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A little m and a trade today here, not so little for this seller here, But we're Amazon, Amazon, which doesn't do a lot of acquisitions, and you agreed to acquire satellite operator Global Start in a roughly eleven point six billion dollar deal to boost its satellite operation. Okay, Michelle Davis, she's got the detailed senior deals reporter for Bloomberg News. Here, Michelle, what's Amazon up to these days?
You know this deal is all about basically, you know, there's a massive rate to race to dominate space based productivity. All the tech giants are trying to do it. SpaceX is obviously the leader. Amazon also has a big ambitions to be a leader in satellites and this steal is all about spectrum. Global Star has really valuable spectrum, which is think of it as real estate. That's you know,
a scarce asset. Whoever got it first was able to sell it later on, and that's that's how Global Star ended up, you know, being able to sell this to Amazon. And not only are they getting spectrum with this deal, they're also getting infrastructure on the ground and a massive
customer in Apple, Apples one of global Stars customers. As part of the deal, Amazon was able to negotiate basically, you know, keeping Apple on board, they'll be using the Apple will be using its services to provide you know, emergency services. If you're out hiking and there's no no cell service, you can use satellites to call nine one one, or you know, people can find you and find my friends.
Basically, is there reason to think that anyone would raise their hand object to this deal?
Would regulators get in the way.
It's a good question. We've seen regulators be pretty open to these spectrum deals. I mean, the regulators themselves are the ones who auction off spectrum when it is of available in the open market. But in a deal like this where you know Global Star was the owner of it, of course, you know they get to be the.
Ultimate decider of who buys it.
And because Amazon isn't the big leader in this space, you know, it doesn't seem like it'd be an issue, but you never know, I think what's interesting.
About but all of this is while this does.
Kind of help Amazon accelerate its ambitions to be a big leader in satellite SpaceX still you know, light years ahead of it has way more satellites in orbit. Amazon hasn't been able to launch as many as SpaceX, so that will be something else that it has to do.
And PAULA was just noticing that Global Star CEO is Paul Jacobs, the former CEO of Qualcom.
Okay, so I mean Amazon does have this low earth orbit satellite network Amazon LEO exactly, but I don't hear much about that.
It's not really in use yet.
There's still kind of literally getting it off the ground, and they're hoping that by twenty twenty eight, especially after this deal, they will be able to launch a.
Direct to device service.
Which is like having a cell phone tower up in space, and it basically means, you know, consumers companies would be able to get voice text data without having to use a cell tower, but by using their statellites.
Paul, you had mentioned that Amazon does not make a lot of big deals. If you go to the buyp function on the Bloomberg terminal, it shows you the buyer profile. And the biggest deal is that Amazon has made direct M and a Whole Foods was back in twenty seventeen for thirteen point six billion dollars Global Star of course what we're reporting on today, and MGM holdings the Library for ten point two billion, that was back in twenty
twenty one. Otherwise, Amazon kind of builds it itself and we'll see how things shake.
Out before it decides what the I don't know this one. Yeah, you could sort by recent and by largest.
So what's Amazon saying is their strategy here? I mean, are they going to invest in this business?
Yeah?
I mean what they're really saying is that this, you know, is part of their vision to provide connectivity to people and be a leader on Earth, connecting people, you know, through groceries and deliveries and now you know, voice, text and data.
And this is separate from Jeff Bezos' own little rocket. Yeah.
Well that's why Michelle said on Earth, because at some point it's going to expand to in space as well.
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Let's talk about another group that obviously is affected directly by the surgeon oil prices, and that is the airline sector. There's a really interesting story today, Paul, about the United CEO pitching President Trump about a possible combination with American that kind of just struck me as bananas because it would create a behemoth.
Yep, and they didn't let smaller airlines get together. I'm not sure why they let these big ones get together.
All right, So let's bring in Sid philipp Is, our chief correspondent for Global aviation. So, I mean, as Pop pointed out, they didn't let Jet Blue and Spirit get together, why would someone okay a United American Airlines combination?
So, Scarlett, this is this is obviously a story that we've sort of heard from multiple sources, and I think the airlines are looking to test the administration on how willing they would be to approve of deals. I mean, the last administration was pretty clear that they did not see consolidation as sort of beneficial to customers, but they sort of Trump administration has been more business friendly, and so United Airlines has sort of floated this idea to
the President. In terms of merging with American Airlines, I mean, it would create the largest airline on the planet, and it's just still wouldn't be I mean, they still only have a third of the US market check combined, so it's not quite this would sort of dominate the market. I mean it would because I mean they would have all the important rules like Dallas and Chicago, where United and American control a large junk of the market, but in other places like we've seen other airlines as well.
So it does look like it's unlikely to go through because I mean, this would be opposed by all the airlines who are not part of it, It would be opposed by consumer rights activists, and may also sort of not find fail with the legislators, and so we have to see how this will go through.
Do we have any feeling from the regulators in the past, because again, as Scarla mentioned, all we kind of know is is observers is that they didn't want they didn't let too little, anty bitty airlines get together. How would this happen?
So we still we're still looking on We're still waiting to see any sort of commentary from it. I mean, the sort of the most direct commentary we've heard was from Sean Duffy, the trap Transportation Secretary, when he spoke last week and told CNN the CNBC that the President likes big deals and he would any sort of and when asked about a specific large merger, he said that they may have to share assets. And so that's the
only thing we've really heard. But in terms of whether or not this administration will be willing to sign off on such a big deal, that's still to be seen.
Okay, So there's a bit of a backstory here in that United CEO Scott Kirby was the one who said that this is something he kind of floated, and he has a history with American Airlines, so it didn't come from out of nowhere.
Absolutely. I mean, this is also personal for Scott Kirby because Scott Kirby was previously the president of American Allies and he left in twenty sixteen when it became clear that he wasn't going to be CEO of American Alliance, and then he sort of joined the United airlines and he rose to the top job. And that's really his sort of backstory. And so American and United have been
sort of always been one uptering each other. I mean at the most recent is that they've been battling in Chicago over gates and market share, and then the FA had to come in and sort of restrict flights because there's too many airlines adding flights in Chicago and the airport can't actually handle those coupes.
So what does it mean for I mean, I'm looking at Jet Blue that stocks up eleven percent today? Are people in the industry saying whoa whoa whoa?
What?
People would talk about it United in American? How about everybody else? Getting together?
Absolutely? I mean the fact that this deals out there, it also sort of opens the doors for other combinations. I mean, especially at times of crisis for the airline industry,
mergers and acquisitions tend to happen. I mean, we saw that in the aftermath of the two thousand and eight financial crisis, and for the airline industry at the moment, this sort of surgeon oil prices is a massive blow because there's only a limit as to how much a consumer will be willing to pay before they sort of say, okay,
we'll hold off on travel this summer. And for the airlines, fuel is the biggest sort of single biggest cost aside from stuff costs, and so they have to sort of figure out how they can actually make money on with fuel being where it's at, and that sort of time when typically consolidation happens where weekup players tend to get snapped up by the more sort of robusts financially. Financially robust ones.
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I'm not into the EV thing yet. I did get one hybrid for the number four Offspring episode.
Who's in California, So like that's the context here.
Six dollars guests. So one of the EV companies I kind of forget about it. It's just me is a lucid group they.
Make because you're not a Timothy shalomy fan.
Oh?
Is that it?
Yeah, he's the global brand ambassador.
All right, the stocks you got two point nine billion dollar valuation down sixteen percent this year, down sixty five percent or the trailing twelve months. But they have some news out today. They're going to new CEO and now seven hundred and fifty million dollars of fresh investment from two big backers here. So let's see what's going on with Lucid. Ticker ELCID is the Bloomberg ticker. Craig Trudeall,
Global Autors, editor for Bloomberg News. He joins from London. Craig, what's Lucid doing here to try to turn things around?
We knew it was going to be a busy morning for them. It was an even busier morning than we anticipated. We spoke with Sylvio Napoli, the former head of Shindler holding of Elevator and you know, moving Walkway fame. He's going to take over as CEO, the person who's been filling that seat for over a year now on an interim basis, Mark winter Off. He will return to the role of COO. He took over from the CEO who
actually kind of took this company public. I think, you know, Lucid in addition to you know, you mentioned that the you know, commitment as well from the Saudi Public Investment Fund and Uber. The other news here was as part of this capital raising which they're doing some raising beyond just from the PIFF, and Uber is releasing some preliminary
earnings which did not look great. So this is a company that has really been struggling to execute make some really appealing and interesting electric vehicles, but has really struggled to make them in higher volumes than doing so in profitable or remotely profitable way. So, you know, I think in short, Napoli has his work cutout for him.
I mean, is Loocid's goal to be a mass market EV company? From what I can find, it doesn't deliver a lot of cars. In twenty twenty four, for instance, it delivered more than ten thousand vehicles, but I mean that's nothing compared to something like Tesla.
Yeah, it's a fraction, you know, And I do think it's been a case where the company has been sort of feeling around what exactly its play is. I think, you know, for a time they were trying to go lower volume, higher higher prices, and you know, kind of
casting themselves as a premium player. But later this year, they will start production of a mid sized vehicle where they've they've flagged the rough pricing of that being around fifty thousand dollars, so that would put them more, you know, at least closer to the sort of mass market where you see, you know, like a model why you can
get you know, price in that range. So you know, this is a company that has tried to compete with like the Mercedes and the Porches of the world, found that really difficult, and they are doing a bit of pivoting. How much that has been a sort of like change in plan versus the plan all along is a little bit unclear, and it's kind of depending on who you ask.
I think the CEO, who is sort of placed about a year ago, I would have preferred they stayed premium, and I think they've changed attack a little bit under the new regime.
So right now, the Lucid's big thing, of course, this is partnership with Uber, and this was first annunced in July where Uber said it would buy at least twenty thousand Lucid Gravity SUVs.
That new vehicle you were talking about.
Has this partnership with Uber amounted to anything just yet, I mean, is it getting its name out there.
Yeah, I think it's going to be really interesting to see if that you know, is able to get off the ground. They have a third party that's involved in that partnership, a company called Neuro that itself was working on delivery robots and has pivoted to getting into autonomous vehicles and trying to compete with the likes of Weimo. You know, this is still very much in the sort of prototyping and testing phase, and we've not seen them
actually launched vehicles. But I'm endlessly fascinated by just how much money Uber is throwing at trying to kind of you know, have its own fleet of self driving vehicles and and have you know, some competition for weimo. Even as it partners with Weimo, there's a lot of experimenting and playing around with business models in the space. And
we are still so early. For all the headlines we read about you know, new cities that Weimo is entering, they still have just a few thousand cars out on US roads across the various cities where they have deployed, and so this is really really early innings. Even if people are increasingly having their first experiences with getting into a fully driverless car.
Craig, what's the what's the latest with Tesla and it's bringing in a lower price model.
Yeah, that was There was an interesting report out of Reuters about maybe they're dipping their toe back into making a vehicle priced below the Model three in the Model y. We saw Tesla China representatives deny that that report. But what may that's so fascinating is it's it's speaking of sort of you know, changes in strategy by companies, you know.
I think Elon Musk has sort of you know, mince no words about, in his words, it being stupid for for Tesla to sort of bring cars to market that are lower price, you know, because in his mind, you know, you know, every day is you know, going to be the day that Tesla sort of flips a switch and is able to render its cars capable of driving themselves.
I think regulators are extremely skeptical of that, in part because you know, those days keep you know, coming and going without that capability really being ready to where you know, people behind the wheel can actually tune out and not pay attention to the system that that Tesla sells as full self driving, which just has not lived up to the name yet.
Yeah, I mean there's two components to that, right, the fact that a switch could be flipped on that and whether regulators would allow it to technologically, whether we're there yet, and whether the regulators have given that the Okay, do consumers want that?
And that's a great question too. I think you know some consumers absolutely and uh, you know you will see uh Tesla super fans. Many of them happen to be investors, you know, sharing uh, you know, indications of a progress where you know they are fond of taping their drives where things go well and uh, and yet the questions that you sort of naturally, you know, raise our how sort of choosy are they being about what clips they
show and don't show? And you still continue to see incidents where you know, teslos that aren't being supervised or getting into two really troubling crashes.
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It is earning season.
The big banks began reporting yesterday with Goldman Sacks kicking things off, which is kind of unusual because.
It's usually not the first bank to report YEP.
That would be JP Morgan, JP Morgan City Group and Wells Fargo reported today.
So four out of six big banks have reported.
Herman Chan, of course, is our senior bank analyst here at Bloomberg Intelligence, and of course we needed to bring him in. Is it as simple as to say that the volatility in the markets is just unit directionally good news for these big banks?
It is, at least for the ones that reported today. So, JP Morgan City posted really strong results on trading equities and on the fixed income side. I would contrast that a bit with what Goldman did yesterday where they disappoint a bit on the fixed income side of the trading house that was driven by areas like rates and mortgage, which seemed like they were not positioned correctly with the volatility that happened in March.
What happened or what's going on with Wells Farg?
Yeah, Wells Fargo, it's interesting story. They reported really strong earnings from a EPs standpoints, but the disappointment came from the net interest margin. It was down thirteen basis points quarter of a quarter. Management talked about some areas that we're driving that growth in some lower yielding markets, businesses that they're intentionally growing due to the fact that they think that will bring along business and other areas like
trading in the prime brokerage business. So it's sort of like build it and they will come type action going on, and they expect some further compression in the second quarter, which is driving some of the weaker market sentiment that we're seeing today.
Wells Fargo had its asset cap lifted by the Federal Reserve, which means that it can now get bigger. So do we expect, you know, some more spending, some you know, tighter margins for the foreseeable future as it tries to really build.
On its assets. Yeah, you see the assets growing really quickly. They're probably going to be the fastest growing JISA bank that we cover, the largest banks that we cover in terms of long growth that's about five percent quarter.
But make up a lot of lost ground it does.
It has to make up a lot of lost ground, and they're sort of growing the balance sheet to hope to help offset some of the margin compression that I mentioned earlier, but that also portends the higher costs in areas like advertising and headcount growth potentially over time, but definitely you're seeing it in the advertising spend.
Are the banks in general are they lending money these days? How does loanrigination look?
Yeah?
They are in pockets right. So there's not a lot of growth in areas like mortgage because of the rate environments. Card is seasonally softer this quarter, but it was strong last quarter given the holiday season. A lot of the growth is areas like lending to non bank finds ancial institutions. That's been the rage in the industry, lending to these private credit firms that are in the news, lending to
areas like a venture capital and mortgage company. So it's a bit of a mixed bag in terms of where the long growth is coming from.
We talk a lot about a K shaped economy where the upper leg of the K is doing very well. The wealthy are getting wealthier, the less wealthy, the ones that are really struggling through this are suffering more. Are banks actively using that as their strategy as well? I'm wondering if the services that they're offering, the areas are choosing to grow, is pursuing that higher end of that K.
Yeah, that's right.
That's been a trend over time where the largest banks are really focusing on that prime customer. So there's not a lot of lending activity towards the bottom half of the K shape, but there is deposit activity on that front.
Right.
So Wells Fargo mentioned that the higher gasoline prices is increasing the spend on energy by about one percentage point cover a quarter, and that can change every time. They're not seeing any changes in the non discretionary spend. That happens gradually, and if we do see these persistent higher energy costs, that could change as well.
All Right, my good friends over at City the worst elevators on Global Wall Street, my former employer worst elevators. Yeah, there's there's two stacked on each other. Have you ever been one of those things? So you it sometimes it stops on your floor, sometimes it doesn't. Oh you're not really sure why. And I was there for like three or four years. I still didn't figure it out.
So I have a former City employee as well. I remember three eighty eight Greenwich and you just had to wait forever for those elevators.
The several subreddits devoted to this, Oh yeah, there is. They've turned the corner.
It looks like they we can give Jane Frasier you know that, I mean.
A pat on the back, right. Yeah.
Yeah. You're seeing that across the board in their first quarter reporting, where they're showing really strong revenue growth throughout their businesses services which is their primary crown jewel, the trading business and markets, banking, US cards. Everything's been going really well and you can see that in their return on Tangra equity profitability metric, which was thirteen point one percent.
They're targeting something about ten or eleven percent for the year, so already cleared that at least in the first quarter, and they alluded to the fact that in their upcoming investor day next month that they'll increase their targets for profitability as well. So strong momentum there. It's going to get better.
It's going to get better.
And of course there's a lot of excitement about what Jane Fraser has been able to do because she streamlined this company down and really deleted all.
These extra management layers. She made it slimmer.
Does that and of course this being banking, the next question is is she going to make it bigger?
Is she going to buy something else? Right? That was a question on the call today.
It was one of the first questions from the analysts because and the analyst was referring to a Bloomberg News article saying that City Group might be interested in buying a large regional bank here in the US to improve their the past funding base. Jane was unequivalent, saying that they're not interested in doing any deals. They're really focused on organic growth in order to avoid any sort of
distractions that come from a merger. So we'll take her buyer word and looking forward to seeing more improvement in the franchise over the next coming quarters.
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