AI transcript
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0:00:40 (upbeat music)
0:00:42 Today’s number 1493.
0:00:47 That’s the year Christopher Columbus landed
0:00:48 on the island of St. Bart’s
0:00:50 and named it after his brother Bartolomeo, true story.
0:00:55 My wife said to me, you know,
0:00:57 sex is so much better on vacation.
0:01:00 And I thought, that’s not the postcard I wanted.
0:01:03 (laughs)
0:01:04 (upbeat music)
0:01:06 Welcome to Prop G Markets.
0:01:16 Today we’re discussing London’s IPO market
0:01:20 and Mistral’s latest funding around.
0:01:22 But first, where are you Ed?
0:01:24 I’m in St. Bart’s, it’s pretty good.
0:01:26 It’s pretty nice out here.
0:01:28 Yeah, I got here yesterday.
0:01:30 You know, it’s all right.
0:01:31 We got the private villa
0:01:35 and it’s got a private pool
0:01:36 and it’s got, you know, there’s a private chef.
0:01:38 So we had breakfast in the morning.
0:01:40 Things are okay is what I’d say.
0:01:42 So first off, I’m the only one
0:01:43 that’s allowed to be cynical here.
0:01:45 How many of you are there in St. Bart’s right now?
0:01:47 How many from the Prop G media team went to St. Bart’s?
0:01:49 Six.
0:01:50 And you’re staying at my favorite place, Lacerano.
0:01:52 I even picked out the villa for you.
0:01:55 Where are you guys going to dinner tonight?
0:01:56 I’m not quite sure.
0:01:57 I think we’re going to…
0:01:58 Typical man.
0:01:59 You’ve leapt it up to the women
0:02:00 to handle everything, right?
0:02:01 That’s right.
0:02:02 I’m not sure.
0:02:03 Oh, there we go.
0:02:04 Love that sound.
0:02:06 You’re really leaning into this.
0:02:07 Good for you.
0:02:09 All right, you’re having a glass of champagne.
0:02:11 Good for you.
0:02:11 That’s right, yeah.
0:02:12 This is, you’re easing into the St. Bart lifestyle.
0:02:16 How are you doing?
0:02:17 You’re back at home?
0:02:18 Yeah, I’m in London.
0:02:20 My life is not nearly as romantic as yours.
0:02:23 It’s, although I’m going to the South of France tomorrow,
0:02:26 which I’m excited about.
0:02:27 That’s right.
0:02:27 You’re going to Cannes.
0:02:28 That’s right.
0:02:29 Going to Cannes.
0:02:30 Excited about that.
0:02:31 Although, I think I’ve lost some brand equity.
0:02:32 I can’t get invited to the iHeart party
0:02:37 at the Ducat with Lenny Kravitz.
0:02:38 I called, I sat next to the CEO of iHeart Media last year
0:02:43 and I emailed him and he kind of sent me a polite response,
0:02:47 but still I haven’t had that invite yet.
0:02:49 So I think I’ve lost some brand equity.
0:02:51 I don’t know what’s going on here.
0:02:52 I don’t, anyways, I can’t get into the hot parties anymore.
0:02:55 I did get invited to Spotify, but I’m not.
0:02:57 Is the iHeart party really that hot?
0:02:59 Lenny Kravitz is going to be there?
0:03:00 Yeah. Well, it’s at the Hotel Ducat
0:03:02 and I’m staying there and Lenny Kravitz is playing.
0:03:04 And so it’ll be like being a prisoner at Alcatraz
0:03:06 if I don’t get invited.
0:03:07 ‘Cause supposedly the prisoners of Alcatraz
0:03:09 when the wind was a certain way,
0:03:10 they could hear people parting in the wharf,
0:03:13 which was supposedly torturous for them
0:03:15 ’cause they got to hear what life was like
0:03:17 for people who are free.
0:03:19 So if I’m in my hotel room at the Hotel Ducat
0:03:21 and I hear, you know, I start hearing Lenny Kravitz
0:03:23 play his, you know, his three songs,
0:03:26 then I’m gonna be very upset.
0:03:28 I’m gonna stop listening to iHeart Radio.
0:03:31 Is that how you feel right now with us?
0:03:33 I mean, we’re having a pretty good time here.
0:03:34 No, I like you guys.
0:03:35 I want you to have fun.
0:03:36 And not like that.
0:03:37 I know that I like that everyone knows
0:03:39 that you’re down there.
0:03:40 I think it makes us seem.
0:03:41 By the way, in case you’re still wondering,
0:03:43 we’re still recruiting for a writer,
0:03:45 a senior writer for No Mercy, No Malice.
0:03:47 So if you want to go to St. Bart’s next year,
0:03:50 come join, come join Prop G.
0:03:53 Anyways, enough of that, get to the news.
0:03:55 Okay, let’s start with our weekly review of market vitals.
0:03:57 (upbeat music)
0:04:00 The S&P 500 closed about 5,400 for the first time ever.
0:04:08 The dollar was flat, Bitcoin declined
0:04:11 and the yield on tenure treasuries dropped,
0:04:13 shifting to the headlines.
0:04:15 The Consumer Price Index showed inflation
0:04:17 cooled again in May with prices up just 3.3%
0:04:20 from a year earlier.
0:04:21 That’s flat month of a month and down slightly from April.
0:04:24 Meanwhile, the Federal Reserve held interest rates steady,
0:04:26 though many Fed officials are expecting
0:04:28 at least one cut by the end of 2024.
0:04:30 Open AI hired the former CEO of Nextdoor
0:04:33 as its new chief financial officer.
0:04:35 As the company’s first CFO in two years,
0:04:37 Sarah Friar will help the company grow its global business
0:04:39 and invest in further AI research.
0:04:42 The company also hired the former SVP of product
0:04:44 Twitter Kevin Weil as its new chief product officer.
0:04:48 Oracle stock rose 13% to reach an all-time high
0:04:51 despite reporting fourth quarter earnings
0:04:53 that were below analyst expectations.
0:04:55 While the company missed slightly on revenue,
0:04:57 the stock surged on account of new deals
0:04:59 with Google Cloud, Microsoft Azure and Open AI.
0:05:01 And finally, Tesla shareholders voted again
0:05:04 on Elon Musk’s $56 billion pay package
0:05:06 and the move to reincorporate in Texas.
0:05:09 They’re actually voting right now as we record this podcast
0:05:11 so we don’t know the results yet,
0:05:13 but the stock rose 6% this morning
0:05:15 after Musk said he expects to win the vote.
0:05:18 Scott, your thoughts.
0:05:20 – I think it’s great that inflation cooled.
0:05:22 I’ve always, as someone who likes to think
0:05:24 they know a little bit about economic history,
0:05:25 inflation is more dangerous than invading army.
0:05:28 I mean, in last year, you know,
0:05:30 part of the village gets invaded,
0:05:31 but revolutions oftentimes can be reverse engineered
0:05:35 to inflation.
0:05:35 I look at what’s happened here in the UK
0:05:38 and basically they have inflation and lower productivity.
0:05:40 So let’s figure out a way to make less money
0:05:42 and have all of our goods go up in price,
0:05:44 which translates to, you know, a worse standard of living.
0:05:47 And that’s when every household gets angry
0:05:49 and wants chaos and change.
0:05:51 It’s the first time in almost two years
0:05:53 that the CPI didn’t climb.
0:05:55 The annual core rate of inflation came down to 3.4%
0:05:58 the lowest since April of 2021.
0:06:01 And the report keeps hopes
0:06:03 of a potential September rate cut alive.
0:06:05 I am sick of talking about rate cuts.
0:06:07 I just don’t care.
0:06:08 The open AI, you know, open AI seems to be
0:06:12 kind of professionalizing, if you will.
0:06:14 The former CEO before her position in next door,
0:06:17 Sarah Fryer served as CFO of Square
0:06:19 and previously worked at Goldman Sachs and McKinsey.
0:06:21 So she’s obviously very qualified.
0:06:23 And hiring Fryer potentially signals
0:06:25 that open AI could be thinking about an IPO.
0:06:28 She’s sort of the, she’s someone who comes in
0:06:31 who has credibility in the street and says,
0:06:32 “Okay, this is how you go public.”
0:06:33 And Sam, you know, do not talk about X, Y and Z,
0:06:36 do not talk about this and can kind of,
0:06:38 that those skills are very important
0:06:41 and the difference between a well-managed IPO
0:06:43 for this company would be tens of billions of dollars
0:06:45 in market capitalization.
0:06:46 And so she is going to make a shit ton of money.
0:06:49 She’ll be there just in time to get a shit ton of options
0:06:52 before they go public.
0:06:53 So this, they literally had their pick of anybody
0:06:57 to be the CFO of this company.
0:06:58 – By the way, do you see how much money
0:06:59 they’re generating now?
0:07:01 The information just reported on this.
0:07:02 Sam Altman revealed the revenue,
0:07:04 the ARR for the company.
0:07:06 Do you see this?
0:07:07 – I did, what did it say?
0:07:07 – $3.5 billion a year is their run rate right now,
0:07:11 which is more than double
0:07:12 than what they were at six months ago.
0:07:14 And just to put that into perspective,
0:07:16 Anthropic, which is arguably their number one competitor,
0:07:20 they’re at 100 million and then cohere is at 22 million.
0:07:23 So it’s like 100 million, 22 million versus 3.5 billion.
0:07:28 The open AI business is 35 times larger
0:07:31 than their next biggest rival.
0:07:33 Like they’re just completely running away
0:07:35 with it at this point.
0:07:35 – Probably the more impressive thing is who said
0:07:37 they’ve grown their revenues doubled
0:07:39 in the last six months.
0:07:40 – Right.
0:07:41 – Yeah, that’s pretty impressive.
0:07:43 Now the question is what was the last round of funding?
0:07:45 I’d be curious to see what the multiple revenues
0:07:47 in terms of valuation.
0:07:49 – Yeah, I mean, I think it was the $86 billion,
0:07:51 but that’s still, that would still put them
0:07:53 on the low end compared to all of these,
0:07:55 all of these other ridiculous AI startups.
0:07:57 So, I mean, they’ll probably have another round soon.
0:07:59 – I would agree.
0:08:00 I would bet that that if it’s three and a half billion
0:08:03 that was at 80, what is that about a 25 times revenues?
0:08:06 That’s actually cheap for the AI sector.
0:08:08 And you’re right, they seem to be running away with it.
0:08:11 It’s interesting ’cause all of the noise
0:08:12 around how dysfunctional it is and board members leaving
0:08:15 and Sam, you know, using Scarja’s voice,
0:08:20 it’s all noise, it’s not news.
0:08:22 The real news is the things you’re focusing on
0:08:24 and that is their revenues and what’s going on there.
0:08:27 But good for them, it does sound,
0:08:28 that’s an observation I hadn’t even thought of.
0:08:30 They’re clearly putting on their best dress for an IPO.
0:08:34 Oracle, it’s really interesting.
0:08:36 Larry Ellison deserves a lot of credit here
0:08:38 because there’s a bunch of companies
0:08:40 that are kind of getting hit hard
0:08:42 for not making the transition to AI.
0:08:44 I think Salesforce has seen as someone
0:08:47 who hasn’t made that transition,
0:08:48 although their stock has done fairly well
0:08:50 and it’s a great company.
0:08:52 I don’t know if IBM is like that,
0:08:54 but Oracle has positioned themselves as,
0:08:57 hey, don’t forget about us and they have made
0:09:00 real big investments here.
0:09:02 By the way, Oracle is in my 401k, so I’m rich.
0:09:06 Now you’re rich.
0:09:07 Finally, there are shares of 13%,
0:09:11 that’s the biggest single day increase
0:09:12 since December of 2021.
0:09:14 People are excited about their partnership with Google,
0:09:17 which will make its database available on Google Cloud.
0:09:20 It’s their second big deal in terms of AI.
0:09:22 The company signed a similar agreement with Microsoft
0:09:24 in 2023 and the company also reported
0:09:27 strong revenue guidance and they’ve signed
0:09:28 more than 30 AI sales contracts,
0:09:31 worth more than $12.5 billion.
0:09:33 So Oracle and Dell have both positioned themselves
0:09:36 in the front of the AI wave.
0:09:37 They’ve done a great job showing that elephants can dance,
0:09:40 if you will.
0:09:41 Another legacy tech company such as IBM and Cisco
0:09:43 have not made that transition.
0:09:45 If you look at total stock returns from 2020 to 2022,
0:09:48 Oracle has a 59% return, Dell’s 55, IBM 26.
0:09:53 Cisco’s only 7%, so it’s underperformed the market.
0:09:56 It’s just pretty impressive what they’ve been able to pull off.
0:10:00 I think Larry Ellison is gonna go down
0:10:01 as one of the more measured success stories in tech.
0:10:04 – Don’t you think what they’re doing right though
0:10:06 is kind of just their storytelling?
0:10:08 I mean, I feel like this is just more evidence
0:10:11 that the Wall Street is basically refusing to listen
0:10:14 to anything that doesn’t have the word AI in it.
0:10:17 Because you look at these earnings,
0:10:18 these were pretty bad earnings.
0:10:20 Like they missed on the top line,
0:10:22 they missed on the bottom line,
0:10:23 they had a 7% revenue growth, like it’s not a good quarter,
0:10:27 but it’s this story about AI that they’ve told
0:10:30 and about the potential pipeline of future AI contracts.
0:10:34 They got everyone so excited
0:10:36 and it basically made all of the other numbers irrelevant.
0:10:38 And then you compare that to Salesforce,
0:10:40 which you brought up and which we discussed a few weeks ago,
0:10:44 they had higher than expected earnings on the bottom line.
0:10:47 They had 11% revenue growth.
0:10:49 It’s significantly higher than Oracle.
0:10:52 But at the same time,
0:10:53 they had a pretty weak AI story
0:10:55 and they just didn’t convince Wall Street
0:10:57 that they’re gonna be on the front lines
0:10:59 with Microsoft, with Nvidia, with the Google.
0:11:01 And what do you know, the stock fell nearly 20%.
0:11:03 So it feels like Wall Street
0:11:06 is kind of sending us a message here,
0:11:08 which is we only care about AI.
0:11:10 – I think that’s really insightful Ed,
0:11:11 because just as you said it,
0:11:13 it struck me that what I would wanna know is that,
0:11:15 so supposedly Oracle has signed 30 AI sales contracts
0:11:18 worth more than 12 and a half billion.
0:11:20 I’d wanna know the complexion of those contracts.
0:11:22 And that is if they just signed up
0:11:24 30 new database contracts,
0:11:26 similar to what they always sign up,
0:11:27 but they’re calling it AI.
0:11:29 I mean, we’d hope that analysts would have something called,
0:11:33 I’d love to produce this, an AI washing index.
0:11:36 And that is everyone’s claiming
0:11:38 that all the revenue now is coming from AI
0:11:39 just because, all right, they, you know, whatever it is,
0:11:43 it has an AI component to it.
0:11:45 And so there is trying to separate
0:11:49 the weed from the chap here or the bullshit
0:11:51 from, you know, the just kind of ball, if you will.
0:11:55 But it all distills down to the same thing.
0:11:59 And that is the core competence in terms of a CEO
0:12:01 is the same core competence you would hope for your kids
0:12:03 and that you wanna inculcate into your children.
0:12:06 And that is not an understanding of accounting.
0:12:08 It’s not leadership skills or ethics or sustainability
0:12:12 or whatever bullshit we can come up with
0:12:13 to try and get people high-paying positions in universities
0:12:16 so they have no accountability.
0:12:18 It’s storytelling.
0:12:21 And that is when I read that investor letter
0:12:23 from 1997 by Jeff Bezos, I thought, I wanna buy stock.
0:12:27 When I hear Ted Sarandos or Reed Hastings speak,
0:12:30 I think I wanna buy stock.
0:12:32 These guys just have an ability to get on an earnings call
0:12:35 and be very straightforward and yet visionary at the same time
0:12:39 and just instill so much confidence or anything, you know?
0:12:42 I’m not sure I even understood what he’s saying,
0:12:44 but I just wanna buy stock.
0:12:46 The way he used to work was, okay, you’re in tech hardware.
0:12:49 You’re in mainframe computing.
0:12:50 Those companies trade between 12 and 14 times EBITDA.
0:12:54 And if we like Bob more than Lisa, Bob gets 14, Lisa gets 12.
0:12:59 And then things just went fucking haywire.
0:13:01 And it seemed like a lot of companies
0:13:02 that were sort of when you really peeled back the curtain
0:13:05 were pretty similar, but one told a much better story.
0:13:08 So storytelling has become really the core competence
0:13:11 for growth firms because their ability
0:13:14 to get the markets excited about what they’re doing,
0:13:15 such that they could pull forward, cheap capital,
0:13:17 reinvest more capital than their peers,
0:13:20 such that they could pull the future forward
0:13:21 and run away with it, see above Amazon and Netflix,
0:13:24 has become the core competence.
0:13:26 So there’s gotta be at some point,
0:13:29 someone’s ability to go, what’s real and what isn’t.
0:13:31 And then the retort to that would be,
0:13:33 well, storytelling is real.
0:13:34 And if you can raise cheap capital,
0:13:36 if you can raise capital cheap and then you’re a competitor,
0:13:38 you can pull the future forward and make the promise,
0:13:41 turn the promise into performance.
0:13:43 But to your point, it sounds like people
0:13:46 who teach communications or investor relations
0:13:48 should probably look pretty closely
0:13:50 at the sales force and the Oracle earnings calls
0:13:53 and say what went right and what went wrong.
0:13:56 – Should we discuss this Tesla shell to vote?
0:13:59 – Yeah, I guess we’re recording on a Thursday.
0:14:02 It’s Thursday at 6.30 here.
0:14:03 Only ’cause I’m planning to go to Maison Estelle tonight
0:14:05 and get fucked up.
0:14:07 – So I’m watching the clock.
0:14:09 My understanding is that both of these things
0:14:11 are gonna pass, that the shareholders
0:14:12 are going to approve them, is that correct?
0:14:15 Is that what you’ve heard so far today?
0:14:17 – That’s what Elon’s been saying.
0:14:19 – Okay, but does anyone know if it’s true?
0:14:21 – Yeah, I believe him on this one.
0:14:22 I think it would be a weird thing to lie about.
0:14:24 He’d look very stupid and we’ll know by the end of the day.
0:14:27 By the time this podcast comes out,
0:14:30 the vote will be in.
0:14:31 – So look, the shareholders get to decide.
0:14:34 It’s been a bit of a soap opera.
0:14:36 I’m only slightly less sick about talking about this
0:14:39 unless we wanna talk about Paramount.
0:14:42 – Christ, make it go away.
0:14:44 – I just want them to get on with it.
0:14:46 – Yeah, I think, I mean,
0:14:49 I can’t say anything with certainty how the vote will go.
0:14:52 I think what I can say with certainty
0:14:55 is that whether or not it’s yes or no,
0:14:57 this vote is basically meaningless
0:15:01 because here’s what’ll happen if the vote is approved.
0:15:04 It’ll go back to the Delaware Court of Chancery.
0:15:07 It’ll go back to Chancellor McCormick
0:15:09 who will open up that briefing.
0:15:11 And she’s gonna be like,
0:15:13 hold on, I adjudicated this case before.
0:15:15 Actually, I looked at this case basically two months ago
0:15:19 and I made my decision very clear.
0:15:21 The answer is no.
0:15:23 And I feel like what Tesla is forgetting
0:15:27 is that if you read her opinion,
0:15:29 she actually didn’t care whether the shareholders
0:15:31 were fully informed or not.
0:15:32 And granted, she said they probably weren’t,
0:15:34 but it had actually no bearing on her actual decision.
0:15:38 She believed that the package was inequitable
0:15:42 and that as a court of equity,
0:15:44 she also believed that she had the power to rescind it.
0:15:47 And that was it.
0:15:49 And now here we are again
0:15:50 and we’ve got the same case on her desk.
0:15:53 So nothing’s gonna change here.
0:15:55 And we discussed this with my uncle,
0:15:57 Charles Elson, a few weeks ago.
0:15:59 And he said the same thing.
0:16:00 He’s like, this isn’t about informed versus uninformed.
0:16:03 This is just about, was it equitable or was it inequitable?
0:16:07 And she’s already decided it’s the latter.
0:16:09 So they can appeal the decision, that might go somewhere.
0:16:13 But this vote, this being their argument,
0:16:16 oh no, we looked at it again
0:16:17 and we still think it’s equitable.
0:16:19 It’s just a non-starter.
0:16:20 For her, for Charles and McCormick,
0:16:22 I just don’t think this is gonna go anywhere.
0:16:25 We’ll be right back after the break
0:16:27 with a look at a new IPO in London.
0:16:30 (upbeat music)
0:16:32 – Support for the show comes from Atlassian.
0:16:42 Ah, the org chart, that top to bottom list
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0:16:46 aren’t you working for the customer?
0:16:48 So maybe the real question is, who am I working with?
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0:17:41 Atlassian.
0:17:43 – We’re back with ProfG Markets.
0:17:55 The London stock exchange got a boost last week
0:17:57 from a surprising new entrant, Raspberry Pi.
0:18:00 Raspberry Pi makes low cost computers
0:18:02 that are about the size of a credit card.
0:18:04 They run an open source operating system,
0:18:06 and for more than a decade, hobbyists have customized them
0:18:09 for things like streaming media, hosting servers,
0:18:12 and learning to code.
0:18:13 They’re also used in manufacturing
0:18:15 for things like inventory management
0:18:16 or production line automation.
0:18:18 Today, the industrial market makes up more than 70%
0:18:21 of the company’s sales.
0:18:22 At its pricing, Raspberry Pi was valued
0:18:25 at about £542 million, or nearly $700 million,
0:18:29 and shares soared 38% on the first day of trading.
0:18:34 So Scott, we recently discussed
0:18:36 how the London stock exchange has been struggling
0:18:39 to attract IPOs, specifically tech IPOs,
0:18:41 but it’s attracted this company,
0:18:44 and Sheehan, which we’ve also been discussing,
0:18:46 is set to list in London too.
0:18:48 So how do you think this IPO of this Raspberry Pi
0:18:52 computer company will affect
0:18:54 the broader IPO market in London?
0:18:56 – It’s a big deal because it could change
0:18:58 the world’s outlook on the London stock exchange
0:19:00 from the exchange of last resort to a player here.
0:19:03 The total capitalization of London listed equities fell
0:19:06 from $4.3 trillion in 2007 to about $3 trillion.
0:19:10 So it’s actually gone down about 40%,
0:19:13 and over the same period,
0:19:14 the value of US stocks has almost tripled to $53 trillion
0:19:19 in the US.
0:19:20 Raspberry Pi, it’s great for the exchange
0:19:22 because it’s sort of a cool little company
0:19:24 that had options to list on other exchanges,
0:19:27 and they’ve started trading
0:19:28 with a three-day conditional dealing period
0:19:31 during which trading was restricted
0:19:32 to institutional investors.
0:19:33 Maybe you can speak more about
0:19:35 what this sort of conditional period means.
0:19:38 – Yeah, I didn’t realize this, I had never heard of it,
0:19:40 but basically, if you IPO in the UK,
0:19:44 there’s this three-day period
0:19:45 where your shares are trading,
0:19:48 but they’re only available for trading among institutions.
0:19:51 And what’s particularly interesting is that
0:19:53 those shares are reserved,
0:19:55 but you don’t officially own them
0:19:57 until the three-day conditional dealing period ends,
0:20:01 which means that if you’re a company
0:20:03 and you decide to IPO
0:20:04 and you’re in the conditional dealing period,
0:20:06 you can just cancel the IPO
0:20:08 if you’re not getting the demand that you’re liking.
0:20:10 In other words, the London stock exchange
0:20:12 basically lets you do a test run before the real thing.
0:20:16 The thing I would ask to you is,
0:20:18 why do you think that they do this?
0:20:21 Like, and what does this say about the UK market
0:20:25 versus the US that they’d say,
0:20:27 oh yeah, we’re gonna give you three days
0:20:29 to sort of test it out among institutions,
0:20:31 but once it’s up, then you’re doing the real deal.
0:20:34 – Well, I mean, I don’t know if this is the reason for it,
0:20:37 but so the IPO market is rigged.
0:20:40 Essentially at prices, the bankers say,
0:20:42 this is a branding opportunity,
0:20:44 you wanna create positive momentum.
0:20:45 So price at 10, 20, 30% below
0:20:48 where we think it’s gonna open.
0:20:49 And then the investment banks get to give
0:20:52 basically free money to their institutional clients
0:20:55 as sort of a quick pro quo for doing all their business
0:20:57 through JPMorgan and Morgan Stanley or Goldman Sachs.
0:21:00 But the retail investors who don’t have access to the IPO
0:21:05 buy in at the first trade, which is sometimes much higher.
0:21:07 Now, technically it could go down a broken IPO,
0:21:09 but it usually doesn’t.
0:21:10 And sometimes as in the case of Airbnb,
0:21:12 it opens, it priced at 68.
0:21:15 That’s what institutions got to buy the shares for.
0:21:17 And it opened it, I think at 150,
0:21:19 which is where retail investors
0:21:21 got to buy it for the first time.
0:21:23 So a guy named Bill Hambrick came up
0:21:26 with this auction model back,
0:21:28 I think it was like 10, 20 years ago,
0:21:29 probably 20 years ago,
0:21:31 where the IPO would be,
0:21:34 they would basically pair the trade.
0:21:36 And that is people would bid,
0:21:38 buyers and sellers would bid in a Dutch auction
0:21:40 until the market demand was sated at the number of shares.
0:21:44 So it was sort of priced exactly
0:21:46 at where the first trade would be, right?
0:21:48 And that was a means of ensuring
0:21:50 that the company got the maximum amount of capital
0:21:52 for the same dilution.
0:21:54 And that did not survive because it ends up the ecosystem,
0:21:57 the biggest players in institutions
0:21:59 and the investment banks really liked a rig market
0:22:02 that retail investors kind of got screwed.
0:22:05 So I wonder if this is,
0:22:06 I don’t know the answer to this,
0:22:07 but is this an attempt to say,
0:22:09 look, retail investors are gonna get to pay
0:22:11 about the same number as institutional
0:22:14 and also give the company an out
0:22:16 if they don’t like where that number ended up being.
0:22:19 I don’t understand if this is nothing but
0:22:22 more lax rulings for the company
0:22:25 or an attempt to have retail investors
0:22:27 pay the same number as institutional.
0:22:30 – Yes, it’s not totally clear to me either.
0:22:31 Tune in next week for more shit we don’t know.
0:22:34 That’s why you had to tune in to Prop G.
0:22:37 But what about this?
0:22:38 No fucking idea, Ed.
0:22:40 How’s St. Bart’s?
0:22:41 – I don’t know.
0:22:45 I’m sure you’ll have a response to this.
0:22:48 So the CEO of this guy, Eben Upton,
0:22:51 was talking about his decision to list in London.
0:22:55 He said, quote, this was not a patriotic decision.
0:22:58 We did take a look at New York,
0:22:59 but we realized that for a company
0:23:01 of our scale, the London market is probably a better home.
0:23:04 He went on to say, quote,
0:23:06 many of the stories people tell
0:23:08 about the differences between the US and the UK,
0:23:11 particularly this sort of magical multiple arbitrage,
0:23:14 don’t seem to be real.
0:23:16 Which I find interesting because it’s almost,
0:23:19 it’s almost like it’s a jab at us
0:23:21 who have been basically saying exactly that,
0:23:23 that if you’re listing in the US,
0:23:25 you’re getting a little bit of a valuation jump
0:23:28 and that isn’t true in the UK.
0:23:30 And the reason that we say that
0:23:32 is because we just look at the numbers.
0:23:34 But apparently the CEO isn’t worried about that.
0:23:37 He isn’t worried about this multiple arbitrage issue.
0:23:41 So I’m just wondering what you think of his comments.
0:23:44 Do you agree with his point?
0:23:45 And do you think maybe he’s finding some other value
0:23:49 in listing in London versus New York?
0:23:51 – I don’t know because it might be.
0:23:52 So we’ve pointed out that stocks that trade
0:23:55 on the NYC and the NASAC traded whatever was 20,
0:23:57 an average multiple of 26
0:23:59 and all the other exchanges is around 13.
0:24:01 Now that might be a self-fulfilling prophecy
0:24:03 and that is the best company’s list on those exchanges.
0:24:06 It also might be much more heavily weighted towards
0:24:08 tech which traded a much higher multiple,
0:24:10 whereas the company’s the list on these other exchanges,
0:24:13 probably more manufacturing or services heavy
0:24:16 which don’t trade it as high multiple.
0:24:18 So it might be a function of the type of company
0:24:19 as opposed to just that these companies ran the gauntlet here
0:24:23 so it deserves a higher multiple, I don’t know.
0:24:26 But I think this is really good for competition.
0:24:29 I’m glad the LSE is getting some love.
0:24:33 The biggest beneficiary here in my view is Sheehan
0:24:36 because everything about Sheehan going public,
0:24:40 potentially on the LSE has been about,
0:24:42 oh, the exchange of last resort
0:24:43 and they couldn’t go public in the US.
0:24:46 Well, this is sort of creating some cloud cover
0:24:49 and some kind of some juju, some mojo,
0:24:53 some sex appeal, some pixie dust across the LSE
0:24:57 where good companies, innovative companies
0:24:59 are choosing this exchange.
0:25:01 So a company with whatever there’s,
0:25:04 I don’t know what the market cap’s gonna be here.
0:25:05 I can’t imagine this could be more than a few billion dollars.
0:25:08 That’s one thing, but the cloud cover
0:25:11 and the umbrella brand increasing in value of the LSE
0:25:14 when Sheehan goes out at a 70, 80, 90 billion dollar
0:25:18 valuation, if that makes the LSE and de facto,
0:25:22 Sheehan trade up five, 10% more,
0:25:26 you’re talking about seven to 10 billion dollars.
0:25:29 In other words, Sheehan, the best thing,
0:25:31 no one is happier about Raspberry Pi going public
0:25:33 on the LSE and having it being a good thing
0:25:35 than Sheehan right now.
0:25:37 Because what it says is no,
0:25:39 the LSE isn’t the exchange of last resort,
0:25:41 the good companies are going public here,
0:25:43 investors should look at it
0:25:45 and it’s not a hold your nose and buy it
0:25:48 because it’s on the LSE.
0:25:49 In other words, Raspberry Pi a little bit turns listing
0:25:53 on the LSE from a bug to a feature.
0:25:56 – And you’re happy, right?
0:25:57 You’re invested in Sheehan or you’re going to invest?
0:26:00 – I’m not as happy as if I was in the St. Bart’s
0:26:01 but I’m still pretty happy.
0:26:03 Yeah, I’ve invested in Sheehan and I’ve got,
0:26:07 I’m trying to find, I don’t have any inside information
0:26:09 but I’ve been investor and so I’ve been waiting
0:26:11 for the prospectus to come out.
0:26:13 I think they confidentially filed on the LSE
0:26:15 but the numbers that I’ve seen
0:26:17 and the information are that it did 30 billion last year.
0:26:21 It’s going to do I think 42 this year.
0:26:22 So it’s growing 40, I mean,
0:26:23 the numbers are just staggering here
0:26:25 and it’s also profitable.
0:26:27 And if you look at their competitors H&M or Zara,
0:26:30 they traded really healthy multiples
0:26:33 and it looks like this company should maintain its growth.
0:26:36 It’s going to surpass Amazon next year
0:26:37 in terms of retail, barrel sales
0:26:40 and then the year after that surpass Walmart
0:26:42 and probably have higher net margin.
0:26:45 So anything that creates cloud cover for a positive reception
0:26:49 I’m down with and excited about.
0:26:50 So yeah, I hope it goes well.
0:26:54 – We’ll be right back after the break
0:26:55 with a look at the hottest new AI startup in France.
0:26:58 – Vox Creative.
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0:28:40 – We’re back with ProfG Markets.
0:28:52 French AI startup, Mistral,
0:28:54 secured $640 million in new funding
0:28:57 at a $6 billion valuation.
0:28:59 That’s triple its valuation from December
0:29:02 and the company was founded just 14 months ago.
0:29:05 Their arm was led by General Catalyst
0:29:07 and included participation from Andreessen Horowitz
0:29:09 as well as NVIDIA and Salesforce.
0:29:11 So, Scott, Mistral’s now sitting on a billion dollars
0:29:14 in total funding.
0:29:16 Do you think it has any chance of taking on the likes
0:29:18 of open AI and possibly the other AI juggernauts?
0:29:23 – Well, I hope so, but according to what you just said,
0:29:24 it sounds like chatGPT is soaking up
0:29:26 or hoovering up all the revenue,
0:29:28 but I would imagine that the EU,
0:29:31 not only companies, but EU regulators
0:29:32 are really ready to be supportive
0:29:35 of a big tech or an AI company that’s on the continent.
0:29:38 I think they are kind of sick of sending
0:29:41 all of their capital overseas to, you know,
0:29:44 land at SFO International and then just stay there.
0:29:47 So I think that this company probably has,
0:29:50 and I’ve heard it’s a good company,
0:29:51 I’ve heard the interesting technology.
0:29:53 The French actually have a very strong background.
0:29:56 I mean, everyone knows that they have
0:29:57 an incredible background in luxury.
0:29:59 When you’re born in France, you’re just like,
0:30:00 at the age of three, you’re rearranging your blanket
0:30:03 and asking for your mes blankets.
0:30:05 And you just, you know,
0:30:06 the kids like have a rattle at it, it’s porcelain.
0:30:08 And then when they throw up their peas on their bib,
0:30:12 it’s designed better and it just looks more seamless somehow.
0:30:15 There’s something about the French, they just get beauty.
0:30:19 I mean, I’ll go to Cannes and I’ll go to these dinners
0:30:21 and be like, who picked out these linens?
0:30:24 These linens are beautiful.
0:30:25 There’s something in the water there, the DNA.
0:30:26 Anyway, that’s what we were doing last night.
0:30:28 We were looking at the wine glasses.
0:30:29 We were like, these glasses are so light.
0:30:31 They’re so beautiful.
0:30:32 Right?
0:30:33 In French, yeah, same part.
0:30:34 So here you go.
0:30:35 It’s unbelievable.
0:30:35 The genetic or the DNA or the business of luxury
0:30:38 has been the gift that has kept on giving in France.
0:30:41 The wealthiest man in Europe is Bernard Arnaud,
0:30:44 who immediately, you know,
0:30:45 pieced out to Belgium for tax avoidance,
0:30:48 but still Chanel, Hermes, you know, Vittane, not is Vittane?
0:30:53 Yeah, Vittane is Dior.
0:30:54 I mean, they just have such clothing,
0:30:57 they have such amazing brands, Clarence, you know,
0:30:59 they have such incredible staggering.
0:31:02 Anyway, what they don’t get enough credit for
0:31:04 is they actually have a fantastic schools in engineering
0:31:07 and Dassault makes an incredible plane.
0:31:10 Daddy wants a Falcon 9X.
0:31:13 Anyways, they have actually a very strong background
0:31:16 in engineering and this is coming through.
0:31:18 And I hope, I would love to see Europe, you know,
0:31:22 kind of punch above its weight class or not even that,
0:31:26 start punching at its weight class
0:31:28 in terms of tech startups.
0:31:30 There’s Salonis out of Germany,
0:31:32 which is an amazing software company.
0:31:34 There’s some fintech companies here in the UK
0:31:37 that are doing pretty well or okay, I should say.
0:31:39 So I hope this is a, I hope this is a win.
0:31:43 I’m a huge fan of General Catalyst.
0:31:44 I’m a bit pissed off, they can call me and say,
0:31:46 “Hey, Scott, you live in Europe
0:31:47 “and you’re super special and partying in Cannes.
0:31:49 “Do you want to invest?”
0:31:50 Didn’t get that call, Ed.
0:31:51 Didn’t get that call.
0:31:52 Also, I tell you, I haven’t been invited
0:31:53 to the fucking Eihardt party with Lenny Kravitz.
0:31:56 – I don’t know why you’re so upset about that, I guess.
0:31:58 – Pissed off, I’m gonna stand at the goddamn hotel.
0:32:02 How embarrassing is that?
0:32:02 I remember either with my boys and I’m like,
0:32:04 “Dad, it’s a party I can’t.
0:32:05 “I thought you were a big deal here.”
0:32:07 Yeah, I’m like, “No, no, let’s order room service.”
0:32:11 Anyways, but Mistral,
0:32:13 this needs to be a healthier ecosystem.
0:32:14 It needs to have more competition.
0:32:17 I hope that it does well.
0:32:18 I’m kind of curious, we need to do a deep dive here
0:32:20 and say what is its point of differentiation
0:32:24 as all of these things begin to look
0:32:25 like the same goddamn company?
0:32:27 – Yeah, I mean, if you look at the cap table,
0:32:30 the lead investor was General Catalyst,
0:32:32 which is an American firm.
0:32:33 Other investors include Andreessen Horowitz and Lightspeed.
0:32:36 There are several other VCs, most of them American.
0:32:39 Most interesting though to me is the corporate investor list.
0:32:43 So you’ve got Salesforce, Samsung, Cisco, IBM,
0:32:49 ServiceNow, NVIDIA and Microsoft.
0:32:54 So basically every single big tech company
0:32:57 who in my view, if this were like 20 years ago,
0:33:00 I think Mistral would be trying to compete
0:33:03 with those companies.
0:33:04 I don’t think they’d be taking their money
0:33:06 and giving them equity.
0:33:08 And you mentioned this issue of diversity,
0:33:10 we need more competition.
0:33:12 I feel like this all goes back to the antitrust issue
0:33:14 which we’ve been discussing.
0:33:16 And that is it feels like big tech
0:33:19 has a new monopolization strategy.
0:33:20 It used to be that you bought your competitors,
0:33:23 but then Lena Kahn came in, she sort of cracked down
0:33:27 and the FTC said, no, no more of that.
0:33:29 Now it feels like the strategy for big tech
0:33:32 is invest in your competitors
0:33:34 because by investing, you establish a level of power,
0:33:38 you get some control, you also get a share in the upside.
0:33:41 And crucially, as it appears, you don’t get regulated.
0:33:46 I mean, we haven’t seen any intervention from the FTC
0:33:49 or the DOJ on any of these corporate investments,
0:33:52 but it feels like the stones throw away
0:33:55 from just buying out your competition.
0:33:57 I don’t see how it’s that much different.
0:34:00 So what are your thoughts on this?
0:34:01 I mean, am I right to be concerned by the fact
0:34:04 that big tech and the MAG7 is basically spread out
0:34:08 across the cap tables of every single significant AI startup
0:34:11 in the world right now.
0:34:12 It’s not just America, it’s Mistral too,
0:34:14 this French company that you’d think is French,
0:34:17 but the entire investor base are just the same Americans.
0:34:20 Is this not kind of a problem?
0:34:22 – The way I would describe it is that if you’re a young man
0:34:24 looking to lose your virginity and live in Kentucky,
0:34:26 you should go to a family reunion.
0:34:28 In other words, there’s a lot of incest here.
0:34:31 And that is, is that wrong?
0:34:33 – Nope. – Was that wrong?
0:34:35 Literally we’ll hear from a dozen people from Kentucky.
0:34:36 I’m gonna find out people I didn’t even know were from
0:34:38 Kentucky or from Kentucky and that I was inappropriate.
0:34:41 – People were upset about what we said about Austin.
0:34:43 People were saying I was being rude to Austin
0:34:46 for saying I don’t want to live there.
0:34:47 – Yeah, just wait, it gets a lot worse.
0:34:49 Just so you know, half my emails are people telling me
0:34:52 what I should not have said and how their cousin suffers
0:34:57 from some syndrome that I’ve, anyways.
0:34:59 Look, you’ve pointed this out.
0:35:02 This industry is just way too incestuous
0:35:05 and has too many overlapping paths to one another.
0:35:08 It’s smart for them.
0:35:09 Nvidia wants to have a really robust ecosystem.
0:35:12 The last thing they want is a small number of players
0:35:14 bidding on their chips.
0:35:17 What they want is a ton of,
0:35:18 they want a huge customer base.
0:35:19 So for them, it makes a shit ton of sense for them to take,
0:35:24 okay, 5% of their market, 3% of the market cap
0:35:27 would be $100 billion and do everything they can
0:35:30 to try and foment, fund and catalyze a super robust
0:35:34 AI ecosystem where not only AI becomes bigger and bigger,
0:35:38 but there’s a variety of future customers
0:35:41 all needing these GPUs.
0:35:43 Also, just from a customer standpoint,
0:35:45 again, I just think regulators and European companies,
0:35:49 at some point, I mean, one of the reasons
0:35:52 I’m gonna get geopolitical here,
0:35:53 one of the most hopeful things about the conflict
0:35:56 in the Middle East right now, the war,
0:35:58 is that the Kingdom of Saudi Arabia
0:36:01 actually coordinated with Jordan to help shoot down
0:36:03 the projectiles coming from Iran.
0:36:04 I realize there’s a reach, but I will bring it home.
0:36:07 And that is the Kingdom wants to normalize relations
0:36:09 with Israel and I think part of the motivation
0:36:11 for normalizing relations is like,
0:36:14 we’re sick of getting on planes and sending money
0:36:16 out of the region to San Francisco for all of our tech.
0:36:19 Israel has a ton of great tech, they’re close to us,
0:36:23 we seem to get along, we’re sick of being,
0:36:27 I think everybody’s getting sick
0:36:30 of sending money back to the,
0:36:32 you wanna talk about real, at least metaphorically,
0:36:35 colonization, it’s American tech companies
0:36:39 that have basically turned every company in the world
0:36:41 into their colonies, sending resources back to,
0:36:44 back to Britain from India, and India is every company
0:36:47 in the world sending money to some company
0:36:49 that’s a bike ride from SFO International Airport,
0:36:53 that’s probably gonna take that metaphor a little too far,
0:36:55 but anyways, this is, I think that a lot of European companies
0:36:59 of Israel just offers a competent product
0:37:03 that’s in shooting distance or spitting distance
0:37:05 of these other guys, I think a lot of European companies,
0:37:08 maybe even under the auspices of not having
0:37:10 to pay additional taxes or whatever,
0:37:13 that the E regulars my place on non-European based tech,
0:37:17 I think this makes a lot of sense,
0:37:20 I think the investors here are smart to get into this thing
0:37:22 because any competent AI company on the continent,
0:37:26 it’s the largest economy in the world, the EO,
0:37:29 and I think a lot of European companies and regulars
0:37:31 would really like to be able to put their money
0:37:33 into a European tech company as opposed to
0:37:36 getting invited to listen to Sam Maltman,
0:37:38 give us hushed tone concerns around AI,
0:37:40 I think they’re kind of sick of these guys,
0:37:43 but anyways, we’ll see.
0:37:44 – Slight change of subject,
0:37:47 but we should talk about this new company Tempus AI
0:37:51 that’s going public, it’s a healthcare company,
0:37:54 but it’s also supposedly an AI company at the same time,
0:37:57 so that they’re aiming to raise $400 million,
0:38:00 they’re targeting a $6.1 billion valuation,
0:38:03 and they’re this precision medicine company
0:38:06 that quote, uses AI to make laboratory tests
0:38:09 more accurate, tailored, and personal.
0:38:13 Now, the reason I bring this up in this conversation
0:38:17 is because until about six months ago,
0:38:20 this company was called Tempus,
0:38:23 and today it’s called Tempus AI,
0:38:27 so they just tacked AI onto the end of the name
0:38:29 and now they’re going public.
0:38:30 And Mia looked at their S1,
0:38:33 she found that they mentioned AI 220 times
0:38:37 in the S1 filing,
0:38:38 and meanwhile as a percentage of revenue,
0:38:41 AI makes up, wait for it, 2% of the business.
0:38:45 I’m gonna go ahead and assume that you and I agree
0:38:49 that there is a very strong stench of BS
0:38:53 coming from this IPO, this Tempus AI IPO,
0:38:57 but as it relates to the broader market,
0:38:59 what do you think this IPO and this company says
0:39:03 about the rest of the AI market right now?
0:39:05 – First off, I like this company.
0:39:08 I actually emailed the CEO, he’s the former CEO of–
0:39:11 – Okay, so I’ve just been shitting on it.
0:39:13 – That’s why people come here,
0:39:16 they want a no mercy, no malice view of this shit.
0:39:18 Here, I mean, that’s why people love PropG.AI.
0:39:22 There’s a lot to like here, healthcare and AI,
0:39:27 and that just feels like champagne and cocaine, right?
0:39:29 I’ve always thought that healthcare
0:39:30 is the most fertile place for disruption
0:39:32 and the fists of stone coming for it might be AI.
0:39:36 It’s a real company, a lot of healthcare companies
0:39:40 use the product, they have real revenues,
0:39:42 they’ve been growing really fast.
0:39:44 Having said that, to your view, is it AI washing?
0:39:48 That’s the bottom line, right?
0:39:49 It’s not, I mean, the stat is crazy.
0:39:52 They mentioned AI 220 times,
0:39:54 and yet AI accounts for less than 2% of its revenue.
0:39:57 So this is gonna be a very interesting IPO to watch
0:40:01 because what it’s gonna indicate
0:40:03 is just how frothy the froth is.
0:40:06 And if this company goes out
0:40:08 and say it goes up 20, 50, 100% on the first trade,
0:40:11 then we know that the party is still going.
0:40:14 And by the way, they might be able to take that cheap capital
0:40:16 and get better at AI and go from 2% to 20%.
0:40:21 So again, see above storytelling.
0:40:23 Or if the market prices this thing
0:40:25 and it doesn’t have a first day pop
0:40:27 and maybe within a few days it’s a broken IPO,
0:40:30 it might signal a top.
0:40:32 It might signal that, okay, the halcyon days
0:40:36 of anything that says AI are over
0:40:39 and that people are sort of,
0:40:41 at some point people are gonna get very cynical
0:40:44 around this stuff, right?
0:40:46 – I’m already getting just so sick of it myself, yeah.
0:40:48 – I can imagine where at some point AI
0:40:50 starts to have the same stench as SPAC, right?
0:40:53 It’s like, okay, enough already or you weren’t around,
0:40:57 but William Sonoma is one of my first clients
0:41:01 as a strategy consultant.
0:41:03 And they were very seriously considering
0:41:05 changing the name to WilliamSonoma.com.
0:41:08 And there were a lot of companies
0:41:10 that thinking about .com and they added
0:41:12 and all that they used to run commercials with nothing,
0:41:14 but just the name and then .com.
0:41:16 – Given your experience there,
0:41:18 what do you think was the right move?
0:41:20 I mean, do you approve of a company
0:41:21 tacking AI onto the end of it?
0:41:24 Is it actually potentially a good thing for the business?
0:41:28 Would William Sonoma have benefited
0:41:30 from going the Amazon route and calling themselves,
0:41:33 WilliamSonoma.com, Amazon.com?
0:41:34 – It went further than that.
0:41:35 And I think the statute of limitations are over.
0:41:37 This was, Jesus, this was 30 years ago.
0:41:41 Let me see, I was 26, I’m 49 now.
0:41:43 So it was 23 years ago.
0:41:44 But I remember being in meetings with bankers
0:41:48 and the bankers were trying to convince
0:41:51 Howard and his team and they invited me
0:41:53 into these meetings to spin out the .com business.
0:41:57 They wanted to take WilliamSonoma.com
0:41:59 and spin it into a different business.
0:42:01 And of course, Howard goes,
0:42:02 “That’s makes no fucking sense.”
0:42:03 And the bankers were like,
0:42:04 “We get 10 times revenues for this business.”
0:42:06 As opposed to his choice, he was like,
0:42:07 “Yeah, but how do I get my store managers to participate?”
0:42:10 And he was just sort of,
0:42:12 he was not easily impressed by financial engineering.
0:42:15 I think that’s one of the things that made him a great CEO.
0:42:18 So if you look back, if history is any guide,
0:42:22 there aren’t that many companies
0:42:23 that were able to get so much cheap cash.
0:42:24 Well, I guess, I mean, Amazon, it was Amazon.com.
0:42:27 Eventually they sold, they dropped it .com.
0:42:29 But Amazon, there was a there there.
0:42:32 They were really selling all their shit online.
0:42:35 The other companies that tried to pull a fast one
0:42:37 and say, “Oh, we’re an internet company
0:42:39 that weren’t really an internet company.”
0:42:41 Like that shit blew up pretty fast.
0:42:44 It just, the whole thing just started collapsing on itself.
0:42:46 Now, the companies that made it through that valley of death,
0:42:49 Amazon and a bunch of others,
0:42:51 ended up being worth a ton of money.
0:42:54 The question is, when is that valley of death
0:42:56 or that shakeout gonna happen?
0:42:58 And I would bet that it’s,
0:42:59 you’re just seeing symptoms everywhere.
0:43:02 Now, does that mean it happens in three or six months
0:43:04 or in two or three years?
0:43:06 I don’t know.
0:43:07 It kind of feels like 98 to me.
0:43:09 I think we’re full for off
0:43:10 and we still got some running distance here.
0:43:12 But these cycles tend to,
0:43:14 the cycles tend to get shorter and shorter
0:43:16 or we tend to cycle through,
0:43:18 cycle through the cycle more rapidly, if you will.
0:43:21 But I think you’re gonna see,
0:43:23 I just think you’re gonna see an enormous fallout
0:43:25 and Tempus, bringing back to Tempus,
0:43:29 this will be a bit of a bellwether
0:43:33 for where we are in the, quote unquote, AI hype cycle.
0:43:36 – Yep.
0:43:37 So you think that the top is not already in?
0:43:39 – I think, let me go this way.
0:43:41 The way I would say it is the bell is in,
0:43:44 we have visual on the bell.
0:43:45 This stuff’s just getting kind of so out of control
0:43:48 that we can see the bell.
0:43:50 Now, is it gonna be wrong in three months or two years?
0:43:53 We’ll see, but there’s no way we can sustain these valuations
0:43:57 across a bunch of companies that quite frankly,
0:43:59 are just sort of David Copperfielding,
0:44:02 their business strategy by saying,
0:44:04 “Look over here, we’re AI.”
0:44:06 And then stuffing an analog rabbit into a hat.
0:44:09 – That was pretty good.
0:44:10 – That was good.
0:44:11 I think I’d argue that the bell for me was
0:44:13 Jensen Huang signing a woman’s chest.
0:44:15 I think that I’m gonna call that as my top.
0:44:17 – That was the bell.
0:44:19 That might be the image.
0:44:20 – All right, let’s take a look at the week ahead.
0:44:25 We’ll see US retail sales and existing home sales for May.
0:44:29 Scott, do you have any predictions for us?
0:44:31 – Well, I’m just super excited or super excited.
0:44:33 As much as I hated and as stupid as the Vision Pro was
0:44:36 for Apple, Apple’s intelligence is that smart.
0:44:41 Apple is the best managed brand in the world
0:44:43 and in a just a stroke of genius, they said,
0:44:44 “Okay, AI is starting to smell like Teen Spirit.
0:44:47 “If Teen Spirit was drama and people fired
0:44:50 “and rehired and catastrophizing,
0:44:52 “it’ll save the world, know to destroy the world.”
0:44:54 And I think that they just said,
0:44:56 “No, we wanna own this, make it our own,
0:44:58 “make it more friendly, make it less,
0:45:00 “make it less Skynet or weirdness.”
0:45:02 Let’s just call it Apple intelligence.
0:45:04 My prediction is big aflop is the Apple Vision Pro is
0:45:08 Apple intelligence will be that big a hit.
0:45:12 That was a mouthful.
0:45:13 Go drink rosé and take care of everybody.
0:45:17 Realize that the reason you’re there is because you work
0:45:20 for someone who is both talented and generous.
0:45:24 Remember what it was like to be a young person
0:45:25 with not a lot of money, although you are overpaid.
0:45:29 But I want you guys to have a wonderful time.
0:45:31 Eat fromage, eat fromage.
0:45:34 I want you to wear a thong, scare some people.
0:45:38 There’s actually a new beach at, what is it?
0:45:41 I think it’s at, where’s that new beach?
0:45:44 It’s on, oh God, what the fuck is my name?
0:45:46 Anyways, you’ll find it, you’ll find it.
0:45:49 Anyways, HR Nightmare.
0:45:50 Your boss telling you to find a new beach.
0:45:53 Call HR.
0:45:54 – This episode was produced by Claire Miller
0:45:57 and engineered by Benjamin Spencer.
0:45:58 Our associate producer is Alison Weiss.
0:46:00 Our executive producers are Jason Stavis and Catherine Dillon.
0:46:03 Mia Silverio is our research lead
0:46:05 and Drew Burroughs is our technical director.
0:46:07 Thank you for listening to Prof. G Markets
0:46:09 from the Vox Media Podcast Network.
0:46:10 Join us on Thursday for our conversation with Ray Dahlio.
0:46:14 (upbeat music)
0:46:17 – Support for the show comes from Atlassian.
0:46:33 What do you think of when you hear the word flow?
0:46:35 How about a smooth river of collaboration
0:46:37 culminating in a shared ocean of positive outcomes
0:46:40 across your organization?
0:46:42 I thought I was the one doing ketamine.
0:46:43 Anyways, Atlassian software like Loom, Confluence and Jira
0:46:46 can help you achieve maximum flow across your teams
0:46:49 by enabling fast and easy communication and connection
0:46:51 no matter what time zone they’re in.
0:46:53 Because individually, we’re great,
0:46:56 but together, we’re so much better.
0:46:57 Learn how to unlock flow across your teams at Atlassian.com.
0:47:01 That’s A-T-L-A-S-S-I-A-N.com.
0:47:06 Atlassian.
0:47:07 (upbeat music)
0:47:10 (upbeat music)
0:00:01 Support for the show comes from Atlassian.
0:00:03 Having trouble getting things done at work?
0:00:05 You’re not alone.
0:00:06 Maybe in order to unlock amazing outcomes,
0:00:08 it’s time to stop looking up and down for answers
0:00:10 and instead start looking across.
0:00:13 What do we mean by that?
0:00:15 The companies with the fastest speed to market
0:00:17 tend to be the ones that look across their organization
0:00:19 rather than up and down the hierarchy.
0:00:21 Stay tuned to hear how Atlassian software
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0:00:25 can help maximize effective teamwork in your organization
0:00:28 because individually we’re great,
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0:00:32 Learn how to unleash the potential of your team
0:00:34 at Atlassian.com, that’s A-T-L-A-S-S-I-A-N dot com.
0:00:39 Atlassian.
0:00:40 (upbeat music)
0:00:42 Today’s number 1493.
0:00:47 That’s the year Christopher Columbus landed
0:00:48 on the island of St. Bart’s
0:00:50 and named it after his brother Bartolomeo, true story.
0:00:55 My wife said to me, you know,
0:00:57 sex is so much better on vacation.
0:01:00 And I thought, that’s not the postcard I wanted.
0:01:03 (laughs)
0:01:04 (upbeat music)
0:01:06 Welcome to Prop G Markets.
0:01:16 Today we’re discussing London’s IPO market
0:01:20 and Mistral’s latest funding around.
0:01:22 But first, where are you Ed?
0:01:24 I’m in St. Bart’s, it’s pretty good.
0:01:26 It’s pretty nice out here.
0:01:28 Yeah, I got here yesterday.
0:01:30 You know, it’s all right.
0:01:31 We got the private villa
0:01:35 and it’s got a private pool
0:01:36 and it’s got, you know, there’s a private chef.
0:01:38 So we had breakfast in the morning.
0:01:40 Things are okay is what I’d say.
0:01:42 So first off, I’m the only one
0:01:43 that’s allowed to be cynical here.
0:01:45 How many of you are there in St. Bart’s right now?
0:01:47 How many from the Prop G media team went to St. Bart’s?
0:01:49 Six.
0:01:50 And you’re staying at my favorite place, Lacerano.
0:01:52 I even picked out the villa for you.
0:01:55 Where are you guys going to dinner tonight?
0:01:56 I’m not quite sure.
0:01:57 I think we’re going to…
0:01:58 Typical man.
0:01:59 You’ve leapt it up to the women
0:02:00 to handle everything, right?
0:02:01 That’s right.
0:02:02 I’m not sure.
0:02:03 Oh, there we go.
0:02:04 Love that sound.
0:02:06 You’re really leaning into this.
0:02:07 Good for you.
0:02:09 All right, you’re having a glass of champagne.
0:02:11 Good for you.
0:02:11 That’s right, yeah.
0:02:12 This is, you’re easing into the St. Bart lifestyle.
0:02:16 How are you doing?
0:02:17 You’re back at home?
0:02:18 Yeah, I’m in London.
0:02:20 My life is not nearly as romantic as yours.
0:02:23 It’s, although I’m going to the South of France tomorrow,
0:02:26 which I’m excited about.
0:02:27 That’s right.
0:02:27 You’re going to Cannes.
0:02:28 That’s right.
0:02:29 Going to Cannes.
0:02:30 Excited about that.
0:02:31 Although, I think I’ve lost some brand equity.
0:02:32 I can’t get invited to the iHeart party
0:02:37 at the Ducat with Lenny Kravitz.
0:02:38 I called, I sat next to the CEO of iHeart Media last year
0:02:43 and I emailed him and he kind of sent me a polite response,
0:02:47 but still I haven’t had that invite yet.
0:02:49 So I think I’ve lost some brand equity.
0:02:51 I don’t know what’s going on here.
0:02:52 I don’t, anyways, I can’t get into the hot parties anymore.
0:02:55 I did get invited to Spotify, but I’m not.
0:02:57 Is the iHeart party really that hot?
0:02:59 Lenny Kravitz is going to be there?
0:03:00 Yeah. Well, it’s at the Hotel Ducat
0:03:02 and I’m staying there and Lenny Kravitz is playing.
0:03:04 And so it’ll be like being a prisoner at Alcatraz
0:03:06 if I don’t get invited.
0:03:07 ‘Cause supposedly the prisoners of Alcatraz
0:03:09 when the wind was a certain way,
0:03:10 they could hear people parting in the wharf,
0:03:13 which was supposedly torturous for them
0:03:15 ’cause they got to hear what life was like
0:03:17 for people who are free.
0:03:19 So if I’m in my hotel room at the Hotel Ducat
0:03:21 and I hear, you know, I start hearing Lenny Kravitz
0:03:23 play his, you know, his three songs,
0:03:26 then I’m gonna be very upset.
0:03:28 I’m gonna stop listening to iHeart Radio.
0:03:31 Is that how you feel right now with us?
0:03:33 I mean, we’re having a pretty good time here.
0:03:34 No, I like you guys.
0:03:35 I want you to have fun.
0:03:36 And not like that.
0:03:37 I know that I like that everyone knows
0:03:39 that you’re down there.
0:03:40 I think it makes us seem.
0:03:41 By the way, in case you’re still wondering,
0:03:43 we’re still recruiting for a writer,
0:03:45 a senior writer for No Mercy, No Malice.
0:03:47 So if you want to go to St. Bart’s next year,
0:03:50 come join, come join Prop G.
0:03:53 Anyways, enough of that, get to the news.
0:03:55 Okay, let’s start with our weekly review of market vitals.
0:03:57 (upbeat music)
0:04:00 The S&P 500 closed about 5,400 for the first time ever.
0:04:08 The dollar was flat, Bitcoin declined
0:04:11 and the yield on tenure treasuries dropped,
0:04:13 shifting to the headlines.
0:04:15 The Consumer Price Index showed inflation
0:04:17 cooled again in May with prices up just 3.3%
0:04:20 from a year earlier.
0:04:21 That’s flat month of a month and down slightly from April.
0:04:24 Meanwhile, the Federal Reserve held interest rates steady,
0:04:26 though many Fed officials are expecting
0:04:28 at least one cut by the end of 2024.
0:04:30 Open AI hired the former CEO of Nextdoor
0:04:33 as its new chief financial officer.
0:04:35 As the company’s first CFO in two years,
0:04:37 Sarah Friar will help the company grow its global business
0:04:39 and invest in further AI research.
0:04:42 The company also hired the former SVP of product
0:04:44 Twitter Kevin Weil as its new chief product officer.
0:04:48 Oracle stock rose 13% to reach an all-time high
0:04:51 despite reporting fourth quarter earnings
0:04:53 that were below analyst expectations.
0:04:55 While the company missed slightly on revenue,
0:04:57 the stock surged on account of new deals
0:04:59 with Google Cloud, Microsoft Azure and Open AI.
0:05:01 And finally, Tesla shareholders voted again
0:05:04 on Elon Musk’s $56 billion pay package
0:05:06 and the move to reincorporate in Texas.
0:05:09 They’re actually voting right now as we record this podcast
0:05:11 so we don’t know the results yet,
0:05:13 but the stock rose 6% this morning
0:05:15 after Musk said he expects to win the vote.
0:05:18 Scott, your thoughts.
0:05:20 – I think it’s great that inflation cooled.
0:05:22 I’ve always, as someone who likes to think
0:05:24 they know a little bit about economic history,
0:05:25 inflation is more dangerous than invading army.
0:05:28 I mean, in last year, you know,
0:05:30 part of the village gets invaded,
0:05:31 but revolutions oftentimes can be reverse engineered
0:05:35 to inflation.
0:05:35 I look at what’s happened here in the UK
0:05:38 and basically they have inflation and lower productivity.
0:05:40 So let’s figure out a way to make less money
0:05:42 and have all of our goods go up in price,
0:05:44 which translates to, you know, a worse standard of living.
0:05:47 And that’s when every household gets angry
0:05:49 and wants chaos and change.
0:05:51 It’s the first time in almost two years
0:05:53 that the CPI didn’t climb.
0:05:55 The annual core rate of inflation came down to 3.4%
0:05:58 the lowest since April of 2021.
0:06:01 And the report keeps hopes
0:06:03 of a potential September rate cut alive.
0:06:05 I am sick of talking about rate cuts.
0:06:07 I just don’t care.
0:06:08 The open AI, you know, open AI seems to be
0:06:12 kind of professionalizing, if you will.
0:06:14 The former CEO before her position in next door,
0:06:17 Sarah Fryer served as CFO of Square
0:06:19 and previously worked at Goldman Sachs and McKinsey.
0:06:21 So she’s obviously very qualified.
0:06:23 And hiring Fryer potentially signals
0:06:25 that open AI could be thinking about an IPO.
0:06:28 She’s sort of the, she’s someone who comes in
0:06:31 who has credibility in the street and says,
0:06:32 “Okay, this is how you go public.”
0:06:33 And Sam, you know, do not talk about X, Y and Z,
0:06:36 do not talk about this and can kind of,
0:06:38 that those skills are very important
0:06:41 and the difference between a well-managed IPO
0:06:43 for this company would be tens of billions of dollars
0:06:45 in market capitalization.
0:06:46 And so she is going to make a shit ton of money.
0:06:49 She’ll be there just in time to get a shit ton of options
0:06:52 before they go public.
0:06:53 So this, they literally had their pick of anybody
0:06:57 to be the CFO of this company.
0:06:58 – By the way, do you see how much money
0:06:59 they’re generating now?
0:07:01 The information just reported on this.
0:07:02 Sam Altman revealed the revenue,
0:07:04 the ARR for the company.
0:07:06 Do you see this?
0:07:07 – I did, what did it say?
0:07:07 – $3.5 billion a year is their run rate right now,
0:07:11 which is more than double
0:07:12 than what they were at six months ago.
0:07:14 And just to put that into perspective,
0:07:16 Anthropic, which is arguably their number one competitor,
0:07:20 they’re at 100 million and then cohere is at 22 million.
0:07:23 So it’s like 100 million, 22 million versus 3.5 billion.
0:07:28 The open AI business is 35 times larger
0:07:31 than their next biggest rival.
0:07:33 Like they’re just completely running away
0:07:35 with it at this point.
0:07:35 – Probably the more impressive thing is who said
0:07:37 they’ve grown their revenues doubled
0:07:39 in the last six months.
0:07:40 – Right.
0:07:41 – Yeah, that’s pretty impressive.
0:07:43 Now the question is what was the last round of funding?
0:07:45 I’d be curious to see what the multiple revenues
0:07:47 in terms of valuation.
0:07:49 – Yeah, I mean, I think it was the $86 billion,
0:07:51 but that’s still, that would still put them
0:07:53 on the low end compared to all of these,
0:07:55 all of these other ridiculous AI startups.
0:07:57 So, I mean, they’ll probably have another round soon.
0:07:59 – I would agree.
0:08:00 I would bet that that if it’s three and a half billion
0:08:03 that was at 80, what is that about a 25 times revenues?
0:08:06 That’s actually cheap for the AI sector.
0:08:08 And you’re right, they seem to be running away with it.
0:08:11 It’s interesting ’cause all of the noise
0:08:12 around how dysfunctional it is and board members leaving
0:08:15 and Sam, you know, using Scarja’s voice,
0:08:20 it’s all noise, it’s not news.
0:08:22 The real news is the things you’re focusing on
0:08:24 and that is their revenues and what’s going on there.
0:08:27 But good for them, it does sound,
0:08:28 that’s an observation I hadn’t even thought of.
0:08:30 They’re clearly putting on their best dress for an IPO.
0:08:34 Oracle, it’s really interesting.
0:08:36 Larry Ellison deserves a lot of credit here
0:08:38 because there’s a bunch of companies
0:08:40 that are kind of getting hit hard
0:08:42 for not making the transition to AI.
0:08:44 I think Salesforce has seen as someone
0:08:47 who hasn’t made that transition,
0:08:48 although their stock has done fairly well
0:08:50 and it’s a great company.
0:08:52 I don’t know if IBM is like that,
0:08:54 but Oracle has positioned themselves as,
0:08:57 hey, don’t forget about us and they have made
0:09:00 real big investments here.
0:09:02 By the way, Oracle is in my 401k, so I’m rich.
0:09:06 Now you’re rich.
0:09:07 Finally, there are shares of 13%,
0:09:11 that’s the biggest single day increase
0:09:12 since December of 2021.
0:09:14 People are excited about their partnership with Google,
0:09:17 which will make its database available on Google Cloud.
0:09:20 It’s their second big deal in terms of AI.
0:09:22 The company signed a similar agreement with Microsoft
0:09:24 in 2023 and the company also reported
0:09:27 strong revenue guidance and they’ve signed
0:09:28 more than 30 AI sales contracts,
0:09:31 worth more than $12.5 billion.
0:09:33 So Oracle and Dell have both positioned themselves
0:09:36 in the front of the AI wave.
0:09:37 They’ve done a great job showing that elephants can dance,
0:09:40 if you will.
0:09:41 Another legacy tech company such as IBM and Cisco
0:09:43 have not made that transition.
0:09:45 If you look at total stock returns from 2020 to 2022,
0:09:48 Oracle has a 59% return, Dell’s 55, IBM 26.
0:09:53 Cisco’s only 7%, so it’s underperformed the market.
0:09:56 It’s just pretty impressive what they’ve been able to pull off.
0:10:00 I think Larry Ellison is gonna go down
0:10:01 as one of the more measured success stories in tech.
0:10:04 – Don’t you think what they’re doing right though
0:10:06 is kind of just their storytelling?
0:10:08 I mean, I feel like this is just more evidence
0:10:11 that the Wall Street is basically refusing to listen
0:10:14 to anything that doesn’t have the word AI in it.
0:10:17 Because you look at these earnings,
0:10:18 these were pretty bad earnings.
0:10:20 Like they missed on the top line,
0:10:22 they missed on the bottom line,
0:10:23 they had a 7% revenue growth, like it’s not a good quarter,
0:10:27 but it’s this story about AI that they’ve told
0:10:30 and about the potential pipeline of future AI contracts.
0:10:34 They got everyone so excited
0:10:36 and it basically made all of the other numbers irrelevant.
0:10:38 And then you compare that to Salesforce,
0:10:40 which you brought up and which we discussed a few weeks ago,
0:10:44 they had higher than expected earnings on the bottom line.
0:10:47 They had 11% revenue growth.
0:10:49 It’s significantly higher than Oracle.
0:10:52 But at the same time,
0:10:53 they had a pretty weak AI story
0:10:55 and they just didn’t convince Wall Street
0:10:57 that they’re gonna be on the front lines
0:10:59 with Microsoft, with Nvidia, with the Google.
0:11:01 And what do you know, the stock fell nearly 20%.
0:11:03 So it feels like Wall Street
0:11:06 is kind of sending us a message here,
0:11:08 which is we only care about AI.
0:11:10 – I think that’s really insightful Ed,
0:11:11 because just as you said it,
0:11:13 it struck me that what I would wanna know is that,
0:11:15 so supposedly Oracle has signed 30 AI sales contracts
0:11:18 worth more than 12 and a half billion.
0:11:20 I’d wanna know the complexion of those contracts.
0:11:22 And that is if they just signed up
0:11:24 30 new database contracts,
0:11:26 similar to what they always sign up,
0:11:27 but they’re calling it AI.
0:11:29 I mean, we’d hope that analysts would have something called,
0:11:33 I’d love to produce this, an AI washing index.
0:11:36 And that is everyone’s claiming
0:11:38 that all the revenue now is coming from AI
0:11:39 just because, all right, they, you know, whatever it is,
0:11:43 it has an AI component to it.
0:11:45 And so there is trying to separate
0:11:49 the weed from the chap here or the bullshit
0:11:51 from, you know, the just kind of ball, if you will.
0:11:55 But it all distills down to the same thing.
0:11:59 And that is the core competence in terms of a CEO
0:12:01 is the same core competence you would hope for your kids
0:12:03 and that you wanna inculcate into your children.
0:12:06 And that is not an understanding of accounting.
0:12:08 It’s not leadership skills or ethics or sustainability
0:12:12 or whatever bullshit we can come up with
0:12:13 to try and get people high-paying positions in universities
0:12:16 so they have no accountability.
0:12:18 It’s storytelling.
0:12:21 And that is when I read that investor letter
0:12:23 from 1997 by Jeff Bezos, I thought, I wanna buy stock.
0:12:27 When I hear Ted Sarandos or Reed Hastings speak,
0:12:30 I think I wanna buy stock.
0:12:32 These guys just have an ability to get on an earnings call
0:12:35 and be very straightforward and yet visionary at the same time
0:12:39 and just instill so much confidence or anything, you know?
0:12:42 I’m not sure I even understood what he’s saying,
0:12:44 but I just wanna buy stock.
0:12:46 The way he used to work was, okay, you’re in tech hardware.
0:12:49 You’re in mainframe computing.
0:12:50 Those companies trade between 12 and 14 times EBITDA.
0:12:54 And if we like Bob more than Lisa, Bob gets 14, Lisa gets 12.
0:12:59 And then things just went fucking haywire.
0:13:01 And it seemed like a lot of companies
0:13:02 that were sort of when you really peeled back the curtain
0:13:05 were pretty similar, but one told a much better story.
0:13:08 So storytelling has become really the core competence
0:13:11 for growth firms because their ability
0:13:14 to get the markets excited about what they’re doing,
0:13:15 such that they could pull forward, cheap capital,
0:13:17 reinvest more capital than their peers,
0:13:20 such that they could pull the future forward
0:13:21 and run away with it, see above Amazon and Netflix,
0:13:24 has become the core competence.
0:13:26 So there’s gotta be at some point,
0:13:29 someone’s ability to go, what’s real and what isn’t.
0:13:31 And then the retort to that would be,
0:13:33 well, storytelling is real.
0:13:34 And if you can raise cheap capital,
0:13:36 if you can raise capital cheap and then you’re a competitor,
0:13:38 you can pull the future forward and make the promise,
0:13:41 turn the promise into performance.
0:13:43 But to your point, it sounds like people
0:13:46 who teach communications or investor relations
0:13:48 should probably look pretty closely
0:13:50 at the sales force and the Oracle earnings calls
0:13:53 and say what went right and what went wrong.
0:13:56 – Should we discuss this Tesla shell to vote?
0:13:59 – Yeah, I guess we’re recording on a Thursday.
0:14:02 It’s Thursday at 6.30 here.
0:14:03 Only ’cause I’m planning to go to Maison Estelle tonight
0:14:05 and get fucked up.
0:14:07 – So I’m watching the clock.
0:14:09 My understanding is that both of these things
0:14:11 are gonna pass, that the shareholders
0:14:12 are going to approve them, is that correct?
0:14:15 Is that what you’ve heard so far today?
0:14:17 – That’s what Elon’s been saying.
0:14:19 – Okay, but does anyone know if it’s true?
0:14:21 – Yeah, I believe him on this one.
0:14:22 I think it would be a weird thing to lie about.
0:14:24 He’d look very stupid and we’ll know by the end of the day.
0:14:27 By the time this podcast comes out,
0:14:30 the vote will be in.
0:14:31 – So look, the shareholders get to decide.
0:14:34 It’s been a bit of a soap opera.
0:14:36 I’m only slightly less sick about talking about this
0:14:39 unless we wanna talk about Paramount.
0:14:42 – Christ, make it go away.
0:14:44 – I just want them to get on with it.
0:14:46 – Yeah, I think, I mean,
0:14:49 I can’t say anything with certainty how the vote will go.
0:14:52 I think what I can say with certainty
0:14:55 is that whether or not it’s yes or no,
0:14:57 this vote is basically meaningless
0:15:01 because here’s what’ll happen if the vote is approved.
0:15:04 It’ll go back to the Delaware Court of Chancery.
0:15:07 It’ll go back to Chancellor McCormick
0:15:09 who will open up that briefing.
0:15:11 And she’s gonna be like,
0:15:13 hold on, I adjudicated this case before.
0:15:15 Actually, I looked at this case basically two months ago
0:15:19 and I made my decision very clear.
0:15:21 The answer is no.
0:15:23 And I feel like what Tesla is forgetting
0:15:27 is that if you read her opinion,
0:15:29 she actually didn’t care whether the shareholders
0:15:31 were fully informed or not.
0:15:32 And granted, she said they probably weren’t,
0:15:34 but it had actually no bearing on her actual decision.
0:15:38 She believed that the package was inequitable
0:15:42 and that as a court of equity,
0:15:44 she also believed that she had the power to rescind it.
0:15:47 And that was it.
0:15:49 And now here we are again
0:15:50 and we’ve got the same case on her desk.
0:15:53 So nothing’s gonna change here.
0:15:55 And we discussed this with my uncle,
0:15:57 Charles Elson, a few weeks ago.
0:15:59 And he said the same thing.
0:16:00 He’s like, this isn’t about informed versus uninformed.
0:16:03 This is just about, was it equitable or was it inequitable?
0:16:07 And she’s already decided it’s the latter.
0:16:09 So they can appeal the decision, that might go somewhere.
0:16:13 But this vote, this being their argument,
0:16:16 oh no, we looked at it again
0:16:17 and we still think it’s equitable.
0:16:19 It’s just a non-starter.
0:16:20 For her, for Charles and McCormick,
0:16:22 I just don’t think this is gonna go anywhere.
0:16:25 We’ll be right back after the break
0:16:27 with a look at a new IPO in London.
0:16:30 (upbeat music)
0:16:32 – Support for the show comes from Atlassian.
0:16:42 Ah, the org chart, that top to bottom list
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0:17:43 – We’re back with ProfG Markets.
0:17:55 The London stock exchange got a boost last week
0:17:57 from a surprising new entrant, Raspberry Pi.
0:18:00 Raspberry Pi makes low cost computers
0:18:02 that are about the size of a credit card.
0:18:04 They run an open source operating system,
0:18:06 and for more than a decade, hobbyists have customized them
0:18:09 for things like streaming media, hosting servers,
0:18:12 and learning to code.
0:18:13 They’re also used in manufacturing
0:18:15 for things like inventory management
0:18:16 or production line automation.
0:18:18 Today, the industrial market makes up more than 70%
0:18:21 of the company’s sales.
0:18:22 At its pricing, Raspberry Pi was valued
0:18:25 at about £542 million, or nearly $700 million,
0:18:29 and shares soared 38% on the first day of trading.
0:18:34 So Scott, we recently discussed
0:18:36 how the London stock exchange has been struggling
0:18:39 to attract IPOs, specifically tech IPOs,
0:18:41 but it’s attracted this company,
0:18:44 and Sheehan, which we’ve also been discussing,
0:18:46 is set to list in London too.
0:18:48 So how do you think this IPO of this Raspberry Pi
0:18:52 computer company will affect
0:18:54 the broader IPO market in London?
0:18:56 – It’s a big deal because it could change
0:18:58 the world’s outlook on the London stock exchange
0:19:00 from the exchange of last resort to a player here.
0:19:03 The total capitalization of London listed equities fell
0:19:06 from $4.3 trillion in 2007 to about $3 trillion.
0:19:10 So it’s actually gone down about 40%,
0:19:13 and over the same period,
0:19:14 the value of US stocks has almost tripled to $53 trillion
0:19:19 in the US.
0:19:20 Raspberry Pi, it’s great for the exchange
0:19:22 because it’s sort of a cool little company
0:19:24 that had options to list on other exchanges,
0:19:27 and they’ve started trading
0:19:28 with a three-day conditional dealing period
0:19:31 during which trading was restricted
0:19:32 to institutional investors.
0:19:33 Maybe you can speak more about
0:19:35 what this sort of conditional period means.
0:19:38 – Yeah, I didn’t realize this, I had never heard of it,
0:19:40 but basically, if you IPO in the UK,
0:19:44 there’s this three-day period
0:19:45 where your shares are trading,
0:19:48 but they’re only available for trading among institutions.
0:19:51 And what’s particularly interesting is that
0:19:53 those shares are reserved,
0:19:55 but you don’t officially own them
0:19:57 until the three-day conditional dealing period ends,
0:20:01 which means that if you’re a company
0:20:03 and you decide to IPO
0:20:04 and you’re in the conditional dealing period,
0:20:06 you can just cancel the IPO
0:20:08 if you’re not getting the demand that you’re liking.
0:20:10 In other words, the London stock exchange
0:20:12 basically lets you do a test run before the real thing.
0:20:16 The thing I would ask to you is,
0:20:18 why do you think that they do this?
0:20:21 Like, and what does this say about the UK market
0:20:25 versus the US that they’d say,
0:20:27 oh yeah, we’re gonna give you three days
0:20:29 to sort of test it out among institutions,
0:20:31 but once it’s up, then you’re doing the real deal.
0:20:34 – Well, I mean, I don’t know if this is the reason for it,
0:20:37 but so the IPO market is rigged.
0:20:40 Essentially at prices, the bankers say,
0:20:42 this is a branding opportunity,
0:20:44 you wanna create positive momentum.
0:20:45 So price at 10, 20, 30% below
0:20:48 where we think it’s gonna open.
0:20:49 And then the investment banks get to give
0:20:52 basically free money to their institutional clients
0:20:55 as sort of a quick pro quo for doing all their business
0:20:57 through JPMorgan and Morgan Stanley or Goldman Sachs.
0:21:00 But the retail investors who don’t have access to the IPO
0:21:05 buy in at the first trade, which is sometimes much higher.
0:21:07 Now, technically it could go down a broken IPO,
0:21:09 but it usually doesn’t.
0:21:10 And sometimes as in the case of Airbnb,
0:21:12 it opens, it priced at 68.
0:21:15 That’s what institutions got to buy the shares for.
0:21:17 And it opened it, I think at 150,
0:21:19 which is where retail investors
0:21:21 got to buy it for the first time.
0:21:23 So a guy named Bill Hambrick came up
0:21:26 with this auction model back,
0:21:28 I think it was like 10, 20 years ago,
0:21:29 probably 20 years ago,
0:21:31 where the IPO would be,
0:21:34 they would basically pair the trade.
0:21:36 And that is people would bid,
0:21:38 buyers and sellers would bid in a Dutch auction
0:21:40 until the market demand was sated at the number of shares.
0:21:44 So it was sort of priced exactly
0:21:46 at where the first trade would be, right?
0:21:48 And that was a means of ensuring
0:21:50 that the company got the maximum amount of capital
0:21:52 for the same dilution.
0:21:54 And that did not survive because it ends up the ecosystem,
0:21:57 the biggest players in institutions
0:21:59 and the investment banks really liked a rig market
0:22:02 that retail investors kind of got screwed.
0:22:05 So I wonder if this is,
0:22:06 I don’t know the answer to this,
0:22:07 but is this an attempt to say,
0:22:09 look, retail investors are gonna get to pay
0:22:11 about the same number as institutional
0:22:14 and also give the company an out
0:22:16 if they don’t like where that number ended up being.
0:22:19 I don’t understand if this is nothing but
0:22:22 more lax rulings for the company
0:22:25 or an attempt to have retail investors
0:22:27 pay the same number as institutional.
0:22:30 – Yes, it’s not totally clear to me either.
0:22:31 Tune in next week for more shit we don’t know.
0:22:34 That’s why you had to tune in to Prop G.
0:22:37 But what about this?
0:22:38 No fucking idea, Ed.
0:22:40 How’s St. Bart’s?
0:22:41 – I don’t know.
0:22:45 I’m sure you’ll have a response to this.
0:22:48 So the CEO of this guy, Eben Upton,
0:22:51 was talking about his decision to list in London.
0:22:55 He said, quote, this was not a patriotic decision.
0:22:58 We did take a look at New York,
0:22:59 but we realized that for a company
0:23:01 of our scale, the London market is probably a better home.
0:23:04 He went on to say, quote,
0:23:06 many of the stories people tell
0:23:08 about the differences between the US and the UK,
0:23:11 particularly this sort of magical multiple arbitrage,
0:23:14 don’t seem to be real.
0:23:16 Which I find interesting because it’s almost,
0:23:19 it’s almost like it’s a jab at us
0:23:21 who have been basically saying exactly that,
0:23:23 that if you’re listing in the US,
0:23:25 you’re getting a little bit of a valuation jump
0:23:28 and that isn’t true in the UK.
0:23:30 And the reason that we say that
0:23:32 is because we just look at the numbers.
0:23:34 But apparently the CEO isn’t worried about that.
0:23:37 He isn’t worried about this multiple arbitrage issue.
0:23:41 So I’m just wondering what you think of his comments.
0:23:44 Do you agree with his point?
0:23:45 And do you think maybe he’s finding some other value
0:23:49 in listing in London versus New York?
0:23:51 – I don’t know because it might be.
0:23:52 So we’ve pointed out that stocks that trade
0:23:55 on the NYC and the NASAC traded whatever was 20,
0:23:57 an average multiple of 26
0:23:59 and all the other exchanges is around 13.
0:24:01 Now that might be a self-fulfilling prophecy
0:24:03 and that is the best company’s list on those exchanges.
0:24:06 It also might be much more heavily weighted towards
0:24:08 tech which traded a much higher multiple,
0:24:10 whereas the company’s the list on these other exchanges,
0:24:13 probably more manufacturing or services heavy
0:24:16 which don’t trade it as high multiple.
0:24:18 So it might be a function of the type of company
0:24:19 as opposed to just that these companies ran the gauntlet here
0:24:23 so it deserves a higher multiple, I don’t know.
0:24:26 But I think this is really good for competition.
0:24:29 I’m glad the LSE is getting some love.
0:24:33 The biggest beneficiary here in my view is Sheehan
0:24:36 because everything about Sheehan going public,
0:24:40 potentially on the LSE has been about,
0:24:42 oh, the exchange of last resort
0:24:43 and they couldn’t go public in the US.
0:24:46 Well, this is sort of creating some cloud cover
0:24:49 and some kind of some juju, some mojo,
0:24:53 some sex appeal, some pixie dust across the LSE
0:24:57 where good companies, innovative companies
0:24:59 are choosing this exchange.
0:25:01 So a company with whatever there’s,
0:25:04 I don’t know what the market cap’s gonna be here.
0:25:05 I can’t imagine this could be more than a few billion dollars.
0:25:08 That’s one thing, but the cloud cover
0:25:11 and the umbrella brand increasing in value of the LSE
0:25:14 when Sheehan goes out at a 70, 80, 90 billion dollar
0:25:18 valuation, if that makes the LSE and de facto,
0:25:22 Sheehan trade up five, 10% more,
0:25:26 you’re talking about seven to 10 billion dollars.
0:25:29 In other words, Sheehan, the best thing,
0:25:31 no one is happier about Raspberry Pi going public
0:25:33 on the LSE and having it being a good thing
0:25:35 than Sheehan right now.
0:25:37 Because what it says is no,
0:25:39 the LSE isn’t the exchange of last resort,
0:25:41 the good companies are going public here,
0:25:43 investors should look at it
0:25:45 and it’s not a hold your nose and buy it
0:25:48 because it’s on the LSE.
0:25:49 In other words, Raspberry Pi a little bit turns listing
0:25:53 on the LSE from a bug to a feature.
0:25:56 – And you’re happy, right?
0:25:57 You’re invested in Sheehan or you’re going to invest?
0:26:00 – I’m not as happy as if I was in the St. Bart’s
0:26:01 but I’m still pretty happy.
0:26:03 Yeah, I’ve invested in Sheehan and I’ve got,
0:26:07 I’m trying to find, I don’t have any inside information
0:26:09 but I’ve been investor and so I’ve been waiting
0:26:11 for the prospectus to come out.
0:26:13 I think they confidentially filed on the LSE
0:26:15 but the numbers that I’ve seen
0:26:17 and the information are that it did 30 billion last year.
0:26:21 It’s going to do I think 42 this year.
0:26:22 So it’s growing 40, I mean,
0:26:23 the numbers are just staggering here
0:26:25 and it’s also profitable.
0:26:27 And if you look at their competitors H&M or Zara,
0:26:30 they traded really healthy multiples
0:26:33 and it looks like this company should maintain its growth.
0:26:36 It’s going to surpass Amazon next year
0:26:37 in terms of retail, barrel sales
0:26:40 and then the year after that surpass Walmart
0:26:42 and probably have higher net margin.
0:26:45 So anything that creates cloud cover for a positive reception
0:26:49 I’m down with and excited about.
0:26:50 So yeah, I hope it goes well.
0:26:54 – We’ll be right back after the break
0:26:55 with a look at the hottest new AI startup in France.
0:26:58 – Vox Creative.
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0:28:37 (upbeat music)
0:28:40 – We’re back with ProfG Markets.
0:28:52 French AI startup, Mistral,
0:28:54 secured $640 million in new funding
0:28:57 at a $6 billion valuation.
0:28:59 That’s triple its valuation from December
0:29:02 and the company was founded just 14 months ago.
0:29:05 Their arm was led by General Catalyst
0:29:07 and included participation from Andreessen Horowitz
0:29:09 as well as NVIDIA and Salesforce.
0:29:11 So, Scott, Mistral’s now sitting on a billion dollars
0:29:14 in total funding.
0:29:16 Do you think it has any chance of taking on the likes
0:29:18 of open AI and possibly the other AI juggernauts?
0:29:23 – Well, I hope so, but according to what you just said,
0:29:24 it sounds like chatGPT is soaking up
0:29:26 or hoovering up all the revenue,
0:29:28 but I would imagine that the EU,
0:29:31 not only companies, but EU regulators
0:29:32 are really ready to be supportive
0:29:35 of a big tech or an AI company that’s on the continent.
0:29:38 I think they are kind of sick of sending
0:29:41 all of their capital overseas to, you know,
0:29:44 land at SFO International and then just stay there.
0:29:47 So I think that this company probably has,
0:29:50 and I’ve heard it’s a good company,
0:29:51 I’ve heard the interesting technology.
0:29:53 The French actually have a very strong background.
0:29:56 I mean, everyone knows that they have
0:29:57 an incredible background in luxury.
0:29:59 When you’re born in France, you’re just like,
0:30:00 at the age of three, you’re rearranging your blanket
0:30:03 and asking for your mes blankets.
0:30:05 And you just, you know,
0:30:06 the kids like have a rattle at it, it’s porcelain.
0:30:08 And then when they throw up their peas on their bib,
0:30:12 it’s designed better and it just looks more seamless somehow.
0:30:15 There’s something about the French, they just get beauty.
0:30:19 I mean, I’ll go to Cannes and I’ll go to these dinners
0:30:21 and be like, who picked out these linens?
0:30:24 These linens are beautiful.
0:30:25 There’s something in the water there, the DNA.
0:30:26 Anyway, that’s what we were doing last night.
0:30:28 We were looking at the wine glasses.
0:30:29 We were like, these glasses are so light.
0:30:31 They’re so beautiful.
0:30:32 Right?
0:30:33 In French, yeah, same part.
0:30:34 So here you go.
0:30:35 It’s unbelievable.
0:30:35 The genetic or the DNA or the business of luxury
0:30:38 has been the gift that has kept on giving in France.
0:30:41 The wealthiest man in Europe is Bernard Arnaud,
0:30:44 who immediately, you know,
0:30:45 pieced out to Belgium for tax avoidance,
0:30:48 but still Chanel, Hermes, you know, Vittane, not is Vittane?
0:30:53 Yeah, Vittane is Dior.
0:30:54 I mean, they just have such clothing,
0:30:57 they have such amazing brands, Clarence, you know,
0:30:59 they have such incredible staggering.
0:31:02 Anyway, what they don’t get enough credit for
0:31:04 is they actually have a fantastic schools in engineering
0:31:07 and Dassault makes an incredible plane.
0:31:10 Daddy wants a Falcon 9X.
0:31:13 Anyways, they have actually a very strong background
0:31:16 in engineering and this is coming through.
0:31:18 And I hope, I would love to see Europe, you know,
0:31:22 kind of punch above its weight class or not even that,
0:31:26 start punching at its weight class
0:31:28 in terms of tech startups.
0:31:30 There’s Salonis out of Germany,
0:31:32 which is an amazing software company.
0:31:34 There’s some fintech companies here in the UK
0:31:37 that are doing pretty well or okay, I should say.
0:31:39 So I hope this is a, I hope this is a win.
0:31:43 I’m a huge fan of General Catalyst.
0:31:44 I’m a bit pissed off, they can call me and say,
0:31:46 “Hey, Scott, you live in Europe
0:31:47 “and you’re super special and partying in Cannes.
0:31:49 “Do you want to invest?”
0:31:50 Didn’t get that call, Ed.
0:31:51 Didn’t get that call.
0:31:52 Also, I tell you, I haven’t been invited
0:31:53 to the fucking Eihardt party with Lenny Kravitz.
0:31:56 – I don’t know why you’re so upset about that, I guess.
0:31:58 – Pissed off, I’m gonna stand at the goddamn hotel.
0:32:02 How embarrassing is that?
0:32:02 I remember either with my boys and I’m like,
0:32:04 “Dad, it’s a party I can’t.
0:32:05 “I thought you were a big deal here.”
0:32:07 Yeah, I’m like, “No, no, let’s order room service.”
0:32:11 Anyways, but Mistral,
0:32:13 this needs to be a healthier ecosystem.
0:32:14 It needs to have more competition.
0:32:17 I hope that it does well.
0:32:18 I’m kind of curious, we need to do a deep dive here
0:32:20 and say what is its point of differentiation
0:32:24 as all of these things begin to look
0:32:25 like the same goddamn company?
0:32:27 – Yeah, I mean, if you look at the cap table,
0:32:30 the lead investor was General Catalyst,
0:32:32 which is an American firm.
0:32:33 Other investors include Andreessen Horowitz and Lightspeed.
0:32:36 There are several other VCs, most of them American.
0:32:39 Most interesting though to me is the corporate investor list.
0:32:43 So you’ve got Salesforce, Samsung, Cisco, IBM,
0:32:49 ServiceNow, NVIDIA and Microsoft.
0:32:54 So basically every single big tech company
0:32:57 who in my view, if this were like 20 years ago,
0:33:00 I think Mistral would be trying to compete
0:33:03 with those companies.
0:33:04 I don’t think they’d be taking their money
0:33:06 and giving them equity.
0:33:08 And you mentioned this issue of diversity,
0:33:10 we need more competition.
0:33:12 I feel like this all goes back to the antitrust issue
0:33:14 which we’ve been discussing.
0:33:16 And that is it feels like big tech
0:33:19 has a new monopolization strategy.
0:33:20 It used to be that you bought your competitors,
0:33:23 but then Lena Kahn came in, she sort of cracked down
0:33:27 and the FTC said, no, no more of that.
0:33:29 Now it feels like the strategy for big tech
0:33:32 is invest in your competitors
0:33:34 because by investing, you establish a level of power,
0:33:38 you get some control, you also get a share in the upside.
0:33:41 And crucially, as it appears, you don’t get regulated.
0:33:46 I mean, we haven’t seen any intervention from the FTC
0:33:49 or the DOJ on any of these corporate investments,
0:33:52 but it feels like the stones throw away
0:33:55 from just buying out your competition.
0:33:57 I don’t see how it’s that much different.
0:34:00 So what are your thoughts on this?
0:34:01 I mean, am I right to be concerned by the fact
0:34:04 that big tech and the MAG7 is basically spread out
0:34:08 across the cap tables of every single significant AI startup
0:34:11 in the world right now.
0:34:12 It’s not just America, it’s Mistral too,
0:34:14 this French company that you’d think is French,
0:34:17 but the entire investor base are just the same Americans.
0:34:20 Is this not kind of a problem?
0:34:22 – The way I would describe it is that if you’re a young man
0:34:24 looking to lose your virginity and live in Kentucky,
0:34:26 you should go to a family reunion.
0:34:28 In other words, there’s a lot of incest here.
0:34:31 And that is, is that wrong?
0:34:33 – Nope. – Was that wrong?
0:34:35 Literally we’ll hear from a dozen people from Kentucky.
0:34:36 I’m gonna find out people I didn’t even know were from
0:34:38 Kentucky or from Kentucky and that I was inappropriate.
0:34:41 – People were upset about what we said about Austin.
0:34:43 People were saying I was being rude to Austin
0:34:46 for saying I don’t want to live there.
0:34:47 – Yeah, just wait, it gets a lot worse.
0:34:49 Just so you know, half my emails are people telling me
0:34:52 what I should not have said and how their cousin suffers
0:34:57 from some syndrome that I’ve, anyways.
0:34:59 Look, you’ve pointed this out.
0:35:02 This industry is just way too incestuous
0:35:05 and has too many overlapping paths to one another.
0:35:08 It’s smart for them.
0:35:09 Nvidia wants to have a really robust ecosystem.
0:35:12 The last thing they want is a small number of players
0:35:14 bidding on their chips.
0:35:17 What they want is a ton of,
0:35:18 they want a huge customer base.
0:35:19 So for them, it makes a shit ton of sense for them to take,
0:35:24 okay, 5% of their market, 3% of the market cap
0:35:27 would be $100 billion and do everything they can
0:35:30 to try and foment, fund and catalyze a super robust
0:35:34 AI ecosystem where not only AI becomes bigger and bigger,
0:35:38 but there’s a variety of future customers
0:35:41 all needing these GPUs.
0:35:43 Also, just from a customer standpoint,
0:35:45 again, I just think regulators and European companies,
0:35:49 at some point, I mean, one of the reasons
0:35:52 I’m gonna get geopolitical here,
0:35:53 one of the most hopeful things about the conflict
0:35:56 in the Middle East right now, the war,
0:35:58 is that the Kingdom of Saudi Arabia
0:36:01 actually coordinated with Jordan to help shoot down
0:36:03 the projectiles coming from Iran.
0:36:04 I realize there’s a reach, but I will bring it home.
0:36:07 And that is the Kingdom wants to normalize relations
0:36:09 with Israel and I think part of the motivation
0:36:11 for normalizing relations is like,
0:36:14 we’re sick of getting on planes and sending money
0:36:16 out of the region to San Francisco for all of our tech.
0:36:19 Israel has a ton of great tech, they’re close to us,
0:36:23 we seem to get along, we’re sick of being,
0:36:27 I think everybody’s getting sick
0:36:30 of sending money back to the,
0:36:32 you wanna talk about real, at least metaphorically,
0:36:35 colonization, it’s American tech companies
0:36:39 that have basically turned every company in the world
0:36:41 into their colonies, sending resources back to,
0:36:44 back to Britain from India, and India is every company
0:36:47 in the world sending money to some company
0:36:49 that’s a bike ride from SFO International Airport,
0:36:53 that’s probably gonna take that metaphor a little too far,
0:36:55 but anyways, this is, I think that a lot of European companies
0:36:59 of Israel just offers a competent product
0:37:03 that’s in shooting distance or spitting distance
0:37:05 of these other guys, I think a lot of European companies,
0:37:08 maybe even under the auspices of not having
0:37:10 to pay additional taxes or whatever,
0:37:13 that the E regulars my place on non-European based tech,
0:37:17 I think this makes a lot of sense,
0:37:20 I think the investors here are smart to get into this thing
0:37:22 because any competent AI company on the continent,
0:37:26 it’s the largest economy in the world, the EO,
0:37:29 and I think a lot of European companies and regulars
0:37:31 would really like to be able to put their money
0:37:33 into a European tech company as opposed to
0:37:36 getting invited to listen to Sam Maltman,
0:37:38 give us hushed tone concerns around AI,
0:37:40 I think they’re kind of sick of these guys,
0:37:43 but anyways, we’ll see.
0:37:44 – Slight change of subject,
0:37:47 but we should talk about this new company Tempus AI
0:37:51 that’s going public, it’s a healthcare company,
0:37:54 but it’s also supposedly an AI company at the same time,
0:37:57 so that they’re aiming to raise $400 million,
0:38:00 they’re targeting a $6.1 billion valuation,
0:38:03 and they’re this precision medicine company
0:38:06 that quote, uses AI to make laboratory tests
0:38:09 more accurate, tailored, and personal.
0:38:13 Now, the reason I bring this up in this conversation
0:38:17 is because until about six months ago,
0:38:20 this company was called Tempus,
0:38:23 and today it’s called Tempus AI,
0:38:27 so they just tacked AI onto the end of the name
0:38:29 and now they’re going public.
0:38:30 And Mia looked at their S1,
0:38:33 she found that they mentioned AI 220 times
0:38:37 in the S1 filing,
0:38:38 and meanwhile as a percentage of revenue,
0:38:41 AI makes up, wait for it, 2% of the business.
0:38:45 I’m gonna go ahead and assume that you and I agree
0:38:49 that there is a very strong stench of BS
0:38:53 coming from this IPO, this Tempus AI IPO,
0:38:57 but as it relates to the broader market,
0:38:59 what do you think this IPO and this company says
0:39:03 about the rest of the AI market right now?
0:39:05 – First off, I like this company.
0:39:08 I actually emailed the CEO, he’s the former CEO of–
0:39:11 – Okay, so I’ve just been shitting on it.
0:39:13 – That’s why people come here,
0:39:16 they want a no mercy, no malice view of this shit.
0:39:18 Here, I mean, that’s why people love PropG.AI.
0:39:22 There’s a lot to like here, healthcare and AI,
0:39:27 and that just feels like champagne and cocaine, right?
0:39:29 I’ve always thought that healthcare
0:39:30 is the most fertile place for disruption
0:39:32 and the fists of stone coming for it might be AI.
0:39:36 It’s a real company, a lot of healthcare companies
0:39:40 use the product, they have real revenues,
0:39:42 they’ve been growing really fast.
0:39:44 Having said that, to your view, is it AI washing?
0:39:48 That’s the bottom line, right?
0:39:49 It’s not, I mean, the stat is crazy.
0:39:52 They mentioned AI 220 times,
0:39:54 and yet AI accounts for less than 2% of its revenue.
0:39:57 So this is gonna be a very interesting IPO to watch
0:40:01 because what it’s gonna indicate
0:40:03 is just how frothy the froth is.
0:40:06 And if this company goes out
0:40:08 and say it goes up 20, 50, 100% on the first trade,
0:40:11 then we know that the party is still going.
0:40:14 And by the way, they might be able to take that cheap capital
0:40:16 and get better at AI and go from 2% to 20%.
0:40:21 So again, see above storytelling.
0:40:23 Or if the market prices this thing
0:40:25 and it doesn’t have a first day pop
0:40:27 and maybe within a few days it’s a broken IPO,
0:40:30 it might signal a top.
0:40:32 It might signal that, okay, the halcyon days
0:40:36 of anything that says AI are over
0:40:39 and that people are sort of,
0:40:41 at some point people are gonna get very cynical
0:40:44 around this stuff, right?
0:40:46 – I’m already getting just so sick of it myself, yeah.
0:40:48 – I can imagine where at some point AI
0:40:50 starts to have the same stench as SPAC, right?
0:40:53 It’s like, okay, enough already or you weren’t around,
0:40:57 but William Sonoma is one of my first clients
0:41:01 as a strategy consultant.
0:41:03 And they were very seriously considering
0:41:05 changing the name to WilliamSonoma.com.
0:41:08 And there were a lot of companies
0:41:10 that thinking about .com and they added
0:41:12 and all that they used to run commercials with nothing,
0:41:14 but just the name and then .com.
0:41:16 – Given your experience there,
0:41:18 what do you think was the right move?
0:41:20 I mean, do you approve of a company
0:41:21 tacking AI onto the end of it?
0:41:24 Is it actually potentially a good thing for the business?
0:41:28 Would William Sonoma have benefited
0:41:30 from going the Amazon route and calling themselves,
0:41:33 WilliamSonoma.com, Amazon.com?
0:41:34 – It went further than that.
0:41:35 And I think the statute of limitations are over.
0:41:37 This was, Jesus, this was 30 years ago.
0:41:41 Let me see, I was 26, I’m 49 now.
0:41:43 So it was 23 years ago.
0:41:44 But I remember being in meetings with bankers
0:41:48 and the bankers were trying to convince
0:41:51 Howard and his team and they invited me
0:41:53 into these meetings to spin out the .com business.
0:41:57 They wanted to take WilliamSonoma.com
0:41:59 and spin it into a different business.
0:42:01 And of course, Howard goes,
0:42:02 “That’s makes no fucking sense.”
0:42:03 And the bankers were like,
0:42:04 “We get 10 times revenues for this business.”
0:42:06 As opposed to his choice, he was like,
0:42:07 “Yeah, but how do I get my store managers to participate?”
0:42:10 And he was just sort of,
0:42:12 he was not easily impressed by financial engineering.
0:42:15 I think that’s one of the things that made him a great CEO.
0:42:18 So if you look back, if history is any guide,
0:42:22 there aren’t that many companies
0:42:23 that were able to get so much cheap cash.
0:42:24 Well, I guess, I mean, Amazon, it was Amazon.com.
0:42:27 Eventually they sold, they dropped it .com.
0:42:29 But Amazon, there was a there there.
0:42:32 They were really selling all their shit online.
0:42:35 The other companies that tried to pull a fast one
0:42:37 and say, “Oh, we’re an internet company
0:42:39 that weren’t really an internet company.”
0:42:41 Like that shit blew up pretty fast.
0:42:44 It just, the whole thing just started collapsing on itself.
0:42:46 Now, the companies that made it through that valley of death,
0:42:49 Amazon and a bunch of others,
0:42:51 ended up being worth a ton of money.
0:42:54 The question is, when is that valley of death
0:42:56 or that shakeout gonna happen?
0:42:58 And I would bet that it’s,
0:42:59 you’re just seeing symptoms everywhere.
0:43:02 Now, does that mean it happens in three or six months
0:43:04 or in two or three years?
0:43:06 I don’t know.
0:43:07 It kind of feels like 98 to me.
0:43:09 I think we’re full for off
0:43:10 and we still got some running distance here.
0:43:12 But these cycles tend to,
0:43:14 the cycles tend to get shorter and shorter
0:43:16 or we tend to cycle through,
0:43:18 cycle through the cycle more rapidly, if you will.
0:43:21 But I think you’re gonna see,
0:43:23 I just think you’re gonna see an enormous fallout
0:43:25 and Tempus, bringing back to Tempus,
0:43:29 this will be a bit of a bellwether
0:43:33 for where we are in the, quote unquote, AI hype cycle.
0:43:36 – Yep.
0:43:37 So you think that the top is not already in?
0:43:39 – I think, let me go this way.
0:43:41 The way I would say it is the bell is in,
0:43:44 we have visual on the bell.
0:43:45 This stuff’s just getting kind of so out of control
0:43:48 that we can see the bell.
0:43:50 Now, is it gonna be wrong in three months or two years?
0:43:53 We’ll see, but there’s no way we can sustain these valuations
0:43:57 across a bunch of companies that quite frankly,
0:43:59 are just sort of David Copperfielding,
0:44:02 their business strategy by saying,
0:44:04 “Look over here, we’re AI.”
0:44:06 And then stuffing an analog rabbit into a hat.
0:44:09 – That was pretty good.
0:44:10 – That was good.
0:44:11 I think I’d argue that the bell for me was
0:44:13 Jensen Huang signing a woman’s chest.
0:44:15 I think that I’m gonna call that as my top.
0:44:17 – That was the bell.
0:44:19 That might be the image.
0:44:20 – All right, let’s take a look at the week ahead.
0:44:25 We’ll see US retail sales and existing home sales for May.
0:44:29 Scott, do you have any predictions for us?
0:44:31 – Well, I’m just super excited or super excited.
0:44:33 As much as I hated and as stupid as the Vision Pro was
0:44:36 for Apple, Apple’s intelligence is that smart.
0:44:41 Apple is the best managed brand in the world
0:44:43 and in a just a stroke of genius, they said,
0:44:44 “Okay, AI is starting to smell like Teen Spirit.
0:44:47 “If Teen Spirit was drama and people fired
0:44:50 “and rehired and catastrophizing,
0:44:52 “it’ll save the world, know to destroy the world.”
0:44:54 And I think that they just said,
0:44:56 “No, we wanna own this, make it our own,
0:44:58 “make it more friendly, make it less,
0:45:00 “make it less Skynet or weirdness.”
0:45:02 Let’s just call it Apple intelligence.
0:45:04 My prediction is big aflop is the Apple Vision Pro is
0:45:08 Apple intelligence will be that big a hit.
0:45:12 That was a mouthful.
0:45:13 Go drink rosé and take care of everybody.
0:45:17 Realize that the reason you’re there is because you work
0:45:20 for someone who is both talented and generous.
0:45:24 Remember what it was like to be a young person
0:45:25 with not a lot of money, although you are overpaid.
0:45:29 But I want you guys to have a wonderful time.
0:45:31 Eat fromage, eat fromage.
0:45:34 I want you to wear a thong, scare some people.
0:45:38 There’s actually a new beach at, what is it?
0:45:41 I think it’s at, where’s that new beach?
0:45:44 It’s on, oh God, what the fuck is my name?
0:45:46 Anyways, you’ll find it, you’ll find it.
0:45:49 Anyways, HR Nightmare.
0:45:50 Your boss telling you to find a new beach.
0:45:53 Call HR.
0:45:54 – This episode was produced by Claire Miller
0:45:57 and engineered by Benjamin Spencer.
0:45:58 Our associate producer is Alison Weiss.
0:46:00 Our executive producers are Jason Stavis and Catherine Dillon.
0:46:03 Mia Silverio is our research lead
0:46:05 and Drew Burroughs is our technical director.
0:46:07 Thank you for listening to Prof. G Markets
0:46:09 from the Vox Media Podcast Network.
0:46:10 Join us on Thursday for our conversation with Ray Dahlio.
0:46:14 (upbeat music)
0:46:17 – Support for the show comes from Atlassian.
0:46:33 What do you think of when you hear the word flow?
0:46:35 How about a smooth river of collaboration
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0:46:42 I thought I was the one doing ketamine.
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0:47:07 (upbeat music)
0:47:10 (upbeat music)
Scott shares his thoughts on why Raspberry Pi chose to list on the London Stock Exchange and what its debut means for the UK market. Then Scott and Ed break down Mistral’s new funding round and discuss whether its valuation is deserved. They also take a look at the healthcare tech firm, Tempus AI, and consider if the company is participating in AI-washing.
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