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Okay, we've been all over this as the process has progressed over the past month or so. Now we know Carol open Ai completed a deal to raise six point six billion dollars in new funding. It gives the company a vale evaluation of one hundred and fifty seven billion dollars, and the idea is that the funding will help bolster their efforts to be the world's leading jen Ai company, bringing the leading technology with it.
General Motors has a market kappa fifty billion. I know it's that appens to Apple's. But I like to just perspect out there the public once private, that's true. I know it's just kind of wild, all right, So is it a short? Is the sun at the top? We continue to have so many questions, So back with us. As Bloomberg News AI reporter Rachel Mets, She's out there in our san Francisco Bureau. Rachel. First of all, let's walk everybody through this global funding raise. Who how much?
How impressive is this funding round in open ai? It sounds rather impressive.
It is rather impressive. I mean, this is a ton of money, and there are a bunch of people in firms involved, including Thrive Capital. You have Nvidio, which also makes the chips that are very very important to this kind of work. I believe Coastal a Ventures as part of it, as well a whole bunch of other players besides, And I think what's so interesting is that, well like the size of it, of the amount of money they're getting, the size of their valuation, but also what they're doing
with this money. They have to raise this kind of money if they want to keep making the kind of AI software that they're making, because it costs gobs of money just to make this stuff.
Where do where are the costs? I mean, this is all in video chips that they're spending the money on. Is it that the engineers you can do this stuff are paid upwards of a million dollars a year? Rachel? Is it the server costs?
Yes? Yes?
And yes? What am I missing?
Is it?
Why Jensen Wong is saying, what is it everything is awesome or what was the wordy? I forget what he said anyway, anyway.
Said demand is insane.
Insane.
That's it, man, is insane. Okay, No, I mean okay, So, like, think about it this way. If you want to train a state of the art AI model, like like a large language model right now, you're going to spend easily hundreds of millions of dollars to do that. Right, So let's assume you want to do that a couple times. Let's assume you know you're happy with two of the
out of the three. Let's say you've done three. I mean that is, you know, that's easily more than a billion dollars right there, right, And then, as you mentioned, you've got all these other costs, I mean staff, I'm not even sure. I would love to see a breakdown if we can do that at some point of like staff costs might not even be you know, that's not even going to rate, right, even if you're paying somebody a million bucks. That's just like pocket change.
Well, this is what you know, we have this question not my pocket change. To be fair, tim and on our list of questions It's like, we're thinking transparency of this business. And I understand it's not public yet so it doesn't have to report things, But how many specifics
this is your world, like your expertise. I am curious how many specifics are you able to get access to or an understanding of when it comes to the business of open AI in terms of users chat GPT, Like, what do we know really that might justify one hundred and fifty seven billion dollar valuation.
Well, we do know that they are bringing in revenue. This has come from some reports. This has also come from information that we have learned. They also have put out some stats. Every once in a while, they'll put out a number or an updated you know, an updated number. We know that as of now, there are I think it was two hundred and fifteen million weekly chat cheept users if I remember the stat correctly. When they said that they're funning round clothes the other day, they also
mentioned that, so we know that. We also know from a recent report we had that a million. They hit the mark of a million paying business customers for chat DBT recently, and that would be across I think it's three different businesses there, sorry, three different products they have. One is like an educational one, and then two are different business products that they saw. So they are bringing in money. It's just you know, you've got to bring in lots and lots and lots of money if you
want to grow this kind of business. So the valuation and the amount of money that they raised, it all, I feel think it all makes sense in a sense. But it is not lost on me that these are all very large numbers.
If you could sit down with the management team and they said, all right, Rachel, we know you want to know more, but we can only give you one statistic to tell you like kind of how we're doing. What might it be? What would you ask or what would you want to know?
Oh my gosh, sorry that is you're putting on.
I know, but you're so smart.
No, I mean, but the things that I'm interested in probably probably might not interest other people. But I mean, I guess I would be curious to know just how has usage of chat GPT changed over time or what the churn is, you know, like how as of now, like people that have been paying to use the service, how many are sticking with it, how long are they sticking with it? That kind of thing. Because I don't have the best sense of how people are using it over time and if they find it useful over time.
Right.
You do wonder if somebody uses it and they're like, ey, this isn't for me and they stop using it, Right, That's where churn could be exactly so telling.
It's also not the only game in town. There's Anthropic out there. I mentioned perplexity. These are not necessarily apples apples comparisons. But who would you say is the biggest competitor to open ai?
Oh?
In my mind, I often think of Anthropic. Some of that is probably because it was started by people who left open ai and has since been joined by a bunch of other people from open Ai, but has always been focused on I mean, they've been very public about their focus on safety, and they are much more geared toward businesses from the get go, Like they are not concerned with doing some of the bells and whistles that you would see on mark consumer facing products, like for instance,
they don't have an image generator, and they have said this is because their clients don't really want that or don't really need that, you know they do, so they are very like methodical about how they're rolling out features, and they seem to focus very firmly on what business users want, not thinking too much about consumers for the most part.
Hey, Rachel, you went through the funding round led by Thrive Capital, which is a venture capital headed by Josh Kushner, brother of Jared. They put in one point three billion. Microsoft, which is open AI's largest back are put in another seven hundred and fifteen right on top of thirteen billion. The role of Microsoft, how much, say, do they have at this company? I think we've talked about this before, but it continues to be like kind of top of mind for me.
Yeah, I mean, I think right now, that's definitely that's definitely a question mark. The company was going to have a board observer seat, and that was that person is not actually doing that role now. It was something that we had learned was happening, and now it sounds like it's not happening. So I think it's a little bit unclear since it is still not a publicly traded company, what role the company has.
I also think do you think or do you think it's interesting for the companies that maybe didn't invest, like a little known company called Apple, Like, does that surprise you at all or no.
I mean, nothing surprises me at this point because everything is weird. But it wouldn't shock me if Apple has other plans. You know, potentially they are already enmeshed with open Ai. They have this deal related to chat GPT, so who knows. I would definitely keep an eye on them and see are they planning to invest employment in the future, all on Microsoft or in some other way. Right now, I think it's still very TBD. I wouldn't say that they're not planning to invest, because we just don't know.
Yeah, would you say, Rachel that Microsoft, even though they're an investor of the tune of more than ten billion dollars in open ai, they also compete with open ai? Is that fair to say?
Sorry, say that one more time?
Was it fair to say that Microsoft also competes with open ai even though they're an investor in open Ai?
Right, And it's been like that the whole time, Like since they invested. I feel like it stood out a little bit more to me, like a year or so ago, and now it feels like maybe they're a little more complimentary. But honestly, that's more that's more vibeespased in my mind, but they definitely are a competitor.
Are they a competitor in the set? Like are their own internal external tools? Are they powered by open ai the same way that Apple's tools are powered by or will be powered by open Ai? Are Microsoft's tools powered by open Ai? Are they? Are they separate? Distinct?
I think it depends. I think it really depends on the products. So you kind of have to have to look at at the different ones sort of break it down.
Hey, one other thing that we need to get into, and this is that an idea of I don't know, open ai maybe growing up a little bit and trying to figure out what its corporate structure or structure is going forward. And they've talked about right moving from a nonprofit to a for profit model, I know in your story and the team story talk about some of the
legal hurdles to doing that. Should we assume do you assume as you watch kind of the evolution of open ai in the last almost two years now or so, say that that's going to be it's going to be a profit a for profit company, that's where it's going.
I mean, one thing that we know is that the company is not afraid to change the structure, right, They already did that once. I believe it was in twenty nineteen when they created this really complicated structure that they have to this day that has an end to you within it that can bring in a profit. So I think based on that, we know that they may be
willing to do that in the future. I think there's still a lot of questions about, like, could converting from what they are now to a public benefit corp, which is what we were hearing from our sources that they would want to convert to. Might that lead to a giant tax liability that that's a big unanswered question to me, because it's potentially possible that something like that, if it was many, many, many billions of dollars, could make it untenable to do that. So it's gonna it's a little
it's a little TVD right now. We're going to have to do some more reporting and stay tuned.
I think also TVD is is what an exit looks like for the investors of this company. Is anyone talking about an IPO yet at this point? Is it too early to be talking about that because that seems like the only exit here.
It makes like it makes sense, right and We've seen other companies take a similar path, where like they get to this point and then the next step is that. To my knowledge, I haven't heard of anybody talking about it. However, definitely seeing investors increasingly talking about it. I mean, you know, they're not investing in this company for fun, right, they want to return at some point. So I think I'm pretty sure.
That's pretty sure. Hey, listen, you have a great deep dive that hit the Bloomberg terminal just about two hours ago, and it's entitled or at least the headline on the story open ayes Sam Altman concentrates power on his path to one hundred and fifty seven billion dollar valuation. Safe to say he is in the driver's seat, Sam Altman, despite being kicked out at one point, just you know what in the past year? Was it earlier this year?
It was like crazy, He's in the driver's seat and just got about twenty five thirty seconds here.
Yes, I think that that is absolutely what's happening there. It was really instructive to spend the last few weeks looking back at our previous reporting, look it back at, looking back at the company's history, and also doing some fresh reporting and just kind of taking a broader look because usually I'm stuck in the weeds with these stories on you know, what's been happening and how did we
get to this point, Where did we start? Where were we in the middle, And though in particular since he was brought back last year, a lot has changed and he is much more powerful now than most.
It's a great story, and as you say, the open AI of today bears a little resemblance to its earlier self, so I highly recommend it. We'll put it out on Twitter. You get interrupted because of folks like us, but we so appreciate it, of course. Rachel Mists, our AI reporter Here at Bloomberg.
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 Bright Auto with a Bloomberg Business app, or watch us live on YouTube.
Well, we talked earlier about this morning to you have sweetly jobless claims being consistent with low layoffs. Mike McKee joined us too to talk about some of the other data points that maybe questioned a little bit about some of the strength that we are seeing in the job market. We do get another read tomorrow morning on the monthly job picture and on the labor front. We also heard from a big player when it comes to being an
employer of a lot of workers. We're talking about Amazon dot Com today earlier as it kind of does around this time of year, earlier, talking about what it will need for the all important and busy holiday shopping season.
Yeah, Amazon's going to bring about two hundred and fifty thousand seasonal, part time in full time employees on for the US holiday shopping rush. It's unchanged from last year. It's an indication that the company expects steady demand in its biggest market. Carol, I will say as of June thirtieth of this year, they had one point five three two million employees.
As well have roles the employee a lot. All right, let's head to Atlanta and to Sandy Gordon. She's Amazon's vice president of Global Operations, Employee Experience and Relations. Sandy, great to have you here on Bloomberg Radio and Television. Tell us a little bit about how you guys determined demand for the year, how you make these projections, and maybe what your needs this year. Tell you a little bit about the market any economic environment.
Yeah, Carolyn, Tim, it's nice to be with you all today, and thank you for taking the time. You know, this time, this is the time of the year when we began preparing for what we do expect to be a busy
holiday season. And as you stated, that preparation includes US hiring for two hundred and fifty thousand full time and part time seasonal roles across our customer fulfillment and transportation network in the US, and this is a diverse range of roles for applicants of all backgrounds and experience levels. We obviously take a look at what we project as
our customer demand. We watch how we're performing in the year leading into the holiday and that helps us to identify the volume of employees that we'll need, the number of employees that we'll need to meet our customers' expectations. And so we are really excited and ready to welcome back so many of our repeat seasonal customers, I mean employees, and we're happy to welcome new.
And customers and customers. That's fair.
Oh, hey, absolutely will say that, of.
Which we all we all can certainly say yep, Amazon customer and certainly use it. Hey, Sandy though, what is what you're seeing in your expectations for what you need for the holiday season? Tell you about how the economy is doing. As you know, we're Bloomberg. We talk a lot about soft landing hard landing. What the outlook is. Do we miss a recession? How would you describe it? Based on your hiring needs and what you guys are expecting for the business come the holiday season.
I think we're projecting, you know, what we're expecting, projecting expected holiday growth in our customer demand, and I don't think we expect there to be anything less than that. I heard you at the opening say we're hiring similar to what we hired last year, and that is true, but that is what we The additional two hundred and fifty thousand compliments are already existing more than one million
Amazon employees. And each year we get smarter in the way that we do business and projecting what our customers will want to purchase and making sure that those items are close to them so that we're able to meet the the commitment to get it there quickly. And so I think just through our typical behaviors of continuing to improve the way we operate, we're able to do more with our two hundred and fifty thousand additional seasonal employees.
It's not too early to be talking about this. I kind of said that yesterday and we spoke to Ali Furman over at PwC. She's Consumer Markets industry leader, and she shared with us with us some data about how consumers are projected to spend a record high of one thousand and six and thirty eight dollars per shopper this holiday season. It's up seven percent over last year, but it's lower than the fifteen percent increase that we saw
the prior year. In terms of hiring your seasonal employees, that you're hiring this year is unchanged compared to last year. What can you tell us about what that reflects when it comes to demand.
I think it not much. For it as it reflects to demand is more so the fact that we are continuing to find ways to deliver smartly for our customers, and in doing so, you know, we have been spending a lot of time making sure that we can anticipate our customers needs and ensure that the inventory is correctly
placed so that it can get to them quickly. And we'll be able to do that with our employees, the two hundred and fifty thousand that we're adding to our already more than one million compliments.
So, Sandy, in other words, it's gotten more efficient just in the last year, you've been able to find efficiencies. Can you tell us what those efficiencies are or how much more efficient you've been able to become just in a short time.
Yeah, I think what we could say is, you know, we're always a culture that is figuring out how we
can do more and continuously improving. And our ability to deliver fast and even faster is rooted in structural changes like placing us I satic thoor, like placing items as close to customers as possible, moving from a national to a regional network and thus reducing the touch points and transportation distances for deliveries, and so with that we are able to deliver faster and meet our customers' expectations with the projected headcount that we're identifying.
Hey, one of the other things that we were thinking about when we looked at the number, standy, We're curious if the base of full time logistics workers, did that base increase year over year in a way that makes the number that you guys are needing to hire for holidays being steady misleading. In other words, your full time logistics workers have been increasing ahead of this, and so maybe that explains why the numbers consistent.
Our full time and our part time employee numbers, they can fluctuate throughout the year, but the seasonal The value of bringing our seasonal employees on is that they allow us to ensure we're able to deliver for our customers while aiding our permanent employees in being able to maintain their flexibility with their schedules so they're able to spend
time with their families around the holidays. And so it's why we this This program has been so popular for us, not only with our permanent employees, but also with our seasonal employees. It's why we see so many people returning because there is flexibility in it and it is an opportunity to earn a good weight with a work schedule that aligns with whatever's going on in their personal life.
Hey, one of the other things, listen, We've got to ask you, Sandy. In a week where you know we've got East Coast and Gulf Coast ports workers on strike, there's been a lot of activity over the last couple of years. When it comes to union organizing, how hot is the temperature? How would you describe it? When it comes to labor organizing. You guys, you know are among you know certainly some of the companies that you know, these issues have come up against.
Yeah, harol. We yeah. We respect our employees' rights to voice their opinions and encourage them to share their experiences
in the workplace. And we have a culture at Amazon that respects and values each of our team members as individuals, and we favor each of our team members having their unique voice heard working directly with our team The fact is that Amazon offers competitive pay, health benefits on day one, opportunities for career growth, and engaging safe work experiences, and working directly with our employees, you know, we can look for ways to continuously improve. And it's in fact, you know,
working with our employees. We we know that wages are a very important part of what makes you know, an employee satisfied to work at a company, and it's such as part of the reason we have an annual wage review, a wage and benefit review, and just a few weeks ago, we announced that we're making a two point two billion dollar investment in employee compensations and benefits for our fulfillment and exportation employees in the US.
All right, good to leave it on that note. So glad we could get some time with you and really give us a window into what you guys are doing, especially for the upcoming holiday season. Sandy Gordon, VP of Global Operations, Employee and Experience Relations at Amazon.
You're listening to the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Applecar Play and Android Auto with the Bloomberg Business and you can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa Play Bloomberg eleven thirty our own Amy or girl. Yeah.
She covers IPOs here at Bloomberg. She reminded us in a story this week that overall, usipos continue along a steady path to recovery. Thirty three and a half billion dollars have been raised so far this year. It's nearly fifty three percent more than the volume for the same period in twenty twenty three. Data compiled by Bloomberg show Yes, However, tech IPOs are lagging the agreea amount raised by tech IPOs so far this year amounted a six point seven billion.
It's lower than the eight point three billion for the same period last year. This also according to Bloomberg Data.
All right, so let's get into the IPO landscape for more on that. We bring back with us here on Bloomberg Business Week. Rachel Gearing, she's ey America's IPO leader and she joins us I believe from Tennessee. So how are oh, Nashville? Yeah, you are Dashville, Tennesseekause are both right? Check Jack? How are you? And how would you describe the IPO market right now?
Well?
I'm doing great, Thanks for having me. IPO market, as you mentioned, I think it's on a healthy recovery yet study so we're not in that kind of sharp hockey stick that everyone is looking for, but that slow recovery with a lot of optimism out there, just navigating through the selection cycle, some other geopolitical tensions, but optimistic for twenty twenty five.
Is it really geopolitics, the market environment, politics that's holding it back? Or is it how much is still that there's a fair amount of money, private money maybe out there to keep companies private longer? Like what is is there some other dynamic going on. I'm just curious.
Yeah, No, they're that the private market is certainly you know a lot of that attention is clearly towards AI and so that the private markets have been have been a bit sluggish as well. But ultimately, you know, what's been holding back i pos largely has been the cost
of capital. So now as we're starting to see rates decrease, the macroeconomic you know, factors really improving, right, strong data coming out, so optimistic for the remainder of this year, going into next year, but the first part of this year, and you know, as we saw even last year, just keeping it a sluggish recovery, but a slow study recovery.
Nonetheless, what about when it comes to tech specifically, what are you seeing in terms of tech i pos?
Tech IPOs you know, still leading largely in in volume, but as you mentioned, you know, not at the levels that we're used to seeing in the in the past. Largely that's because what we're seeing right now are large scale companies ipoing. The investors are still favoring the large companies, proven profitable path to profitability, so forth, what you what we need to see to see IPOs the volumes and so forth get back to historical norms. We need to
see more of those growth companies coming to market. That's really where tech plays a role. And yet we need, you know, other factors to come into play. I think as interest rates continue to decrease, that will certainly help.
Okay, that's exactly where I want to go. Do we ever see a return to the IPO market of zero interest rates without zero interest rates?
I think we will. I think we will. It's not happening overnight. But when we look at you know, coming out of the heights of twenty one, we've got you know, twenty three doing better than twenty two. Twenty four is already out passed outpacing full year twenty twenty three. So we're making the right you know, we're in the right trajectory. We need we need some of this, some of the these elements, the rates to continue to come down really to stick.
Yeah.
And it's interesting like if we don't get those kind of some high growth i PO specifically in the tech space, do you then anticipate that it will be a mellower I p O market that we need that as a catalyst, and if we don't get it, it's going to be kind of quiet ish.
We need growth I pos to come back, you know, so largely in tech, but quite frankly across all sectors. But that those growth companies, the environment needs to continue moving in the direction that we're going now. But make that, you know, make that a strong market for growth companies to come to market. Cost of capital needs to decrease, and then we'll see, you know, we'll see IPO volumes continue to increase.
What about the pipeline because it so much of this has to do with private capital and what we saw in the last couple of years in terms of funding for some of these companies. We spend a long time today and yesterday talking about open AI and just how much money.
Do you need open AI to go public? I mean, Rachel, let's just put it out there.
Seriously, how do you watch that?
Yeah, I can't can't speak to open AI and they're they're public, they're going public. But ultimately, a AI is certainly a sector or one that's that's getting a lot of attention, and so frankly is getting a lot of the funding, a lot of VC funding we're seeing pointed towards AI. I think over thirty percent of VC funding this year is directed towards AI in AI related companies, So a lot of attention there, a lot of the
VC private private funding being interested there therefore investing. But what that means then is those companies can stay longer, can stay private for longer? Can you working on that technology? I think there's going to be you know, there's still time for seeing more AI or AI related companies to come public. They need to prove out that technology really have a strong story for a public facing debut.
Yeah, So what do you guys do then in that, you know, in the meantime as you kind of wait for this to happen, I mean, is it a case of companies coming to you, do you guys reach out to try and kind of gauge where people are in the in the IPO process or even the thinking about the iput IPO prices process.
Excuse me, well, the process itself, and that's a that's a great question. The process is not one, you know, one to take lightly and it doesn't happen overnight. It takes thoughtful planning. Really getting your organization public company ready can take you know, anywhere from twelve to twenty four months. So we're encouraged by you know, the pipeline and the shadow pipeline via you know, the companies that we're working
with right now who are planning to go public. Though some of this activity we won't see come to market until twenty twenty five and in some cases even twenty twenty six. It takes a lot of time. It takes you know, again, thoughtful planning to organize you know, the company around getting you know, getting ready for you know,
to be public. Talent. Access to talent is one key element that companies start to look at early and making sure that they have the right people and the processes in place to be ready when the market, when the market opportunity is right for them.
Hey, Rachel. We spoke yesterday to Triago CEO Matt Swain, He's Global CEO, Matt Swain, talking about private equity, and one thing that he mentioned to us was that because of the higher rate environment over the past couple of years, there are a lot of companies out there that are owned by private equity, that are still owned by private equity and they haven't seen that exit that typically would
have seen in a lower rate environment. Are those the types of companies that you think will be going to market or are those going to avoid the public listing process and they'll stay private.
I think we will definitely see more companies that have private equity and investment coming public. Completely agree when I look back at kind of the historical norms, you know, pre twenty nineteen, over a course, generally speaking, you know IPO companies that we're ipoing twenty to thirty percent of those we're private equity backed. That is not what we're seeing.
You know, we're not seeing those levels today. So to your point, the private equity backed companies are staying with PE longer, it will naturally run its course where those companies there needs to be a sale or there will need to be an IPO. So I do do anticipate as the market continues to recover, as valuations, as valuation targets, you know, start to write size and kind of meet each other, we're going to start seeing more E backed companies coming coming to market.
How how difficult though, is it do you think for some of those PE owned companies at this point. We've done some reporting Bloomberg just doing some reporting just you know, it's a tricky environment, right and not being able to exit and maybe having to lower valuations and so on and so forth. What are you hearing? How would you characterize what's going on with private equity portfolio companies right now?
You know, a lot of the companies that we're speaking with, you know, the focus is on managing managing cost. How are how are we how are we investing in our growth strategy in a very smart, you know, scalable manner. So those are those are top of mind, you know
cash flow, you know, forecasting, so forth. Those are those are areas that I see a lot of these companies paying particular attention to, where the focus is making sure that the business is kind of right sized and there's a strong growth story that's being kind of built and building that out in a very compelling manner.
So do you think twenty four will be better than twenty five or twenty five will be better than twenty four?
I would say, sitting here right now, all things you know, sustaining twenty five will be definitely better than twenty.
Four, regardless of who's president's regardless of who's president.
Okay, yeah, yeah, that's my current that's today's prediction.
That's fair. That's fair. Hey, listen, A great overview of the IPO market. So grateful to Rachel Garing back with us. She's Ey America's ip leader, joining us from Nashville, Tennessee.
Brother Marco.
A journal Now about you let me drive?
Oh no, no, no, no, please, honey, please, I'll do the gravel. I want to try it.
It's a good question.
This is the Drive to the clothes well d on Bloomberg Radio.
Everybody coming up.
On about eighteen minutes left in today's trading session, getting ready to wrop up the Thursday trade. Shortly, we'll head over to our TV colleagues, catting you down to the clothes on this Thursday. In the meantime, we do want to talk a little bit about the trade. It feels like we're once again kind of just in a little bit of a holding pattern, although certainly some yin and yang based on economic data that we got this morning,
the concern over the tensions in the Middle East. So we'll see what our next guest has to say, because actually some optimism, but not necessarily here in the United States.
Yeah, we got with us Lance Cannon, portfolio manager at Hood River Capital, joining us from Palm Beach Gardens, Florida. Lance manages the hood River International Opportunity Fund ticker hr IOX. You to David dat it's up a bit more than seventeen percent. It puts it in this seventy six percentile compared to Piers Lance.
Welcome.
Look, before we get to stock picks, and before we get to your optimism on international small cap growth, talk to us a little bit about the macro right now and what you're seeing in this environment big picture.
So, I think I'm probably not alone when I say this. There's a lot of uncertainty. It's out there, and while we're not necessarily bought our top down investors here at hood River, we are cognizant of what's happening out there. There's definitely a lot of things that we're looking at
and trying to figure out at this juncture. But for the most part, what we're trying to do is look for high quality companies that we believe can beat earnings and have see are going to see beate and raise opportunities going forward.
Why small cap and play it that way?
Yeah, So, for our perspective, small cap right now is undervalued relative to large cap historically. If you look at the large cap index specifically from my perspective on the international side, the large cap indexes non US, I've historically traded a discount relative to the small cap index non US, and right now that is inverse by two or three
turns on the multiple. And so from our perspective view that there's a lot of great opportunities in small cap in general, but specifically if you've got the right stock pickers out there working for you, that are identifying the companies that are a high quality nature, these things are going to work to your favor in an even greater fashion.
Hey, who are your typical investors? I'm curious if it's institutional, if it's retail, I'm just curious.
We have about a fifty to fifty split between both retail and institutional at this juncture, and that will continue to kind of be that. I think the mixed on and go for a basis.
What kind of flows are you seeing coming in coming out?
We are seeing We are very fortunate at this junction. We'll be seeing a nice amount of flows coming in and very little outflow.
Okay, and where the flow is coming from.
The flows are it's a mix right now almost I would say a fifty to fifty split between both institutional.
And even retail, even as you continue to get new money.
Yeah, but I said the new money just because for the most part we have been historically a more institutional based company or investment platform for a lot many years. We opened up to the retail side of things. I would say, you know, six or seven years ago in kind of real more grand order, and kind of had gone after that, So our inflows have been slightly more tilted towards the retail side of things. But for the most part, I would still say it's pretty split evenly.
You know, it's interesting. I kind of love the international and global space, but feel like we used to talk about it a lot more. Investors used to invest in it a lot more, and then you had just indexing and the S and P five hundred on fire for such a long time that you could be a passive investor right in large cap us names and do just fine. So tell us take us there, give us a name that either you've had in your portfolio that you've recently added to, and walk us through the investment thesis.
Sure happy to do so. One of the names that we're really excited about now is a company called Do and co out of Austria, tickers doc AV. We are very excited about this is a company that has kitchens at airports or adjacent to airports around the world. Is one of their main courses of business. These kitchens are serving the international flights the food and they're so no longer are you getting fresh or you're not getting the frozen food that then is heated up. You're getting fresh
food delivered to you. And that goes for basically all types of cabs, depends upon the airline you're with. They've been expanding globally, so now they're here in the US as well as across Europe. They're expanding into Asia as well. But these kitchens are underutilized at this juncture right because they just started entering in their partner with Delta here
in the US. They've got a few other airlines they're working with, and so those kitchens they've built, you know in Miami, New York and other major airports around the US, they're underutilized and so those pressure, those margins are pressured relative to what they can be. Is a continue to
great greater utilization within the kitchens. We believe that utilization is coming that as they go further with the likes of their current clientele, as well as an ad additional airlines maybe adjacent opportunities within those cities, that the margins can continue to expand, the top one will grow a little bit faster. With the street's projecting out there in twenty twenty five, that we will then see even margins expand faster than what the street's expecting, and that will
lead to even greater EPs growth. The company currently trades at a discount relative to what it has historically from a multiple perspective, believe that will not only come more and back in line, but then also you get the benefit of a faster earnings growth perspective.
How's the food? It's really good.
Someone who travels with Tim on an airplane often eats all of it.
Yeah. My favorite though, is ice cream Sundays. It doesn't I don't like I'm not going to go out and buy an that's.
A United specialty, is it? I don't know, is it United?
I can go out and buy like an ice cream and the warm cookies, But if I get served on an airplane offered one, you can sure the best. You can bet that i'mond eat that.
That's all I can tell you is we will travel and will like quick grab like a good meal before we even get on the plane because it's a late flight. And then we'll get on the plane and I'll look over and I'm thinking, all right, I'm going to go to work now.
Yeah, well I'm not.
Tim is eating another meal. That's just the way it goes.
Hey, they bring it by on a tray. I'm going to eat it.
I know, I know, I know.
Hey, Linz, I know. We have a couple of minutes left with you all want to get to tbb Uh. They got stores in Mexico. It's another one of your picks.
Yeah, so this is a competitor to Walmart Mexico recently IPILD here in the US. But when we talk to consumers about their experience at Walmart Mexico versus TV, you know, T Triple B, they mentioned that these stores are cleaner, They're getting the same type of prices, they're seeing sometimes in some cases more products relative to what Walmart has with just some of the surprise and given what we experienced from the.
US tiny market cap compared to Walmart, I mean, this is a three point three billion dollars they have.
A lot of opportunity to grow the top one. The top one is going to grow in two ways. One will be through same store sales, which we think will be better than what the Street's projected. But the other way is going to be is they continue to expand and build out their own store base. There's still relatively small, pretty good relative to Walmart. They're in Mexico with a lot of white space there.
Could Walmart buy them? And Walmart's worth over half a trillion dollars six hundred and forty five billion dollars.
And I think that's possible, But I think there's also going to be some regulatory issues that would come if that were to happen, right, I think everyone wants to see some type of competition that's out there. And then so as they continue to have the opportunity to grow and take and gain market share, if you will, they should see leverage both from the scenes store selves increasing and then also as they get leverage through their stores margin.
You said they're coming in the US just quickly.
Now that they are listed here in the US, but you can actually buy the ticker here in the US Mexico Company with everything in Mexico.
Okay, just check it. Yeah, more than two thousand stores. Pretty cool stuff. Lance, thank you, that was fun. Lance Canon, portfolio manager at hood River Capital Management, joining us from Palm Beach Gardens, Florida. I love taking a look at international companies.
Yeah, I would think it's fair to say get a little lost in the shuffle with so much focused. Yeah on the US trading day, the S and P five hundred, but there used to.
Be a point where, especially like small cap international people has.
Just been dominating over the last decade. But you know, you can get some good value alpha maybe.
Maybe.
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