The hardest hit nation is iran. Nearly 22 thousand people there have died from covid19. Spacex has placed 64 more satellites into orbit. A rocket took them into orbit from florida. It is the 12th the batch of satellites for the companys broadband network. Rocketalso recovered the booster with a controlled landing at sea. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Vonnie it is 1 00 in new york 6 00 p. M. In london, and 1 00 , a. M. In hong kong. Im vonnie quinn. Welcome to Bloomberg Markets. In just a few moments, and inclusive interview with bill ackman of Pershing Square, an update on the spac and the market turmoil. Lets get to the markets. The vix today is above 30, the worst day for the nasdaq 100 so far since march. The nasdaq down 5 . The s p down 3. 5 . The dow down 2. 7 . Several individual companies have been doing extraordinarily well such as doc you sign, down 12 . Tesla down 8 . The vix at 32. Then we have Everything Else also being dragged to lower, 41. 20 a crude oil, barrel. This morning, we got Economic Data showing multitudes unemployed. Initial jobless claims coming in a little better than expected adjustments, it is still a bleak picture. Nonfarm payroll tomorrow, which i believe will confirm what many people out there already know, that they are unemployed. It is time to get to our guest. Nasdaq 100ay for the since march, so what better person to come in than our next guest, bill ackman. Square, that spac raising about 4 billion. Rebuffed an approach from bill ackman, so we will get all of the details. The worst day for the nasdaq since march, which is around when you were pretty public about the market. I am curious about what you think about this particular trade. Market jitters at the beginning of september or is this the beginning of the end . Bill certainly not the beginning of the and but we are coming on one of the more in u. S. N periods history, a very divisive president ial election coupled with a virus that has a huge impact on the economy. Surprising. Valuations, certain technology landscapes, have gotten to some pretty extraordinary levels. I think it is not a surprise. I dont think its an indication of the beginning of the and but markets do not like uncertainty. We have an election in 60 days where it is a tossup who will be the next president , and what the policies of that next president would mean for the country, corporate america, taxation. These are uncertain issues. Uncertainty, as i say, is the enemy of the markets. Vonnie you have said it wouldnt change your investment position no matter who was president. Are you changing your thoughts on that now, do you think there would be widely different policies were there to be a biden administration, for example, rather than a second trump term . Bill i dont know that is completely knowable. Biden and his choice of vice would tend to be more moderate than progressive, if he is the winner, but they will have different approaches toward taxation, business, etc. Although i do think bidenharris is in the more moderate camp cap, forden warren example. Vonnie i want to ask you about valuations. Ducky side down 12 , tesla down 8 . Is that closer to the real valuation for these companies, could there be even more to go . Bill i dont know enough about those businesses to know whether it is a fair price or not. Speaking about some of the more highflying companies, a lot is predicated on what will happen in the future. When you have a world with almost 0 interest rates, discount rates you used to discount the future are very low. ,ith Companies Growing rapidly low discount rates, rapidly growing companies can get to high valuations, but the problem is small changes in your assumption can lead to different outcomes in terms of what a business is worth. Those small changes and assumptions can relate to someones confidence in what the future will look like, and it is hard to take the future when we have an uncertain political environment, uncertainty about the virus. Statesay, the cdc told to pair for possible distribution of a vaccine november 1. If there is a real vaccine distributed at scale before the end of the year and has a meaningful impact, maybe not one until the second half of next year, that would have an impact. It is not known what those impacts are. ,ou factor in your risk premium should go up when there is more uncertainty. The risk premium relating to the risk premium. Many rapidly growing companies cannot justify the value, placing a multiple on the years earnings, which is the convention for more businesses. You have to make expectations about a companys ability to come profitable. That inevitably leads to more volatility. Isnie in some ways there more uncertainty now than in march, when we knew less about how much there was to be uncertain about. Coronavirus wise, what are you looking at, do you anticipate going back into the office, any of your staff anytime soon . Bill we would love to get back to the office. Humor does not work very well on zoom. That is part of the culture, how people relate to one another. We have regular zoom in meetings but it does not compared to the type of camaraderie you can develop in an office environment. We would love to get back, but at the same time, we have worked effectively from home, we dont want to create any risk for our employees. The nature of our business is one where we do not need to be in the office. We are taking it day by day. But we have no current plans to come back to the office this winter, i would say. Hopefully, we can get back as soon as possible. I do miss the office, physical interaction. Vonnie i want to mention one analyst in the u. K. Labeled your february trade arguably the greatest trade. Are you trading this market on down days like this . Are you or your managers considering derivative, hedgetype trades . Bill we are not treating at all, not doing anything. 9, 10 companies, we elected businesses, comfortable with their valuations. We have pretty full positions in each of them. We are not adding on a day like this but we are not subtracting. We like the companies we own. And we dont put them in the overvalued camp. Vonnie none of them. Bill absolutely not. Vonnie with a 46 plus your due date gain, they have all been in your portfolio. Lets get to the spac. Only six weeks. There have been conversations, Due Diligence being done. We reported yesterday that airbnb rebuffed an approach from you. Explain what that means, how that went down . Bill i would not use the word rebuffed. We had a nice dialog, we got to know the team. It is a business that we have admired over time. They have been on a path to go public. We talked to them about our structure. As your article pointed out, they have not decided going against the spac route, but at this point their first choice is to do an ipo. Speaking generally, what we offer to a company, the ability to project 5 million of cash, take them public. Duee started today, opened diligence, got access to a data room on a company, got to spend time with management, i would say within three or four weeks, depending on the business, we could get a sufficient understanding to be comfortable and negotiate a deal, and give them certainty on capital, and they could become a Public Company 45 to 60 days after that time. But we give them certainty in that first 30 days. A company like airbnb, files confidentially, at some point they will file their perspectives. Election, before the new administration comes in. It is that last day of the roadshow that they know what price they will get, whether that is a certain transaction, how much capital they raise. It is a different approach. Behind taking what is Door Number Three instead of the bird in hand, so to speak. We did not get to a state where we could do real Due Diligence on the business, or did we have an opportunity to discuss valuation. It was really a get to know you. Reports are true that we had some discussions, but very bulimic area. We certainly did not specify a valuation. We didnt do a deep enough dive to determine whether this is a business we want to own, at what price you would want to own it at. We like the company from the outside, the nature of the business. We dont know enough about the economics of the business or the way it is run to have a view. Obviously, the certainty of the price they would get is a big plus. And given that they would have to give up something to go the you route, they would let have a big say in how they run the business, what would be in it for them to go the spac route given their board . There is plenty of advice there. Bill we are not insisting on a particular role for Pershing Square or any member of our team or any of the directors on the board. The governors of whatever company we emerge with will be an important topic, we want to make sure it has independent representation, but we are not requiring Pershing Square necessarily has a seat on the board. It depends on the situation, the existing board. We didt spac transaction a few years ago was burger king. A couple of directors from our spac joined the board, but i did not personally. It has been a successful experience. Maybe there are some misconceptions about spacs generally, but you dont really give up anything by working with us. You get to see everything upfront before you sign the papers, tell anyone you have begun your process. What is attractive about what we are offering is the ability to give certainty in a short period of time, a 5 billion ipo is a large ipo. Other than alibaba, facebook, uber, there has not been one that size for the past decade. If you are a Large Company that wants to raise a large amount of capital, today is a perfect reason while markets are nt, maybe that makes sense, but you dont know until the last day of the ipo process whether your transaction gets done or not. By airbnb, rebuffed but we have certainly been welcomed by a meaningful number of private equity controlled preliminaryn discussions, as well as with family or individually controlled companies. We are doing work on various businesses, getting to know management teams. Im confident that we will find a transaction that makes sense for us and the other side. But in a volatile market, the reason that we launched in this market, our expectation was volatility to come, and certainty and a 5 billion injection of cash is not something i would walk away from so quickly. If our positions were reversed and i was the ceo of a company that needed to raise a lot of cash, i would take a look at what we have to offer. Vonnie so let me ask you why you would be interested, if there is a volatile environment, and we although the criticism against airbnb. Brian chesky was called upon to stand down early in the pandemic. Why would you be so interested in this business, if itis business . Atile you know a lot about hotels and travel, but what would be your confidence in this business . Bill again, we have not done the work, do not have access to insider information. Our favorite businesses are sort of asset, annuitylike as this is that can grow over a long period of time with a lot of durability. Airbnb meets that criteria, is managed well, control over their cost structure, a path to meaningful profitability, then it is a business that meets our criteria. If not, it does not meet our criteria. The companies we are looking for our very durable growth companies. We will accept a degree of volatility. We were buying hilton stocks in the depths of the market in march, even though the Hotel Industry is on its knees. We have a longterm view on the industry. 5 of the just under company. We like businesses where, if you will, you can get a royalty on future travel, but there are many other companies that we are looking at in the fintech space, b2bsumer businesses, companies, a full spectrum of different businesses. We are trying to find a fit between what we offer and what would be of value to a counterparty. I do think market volatility is our friend. I think what the market is saying is that this entity becomes more valuable with greater uncertainty. Now trading at a 10 premium to the cash we have, and it is worth the premium. The worse the world gets, in a way, the better the deal gets. Vonnie definitely some fintech and Financial Companies that we talked about, including bloomberg lp, but also the likes of strike. Is that the type of company that you feel would be a good candidate for your spac . Wel while im on bloomberg, may as well talk about bloomberg. This is a business i have known for a long time, i became a customer in 1992, have never canceled my subscription. We have many more today than we did back then. Certainly a business i admire, great company. Certainly a fit within the kinds of businesses that we would be interested in. Stripe, i have a high regard for president , the brothers that run the business. I think they are building a remarkable franchise. I do like the company. Wese with stripe today have had limited discussions they are not ready to go public. One of the other criteria for us, the company has to be ready to be a Public Company today. Has to be a great business, durable growth company, managed well, a path to profitability, and they have to be ready to be a Public Company. There are certain requirements in terms of management, infrastructure, systems that you need. Vonnie most of the chatter as discussed Silicon Valley because you use that language when you talk about what you are looking for, but are you looking at a range of other things, industrials, parts of companies, assets of Different Companies . Bill the highest probability transactions, the biggest universe, is the private equity controlled universe. Are veryquity firms comfortable doing transactions with spacs, they understand the certainty and benefits. They understand transaction value. We have a number of discussion going on in private equity. Privateioned earlier, equity has always been open to transactions with spacs. The biggest change is the venturebacked immunity is open to spac transaction today. In the last day or so, reid hoffman, member of the airbnb board, announced that he was raising a spac with one of the early angel investors. I do think the spac structure has come into its own. Structure,iew of our scale, the least amount of friction to do a transaction. I think we are changing the way that companies will go public, and that is probably a good thing. Good for capital formation, easier to raise capital. Vonnie as you say, partially market concerns. Venture capital has to find a way of having their businesses funded. Not much time left. I want to ask you about fannie, freddie, the rest of your portfolio before moving onto an idea you have for children. You anticipate any problems with fannie and freddie going forward, the argument that will not go away about capital rules . Bill fannie and freddie are on a path to becoming privatized companies, and all the necessary steps are in the process of being taken. One of the final ones is finalizing the capital rule. The new version of the capital rule has improved. The amount of capital that has been proposed at 4 , assets and offbalancesheet guarantees, is well above what they actually require. The problem with that is it will make it difficult to raise a sufficient amount of capital for these two to emerge. Mortgage rates will have to go up. Fannie and freddie wrote letters about the capital rule, in order for investors to invest, particularly in light of what has happened, investors will need to earn an adequate return on the capital. It becomes almost impossible to do so if capital levels are set at levels well beyond what the business needs. Arehink fannie and freddie more than wellprepared. 4 againstto hold their mortgage portfolios. Banks hold mortgages on balance sheets. Fannie and freddie are just guarantors of timely payment on interest, very low risk securities. They have a much better franchise than banks regarding the cash flows they collect. That will be worked out. The next step is resolving the government preferred stock. Freddie hope fannie and emerges as independent companies, taking the risk away from the taxpayer. That is important, as we see in the pandemic, the first people to draw from the financing. Arkets were the traditional vonnie only a couple of minutes left. In your Investment Managers aport, you said if there were stock market for Small Businesses, it would be down even more, making the inequality problem even worse. Talk about this idea that every child gets an account created when they are born funded with nearly 7,000. Where is that money going to come from . That would bring the u. S. Closer to european or australian systems. Bill i would be happy to pay my share of the 26 billion. I think every successful wealthy person will be very comfortable helping to fund the next generations ownership of the capital system. The income inequality program, in a way, the bigger problem is a wealth inequality problem. You have a smaller percentage of the country that owns investment assets, so while they sleep they can make money. The rest of the country relies on wages. Wage growth has not kept pace with the growth in investment assets. Really has not been meaningful until recently in real wages. I think it creates resentment. This is the greatest capitalist country on earth. In a way, that is our birthright, so if i were in the congress, i would propose birthright legislation, which gives every baby that is born an account. Lets call it a Million Dollars in retirement, given 8 compounded return. The key is setting aside money for your retirement, and beginning early. The power of compounding is a norm us. A piece american owned of capitalism, people would get excited when the stock market went up, and they would be happy when amazon stock price went up. Whereas now you have a world, the haves own investment portfolios, and the havenots, that dont have 400 set aside. If their children were taken care of. Vonnie actually, we have to wait for the second part. We are out of time. Thank you so much. We look forward to hearing from you and to whom you pitch on capitol hill so we can figure out if this is something that could be taken seriously or not. Our thanks to bill ackman of Pershing Square. Withg up, we will check in a black owned Business Owner that is seeing an uptick in