference between the Gargan Show and wealth of
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  Speaker 9: today's sort of wealthiest people lens the equivalent one hundred
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  Speaker 9: years ago in the Gilded Age, when you had people
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  Speaker 9: with about the same level of GDP is. Back then,
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  Speaker 9: there were profound normative constraints about you could you could
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  Speaker 9: not be seen to use your wealth to just sort
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  Speaker 9: of like drown the political system. However, much political influence
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  Speaker 9: they had, there were limitations about what you could do
• 6:58
  Speaker 9: when you were sort of expected to give my I
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  Speaker 9: need to charity and things like that. All of those
• 7:01
  Speaker 9: things have apparently fallen by the wayside. So the easiest
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  Speaker 9: way to think about the level of Elon Musk's political power,
• 7:08
  Speaker 9: even apart from his work with the administration, is in
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  Speaker 9: Ohio the most expensive Senate race of all time. The
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  Speaker 9: two campaigns combined spent about one hundred and fifteen million.
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  Speaker 6: Dollars, So that's a lot of money.
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  Speaker 9: So that is about less than one percent of a
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  Speaker 9: day to day random fluctuation in Elon Musk's network, so
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  Speaker 9: he can buy he can spend more money than two
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  Speaker 9: senate campaigns combined, and the most the powerful, most expensive
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  Speaker 9: Senate campaign in history. About as casually as you or
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  Speaker 9: I buy a cup of coffee or soda. If you
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  Speaker 9: are a politician and you and you're thinking about what
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  Speaker 9: political stances you should take or how you should shape
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  Speaker 9: government baction, if that's not top of your mind, you
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  Speaker 9: should get out of the business.
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  Speaker 3: Okay, Well, you've given us a lot to think about here.
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  Speaker 3: And one thing that I did like about your column
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  Speaker 3: is that you point out these megabillionaires. And I think
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  Speaker 3: according to Rich God, there's maybe like twenty odd people
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  Speaker 3: who have who are worth.
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  Speaker 8: At least one hundred billion dollars.
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  Speaker 3: So let's just call them the mega billionaires in one trillionaire.
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  Speaker 3: They run companies, they own companies, and those companies employ
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  Speaker 3: a lot of people, and a lot of those people
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  Speaker 3: reach out to you for advice, and as you put it,
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  Speaker 3: the conversation always goes like this. These are people who
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  Speaker 3: have accomplished a lot of things, and they're very successful
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  Speaker 3: what they do, but right now they're struggling in this
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  Speaker 3: company that they work for.
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  Speaker 8: Why is that? And what do you tell them?
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  Speaker 9: Because when you operated this stratosphere of wealth and power
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  Speaker 9: and influence, we should stop thinking about you like a
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  Speaker 9: private citizen. You're a king and you're surrounded by a court,
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  Speaker 9: and there are people around you whose only desire in life,
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  Speaker 9: whose only goal in life is to please you.
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  Speaker 6: That's being a court here.
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  Speaker 9: So you know, I talk to people who you know,
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  Speaker 9: they've been army special forces or very senior executives, and
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  Speaker 9: they go to these companies and they're like, nothing makes sense.
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  Speaker 9: I have been trained to succeed, but I don't even
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  Speaker 9: know what success means. And I said, that's right, because
• 9:02
  Speaker 9: you've always been trained success means winning a war or
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  Speaker 9: making a profit. Success means keeping the king happy, that's
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  Speaker 9: what it means. And that's a completely different way of
• 9:12
  Speaker 9: looking at the world. And so now you have these people.
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  Speaker 9: They have the power and resources of a nation state.
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  Speaker 9: In fact, most of the nation states in the world
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  Speaker 9: don't have the resources of someone like Elon Musk, you know,
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  Speaker 9: and it changes everything.
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  Speaker 2: You know, I was thinking, Gotham, just when you're speaking here, well,
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  Speaker 2: he's got to answer to a shareholders. And then I'm like, no,
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  Speaker 2: he doesn't because he's got the super voting stock.
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  Speaker 10: So there goes that argument.
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  Speaker 8: Nominally he might, but in practice, in reality, he doesn't.
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  Speaker 9: So go, yeah, that's right and in a real sense,
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  Speaker 9: So like there's this wonderful term post economic right, if
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  Speaker 9: Elon Musk fails to answer the shareholders and they sell
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  Speaker 9: the stock and his net worth goes down by seventy
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  Speaker 9: five percent, he'll still have three hundred billion dollars.
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  Speaker 6: I'm sure he'll be okay.
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  Speaker 3: Yeah, I mean, although for those who are keeping score
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  Speaker 3: that that's not okay with them. I mean, so you
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  Speaker 3: don't get to that level without keeping score.
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  Speaker 6: So I think that's completely right.
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  Speaker 9: You keep you know, keeping score, and it is striking
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  Speaker 9: right that like that, it seems like the one thing
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  Speaker 9: that they can't buy is enough. But let me put
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  Speaker 9: it differently. At that level, I think keeping score isn't
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  Speaker 9: just about the number on the Bloomberg Billionaires list.
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  Speaker 6: It's about power.
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  Speaker 9: Right, you have transcended with the things where the things
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  Speaker 9: you can where you can buy material things. What you
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  Speaker 9: can buy are governments or immunity from the law, or
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  Speaker 9: just the fulfillment of your every whim, no matter what it.
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  Speaker 6: Is, that what that might be.
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  Speaker 9: And at that point, the amounts of money that you
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  Speaker 9: have can translate to power in ways that we just
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  Speaker 9: haven't seen in democratic societies before.
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  Speaker 2: Is there any I'm not to say there's a problem,
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  Speaker 2: so I'm not going to asay for a solution, but
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  Speaker 2: is there any way that you think society may change
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  Speaker 2: or bend or try to deal with some of this
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  Speaker 2: newfound extraordinary wealth and influence?
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  Speaker 9: There is because we've done this before, right, the United
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  Speaker 9: States has dealt with people of this kind of wealth
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  Speaker 9: and power relative to society, not in ansolute terms. Before
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  Speaker 9: Theodore Roosevelt did that with JP Morgan, and you know,
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  Speaker 9: the anti trust people did that with John D.
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  Speaker 6: Rockefeller. And there are two big lessons that we should
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  Speaker 6: take away from that.
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  Speaker 9: Right One is that however powerful, wealthy and powerful these
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  Speaker 9: people are, when the government, backed by the people, decides
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  Speaker 9: to go and say do things, the government is still
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  Speaker 9: the government. And in a democratic republic like the United States,
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  Speaker 9: the people still rule, not individual wealthy, not in certain
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  Speaker 9: individual oligarchists. But the second thing to remember is that
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  Speaker 9: over the long term, that outcome was much better for
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  Speaker 9: the wealthy people than the fulfillment.
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  Speaker 6: Of their whims.
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  Speaker 9: Right, would you rather live in a state like Russia
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  Speaker 9: that bends to the whims of you know, whatever the wealth,
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  Speaker 9: the wealth the handful of wealthiest people who around the state.
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  Speaker 9: Would you rather live in the United States? The answers,
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  Speaker 9: you would rather live in the United States. It hard,
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  Speaker 9: as it is to might to hear. Right constraints can
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  Speaker 9: be good for you, even if you're a trillion error.
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  Speaker 9: And democratic constraints aren't just good for the whole society,
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  Speaker 9: They'll end up being good for the wealthiest members of
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  Speaker 9: it too.
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  Speaker 3: Gotam, have you gotten any feedback on writing this column?
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  Speaker 3: I'm wondering if any readers have reached out to you
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  Speaker 3: and what they've said.
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  Speaker 9: More than any other column I've written for Bloomberg Actually,
• 12:17
  Speaker 9: and so far, I would say of people who have
• 12:20
  Speaker 9: reached out to me directly, the result the response has
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  Speaker 9: been sort of enormously positive.
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  Speaker 6: Of people who responded.
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  Speaker 9: On Twitter who seem to be big fans of Elon Muss,
• 12:30
  Speaker 9: let's just say that they were not so positive.
• 12:32
  Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 12:46
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• 12:49
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:53
  Speaker 2: Stuck ale of retail Here, we just got through a
• 12:55
  Speaker 2: lot of the earnings from the retailers. They was kind
• 12:57
  Speaker 2: of bringing up the rear their different calendars. Here, Bloomberg Intelligence,
• 13:00
  Speaker 2: take it a survey. I'm looking at Prime Day deals
• 13:03
  Speaker 2: and there's a lot to talk about there. I want
• 13:06
  Speaker 2: to talk about how AI influences how we shop.
• 13:09
  Speaker 6: Who do we talk to about that?
• 13:10
  Speaker 10: We talked to put them goil.
• 13:11
  Speaker 2: She covers all all the e commerce and the retailers
• 13:14
  Speaker 2: for Bloomberg Intelligence.
• 13:17
  Speaker 7: Put them.
• 13:17
  Speaker 2: I know you have a new survey out here. What
• 13:19
  Speaker 2: did you find here? What you're looking to find?
• 13:24
  Speaker 7: People are still interested in deals in shopping Amazon's Prime Day,
• 13:28
  Speaker 7: which comes earlier this year. It comes in June versus
• 13:30
  Speaker 7: July last year, so part of two Q not three
• 13:33
  Speaker 7: Q in terms of their financials. I think what we
• 13:38
  Speaker 7: found just confirmed what we believed, which is that more
• 13:41
  Speaker 7: than every deals matter today, especially in the face of
• 13:43
  Speaker 7: rising inflation where you have tariffs and higher gas prices,
• 13:47
  Speaker 7: consumers are looking to find ways to stretch their dollars,
• 13:50
  Speaker 7: and more and more are looking to shop on Prime
• 13:53
  Speaker 7: Day than last year.
• 13:55
  Speaker 3: This is a dumb question, but I'm going to ask
• 13:57
  Speaker 3: it anyway. It's called Prime Day, and Amazon has that
• 13:59
  Speaker 3: Prime loyalty program.
• 14:01
  Speaker 8: But do people who shop Prime Day?
• 14:03
  Speaker 3: Are they all Prime Members or is there a significant
• 14:07
  Speaker 3: number that actually has not signed on to the program
• 14:10
  Speaker 3: yet And we'll do so because of these offers.
• 14:13
  Speaker 7: No dumb question, but the answer is Prime Day is
• 14:16
  Speaker 7: for Prime Members, so to take advantage of the deals,
• 14:19
  Speaker 7: you have to be a Prime Member. So Amazon does
• 14:22
  Speaker 7: have over two hundred million Prime members around the world
• 14:25
  Speaker 7: that will be taking advantage of these deals. But it
• 14:27
  Speaker 7: is also a time where many people sign up for
• 14:31
  Speaker 7: deals that don't have the membership. Some of them sign
• 14:33
  Speaker 7: up to take advantage of the deals and cancel, and
• 14:35
  Speaker 7: many of them do stay on. In fact, in our survey,
• 14:38
  Speaker 7: that was one of the questions we asked is do
• 14:40
  Speaker 7: you have a Prime membership? And if not, are you
• 14:43
  Speaker 7: planning to get one? And the answer was very consistent
• 14:46
  Speaker 7: with last year that there is a select group of
• 14:48
  Speaker 7: respondents that plan to get the Prime membership and hold
• 14:52
  Speaker 7: it indefinitely, just growing that Prime member base, which is
• 14:55
  Speaker 7: always a key win for Amazon.
• 14:56
  Speaker 2: All Right, yesterday I pulled to John Tucker. I said,
• 14:59
  Speaker 2: you know what, I need a powerwasher for my back patio.
• 15:03
  Speaker 8: So it sounds like you could borrow that from him.
• 15:06
  Speaker 2: I could probably borrow from John Tarker. So instead of
• 15:08
  Speaker 2: going to Google, I just went into Amazon dot com
• 15:10
  Speaker 2: search bar, power washer, boom. A lot of stuff comes up,
• 15:13
  Speaker 2: a lot of good descriptions.
• 15:14
  Speaker 10: I found on Boom.
• 15:15
  Speaker 2: Didn't even go to search. And it's coming tomorrow.
• 15:17
  Speaker 10: For those that care.
• 15:19
  Speaker 5: You didn't want to wait for Prime Day now, I'm
• 15:21
  Speaker 5: not just I don't know. I want to ride away.
• 15:25
  Speaker 5: AI punam. How are people using AI for shopping? How
• 15:30
  Speaker 5: are retailers using AI?
• 15:33
  Speaker 7: Yeah? I think Amazon is furthest along when you think
• 15:35
  Speaker 7: about how a retailer is using AI. You know what
• 15:38
  Speaker 7: you just explained about the search bar. I think what
• 15:40
  Speaker 7: many people still don't know is the Amazon search bar
• 15:42
  Speaker 7: is no longer just in search bar. It's an AI
• 15:45
  Speaker 7: powered agent led tool, which means if you don't have
• 15:49
  Speaker 7: to no longer go in the search bar like you
• 15:50
  Speaker 7: did and say powerwasher, you can say I'm looking to
• 15:54
  Speaker 7: clean the bricks or the paper outside of my house,
• 15:56
  Speaker 7: and I want the strongest powersher, and it will provide
• 15:59
  Speaker 7: you with an answer. Not only that when you get
• 16:02
  Speaker 7: to it, you can go ahead and say what was
• 16:05
  Speaker 7: the cheapest price that this power washer sold in the
• 16:09
  Speaker 7: last three months six months? And it will give you
• 16:12
  Speaker 7: a price chart. Then you can go ahead and further say, okay,
• 16:15
  Speaker 7: when this power washer drops to this price, go ahead
• 16:19
  Speaker 7: and purchase and long behold. If it drops at that
• 16:22
  Speaker 7: price next week, you'll have it at your door without
• 16:23
  Speaker 7: you having to go back. Well, that's really really further along.
• 16:27
  Speaker 2: I thought I was like doing really well, Yes, it's
• 16:29
  Speaker 2: just going into Amazon search, But apparently put them says
• 16:32
  Speaker 2: I could do a lot better.
• 16:32
  Speaker 3: Yeah, you could make it work for you as opposed
• 16:34
  Speaker 3: to doing the legwork yourself. Given all of this put them,
• 16:38
  Speaker 3: how are competitors responding.
• 16:40
  Speaker 8: We've seen how Prime Day and you know the fact
• 16:43
  Speaker 8: that it's an.
• 16:44
  Speaker 3: Annual sales extravaganza has really forced other companies, like the
• 16:49
  Speaker 3: targets of the world, like Walmart, to come up with
• 16:53
  Speaker 3: their own kind of sales extravagant in the middle of summer.
• 16:57
  Speaker 7: Yeah, and it won't be any different this year. So
• 16:58
  Speaker 7: as soon as Amazon launches it's Prime Day dates, what
• 17:02
  Speaker 7: happens is the larger retailers and some of the smaller
• 17:05
  Speaker 7: ones just follow right to make sure that they can
• 17:07
  Speaker 7: capture some of that walletchhare. To remember, this Prime Day
• 17:10
  Speaker 7: comes before the July fourth sales, so it's actually a
• 17:14
  Speaker 7: move to pull sales forward even more than it has
• 17:16
  Speaker 7: been ever in the past. And we do expect online
• 17:20
  Speaker 7: sales across the board, not just for Amazon, but even
• 17:22
  Speaker 7: the Walmart's, the target's best spies of the world to
• 17:25
  Speaker 7: feature deals to try to lower that customer spend because
• 17:29
  Speaker 7: it's a time when consumers are prepared to stretch their
• 17:32
  Speaker 7: wallets to take advantage of the deals put iman.
• 17:34
  Speaker 2: You mentioned Walmart, and I'm just amazed. Every quarter whenever
• 17:37
  Speaker 2: they report earnings, I go right to their digital sales,
• 17:41
  Speaker 2: and every quarter they don't disappoint it. You know, teens
• 17:44
  Speaker 2: twenty five percent growth in digital Walmart's they go toe
• 17:48
  Speaker 2: to toe with Amazon, don't they?
• 17:51
  Speaker 7: Absolutely? I mean, Walmart's done an amazing job at at
• 17:54
  Speaker 7: capturing the online shopper. You know, if I speaking to
• 17:56
  Speaker 7: you five years ago, they were very, very small when
• 17:59
  Speaker 7: it came to the online presence that they haven't today
• 18:02
  Speaker 7: they're approaching over roughly two hundred billion dollars and almost
• 18:05
  Speaker 7: online sales, So quite a move since then. When you
• 18:08
  Speaker 7: compare it to Amazon, you know, we're expecting Amazon to
• 18:11
  Speaker 7: get to a trillion dollars and GMB, so still you know,
• 18:15
  Speaker 7: Amazon is further along on a global basis, but Walmart
• 18:18
  Speaker 7: is catching up fast for sure.
• 18:21
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 18:28
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 18:32
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• 18:36
  Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
• 18:39
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 18:43
  Speaker 2: One of the M and E trades today, Young Brands
• 18:45
  Speaker 2: selling its Pizza Hut division for two point seven billion
• 18:48
  Speaker 2: dollars to focus on it's KFC and Taco Bell chains.
• 18:52
  Speaker 2: I'm in on all three of those.
• 18:53
  Speaker 6: Those are all good with me.
• 18:54
  Speaker 2: Michael Halen he joined us here, a senior restaurant of
• 18:57
  Speaker 2: food service analysts for Bloomberg Intelligence. Michael, just about this transaction.
• 19:01
  Speaker 2: What's Yu'm doing here?
• 19:03
  Speaker 11: Yeah, And it's been expected they've since last fall they
• 19:06
  Speaker 11: had announced that they were looking for strategic options here
• 19:11
  Speaker 11: for Pizza Hut, which has been struggling for years, right,
• 19:14
  Speaker 11: and so we think it's a great deal for them,
• 19:18
  Speaker 11: you know, and it allows their very talented management team
• 19:21
  Speaker 11: to focus on their two real growth brands, Taco Bell,
• 19:25
  Speaker 11: which is a monster, it's the gold standard and QSR
• 19:30
  Speaker 11: best marketing program, phenomenal seam source sales for years now,
• 19:35
  Speaker 11: probably since I've been you know, an analyst of probably
• 19:38
  Speaker 11: about fifteen plus years, great seam sore sales. And KFC,
• 19:43
  Speaker 11: which is phenomenal overseas, strong net unit growth overseas and
• 19:49
  Speaker 11: starting to turn around here in the United States in
• 19:51
  Speaker 11: the last couple of quarters. So you know, with the
• 19:55
  Speaker 11: cash it's going to be about two point three billion
• 19:57
  Speaker 11: after tax.
• 19:57
  Speaker 10: Are going to for that right now into into.
• 20:00
  Speaker 11: Share buybacks to offset some of the operating profit loss
• 20:05
  Speaker 11: that they're going to have here.
• 20:06
  Speaker 10: And you know, we think it's it's a good deal.
• 20:11
  Speaker 11: It's it's going to have a much higher operating profit
• 20:13
  Speaker 11: and net unit growth, faster revenue growth than all of
• 20:17
  Speaker 11: that is, you know, turning into a higher multiple. Is
• 20:21
  Speaker 11: what we're seeing in the market today.
• 20:22
  Speaker 2: Stocks up two point three percent today on this news,
• 20:25
  Speaker 2: up about almost five percent year to date and up
• 20:27
  Speaker 2: about eleven percent of the trailing twelve months. KFC and
• 20:31
  Speaker 2: Taco Bell, do you think they're going to maybe think
• 20:34
  Speaker 2: about growing va acquisition? Is there something for them to
• 20:37
  Speaker 2: go out and buy? Is that part of their strategy
• 20:39
  Speaker 2: their DNA?
• 20:39
  Speaker 10: You know, we could be you know, it has historically.
• 20:42
  Speaker 11: They purchased Habit Burger a few years ago, but it
• 20:45
  Speaker 11: was just really too small to make a big difference
• 20:49
  Speaker 11: in the in the top and bottom line. But that
• 20:52
  Speaker 11: could be an option. You know, Chris Turner, he was
• 20:56
  Speaker 11: the prior CFO, is the new CEO, and he's more
• 21:00
  Speaker 11: you know, the company was run pretty conservatively under their
• 21:03
  Speaker 11: prior CEO, you know, good solid company, you know, but
• 21:08
  Speaker 11: not very exciting. And so you know, as you can
• 21:11
  Speaker 11: see with this deal, uh Turner hasn't wasted any time
• 21:14
  Speaker 11: and he's being more aggressive with the moves that they're making,
• 21:18
  Speaker 11: and so I could see I could see.
• 21:20
  Speaker 10: M and A being an option going forward.
• 21:23
  Speaker 2: So what was the problem with this Pizza Hut? Was
• 21:28
  Speaker 2: it simply Dominoes? What was kind of the problem?
• 21:31
  Speaker 11: Dominoes was a big part of it because since two
• 21:34
  Speaker 11: thousand and nine, and in two thousand and nine Pizza
• 21:37
  Speaker 11: Hut was number one in the country, Dominoes has taken.
• 21:41
  Speaker 10: Share year after year after year, So that's been a
• 21:43
  Speaker 10: big part of it.
• 21:44
  Speaker 11: Papa John's had some good years in there too where
• 21:47
  Speaker 11: they were taking some share.
• 21:48
  Speaker 10: So that's a big part of it. But you know,
• 21:51
  Speaker 10: I'd say a big issue is like food.
• 21:53
  Speaker 11: Quality and the real estate, right, Like they have these
• 21:56
  Speaker 11: really big boxes that cost a lot of money. These
• 21:59
  Speaker 11: franchise are paying big rents, and when you don't have
• 22:01
  Speaker 11: people coming into the restaurants anymore, because in addition to
• 22:05
  Speaker 11: the Dominoes and Papa John's competition, you had more competition
• 22:09
  Speaker 11: at sit down restaurants, higher qualities, sit down pizza joints
• 22:12
  Speaker 11: cropping up locally, you know, and it just starts this
• 22:16
  Speaker 11: downward spiral that that that you know, people aren't coming in,
• 22:19
  Speaker 11: so the franchises aren't going to spend money on improving
• 22:22
  Speaker 11: you know, the look and the feel of the restaurants.
• 22:27
  Speaker 11: You know, restaurants fall into disrepair. And so it's kind
• 22:30
  Speaker 11: of been been this spiral here in the US anyway
• 22:34
  Speaker 11: that that's you know, been going off for quite I've.
• 22:38
  Speaker 2: Been telling the story today. Back in the eighties and
• 22:39
  Speaker 2: college in Richard, Virginia, it was our savior. It was
• 22:42
  Speaker 2: our go to place.
• 22:44
  Speaker 10: But that was a long time ago. Listen, of the
• 22:46
  Speaker 10: breadsticks were phenomenal.
• 22:47
  Speaker 2: Exactly, all right. So all the restaurant companies that you cover,
• 22:51
  Speaker 2: you cover them all.
• 22:53
  Speaker 6: What's the theme you're.
• 22:54
  Speaker 2: Hearing from your restaurant companies about kind of how the
• 22:56
  Speaker 2: consumer's doing out there.
• 22:58
  Speaker 11: The theme is that they're holding in right. And I
• 23:01
  Speaker 11: think part of that was the tax refund checks.
• 23:03
  Speaker 6: You know.
• 23:04
  Speaker 11: You know, as you probably know, I was pretty bullish
• 23:06
  Speaker 11: coming into this year because inflation was close to two percent,
• 23:10
  Speaker 11: we had these refund checks coming. We're less much less
• 23:14
  Speaker 11: bullish now based on the inflation that we're seeing, you know,
• 23:17
  Speaker 11: like I said, a lot of them are talking about
• 23:20
  Speaker 11: kind of holding in.
• 23:23
  Speaker 6: Beef.
• 23:23
  Speaker 11: Inflation continues to be an issue, So some of those
• 23:25
  Speaker 11: chains are kind of worried there, you know what they're saying.
• 23:30
  Speaker 11: I'm paying closer attention what they're doing, and what we're
• 23:32
  Speaker 11: seeing is the most aggressive discounting we've seen in this
• 23:36
  Speaker 11: business for a while, and that's that's really worrisome.
• 23:40
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  Speaker 7: M