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Hi, welcome to The Money Stuff Podcast, your weekly podcast where we talk about stuff related to money.

I'm Matt Levian and I write The Money dot Com for Bloomberg Opinion.

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

I like Apostle merger fight, but like, yeah, I don't like a media deal because everyone pays attention to the media deals, and the Warner Brothers merger fight has been wall to wall coverage everywhere, including the Money Stuff newsletter, and it's like, I don't know, I can't keep up with it.

Yeah, it was going to say, when we were talking about topics and I suggested Warner Brothers, it seems like you were not psyched, and it's like, I don't know your column that you write would suggest differently.

I agree with you, though I don't really get jazz talking about media, and obviously we're covering it on Bloomberg Television as well.

This one.

The fact that it's become this bidding war does make it kind of fun and interesting.

Oh yeah, right, Like I merge your bidding war is interesting although it's like a strange bidding war.

Yeah, recruiting is on like Thursday afternoon, who knows.

But basically the deal is that on Friday, Warner announced they signed a merger agreement with Netflix fair price, let's call it like twenty nine or thirty dollars in a mix of cash and two different flavors of stock, mostly cash, but a fair amount of the value comes from two flavors of stock.

And then on Monday, Paramot Skydance jumped in with a thirty dollars cash tender offer.

And one thing that's worried about the bidding war is that, like those bids are pretty close, and a Warner's board did determine that the Netflix bid was higher because they valued some of the stock higher.

So I think that the bid is our thirty one on our thirty two dollars to share.

But also like they did an auction, they head advisors, they took bids, Netflix bid whatever the number, and Paramount bid thirty dollars in cash, and Warner looked at that and we're like, we're gonna take the Netflix bid because we think it's higher.

And Paramount went to shareolders with the same bid that got rejected.

It's like kind of an unusual move, Like you normally you raise your bid to like to be like, look at how great this bid is.

And here they're like going with the same bid and arguing the value of the stub stock on the Netflix pid.

It's, I guess, strange way to connect a bidding.

More.

They've also gone on TV.

I mean like this is not our best and final offer, which is a crazy way to connect a shipping more Like, ordinarily you don't negotiate against yourself, and if you do negotiate against yourself, you do it.

You know, You're like like I haven't got to raise the bid, but instead they're like, we're not going to raise the bid, but this is not our best and final offer.

Like how could you tender to that?

How could you be like, okay, you can have it for not your best and final offer.

Well you too that.

It's also an interesting strategy since they need this to be a friendly situation with Warner Brothers as well.

And they don't like strictly need it, but like they kind of need it, like they've conditioned their offer on it becoming a friendly Yeah, it's not that weird, Like people don't usually do hostile deals all the way through in twenty twenty five, you know, like you do a hostile deal, the pressure of the board into coming to the table with a friendly deal like this is you know, this is kind of how Twitter worked out, right, It's like a normal playbook.

Yeah, but they're not doing a pure hostile deal.

They're not tendering to share elders and saying, you know, give us your shares and we're clothing and never mind what the board says.

They need the board on side, and so it is a negotiation where they are like waging a public pressure campaign on the Warner board, but they're not just like doing a pure hostile offer.

So what happens here?

I mean, does Netflix now raise their bid?

I don't know who has to move first.

Yeah, right now, Warner has said they're sticking with the Netflix deal.

Paramount can close it thunder and it's all just sort of like a limbo and you could imagine Netflix just waiting it out.

But I think given that Paramount has said things like this is not our best and planal offer, probably the next move is for Paramount to raise.

But I don't know.

I think they're sort of seeing what the shaholders said, if all of the shareholders are tendering into their offer and like calling up warners bored and saying the Paramount deal is so much better, then maybe Paramount can get away with it.

But it's just hard to imagine them paying thirty dollars a share when they said they'd pay more.

Yeah, so I think they have to raise.

But then Netflix has there ra is you know, it's like and forth.

There's also the detail that Paramount is for the entirety of Warner Brothers Discovery, including the cable networks, whereas the Netflix offer is not.

It excludes the cable networks including CNN, So I mean it also depends on how you value the cable networks.

Yeah, this is why the Netflix deal is of uncertain value because like in that deal, the cable networks stay with Warner shareolders, which Yeah says is worth about a dollar per share, and you know the board thinks it's worth three four.

Yeah, it seems like consensus would say that one dollar shares low on the lower end.

Yeah, Like I think if you add it up, the Netflix bit is worth right around thirty dollars, is like kind of market consensus and then like the board is a little high and Paramoun's a little low, but like it's not like vastly more, right, It's like around thirty.

There's also the Ellison of it all because Paramount is a pretty small company.

It's like it's an LBO.

Right, It's like it's like there happens to be a Paramount attached to it.

But like basically it's like we're going to borrow a lot of money against the Warner assets.

Paramount does not on its own have the capacity to raise like, you know, fifty billion dollars of debt, right, Yeah, it would raise fifty billion dollars a debt against Warner, and then it would have a big equity check from you know, they have like commitments lined up from Jared Kushner and like some Middle Eastern investors.

But it seems that owner's board expressed uncertainty about the quality of those commitments, and so they also have a backstop from Larry Ellison's personal trust or like he'll pay the equity check with his PA if he has to.

Yeah, there's been a lot of good succession flavored memes on social media about this situation.

It is very weird to have your dad by several companies for you, whatever it's it.

Is, I think it's cool.

An expression like, of course my dad would.

Buy that was an editorial comment by.

Matt You didn't see the expression.

Yeah it's weird.

Yeah, it's weird to be the CEO of a public copany and feel like my company is going to buy this prized asset with my dad's tech book.

I don't know.

There's also I mean, so Larry Elson's check book is a factor here, but also Larry Ellison's relationship with the White House.

I don't know.

I try to write about this too much, but it is like the very depressing backdrop to this is that like Donald Trump does not like CNM, he would like his friends to buy CNN and change it to be friendlier to him.

And the way merger regulation in the United States in twenty twenty five works is that to get a merger done, you have to commit to making television news friendlier to Donald Trump.

Yeah, it's really bad.

Yeah, it's not like, that's not how it used to be.

I'm trying to find exactly what Trump said on Wednesday as it relates to CNN.

I mean, Trump is he doesn't like CNN.

Yeah, well he said, like when it comes to a potential deal here, I believe he said that CNN needs to be included.

I don't think he really like has been paying attention to the mechanics of this merger.

Yeah, you don't think he's like following along reading money stuff and like watching me on Bleep.

He's watching you on gleen Berger.

He's reading money's too.

I mean he wants changes at CNN, right, and so if the Paramount deal, then Paramount will own CNN and we'll make it, you know, twenty four hour praise Donald Trump network, because like that's a small price to pay to get the deal done, right.

I mean they're valuing They're valuing not CNN.

They're valuing the entire cable package, including CNN, at like one dollar per share.

It's like, yeah, yeah, turn CNN into the propaganda channel.

Who cares, it's not a major part of the business investment.

If the Netflix still gets done, then CNN will be part of Discovery Global, which will be a much smaller, more leveried public company run by you know, existing Warner Discovery Management.

But is that going to be an acquisition target?

Jared Kushner by that it's not obvious that CNN remains independent and with the same editorial posture that it has now even in the Netflix deal.

Yeah, it just doesn't go to Netflix.

And by the way, like you know, a lot of the reporting on this is that, like Larry Ellison is friendlier with Trump, and therefore we'll win, right, And by will win, I mean like Trump will tell the Justice Department you have to find an anti trust pretext to prevent the Netflix deal from closing, and therefore the only way to get the deal done is to sell the paramam because the Netflix deal can't close.

But there's also been reporting that Netflix's management have done a good job of closing after Trump, Like, is one possible outcome here that like Netflix says, fine, fine, we'll buy a CNN two and make it into the Trump propaganda channel.

Maybe change the deal.

I should say, Also, like I said, it feels like, because like this is so much about Trump's feelings about CNN that he could tell the Justice Department to find a pretext, to find an antro trust reason to start the deal.

Separately, everyone thinks they're like real assyss problems, Like yeah, it's not like you don't need a pretext, like it's a real concern when like the biggest streamer buys HPOE And it's also a real you know, people in the media industry have real concerns, you know, about both, but especially about the idea of Netflix taking over like all these iconic films.

Yeah.

No, it's fascinating, I mean relative to most media news because we've been discussing the media angle on Bloomberg TV heading up into the Netflix deal getting announced.

And for Netflix, i mean, Netflix is so dominant in streaming, you know, talking to analysts about this, they were like, this is really a nice to have for Netflix, you know, versus paramount.

This is more of a need to have.

So it's an interesting move by Netflix to even pursue this.

But you think about the anti trust concerns.

It's also built into the deal that they announced, like they accounted for a lot of time to work through all the.

Different time right, I'm sure you.

Know whether or not at all.

And then well that's part of the record breakup fee, rights fee.

It's like two miks of share you want a deal, they get done.

Yeah, it's a nice consolation prize though, Okay.

No, Warner Schralder is going to be like, let's take the Netflix deal because at least we'll get two bucks to share in eighteen months when the deal falls apart.

Like they want certainty, right, like Netflix, part of their job here is to get on sherolders that their deal will close and like that's not.

Yeah, it's like some amount of like you know, economic analysis and some amount of like photo ops with Trump.

Yeah, I do wonder, like just to bring it back to the employees, like in a situation where your company is in this deal limbo for eighteen months, I have to imagine that the company is kind of in suspended animation.

Like things will get done obviously, but that's a lot of uncertainty to hang over there.

I don't know about suspended animation, but yeah, it's.

Depressing, slightly dramatic.

I think if you work in media, you're work in media.

Like the time between now and eighteen months from now is it's a perilous time, whether or not you're at Warner Brothers.

The only sure thing is podcasts.

It's true, shall we talk about SpaceX?

Yeah, another eighteen month.

Remember it's not eighteen months.

It's like they wouldn't an ip it's.

Twenty If it's in twenty twenty six, it will be six months fewer than eighteen months.

I just remember, you know, we spent so much time talking about how private markets are the new public markets.

But now all these mega companies that were the poster child of staying private forever potentially coming public.

Yeah.

First of all, it hasn't happened.

Right, Yeah, it hasn't happened.

But it's an I don't like, the private markets are the new public markets like thesis.

I mean, look, I have said in my column on this podcast, Yeah you can stay private forever, right, and like why not?

Why not?

But if it is the case that SpaceX, Open Air, Anthropic, other names go public in twenty twenty six, then that might suggest that you count they private forever.

But it will be like really different from previous I p honly ye going public at a one point five trillion dollar valuation, which is like the number that SpaceX is banding around.

Depending on what second you're checking, it's bigger than Tesla.

Yeah, but like that's not how was used to work back when public markets were the public markets.

Go public, when you were like you know, there was there was growth still to come, but like going public at a one point tried trillion dollar valuation is like, okay, it's wild in two ways.

One is that ordinarily you go from zero in a garage to one hundred million or a billion or a ten billion dollar valuation, and then you go a public and then the next leg up to like becoming a trillion dollar company, public investors capture, right, So public investors can invest not early, but like you know, in like the growth trajectory of a company that will eventually become large, right, Like that's part of the promise of an IPI was like, this is a fairly immature company and you can get in not on the ground floor, but on like the third floor.

You can public get a one point five trillion dollar valuation, so much of the upside has been captured already, I mean by private market investors.

Maybe you're just thinking small you know, no, I know, I hear.

You, right, Like then this is like every elon musk com package, right, Like, well, it's really one hundred trillion dollar company, so like going probably at one point.

Five tracking the final frontier.

But the other thing, and this is related in the SpaceX case, is like if SpaceX goes public next year at a one point five trillion dollar valuation.

In one sense, the private markets have captured most of the upside.

In another sense, it is not a mature company.

Blomberg reported that they're expecting twenty two to twenty four billion dollars in revenue in twenty twenty six, which is a lot of money.

It's a big company to go public or whatever.

But like they can public it at what seventy times revenue?

Yeah, like that's really big.

That is what has happened here is not they've grown into an enormous company and then gone public at their enormous valuation.

What happens is they've not grown into an enormous company and they've they're going public at a huge valuation that reflects the next ten years of growth, which is a crazy thing to do.

Yeah, well, let's talk about why they potentially need to do it, Like why now do they need to do it?

I mean, you think about some of the things that they're going to.

Build data centers in space, So they need thirty billion dollars to build.

Data centers on the moon, not actually on the moon, just.

Sustainable data centers.

Yeah, that's great.

It's such a sign of the times.

Like one theme of the financial markets this year is that everyone is building data centers and they have tapped every possible source of financing for data centers, and at some point, selling thirty billion dollars of SpaceX stock is one way away to fill the whole of need for building data centers.

And so like space I can raise a lot of money staying private.

And by the way, it's like cash flow positive and doesn't need to raise a lot of money to shoot rockets into space.

But the capital expenses are required to build data centers on every inch of the Earth, and also in space is so enormous that even space like has to go public.

Yeah, and even open eyes.

But maybe, well that's the thing, like I feel like, you know, when we really do think big and you don't really put our thinking caps on in terms of how ridiculous things could get, there is a limit to how long you can stay private.

Yeah, right, right, Like one possibility is that, like I've been writing about you know, private markets or the new public markets for you know, a decade or whatever.

And that was in the context of the biggest, hottest like most sort of household name tech companies were kind of at bottom, like capital light consumer tech right, Like, it's a lot of Like you wouldn't have said Face had a lot of CAPAX needs because it was a website.

Right now, Facebook has a lot of CAPEX, but like for a long time it didn't.

You know, Uber is like, yeah, we're going to match drivers and writers.

We don't have to have anything, you know.

Yeah, it was a real like capital light model.

And now in that context it was fairly you know, you have capital light and very scalable.

It's very easy to stay private.

You need to spend a trillion dollars a year putting data centers on the moon.

You have to, like, the private markets are really big, but they're not big enough for that.

And even before we get there, like before we get to the moon, SpaceX has a lot of rockets to build.

That's right.

They're not capital light, and yet they've but they've managed the private markets to be large and build a lot of rockets.

You know.

The point that has been made is the fact that you know, they have been able to raise large amounts of money in the private markets.

We cover rocket launches on Bloomberg TV all the time.

A lot of the rockets blow up, a lot of the tests fail.

If SpaceX is a public company, it's going to be really interesting to have, you know, a split screen of the rocket of a test launch potentially failing and also the stock.

That's so true, right, Like you know, I write all the time that every bad thing that happens to a public company of security is for it.

But like every time a rocket blows up and they it, it's really awesome to think about.

We didn't talk about the wrinkle of Elon Musk potentially being the CEO of two public companies too.

Yeah, but you can do that.

I mean whatever the er companies, they're big, now, I know.

I'm just like, I'm I'm I'm curious, like what the dynamic is of pricing at one point five trillion dollar IPO because on the one hand, it's like so big, right, and it's like, you know, like the talk is like they'd raise thirty billion dollars.

That's the trades, like thirty billion dollars or stock good day, right, Like at some level, like you just suspend disbelief and you're like, this is not an IPR.

This is just like an Elon Msk public company that happened to not be public and now it's public and then like you know, they work it out in a couple of days, Like it's not I don't know.

There's something like when you get to this level of bigness and constantly doing tender offers and price transparency, it's like no one needs a deck to be introduced to SpaceX.

Like yeah, it's just like yeah, yeah, the roadshow.

Owns it in like weird vehicles anyway, it's like it's SpaceX, man.

Yeah, I hope it does go public because yeah, it's cool.

That would be fun.

There was a thing where he tried to take Tesla private, right and like he complains about the public markets and it'll be interesting to the Yeah, it'll be interesting to see what like a public SpaceX looks like.

It'd be interesting when he gets sued for the fourth time at a.

Rocket plank, I mean, to be fair, it happens.

Yeah, I'm not saying that it's actually a securities route to blow up a rocket, or that he should be sued for blowing up a rocket, and like the investors in the current private SpaceX understand that that's part of the deal and they don't sue him when he blows up a rocket.

All that's wrong.

Should talking about private credits and new public credit.

Yeah, there's this fascinating Wall Street Journal story this week about how it is harder to know how consumers are doing because the way you traditionally look at how consumers are doing is bank data, credit card data, like bank reports.

Banks say things like people are charging a lot of money on their credit cards, or like we have a lot of delinquencies on our credit cards, and you get a sense of like what consumer credit looks like and consumer spending, and what is happening is that some consumer spending it's like marginal bit's real has moved away from credit cards and into other stuff.

Alternative consumer lending, which I think I shorthand is like buy now, pay later, So it's like a firm and things like this where it's like you charge something, but instead of charging it to a credit card, you charge it to a buy now pay letter lender.

And the money for that doesn't usually come from banks.

It comes from other people, and there are a variety of lenders, but like a lot of it is what you'd call private credit.

It's like insurance companies and private credit firms that are providing their balance sheet to like FinTechs that are the front end for these loans, that like make the buyout pay letter credit decisions right.

And so the thing that you're seeing is that instead of banks with credit cards providing credit for consumer spending, you have private credit providing credit for consumer spending, which is kind of a weird development.

And also like a thing that I've been writing about for a long time now is that banking is getting narrow.

Private credit is taking over from the banks.

But like a lot of that has been in LBO lending, business lending, data center lending, and now it's also in consumer lending.

It's sort of an interesting shift.

Yeah.

Absolutely, And you point out, as the Wall Street Journal did, this makes data worse, you know, in terms of tracking.

But I don't care that much about that.

I care a little bit, I guess.

Yeah.

It's like I read about stuff, but I don't ever write about like, oh, consumer credit as well.

I don't care about this data.

Other people care about this data Like that's bad.

But like, I mean, the broader point I would make is that the worsening of data is because bank regulators collect a lot of data from banks and make it public in some form, and so you can see stuff about what banks are doing.

Also, a lot of you know, the big banks are largely publicly traded, and so we'll talk about you know, consumer credit weakness on their runnings calls.

Yeah, private credit is private, and so they don't do those earnings calls.

I mean, there's a publicly traded manager, so you get a little bit, but like it's not the same level of interest in that, and like they're not reporting to regulators in the same way that banks to it.

And the point I make is that, like the whole point of financial regulation in the last twenty years is that the banking funding model is systemically important and risky, right, Like banks have runs.

When there's runs on banks, credit titans, and like the economy gets worse.

And if you can replace a runnable banking system with a long term funded, equity funded private credit system, then that is structurally better.

And the tradeoff for that is that that's less regulated, right, Like that's what happens.

Like banks are highly regulated because their funding model is risky.

If you just like have a pot of your own money and make loans out of it, you're less regulated.

And people get nervous about that because it's less regulated.

But it's like that's the trade off that like the regulator is meant to strike mostly is that always thinking about it, and it's like a sensible trade off, and it just makes people real nervous.

Well, I mean, does it become more regulated?

I have to no, man, the people keep talking about it, but we're not in an environment that is like gung ho and making anything more regulated.

That's true, And like my point is that it doesn't makes sense.

I mean whatever makes it.

Like there's a reason this stuff is less regulated, which is that it is less risky, Like just as a baseline funding model is less risky.

And so when a private credit firm wants to make bad loans, it's like, all right, that's your mistake, man, it's your money, right.

When a bank wants to make bad loans is like, no, no, that's the depositors money.

That's like taxpayers money, Like we need to make sure they don't make bad loans.

So you know, the regulatory pressure is less.

But we'll see.

But like for now, nothing's getting more regulated.

Banks are getting less regulated.

This is a turn.

But did you see that piece in the Ft about Apollo and it quoted an Apollo executive saying we're becoming a bank.

It truly sucks.

It was an unnamed person.

It sounds like you didn't see this piece.

No, it was kind of funny.

I'll send it to you.

Yeah, look, I mean see if you were still on Twitter, you would have seen it.

But there's like a long running history of like banks get regulated, things that are not banks move into the business, they become big, they move into risky you're in risk of your funding models, they blow up, they get built up by the fat and they become banks.

Right, Like that's kind of the story of two thousand and eight, Like could that be the story of private credit?

Like yeah, maybe I'm excited to find out.

Truly as a consumer of news, Yeah, I.

Don't have in my mind a picture of what it looks like to have like like the crypto crisis in twenty twin tiers.

It's like truly like a replay of two thousand and eight, Right, I don't have a picture in my mind of what that looks like in the private credit version, Like I don't have a picture of like runs on private credit firms, but like it would be cool, yeah, well to write about not like for the world or whatever.

But it would be like an interesting development.

But I again I can't quite visualize it yet.

Who will get there?

And that was the Money Stuff Podcast.

I'm Matt Levine and I'm Katie Greifeld.

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