Transcripts For BLOOMBERG Bloomberg 20240703

We will push ahead to the other companies lining up to go public. We will also look at the process for digital dollars with fitz giancarlo. Before we head over to the nasdaq with Caroline Hyde we are also getting indication that arm may open shortly. We are giving estimations of starting at 66. Lets see where we had. Caroline how important is this arm listing. It is important. It needs to trade well. This is a moment in time where everyone is paying attention and markets have been open to Great Companies for some time now. It has really been on the supply side and arm is said to unlock that. Caroline many people want this to be a bellwether, its at the Tipping Point of ai, how hard is it to the square of demand what is happening behind the scenes . Karen its important to get the opening cross right. We provide technology to the person opening the stock which is jp morgan in this case. We turned it into more of a science than an art that is still in our. You want enough buyers and sellers enterprise the opening at a level that it will trade well. Caroline when you have the technology, how is it apart from other listings . Karen the underwriters have more information thats helpful to them. There are other factors, brand alignment is important. The fact that we own and operate and differentiate the services. We build relationships in our company throughout the life cycles. Caroline when arm with public back in the 90s there were a lot more companies. How does it look as a Company Looking so public at the moment . Is it desirable . Karen we would say so and we do a lot of work with the sec and to work with our issuers around that. We want to focus on the issues that are important and we want the cost to remain reasonable for companies. Caroline looking at Compliance Costs and volatility more broadly, what could be the catalyst in 2024 . When will we see windows open and close . Karen i think arm will open a window and companies are ready to go public. A lot of Companies Want to go in the first half of 24 ahead of the election. Caroline so there is geopolitical risk in this. You are ahead of global listing and how are you seeing the pushes and pull of the global narrative right now . Karen there is a lot of interest from Global Companies and chinese companies, latin america, india. The market is really open in the United States and very recognize. Caroline it is a better pill that they didnt manage to woo arm back. Are they not worried about the closing of the Investor Base to china . Karen it is a tricky time. I think everyone recognizes that the u. S. Market is the most liquid and everyone has to consider that when they go public regardless of where they are in the world. Caroline when we look at companies that could, after the next week or so. Im interested in what is the recipe . Will they have to demonstrate Profit Growth . Revenue growth . Karen i would say yes to both of those and they have to be priced at valuation that accommodates for the growth or not. Caroline what about the overall desire, did that speak to wanting to ensure share pop . Karen i think his view is longterm. It is the right thing to do for the longterm and i think you will find that investors love to get a little bit of a kiss and not every dollar that could have been taken is taken by the company and arm is thinking for the long term. Caroline they have a democratization of the banks and the way theyve been underwritten but have ensured that others can invest. Does that make it a recipe for others to follow suit . How difficult is it to replicate . Karen there are a lot of different factors that go into a Company Decision and how they put their book together, who their partners are. There is no one recipe that works for everyone. It depends on the company, the advice they are getting in the decisions they make around that. Caroline we will see some be in seen names. , will this recipe be crucial going into this next era of ira . Karen what is important to recognize about the Retail Investor they were an important part and they became more active. It does democratize the process and everyone is able to participate in so many people got educated about the Public Market and what that could mean for your overall wealth. Caroline it was so wonderful to speak with you. Sonali that was karen snow president of listings at nasdaq. What is interesting to me if you look at the price at 56 per share with a valuation of 60 billion, does arm have a global reach that justifies the price tag . Not in the near term but definitely in the long term. The company is just getting started. Sonali we are getting arm trading life at 56 and . 10 a share. That is more than five dollars above its ipo price. That is the ipo pop for arm holdings. This should take a few hours to get the first trade movie for the underwriters to make sure the book was built in time and is just about to spend the day as you can have for an ipo in the year where we have had virtually no ipos. At 56. 10 a share you are looking at a company that is worth near 59 billion. We will turn to abigail doolittle. This is a landmark day for arm. Abigail trading higher by nine. 5 there was a possibility they would price it 52 but the ceo wanted to make sure they were not too greedy and it seems that him and the bakers did a good job of raising the valuation on the actual ipo price. This is the biggest ipo of the year and the reason that matters is because last year there were 179 billion for the market in the year prior to that 630, there has been a drought this year. Will this ipo stake successful through to close. It will support instacart next week. Going into next year will it create what they want to see relative to having the confidence that big tech ipos can go . With the rising rates and inflation that makes Growth Stocks less attractive. We are looking at a positive opening here for arm holdings of 9. 8 , and oppressive ipo start. Sonali underwriting the deal with barclays, we will turn back, to talk about the valuation because were looking at a company that is 60 billion on his first day after its ownership and that implies a 22. 4 times of trailing sales what does that mean to you . Along with ai Companies Like in video, the future is coming from these markets. Sonali it is a good day on the markets, relative calm. The vix is low. There are a lot of risks on the horizon. If youre a new investors what are the risks you should be aware of impacting the valuation . In the near term, because they have heavily relied on the smartphone in the smartphone is going through a slump. Investors will have to be patient and pay for some heartache in the near term. The second key risk is china. From china, its the exposure and concentration. There is revenue coming from china which is not a lot. Everyone has exposure in that range. Is there a gateway to the entire Chinese Market . There is something sonali when you think about the long term how long is the long term . At least about three years. The market share is in the mid single digits. We expected to almost double in threefive years. These markets are large. The ai market is only adding to it. Sonali at this point you have arm in Public Markets how do you expect them to stack up against their competitive set when it comes to how investors will put money into the sector . They need to continue on the promise that they will deliver and investors will keep an eye on how they are doing in the data department. Sonali from bloomberg intelligence, thank you for your time. We will head back down to the nasdaq tower. Before those details what is the mood . It must feels pretty good to see an ipo pop after such a drought. Caroline there is cautious optimism. Now they see this trade trading up 30 . It takes a while to ensure they got the right amount. In this instance, the issue is they had 100 million taken down by important investors but they also have to ensure that people will be putting the less than 10 free flows and locking in profits. This is so important to the sentiment of the market. They went lower at 51 and now it will tradethe rest of the day. That is what the Companies Need to see. Sonali do you think their conservative approach to writing the ipo will be the name of the game for the companys coming up . Caroline is this idiosyncratic . They took time deciding they would not go for the 52 they would stick to 51 to get that really good data sentiment. He said yes he wants to see valuation increase but in the long term, we could see more of flows in stock or use it as collateral and financial engineering. We will see the likes of endicott having to decide to leave a little money on the table to make sure their Company Comes with the this has been a volatile market for some time. They have been waiting for this window to open. Sonali we thank you so very much for all of your time and such perfect timing. Lets continue the conversation on Venture Capital. What a win. Them having this on the books weather for their Portfolio Company but the appetite for other companies. Katie we have instacart coming up next week so they want to see public investors with enthusiasm for tech stocks. A 10 pop isnt that big of a pop. Typically you would see 2030 and prices have gone higher than 10 . The fact that it went up is good. The only big tech ipo we have had since 2021. People are watching closely even though its a pretty different sector than other Tech Companies. Sonali we are talking about pricing but what about ownership . In the last 24 hours, do you expect more investors to be doing that . That is designed for a better pop because if you limit supply, it artificially raises demand. We have seen that in the past and i think right now, most Tech Companies would be wise to price these things conservatively. At least that is what people are telling me. If you make a bad First Impression on the market it can get investors in the long run. Sonali i know youve been running around and doing reporting. What has been the name of the game . Its not just about profitability. They tend to be Growth Investors and look at companies with Topline Revenue growth and public investors use be interested in that but that seemed to change. We see with instacart that they are profitable in line with the perception of what tech investors want but they have had slow growth. That is one people will be watching. Sonali how do you think about the week ahead, the bankers will be busy with both of these companies, blessed timeline . You have instacart in next week. Sonali with data breaks making more money, but is that mean . You have other companies that raise money before the ipo. A lot of Companies Know when they need to raise high valuations or flat valuations in the last year. Data breach is a company that has a lot of investor interests of even though the price is high theyve been able to sustain that. When i see a company like this raising money i think they are not on the verge of ipo. You would not want to dilute your ownership in the next two months if you would do a direct listing. Sonali let me give you an update on where arm is trading. The ipo pop is still holding. This has been rising as much as 15 . Some of those gains are volatile but some of those pots could be as large as 10 . The stock is up to more than 50 a share. It was at twice 51. They tried to bring it up to 52 a share but bringing it down has not only given it an initial pop but even more than it wouldve been had they price it higher. There have been bigger pops in history but there were questions coming into this ipo from the beginning about the valuation itself. This is stacking up for a win for the underwriters. When you take a look at the Competitive Dynamics why do you think its getting such a warm reaction the Public Markets . Ian the set up of the mechanics of the ipo. This is just a small portion of the company by strategic investors. So theres very little supply here in terms, but this is the time when people are focused on the opportunities ai are creating for these company. Sonali do you think this excitement around the new kid on the block or the idea that they will continue to keep spending . Ian they are really not the new kid on the block. They have been around for a long time. Technology is used everywhere and used by all the latest chipmakers. They are pitching themselves as a Different Company that sells the barebones that goes into these chips. There are selling themselves as a broader tech company. Sonali the governance all points to softbanks. Ian thats the way to describe it, softbanks will maximize its profits down the line. That is definitely an overhang or consideration but at the same time it gives them the latitude that other publicly traded Companies May not have. Sonali we wanted touch back in with arm shares. We are looking at the ipo pop. We are looking at 61 a share. A price here that is 20 more than what we initially counter price that just last night. What is this mean in terms of valuation . You are watching the company shoot higher very quickly. The current valuation at 65 billion is a little bit higher than what softbank had brought back just a couple of weeks ago. This is bloomberg. With your hearing, if you start having a little trouble, youre concerned that its going to cost you money. To this day i only paid what i had to pay for the device. When i go back everything is covered. Theres so much youre missing by not having hearing aids. Well find you a hearing aid that fits your lifestyle and budget at one of our over fifteen hundred locations. Call miracle ear at 1800miracle and schedule your free, no obligation hearing evaluation today. The power goes out and we still have wifi anto do our homework. E, and thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Its an amazing thing home of the xfinity 10g network. When you show generosity of spirit to someone. And you want people to be saved and to have a better life, then you dont stop. The idea that we have saved five million peoples lives, its overwhelming. Its everything. Sonali welcome back to bloomberg technology. We will look quietly at the arm ipo price. You are getting a 20 pop in the first day of trading. That is about 60 a share. It is up immediately from the 51 it was priced out. You are getting a price very near what they bought their stake back for. We have one of the underwriters from the arm ipo. What is it mean for the company that they can finally make it back to market . Sonali we will get right back to you because we are standing by. We have the ceo with our own Caroline Hyde. Caroline this is your day. There have been phone calls, emails, celebrations, how does it feel . What an amazing day. Hearing from high school friends. Most of all i am so thrilled for the employees of this 33yearold company, great heritage. Watching all of the employees celebrate was great. Caroline and celebrating a 17, 18 increase. You have been able to successfully sell, what do you want to see here Revenue Growth . What drives you . Investors wanted to understand the opportunity we had in front of us and ai. Help people understand you cant run ai without his cq. That was a big part of the process. Caroline because everyone has the equivalent of a iphone. How certain are you of the revenue that you can deliver the address the concerns or where and a hype cycle . Rene we are seeing it in cloud and data center with the growth of nvidia. Arm is everywhere related to ai. It allows us to have a big vision for our future when it comes to our product. We have very high confidence of the growth rate. I think there are a lot of questions about china and geo politicals. We had great growth in the data center and china has been using electric vehicles. We have the same headaches that every tech ceo has. Caroline do you think there will be more pressure that your public again . You are listed in 2013 but in 2016 the game changed . Rene there are some things we can do as a private company that are different but arm is not something you measure quarter to quarter but over years. Caroline you have a lot of vested interest in your clients, how important are their voices versus the masses . Rene one of the challenges is that were everywhere. None of this work so must refinance with others. We need to have a lot of engagement with partners and make sure were achieving of balance. Its not about the daytoday but the longterm vision. I dont expect that to change by going public. Caroline do you think you will go public in the u. K. . Rene today we are in the u. S. But we are a u. K. Company. Caroline before you get through today, investors love all things developing Artificial Intelligence but how is your story different . They are exuberant about gpus. Rene one of the benefits of the roadshow is speaking with investors and the misconception is that the gp can run without his cpu. Thats just not the case is central to every electronic device. Once the investors got that, i told them you need his cpu and at the same time nvidia is making more sophisticated products. And then the light went off. Caroline we are trying to understand how the landscape works with Global Demand and that can make a revenue. It doesnt always immediately turn into revenue. How will that become evident to you in the next few quarters . Rene in terms of ai . While its already been here for a number of years. Were just now finding out the full capability of what we can do Going Forward. There tends to be lightning bolt moments that accelerate the adoption of technology and with ai, we have seen an acceleration of that. Ai is here to stay. Theres no question of that. Caroline you are integral to softbanks vision of ai, what is the vision of arm Going Forward . Rene we share the view that arm is a Foundational Technology company and we hope to be recognized that way. We are very aligned on that. Caroline longterm thinking and nearterm action. We understand that he was integral on cornering the shop. Rene we wanted to be at the high range of the highend of the range that we set and were very pleased with that. Caroline how do you feel differently now as the ceo of a publicly traded company . Rene i feel different when looking at this number and the share prices. I tell this to employees, while it is amazing how much more excited about the next 510 years. Caroline and sometimes, you will become more relevant now. A lot of people dont know that evs are made with your blueprints and designs. Rene Going Forward how to market ourselves to the public, i will spend some time thinking about it. But now, we are figuring out what that means. Caroline yesterday, in front of every chief ceo of ai inside with the closeddoor hearing. Can you tell us about regulation and how that will be evolving so you can harness the ai moment . Rene i remember speaking to an executive about medical usage. There was a lot of things people had to figure out in terms of being productive but it could be dangerous. Ai could be the same where we are in a new paradigm where rules and regulations need to be figured out. Caroline is the u. S. Leading the charge and regulation is europe or the u. K. . Rene i think all the governments are trying to figure it out. In terms of who is getting it right, i think it is still early days. Caroline it was great to spend some time with you. It is up 17 , a busy day for daytrading. Sonali lets bring in deutsche banks had for global media. I wanted to see what rene had to say because he talked about this idea that people will pay for ai related stocks eventually but we are in a different era than that hyper growth, what is investor appetite . Thank you for having me on the show. We have seen increases on the Capital Market side. There is more demand and expectation that markets will sit there, arm is emblematic as one of those things needed for ai. It provides some of the key hardware which is why people are so interested. We have certainly seen the markets change from growth at any cost to grow responsibly. I think investors have been doing work and they have done work on arm and some of these other ipos i came to market earlier this year intact. They are still making calculations but this year they partner growth with profitability. Sonali theres not a lot of time left in the year. As the pipeline into next year much bigger. Is it needed given the dynamics we see in the market with macro uncertainty there . It is getting bigger by the day. I think you will see a lot more Companies Come to market now than at the end of the year and getting ready for next year. The ecosystem with a company like reddit, weve seen expectations are out of sight. You have eugenesis there are companies that would like to access the market like sterila bs. The pipeline is open and we will see it grow Going Forward. Once we know how investors feel about the economy and what the fed decides to do Going Forward. Sonali you could see them hamper down expectations but this is across trade which keeps picking up in the market. Can m a meaningfully compete in the market . The m a market has gone down, the two years back and with the ip market showing signs of opening, that is real competition. I do see the opportunity to increase Going Forward. Increasing, they are stronger than they were last year. They are of 30 , the vix was down 40 and those are factors that they look at when they think of m a now that theres a real option for companies to go public. We do expect companies Going Forward, you havent seen as many corporate m as in the economy starting to grow. We do expect m a market calls to pick up. Sonali this is not a u. S. Based company but listed in the United States. Are you a scouring the globe for hopefuls given that valuations may be done outside the United States . Ajay there have been several options in asia and europe that have been rated and we shall see an increase in listing in europe and asia working with companies that are looking to go public across both sides of the ocean. Sonali joining us here in studio, headlined Venture Capital partner with his read on the ipo landscape. We have been talking about ipos versus m a. There are fireworks about them holding on too long before going into Public Markets. How do you see the playing out. I think you will see its an arm chase you only have one seller which is softbank. They went private seven years ago but we have other companies coming up this week, which are venture backed startups. They could see investors selling into the ipo in a meaningful way. Its a fundraising event. Sonali its been a strange year. How much is ai the real Silver Bullet . Do you think it is a red herring or that there is more opportunity out there . I was one of the only investors to play into the ai scene. There arent that many public opportunities to play ai. There are a lot of opportunities elsewhere and a lot of companies listing. We talked about reddit and datacom. They are not ai per se they are companies that will do very well. Sonali when do you think it actually goes . They were previously priced at 95 billion. The fundraising on the runway now, i think it will be 2024 be before strike himself. Sonali with instacart they had 60 of their assets invested and capital. When you look at those huge hedge funds what role do you think they play . Going forward is been very quiet. We see the tiger and a lot of these funds coming into these opportunities when they see deals. They have been pretty quiet. I think Going Forward, i could see less of those early stage venture deals both the case of instacart, one of the greatest interest funds are looking to get on it as part of the ipo. Sonali how do you think it affects valuations even though weve seen so many down rounds this year . I think the last valuation was in the 39 billion. If you look at doordash it had four times revenue so this is a fair price 11, 12 billion but pricing and at nine is to the upside. With Companies Like paypal, safe lock are down 50 from their highs. Sonali when you look at the nearly 15 pop, it is trailing in sales. Do you look at these companies and think thats achievable or is it a one off . The size and scale of the business, how stable it is Something Like google or apple. It is a slow Growth Business in the highgrowth center. Its not growing right now. They had a flat last year and started to grow this year. Again, you are seeing a 15 pop. We started this ipo and to see it get here and im sure you saw the news that birkenstock is coming out. Its not a tech name. Sonali so is that my new stock . Lets take it home with Caroline Hyde who was on the ground at nasdaq looking at that 15 pop. What is next . Caroline instacart, these companies are coming next week and they will be on the new york stock exchange. We know that there is exuberance around the first day of trade. How does arm continue this narrative of growth in the face of china. I think on the road of arm who is potentially eying a u. K. Listing. Thats an important step. This is a Global Company with global exposure. And then this is a 50 upside. People of taken an upside with this ipo. How will you manage to sustain growth stories and managed to see a pop on the first day of trade . They try to take advantage of the technology but at the end of the day sonali he said this was his first roadshow. When he think of the list of ipos that are trying to take it tomorrow and the role of these underwriters play. Goldmans big day has played such a big role in the technology market. What did he tell you on the sidelines about what it felt like to be listing such a Massive Company in the market right now . Caroline i think he was trying to keep his emotions contain. He had friends calling in from college calling into say they had no idea. Instacart is about to go public as well. But they have been very crafty in the way they democratize their banks and have underwriters. How can that be replicated . With instacart they will not be depending as much on institutional players instead they will be basing it on the Retail Investor which is interesting that so fight as an underwriting partner there. Sonali and an unwritten underwritten ipo. You are down at nasdaq and there are business that includes listings with 20 revenue, how does it feel to have the market come back . Caroline everyone has a smile on their face. They cannot wait for this petulant company come back open. There are 157 company want to come forward. Many want to try to get ahead of the 2024 election. There are a host of companies that want to start the process soon. Sonali that timeline makes sense including a government shutdown. Thank you so much for your time and incredible interviews. Thats it for my edition of bloomberg technology. You can find the podcast online, spotify. This is bloomberg. I am kailey leinz. Welcome to bloomberg crypto. Coming up, sec chair tells the senate that crypto is ripe with fraud and misconduct. He says claims that u. S. Lacks rules for