Latest / Bloomberg Intelligence / Conoco Deal, American Air Guidance, Musk Empire

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Conoco Deal, American Air Guidance, Musk Empire · Bloomberg Intelligence

0:02
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
0:10
Speaker 2: This is Bloomberg Intelligence with Alex Steinhl and Paul'sweeny.
0:14
Speaker 1: The real app performance has been in US corporate high yield.
0:17
Speaker 3: Are the companies lean enough? Have they trimmed all the fats?
0:20
Speaker 1: The semiconductor business is a really cyclical business.
0:23
Speaker 2: Breaking market headlines and corporate news from across the globe.
0:27
Speaker 3: Do investors like the M and A that we've seen?
0:30
Speaker 1: These are two big time blue chip companies.
0:33
Speaker 4: The window between the peak and cut changing super fast.
0:37
Speaker 2: Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio.
0:43
Speaker 1: Today's Bloomberg Intelligence Show, we dig inside the big business
0:45
Speaker 1: stories impacting Wall Street and the global markets.
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Speaker 4: Each and every week we provide in depth research and
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Speaker 4: data on some of the two thousand companies and one
0:51
Speaker 4: hundred and thirty industries our analysts cover worldwide.
0:54
Speaker 1: Today, we'll look at why offshore wind industry, particularly in
0:57
Speaker 1: the US, has been struggling.
0:59
Speaker 4: Plaus We'll discuss why the CEO Elon Musk's companies may
1:01
Speaker 4: be under threat as Tesla struggles.
1:04
Speaker 1: But first we dive into M and A in the
1:06
Speaker 1: oil and gas industry. This week Conoco Phillips agreed to
1:09
Speaker 1: require Marathon Oil in an all stock deal, value in
1:12
Speaker 1: the company at about seventeen billion dollars.
1:14
Speaker 4: The move expands Conicco Phillips footprint and domestic shale fields
1:17
Speaker 4: from Texas to North Dakota. It also adds to the
1:19
Speaker 4: wave of recent mega deals as producers are betting that
1:22
Speaker 4: oil and gas demand will remain robust for years to come.
1:25
Speaker 1: For more, we were joined by Vince Piazza, Bloomberg Intelligence,
1:28
Speaker 1: senior equity research Channels, who covers the oil and gas space.
1:31
Speaker 4: We first ask bens and if this deal makes Conicgo
1:33
Speaker 4: Phillips bigger or better.
1:35
Speaker 5: I think a little bit of both. It makes them.
1:38
Speaker 6: Better in certain basins because it does consolidate an opportunity
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Speaker 6: set in places like the Delaware, the Baking and even
1:47
Speaker 6: the Eagle Forward.
1:49
Speaker 5: But it does extend the franchise into other areas that
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Speaker 5: probably dilutes some of that narrative. You know, the narrative
1:58
Speaker 5: has been consolidate streamline leverage to what you do best.
2:04
Speaker 5: We saw that in the Permian. We saw that for
2:07
Speaker 5: natural gas as well, with Southwestern and Chesapeake likely getting together.
2:13
Speaker 5: So in this case you have some pieces of that
2:17
Speaker 5: marathon pie. That may not work as well within the
2:22
Speaker 5: broader Conicco platform, but that's an opportunity set to divest
2:28
Speaker 5: some of those pieces and really concentrate around Texas and
2:33
Speaker 5: the Bakan. But the bocket itself is maturing as well.
2:36
Speaker 5: What you're really getting here is a ton of free
2:39
Speaker 5: cash flow as well. You know, this is consistent with
2:43
Speaker 5: the formula, the theme, the narrative that we've heard and
2:47
Speaker 5: seen in the past, the acquirer using a slightly higher
2:51
Speaker 5: multiple to do an all stock transaction by the company,
2:56
Speaker 5: bring those assets, those cash flow generating assets that's into
3:01
Speaker 5: the platform, lower the spend, generate that free cash flow,
3:06
Speaker 5: be able to boost the ordinary dividend and also the
3:10
Speaker 5: supplemental dividend and support the stock by buying back shares
3:14
Speaker 5: as well. And in this case financially, financially, engineering wise,
3:18
Speaker 5: it actually works out right.
3:20
Speaker 1: Hey, Vince, I noticed you know there's a lot of
3:23
Speaker 1: M and A stuff going on in your energy world here.
3:25
Speaker 1: Do the regulators care about this stuff?
3:27
Speaker 5: Oh yeah, they will take a serious look at this.
3:31
Speaker 5: They will increase the scrutiny of all of these deals.
3:34
Speaker 5: I know that they're looking to close this by four
3:37
Speaker 5: q twenty twenty four. I think that's kind of tight.
3:42
Speaker 5: We have seen other deals close Exxon closing Pioneer around
3:47
Speaker 5: that same time as a projected closing date as well,
3:51
Speaker 5: But there are other deals that may be prolonged. And
3:54
Speaker 5: this will be a rather large entity. It's going to
3:58
Speaker 5: be roughly, you know, two point two million barrels a
4:00
Speaker 5: day of production, so it will get scrutiny. It will
4:04
Speaker 5: get scrutiny more broadly, but in general, it's really not
4:10
Speaker 5: sizeable in those particular basins that they are consolidating.
4:14
Speaker 4: So to that point, do we see another bitter come in?
4:19
Speaker 4: So Bloomberg has reported that Devin was also interested in
4:22
Speaker 4: Marathon Oil. Do you think we see this happening now?
4:26
Speaker 5: Well, you know they were looking at it. When you
4:28
Speaker 5: work out the numbers, it would have been kind of
4:31
Speaker 5: difficult to make it work. But the increation here Conico
4:35
Speaker 5: Marathon actually works out better for Marathon holders. It's interesting
4:41
Speaker 5: because within the first three years of the deal, Conico
4:45
Speaker 5: suggests that they'll buy back as much stock as the
4:49
Speaker 5: entire market cap of Marathon, including a boosted dividend for
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Speaker 5: legacy Conical holders and new holders from the Marathon purchase.
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Speaker 1: You know, it's an all stock deal, which all right,
5:02
Speaker 1: I get my M and A fee Alex, but I
5:03
Speaker 1: don't get to do the high yield piece which choices
5:05
Speaker 1: mine here. So I'm not really happy with an all
5:08
Speaker 1: stocks it's evercore.
5:09
Speaker 3: I think that led kind of go on this one.
5:12
Speaker 7: Yeah.
5:12
Speaker 1: I looked at M A go. They did not have
5:14
Speaker 1: the M and advisors. They're a little bit slow on.
5:16
Speaker 8: That, Vincer.
5:17
Speaker 1: We going to see more of this. I mean, we're
5:19
Speaker 1: going to be talking to you more about M and
5:21
Speaker 1: A in your space.
5:23
Speaker 5: Yeah, we've seen it across the Permian. We've seen it
5:26
Speaker 5: in natural gas as well. Haven't seen it as much
5:30
Speaker 5: in natural gas, but I think that'll pick up as well,
5:33
Speaker 5: as we're seeing a big here for Henry Hub and
5:37
Speaker 5: various prices across the regions. When you have a industry
5:41
Speaker 5: that is in the crosshairs of both civic and political leaders,
5:45
Speaker 5: the one way to survive is to consolidate and get
5:49
Speaker 5: bigger if you're not able to grow organically.
5:52
Speaker 1: Our thanks to Vince Piatza, Bloomberg Intelligence senior equity research
5:55
Speaker 1: channelists on the oil and gas industry.
5:57
Speaker 4: We move now to big tech and Apple Apples, I
6:00
Speaker 4: on stage the rebound in China last month, with shipments
6:02
Speaker 4: rising fifty two percent. That's according to the latest figures
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Speaker 4: from the China Academy of Information and Communications Technology.
6:09
Speaker 1: This all comes as Apple and it's Chinese retailers have
6:11
Speaker 1: been cutting prices since it start of twenty twenty four,
6:14
Speaker 1: following steep declines.
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Speaker 4: For more, we're joined by aniog Rana, Bloomberg Intelligence Technology analysts.
6:19
Speaker 4: We first asked anarog for his reaction to the data.
6:21
Speaker 9: This is the way I looked at it in jan
6:23
Speaker 9: and feb. This data was down I think minus thirty
6:26
Speaker 9: five minus forty percent or so. And then when Apple
6:29
Speaker 9: reported their quarter, they said, you know what, mainland China,
6:32
Speaker 9: our iPhone revenue grew. So there is not that direct
6:35
Speaker 9: correlation between the two numbers. And it could be because
6:39
Speaker 9: there are times when Apple, you know, sells phone, but
6:43
Speaker 9: it's stuck in the inventory channel in between. Then they
6:45
Speaker 9: put out a sale and then gets cleared up. So
6:48
Speaker 9: it's a question of timing not so much. But the
6:50
Speaker 9: big thing for us is that there was a downdraft
6:53
Speaker 9: of negative news coming out of China. It's turned positive
6:57
Speaker 9: two months in a row, so that's a good news.
6:59
Speaker 9: Seems more like a cyclical issue to me than a
7:02
Speaker 9: structural problem of people giving away Apple phones not buying it.
7:06
Speaker 8: So that's not the case. So that's a good news.
7:08
Speaker 8: So I think, you know, from an overall point of sentiment.
7:10
Speaker 9: Point of view, I think this is good news for
7:12
Speaker 9: Apple that China, which in our view is the most
7:15
Speaker 9: important market for them over the next three to five years,
7:18
Speaker 9: and we are not going to see you know, let's
7:20
Speaker 9: say eurobar declining share. I think it's going to be
7:24
Speaker 9: okay over the next few years, even if it goes
7:27
Speaker 9: ups and down.
7:28
Speaker 8: So that's really the big takeaway for us.
7:29
Speaker 3: So can I call this a nothing burger?
7:33
Speaker 8: No, that's not true because.
7:35
Speaker 3: I say that because you didn't hear it.
7:37
Speaker 4: But Paul was guessing you would call this data a
7:39
Speaker 4: nothing for But you're being too polite about it.
7:41
Speaker 3: I think gone a wrong.
7:42
Speaker 8: So sentiment advice, think about it.
7:44
Speaker 9: The only thing that we've been hearing for almost a
7:47
Speaker 9: year now that people don't want to buy iPhones in China,
7:50
Speaker 9: it's because of the government and nationalism and so many
7:53
Speaker 9: all things. And I think this one tells us that's
7:55
Speaker 9: not the case. People are strapped for cash and if
7:58
Speaker 9: they get a good deal on a phone, buy it.
8:00
Speaker 9: So what do I expect. I expect Apple to go
8:03
Speaker 9: out and do more promotional activities over the next few
8:06
Speaker 9: months to try and sell more products into the market. Now,
8:09
Speaker 9: not every market is different. Apple's not known to give
8:12
Speaker 9: a lot of discounts globally, but if that's what they
8:15
Speaker 9: have to do in China, that's what they have to.
8:16
Speaker 3: Do, all right, fair enough. But let's go to the
8:19
Speaker 3: discounts though for a second.
8:20
Speaker 4: So even if we don't say, take this data as gold,
8:23
Speaker 4: but just directionally, Apple and discounts tend not to go together,
8:27
Speaker 4: at least in my mind.
8:28
Speaker 3: What do you make of that?
8:30
Speaker 9: Yeah, I think this is a new thing for Apple,
8:32
Speaker 9: and again they're probably grinding their teeth and not liking it.
8:35
Speaker 9: But you know what, they have the rest of the
8:37
Speaker 9: world to make up for it. In the US, for example,
8:39
Speaker 9: people are liking to buy the higher end model, the
8:42
Speaker 9: pro model. That helps margins, that helps the average selling price.
8:46
Speaker 9: So if they have to give a little bit up
8:47
Speaker 9: to gain market share in China, I think they should
8:50
Speaker 9: do it, because you don't want to be branded as
8:52
Speaker 9: somebody a second player in China out there, which is
8:55
Speaker 9: you know, in our view the most important market for
8:58
Speaker 9: growth for Apple, what's going to happen is you're not
9:01
Speaker 9: going to see any growth in China. For that matter,
9:04
Speaker 9: their top line growth is not going to grow, and
9:06
Speaker 9: that's not good for the stock.
9:07
Speaker 8: Also, and I've talked to.
9:09
Speaker 1: Us about India. What is it as a percentage of
9:12
Speaker 1: Apple's business today and what do you think it can
9:14
Speaker 1: be five, six, seven years from now.
9:17
Speaker 9: Yeah, so in our view, apples very small, less than
9:19
Speaker 9: five percent. In fact, when we have done a lot
9:23
Speaker 9: of work on the number of shipments in India, Apple's
9:26
Speaker 9: market share is, you know, less than five percent.
9:29
Speaker 8: But here's the kicker.
9:30
Speaker 9: Ninety five percent of the phones don't even qualify for
9:34
Speaker 9: to be in the Apples you could say ecosystem, which
9:37
Speaker 9: means they're under three hundred dollars. As the Indian economy grows,
9:42
Speaker 9: as the middle class becomes more affluent, I think Apple's
9:45
Speaker 9: going to be a winner over here. But think about
9:47
Speaker 9: it this way. When we look at the US with
9:49
Speaker 9: per capita income of let's say sixty five seventy thousand dollars,
9:52
Speaker 9: somewhere in that realm, China is around twelve and a
9:54
Speaker 9: half thousand dollars. India is about two thousand, twenty five
9:57
Speaker 9: hundred dollars. So when you look at these three systems,
10:01
Speaker 9: I think when we look at that growth driver from
10:04
Speaker 9: five years onwards, that's where you know, India comes in
10:07
Speaker 9: and there's a massive market there for Apple. But that's
10:10
Speaker 9: not going to happen next year or the year after.
10:12
Speaker 4: Right, that's sort of a structural change, et cetera in
10:15
Speaker 4: the market. I don't know what else are you working
10:17
Speaker 4: on right now.
10:18
Speaker 9: I think the biggest thing right now is what happens
10:20
Speaker 9: at WWDC and whether that's going to be enough to
10:23
Speaker 9: sustain this. You know, I would say optimism that we
10:27
Speaker 9: have seen in Apple for the first time, I would
10:29
Speaker 9: say in the last eighteen months, because we all knew
10:32
Speaker 9: China was a problem. We saw that in the numbers,
10:35
Speaker 9: sales numbers and not very strong. But AI has that
10:39
Speaker 9: outside potential to go out and spur the next sale
10:42
Speaker 9: off phones. Why because there is a massive amount over
10:46
Speaker 9: forty three percent of the phones our iPhone twelve and below,
10:49
Speaker 9: which is old phones with lower you know, you could
10:52
Speaker 9: say RAM memory and other things. Now for if they
10:55
Speaker 9: go out and say I have really cool features coming
10:57
Speaker 9: into the phone you got to go find a way
10:59
Speaker 9: to upgraded. Now, if somebody has a fourteen or a fifteen,
11:03
Speaker 9: they're most likely not going to upgrade it. But if
11:05
Speaker 9: you have something that I can iPhone ten, iPhone eleven,
11:08
Speaker 9: there may be a reason enough for you to upgrade it.
11:10
Speaker 9: So that really brings a new fresh you could say
11:14
Speaker 9: life and Apple, and that's really important. On June tenth
11:17
Speaker 9: when they get this developer conference.
11:19
Speaker 1: All right, I'm sitting on an Apple iPhone eleven. When
11:24
Speaker 1: do I upgrade?
11:26
Speaker 9: You should update it in the winter when the sixteen
11:28
Speaker 9: comes out or whatever the name they give that phone,
11:31
Speaker 9: because it should have a faster processor, it should have
11:34
Speaker 9: a lot more memory. They'll just make things easier for you.
11:37
Speaker 9: You can watch your golf shows in a little bit
11:39
Speaker 9: easier way.
11:40
Speaker 1: Very good. Now, Tim Cook's sixty three, I'm gonna switch
11:42
Speaker 1: gears on you. Is there any push for this guy
11:45
Speaker 1: to put out a succession plan of note or things
11:49
Speaker 1: just going so well at Apple that nobody's pushing for that.
11:52
Speaker 9: See, Tim's done well. The Apple's done very well under Tim.
11:56
Speaker 9: I have no way of predicting what he's going to leave.
11:59
Speaker 9: But in my view, if you were to somehow ring
12:01
Speaker 9: fence the China business. Apple alone is a company that
12:05
Speaker 9: I think can do good by itself. It doesn't really
12:08
Speaker 9: need a massive charismatic leader in order to, you know,
12:11
Speaker 9: come up with that. This is a company with a
12:13
Speaker 9: global brand, the products people love, people trust the products,
12:17
Speaker 9: and the installed base is very loyal. I mean, we
12:20
Speaker 9: think somewhere in the mid nineties people can keep the phones.
12:23
Speaker 9: They don't go out and change into a new ecosystem.
12:27
Speaker 9: I think this is a phenomenal business, but you know,
12:30
Speaker 9: you do need certain innovation, but not to the level
12:32
Speaker 9: you need in other technology companies.
12:34
Speaker 1: Our thanks to anorak Ruana Bloomberg Intelligence technology analyst.
12:37
Speaker 4: Coming up, we're going to breakdown why American Airlines gave
12:40
Speaker 4: an outlook for the coming quarter the disappointed investors.
12:42
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Speaker 4: I'm Paul Sweet and I'm Alex Steel and this is Bloomberg.
13:00
Speaker 2: This is Bloomberg Intelligence with Alex Steele and Paul Sweeney
13:04
Speaker 2: on Bloomberg Radio.
13:07
Speaker 4: We move now to the airline industry. This week, American
13:09
Speaker 4: Airlines issued guidance for the second quarter. The disappointed investors.
13:13
Speaker 1: The carrier slash profit and revenue expectations, and American air
13:17
Speaker 1: also acknowledged that it misjudge domestic demand heading into the
13:20
Speaker 1: crucial summer travel season.
13:22
Speaker 4: For more, we're drawn by George ferguson Bloomberg Intelligence in
13:25
Speaker 4: your Aerospace, Defense and Airlines analyst.
13:27
Speaker 1: We first asked George for his take on this week's guidance.
13:30
Speaker 10: There's some analysts that think that this is driven by
13:34
Speaker 10: they got a very much more domestically focused strategy, different
13:38
Speaker 10: corporate strategy than United in Delta. You know, I guess
13:42
Speaker 10: we're the view that American has been underperforming Delta United
13:47
Speaker 10: for the last couple quarters, especially last quarter. We saw
13:50
Speaker 10: them down in every single market, including Transatlantic, which had
13:55
Speaker 10: been an area of strength for airlines like you know, Delta.
14:01
Speaker 10: So they absolutely seem like they've been underperforming. But you know,
14:05
Speaker 10: we've taken a look at the capacity that's getting added
14:07
Speaker 10: to the market all the markets US airlines fly domestic,
14:13
Speaker 10: Latin America, you know, Atlantic and Pacific, and frankly, what
14:17
Speaker 10: we see is capacity ads that are in some cases
14:21
Speaker 10: twice GDP growth since last summer. So well, we think
14:25
Speaker 10: Americans probably going to be the worst on the downside
14:28
Speaker 10: of the big three. I think it's going to be
14:31
Speaker 10: hard for the other two to avoid similar trends. They
14:34
Speaker 10: won't be as bad, but we just see too much
14:36
Speaker 10: capacity coming to most of the markets US airlines fly too,
14:40
Speaker 10: and we think the REDA cross is probably even greater
14:43
Speaker 10: to the budget very domestically focused and Latin American focused
14:47
Speaker 10: carriers that be Southwest, that be Jet Blue, that be
14:50
Speaker 10: all the low cost carriers, So the REDA cross is
14:52
Speaker 10: probably even stronger for those carriers.
14:55
Speaker 1: So Georgia, I kind of feel my just you know,
14:58
Speaker 1: layperson's eye, United, Delta, and American. Are they all kind
15:03
Speaker 1: of the same, kind of the same strategy.
15:06
Speaker 10: No, No, not at all, all.
15:08
Speaker 1: Right, So what's different?
15:10
Speaker 3: God, exactly?
15:12
Speaker 1: Well, I fly Delta, I'm like I fly United being
15:15
Speaker 1: a Newark person myself. But so what's different about these guys.
15:18
Speaker 10: Well, they each have their own, you know, their different strengths, right,
15:21
Speaker 10: and so American really has very little presence in the
15:25
Speaker 10: Pacific region, so they don't get much pickup fares there.
15:28
Speaker 10: Are pretty strong, although coming down because capacity is getting added,
15:32
Speaker 10: but they don't get any of the Pacific tailwind because
15:34
Speaker 10: that's sort of the last recovering market right now. American
15:37
Speaker 10: is very strong, has a lot of capacity into Latin America.
15:41
Speaker 10: Latin America is very weak right now, especially near in
15:46
Speaker 10: Latin America. You know, the sort of short haul narrow
15:49
Speaker 10: body flying. There's just a lot of capacity going into
15:52
Speaker 10: beach markets, a lot of capacity coming out of Mexico.
15:56
Speaker 10: So that's a source of pain. American I think more
15:59
Speaker 10: focused than United in Delta on the US domestic market,
16:04
Speaker 10: where we're seeing United in Delta do more out across
16:07
Speaker 10: the Atlantic, where yields are yields are stronger.
16:11
Speaker 8: I kind of get the sense.
16:12
Speaker 10: That America just doesn't get to pick up from Europe
16:15
Speaker 10: like United in Delta do because I think they've just
16:19
Speaker 10: got a strong partner there in British Airway that kind
16:22
Speaker 10: of really runs Heathrow. So American gets some of it,
16:25
Speaker 10: but they don't ever seem to get as much as
16:28
Speaker 10: United in Delta do out of Europe. So they all
16:30
Speaker 10: have sort of their nuances.
16:32
Speaker 4: CCO is leaving, how long do they get back on track?
16:35
Speaker 10: So you know, again, what we see is a marketplace
16:39
Speaker 10: that isn't just this isn't an American anomaly. It's a
16:42
Speaker 10: little bit of an American anomaly, but it's a larger
16:45
Speaker 10: broader trend, and that is consumers running out of gas
16:48
Speaker 10: a bit here, especially the lower end consumer, and a
16:52
Speaker 10: lot of capacity coming to the US domestic market, the
16:55
Speaker 10: beach markets and transatlantic so I think the rest of
16:58
Speaker 10: them are coming American direction. America isn't going their direction
17:02
Speaker 10: over the near term. Over this summer, we'll see.
17:05
Speaker 7: All right.
17:06
Speaker 4: Thanks to George ferguson Bloomberg Intelligence, Senior Aerospace, Defense and
17:09
Speaker 4: Airlines analyst.
17:10
Speaker 1: On Bloomberg Intelligence Radio, we bring you all the top
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Speaker 1: analysts providing in depth research and data on two thousand
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Speaker 4: We also have something here at Bloomberg called Bloomberg New
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Speaker 4: Energy Finance, and the idea behind it is to provide
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Speaker 4: data on commodities, power, transport, industries, buildings, agriculture and new technology.
17:27
Speaker 1: This week we looked into offshore winds. The industry, particularly
17:31
Speaker 1: in the US, has been struggling.
17:33
Speaker 4: This comes as inflation and supply chain challenges have driven
17:36
Speaker 4: up capital expenditure, while financing costs have spiraljuterizing interest rates
17:40
Speaker 4: for more.
17:41
Speaker 1: We were joined by Oliver Metcalf BNEF, head of Wind Research.
17:45
Speaker 1: We first asked Oliver where things stand now with offshore
17:48
Speaker 1: winds in the US.
17:50
Speaker 7: It's been a difficult last twelve months for the US
17:52
Speaker 7: off shore wind industry. We saw around nine gigawatts of
17:55
Speaker 7: off take contracts, so contracts for the generation of these
17:58
Speaker 7: projects get canceled. That's around a third of the contracts
18:01
Speaker 7: that were assigned in total for the US off your
18:03
Speaker 7: wind pipeline. You mentioned there it was because of high inflation.
18:07
Speaker 7: High interest rates have really hit the technology as well.
18:10
Speaker 7: So it's a really capitally intensive technology and so a
18:14
Speaker 7: higher cost of financing hits off your wind especially hard
18:17
Speaker 7: compared with other technologies. We're beginning to see a bit
18:20
Speaker 7: of a turning of the fortunes. So we're seeing the
18:23
Speaker 7: first couple of commercial scale off your wind projects start
18:27
Speaker 7: to come online in the US. One has already come
18:29
Speaker 7: online off the coast of New York, and one that
18:31
Speaker 7: will feed Parento Massachusetts is under construction at the moment.
18:35
Speaker 7: So some good stories beginning, and we're also seeing states
18:38
Speaker 7: willing to adjust their subsidy mechanisms to account for some
18:41
Speaker 7: of the pain that projects have been feeling recently. So
18:44
Speaker 7: offer developers more protection in the contracts, the off take
18:47
Speaker 7: contracts they're offering, and just simply higher prices that these
18:51
Speaker 7: developers need to make their return.
18:53
Speaker 1: So talk to us about just wind power. How is
18:56
Speaker 1: that from an efficiency perspective versus and versus other stuff
19:01
Speaker 1: that's out there? How competitors is wind?
19:04
Speaker 7: So you get kind of higher productivity from a wind
19:06
Speaker 7: turbine compared with a solar panel, and that's even more
19:10
Speaker 7: productive offshore, and so offshore wind you have more consistent
19:14
Speaker 7: wind speeds, stronger winds as well. So that means kind
19:17
Speaker 7: of if you imagine a wind turbine operating one hundred
19:20
Speaker 7: percent of the time, that's kind of theoretical maximum. You
19:22
Speaker 7: can get between forty to sixty percent of that generation
19:26
Speaker 7: typically on a wind project. Now that sixty percent isn't
19:29
Speaker 7: too far off the kind of percentage we could see
19:32
Speaker 7: from a kind of conventional generator, a gas or a
19:35
Speaker 7: cold plant.
19:36
Speaker 3: What about like nuclear, It's a nuclear a lot better.
19:38
Speaker 7: Than that nuclear it's much harder to ramp up and down,
19:41
Speaker 7: and so they tend to operate completely as base loads,
19:43
Speaker 7: so you get really high what we call capacity factors
19:46
Speaker 7: for nuclear so it's operating almost all the time if
19:48
Speaker 7: it's if it's part of the mix.
19:49
Speaker 3: So part of the issue is the off take contract.
19:52
Speaker 4: So basically, if I'm a developer, you know, Paul goes
19:55
Speaker 4: and says, Okay, I'm going to buy this wind from
19:57
Speaker 4: you for this amount of time. He's going to pay
19:59
Speaker 4: me this, which gives me clear then how I can
20:00
Speaker 4: go and invest that money? But my cost go up
20:03
Speaker 4: and I'm kind of left naked at that point. How
20:06
Speaker 4: is that being resolved? You mentioned subsidies, but like what else?
20:09
Speaker 4: Because that gap is very unpredictable. And I remember talking
20:12
Speaker 4: to Siemens North America ahead about that and they're like,
20:15
Speaker 4: we took on all the commodity risk and they're trying
20:18
Speaker 4: to change that now because they're not commodity traders, But.
20:20
Speaker 3: Like, how do you do that?
20:21
Speaker 7: Well, Yes, it's that unpredictability that hit developers especially hard.
20:26
Speaker 7: So in the previous contracts, there's ones I was talking
20:29
Speaker 7: about that got canceled. There was very little adjustment in
20:32
Speaker 7: the contract price to account for moving commodity prices, to
20:35
Speaker 7: account for inflation. So that's the kind of thing that
20:37
Speaker 7: states are building into these contracts now to kind of
20:41
Speaker 7: better share the risk between a state which is buying
20:43
Speaker 7: the power and the developer that's building the project. So
20:47
Speaker 7: we're seeing kind of these prices getting index to CPI
20:51
Speaker 7: for example, to certain kind of producer price indexes and
20:55
Speaker 7: to certain commodity prices to make sometimes a one time
20:59
Speaker 7: adjustment from when you're reach that price to when you're
21:01
Speaker 7: actually securing finance, and sometimes you see that adjustments accounting
21:05
Speaker 7: for inflation right throughout the life of the project.
21:07
Speaker 1: That's interesting.
21:08
Speaker 7: That's the kind of structure we see in lots of
21:10
Speaker 7: other countries that have managed to build large scale off
21:12
Speaker 7: your wind projects globally, and so yeah, from the offs
21:16
Speaker 7: your wind industry's perspective, it's good to see that happening
21:18
Speaker 7: in the US as well.
21:19
Speaker 1: You mentioned the project off the coast of New York.
21:23
Speaker 1: Talked to us about the economics, how much does it
21:25
Speaker 1: cost to build that thing, who paid for it, and
21:28
Speaker 1: just the economics.
21:30
Speaker 7: So that is a project called South Fork. It was
21:32
Speaker 7: the kind of the first commercial scale offshore wind project
21:36
Speaker 7: in the US that was significantly more expensive than a
21:39
Speaker 7: project we expect to see getting installed today. That's partly
21:44
Speaker 7: because it was it was almost like a proof of concept.
21:46
Speaker 7: So up until then, there are only seven operational offshore
21:49
Speaker 7: wind turbines off the coast of the US so far.
21:52
Speaker 7: So this is the first kind of larger scale project
21:55
Speaker 7: for one of the newer projects. You're probably looking between
21:58
Speaker 7: two point eight to three billion dollars for a one
22:01
Speaker 7: gigawap project, which is a really big offshore wind from
22:04
Speaker 7: almost ten times the size of that early kind of
22:07
Speaker 7: commercial scale project that just came off the coast of
22:10
Speaker 7: New York. So these are a really sizeable infrastructure investments.
22:14
Speaker 3: Yeah, what part is the hardest?
22:16
Speaker 4: Because it seems to me that you know, moving the
22:19
Speaker 4: energy from offshore to the grid on land, like you
22:23
Speaker 4: got to like build a transmission line for that, Like
22:26
Speaker 4: that seems really hard and dangerous. And then I also
22:29
Speaker 4: hear of the transmission plug shortages, so basically the thing
22:33
Speaker 4: you need to actually plug that wind into the grid,
22:36
Speaker 4: there's a shortage of that.
22:37
Speaker 3: And then you got to build it.
22:38
Speaker 4: And there's all the raw material costs that come at
22:40
Speaker 4: actually building the turbine.
22:41
Speaker 3: Where's the biggest price increases?
22:44
Speaker 7: I mean, we saw a lot of price increases across
22:46
Speaker 7: the board over the last couple of years. Actually, when
22:49
Speaker 7: you look at a lot of commodity prices that are
22:51
Speaker 7: important for manufacturing of wind turbines, cables, that kind of thing,
22:55
Speaker 7: a lot of those raw material costs have come down.
22:57
Speaker 7: What we've seen is turbine prices have remained stubbornly high.
23:00
Speaker 7: Wind turbine makers were hit just as hard by rising costs,
23:04
Speaker 7: rising inflation, and many of them were having to deliver
23:08
Speaker 7: on contract said signed at cheaper rates in this higher
23:10
Speaker 7: priced environment. So that means many of the kind of
23:13
Speaker 7: major wind turbine makers have suffered a lot over the
23:15
Speaker 7: last couple of years, and so they they're maintaining higher
23:19
Speaker 7: prices to kind of have a bit of a buffer
23:21
Speaker 7: on their margin, trying to regain kind of stronger margins.
23:26
Speaker 7: But that means that developers are left paying higher prices
23:29
Speaker 7: for the turbines despite the fact that some of these
23:31
Speaker 7: input costs have started coming down.
23:32
Speaker 1: Who makes these big turbine things in the ocean.
23:36
Speaker 7: So that's companies like vestas Semens Energy GE is a
23:41
Speaker 7: big US player and so those are I recently spun out.
23:49
Speaker 7: I mean, so also it is one of the one
23:51
Speaker 7: of the companies that builds builds the project, so one
23:54
Speaker 7: of the biggest project developers globally. But there'll be the
23:56
Speaker 7: guys putting in the orders with your likes of vestors,
23:59
Speaker 7: g semen.
24:01
Speaker 1: I mean, how do you build these things? I mean
24:03
Speaker 1: how do you install them? I mean difficulty, it's tough,
24:07
Speaker 1: build them on land, ship them out there, then just
24:10
Speaker 1: plug them in the sand. I mean, how does this work?
24:12
Speaker 7: So most of what's getting built at the moment is
24:14
Speaker 7: bottom fixed off your wind. So you go out there,
24:17
Speaker 7: you build a foundation that's fixed to the seabed, and
24:19
Speaker 7: then you come out and you build the turbine on
24:21
Speaker 7: top of that. So you build up the tower and
24:23
Speaker 7: then component by component kind of build the big fan.
24:26
Speaker 8: You can see it at the top, I know.
24:28
Speaker 4: And then also how do you Then that question is
24:31
Speaker 4: like if something happens and it gets its broken, like
24:34
Speaker 4: how do you fix it?
24:35
Speaker 3: Like what's it like when you go off shore? I mean,
24:37
Speaker 3: what happens when one of these things dies? It just
24:39
Speaker 3: like what's the shelf life of a turbine? And how
24:41
Speaker 3: do you recycle it? I don't, we haven't, we don't
24:44
Speaker 3: know that yet.
24:44
Speaker 7: Yeah, Well, well, going to your question on what happens
24:47
Speaker 7: when it goes wrong or how you construct it. You
24:50
Speaker 7: need really specialized vessels to build these things, so they
24:52
Speaker 7: call them jack up vessels, So they're vessels that kind
24:55
Speaker 7: of have legs that they extend down into the seabed.
24:58
Speaker 7: Jacks up the vessels so it's sitting kind of above
25:01
Speaker 7: the water, so you've got a solid platform by which
25:03
Speaker 7: to install the components, or if something goes wrong, to
25:06
Speaker 7: send it out there, take off one of the components
25:08
Speaker 7: and replace it with a fixed one. But these are
25:11
Speaker 7: really specialized vessels. They cost a lot of money to build.
25:14
Speaker 7: Are estimates around three hundred to five hundred million dollars,
25:17
Speaker 7: and there's a shortage of these things globally at the moment,
25:20
Speaker 7: the kind of specialized vessels to install the foundations and
25:23
Speaker 7: then and then the turbines. So if you're a developer,
25:25
Speaker 7: you're struggling to find those slots where you can secure vessels.
25:29
Speaker 7: And if something goes wrong on a recently installed project
25:31
Speaker 7: with one of these big, big new turbines, then you
25:34
Speaker 7: might struggle to get a vessel to come in and
25:37
Speaker 7: do that do that replacement work.
25:39
Speaker 1: Our thanks to Oliver medkef BN, the f head of
25:41
Speaker 1: Wind Research.
25:42
Speaker 4: Coming up on the program a logo Why Dick's Sporting
25:45
Speaker 4: Goods raised it's outlook for the year even as athletic
25:48
Speaker 4: where companies struggle.
25:49
Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
25:52
Speaker 1: depth research and data on two thousand companies and one
25:54
Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence to
25:57
Speaker 1: be a bi go on the terminal. I'm Paul Swinging
25:59
Speaker 1: and Alex Steel.
26:00
Speaker 4: And this is Bloomberg.
26:06
Speaker 2: You're listening to Bloomberg Intelligence with Alex Steel.
26:10
Speaker 1: And Paul Sweeney on Bloomberg Radio.
26:13
Speaker 3: We move next to retail.
26:14
Speaker 4: This week, dick Sporting Goods raised its outlook for the year,
26:17
Speaker 4: reported quarterly sales it's their past analyst expectations.
26:20
Speaker 1: This was due to strong demand for sports gear across categories,
26:23
Speaker 1: even as athletic, where companies struggle.
26:26
Speaker 4: Separately, the clothing retailer Abercrombie and Fitch also reported quarterly
26:29
Speaker 4: sales that beat analyst estimates. For more on all of this,
26:32
Speaker 4: we were joined by Lindsay Dutch Bloomberg Intelligence Consumer Hardlines, a
26:35
Speaker 4: senior analyst.
26:36
Speaker 1: We first asked A Lindsay why these companies are doing
26:39
Speaker 1: so well.
26:39
Speaker 11: I think when you think about the sporting goods, you know,
26:42
Speaker 11: they do have a higher income sort of consumer base
26:46
Speaker 11: and that definitely helps. They also sell sort of a
26:49
Speaker 11: premium product, especially if you think about their footwear line,
26:53
Speaker 11: and when we think about the consumer broadly, they are
26:56
Speaker 11: you know, making some trade.
26:57
Speaker 3: Offs, but people are still.
26:59
Speaker 11: Willing to spend for that premium product, whether it be
27:03
Speaker 11: in footwear or even if you're thinking about that apparel
27:06
Speaker 11: like Abercrombie.
27:07
Speaker 1: As you mentioned, how is there same store traffic? I
27:10
Speaker 1: know in the retail space, that's important, So how was
27:12
Speaker 1: it kind of in terms of the gross story traffic
27:15
Speaker 1: versus pricing?
27:17
Speaker 11: Right, So when you think about Dick's comp sales were
27:19
Speaker 11: up over five percent in the quarter. That was a
27:22
Speaker 11: surprise or really strong number. It was really driven by
27:25
Speaker 11: number of transactions and ticket price. So they're seeing more
27:30
Speaker 11: customers come in their door and those customers are spending
27:33
Speaker 11: more and again I think that is driven by sort
27:37
Speaker 11: of a broad assortment. If you're going in you're sort
27:40
Speaker 11: of playing a new sport or continuing with your active wear,
27:44
Speaker 11: like you're buying more things you know in that assortment
27:48
Speaker 11: that Dix carries for you.
27:50
Speaker 4: Really dumb question because you know I'm a big sports person.
27:53
Speaker 4: That's not true, but like, why can't you just go
27:55
Speaker 4: to like Target or Walmart for this stuff?
27:58
Speaker 11: I think when you think about f letics, you know,
28:01
Speaker 11: brands matter, performance matters, and I think, you know, when
28:06
Speaker 11: I think about Dix's a great entry point when you're
28:10
Speaker 11: starting or if your kids are starting a new sport.
28:13
Speaker 11: You know, I'm a runner. If my kid is trying baseball,
28:15
Speaker 11: I know nothing about baseball. I can go there and
28:18
Speaker 11: figure out what do I need? And I can also
28:20
Speaker 11: figure out, you know, where I want to be on
28:22
Speaker 11: the price spectrum.
28:23
Speaker 6: Right.
28:23
Speaker 11: They have their own brands, so you can get sort
28:26
Speaker 11: of a cheaper glove if you don't want that name
28:28
Speaker 11: brand glove, and you can kind of get everything that
28:30
Speaker 11: you need in one space. And I think that's where
28:33
Speaker 11: Dix really does stand out.
28:36
Speaker 1: How about inventories, How are they managing their inventories? Some
28:38
Speaker 1: folks kind of surprisingly do a materially better job than
28:43
Speaker 1: the others quarter to quarter.
28:44
Speaker 11: Right, So when you think about this sporting industry as
28:47
Speaker 11: a whole, it sounds like inventory is slightly better positioned
28:51
Speaker 11: than it was about a year ago. Dicks in particular
28:54
Speaker 11: seems very well positioned heading into the second quarter. Second
28:58
Speaker 11: quarter is also seasonally better for that company when we
29:02
Speaker 11: think about sort of the summer and like kind of
29:03
Speaker 11: getting back to school, like fall sports kind of thing,
29:07
Speaker 11: So inventory is in a better position. I think that's
29:10
Speaker 11: helping Dix. I also think Dix has done a really
29:13
Speaker 11: great job sort of scaling back promotions. They're not giving
29:18
Speaker 11: out the discounts that they were pre pandemic. They've really
29:21
Speaker 11: held a line on that and that has really helped
29:23
Speaker 11: them in terms of profitability. Also, their consumer knows what
29:26
Speaker 11: they're getting when they come there, so they're not just
29:28
Speaker 11: like waiting for that fifty percent off deal. They know
29:32
Speaker 11: when they go there, you know what brands might be
29:35
Speaker 11: on sale, and that if they don't want to pay
29:37
Speaker 11: full price for Nike, they might be able to get
29:40
Speaker 11: their private label brand.
29:42
Speaker 4: It was something similar with Abercrombie. Gross margin was sixty
29:45
Speaker 4: six point four percent. Those higher than estimates.
29:47
Speaker 3: Same deal.
29:48
Speaker 4: Like, they're rolling back promotions and they have the power
29:51
Speaker 4: with which to do that.
29:52
Speaker 3: How is that possible?
29:53
Speaker 4: Like I'm trying to distinguish what the macro read is
29:56
Speaker 4: when like all indications point to a.
29:59
Speaker 3: Discerning sol lowing consumer.
30:01
Speaker 4: Base that is much more cash strapped and sensitive with
30:04
Speaker 4: their wallet versus certain companies like Dick Sporting Goods or
30:08
Speaker 4: Abercrombie and Fitch that have the power to keep their margins.
30:12
Speaker 11: Yeah, it's so. I think sort of what happened is,
30:15
Speaker 11: you know, in the pandemic, when we saw a surge
30:17
Speaker 11: for in demand for a lot of these categories, sporting
30:20
Speaker 11: goods and like athletic wear being one of them. You know,
30:23
Speaker 11: these companies saw where their margins could go when demands
30:29
Speaker 11: spike like that, and I think a lot of them
30:31
Speaker 11: made a proactive decision that they would never go back
30:35
Speaker 11: to that level of promotion that they had done before
30:40
Speaker 11: in order to protect that profitability. Coming into twenty twenty four,
30:44
Speaker 11: just broadly in retail, you know, profitability margins are majorly
30:49
Speaker 11: in focus across the board because there is still pressure
30:52
Speaker 11: on sales and everyone is looking to see how are
30:55
Speaker 11: these companies managing margin, how are they managing costs? And
30:58
Speaker 11: Dix has stood out there. I would say it's easier
31:02
Speaker 11: for a company like Dix who has a higher income
31:05
Speaker 11: customer base, or anybody that sort of has an assortment
31:10
Speaker 11: that includes like a higher level premium type brand than
31:14
Speaker 11: the retailers that are really trying to compete on value,
31:17
Speaker 11: because if you have a value focused consumer and they
31:21
Speaker 11: are only looking for the lowest price or the best deal,
31:24
Speaker 11: it's very difficult to compete and you're going to have
31:27
Speaker 11: to go back to that promotional environment. So you're sort
31:30
Speaker 11: of seeing a split in strategy depending on what category
31:35
Speaker 11: you're in. You know what level of assortment you have,
31:38
Speaker 11: and you know whether you're going after that value customer
31:41
Speaker 11: or whether you kind of hold firm try to protect
31:44
Speaker 11: that margin and get that better sale, maybe more longevity
31:48
Speaker 11: with a better consumer over time.
31:51
Speaker 1: And for the retailers that you talk to in including Dix,
31:55
Speaker 1: is there are there any supply chain issues left or
31:57
Speaker 1: that is that all fixed?
31:59
Speaker 11: I guess I think in sporting goods we're not really
32:02
Speaker 11: seeing a lot of supply chain issues anymore. We've seen
32:06
Speaker 11: transportation costs start to come down actually in the second
32:09
Speaker 11: half of last year. Many retailers in the space are
32:12
Speaker 11: still benefiting from those lower costs again helping the margin
32:16
Speaker 11: this year, and that is where we're seeing some of
32:19
Speaker 11: the improvement on that profit line.
32:22
Speaker 5: All right.
32:22
Speaker 4: Thanks to Lindsay Dutch Bloomberg intelligence, consumer hardline senior analyst.
32:25
Speaker 1: Return now to Elon Musk and the ev giant Tesla.
32:28
Speaker 1: The company appears to be in disarray as its stock
32:31
Speaker 1: has been creatoring, sales have been weak, and some investors
32:34
Speaker 1: say it has a distracted leader.
32:36
Speaker 4: But what about some of the other companies that CEO
32:38
Speaker 4: Elon Musk runs, like X and SpaceX. This is the
32:41
Speaker 4: subject of a big Take piece this week titled Tesla's
32:44
Speaker 4: Slump Exposes Elon Musk's distractions across his empire.
32:47
Speaker 1: We were joined by one of the pieces co authors,
32:49
Speaker 1: Bloomberg Tech reporter Kurt Wagner. We first asked Kurt for
32:53
Speaker 1: more context on his story.
32:54
Speaker 12: A big part of what you know working for Elon
32:58
Speaker 12: is all about, is sort of working for Elon everywhere
33:00
Speaker 12: he needs you, right, So you might be employed technically
33:03
Speaker 12: by Tesla, but you might show up on you know,
33:06
Speaker 12: a SpaceX project or an X project. And I think,
33:09
Speaker 12: you know, not only are the people that he works
33:12
Speaker 12: with sort of hovering around and all these various roles,
33:14
Speaker 12: but I think his companies are becoming closer and closer together.
33:17
Speaker 12: And that's why it's so important that you know when
33:20
Speaker 12: Tesla is struggling, it has this trickle effect because that's
33:23
Speaker 12: where he gets his wealth to fund XAI, to to
33:26
Speaker 12: you know, deal with X, to deal with SpaceX, and so,
33:29
Speaker 12: you know, what we wanted to sort of do is
33:31
Speaker 12: show people that all of these different companies and all
33:33
Speaker 12: the people who work them are interconnected. And we try
33:36
Speaker 12: to do that with a pretty cool visual graphic that
33:39
Speaker 12: folks can see on the website.
33:41
Speaker 1: Kurt, what is the musconomy to find that?
33:44
Speaker 12: Yeah, it's a term that represents or reflects these six
33:48
Speaker 12: different businesses that he's running at any given time, and again,
33:53
Speaker 12: sort of this idea that they all work together. They
33:57
Speaker 12: they you know, in X's case, the data from X
34:00
Speaker 12: which used to be called Twitter, is now sort of
34:03
Speaker 12: powering XAI his startup.
34:04
Speaker 5: Right.
34:05
Speaker 12: The money from Tesla has historically been used to help
34:08
Speaker 12: fund SpaceX and his purchase of X. And again, you
34:12
Speaker 12: see the musconomy as this collection of businesses that Elon
34:16
Speaker 12: runs and how they are all intertwined with one another.
34:19
Speaker 3: Do the people in his orbit do they like this?
34:22
Speaker 3: Like that to me sounds terrible.
34:23
Speaker 4: Like I like predictability, which I know as funny as
34:26
Speaker 4: I work in news. I like predictability. I like to
34:28
Speaker 4: know what I'm doing. I do not want to be
34:29
Speaker 4: pulled in seventeen thousand directions. Do people in his orbit like.
34:32
Speaker 12: That, Well, I think the people at the very center
34:36
Speaker 12: of this universe, the people who are closest to Elon.
34:39
Speaker 12: Whether they like it or not, it's sort of a necessity, right,
34:41
Speaker 12: because that's what it takes to be close to that
34:44
Speaker 12: center of power. And so we've seen, for example, his
34:47
Speaker 12: business manager Jared Burchell shows up pretty much across all
34:50
Speaker 12: of these different companies. His lawyer Alex Spiro shows up
34:53
Speaker 12: across all of these companies. So if you want to
34:55
Speaker 12: be at the center of this universe, you have to
34:58
Speaker 12: be willing to go where Elon go. And as we know,
35:01
Speaker 12: he not only has these six companies, but he's doing
35:02
Speaker 12: a million other things as well. And so whether they
35:05
Speaker 12: like it or not, I'm not sure if it really matters,
35:07
Speaker 12: because that's just what it takes to work for Elon Musk.
35:10
Speaker 3: How do they all?
35:11
Speaker 4: How do all the businesses though intersect? Because from a
35:15
Speaker 4: broad look they don't. But then if you dive a
35:18
Speaker 4: little deeper like they do, like X, you can use
35:20
Speaker 4: all that stuff for large language models, for his AI
35:23
Speaker 4: stuff and the AI stuff goes into the car stuff,
35:25
Speaker 4: and the car stuff I guess goes into the rocket
35:27
Speaker 4: ship stuff.
35:28
Speaker 12: Yeah, I mean you kind of hit on it. Like
35:30
Speaker 12: the connective tissue between these companies can be somewhat small.
35:34
Speaker 12: In X's case, as you pointed out that data there
35:37
Speaker 12: is being used to train a chatbot called Grock within XAI.
35:42
Speaker 12: We know that, for example, the corporate plane, like small things,
35:45
Speaker 12: the corporate plane that Elon uses at Tesla's the same
35:48
Speaker 12: one that's used at SpaceX. We know that they share
35:50
Speaker 12: certain employees, so you know, I mentioned Jared Burchell, his
35:54
Speaker 12: business manager, Alex Biro, his lawyer. Like these are the
35:57
Speaker 12: types of connective things that bring these companies together. Is
36:00
Speaker 12: the people and and sort of you know, the smaller
36:03
Speaker 12: parts of their business that are intertwined. And I feel
36:06
Speaker 12: like Tesla is sort of the engine behind this whole thing.
36:09
Speaker 12: If Tesla is humming and doing well, it kind of
36:12
Speaker 12: enables everything else to grow too.
36:14
Speaker 1: How about Twitter? You bought that for forty four billion dollars.
36:17
Speaker 1: Kurt and a lot of analysts says the value of
36:19
Speaker 1: Twitter's declined dramatically as advertisers have fled. Is there any
36:23
Speaker 1: pushback from anybody or or folks just saying, hey, it
36:26
Speaker 1: was his money, he can do with it what he wants.
36:28
Speaker 12: Yeah, I mean, I do think it poses a challenge
36:31
Speaker 12: because of this distraction with Elon's time, right. I think,
36:34
Speaker 12: especially if you're a Tesla investor, you have to be
36:37
Speaker 12: scratching your head and saying, what are you doing? You know,
36:40
Speaker 12: why are you spending time on this money losing business
36:43
Speaker 12: when you could be sort of you know, making money
36:45
Speaker 12: for shareholders over here. And I think it's you know,
36:49
Speaker 12: becoming a bit of a problem. I think what will
36:51
Speaker 12: be interesting is to see whether X sort of gets
36:55
Speaker 12: folded into x AI at some point. I could see
36:58
Speaker 12: those two companies sort of merge so that you know,
37:01
Speaker 12: again X provides the data for these large language models,
37:04
Speaker 12: but it sort of gives him some cover to spend
37:06
Speaker 12: time in X because now it's part of the AI business,
37:09
Speaker 12: which is much more exciting, I think, for people than
37:11
Speaker 12: the free speech business, which hasn't been very lucrative for him.
37:15
Speaker 3: The free speech Businessho's in the free speech business? Like,
37:17
Speaker 3: what is that mental lawyers?
37:19
Speaker 12: That is Elon? Elon is the is in the free
37:21
Speaker 12: speech business.
37:22
Speaker 8: I guess.
37:22
Speaker 4: So in your reporting, what emerges the biggest problem or
37:26
Speaker 4: the biggest question.
37:27
Speaker 12: Yeah, I think really it comes down to kind of
37:30
Speaker 12: this we I haven't really talked much about this yet,
37:32
Speaker 12: but Elon's pay package at Tesla is sort of up
37:35
Speaker 12: for debate.
37:36
Speaker 5: Right.
37:37
Speaker 12: You may remember he was supposed to be paid I
37:39
Speaker 12: believe it was fifty six billion dollars and that pay
37:42
Speaker 12: package was I believe set up in twenty eighteen. It's
37:45
Speaker 12: been challenged in court and a judge basically said this
37:48
Speaker 12: isn't a fair you know, compensation, and Elon is fighting
37:52
Speaker 12: this in court. But it's a huge deal, not only
37:54
Speaker 12: because it's you know, his own net worth, but because
37:57
Speaker 12: that money is then used to fund many of these
38:00
Speaker 12: other projects. So if he's not able to secure this
38:03
Speaker 12: pay package that he thought he had, it impacts the
38:06
Speaker 12: loans that he takes out and impacts his liquidity to
38:09
Speaker 12: be able to use on these other companies. And I
38:11
Speaker 12: do wonder if he starts to lose a lot of
38:14
Speaker 12: his net worth, his value, if that's going to have
38:17
Speaker 12: an impact on XAI, Twitter, SpaceX and others.
38:20
Speaker 3: All Right, Thanks to Kurt Wagner, Bloomberg Tech Reporter.
38:23
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