An antitrust probe overload. The u. S. Justice department launches its own facebook probe. This, as the social network is already the focus of a federal trade commission investigation. But first to our top story, pellet gun falling as much as 9. 5 after raising more than 1 billion in its u. S. Initial public offering. It is the latest unprofitable startup to struggle in its trading debut, but the ceo john foley remains upbeat about pelotons future. s jason with Bloomberg Kelly at the nasdaq. John we are playing the long game. We see this as building millions and millions of subscribers around the globe in the coming years. Now we have the money to do that. We are fully funded after todays primary, so we are feeling confident. Jason when you think about the last couple of days and weeks, you mentioned the market. It is a tricky ipo market, to say the least. Do you have a sense of where the miscalculation was . Or if there was one . My eights is fundraiser for appellate on. It is a funny thing where people either see it or they dont. There are believers or nonbelievers. Those who believed in the and invested in appellate on for eight years now have been very happy, and we will continue to rely on Capital Partners who invest in us. Jason you mention fully funded. What will you do with that money . What does expansion look like . John we are building a 50 million streaming Television Studio in new york city, another 50 million studio in london, where we will hire Foreign Language instructor. German instructors are streaming toward german market, which we open in 50 days, so investing in new content, new verticals, the treadmill markets, we have canada, the u. K. , germany. We are in investment mode. Someone earlier today was saying you are losing money. No, it is semantics. We are investing money and feel good about what we are doing. Jason how do you feel about the Consumer Market . You sell a very highend product. There is some volatility we are experiencing. What do you hear back from your customers and maybe more importantly your potential customers about their willingness to write a big check or charge something pretty big on the credit card . John one of the most important things we think about at peloton is affordability. It is insane value visavis anything else. Interestingly i know you wrote the book on this, so you know this, but fitness has been a recession proof category for the last 15 years. More dollars went into fitness in 2008 and 2009, so there has been secular growth for the last 15 years. We think if we create the best value in fitness if you ride your bike on average our bikes are ridden 12 to 14 times a month, divided by 39, a couple of dollars for a workout, it is obviously better than going to the boutique fitness world. And we will show over time it is an even better value than going to the gym. Jason you have described the company in the s1 and the roadshow as all sorts of things, the Media Company that does a lot more. Where will you be primarily spending money . Is this a content push that is coming . I would say that at our core we cannot Hire Software engineers fast enough. We are a software company, tech company at our core. Now we have 13 Emmy Awardwinning producers. We just hired this new fantastic officer in jevon carter. She will build one of the most special media divisions in any category. But to your question, the investment will go into technology. We were open retail stores, logistics, more markets, but which starts to show how multifaceted palatine is, but certainly Software Engineering is at our core. Taylor that was the peloton ceo john foley. To discuss the companys first day of trading, i am joined by our guests. Crystal, let me start with you. Down 11 today, what was the biggest concern from investors, why it closed so much lower than where it priced yesterday . During the roadshow, it has been a pretty binary story. You other have a bunch of people who believe that pellet gun will change the entire fitness ton will change the entire fitness landscape and how people work out and think about workout, or you have people who think it is a Business Model they cannot sustain, that that has been a story in the investors mind. You either believe it or you dont. That has made for interesting dynamics in the pricing, because you have a bipolar set of feedback from investors, so that is probably why we are seeing that the deal is struggling this morning. And we were seeing the price fluctuate in the morning and at the open at the end of the day closing below. But more of the criticism has been the profitability of the company. It is still unprofitable. Investors want to see an end to that. Taylor natalie, was valuation a concern today . It certainly was. You had a valuation that was double the last private funding round, and yet he wants to make it into a content company. The 29 a share left it at more than 8 billion, which is more than that flexed if you do it at a price to sales basis in 20 sales. So it was quite expensive. By the way, my valuation professor believes it should have been 23 a share. It was a little more expensive than people were thinking. With that said, ive got to say that peloton, like smile direct club, are not a traditional tech company, so they have a harder time selling themselves as technology companies. Taylor crystal, the ceo touted the health of the Balance Sheet, citing cash, saying we are fully funded. After today, are there concerns about the health of the Balance Sheet . Crystal i also spoke to the cfo of the company just now. She was saying this really is a funding event for them. Where the stock price ended today, it doesnt really matter. They have happily raised 1 billion. They will deploy the capital into content. Software content is the valuation they are talking about. We havent actually seen that much of a selloff in a market yet, but in terms of where they deploy their content, they mentioned international expansion, content, tapping the existing base, and potentially rolling out new hardware. Taylor you heard crystal luncheon hardware. Which is more important, a 2000 bike, a 4000 treadmill, or 40 subscription revenue that investors can hang their hat on . The subscription revenue is still something that is recurring. It is as much a percentage as it was the last couple of years, so they have not seen that grow super significantly. People are going to want to see more of that. Not to mention the hardware. We have been talking about all these costs. Hundreds of dollars in marketing, but also international expansion. But the hardware is also expensive. There are hundreds of mains of dollars poured into there. So the cost base has been rising quite a bit, and that is not something we are able to put a clamp on. For investors to bite on the story will be a challenge without that current revenue. Taylor thank you both for joining me. Tesla saw their shares spike in spike the most in three months on thursday, after elon musk told his staff that the carmaker has a chance to top the vehicle delivery record set in the second quarter. In an email to staff, musk says tesla has a shot at achieving the first 100,000 vehicle delivery quarter. Tesla reported deliveries of more than 95,000 vehicles in the second quarter. And coming up, the clock is ticking for wework to raise billions. We look at the struggles ahead for its new leadership team, next. If you like Bloomberg News to if you like Bloomberg News, check us out on the radio, the app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Taylor it seems the hits keep coming for wework. Thursday, the chief product officer is set to depart the company. This comes days after the cofounder said he would step down in order to salvage that ipo. The company has seen a rash of departures of other executives as well in recent weeks, then this comes amid a dash for cash. Wework is in talks with Goldman Sachs and jp morgan about a new 3 billion loan. But there is a catch. It would still mean returning to its biggest investor, softbank. Joining us is dan morgan and ellen hewitt, who has been tirelessly covering we work. Walk me through this new loan. 3 billion. Who gets that new money . Ellen that will come likely from a consortium of banks, and is contingent on equity from a different funder, most likely softbank. The whole thing is this plan that is really being developed as we speak, because there have been so many changes for the company in the last four days. The ceo has stepped down. His wife has also left the company. She was cofounder and ceo of the education arm. There has been a lot of intrigue around other executives and employees at wework close to him. It seems like the new coceos are interested in cleaning house. Taylor talk to me then about s. Se new coceo who are they . What do you know about him . If they are cleaning house, who would they turn to . Ellen these are both executives at wework who notably have experience with Public Companies outside of wework. Sebastian is from amazon, marty was cfo at time warner cable. They have some ties to wework, but not too many. There were a lot of people who had been there many years, especially people who had been close to the newmans. There were a lot of people who were personal friends of adam from his childhood, or relatives. As we reported recently, the person leaving the company is adams brotherinlaw. There are lots of connections there. I think the new ceo is interested in trying to strike a sense that this is a different era. Taylor dan, let me bring you in here. Thank you for joining me. As you look at wework and the and the fact that if they dont ipo, they need more money soon, as is that still the biggest concern, the financials of this company . Dan you are right, taylor. They need the ipo to secure 6 billion in financing. They are currently burning about 2. 4 billion in terms of cash flow. They were hoping to get 3 billion in cash on the Balance Sheet from this deal. That is the Real Driving Force for them right now, getting the money from the ipo so they dont have to rely on softbank to fuel their growth for the remainder of the year. That is the driving force going forward, to push this ipo and get it done more than anything else. Taylor you talk about raising leftand the revenue, the side of the Balance Sheet. On the right side are the expenses. A lot of it has to be perhaps cutting back on some of the fat. We had the coceos write in email to employees that we anticipate fiscal decisions ahead. What would you like to see from this company, more layoffs . How do they cut excess expenses . Dan you are right, taylor. If you look at their model, their biggest expense is the cost of the leases they have to take on. Based on the last data in the s1 filing that averaged between 80 to 85 of their total revenues. What we would like to see in this third quarter, which they will have results here in the next couple weeks, are steps from these new ceos showing we are cutting costs, because right trying to drive these down to profitability because right now, as you know, it is 1. 7. For every dollar they make, they lose money at a very fast pace. Just trying to show some discipline and trying to show they are trying to get to the end of the tunnel in terms of driving some profitability would be huge. But right now with the model, it is difficult. Taylor when we talk about wework, you cant mention wework without mentioning softbank. Have they been enablers here . Ellen that is a great question, and one people will be examining for the next months, if not longer, this idea that money came so easily to wework. They had to sell equity, but they had no shortage of venture funding available to them. I remember interviewing adam in april. He talked about softbank is amazing to me. They have given me 10 billion. The way they thought about it is clear that they had given him the cash to build this incredible company, and now we are seeing how many ventures wework had that was outside their regular business of renting out office space, those are the things that are seemingly on the chopping block as we go forward, including the Elementary School they run. They have two residential dorm buildings. They are going to have changes in these things, and i think as we reported, i think job cuts are part of that as well. Those will be likely outside the wework core business. Taylor dan, talk to me a little bit about softbanks role. Have they changed the vc investing landscape, given the dominant force they are . Have they changed the way the private investing market works . Dan i think so. The fact they have so much money, and like i said, the willingness to lend it out, not only to wework, but all these unicorn deals. They are connected, and just the fact that there was so much money being put into their various funds that they have to distribute out to all these deals. So now you get this point like, wait a minute, what is going on . We have lyft, we have uber, we have these other companies, stocks turning below the ipo prices. Some of these other ones, now people are starting to think, well, can this model continue for softbank . Can they keep giving this money away . The end result will be everybody is happy and everybody gets their money back. The market right now is saying no. Taylor the Public Market seemed to be in charge. Thank you for joining me. Dan morgan, you will be sticking with me. Because coming up, the global microchip market is not yet in the clear. How global trade tensions are impacting microns future. That is next. And Bloomberg Technology is livestreaming on twitter. Check us out technology. Be sure to follow our global breaking news network tictoc on twitter. This is bloomberg. Taylor there is word now that endeavor group is set to pull its ipo. Earlier thursday, endeavor, which has a stake in another r operator, lowered its price range from the previous range. It cut the offering size to 15 million shares from 19. 4 million. And shares of micron falling in after hours trading, after the company gave a disappointing profit forecast suggesting the memory chip industry slump is not over yet. The chipmaker guidance the chipmakers guidance means it sales are on course to decline 20 year on year for a fourth straight quarter. There with me to discuss the forecast and microns fourthquarter earnings in atlanta, dan morgan. You know better than me. I dont care about the Current Quarter because its over. I care about the future forecast. And that was a disappointment. Do you agree that forecast was disappointing . Was taylor, everybody looking to this quarter, which is there fourthquarter 2019. They have a different fiscal calendar, to be the low point in the valley. And that guidance going into their upcoming First Quarter for 2020, which shows some improvement. Now they did revenue of a little more than 4. 8 billion on the fourth quarter, they guided for 5 billion, plus or minus 200 million dollars. That puts you on the high range from that perspective. But the real thing to focus and with this micron report was cap gross margin came in at 28 , and they guided 24 to 27 gross margin going into the First Quarter 2020, so it leads to the conclusion, like you were saying that everybody was looking for this to be the bottom of the valley, then we will start going back up the store case going up the staircase starting the First Quarter and unfortunately 2020. Based on the guidance and a it looks like its going to be somewhat flat or about the same, or even slightly down with regards to gross margins. So i think that disappointed people in terms of the Headline News out of micron. Taylor i want to show a chart im showing to our bloomberg audience inside the terminal i have here at gtv. Interestingly enough, we talked about memory chip prices, and this is why analysts were so this is why analysts were so bullish coming into the quarter, because we thought these prices were bottoming out. Does the micron earnings suggest that call was too early . Dan you know, taylor, i think it might be, because, as you mentioned, we have seen dram prices in the last quarter were down about 9 . That is total dram revenue, and as you mentioned, ticking down from the last four or five quarters, and the expectation in terms of analysts was it would start to pick up again. At least based on the remarks that we have coming out from micron that they had from their results, it is not showing the type of improvement that we were hoping for. It is showing a continuation of a lot of the same, a lot of uncertainty around tariffs and huawei. So because of that, you could make the case analysts were a little ahead of themselves in terms of predicting that Inflection Point and things will start ticking back off again. Taylor what is the bottomline impact from trade and tariffs . Dan well, taylor, in the release, they talked about the relationship with huawei in regards to concerns about getting approval from the Commerce Department to delve into that company. You have to realize microns technology, of all the semiconductor stocks, drives 50 of their revenues out of china, so they are very, very heavily entrenched in that debate, so because of that, that is a huge headwind for them in regards to being able to recover, along with the fact we had a mature cycle in smartphones and pcs, and we have a little bit of indigestion going on in the infrastructure of Service Cloud space. So you have all these things coming against them, but obviously china tariffs are big part of those headlines. Taylor dan, we sound pretty negative on the company, but when we look at the general chip industry, im shocked at the relative resilience. If we take a look at another chart im showing here on my bloomberg terminal, it shows the fact that dram prices have been bottoming out. The broader gauge has continued to climb. Are you surprised at the relative resilience of the sector . Dan what is amazing, taylor, and you have the numbers in front of you. The stocks are up, i believe, 36 , yeartodate, correct . If you look at the Overall Technology sector, it is up about 28 .