Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus gloom Ol Business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio.
Decker ZK. It's definitely on our minds today. We said we've got a theme of China this hour, and we're going to continue with that. Shares of Zeker Intelligent Technology Holding, the high end electric car brand under Jilly Holding Group, rising as much as forty percent after an expanded initial public offering. That's the biggest US listing by a China based company since twenty twenty one. And we're looking at Zecer up right now, Tim Jashi of thirty three percent.
Okay, so let's get to our roundtable, because we got a great one. We got Amy Or with us. She's Bloomberg News Equity capital market supporter. You know when we see her in our studio IPOs.
Also with those last year.
She's you know, she's been busy with this one, also with us as Bloomberg Intelligence, Global Autos and industrials research analysts Steve Man, Steve, I do want to start with you because this is an IPO, but it's also a story about the auto industry, and especially comes at a really interesting time given that demand for electric vehicles, especially here in the US but also globally is not what a lot of investors and a lot of analysts thought
it would be in twenty twenty four. Talk to us about the timing of this company coming to market against these headwinds.
Yeah, it is very interesting, very interesting. If you look at Neil x, pung Li Auto, all three are Chinese automakers listening to us, they've you know, they've been down twenty seven to forty five percent year to day, So the timing doesn't seems very timely. But I think globally auto sales are down, especially in Europe in the US, but the Chinese are still doing all Hey, in the last couple of months, sales have gone up. And I think,
I think Zeker, you know, they don't. I don't think I have plans to sell in the US, maybe in Europe, but this is going to help build brand cachet for the brand locally in their home market.
All Right, We're going to dig into that little bit more because it sounds like they're gunning for Tesla because it's a little bit more of a higher end play. But hang on for a second. I do want to bring in Amy or who follows the IPO market for us. Amy, as we mentioned out of the gate Strong showing, how would you characterize this and get into that Jeli has indicated that it is going to subscribe to more than ninety percent of the stock, so they're going to own
a lot of it. It sounds so put it all in perspective for us well.
So to start off with, I would say that this is one of those deals that we've been waiting for a very long time because a is ev Ipo, but is also a Chinese company of sizeable size that we haven't seen in a very long time. And so it's
great that it's going up. And as you mentioned, ninety percent of it, it was already sold like before it actually started the road show, So which is good to actually provide a good base and foundation for the stock to go up at a time when, like Steve was mentioning that ev is not actually particularly kind of doing well across.
The But does it show that Jilie was a little am I saying it right too. We had some debate Jill Jillie, Jillie, Okay, we want to make sure we've got it correct because there was a little bit of a debate in the newsroom. But is it assigned to that? Jillie was a little concerned about maybe the interest amid kind of the broader EV backdrop.
To be honest, I would say that just IPOs as a whole has been kind of choppy, and then particularly EV. And then given that at the time of the pricing it was only five point two billion in market cap and then now it's went up to around seven billion or.
So billion they were talking about a year a.
Far away from that. I'm sure there were conservatism right there, just to make sure that there is a good base that it was not like three or even below. So definitely there is a bit of that, and probably also Jilly wants to continue to hold a little bit more of that looking at the future growth of the company. Especially we're talking about this is the high end side of the market. It's not the math market that we've seen.
Bradbrick has reported before that there were some headwinds there as well, so, yeah, and how to go beyond the Europe market and beyond the Chinese market, going to Europe and other places as well.
So Steve, talk a little bit about that, because it's kind of the perfect segue to what you cover as Bloomberg Intelligence Global Autos and Industrial Research analysts. What exactly are the vehicles that are being offered. Carol did allude to the idea that they do compete with Tesla, but but paint a picture of this company for a lot of people I think listening and watching right now who have probably never before today heard of this company.
Yeah, Zeeker is born out of jil the It's you know, it's it's one. It's the parent company Dredge and Gil. You know, it's it's related to the one seven to five HK that's listed in Hong Hong. I mean a lot of They offer two vehicles right now. One is an SUV. One is to sit there. It's a pure battery ev It's selling at around thirty seven to forty thousand US dollars in China. That's about the same price
as the Model three and Model Y over there. I think what's really unique about Zeker and a lot of the Chinese brands over there is there can They're all called considered smart cars okay, with great connectivity apps that resonate with the consumers. Very different consumer base over there. So I think they're going to try to export that
that type of UH offering to the globe. And I think listing the shares here it's gonna it's gonna help bring the brand cachet not only in China, but it's gonna get the name out there on a global basis.
Hey, Steve, people here Zili and they think, I think Volvo here in the US, then maybe they hear Volvo, they think cole Star, which is, you know, an EV that is sold here in the US, a pretty high performing lie.
I was in a cool Star out on the West Coast.
Pretty cool. What's the Polestar relationship with Zeker, Like, how can we think about it like a corollary?
Yeah, that's a good question. I think if I think a lot of the design cues that's UH that's in the Zeker, A lot of technology within the Zeker brand, e V brand it's actually shared between JE, between Polestar, uh And and Vovo. And there's actually another another brand called Lincoln co that's it's not available. I else swear only in China. And uh so all all those companies are actually related. Zeker's actually Zeker's R and D headquarters actually is in Gothenburg, Sweden.
Hey, listen, one more in the company than I want to go back to amy. But I do think about the Chinese EV market. How crowded, Steve, is it getting?
Oh, it's very crowded. It's a hyper competitive market. As you probably heard, deep discountings happening, been happening in the last year and a half. Uh And it's it's it's it's interesting because the auto industry, the EV makers, the Chinese event makers, are very much vertically integrated over there, so they they mine the lithium, they make the batteries and then as well as the software, quite different than
how it works here. And I think in the earlier segment you talked about tariffs in the US, and that's it's really necessary that the US put these policies in place because to compete effective with the Chinese. Uh, the auto industry needs to be vertically much more vertically integrated. The supply chain needs to be much more vertically integrated than it is now. To really compete effectively with the Chinese really important.
You mentioned the price cuts though, Chinese best selling car maker Buid slashing prices across much of its lineup this year, so that is certainly the backdrop there. Amy come on back in an IPO market out at Milkin. We talked with the M and A guys. They think it's starting to come and you know, come a little bit more activity.
The significance of this one actually doing well out of the gate, is it something particular that it's Chinese, that it's an ev maker, or is it just kind of good to just see an issue come out and actually do well in its first day of trading.
Definitely, we just want any ipo to trade well at this point I kind of feel. But then, like as a Chinese IPO, I would say that the biggest hurdle is not for a Chinese company to actually do well. It's really about whether Chinese government is going to really release the kind of flood of Chinese companies waiting to actually get listed here and is there a lot just waiting? Definitely, And essentially Chinese companies used to actually form the bulk
of US listings as well. And also the fact that I think reut is, if I remember correctly reported this earlier this morning, that she is actually going for London as well. So essentially, these are the kind of headwinds political headwinds that we're feeling that is going to hamper the kind of Chinese companies coming to the US.
So what are you watching in the next few weeks, in the next few months as an indication from the Chinese government from the way that investors receive Zeeker, that might indicate that we could see more IPOs from China listed companies.
Steve mentioned that this company technically is not headquartered in China, but it's got very strong ties with China that we always kind of see it as a Chinese company per se. But there are also quite a few like I think san Is in the same bucket as well, Bite Dance in the same bucket as well, that they're headquartered elsewhere, but then we generally just see them as Chinese companies.
But I don't feel that there is a yeah, a floodgate being opened right now is still kind of yeah, trickle, it's on a date case my case basis.
Hey, Steve, just twenty five seconds here, Joe Matthew tried to push this the official over at Zeker about Chinese government involvement in this in this company in Zeker, what do we know and forgive me just got about twenty five seconds.
Yeah, it's actually a private company, Julie. So I mean there's yeah, always giving subsidies. Yeah, so you know, there are some ties, but it's a private company, all right.
Gonna leave it on that note. Guys, thanks, We came at it from different sides, so so appreciate it. Steve Mann out there at our Bloomberg Intelligence headquarters in Princeton, New Jersey, Steve is global Autos and industrials research analysts. And then right here in our studio, our Amy or equity capital markets reporter, as we said, watching the IPO market this as we see Zeker shares, they're uptim roughly about thirty three percent.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from two to five pm Eastern Listen on Apple car Play and then brout Auto with a Bloomberg Business ACP, or watch us live on YouTube.
As we talked about earlier our Bloomberg exclusive about President Biden getting ready to hit hard on China EV's with tariffs as soon as next week. That's according to folks familiar at the Wall Street Journal doing some reporting on this as well, saying those tariffs could quadruple. So it's one of our big stories certainly on this Friday.
Yeah, Bloomberg News reporting today that China is losing its luster is a top country to invest in a sperm seek to avoid geopolitical risks and turn to Southeast Asia and Europe, according to a survey by the European Union Chamber of Commerce in China. So we thought we'd get a perspective from Ben Harberg. He's founder in portfolio manager at Core Values Alpha. He joins us where it is very early in the morning in Beijing, the Core Values Alpha Great China Growth ETF. It's got about eight million
dollars in total assets. It's ked about six percent so far here to date.
Normal people would be asleep. I'm just going to put that out there, Ben. Anyway, we appreciate you getting up. It is hard to get your head and hands around if you will, China being investible investible today, especially on a day like today where you've got a very successful Chinese ev MA ipoing here in the United States, and then you've got, of course, what seems to be more tariffs coming on that market, pushed back on Chinese made
goods coming to the United States, if you will. So, having said that, why is China investible in your view? Because it looks like, you know, there isn't a lot of investor interest, I think you.
Have to separate the tariffs from the realities on the ground and the scale and growth of Chinese businesses and the demand.
Of Chinese consumers.
So, if anything, the tariffs are the direct result of the success of Chinese companies. If I were the Biden administration, I'd also be looking to bolster American auto industry support, if that's domestic subsidies in the United States or hitting hard on Chinese exports because because they're falling behind, the Americans simply don't have that kind of vertical integration that the Chinese evs and the kind of the case study
that we're talking about have. And so the net result of all that is I think that that actually belies a really strong Chinese market a significant threat to incumbent interests across a lot of the key verticals. One would say that, for instance, a lot of the pushback against the likes of Tencent or TikTok is again driven by that by you know, the success it's had against incumbents
like Meta or Snap or others. So I wouldn't look too too deeply into tariffs to explain the challenges facing the Chinese market, only that they might ultimately scare away some investors who see that type of headline risk.
Then, is that the way that this is presented in Chinese media? Is it the way that that you view it within China? That these tariffs and the reaction that lawmakers here in the US have to TikTok parent Byte Dance is the result of success of those companies.
I think they do.
I think they perceived that. I mean, and you know, there was leaked internal audio from you know, the likes of Mark Zuckerberg, who was just simply stunned by the success of TikTok against his platform and even tried to create a replica and named Last So that just absolutely got demolished by it.
And we're going to see this across all verticals.
It's not just electric vehicles, it's not just a social media and short form video. The likes of Shean and Tembu are penetrating deeply into American fast fashion brands, American online incumbents like Amazon, or even offline retailers like a Dollar General, and so I think that necessitates action from the US side to protect those incumbent industries. But it says nothing about the success of those Chinese business where I think are doing very well in their own right.
And China, as you know, builds companies that are built for that digital native population, that next generation of consumers, and that's why the likes of TikTok and Shean are doing so well against their American incumbents, which are more built for folks like us that went through this longer retail online evolution.
So Ben talk to us about the core values alpha Great China Growth. Atf It's got about eight million dollars in total assets. It's up about six percent year to date. So is the idea of the fund and the opportunity that you're betting on Chinese domestic growth and those Chinese companies that sell domestically or is it the Chinese company that sells to the rest of the world.
So we do both.
We see huge continued demand from the Chinese domestic consumer, and so we're investing in that kind of what we'd call kind of down consumption, downgrade and re shoring of domestic behavior. And so that includes domestic brands, so domestic cosmetics brands, domestic quick service restaurants, domestic FMCG brands, but also that includes domestic travel and other things that are
benefiting from people staying home rather than going abroad. Then of course we invest in those cross border players, both that are integrated on the hardware side, like the voids of the world, as well as those that I mentioned previously, the likes of Temu and their parent company, Pinduo Duo, which is doing incredibly well well.
But tell me about okay, so tell me about your cap raise. Your fundraising eight million dollars in assets does seem like a lot of money under management, So talk to me. You know, we talked last time in February. What kind of flow are you getting in terms of assets, because it does feel like investors are pretty tentative still.
So again, you know, our background is on the private side, where we manage over two billion dollars, so certainly fry our standards. This is a small AUM as well. I think it is largely different by American sentiment towards China and particularly global sentiment of folks that would invest in ETFs. And I think we're starting to now see that our etf uh, you know, for one of the months of
this already beat the SMP. It's beating all the other kind of China ETFs since it's since it's launched as well, and so but we've still got to see that kind of investor sentiment toward and towards China. And I think
that's less about geopolitics and more about returns. If I was an investor to day, I would have kept my money closer to home because the Nasdaq and NYC have been ripping, and there's no reason not to continue to keep to do that because all the geopolitical noise is, you know, is irrelevant if the if the if, the
returns are there. And so our belief is that as we're starting to see these markets botton me and you finally saw a lot of that capital was flowing to Japan and else, we're finally coming back into China, coming back into Hong Kong. I think that rising title lift all boats, and then we really like our head to head chances against the other Chinese TF because we're actively managed, and we also try to filter out, you know, geopolitical risk or threats to American national security.
Hey, Ben, China. Carol just mentioned the idea that China, you know, quote unquote uninvestible. It's a question that we've been asking for a couple of years now, since a prominent bank brought it up a few years ago, and even at Milkin this year one of the panels, one of the panelists was asked, I think it was the CEO of Capitol Group was asked, if China is uninvestable
right now? What would you say to somebody who argues with you and says, you know what, given the geopolitical concerns, given the domestic concerns, given what's happening with the government there, I don't believe that China's investible. What would you say to that person?
The numbers would tell you that's not the case, right, So the numbers would tell you that China is growing at about double the pace of the United States. If you're interested to know their emerging markets, let's say Southeast Asia, which you guys mentioned earlier on the program. China is the process of urbanizing people from rural communities and second third tier cities. The first tier cities that urbanization alone and generate a customer base that's two times the size of Indonesia.
Ben, sorry, I want to jump in real quick because we only have thirty seconds left. Does that growth number even matter if the government can intervene at the drop of a hat.
The government had made changes over the last few years that were more to defend against what they believed were antitrust or other monopolistic actions by large Chinese technology companies. But overall, the Chinese government is still very much growth friendly and has now turned all of its attention on improving global investor companies in its public markets.
All right, we're going to leave it there. Hey listen, thanks so much, and again thanks. We know it's three hours there in China, so we appreciate you getting up for us. Ben Harberg, founder and portfolio manager at Core Values Alpha, joining us from Beijing. As we mentioned, the Core Values Alpha Great China Growth ETF about eight million in total assets. It's up about six percent so far here in twenty twenty four.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two PM Eastern not Applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven Thirty's the Jersey's Fun and where You're Headborner.
The Jersey Bounce Well.
New Jersey is known for a lot of things. I think it's fair to say the best tomatoes in the nation is that true.
Horse farms, incredible beaches, great public education in some areas.
Bruce Springsteen, and I was born there the Jersey Shore. I was born there, Bell Labs and a lot of stuff Ferrel Master's home stage.
Yes, indeed.
Our next guest, though, wants to make it known for even more, including the Hall of the East as well as an exemplar for clean energy. We got with us Tim Sullivan, CEO of the New Jersey Economic Development Authority, also known as NJEDA. It's the agency responsible for driving economic growth and development and to create jobs in the Garden State. Tim here in the Bloomberg Interactive at Brokers Studio. Welcome, how are you.
I'm doing great? Thanks much for having me over. Well, thanks for.
Joining us here, And we should say just full disclosure. You actually worked with Mike Bloomberg.
Right four is a better word for it. He was the mayor and I was on the staff. But yeah, it was a great career highlight to be part of the mayor's team.
So from city Hall in New York to Connecticut, then to the state of New Jersey, back.
To my home state. When Governor Murphy became governor, I got elected in late twenty seventeen, I got a chance to come home and work for the home team.
Yeah, so talk to us about not just the biggest challenge when it comes to economic development, but what you see as the biggest opportunity for the state of New Jersey when it comes to economic development.
Yeah, we see Governor Murphy sees huge opportunities in front of us. You mentioned a couple in the intro film and TV for sure, clean Energy and Officer wind Ai and what that means for New Jersey and what that means for the world. Those are three, you know, huge opportunities that we're attacking pretty agressively.
I think it's really interesting. You know, New Jersey has also been known, you know, a big time for the pharmaceutical industry. But I do feel like a reboot is kind of needed and necessary. Tell us how you see it, Give us the backdrop of what's been going on in terms of economic development in New Jersey and kind of what needs to be doing, how you're hoping to change it.
Yeah, one of the big priorities for Governor Murphy's is economic diversification. So you know, farm and life sciences is still a huge calling card for us. We're home to a huge concentration of you know, global headquarters and US headquarters for big multinational farming companies, and we've seen a huge continued surge in that industry. But we want to diversify as well. So film and TV is a great example of that. You know, the motion picture camera was
invented by Thomas Edison in New Jersey. Fort Lee was Hollywood before there was Hollywood. We're trying to win it back and we're not alone in that journey. So Netflix is committed to building a billion dollar production facility in Mammoth County at the Old Fort Mammoth. We just announced plans to see another major facility built in bay Own. There's a bye A developer that's going to build a prouct called eighteen eighty eight Studios. Eighteen eighty eight was
when Thomas Edison invented the motion picture camera. Y, so it's a bit of a nod to our history. And then in the southward of rep by Newark Airport is another product by Lionsgate to develop a world class studio as well. So we're on the cusp of something big.
Joe was just a Newark Airport earlier this morning, so real, Yeah, me too.
It was a little quiet.
It was a little quiet.
There's not a quient when I was there. There's actually a lot of traffic coming into the city when I came in.
Well, it's because everybody was going to work, Yes, exactly, tim. One thing I want to ask, what is taken that I have done. I remember early in my career doing a piece about does it really pay to develop kind of movie entertainment that industry because the tax breaks that are often necessary to bring the business in tell us about the business model there.
Yeah, we see huge upside here. It does absolutely require upfront investment. You know, we have a tax credit program that Governor Murphy brought back, which we think is most
combination of the most competitive and most progressive. So it does things like in awards and rewards, diversity both in front of them behind the camera, but the returns we see on the job side, So you know we're going to see and particularly our incentive program in the sonthing, Governor Murphy's spent a lot of time making sure we're emphasizing is encouraging brick and mortar construction because that's how you're going to get development of facilities that are going
to be full all the time. So Netflix is going to is going to build this billion dollar facility. They're going to keep that thing hum and that means lots of permanent jobs, not in front of the camera.
It's a case of bringing a movie in for six months and then having them gone correct.
Those are permanent careers. And that's not just you know that's in film production, but that's in hair and makeup, that's in craft services, that's in carpentry and electric electrician work and all that overwhelmingly union jobs as well. So we see huge upside there.
How do you make sure that it's not a race to the bottom, because you're competing with not just New York, which is so close and also very well known when it comes to entertainment, you have big stuff happening in Queens and Brooklyn right now when it comes to this type of stuff Silver Cup Studios for example, and then also in Canada, which is just a huge place for
filming movies and TV shows right now. How do you make sure that you know the incentives that you're offering in the long run are actually beneficial rather than taxing New Jersey.
Yeah, Again, the returns we think we're going to see are significant on the job side. So again, the permanent jobs that we hope to see be built and the construction jobs we'll see in the development these facilities as well. We also see an opportunity to take share from other.
Places, but those jobs don't necessarily lead to economic development if nobody comes and uses those studios. Oh sure, yeah, no, we think that's what I mean, Like you're you're competing for every moment there.
Absolutely, But that's why, you know, having a partnership with someone like Netflix who is going to build and develop their own studio and personally going to keep it fill full with their own stuff, and they're you know, they're certainly a partner we're thrilled to be betting on because they're we think they're you know, one of, if not the leaders of the streaming kind of revolution and the winners of the streaming wars and all that. And so
we see huge, huge, permanent job creation opportunities. And then also you know there's you know, we will continue to have to you know, be on our front foot and be competitive on the tax credit side. Our program. One of the things that's important about our program is it's
on the books until twenty thirty nine. So from a predictability perspective, if you're putting on the TV side, if you're a show runner and you hope to do four or five, six, seven, eight, nine, tens seasons, which they're all hoping for, our program will be there for them.
So they so they understand they have till twenty thirty nine that they get those benefits.
Yeah. Absolutely, And it's an important part of our of our marketing.
How quickly do the benefits though, Okay, so there's the benefit outlay, how quickly does the kind of payback come to the state of New Jersey.
PAYDA happens almost right away. It's one of the exciting things about you know, film and TV. You know, you have a movie, even if it is just coming for a couple of months to shoot. You know, there's a movie shooting right now. That's a pretty high profile movie that's shooting all throughout the state. They're they're spending a lot of money. They eat a lot of pizza, They do a lot of dry cleaning. Which movie is this, It's called a Complete Unknown. Timothy Shallon is in it.
It's a Bob Dylan bio.
Yeah, they're also filly in New York.
They film a bit of a New York city. If it's not that we're competitive, but it's more in Jersey than New York.
We're competitive, always competitive.
We're really competitive.
Who really owns the statue?
Let's just like talk to actual liberty. Is a Jersey girl. I know, I know, you can have an emotional argument some other way, but she lives in New Jersey.
You can't see you can't see this, Yes, you can't in favor of it. A Jersey card, I know, but it's like I got, you know, two I'm surrounded by two New.
Jersey people right here.
So and a California guy. Let's talk about alternative energy, renewable renewables coming back from milk and another big theme and a lot of it has to do with artificial intelligence. All the data centers that are going to be needed to do all of that really kind of amped up computing necessary for AI machine learning, if you will, a lot of investments going into the data centers. But tell us what the strategy is for New Jersey.
Well, around energy. You know, our biggest initiative is offshore wind. New Jersey has a huge opportunity and the Governor murphya set the most aggressive target for offshore winded option in America in New Jersey. So we're going to hope to or plan to generate eleven giga wats of power from off of our shores. That's enough to fuel or power every home in most businesses in New Jersey. So it's
a huge incremental energy generation framework. And we're right now net importers for every home and business enough power too. How long does it take until that we hit that goal p Twenty three somewhere in that range the goals twenty thirty five, okay, and so that that's contingent on you know, the development of lots of wind farms over
the next decade or two. Governor Murphy has provided all the resources we think these companies need to build these farms, these wind farms as including things like building import in South Jersey to support the development of it.
What happens if former President Trump wins in November to the state's ambitions when it comes to wind, And here's why I ask our own gender Lui's got a story out today about wind farmers bracing for Trump's next salvo as he visits the New Jersey Shore formn President Trump's vocal disdain for wind farms is another worry for developers who faced high costs and supply chain woes. President Trump
is going FORGM. President Trump is going to hold a rally on the beach in Wildwood, New Jersey this weekend, a state that's become the frontline for fights over the future of offshore wind.
It'd be hard to argue that it will be helpful to the to the wind industry, you know. That being said, I think one of the things that we're encouraged by as we think about the future offshore wind is the is the folks who are investing in Officer Wind are actually the big global energy players. So we have a wind farm that's poised to start construction soon that's backed.
It's called Atlantic shores. It's back, it's half owned by Shell. Right, that is not a fly by night concern, nor is it someone who's it's committed to clean energy.
Yeah, it's got its permits, it's all ready to go.
It has a few more permits to get through that those will hopefully happen this year. And so you know, there's a huge amount of capital that wants to invest in offshore wind, and generally speaking, I think the country has not failed to figure out ways to harness energy that's been out there. This is an industry that's has been through fits and starts. It'll be through go through more fits and starts, but we think the thirty fifty year trajectory of this industry and the sector is too
important Strategically. Again, we're talking about controlling our energy future, not just as a state, but as a country. We're talking about tons of manufacturing jobs, talking about renewable energy and clean energy. There's too many reasons to care about this. So certainly, one of the reasons I think our administration is a big fan of the Biden administration approach on this is that he's all in on wind. You know,
we'll see what happens in November. But it's an industry that has been through challenges, and like any new industry that's capital intensive, regulatorially complex, it's going to go through fits and starts. But we think the long term opportunity for New Jersey, for the Northeast as far down as Virginia and the Carolina is by the way, we're also pursuing offshore wind is too big.
So could be some you know, starts and stops if we see someone else in the White House or a different if a turnover. But having said that, you're saying the long, longer term trends are in place. So even if there's a slow in permitting for wind farms in New Jersey, you're saying tim that longer term, that that's the push you can see it happening.
Yeah.
Again, I think the rationale for energy independence, for the emissions framework, for the job creation and economic development impact, it's too big. There's too many there's too many reasons to like offshore wind to turn our back on it long term. And some of these wind farms that were just approved in New Jersey about six months ago are as far as forty miles off the shore. So unless you have access to the Hubble telescope. You cannot see that from the from the shore.
I'm a sailor and for the first time of off of Long Island sound coming up like on Block Island, like to see them. I really haven't seen them in the past, and it was kind of interesting. I mean, they're they're way off shore and it's kind of interesting.
But they were they spinning.
They were spinning. I didn't get that close. Yeah, you want to get something so from a distance, but it was like, what is that? Then you realize that those are wind farms out there and you're listen. I am full of transparency. I'm all in unclean energy.
Hey.
One thing that I wanted to ask you about, Tim was congestion pricing, because it's a huge topic here in New York City. If you don't if you walk, uh, not too far from here, you'll actually see the infrastructure in place to charge commuters who come from it come into the city in certain parts of it each day. When that program is launched later this year, how do you think about that from a New Jersey economic development perspective?
Because the governor has made no secret about his opposition to it, Does it affect your world at all.
Yeah, I think, you know, those comments mostly the Governor Murphy, who's who's not been shy about his take on this. There's some there's an actively a gation underway that is not a good thing for me to comment on. Yeah, I think it's certainly, you know, it changes the framework of you know, how people think. If it's gets more expensive to go somewhere and do something, it gets harder to do it usually, And so you know, if you're a business in New York City that's thinking about you know,
it's customers, it's suppliers, it's trucks. You know, we think it makes New Jersey all the more attractive. That's interesting, we you know, So I think it's you know, we'll see how this all plays out. But again, I think the Governor has also been clear he does not oppose congestion pricing, you know, in all, in any form. And I think the way this was gone about has met with some concern from from him and from our administration. But you know, he's not a hell no on all
and congestion pricing. But I think the way this has been proposed, you know, we think is detrimental to New Jersey from a health and other perspective, other perspectives. But yeah, I think it's certainly. I don't think it's going to be a revolutionary impact on the economic development framework. But then the competition between the usually friendly competition between you know, New York and New Jersey and the tri state area.
But it's it's certainly probably it's a it's a pebble on the stone on the scale on our side.
We started, you know, and we talked a little bit about you know, healthcare, pharmaceuticals. It's been such a backbone I feel like, or an important part uh in terms of New Jersey when it comes to business development. What's new on that front and what are you seeing, whether it's AI again coming back from Milkin and people talking about artificial intelligence, how it impacts things like drug development. So I'm just curious what you're seeing on that front.
The arm momentum in life sciences is really good. Probably the best example of that is ken View, who just spin off, split spin off, was spun off or split.
Off Friday, you can say anything.
They just were separated out what the right word is from Johnson and Johnson. But they did a global search where they're gonna put their headquarters. They chose Summit, New Jersey. We just did a groundbreaking for that new facility that they're going to develop out there. So that's a good example of momentum. So band Aids and Listerine and isn't going anywhere from New Jersey. And then we've also seen you know, companies like ASI out of Japan have made
big commitments to New Jersey. Gilead out of the West Coast is built its East Coast headquarters in New Jersey. So not just the you know Merks and Jay and Jays of the world, which we're thrilled to have continue to be headquartered in Jersey, but lots of new companies choosing New Jersey.
Okay, you know where I'm going to go. We got thirty thirty forty seconds. So Tim, you're a tax payer in New Jersey. I'm a tax payer in New Jersey. Any of these that are they going to pay for themselves or am I going to be looking at paying more taxes?
Yeah? You know, we think the one of the keys I think to our long term success in the state is growing in the pie and grow You're having more revenue you know coming into the state, more jobs, more employment, so that you know, it only provides either the resources to invest in things we need to invest in, because we've we're still catching up from a period of under
investment before Governor Murphy was governors and things. Yeah, and things like infrastructure in our schools and our pension system. We catch up to do their on the fiscal side, so I think we'll continue to plow forward on growing as best we can.
Are the taxes high? Are the taxes high?
They have come pretty high for me, Tim, this was great. We really covered a lot. Thank you so much. It was interesting. Tim Sullivan, chief Executive Officer of the New Jersey Economic Development Authority, joining us here in our Bloomberg Interactive Brokers studio. You are listening in watching Bloomberg Business Week. I'm Carol Masser along with Tim Stanevik, and this is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Can't just live weekday afternoons from two to five pm Eastern Listen on Apple car Play and Androut Auto with a Bloomberg Business act or watch us live on YouTube.
Oh that's right. Everybody check the calendar man, because Mother's Day this weekend.
I know it's no I didn't forget. I'm actually traveling this weekend, are you?
Yeah?
Oh yeah, away?
Yeah, I'm going away.
I'm going to Are you going to spend time with Mom? No, I'm not. Are you actually going to go spend time.
With my wife? No, I'm not.
It's bad.
It's very, very bad. Christina. We got to help him out.
Actually, I was actually, as I was burying this segment, I was like, is it too late for me to call Christina and get some flowers?
Shift to Brooklyn.
I don't know, I don't think it all right.
Christina Stemble is back with us. She's found her in ceo farm Girl Flowers. She joins us from it looks like gorgeous where you are, gig Harbor, Washington, just outside of Seattle. So good to have you back with us. It is the super Bowl of the flower industry. Tell us how important. Just remind our folks how important this day is for you guys.
Yes, thanks for having me back. Carroll and Tim and Tim we got to talk after this. No, Mom, we did just all out fifteen minutes ago. I might build to make an exception, but this is our definitely our super Bowl. We like to call it of our year. We do more revenue and more profit in this month than any other month of the year by a significant amount. You know, I think I talked about Valentine's Day with you. We do Mother's Days, you know, even more important than
Valentine's Day, which really surprises people. We do usually double the revenue, but significantly somemost three to four times more in profit than Valentine's Day because flowers are you know, better priced around Mother's Day because it's not winter and there's less storms for redeliveries and things like that.
You less to get the flowers, But the prices are the same for consumers or is there a little bit of wiggle room.
Yeah, there's a little wiggle room. We can get more varieties now so we can offer different price points. So some flowers like pa andies are still super high priced. We pay usually double before Mother's Day what we'll pay after Mother's Day for the same stems one week makes a huge difference, so buying demand right at its best.
But we can hear.
Pa andies your favorite flower totally.
Yeah night. We pulled our consumers. Ninety two percent of them say peonies are their favorite flowers.
I used to grow them, my mom, my grandmother, Like, they're just incredible flowers. I have a statistic for everybody. Consumers are expected to spend three point two billion dollars in flowers, while spending on greeting cards is expected to reach one point one billion. More money is spent from moms on Mother's Day than dad's on Father's Day. That's a lot.
Sounds good to me, Christina.
Fine, what we love is you kind of make the sausage for us a little bit, you know, or tell us what's involved in the flower business. It's not so easy. It looks so beautiful you get flowers. You're like, that was easy. It's not as easy though.
No.
Parish ability is so hard. I wish I would have known that back in twenty ten when I started farm Girl. It's so much harder. I wish, you know. I constantly talk about I wish we sold sweaters, so we could even put them on sale in June, but we can't. We have to We have to guess a full year in advance on what consumer spending is going to be the next year. And as you're just talking about, you know, the markets right now, we have no idea what environmental
conditions we'll be in coming into play. You know, this year, most strict consumer businesses are really hurting, and so we're you know trying to figure out like what should our goal be, what should our productions be, But we have to do that so far in advance. So for this year, we were playing it safe. And thankfully, because we're bootstrapped, we can do that. We don't have to show you know, huge growth numbers for our investors and board. So I'm
so great, so thankful and grateful for that. So we were just you know, I was gonna went into this holiday just saying, if we have a flat holiday, I said this to my team, if we have flat holiday, I'm gonna count that as successful. And we did have a better holiday than last year. So we're definitely counting our blessings right now. But it is such a risk.
We always like we're standing at like a craps table rolling dice when we're putting in those pa andy orders, you know, nine months in advance sometimes to you know, we don't know how mother nature is going to react. This year actually was the first year and twenty years that we had domestic paeonies in time for Mother's Day.
Why is that just because of the warm weather we've had.
Yes, Yeah, because with the warm weather it made them pop earlier. Usually they come on with the week after Mother's Day. But that definitely threw wrenching things because domestic peenies are better than shipping them in from Europe and other locations, but we'd already placed orders further away. So then it's trying to figure out, like, how can we also incorporate some domestic penies and since we can get them this year, very last minutes, how do.
You compete with the bigger players on this Christina? Because let's say, you know, it's is one hundred Flowers having the same challenges that you have for example, or are they able to mitigate it more because of their scale.
Both.
I think they have some of the same challenges that are you know, mother nature related or shipping partner related. We you know, I talked to our competitors often, and you know, we complain about, you know, the shipping delays and things like that that we're all trying to figure out last minute together, you know, Like you know, for our companies, that's we're not unique in that way. They
one one hundred Flowers also has those same issues. You know, they don't have their own planes delivering other flowers, but they do have better you know, buying power than us, so I'm sure their flower costs are significantly cheaper than us, and they get probably first right refusal on a lot of them as well. So we don't, you know, we'll never be able to compete unless we're you know, doing
hundreds and hundreds of millions of dollars. I think they did two point one six billion company wide last year, so we're not that scale, but with some of the same issues and some different ones well, And I also do.
Think about, you know, I'm curious. I want to get your take on how the consumer's doing because I do think when it's something like Mother's Day, like we don't scamp typically, but I do wonder. But sometimes there are years that are tougher and you're like, I'm still going to do something, but maybe not as much. So give us an idea of what you're seeing in consumer buying trends for the holiday, maybe more broadly as well.
Yeah, we have found over many years of research on this, that people spend more on their lovers than their mothers, so they actually spend way more on Valentine's Day than they do Mother's Day, maybe because they're buying for two of them. You know, they might buying for a mother in law and a mother. So we typically dower some lower price point options for Mother's Day more so than we do for Valentine's Day. And we thought that would
be the case this this holiday. We you know, thought that people would be going because the economic climate right now. We thought that lower priced options would be the first to go. But we were wrong that way. We had a lot more people spending more than we anticipated this holiday. That was great but also bad because we didn't plan for that. So we had a lot more smaller options that were available on our site later, while the bigger ones sold out quickly.
Wow, that's really interesting to hear.
Yeah, right, because right if something changes last minute, you've already had your orders in, Right, you can't just like call up I don't know Costco and say hey I need right Like, that's not how it works in your business.
Yeah, we're very flexible. So that's something that we are different than the big guys. We're more adaptable than any other company. I think at our scale in Flowers, we're told that by our partners, and we all use kind of the same partners.
We can we change things quickly.
Well, sometimes, if you know, one of our partners will cause one of our farms or costs and say that they have, you know, a huge flush of something, will be like, Okay, no problem, we'll take a photo of it that day with our cell phone, we'll put it on the site, and we'll be selling it by tomorrow. Where our bigger competitors plan way further out than we do and can't kind of adapt to that. So I really like that about our company. We try to stay agile that way.
Hey, Christina, one of the things that we love just about talking to you is how candid you are when it comes to not just the successes that you've had, but also the challenges that you had, especially through COVID and what you saw post COVID as well. So just give us an update on how the company is doing and how you guys are doing.
Nice.
Yeah, yeah, I just tell you straight.
I think it's our most saying that they consider a flat year success.
You know, I went into this year with our team knowing it was going to be a hard year, and it has been. It's definitely been more challenging, you know, so I kept our expectations really low, like flat, will be happy if we do flat to last year. Really focus on profitability. Everybody's kind of gotten into the game of, you know, having to over discount everything and then they lose money. And a lot of our competitors I think might be in that boat a little bit, spending too
much on marketing, marketing dollars. Oh, it's cost so much to acquire a customer now. So we've just decided, like I said earlier, we can do this because I don't have to report into a board or investors that we're just going to stay small. If we need to stay flat to last year. We'll even go down if we need to from last year, although thankfully we haven't had to do that yet this year. But really focus on making that bottom line on the spreadsheet black so we
can stay in this long long term. So you know, if we need to be smaller for the next you know, two or three years until the economy comes back, we can do that and make it through.
All right. Do I have to send you flowers soon because you're gonna maybe sell or you just still still going alone?
Probably still going alone. I did think. You know, I never thought i'd be fourteen years in still talking flower business because I thought I would have sold my ten to raise your ten.
Yeah.
Yeah, but I've changed my mindset a lot. I think that that we don't talk enough about, you know, being a long term sustainable business and that's a success, and so changed my mindset to be that we can provide great jobs, tax dollars, things like that.
I got to tell you, I did an interview with the administrator of the Small Business Administration is about Guzman at Milkin, and we just one of the big things we talked about was viability of small businesses. It's tough. So fourteen years in counting, you should feel pretty good about that. So always great to check in with you. Happy Mother's Day or ahead of Happy Mother's Day. Yeah, good stuff, Christina, Thank you so much. Christina Stanbele, founder
and CEO farm Girl Flowers. I always like talking with Yeah.
And reminder everybody get the Mother's day stuff done.
Reminder then later.
Brother journal. How about you let me drive?
Oh no, no, no, no, who's.
Honey?
Please gravels.
Let's make I want to drive.
It's a good question.
Good this is the drive to the globe. Do think well by around on Bluemberg.
Radio, right, TikTok everybody, not like Tim and I are counting or anything. But we've got about eighteen wait, eighteen eighteen minutes left till we wrap up the trading day.
That's maths for you.
That it's been a packed week, a good week. Feel like we've really picked up on some trends. Whether it's in the technology world, they're the investment world. So let's get to it because it's a great backdrop for us to dig into it all. With Alan Zaffron, founding partner and co CEO at i EQ Capital, joining us from Foster City, California, just south of San Francisco, we were just there.
Yeah.
We really hot day yesterday, Alan, kind of unseasonably warm in your neck of the woods. How is it today?
Loving it today? Sunny and warm? It's it's fantastic.
Couldn't be better.
Why we pay the high taxes out here?
Yeah, I was gonna say, sounds like a day that ends in Why in California? Carol pays high taxes in New Jersey but doesn't have the same weather.
That's weird.
Yeah, it's a little kicky January February.
Still kind of now a month that's months that end and why yeah.
All right?
So what do you make of the month of May? Here we are it used to be what sell and may go away? And maybe I don't know, it hasn't happened yet, but we are seeing some upward momentum on the equity side of things here in May. Does it stick for you?
Alan it sticks for me as long as interest rates don't get too high. And I don't know where the trigger is. Maybe it's a ten year yield over five percent, But I think what's happened it's fascinating this year. Everyone's been worried about the Fed's getting cut rates, cut rates, so it won't cut rates. Oh my gosh, I have
to reprice my models. But stocks keep going up anyway, And I think the lesson learned is the economy isn't as interest rates sensitive as it used to be, and there was so much money thrown at corporations and individuals through COVID that it has a lot of pent up cash on the sidelines, ready to buy any asset at any drop. And that's I think been the story, and I think it's going to stick through the balance of
this year. Unless we get rate shocks meaningfully higher, I think that we are going to keep working this way, grinding our way higher.
All right, so meaningful higher, like you said, up above five percent? I think you said on the ten year. Was that what you said, because it's interesting coming back from Milk, and most folks were like, you know, if we go up a little bit, if we go down a little bit in terms of what the Fed does, it's really not going to impact my investment decision. So it has to be something more than that in your view.
Well, it does. Let's just take the economy. Okay, on an in interest rate sensitivity front, any company or individual who could refinance their balance sheet did when rates were really low through COVID. So as a fact, forty percent of homeowners in America do not have a mortgage, and ninety five percent of the mortgages are thirty year fixed. So the notion that rates going up is going to impair people's ability to pay their mortgage is kind of flawed.
And a lot of the purchases today are software, it's intangibles, it's not it's not capital leases tied to equipment. So this notion that interest rates are driving behavior. It's not nearly the way it used to be long ago. And then you take into account everybody has already refinanced, and there's still a tremendous amount of money sitting in CDs and treasury bills and money market funds, all sitting and
waiting on acid drops to make purchases of assets. So no matter where you're talking, stocks, bonds, even real estate buyers are ready to buy when and if they fill, the prices are at attractive points of purchase. And that's why I think we're in this funny situation that we can watch the FED all we want. I don't know if it matters that.
Much, Heyll. And one thing I wanted to talk to you about that was really interesting in the notes that you sent to us ahead of time. Thanks as always for doing that, is you're bullish when it comes to private equity right now, and I think that's a little bit contrarian, especially when it comes to some of the articles that we've seen about private equity and a higher
rate environment. We have a Bloomberg opinion piece. It's a video, it's great by a near Casar that's just out this week, and it's all about the concerns of private equity and a high rate environment, the idea that there are many deals to be had, there aren't many businesses to be bought. The leverage that was typically used in a low interest rate environment is so much more difficult to do nowadays. Why do you think private equity is an opportunity for you and your clients?
Well, of course it begins on your starting point. But now if you're in a world where the interest rates at which we're starting to place valuations on businesses are higher, that means the discount rate which I used to discount future cash flows and pushing it back to a present price creates the purchase price to be more attractive or lower.
And so I think that a couple with the fact that bank lendings less available than it used to be, the demise of First Republic Banks, Silicon Valley Bank, and others, has it made it more difficult for business owners to get conventional borrowing. I think there are opportunities for craftful individuals that work at private cotyfirms who can actually source access to buying ownership stakes in private companies for the
right price. There are some incredibly attractive businesses and in the absence of conventional bank lending, their equity isn't quite as expensive role as to debt as at once was. So I think it's an interesting time to be a buyer of private companies.
Well, that's what you know. It's interesting At MILK and we talked about that the buyers and sellers in terms of price are coming much closer together, and that that's been a big disconnect and kind of really the sellers are having a reality check of like, Okay, here's what we really need to do to maybe have some kind of deal actually happen. Having said that, when I think about the broader investing landscape, why is kind of focusing on the PE area so important to you? Is it
because you think there's going to be IPOs? Like why more broadly, why is that so important in terms of the broader investment landscape.
Well, I just think in the big picture, private equity is one of many different arrays in which to be invested.
So you should always be incredibly well diversified cash bond stocks publicly, let alone potentially if you're qualified purchaser or an a credited investor, getting some private equity exposure or other forms of risk public equities have historically generated higher returns than public equities, but it's come along with greater volatility, and there's a greater degree of risk that you end up in the right private equity fund. So you've got
to be careful about that. But if you think you have access to the right manager and you have a long enough time frame for investment horizon, now it's not a bad time to be beginning to look at that as a potential asset class. To put a small question for campies.
Credit investors, yeah exactly, although they all pe private credit as well, would love to kind of maybe even open it up more widely.
I think you talked a little bit about that at Milk Yeah, yeah, and we talked about that before, Carolynton.
We actually think private credit is a very attractive asset class because private credit is generally priced as a floating rate plus a spread. So today's floating rate, right, the structured overnight finance rate is where the Fed funds basically is at five and a half percent. If you throw another seven percent on top of that in order to get Alan making loans at twelve percent.
What do you make of the kind of wall of debt corporate debt that's going to be facing the markets probably starting you know, obviously next year and then out into twenty twenty six and so on and so forth. The implications of that, especially as companies private equity or other you know, potentially have to refinance that debt at much higher rates, do you anticipate a wave of defaults? And just got about thirty seconds left here.
I think we'll have a slightly elevated amount of the faults. But I think managers that are proven, were well in advance could identify the companies that have those debt maturities that they'll have to be refinanced. And if you're sitting things like private credit, which are floating rate short term loans, they don't face the debt problems that fixed rate corporate borrowers faced.
All right, kind of leave it on that note, Hey, listen, thank you so much. Alan really appreci Allen Zaffron, founding partner and co CEO at IQ Capital joining us of course there from Foster City, California, said Foster It sounds pretty gorgeous there, California.
This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from two to five pm Eastern on Bloomberg dot Com, the iHeartRadio app tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal