Latest / Bloomberg Intelligence / SK Hynix ADRs Surge After Record $26.5 Billion US Offering

Transcript

SK Hynix ADRs Surge After Record $26.5 Billion US Offering · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the
• 0:10
  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
• 0:14
  Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg
• 0:17
  Speaker 1: Business App. Listen on demand wherever you get your podcasts,
• 0:21
  Speaker 1: or watch us live on YouTube.
• 0:24
  Speaker 2: We have sk heinez ADRs opening for trade. They opened
• 0:28
  Speaker 2: fourteen percent above the offer price. They opened at one
• 0:30
  Speaker 2: hundred and seventy dollars. The offering was at one hundred
• 0:34
  Speaker 2: and forty nine dollars. The company raised twenty six and
• 0:37
  Speaker 2: a half billion dollars in selling American Depository receipts on
• 0:40
  Speaker 2: the Nasdaq.
• 0:41
  Speaker 3: Let's bring in Anthony Hughes.
• 0:43
  Speaker 2: He is our senior equity capital markets reporter here at
• 0:46
  Speaker 2: Bloomberg News, and Anthony, you've been monitoring this.
• 0:49
  Speaker 3: This was a very oversubscribed offering.
• 0:51
  Speaker 2: There's a lot of demand for it, and this opening
• 0:54
  Speaker 2: indicates the demand has not stopped.
• 0:57
  Speaker 4: Yes, for the size that is offering this game that
• 1:00
  Speaker 4: you can see here, you know, around fifteen percent is
• 1:04
  Speaker 4: what you'd expect for perhaps a deal like this where
• 1:07
  Speaker 4: it's pretty large, you would expect maybe to go up,
• 1:11
  Speaker 4: you know, like fifty one hundred percent or.
• 1:12
  Speaker 5: Something like that.
• 1:13
  Speaker 4: But you know, really what this confirms is that s
• 1:16
  Speaker 4: k Heinez has been able to achieve a premium to
• 1:19
  Speaker 4: it's you know, the price at which the stock trades
• 1:21
  Speaker 4: in Korea, and that was part of the part of
• 1:24
  Speaker 4: this exercise here. This was a offering which was designed
• 1:29
  Speaker 4: to fund the capital expenditure of the company, but it
• 1:32
  Speaker 4: was also trying to do that in a way which
• 1:34
  Speaker 4: was most efficient for the company and enabling the company
• 1:38
  Speaker 4: to get a cost of capital that was more the
• 1:41
  Speaker 4: best the lowest they could and you know, basically as
• 1:46
  Speaker 4: good as Micron's getting in the US. So you know,
• 1:49
  Speaker 4: obviously it's an efficient way for the company to raise
• 1:51
  Speaker 4: money in the US. This is the way they did it.
• 1:54
  Speaker 5: What does the company said about their need for additional
• 1:56
  Speaker 5: capital going forward? Did they put out a message we
• 2:00
  Speaker 5: may come back for equity, we may access to the
• 2:03
  Speaker 5: US debt markets would did they say anything about that? Yeah?
• 2:05
  Speaker 4: I think if you see the interview with the chairman,
• 2:07
  Speaker 4: he did say that there was a possibility they could sell
• 2:09
  Speaker 4: more ad rs and obviously they can raise debt in
• 2:11
  Speaker 4: the future as well. So I think the company is
• 2:13
  Speaker 4: going to have significant capital expenditure needs and This is
• 2:18
  Speaker 4: the sort of interesting thing about the mark at the
• 2:19
  Speaker 4: moment where there's a lot of interesting companies that do
• 2:21
  Speaker 4: have heavy capital expansion needs, and I think in the
• 2:24
  Speaker 4: past we'd probably think they were not the best companies
• 2:26
  Speaker 4: to invest in, but these things are different these days.
• 2:29
  Speaker 4: But obviously they're generating a huge, huge amount of huge
• 2:34
  Speaker 4: return on the assets they have the moment. But you know,
• 2:37
  Speaker 4: I think the really interesting thing from that interview I
• 2:39
  Speaker 4: thought with the chairman was that you know, he has
• 2:41
  Speaker 4: to balance off really you know, maximizing profit for the shareholders,
• 2:44
  Speaker 4: but he's also got a supply his customers with the product,
• 2:47
  Speaker 4: and you know, obviously he has to expand the production
• 2:52
  Speaker 4: of the memoryships and doing this is something that you
• 2:54
  Speaker 4: know could subtract a little bit away from shareholder returns
• 2:57
  Speaker 4: at a time. But that's a balancing act that you know,
• 2:59
  Speaker 4: management has to has to achieve, and that's really interesting
• 3:03
  Speaker 4: challenge for the company looking forward here.
• 3:05
  Speaker 2: So the market where eske Heinez has its primary listing,
• 3:09
  Speaker 2: SOUL is the world's best performing stock market, right. I mean,
• 3:13
  Speaker 2: it's done incredibly well, and this is even after it
• 3:16
  Speaker 2: basically had this moment of whiplash the last couple of weeks.
• 3:21
  Speaker 3: You know, it's been very, very volatile.
• 3:22
  Speaker 2: Just this week alone, I'm looking at it, the costpy,
• 3:25
  Speaker 2: the benchmark index. They're closed down five percent. Last night
• 3:29
  Speaker 2: it rose three percent, So it's kind of all over
• 3:31
  Speaker 2: the place. Is there a sense that this was kind
• 3:34
  Speaker 2: of the not I don't want to say the top,
• 3:36
  Speaker 2: but you know, it was kind of a dicey time
• 3:38
  Speaker 2: for eske Heinis to go public in the US, given
• 3:41
  Speaker 2: that there's so much volatility in its home market.
• 3:44
  Speaker 6: Yeah.
• 3:44
  Speaker 4: Well, I think when the stock's up six or seven
• 3:47
  Speaker 4: hundred percent in the last year, finding the right price
• 3:50
  Speaker 4: here it was always going to be a little bit challenging.
• 3:51
  Speaker 4: And I think although the offering did price at a
• 3:54
  Speaker 4: premium to the translated value of the stock in career,
• 3:57
  Speaker 4: you know, it did come back twenty five percent and
• 4:00
  Speaker 4: thirty percent ahead of this offering and in the past
• 4:02
  Speaker 4: few weeks, and that was something that I think the
• 4:04
  Speaker 4: investors in the offering, the US investors that came into
• 4:06
  Speaker 4: for the ADRs, were pleased about. I mean, obviously it'd
• 4:09
  Speaker 4: be much better to have bought the stock a year
• 4:12
  Speaker 4: ago when it was before it had gone up six
• 4:14
  Speaker 4: hundred percent, But you know, the investment opportunity was laid
• 4:16
  Speaker 4: out to them here, and you know, the stock did
• 4:19
  Speaker 4: come back ahead of the offering, and then it priced
• 4:20
  Speaker 4: a premium and now it's trading, you know, up again,
• 4:23
  Speaker 4: so you know that the company is trying to get
• 4:26
  Speaker 4: a multiple that's closer to Micron, which has been an
• 4:30
  Speaker 4: outstanding stock in the US. And you know, but whenever
• 4:33
  Speaker 4: you see stock prices go up in a a in
• 4:36
  Speaker 4: a straight line like they have, or at least go
• 4:38
  Speaker 4: up very, very sharply over a short period of time,
• 4:40
  Speaker 4: there's always a chance for retlacement. But to your point,
• 4:43
  Speaker 4: the Korean market has been hugely volatile. It's been very
• 4:46
  Speaker 4: it's been very strong, yes, one of the strongest market
• 4:49
  Speaker 4: in the world, but it's highly it's very volatile. So
• 4:51
  Speaker 4: I think the interesting thing for investors is whether this
• 4:53
  Speaker 4: stock is going to be volatile now that it's trading
• 4:56
  Speaker 4: in the US, and so that is some of that
• 4:58
  Speaker 4: volatility in career get imported into the US.
• 5:01
  Speaker 2: Very well said, Okay, you keep bringing up my Cron
• 5:03
  Speaker 2: and that's because that's the US's biggest memory chip maker,
• 5:06
  Speaker 2: But ask heinez has a rival at home, and that's
• 5:08
  Speaker 2: Samsung Electronics. Does Samsung Electronics trade in any way in
• 5:13
  Speaker 2: the US, and if not, would it consider listing in
• 5:16
  Speaker 2: the US because aske Heinez.
• 5:17
  Speaker 4: Has Yeah, well, I think people are expecting other companies
• 5:20
  Speaker 4: to look at ADR programs. I mean Kiyoksa kiyoksya of Japan.
• 5:26
  Speaker 3: Oh right here, Sarah, right, yeah, yeah, I've got the
• 5:28
  Speaker 3: name right.
• 5:29
  Speaker 4: But you know, I think ADR programs are not necessarily
• 5:34
  Speaker 4: simple things for companies to roll out, and I think
• 5:36
  Speaker 4: a lot of Asian companies have probably shyed away them
• 5:37
  Speaker 4: in recent years. Certainly Chinese companies have not really been
• 5:40
  Speaker 4: encouraged to in either direction to do ADR programs. So
• 5:44
  Speaker 4: you know, this might be a little bit of one
• 5:45
  Speaker 4: off and really reflective of these amazing conditions in the
• 5:48
  Speaker 4: in the memory chip market, but yeah, it's this has
• 5:53
  Speaker 4: been a pretty orderly outcome so far.
• 5:56
  Speaker 5: Real quick, Do we expect Stark the treaty to Premium
• 5:59
  Speaker 5: in the US for career from evaluation perspective? Yeah?
• 6:02
  Speaker 4: So, I guess to Scarlet's point there, even though Samsung
• 6:07
  Speaker 4: is a rival, they're really the direct camp here was Micron,
• 6:10
  Speaker 4: and Micron does trade it to premium to to s
• 6:14
  Speaker 4: k Heinex based on forward earnings. I mean, obviously you
• 6:17
  Speaker 4: can value companies in different ways. But and part of
• 6:20
  Speaker 4: the exercise here was to close that gap at least
• 6:22
  Speaker 4: as far as the stock trades in the US. And obviously,
• 6:26
  Speaker 4: when the company goes to look to raise further capital
• 6:28
  Speaker 4: a little bit, raise it in the cheapest way possible.
• 6:30
  Speaker 4: And if stock is trading at a premium in the
• 6:32
  Speaker 4: US versus career, there's obviously going to be an incentive
• 6:34
  Speaker 4: for them to raise the money in the US. And
• 6:36
  Speaker 4: obviously the other thing about the US is there's a
• 6:37
  Speaker 4: lot of money in the.
• 6:38
  Speaker 5: US as well to play that arbitrage.
• 6:40
  Speaker 4: Yeah, but that was very much expected that there would
• 6:43
  Speaker 4: be a premium here and that's part of the exercise
• 6:46
  Speaker 4: that that that.
• 6:48
  Speaker 3: They've been able to do that.
• 6:49
  Speaker 4: But obviously there is a Korean discount that people talk
• 6:51
  Speaker 4: about that reflects the fact that there's a lot of
• 6:53
  Speaker 4: governance concerns about the way Korean business.
• 6:56
  Speaker 5: Korea does business a little bit differently to America.
• 6:58
  Speaker 4: I think they're less the Korean companies are less focused
• 7:01
  Speaker 4: on capital returns and dividends end Also, just you know,
• 7:06
  Speaker 4: Americans is a bit more shape price focused.
• 7:08
  Speaker 2: For more accounts, stay with us more from Bloomberg Intelligence
• 7:11
  Speaker 2: coming up after this.
• 7:16
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 7:20
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 7:23
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 7:26
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 7:30
  Speaker 5: All right, let's switch gears to the airspace business, the
• 7:33
  Speaker 5: airlines business. We do that with George Ferguson, and he's
• 7:38
  Speaker 5: a senior airspace analyst at Bloomberg Intelligence. And George, the
• 7:41
  Speaker 5: only thing between me and the beach is this discussion
• 7:44
  Speaker 5: with you. So I want to get through this. George
• 7:47
  Speaker 5: talk to us about Delta earnings came out. I thought
• 7:50
  Speaker 5: they were pretty good here. It seems like demand's holding
• 7:53
  Speaker 5: up for these airlines.
• 7:56
  Speaker 6: Yeah, I mean I think that, you know, Delta United
• 8:00
  Speaker 6: and to a lesser extent, American are going to probably
• 8:03
  Speaker 6: be the best part of.
• 8:04
  Speaker 3: The story this quarter.
• 8:06
  Speaker 6: And I think Delta showed some resilience in that in
• 8:09
  Speaker 6: the revenue lines, right, and I think you know, if
• 8:12
  Speaker 6: you remember, this is a pretty diversified from a revenue
• 8:16
  Speaker 6: standpoint company. They have maintenance business that brought in some
• 8:20
  Speaker 6: great double digit gains They've got They had cargo, they
• 8:25
  Speaker 6: had loyalty that all sort of brought in gains as
• 8:28
  Speaker 6: well as premium. Uh and then and Basic lagged a
• 8:31
  Speaker 6: little bit, although they indicated that, you know, they've been
• 8:34
  Speaker 6: cutting down a number of Basic seats. But I think
• 8:37
  Speaker 6: Jenner of this story was pretty good on the revenue front.
• 8:40
  Speaker 6: They grew less than United in Americans, so I think
• 8:43
  Speaker 6: that means they could support some of those higher faares.
• 8:46
  Speaker 6: They were like, at one percent seat count growth, We're
• 8:49
  Speaker 6: going to see United and they come in closer to six.
• 8:52
  Speaker 6: We're going to see American around three ish, so they
• 8:56
  Speaker 6: I think this might be the best part again of
• 8:59
  Speaker 6: the revenue story for US airlines as we get into
• 9:02
  Speaker 6: this earning season. And one of the challenges I think
• 9:04
  Speaker 6: too and growing a little slower on the capacity front,
• 9:08
  Speaker 6: is that some of their cost ballooned a little bit.
• 9:12
  Speaker 6: But look again, I think they made some good ground.
• 9:14
  Speaker 6: They haven't totally compensated for higher fuel prices, but they
• 9:17
  Speaker 6: made some good ground. I think it was a it
• 9:19
  Speaker 6: was it was a pretty decent earnings you know, earnings numbers.
• 9:24
  Speaker 5: Hey, George, talk to us about just maybe the trend
• 9:26
  Speaker 5: in the industry to maybe taking out some economy seats,
• 9:30
  Speaker 5: putting in more business or first class seats. How is
• 9:32
  Speaker 5: a cabin changing within the industry these days?
• 9:36
  Speaker 6: Yeah, I think you're just you know, on the big
• 9:38
  Speaker 6: full service guys, you're seeing a lot of I don't
• 9:41
  Speaker 6: know what we call it, upgrading improving, right, And remember
• 9:46
  Speaker 6: like that premium seat, you know, that can stretch anything
• 9:49
  Speaker 6: from premium economy to more business seats. And you know,
• 9:54
  Speaker 6: I think they're finding again, you know, they're sort of
• 9:58
  Speaker 6: they're focusing on the well healed concer tumor your retiree
• 10:02
  Speaker 6: you know, and your four to one K accounts. I
• 10:05
  Speaker 6: guess it's not a former anymore. Your investment accounts are
• 10:08
  Speaker 6: rocking and rolling. You don't want to fly overseas, you
• 10:11
  Speaker 6: don't want to fly to the West coast in something
• 10:14
  Speaker 6: that's has cramped as some of that basic economy in
• 10:16
  Speaker 6: the back of the airplane. So those carriers are sort
• 10:19
  Speaker 6: of pushing that upgraded seat, trying to get more money
• 10:22
  Speaker 6: from it. And again I think, you know, Delta has
• 10:25
  Speaker 6: shown some success on that front, and I would expect
• 10:28
  Speaker 6: to get to see the same out of United an
• 10:30
  Speaker 6: American but to a lesser extent.
• 10:33
  Speaker 5: But what happens, what about guys, what happens to the
• 10:37
  Speaker 5: lower end consumer? Where does that consumer go? Do I
• 10:39
  Speaker 5: have to fly? I mean, aren't some of these airlines
• 10:41
  Speaker 5: going out of business, these discount airlines.
• 10:43
  Speaker 6: So we saw spirit, you know, we saw a spirit
• 10:46
  Speaker 6: leave the business. I think that helped. Look, I think
• 10:49
  Speaker 6: still at the bottom end of the scale, right, that
• 10:52
  Speaker 6: basic economy traveler one, they're under a little more pressure economically.
• 10:57
  Speaker 6: I think inflation's hurting them a little harder. Right, if
• 11:00
  Speaker 6: when you raise the price of gas, it hits them
• 11:04
  Speaker 6: in the pocketbook a little further too, Right, you know,
• 11:06
  Speaker 6: the cost of the more to commute to work of
• 11:08
  Speaker 6: their total income. And so I think that means demand
• 11:12
  Speaker 6: is probably a little bit softer in that basic economy
• 11:15
  Speaker 6: world than it is in the premium world. And so
• 11:19
  Speaker 6: and so I think, you know, that kind of took
• 11:20
  Speaker 6: away some of the gains we might have seen as
• 11:23
  Speaker 6: spirit left. And again, I think, you know, you've got
• 11:26
  Speaker 6: to bear in mind that Delta, United and American are
• 11:30
  Speaker 6: going for that basic economy travel Right, there's still a
• 11:34
  Speaker 6: basic economy section in the back of those airplanes that,
• 11:38
  Speaker 6: you know, provided they can sell that seat at a
• 11:41
  Speaker 6: price that's higher than their incremental cost to deliver it.
• 11:46
  Speaker 6: They're going to do it to that basic economy traveler.
• 11:49
  Speaker 6: Fill out those load factors and create you know, efficiencies,
• 11:52
  Speaker 6: which improves profitability. And so that's the challenge in this
• 11:55
  Speaker 6: businesses United Delta, especially under the again six percent seats,
• 12:01
  Speaker 6: there's probably going to be about that much in basic
• 12:04
  Speaker 6: economy growth. They do that for long enough, and they
• 12:08
  Speaker 6: kind of make up pretty quickly for Spirit Airlines leaving
• 12:11
  Speaker 6: the business. So there's still a lot of competition. I
• 12:13
  Speaker 6: think in that basic economy we'll see as earning season
• 12:16
  Speaker 6: goes on.
• 12:16
  Speaker 5: All right, folks, George, in addition to covering the airlines,
• 12:19
  Speaker 5: also covers the airspace companies think Boeing. And all I
• 12:22
  Speaker 5: know is every summer right around this time he gets
• 12:25
  Speaker 5: to go to these lavish trips to your One year
• 12:27
  Speaker 5: it's London, the next year's Paris. They alternate, and they're
• 12:31
  Speaker 5: these air shows. I have no idea what happens to
• 12:33
  Speaker 5: djash shows, but George tells us he must go, So
• 12:36
  Speaker 5: we send them George, where are you going this summer?
• 12:40
  Speaker 5: I see the week of July twentieth might be penciled in.
• 12:44
  Speaker 6: It is, so July twentieth, Farmborough Air show in the
• 12:49
  Speaker 6: the verbs around London, and so you know, we go
• 12:55
  Speaker 6: there to sort of keep a pulse on demand for airplanes.
• 12:58
  Speaker 6: Usually there's a fair amount of orders placed the show
• 13:02
  Speaker 6: for airplanes, but you know, by airlines around the world
• 13:05
  Speaker 6: this year may be a little bit muted, you know,
• 13:06
  Speaker 6: sort of the on again, off again of the sort
• 13:09
  Speaker 6: of Iran fight has fuel prices sort of bouncing all
• 13:13
  Speaker 6: over the place. So we'll see how much airlines want
• 13:15
  Speaker 6: to get in the back of very large cues for airplanes.
• 13:18
  Speaker 5: Don't work too hard over there. I heard the Rose flows.
• 13:22
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 13:28
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 13:32
  Speaker 1: weekdays at ten am Eastern on Apple Corplay and Android
• 13:35
  Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
• 13:39
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 13:42
  Speaker 5: Great Bloomberg opinion column out here Today, Meta ushers in
• 13:47
  Speaker 5: the ear of the K shaped company. A new class
• 13:50
  Speaker 5: divide is emerging in big tech between those at the
• 13:52
  Speaker 5: top of the artificial intelligence hierarchy and everyone else, with
• 13:56
  Speaker 5: the former receiving high salaries and resources and the latter
• 13:59
  Speaker 5: being viewed as disposed well. Beth poh It joins us here.
• 14:02
  Speaker 5: She has a Bloomberg Opinion columnist author of this piece. Beth,
• 14:06
  Speaker 5: what's going on out there with some of these big
• 14:08
  Speaker 5: tech companies. It seems like we are if you're an AI,
• 14:12
  Speaker 5: they love you.
• 14:13
  Speaker 3: Yeah.
• 14:14
  Speaker 7: I mean it's really interesting because I think tech has
• 14:16
  Speaker 7: long thought of itself as this egalitarian utopia and that
• 14:20
  Speaker 7: you know, that's a much more complicated story, and we're
• 14:22
  Speaker 7: seeing that play out again here where I really think
• 14:25
  Speaker 7: there is an AI hierarchy. There's the AI elite and
• 14:28
  Speaker 7: then there's everybody else. And even if you're doing things
• 14:32
  Speaker 7: with AI, even if you're using AI tools, unless you
• 14:34
  Speaker 7: are at the very top of this hierarchy.
• 14:37
  Speaker 3: You are at risk less.
• 14:39
  Speaker 2: Unless you're the kind of person who is recruited to
• 14:41
  Speaker 2: work at say a Meta and in charge of developing
• 14:44
  Speaker 2: the AI capabilities, everyone else just feels like they're you know,
• 14:48
  Speaker 2: hired hands and disposable. Increasingly, what is happening at Meta
• 14:52
  Speaker 2: that is really exacerbating this divide.
• 14:55
  Speaker 3: So we really are seeing this here.
• 14:57
  Speaker 7: So there's you know therecutives have thrown massive paypack like
• 15:03
  Speaker 7: nine figure salaries at developers, researchers, engineers who are really
• 15:08
  Speaker 7: at the top of this field. Everybody else is really
• 15:11
  Speaker 7: has faced the prospect of mass layoffs. I mean we're talking,
• 15:15
  Speaker 7: you know, ten percent of the company multiple multiple times
• 15:17
  Speaker 7: over right, We've we've seen multiple rounds of mass layoffs here.
• 15:21
  Speaker 7: Workers have been surveyed in order to basically train their
• 15:24
  Speaker 7: AI replacements. They've been drafted onto teams that are described
• 15:29
  Speaker 7: as sort of soullless gulogs. So it's it's, you know,
• 15:32
  Speaker 7: this company that once was really one of the most
• 15:36
  Speaker 7: coveted employers in Silicon Valley for a lot of people
• 15:39
  Speaker 7: has now become you know, it's people are sort of
• 15:42
  Speaker 7: hoping to get laid off.
• 15:43
  Speaker 3: They want out.
• 15:45
  Speaker 5: What are the companies saying, if anything? Are they responding?
• 15:48
  Speaker 7: Well, what's really interesting here is Meta has walked some
• 15:51
  Speaker 7: of this back. They've acknowledged recently that the way some
• 15:55
  Speaker 7: of their various initiatives were rolled that was atrocious. They've
• 15:58
  Speaker 7: said the environment is rutal. And I don't think this
• 16:02
  Speaker 7: is because all of a sudden they've discovered empathy. I
• 16:04
  Speaker 7: think this is because it wasn't working right, Like they
• 16:06
  Speaker 7: are not winning the AI race, and I mean that's
• 16:10
  Speaker 7: not a big surprise that if you treat employees this way,
• 16:12
  Speaker 7: they're not going to perform for you. So I think
• 16:15
  Speaker 7: they I think they've kind of realized that a little bit.
• 16:17
  Speaker 7: They know what the problem.
• 16:19
  Speaker 2: Is, they know what the problem is. How are they
• 16:22
  Speaker 2: solving it because there is a talent war. You just
• 16:24
  Speaker 2: talked about these nine figure salaries for folks who are
• 16:27
  Speaker 2: at the top of the AI game, but at some
• 16:29
  Speaker 2: point you also need everyone else to kind of continue
• 16:33
  Speaker 2: to keep the ship moving in the right direction.
• 16:35
  Speaker 7: Yeah, so it's interesting they've said things like, we're not
• 16:37
  Speaker 7: going to have any more mass layoffs this year, better
• 16:40
  Speaker 7: micro kitchens, you know, smaller teams they were having in
• 16:44
  Speaker 7: some cases where one manager would have fifty reports, so it's.
• 16:47
  Speaker 3: More attentive leadership.
• 16:51
  Speaker 7: They stopped their surveillance program because there actually was a
• 16:54
  Speaker 7: data leak attached to that.
• 16:56
  Speaker 3: That's why they stopped it, and that's why they stopped it.
• 16:58
  Speaker 7: That's why they stopped it, And so we're kind of
• 17:01
  Speaker 7: seeing that they're saying, Okay, we're going to try to
• 17:03
  Speaker 7: move back to how things were a little bit.
• 17:05
  Speaker 3: But I don't think it's that simple.
• 17:07
  Speaker 7: It's once you break the trust of employees, it's really
• 17:09
  Speaker 7: not that easy to gain it back.
• 17:12
  Speaker 5: So are the established Silicon Valley companies like the Metas
• 17:16
  Speaker 5: of the world of Google's are they seeing AI startups
• 17:19
  Speaker 5: in the valley take poaching talent away? Is that is
• 17:21
  Speaker 5: that at risk as well?
• 17:22
  Speaker 7: Yeah, Well, what's what's interesting here is that the way
• 17:25
  Speaker 7: Meta actually got some of its top AI talent was
• 17:28
  Speaker 7: by acquiring, but investing in and then bringing on some
• 17:31
  Speaker 7: of the Yeah, it was a big investment. They invested
• 17:34
  Speaker 7: and then brought in some of the talent. So this
• 17:36
  Speaker 7: is you know, this is these are the employees that
• 17:39
  Speaker 7: they are really focused on, and then there's sort of
• 17:42
  Speaker 7: the bottom of the pyramid. And you know, I think,
• 17:46
  Speaker 7: just like we see in the ke shaped economy, these
• 17:48
  Speaker 7: employees they are fearful. They they really they resent what's happening,
• 17:54
  Speaker 7: and you know that is also happening here at in
• 17:58
  Speaker 7: corporate America.
• 18:00
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
• 18:07
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 18:11
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 18:14
  Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
• 18:17
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 18:21
  Speaker 5: I tell you. One of the many, many, many industries
• 18:23
  Speaker 5: that were hurt by the pandemic was the theater business
• 18:26
  Speaker 5: going out to movies. A lot of folks said, that's
• 18:29
  Speaker 5: gonna be the final nail on the coffin of the
• 18:30
  Speaker 5: theatrical window. It's been tough, but they're getting an inch
• 18:35
  Speaker 5: and a way back there. Kevinnier follows this industry. He's
• 18:37
  Speaker 5: senior equity researchannels from Bloomberg Intelligence in studio.
• 18:42
  Speaker 3: In studio, it's a Friday in the summer.
• 18:45
  Speaker 5: The BI management team ascons at their various locations. We
• 18:49
  Speaker 5: appreciate Kevin coming in here talk to us about the
• 18:52
  Speaker 5: theatrical business.
• 18:53
  Speaker 8: Here.
• 18:53
  Speaker 5: Where are we kind of historical levels pre pandemic to
• 18:57
  Speaker 5: now what's going on there?
• 18:58
  Speaker 8: Yeah, Paul, you set it up nicely. I mean, you said,
• 19:00
  Speaker 8: it's been a really tough road back from the pandemic.
• 19:02
  Speaker 8: We've had just years of stunted supply. Theorters have been
• 19:05
  Speaker 8: struggling really in survival mode for a long time. This
• 19:08
  Speaker 8: year we're seeing a total inflection in demand, and really
• 19:11
  Speaker 8: that's coming from the supply side. We're seeing more movies
• 19:14
  Speaker 8: and really just as importantly, these movies are staying in
• 19:16
  Speaker 8: theaters for longer. That's retraining the consumer that you don't
• 19:20
  Speaker 8: have to go and see these movies at home, go
• 19:22
  Speaker 8: to the theater, go out on a midweek see the movie.
• 19:25
  Speaker 8: And we're seeing that's a really really driving the box
• 19:28
  Speaker 8: office to a post pandemic record.
• 19:29
  Speaker 5: Hall.
• 19:30
  Speaker 2: Okay, so you set it up for me to ask
• 19:31
  Speaker 2: obvious next question, which movies are convincing people to pay
• 19:35
  Speaker 2: up and go to the movie theater?
• 19:36
  Speaker 5: Yeah?
• 19:36
  Speaker 8: I mean Scarlet is a great question because I think
• 19:38
  Speaker 8: it's the totality. Right, it's a diverse slate. We're not
• 19:41
  Speaker 8: seeing nearly as much emphasis on a single blockbuster carrying
• 19:44
  Speaker 8: an entire month or the entire summer like we saw
• 19:47
  Speaker 8: with with Top Gun Maverick just a few years ago.
• 19:50
  Speaker 8: This year, there's just more content, right, So there's horror,
• 19:52
  Speaker 8: there's something for different audiences, family audiences. We're seeing more
• 19:56
  Speaker 8: IP back in theaters, so there's something for everyone.
• 19:59
  Speaker 5: Really, how about the demos? Here are you said training
• 20:03
  Speaker 5: an audience to go back into the theaters? Is that?
• 20:06
  Speaker 5: What are we seeing? Are younger people going to the
• 20:08
  Speaker 5: theaters differently as much less than older folks. Houses that work.
• 20:12
  Speaker 8: You picked up on my next point, younger audiences have
• 20:14
  Speaker 8: been some of the strongest to come back to the
• 20:17
  Speaker 8: theaters really honestly, surprisingly, we think of these younger people
• 20:20
  Speaker 8: gen z more as the digital age. You know, they're
• 20:22
  Speaker 8: particul to their phones. That hasn't been the case, and
• 20:25
  Speaker 8: a big reason is because of the pandemic. You know,
• 20:28
  Speaker 8: they lost out a lot of the communal experience, whether
• 20:30
  Speaker 8: it was prom, whether it was all these things that
• 20:32
  Speaker 8: a lot of us have taken for granted. Now that
• 20:34
  Speaker 8: we're back, they really value in person experiences. And it's
• 20:38
  Speaker 8: not just theaters, right, it's concerts, it's sporting events. We're
• 20:40
  Speaker 8: seeing these hillwinds in a lot of different verticals.
• 20:42
  Speaker 2: And going to the movie theater is a lot cheaper
• 20:44
  Speaker 2: than going to a concert. So there's that to keep
• 20:46
  Speaker 2: in mind as well. What are the theaters doing to
• 20:49
  Speaker 2: make sure that once customers go in there they have
• 20:51
  Speaker 2: a good experience, because you know a lot of times
• 20:53
  Speaker 2: you go in there and the floor is sticky, there's
• 20:55
  Speaker 2: popcorn on the seats, like, it's not a great experience.
• 20:58
  Speaker 8: Yeah, yeah, it's true. And you know a lot of
• 21:00
  Speaker 8: those underperforming theaters have gone away, right, So we're thinking
• 21:03
  Speaker 8: about more high quality. We want to improve the consumer
• 21:05
  Speaker 8: experience because when people are in there once foot traffic
• 21:08
  Speaker 8: rises with a high quality slate, naturally, concession spending goes up.
• 21:12
  Speaker 5: Food and beverage.
• 21:12
  Speaker 8: That's where profit comes from the movie theaters. So movie
• 21:16
  Speaker 8: theaters are investing more in premium options. I think, you know,
• 21:20
  Speaker 8: popcorn and soda are still the biggest profit drivers, but
• 21:22
  Speaker 8: think like you know, chicken fingers, pizzas, even alcohol. A
• 21:25
  Speaker 8: lot of theaters are getting alcohol licenses now and that's
• 21:28
  Speaker 8: been a really big success story as well.
• 21:30
  Speaker 5: One of the key things that you mentioned earlier is
• 21:32
  Speaker 5: at the theatrical window. What are the are the studios
• 21:35
  Speaker 5: making a conscious decision to keep movies in theaters longer?
• 21:41
  Speaker 8: They are? They are and this is a direct reaction
• 21:43
  Speaker 8: to the demand, right, So the demand has risen now,
• 21:46
  Speaker 8: studios are investing more in the contents. We've heard of promises,
• 21:50
  Speaker 8: we've heard of vocal commitments. The proof is actually showing
• 21:53
  Speaker 8: up with the data, and we've seen a material materially
• 21:55
  Speaker 8: higher dollar recovery in midweek gross box office. There could
• 21:58
  Speaker 8: be some things going on there. Maybe some people are
• 22:01
  Speaker 8: putting less emphasis on those expensive opening weekends and just
• 22:04
  Speaker 8: going to the discounted tickets on you know, Tuesdays or Wednesdays.
• 22:07
  Speaker 8: But really, you know, the flip side of that is
• 22:09
  Speaker 8: just there's now as much emphasis to see it on
• 22:11
  Speaker 8: that opening weekend where there can be capacity constraints, especially
• 22:14
  Speaker 8: during the summer. So I don't need to see it
• 22:16
  Speaker 8: on a Friday. I'll go see it on a Wednesday.
• 22:17
  Speaker 2: Last movie that you went to the theater for, thank
• 22:20
  Speaker 2: God past I can't remember.
• 22:23
  Speaker 3: Devil Worre's Prada. What's devil wors.
• 22:25
  Speaker 5: Double Wor's product thing?
• 22:26
  Speaker 7: Yeah, I.
• 22:28
  Speaker 4: Fantastic.
• 22:28
  Speaker 5: What did you see most recently?
• 22:30
  Speaker 8: I saw Session, which.
• 22:31
  Speaker 2: Was just, oh yeah, So that's the hard movie that
• 22:33
  Speaker 2: you're talking about. Write something for everyone, John Tucker.
• 22:36
  Speaker 5: The last one, my son Dragon went seen Dune or
• 22:39
  Speaker 5: Dune that wasn't recent.
• 22:41
  Speaker 3: Well, that's the last time. I there's way too much
• 22:44
  Speaker 3: sand in that movie too.
• 22:45
  Speaker 5: Nixon was resident. So what's the slate coming out of
• 22:48
  Speaker 5: Hollywood over the next couple of years.
• 22:50
  Speaker 8: Yeah, absolutely, So we have much much better visibility, not
• 22:53
  Speaker 8: only into the second half but also into twenty twenty seven, right,
• 22:56
  Speaker 8: And that's just something that's been a big change from
• 22:57
  Speaker 8: the prior years. That's giving us a lot of confidence
• 23:00
  Speaker 8: and why we see kind of a structural reduction in
• 23:02
  Speaker 8: downside risk where the visibility goes away is twenty twenty eight, right,
• 23:07
  Speaker 8: And this is where we're just not sure what's going
• 23:09
  Speaker 8: to happen, especially if the studios consolidate, which it very
• 23:12
  Speaker 8: much seems like the windsor point in that direction. We
• 23:14
  Speaker 8: have Paramounts set to take over Warner Bros's Discovery comcasts.
• 23:17
  Speaker 8: NBCUniversal is now kind of a question mark two extremely
• 23:21
  Speaker 8: important healthy studios for this ecosystem. So there is a
• 23:24
  Speaker 8: historical precedent. When Disney bought twentieth Century Fox, we saw
• 23:27
  Speaker 8: that their combined output really really dwindled over the last
• 23:30
  Speaker 8: seven years. That's the same concern with these other studios combining,
• 23:35
  Speaker 8: I think in naturally defensive moves, is if the studios
• 23:38
  Speaker 8: or excuse me, that the cinema is combined to get
• 23:40
  Speaker 8: better to negotiating terms with the rental costs. But we'll
• 23:43
  Speaker 8: just have to see what happens.
• 23:45
  Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
• 23:50
  Speaker 1: and anywhere else you get your podcasts. Listen live each
• 23:53
  Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com,
• 23:57
  Speaker 1: the iHeartRadio app tune In, and the Blue Bomberg Business app.
• 24:01
  Speaker 1: You can also watch us live every weekday on YouTube
• 24:04
  Speaker 1: and always on the Bloomberg Terminal