# SpaceX’s $101 Billion Unlock Heaps Pressure on Battered Shares

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 5 Aug 2026, 27 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/ccde6a36-42ec-4edb-85e2-b49d01181601/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu -George Ferguson, Bloomberg Intelligence Senior Aerospace, Defense, & Airlines Analyst, recaps SpaceX earnings. SpaceX shares fell after the company disclosed higher-than-expected spending on its artificial intelligence business. The company's capital expenditures soared to $28.5 billion in the first half of the year, with the vast majority of expenditures steered toward AI. -Mandeep Singh, Global Head of Tech Research for Bloomberg Intelligence, discusses AMD earnings. Advanced Micro Devices fell after the company gave an underwhelming sales outlook, a sign shareholders expected more of a return from the global expansion of AI data centers. -Geetha Ranganathan, Bloomberg Intelligence Analyst on US Media, recaps Walt Disney earnings. Walt Disney's profit beat Wall Street estimates in the company's fiscal third quarter, driven by soaring income from its entertainment division and the resilience of its theme parks in California and Florida. -Lily Meier, Bloomberg Retail Reporter, discusses her story: “Lululemon’s New CEO Has to Contend With Founder Raring to Fight.” Description: The troubled $14 billion athleisure giant has a new CEO and a seemingly fresh start. But the next battle is only beginning. See omnystudio.com/listener for privacy information.

## Transcript

[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
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[0:21] Speaker 1: or watch us live on YouTube.
[0:24] Speaker 2: SpaceX the stock down about eight and a half percent
[0:26] Speaker 2: right now, but at its low it was down about
[0:29] Speaker 2: twelve and a half percent, and that raises a lot
[0:32] Speaker 2: of questions about the results and what we learned. Alexis
[0:36] Speaker 2: mentioned a lot of AI spending. Let's bring in George Ferguson.
[0:39] Speaker 2: He's our senior aerospace, defense and airlines analysts joining us
[0:42] Speaker 2: from Princeton and George, it's tempting to chalk this up
[0:46] Speaker 2: to investors. We're not in the mood to hear of
[0:48] Speaker 2: plans for more spending when they're not seeing how the
[0:52] Speaker 2: spending is paying off trust yet. But is this kind
[0:55] Speaker 2: of decline that we're seeing in overreaction given the set
[0:57] Speaker 2: of results that SpaceX published.
[1:00] Speaker 3: Well, you know, we put.
[1:01] Speaker 4: Out a report right around the IPO time talking about
[1:05] Speaker 4: valuations for SpaceX right and we we don't tell people
[1:09] Speaker 4: to buy or sell, but we said was look you
[1:12] Speaker 4: had to get out to like twenty twenty nine and
[1:15] Speaker 4: projections for a lot of growth and revenue and then
[1:18] Speaker 4: turning profitable in twenty twenty eight just to start to
[1:21] Speaker 4: be able to compare to the other hyperscalers like Microsoft.
[1:26] Speaker 4: So look, I think that you know, the challenge here
[1:30] Speaker 4: is valuations are are living, you know, in the stratosphere
[1:34] Speaker 4: compared to some of their peers, and so you're challenge
[1:38] Speaker 4: to kind of see, you know, what's the advantage of
[1:41] Speaker 4: SpaceX over some of those other companies. Right, And so
[1:43] Speaker 4: I think there was selling going on in the stock
[1:46] Speaker 4: prior to earnings call yesterday, so you know, for days
[1:51] Speaker 4: and weeks before that, yesterday was a bit of a
[1:54] Speaker 4: you know, a turnaround where there was a bit of
[1:56] Speaker 4: a rally. But I think you're back to a sale.
[1:58] Speaker 4: It's still I think the same story they re sold us,
[2:01] Speaker 4: the story that we heard at the IPO.
[2:04] Speaker 5: So what I mean in terms of the actual revenues
[2:07] Speaker 5: and cash flows and so on from from the court
[2:10] Speaker 5: of the just reported they came in better than expected here,
[2:13] Speaker 5: So I mean they are delivering on kind of what
[2:16] Speaker 5: they're talking about. It's just a question of you so
[2:18] Speaker 5: much of evaluation hinges on. I guess Elon's vision longer term.
[2:22] Speaker 4: Yeah, I mean, you know again, it's on this AI vision.
[2:25] Speaker 4: But you know, when I looked at the numbers yesterday,
[2:29] Speaker 4: they were a bit better than consensus. Uh frankly, they
[2:33] Speaker 4: were on top of Bi's numbers, to be honest with you,
[2:36] Speaker 4: which so I'll blow our horn here for this. Maybe
[2:39] Speaker 4: we're better seers. I don't know, but you know again
[2:42] Speaker 4: we're you know, what we're talking about is, you know,
[2:45] Speaker 4: really strong revenue growth. And I think Elon Musk laid
[2:48] Speaker 4: out all the revenue opportunities in the call. But look,
[2:53] Speaker 4: I'm an old you know, industrial aerospace defense analyst. At
[2:56] Speaker 4: some point you got to give me profit, right you gotta.
[2:59] Speaker 4: And you know, you spend sixty billion dollars on these
[3:02] Speaker 4: companies that you've got ninety three billion dollars of cash
[3:04] Speaker 4: in your balance sheet, The spend is is large. They
[3:08] Speaker 4: doubled capex inside the AI business and that's still very
[3:13] Speaker 4: loss making. At some point you got to turn this
[3:16] Speaker 4: into a profitable enterprise. And right now the vision looks
[3:20] Speaker 4: like a lot of AI for you know, and and
[3:24] Speaker 4: capex for as far as the eye can see. And
[3:27] Speaker 4: I think that's it's hard for people to put their
[3:29] Speaker 4: arms on. Plus there is no guidance, right So yeah,
[3:32] Speaker 4: you know, so I don't even no one even gave
[3:34] Speaker 4: us a handle to try to hold on to right
[3:37] Speaker 4: now when we would start to see profits or you know,
[3:42] Speaker 4: at least losses starting to improve.
[3:44] Speaker 6: So this is something that you say, you.
[3:45] Speaker 2: As a kind of an old school analyst, would be
[3:47] Speaker 2: looking for. And I suspect many investors in industrial companies
[3:51] Speaker 2: are looking for something similar.
[3:53] Speaker 6: But Elon Musk is trying to turn.
[3:54] Speaker 2: SpaceX into this next gen tech AI behemoth, and you know,
[4:00] Speaker 2: he casts his own spell over his shareholders. I just
[4:04] Speaker 2: wonder how much overlap is there between SpaceX's investor base
[4:08] Speaker 2: and Tesla's investor base, where he usually goes through this
[4:11] Speaker 2: playbook and does very well because they want to hear
[4:14] Speaker 2: about the hopes and dreams, and they're less concerned perhaps
[4:16] Speaker 2: with the immediate payoff the way that old school analysts
[4:19] Speaker 2: and industrial investors might be.
[4:22] Speaker 4: Yeah, like again, I you know, old school payoff. I
[4:26] Speaker 4: get it. This is not an old school payoff kind
[4:28] Speaker 4: of company, right, but give us again some guardrails, I think,
[4:33] Speaker 4: you know, or some you know, give us a middle
[4:35] Speaker 4: line to the road and let us know kind of
[4:38] Speaker 4: where we are in the trajectory where those those profits come.
[4:41] Speaker 4: And I think you saw it on the call, right,
[4:43] Speaker 4: Elon Musk showed up in the beginning to discuss his
[4:47] Speaker 4: version of the world and the company and look at
[4:52] Speaker 4: the tech is amazing, it's outstanding, right, and the vision
[4:55] Speaker 4: is grand. Right.
[4:56] Speaker 6: I love all of that.
[4:58] Speaker 4: The question always comes down to me, and I think
[5:02] Speaker 4: clearly to people in the markets. At what price? How
[5:06] Speaker 4: do we put a price on this opportunity? And there's
[5:10] Speaker 4: going to be a fight in the marketplace, like you said,
[5:12] Speaker 4: between the people that just love the vision and you know,
[5:16] Speaker 4: love the tech and others that say, when can you
[5:19] Speaker 4: bring some cash because you've got heavy investments coming on here.
[5:22] Speaker 5: Right, we also have a big lockup expiring tomorrow.
[5:27] Speaker 6: How do you think that's kind of weighing on the shore.
[5:29] Speaker 5: It's got a lot of stock out there potentially potentially
[5:33] Speaker 5: coming on the market tomorrow.
[5:35] Speaker 4: Yeah, yeah, I mean, look, you know, I think about
[5:37] Speaker 4: this sort of maybe, you know, through my own sort
[5:40] Speaker 4: of thought processes. I guess if I was internal, you know,
[5:46] Speaker 4: I don't know, you know, it depends how much of
[5:47] Speaker 4: your cop is wrapped in this? Would you start to
[5:50] Speaker 4: sell out? Do you feel bad because it's well below
[5:53] Speaker 4: the IPO price? Do you weigh out things? But the
[5:55] Speaker 4: trend definitely has been down. So that's I think a
[5:58] Speaker 4: really hard calculus people that have been locked up in this.
[6:02] Speaker 2: So how important do you think it is for Elon
[6:04] Speaker 2: Musk and his management team to get the stock back
[6:07] Speaker 2: above that one point thirty five IPO price? Do you
[6:09] Speaker 2: think that's something that they're concerned with?
[6:13] Speaker 4: Look, so, I think if I'm Elon Musk, I want
[6:16] Speaker 4: to be able to attract more investors to my shares,
[6:19] Speaker 4: and losing money isn't a great way to attract investors.
[6:23] Speaker 4: So I think they I think they absolutely want to.
[6:26] Speaker 4: I don't know that they have a window here to
[6:29] Speaker 4: influence that, you know, for another quarter until they have
[6:32] Speaker 4: another sort of earnings called So I don't necessarily what
[6:34] Speaker 4: they do. I know there's rumors in the marketplace about
[6:36] Speaker 4: merging with Tesla. I can't say that I totally understand
[6:39] Speaker 4: all the logic there. I think they want to get it,
[6:43] Speaker 4: get it up. I think they want to be able
[6:45] Speaker 4: to come back to the markets, the equity markets and
[6:47] Speaker 4: issue Again, I'm not sure in the near term, though,
[6:50] Speaker 4: what you do to change some of the trajectory here.
[6:53] Speaker 5: George, you mentioned they've got you know, one hundred billion
[6:55] Speaker 5: dollars of cash on the bound sheet. How long is
[6:57] Speaker 5: that lasts you think before they do.
[6:58] Speaker 6: Have to tell a lot of markets.
[7:00] Speaker 4: Yeah, Look, I mean I think you got it was
[7:02] Speaker 4: like ninety three billion when I looked yesterday they got
[7:05] Speaker 4: this buy of sixty billion out there. I got to
[7:07] Speaker 4: figure out how they're going to fund that. You know,
[7:10] Speaker 4: there was I think it was fifteen billion in capex
[7:14] Speaker 4: during the quarter, you know, out to the AI businesses.
[7:19] Speaker 4: I think this is not a technical answer. It doesn't
[7:21] Speaker 4: seem like it's going to last long.
[7:23] Speaker 5: Yeah, And it's just I mean, it's a lot of cash,
[7:25] Speaker 5: but they have a lot of needs.
[7:27] Speaker 6: They have a lot of needs.
[7:27] Speaker 2: Are they going to go dip back into the bond
[7:29] Speaker 2: mark again, do you think, George?
[7:32] Speaker 4: Well, look, I think that's that's really going to get
[7:34] Speaker 4: predicated on whether or not they can maintain their investment
[7:37] Speaker 4: grade rating, right, because I think you want you don't
[7:39] Speaker 4: want to let that slip too much. And everyone I
[7:42] Speaker 4: talked to about the investment grade rating tells me it's
[7:44] Speaker 4: a function of the cash on the balance sheet, right,
[7:46] Speaker 4: because you don't have a company here that's sort of
[7:48] Speaker 4: a heavy cash generator. Yeah, and maybe the ability to
[7:53] Speaker 4: tap markets again. Yeah, I think Sara Wo'd rather go
[7:57] Speaker 4: to the debt market, but again, I don't know how
[8:00] Speaker 4: long that that remains open.
[8:02] Speaker 5: As your spending cat, I think the big thing is
[8:04] Speaker 5: going to be the farmer creditor. It's the it's actual
[8:07] Speaker 5: equity value that's underneath me supporting me. That's the only
[8:10] Speaker 5: thing that's the same thing it was with Tesla.
[8:12] Speaker 2: Yeah, and now you're looking to stalk again, We'll blow
[8:14] Speaker 2: that one thirty five IPO price.
[8:15] Speaker 4: Yep, yep.
[8:17] Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
[8:24] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[8:27] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[8:31] Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
[8:34] Speaker 1: you get your podcasts, or watch us live on YouTube.
[8:38] Speaker 6: Man, you've seen joints us here.
[8:39] Speaker 5: Glottal Tech, research head for Bloomberg Intelligence Advanced micro Devices
[8:43] Speaker 5: A M. D. I thought the sales was good, but
[8:49] Speaker 5: people are calling in an underwhelming sales ATLEC. How can
[8:51] Speaker 5: a chip maker have an underwemer.
[8:54] Speaker 7: Well, I guess partly that has to do with the
[8:57] Speaker 7: valuation and where I think this has run up. But
[9:02] Speaker 7: you know, you're being compared against Nvidia, and that's where
[9:06] Speaker 7: Nvidia's data center sales is probably at this point, you know,
[9:10] Speaker 7: twelve thirteen times bigger than AMD's, even though AMD grew
[9:14] Speaker 7: you know, over one hundred percent and they guided to
[9:17] Speaker 7: triple digit growth going forward. But the fact that Nvidia
[9:21] Speaker 7: is still growing you know, seventy five percent at their rate,
[9:25] Speaker 7: which is twelve times bigger, it just goes to show
[9:28] Speaker 7: that right now, AMD is just holding share, it's not
[9:33] Speaker 7: you know, in any ways gaining share, and this market
[9:35] Speaker 7: is lifting all both, so AMD does have a role.
[9:39] Speaker 7: And the other thing that I noted last night is
[9:42] Speaker 7: so they have this new architecture coming up in the
[9:45] Speaker 7: second half, everyone seems to be holding off for that,
[9:49] Speaker 7: Like why would they buy something that's going to be
[9:53] Speaker 7: older generation three months from now. So that's the other thing.
[9:56] Speaker 7: When you announce a new architecture. That doesn't happen with Nvidia,
[10:00] Speaker 7: by the way, because everyone feels their supply constraint within
[10:03] Speaker 7: Vidia gear. But for someone like AMD, you've said, you know,
[10:07] Speaker 7: you've got a much better chip coming three months down
[10:10] Speaker 7: the line. So I feel there is some hold up
[10:14] Speaker 7: in that aspect, Like no one wants to commit big
[10:17] Speaker 7: when they know there's another something better coming through.
[10:20] Speaker 2: So that strategy only works if you're the market leader,
[10:22] Speaker 2: not if you're the number two. And it feels like
[10:25] Speaker 2: Intel has intell It feels like AMD has been number
[10:27] Speaker 2: two for a long time. It's the number two to Intel,
[10:29] Speaker 2: it's now bigger than Intel. It's now the number two
[10:31] Speaker 2: to Invidia. But as we've said, there's not enough supply
[10:34] Speaker 2: to meet all this demand. So AMD should be in
[10:37] Speaker 2: a good position. Is it because all the other companies
[10:40] Speaker 2: have come out and decide to make their own ships
[10:42] Speaker 2: go proprietary, that AMD's kind of left on the outside.
[10:45] Speaker 7: I think that's also a long term factor when it
[10:49] Speaker 7: comes to AMD's prospects, you know, three years, five years
[10:53] Speaker 7: from now. I mean every hyperscaler has ambitions to make
[10:57] Speaker 7: their own chip. Google has done that success, others wanted
[11:01] Speaker 7: to do the same. So from that perspective, I mean, yes,
[11:04] Speaker 7: AMD has a deal with open Ai and Tropic. They
[11:08] Speaker 7: have committed to Meta as well. In fact, they ended
[11:10] Speaker 7: up giving some equity to Meta for that six gigawatt commitment.
[11:14] Speaker 7: That just goes to show they're not playing from a
[11:17] Speaker 7: position of strength like n videos. So they really have
[11:21] Speaker 7: to course this these hyperscale, especially the new ones like
[11:25] Speaker 7: Open AI and Entropic, and make sure they end up
[11:28] Speaker 7: using AMD chips and not just you know, other chip makers.
[11:32] Speaker 7: So overall, I think the print was great. The valuation
[11:36] Speaker 7: is rich, so they sort of meta expectations they didn't wow,
[11:40] Speaker 7: and then that's why you see that sort of reacting.
[11:42] Speaker 5: All right, we were just chatting with George Ferguson about
[11:44] Speaker 5: SpaceX and he was gonna the angle from the satellite side,
[11:47] Speaker 5: which is good. I know you just published something regarding
[11:51] Speaker 5: the AI part of the story here because the socks
[11:53] Speaker 5: down another eight percent today. Can't find a bid here.
[11:57] Speaker 5: If you're buying this thing, you're buying it for the
[11:59] Speaker 5: AI play you are.
[12:01] Speaker 7: And it's amazing how much they have pivoted to AI.
[12:04] Speaker 7: In fact, they gave a one hundred billion dollar revenue
[12:08] Speaker 7: run rate number by the end of this year. So
[12:11] Speaker 7: this company is going from about eighteen billion at the
[12:14] Speaker 7: time of IPO to one hundred billion dollar run rate
[12:17] Speaker 7: in a span of six months. And that's for the
[12:20] Speaker 7: AI business all AI driven, and that's where seventy percent
[12:24] Speaker 7: of that like, they could be the biggest neocloud out
[12:27] Speaker 7: there by the end of the year simply because they
[12:31] Speaker 7: have that ramp up in CAPEX. And that's where you know,
[12:35] Speaker 7: the investors may find holes in.
[12:38] Speaker 6: How are they going to raise money?
[12:40] Speaker 7: If you are hyperscaler, you have the balance sheet to
[12:42] Speaker 7: do two hundred billion dollars in CAPEX. I mean what
[12:46] Speaker 7: SpaceX literally implied last night is they will do two
[12:48] Speaker 7: hundred billion dollars in capex twenty twenty seven. But investors
[12:53] Speaker 7: are not buying it because they don't have the balance
[12:55] Speaker 7: sheet unlike the hyperscaler. So are you doing a debt ras,
[12:59] Speaker 7: are you doing an equity raise? How are you raising
[13:01] Speaker 7: the funding? Or maybe Nvidia is doing the backstop because
[13:05] Speaker 7: they said we will rely solely on Nvidia chips for
[13:09] Speaker 7: this buildout, and in fact that's why AMD is down
[13:11] Speaker 7: because they could have said, you know, we'll give it
[13:14] Speaker 7: a md A ten percent shares that didn't happen with
[13:17] Speaker 7: SpaceX plans last time.
[13:19] Speaker 6: Is that feasible that they're going to rely solely on
[13:20] Speaker 6: Nvidia for the.
[13:21] Speaker 7: Buildoutdo if Nvideo is doing the backstop and saying they
[13:25] Speaker 7: need the funding. In this case of SpaceX, the biggest
[13:29] Speaker 7: apprehension is how is this company going to find the
[13:33] Speaker 7: funding for two hundred billion dollars in capex, which Elon
[13:36] Speaker 7: must said we'll have ten gigawatt capacity by end of
[13:39] Speaker 7: twenty twenty seven. That definitely amounts to two hundred billion
[13:42] Speaker 7: dollars plus just in purchases of Nvidia chips and other components.
[13:47] Speaker 7: How are you going to raise that funding? So that's
[13:49] Speaker 7: where Nvidia comes in with you know, its balance sheet
[13:52] Speaker 7: and saying we're supporting all the neo clouds, we will
[13:55] Speaker 7: support SpaceX.
[13:57] Speaker 5: What is neocloud again?
[13:59] Speaker 7: I mean it's just you know, renting your data centers
[14:02] Speaker 7: with GPUs with power. So it's not a commodity business.
[14:07] Speaker 7: Don't think right now all these Eventually it may become one,
[14:11] Speaker 7: but right now, sourcing the power, getting these servers online
[14:16] Speaker 7: and getting it.
[14:16] Speaker 6: Ready, it's there's a ton of demand.
[14:19] Speaker 7: There's a ton of demand, and it's not commoditized in anyway.
[14:22] Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
[14:30] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
[14:33] Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
[14:36] Speaker 1: Auto with the Bloomberg Business app, Listen on demand wherever
[14:40] Speaker 1: you get your podcasts, or watch us live on YouTube.
[14:44] Speaker 2: It's really earnings power that is driving the stock market
[14:47] Speaker 2: certainly today with the S and P five hundred making
[14:50] Speaker 2: yet another record high.
[14:51] Speaker 6: If we close at these levels.
[14:52] Speaker 2: It'll be the second straight record close, and earnings is
[14:56] Speaker 2: behind all that. So let's talk to Getha Rung and
[14:58] Speaker 2: Athen our analyst on US Media in Princeton, about the
[15:01] Speaker 2: latest earnings from Walt Disney Company, the entertainment giant. And
[15:06] Speaker 2: there's a lot to like in this earnings report. The
[15:09] Speaker 2: stock is up about two and a half percent right now.
[15:12] Speaker 2: Is the entertainment division which saw sixty four percent rise
[15:15] Speaker 2: in profit that kind of drove everything? Or is it
[15:19] Speaker 2: once again the parks and cruises the experience's arm which
[15:22] Speaker 2: saw a smaller increase in profit but really has become
[15:25] Speaker 2: the crown jewel of Disney's empire.
[15:28] Speaker 3: Yeah, absolutely, Scarlett, And it's actually a bit of both.
[15:32] Speaker 3: So you know, the experiences division of the theme parks division,
[15:35] Speaker 3: as you just pointed out, makes up less than forty
[15:37] Speaker 3: percent of total company revenue, but almost sixty percent of profit.
[15:42] Speaker 3: So really it is the crown jewel, as you rightly
[15:45] Speaker 3: alluded to it. And you know, again the profit there
[15:48] Speaker 3: was really strong, and I think coming in investor expectations
[15:51] Speaker 3: were really really low. Profits were up twenty percent. Remember
[15:56] Speaker 3: consensus was at about ten and a half percent increase.
[15:58] Speaker 3: So again, really strong number, and what it really did
[16:02] Speaker 3: was elaid fears because Comcast, which just reported a few
[16:05] Speaker 3: weeks ago, talked about weakness and a slowdown, a demand
[16:08] Speaker 3: slow down in their Universal theme parks, especially in Orlando,
[16:12] Speaker 3: and now seeing Disney come out with such strong numbers
[16:15] Speaker 3: really shows that, you know, they're executing really well and
[16:19] Speaker 3: demand continues to be strong as they head into fiscal
[16:22] Speaker 3: the fiscal fourth quarter as well. But then, as you
[16:24] Speaker 3: you know again said, streaming, which is part of that
[16:27] Speaker 3: entertainment division, is really the growth catalyst for this company,
[16:32] Speaker 3: and it's all about streaming profitability and how far and
[16:35] Speaker 3: how far ahead they can get on operating margin for
[16:39] Speaker 3: the streaming business. And they prove that they did a
[16:41] Speaker 3: really good job of this quarter, and there's there's obviously
[16:45] Speaker 3: a lot more growth levers going forward.
[16:47] Speaker 7: KEITHA.
[16:47] Speaker 5: This is the second straight quarter of better than expected
[16:50] Speaker 5: profitability for the CEO, Josh Tomorrow, who succeeded Bob Ayger
[16:55] Speaker 5: in that role in March. Talk about big shoes to Phil.
[16:58] Speaker 5: What's the early read from investors on mister Tomorrow.
[17:02] Speaker 3: I think they're really liking all what they see. You know,
[17:06] Speaker 3: Josh obviously has a very clear strategy. He's He's made
[17:10] Speaker 3: some pretty big changes. So just today, for instance, they
[17:13] Speaker 3: announced that they got rid of their fifty percent stake
[17:15] Speaker 3: in A and E Global Media. They got about one
[17:17] Speaker 3: point two billion dollars in cash and they're going to
[17:19] Speaker 3: deploy that towards share repurchases. Then again, you have this
[17:24] Speaker 3: new deal. They had to get out of their Sora
[17:26] Speaker 3: deal after obviously soa shut down, but now they have
[17:29] Speaker 3: today they announced this new deal with TikTok So. Again,
[17:32] Speaker 3: Josh is I think, really kind of taking a hard
[17:34] Speaker 3: look at all of the different businesses. He obviously knows
[17:37] Speaker 3: that they need to reduce their exposure to you, linear TV,
[17:42] Speaker 3: but you know, they're doing all that they can in
[17:45] Speaker 3: terms of streaming, and of course he is a Parks veteran,
[17:47] Speaker 3: so he knows exactly, you know, how that business works.
[17:51] Speaker 3: But it also looks like he's positioning Disney Plus to
[17:54] Speaker 3: become this major hub for the entire Disney ecosystem, something
[17:59] Speaker 3: almost akin to Amazon Prime for all things Disney, starting
[18:03] Speaker 3: in spring of twenty twenty seven. And so I think
[18:04] Speaker 3: that's going to be pretty exciting for the company.
[18:07] Speaker 6: Yeah, that sounds very strategic.
[18:09] Speaker 2: How do you think about how that's going to change
[18:11] Speaker 2: the entertainment industry and how other media companies respond to
[18:15] Speaker 2: that kind of positioning.
[18:17] Speaker 3: Yeah, So, I mean Disney has a really unique hand
[18:20] Speaker 3: to play here, Scarlett. I mean, they have theme parks,
[18:22] Speaker 3: which really other than Comcast, nobody else has. Obviously, they
[18:26] Speaker 3: have this great movie and studio business, and of course
[18:29] Speaker 3: that they're streaming business too, And the one thing that
[18:32] Speaker 3: they have or they do better than everybody else is
[18:35] Speaker 3: ESPN and sports. They have huge, huge exposure there to
[18:38] Speaker 3: all of the Marquee sports rights. So you know, again,
[18:41] Speaker 3: it's all come down to one thing in the streaming world,
[18:44] Speaker 3: which is engagement, and if they can build on that
[18:47] Speaker 3: engagement and keep you within that Disney ecosystem for everything,
[18:51] Speaker 3: I mean, whether you're buying a theme park ticket or
[18:53] Speaker 3: wanting to watch a movie or wanting to watch a
[18:54] Speaker 3: show on Disney Plus or Hulu, I mean, right there,
[18:58] Speaker 3: that's a major differentiator versus peers.
[19:01] Speaker 5: So Githa Paramount also reported numbers here. I'd love to
[19:05] Speaker 5: get a sense of kind of what the company's saying
[19:07] Speaker 5: these days about their I guess stalled merger with Warner
[19:13] Speaker 5: Brothers Discovery and how they plan to operate as an
[19:16] Speaker 5: single entity over the next twelve months.
[19:19] Speaker 3: So their numbers yesterday, Paul were actually pretty decent, and
[19:22] Speaker 3: a lot of that was just the cost savings from
[19:24] Speaker 3: the sky Dance, you know, acquisition. So it's it's pretty
[19:27] Speaker 3: clear that once they are able to get their hands
[19:30] Speaker 3: on Warner Brothers and they're able to close on that transaction,
[19:32] Speaker 3: they're obviously going to do all that they can to
[19:36] Speaker 3: deliver on those six billion and synergies. But it's really
[19:39] Speaker 3: been a very long and arduous road and it's not
[19:42] Speaker 3: looking easy at all. So one of the things that
[19:45] Speaker 3: I think people still are extremely concerned about is leverage.
[19:47] Speaker 3: We know it's going to be about six and a
[19:48] Speaker 3: half times at closing whenever that happens, and then the
[19:52] Speaker 3: other thing that you have now is kind of the
[19:53] Speaker 3: sticking fee, right, and so that's because this deal is
[19:56] Speaker 3: going to get delayed by.
[19:57] Speaker 6: At least two full quarters.
[20:00] Speaker 3: It was supposed to close on September thirtieth, it's going
[20:02] Speaker 3: to be maybe closer to a March end of March timeframe.
[20:06] Speaker 3: We're going to see it close to almost about one
[20:08] Speaker 3: point three billion dollars in ticking fees and guess how
[20:11] Speaker 3: that's going to be funded more share issuance. So we're
[20:15] Speaker 3: looking at massive dilution here, I mean paramount share, paramounts,
[20:18] Speaker 3: guidance share. You know, a number of shares outstanding right
[20:22] Speaker 3: now is one billion. It's going to go to close
[20:24] Speaker 3: to about five billion when all of this is said
[20:27] Speaker 3: and done. So this is just, you know, it just
[20:30] Speaker 3: is not a very very encouraging outlook at all from
[20:34] Speaker 3: an investment perspective.
[20:35] Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
[20:42] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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[20:56] Speaker 5: One of the most read articles on the Bloomberg Terminal
[20:59] Speaker 5: and a long time is to do with Lulu Lemon
[21:03] Speaker 5: and the management team there and some of their product
[21:06] Speaker 5: challenges that they have, and it seems like Lululemon pants
[21:09] Speaker 5: are everywhere, but it's been a journey. Lily Meyer Joints
[21:13] Speaker 5: is here, Retai reporter for Bloomberg News. Lily, what was
[21:15] Speaker 5: your focus here when doing this story on Lululemon.
[21:18] Speaker 8: Yeah, so, the story chronicles how the company that basically
[21:24] Speaker 8: invented leggings as we know it today got to this point.
[21:28] Speaker 6: Where they're really struggling.
[21:30] Speaker 8: You know, they have an influx of competitors, they have
[21:33] Speaker 8: a CEO who's starting in September. They've been without a
[21:36] Speaker 8: CEO for several months, and until recently, they had a
[21:39] Speaker 8: founder who was really criticizing many of their moves.
[21:44] Speaker 6: So how did they get here?
[21:46] Speaker 5: What happened here? Because we've had a lot of reporting
[21:49] Speaker 5: on Lululemon over the years here a Bloomberg.
[21:52] Speaker 8: Yeah, so, you know, lul Lemon was founded by Chip Wilson,
[21:56] Speaker 8: who is a executive from Vancouver, and he came up
[22:04] Speaker 8: with this idea. He was going to yoga classes to
[22:08] Speaker 8: help with the back problem he was having and saw
[22:10] Speaker 8: it that many of the people in the class didn't
[22:12] Speaker 8: really have, you know, the athletic wear that they needed,
[22:16] Speaker 8: and the company has since you know, gone public, become
[22:20] Speaker 8: a fourteen billion dollar company, gone through multiple executives, and
[22:24] Speaker 8: through throughout the way, they've had these problems with sheerness
[22:29] Speaker 8: in their leggings. So in twenty third.
[22:31] Speaker 6: Sheerness yes like see through?
[22:33] Speaker 5: Yes, not good?
[22:34] Speaker 7: Right?
[22:34] Speaker 8: Yeah, So in twenty thirteen they had their first big issue,
[22:37] Speaker 8: they had to pull almost twenty percent of their women's
[22:42] Speaker 8: pants from stores. That led to management changes, and just
[22:48] Speaker 8: recently earlier this year, they had another issue with sheer leggings.
[22:51] Speaker 5: Okay, so new management we have, I guess In April,
[22:55] Speaker 5: the company has selected Heidi O'Neill, a former top executive
[22:58] Speaker 5: at Nike, to be its next CEO. What do we
[23:02] Speaker 5: know about miss O'Neil and maybe what her agenda or
[23:05] Speaker 5: what her strategy is going to be here.
[23:07] Speaker 6: Yeah, so Heidi is a really interesting pick. She was
[23:09] Speaker 6: a top executive.
[23:10] Speaker 8: At Nike under its previous CEO, John Donaho, who presided
[23:15] Speaker 8: over a period of Nike's history where you know, they
[23:19] Speaker 8: cut ties with many of their wholesale partners, they went
[23:22] Speaker 8: too deep into lifestyle sneakers, and Heidi led product and
[23:27] Speaker 8: led Nike's direct to consumer push.
[23:29] Speaker 5: So talk to us about this founder here I mean,
[23:33] Speaker 5: he didn't go quietly into the night.
[23:34] Speaker 2: Did he.
[23:35] Speaker 5: He's still pretty active on social media, kind of taking
[23:39] Speaker 5: potshots at the company, it seems like, right.
[23:41] Speaker 8: Yeah, So he launched a proxy campaign against the company
[23:45] Speaker 8: last year, advocating for changes.
[23:47] Speaker 6: He criticized the management, the.
[23:49] Speaker 8: Board, you know, the CEO left shortly after, and in
[23:55] Speaker 8: May he reached a settlement with Lulu. So the settlement
[23:58] Speaker 8: is granting him two boards, so he'll have a bit
[24:02] Speaker 8: of a foothold in that sense. And he also is
[24:05] Speaker 8: going to get quarterly meetings with Heidi when she starts,
[24:08] Speaker 8: and in return, he has to stay quiet for eighteen months.
[24:12] Speaker 5: Eighteen months?
[24:13] Speaker 6: What do we know about?
[24:14] Speaker 5: Does he support this selections new CEO Heidy O'Neil.
[24:18] Speaker 8: He was pretty critical about the CEO process. He you know,
[24:23] Speaker 8: criticized the way it happened. He took some shots there.
[24:29] Speaker 8: But he also reached out to Heidi, congratulated her on
[24:33] Speaker 8: the role, said he looked forward to meeting her soon.
[24:35] Speaker 8: So it'll be really interesting to see what these quarterly
[24:38] Speaker 8: meetings are like between them.
[24:40] Speaker 5: So is it for Lululemon? Is it a product story?
[24:44] Speaker 5: Is it a promotional story? Where do most people think
[24:48] Speaker 5: the challenge or is it maybe just a competitive story.
[24:50] Speaker 5: I don't know, what do people think? This is the issue?
[24:52] Speaker 8: Yeah, it's kind of all so on the product side,
[24:55] Speaker 8: you know, new competitors like Aloe and Viewori have come in.
[24:58] Speaker 8: They've launched product that customers have found really exciting, customers
[25:02] Speaker 8: have switched over and Lulu product some of it has
[25:05] Speaker 8: fallen short. You know the get Low laggings that came
[25:07] Speaker 8: out in January and had to they had to pause
[25:11] Speaker 8: sales on because they were see through Lula and pushed
[25:14] Speaker 8: into sneakers, which hasn't really panned out.
[25:16] Speaker 6: They had this collaboration with.
[25:17] Speaker 8: Disney which they got a lot of critique over.
[25:20] Speaker 6: So it's a product story.
[25:21] Speaker 8: You know, she has to win over shareholders as well
[25:25] Speaker 8: and went over the street.
[25:27] Speaker 5: So it's I guess when I talked to like Scarlett
[25:30] Speaker 5: fou or Alex Steele or anybody, I kind of get
[25:33] Speaker 5: the same story, which is they love Lululemon, but it's
[25:37] Speaker 5: just too expensive for a lot of people. So it's
[25:40] Speaker 5: a premium product at a premium price. But I don't
[25:43] Speaker 5: know that's kind of the feedback I get. Yeah, I
[25:46] Speaker 5: mean that does a company acknowledge that I don't know.
[25:48] Speaker 6: If they've really acknowledged that.
[25:50] Speaker 8: I mean, I think their price points have remained pretty
[25:53] Speaker 8: stable for many years, but obviously they're on the more
[25:57] Speaker 8: premium side, which adds more pressure when the product, you know,
[26:00] Speaker 8: doesn't meet customers expectations. And addition to allo and viewery,
[26:05] Speaker 8: they've also gotten more competitors on the lower end, so
[26:07] Speaker 8: you know, people are buying likings from Target, they're buying
[26:09] Speaker 8: likings from Old Navy, and so that's taken some of
[26:12] Speaker 8: their share as well.
[26:14] Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
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