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Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.
Each and every week we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.
Today, we'll look at why offshore wind industry, particularly in the US, has been struggling.
Plaus We'll discuss why the CEO Elon Musk's companies may be under threat as Tesla struggles.
But first we dive into M and A in the oil and gas industry. This week Conoco Phillips agreed to require Marathon Oil in an all stock deal, value in the company at about seventeen billion dollars.
The move expands Conicco Phillips footprint and domestic shale fields from Texas to North Dakota. It also adds to the wave of recent mega deals as producers are betting that oil and gas demand will remain robust for years to come.
For more, we were joined by Vince Piazza, Bloomberg Intelligence, senior equity research Channels, who covers the oil and gas space.
We first ask bens and if this deal makes Conicgo Phillips bigger or better.
I think a little bit of both. It makes them.
Better in certain basins because it does consolidate an opportunity set in places like the Delaware, the Baking and even the Eagle Forward.
But it does extend the franchise into other areas that probably dilutes some of that narrative. You know, the narrative has been consolidate streamline leverage to what you do best. We saw that in the Permian. We saw that for natural gas as well, with Southwestern and Chesapeake likely getting together. So in this case you have some pieces of that
marathon pie. That may not work as well within the broader Conicco platform, but that's an opportunity set to divest some of those pieces and really concentrate around Texas and the Bakan. But the bocket itself is maturing as well. What you're really getting here is a ton of free
cash flow as well. You know, this is consistent with the formula, the theme, the narrative that we've heard and seen in the past, the acquirer using a slightly higher multiple to do an all stock transaction by the company, bring those assets, those cash flow generating assets that's into the platform, lower the spend, generate that free cash flow, be able to boost the ordinary dividend and also the supplemental dividend and support the stock by buying back shares
as well. And in this case financially, financially, engineering wise, it actually works out right.
Hey, Vince, I noticed you know there's a lot of M and A stuff going on in your energy world here. Do the regulators care about this stuff?
Oh yeah, they will take a serious look at this. They will increase the scrutiny of all of these deals. I know that they're looking to close this by four q twenty twenty four. I think that's kind of tight. We have seen other deals close Exxon closing Pioneer around that same time as a projected closing date as well, But there are other deals that may be prolonged. And this will be a rather large entity. It's going to be roughly, you know, two point two million barrels a
day of production, so it will get scrutiny. It will get scrutiny more broadly, but in general, it's really not sizeable in those particular basins that they are consolidating.
So to that point, do we see another bitter come in? So Bloomberg has reported that Devin was also interested in Marathon Oil. Do you think we see this happening now?
Well, you know they were looking at it. When you work out the numbers, it would have been kind of difficult to make it work. But the increation here Conico Marathon actually works out better for Marathon holders. It's interesting because within the first three years of the deal, Conico suggests that they'll buy back as much stock as the entire market cap of Marathon, including a boosted dividend for legacy Conical holders and new holders from the Marathon purchase.
You know, it's an all stock deal, which all right, I get my M and A fee Alex, but I don't get to do the high yield piece which choices mine here. So I'm not really happy with an all stocks it's evercore.
I think that led kind of go on this one.
Yeah.
I looked at M A go. They did not have the M and advisors. They're a little bit slow on.
That, Vincer.
We going to see more of this. I mean, we're going to be talking to you more about M and A in your space.
Yeah, we've seen it across the Permian. We've seen it in natural gas as well. Haven't seen it as much in natural gas, but I think that'll pick up as well, as we're seeing a big here for Henry Hub and various prices across the regions. When you have a industry that is in the crosshairs of both civic and political leaders, the one way to survive is to consolidate and get bigger if you're not able to grow organically.
Our thanks to Vince Piatza, Bloomberg Intelligence senior equity research channelists on the oil and gas industry.
We move now to big tech and Apple Apples, I on stage the rebound in China last month, with shipments rising fifty two percent. That's according to the latest figures from the China Academy of Information and Communications Technology.
This all comes as Apple and it's Chinese retailers have been cutting prices since it start of twenty twenty four, following steep declines.
For more, we're joined by aniog Rana, Bloomberg Intelligence Technology analysts. We first asked anarog for his reaction to the data.
This is the way I looked at it in jan and feb. This data was down I think minus thirty five minus forty percent or so. And then when Apple reported their quarter, they said, you know what, mainland China, our iPhone revenue grew. So there is not that direct correlation between the two numbers. And it could be because there are times when Apple, you know, sells phone, but it's stuck in the inventory channel in between. Then they put out a sale and then gets cleared up. So
it's a question of timing not so much. But the big thing for us is that there was a downdraft of negative news coming out of China. It's turned positive two months in a row, so that's a good news. Seems more like a cyclical issue to me than a structural problem of people giving away Apple phones not buying it.
So that's not the case. So that's a good news. So I think, you know, from an overall point of sentiment.
Point of view, I think this is good news for Apple that China, which in our view is the most important market for them over the next three to five years, and we are not going to see you know, let's say eurobar declining share. I think it's going to be okay over the next few years, even if it goes ups and down.
So that's really the big takeaway for us.
So can I call this a nothing burger?
No, that's not true because.
I say that because you didn't hear it.
But Paul was guessing you would call this data a nothing for But you're being too polite about it.
I think gone a wrong.
So sentiment advice, think about it.
The only thing that we've been hearing for almost a year now that people don't want to buy iPhones in China, it's because of the government and nationalism and so many all things. And I think this one tells us that's not the case. People are strapped for cash and if they get a good deal on a phone, buy it. So what do I expect. I expect Apple to go out and do more promotional activities over the next few months to try and sell more products into the market. Now,
not every market is different. Apple's not known to give a lot of discounts globally, but if that's what they have to do in China, that's what they have to.
Do, all right, fair enough. But let's go to the discounts though for a second.
So even if we don't say, take this data as gold, but just directionally, Apple and discounts tend not to go together, at least in my mind.
What do you make of that?
Yeah, I think this is a new thing for Apple, and again they're probably grinding their teeth and not liking it. But you know what, they have the rest of the world to make up for it. In the US, for example, people are liking to buy the higher end model, the pro model. That helps margins, that helps the average selling price.
So if they have to give a little bit up to gain market share in China, I think they should do it, because you don't want to be branded as somebody a second player in China out there, which is you know, in our view the most important market for growth for Apple, what's going to happen is you're not going to see any growth in China. For that matter, their top line growth is not going to grow, and that's not good for the stock.
Also, and I've talked to.
Us about India. What is it as a percentage of Apple's business today and what do you think it can be five, six, seven years from now.
Yeah, so in our view, apples very small, less than five percent. In fact, when we have done a lot of work on the number of shipments in India, Apple's market share is, you know, less than five percent.
But here's the kicker.
Ninety five percent of the phones don't even qualify for to be in the Apples you could say ecosystem, which means they're under three hundred dollars. As the Indian economy grows, as the middle class becomes more affluent, I think Apple's going to be a winner over here. But think about it this way. When we look at the US with per capita income of let's say sixty five seventy thousand dollars, somewhere in that realm, China is around twelve and a
half thousand dollars. India is about two thousand, twenty five hundred dollars. So when you look at these three systems, I think when we look at that growth driver from five years onwards, that's where you know, India comes in and there's a massive market there for Apple. But that's not going to happen next year or the year after.
Right, that's sort of a structural change, et cetera in the market. I don't know what else are you working on right now.
I think the biggest thing right now is what happens at WWDC and whether that's going to be enough to sustain this. You know, I would say optimism that we have seen in Apple for the first time, I would say in the last eighteen months, because we all knew China was a problem. We saw that in the numbers, sales numbers and not very strong. But AI has that outside potential to go out and spur the next sale
off phones. Why because there is a massive amount over forty three percent of the phones our iPhone twelve and below, which is old phones with lower you know, you could say RAM memory and other things. Now for if they go out and say I have really cool features coming into the phone you got to go find a way to upgraded. Now, if somebody has a fourteen or a fifteen,
they're most likely not going to upgrade it. But if you have something that I can iPhone ten, iPhone eleven, there may be a reason enough for you to upgrade it. So that really brings a new fresh you could say life and Apple, and that's really important. On June tenth when they get this developer conference.
All right, I'm sitting on an Apple iPhone eleven. When do I upgrade?
You should update it in the winter when the sixteen comes out or whatever the name they give that phone, because it should have a faster processor, it should have a lot more memory. They'll just make things easier for you. You can watch your golf shows in a little bit easier way.
Very good. Now, Tim Cook's sixty three, I'm gonna switch gears on you. Is there any push for this guy to put out a succession plan of note or things just going so well at Apple that nobody's pushing for that.
See, Tim's done well. The Apple's done very well under Tim. I have no way of predicting what he's going to leave. But in my view, if you were to somehow ring fence the China business. Apple alone is a company that I think can do good by itself. It doesn't really need a massive charismatic leader in order to, you know, come up with that. This is a company with a global brand, the products people love, people trust the products,
and the installed base is very loyal. I mean, we think somewhere in the mid nineties people can keep the phones. They don't go out and change into a new ecosystem. I think this is a phenomenal business, but you know, you do need certain innovation, but not to the level you need in other technology companies.
Our thanks to anorak Ruana Bloomberg Intelligence technology analyst.
Coming up, we're going to breakdown why American Airlines gave an outlook for the coming quarter the disappointed investors.
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We move now to the airline industry. This week, American Airlines issued guidance for the second quarter. The disappointed investors.
The carrier slash profit and revenue expectations, and American air also acknowledged that it misjudge domestic demand heading into the crucial summer travel season.
For more, we're drawn by George ferguson Bloomberg Intelligence in your Aerospace, Defense and Airlines analyst.
We first asked George for his take on this week's guidance.
There's some analysts that think that this is driven by they got a very much more domestically focused strategy, different corporate strategy than United in Delta. You know, I guess we're the view that American has been underperforming Delta United for the last couple quarters, especially last quarter. We saw them down in every single market, including Transatlantic, which had been an area of strength for airlines like you know, Delta.
So they absolutely seem like they've been underperforming. But you know, we've taken a look at the capacity that's getting added to the market all the markets US airlines fly domestic, Latin America, you know, Atlantic and Pacific, and frankly, what we see is capacity ads that are in some cases twice GDP growth since last summer. So well, we think Americans probably going to be the worst on the downside of the big three. I think it's going to be
hard for the other two to avoid similar trends. They won't be as bad, but we just see too much capacity coming to most of the markets US airlines fly too, and we think the REDA cross is probably even greater to the budget very domestically focused and Latin American focused carriers that be Southwest, that be Jet Blue, that be all the low cost carriers, So the REDA cross is probably even stronger for those carriers.
So Georgia, I kind of feel my just you know, layperson's eye, United, Delta, and American. Are they all kind of the same, kind of the same strategy.
No, No, not at all, all.
Right, So what's different?
God, exactly?
Well, I fly Delta, I'm like I fly United being a Newark person myself. But so what's different about these guys.
Well, they each have their own, you know, their different strengths, right, and so American really has very little presence in the Pacific region, so they don't get much pickup fares there. Are pretty strong, although coming down because capacity is getting added, but they don't get any of the Pacific tailwind because that's sort of the last recovering market right now. American is very strong, has a lot of capacity into Latin America. Latin America is very weak right now, especially near in
Latin America. You know, the sort of short haul narrow body flying. There's just a lot of capacity going into beach markets, a lot of capacity coming out of Mexico. So that's a source of pain. American I think more focused than United in Delta on the US domestic market, where we're seeing United in Delta do more out across the Atlantic, where yields are yields are stronger.
I kind of get the sense.
That America just doesn't get to pick up from Europe like United in Delta do because I think they've just got a strong partner there in British Airway that kind of really runs Heathrow. So American gets some of it, but they don't ever seem to get as much as United in Delta do out of Europe. So they all have sort of their nuances.
CCO is leaving, how long do they get back on track?
So you know, again, what we see is a marketplace that isn't just this isn't an American anomaly. It's a little bit of an American anomaly, but it's a larger broader trend, and that is consumers running out of gas a bit here, especially the lower end consumer, and a lot of capacity coming to the US domestic market, the beach markets and transatlantic so I think the rest of them are coming American direction. America isn't going their direction over the near term. Over this summer, we'll see.
All right.
Thanks to George ferguson Bloomberg Intelligence, Senior Aerospace, Defense and Airlines analyst.
On Bloomberg Intelligence Radio, we bring you all the top analysts providing in depth research and data on two thousand companies and one hundred and thirty industries.
We also have something here at Bloomberg called Bloomberg New Energy Finance, and the idea behind it is to provide data on commodities, power, transport, industries, buildings, agriculture and new technology.
This week we looked into offshore winds. The industry, particularly in the US, has been struggling.
This comes as inflation and supply chain challenges have driven up capital expenditure, while financing costs have spiraljuterizing interest rates for more.
We were joined by Oliver Metcalf BNEF, head of Wind Research. We first asked Oliver where things stand now with offshore winds in the US.
It's been a difficult last twelve months for the US off shore wind industry. We saw around nine gigawatts of off take contracts, so contracts for the generation of these projects get canceled. That's around a third of the contracts that were assigned in total for the US off your wind pipeline. You mentioned there it was because of high inflation. High interest rates have really hit the technology as well.
So it's a really capitally intensive technology and so a higher cost of financing hits off your wind especially hard compared with other technologies. We're beginning to see a bit of a turning of the fortunes. So we're seeing the first couple of commercial scale off your wind projects start to come online in the US. One has already come online off the coast of New York, and one that will feed Parento Massachusetts is under construction at the moment.
So some good stories beginning, and we're also seeing states willing to adjust their subsidy mechanisms to account for some of the pain that projects have been feeling recently. So offer developers more protection in the contracts, the off take contracts they're offering, and just simply higher prices that these developers need to make their return.
So talk to us about just wind power. How is that from an efficiency perspective versus and versus other stuff that's out there? How competitors is wind?
So you get kind of higher productivity from a wind turbine compared with a solar panel, and that's even more productive offshore, and so offshore wind you have more consistent wind speeds, stronger winds as well. So that means kind of if you imagine a wind turbine operating one hundred percent of the time, that's kind of theoretical maximum. You can get between forty to sixty percent of that generation
typically on a wind project. Now that sixty percent isn't too far off the kind of percentage we could see from a kind of conventional generator, a gas or a cold plant.
What about like nuclear, It's a nuclear a lot better.
Than that nuclear it's much harder to ramp up and down, and so they tend to operate completely as base loads, so you get really high what we call capacity factors for nuclear so it's operating almost all the time if it's if it's part of the mix.
So part of the issue is the off take contract.
So basically, if I'm a developer, you know, Paul goes and says, Okay, I'm going to buy this wind from you for this amount of time. He's going to pay me this, which gives me clear then how I can go and invest that money? But my cost go up and I'm kind of left naked at that point. How is that being resolved? You mentioned subsidies, but like what else?
Because that gap is very unpredictable. And I remember talking to Siemens North America ahead about that and they're like, we took on all the commodity risk and they're trying to change that now because they're not commodity traders, But.
Like, how do you do that?
Well, Yes, it's that unpredictability that hit developers especially hard. So in the previous contracts, there's ones I was talking about that got canceled. There was very little adjustment in the contract price to account for moving commodity prices, to account for inflation. So that's the kind of thing that states are building into these contracts now to kind of better share the risk between a state which is buying
the power and the developer that's building the project. So we're seeing kind of these prices getting index to CPI for example, to certain kind of producer price indexes and to certain commodity prices to make sometimes a one time adjustment from when you're reach that price to when you're actually securing finance, and sometimes you see that adjustments accounting for inflation right throughout the life of the project.
That's interesting.
That's the kind of structure we see in lots of other countries that have managed to build large scale off your wind projects globally, and so yeah, from the offs your wind industry's perspective, it's good to see that happening in the US as well.
You mentioned the project off the coast of New York. Talked to us about the economics, how much does it cost to build that thing, who paid for it, and just the economics.
So that is a project called South Fork. It was the kind of the first commercial scale offshore wind project in the US that was significantly more expensive than a project we expect to see getting installed today. That's partly because it was it was almost like a proof of concept. So up until then, there are only seven operational offshore wind turbines off the coast of the US so far. So this is the first kind of larger scale project
for one of the newer projects. You're probably looking between two point eight to three billion dollars for a one gigawap project, which is a really big offshore wind from almost ten times the size of that early kind of commercial scale project that just came off the coast of New York. So these are a really sizeable infrastructure investments.
Yeah, what part is the hardest?
Because it seems to me that you know, moving the energy from offshore to the grid on land, like you got to like build a transmission line for that, Like that seems really hard and dangerous. And then I also hear of the transmission plug shortages, so basically the thing you need to actually plug that wind into the grid, there's a shortage of that.
And then you got to build it.
And there's all the raw material costs that come at actually building the turbine.
Where's the biggest price increases?
I mean, we saw a lot of price increases across the board over the last couple of years. Actually, when you look at a lot of commodity prices that are important for manufacturing of wind turbines, cables, that kind of thing, a lot of those raw material costs have come down. What we've seen is turbine prices have remained stubbornly high.
Wind turbine makers were hit just as hard by rising costs, rising inflation, and many of them were having to deliver on contract said signed at cheaper rates in this higher priced environment. So that means many of the kind of major wind turbine makers have suffered a lot over the last couple of years, and so they they're maintaining higher prices to kind of have a bit of a buffer on their margin, trying to regain kind of stronger margins.
But that means that developers are left paying higher prices for the turbines despite the fact that some of these input costs have started coming down.
Who makes these big turbine things in the ocean.
So that's companies like vestas Semens Energy GE is a big US player and so those are I recently spun out. I mean, so also it is one of the one of the companies that builds builds the project, so one of the biggest project developers globally. But there'll be the guys putting in the orders with your likes of vestors, g semen.
I mean, how do you build these things? I mean how do you install them? I mean difficulty, it's tough, build them on land, ship them out there, then just plug them in the sand. I mean, how does this work?
So most of what's getting built at the moment is bottom fixed off your wind. So you go out there, you build a foundation that's fixed to the seabed, and then you come out and you build the turbine on top of that. So you build up the tower and then component by component kind of build the big fan.
You can see it at the top, I know.
And then also how do you Then that question is like if something happens and it gets its broken, like how do you fix it?
Like what's it like when you go off shore? I mean, what happens when one of these things dies? It just like what's the shelf life of a turbine? And how do you recycle it? I don't, we haven't, we don't know that yet.
Yeah, Well, well, going to your question on what happens when it goes wrong or how you construct it. You need really specialized vessels to build these things, so they call them jack up vessels, So they're vessels that kind of have legs that they extend down into the seabed. Jacks up the vessels so it's sitting kind of above the water, so you've got a solid platform by which to install the components, or if something goes wrong, to send it out there, take off one of the components
and replace it with a fixed one. But these are really specialized vessels. They cost a lot of money to build. Are estimates around three hundred to five hundred million dollars, and there's a shortage of these things globally at the moment, the kind of specialized vessels to install the foundations and then and then the turbines. So if you're a developer, you're struggling to find those slots where you can secure vessels.
And if something goes wrong on a recently installed project with one of these big, big new turbines, then you might struggle to get a vessel to come in and do that do that replacement work.
Our thanks to Oliver medkef BN, the f head of Wind Research.
Coming up on the program a logo Why Dick's Sporting Goods raised it's outlook for the year even as athletic where companies struggle.
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And this is Bloomberg.
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And Paul Sweeney on Bloomberg Radio.
We move next to retail.
This week, dick Sporting Goods raised its outlook for the year, reported quarterly sales it's their past analyst expectations.
This was due to strong demand for sports gear across categories, even as athletic, where companies struggle.
Separately, the clothing retailer Abercrombie and Fitch also reported quarterly sales that beat analyst estimates. For more on all of this, we were joined by Lindsay Dutch Bloomberg Intelligence Consumer Hardlines, a senior analyst.
We first asked A Lindsay why these companies are doing so well.
I think when you think about the sporting goods, you know, they do have a higher income sort of consumer base and that definitely helps. They also sell sort of a premium product, especially if you think about their footwear line, and when we think about the consumer broadly, they are you know, making some trade.
Offs, but people are still.
Willing to spend for that premium product, whether it be in footwear or even if you're thinking about that apparel like Abercrombie.
As you mentioned, how is there same store traffic? I know in the retail space, that's important, So how was it kind of in terms of the gross story traffic versus pricing?
Right, So when you think about Dick's comp sales were up over five percent in the quarter. That was a surprise or really strong number. It was really driven by number of transactions and ticket price. So they're seeing more customers come in their door and those customers are spending more and again I think that is driven by sort
of a broad assortment. If you're going in you're sort of playing a new sport or continuing with your active wear, like you're buying more things you know in that assortment that Dix carries for you.
Really dumb question because you know I'm a big sports person. That's not true, but like, why can't you just go to like Target or Walmart for this stuff?
I think when you think about f letics, you know, brands matter, performance matters, and I think, you know, when I think about Dix's a great entry point when you're starting or if your kids are starting a new sport. You know, I'm a runner. If my kid is trying baseball, I know nothing about baseball. I can go there and figure out what do I need? And I can also figure out, you know, where I want to be on the price spectrum.
Right.
They have their own brands, so you can get sort of a cheaper glove if you don't want that name brand glove, and you can kind of get everything that you need in one space. And I think that's where Dix really does stand out.
How about inventories, How are they managing their inventories? Some folks kind of surprisingly do a materially better job than the others quarter to quarter.
Right, So when you think about this sporting industry as a whole, it sounds like inventory is slightly better positioned than it was about a year ago. Dicks in particular seems very well positioned heading into the second quarter. Second quarter is also seasonally better for that company when we think about sort of the summer and like kind of getting back to school, like fall sports kind of thing, So inventory is in a better position. I think that's
helping Dix. I also think Dix has done a really great job sort of scaling back promotions. They're not giving out the discounts that they were pre pandemic. They've really held a line on that and that has really helped them in terms of profitability. Also, their consumer knows what they're getting when they come there, so they're not just
like waiting for that fifty percent off deal. They know when they go there, you know what brands might be on sale, and that if they don't want to pay full price for Nike, they might be able to get their private label brand.
It was something similar with Abercrombie. Gross margin was sixty six point four percent. Those higher than estimates.
Same deal.
Like, they're rolling back promotions and they have the power with which to do that.
How is that possible?
Like I'm trying to distinguish what the macro read is when like all indications point to a.
Discerning sol lowing consumer.
Base that is much more cash strapped and sensitive with their wallet versus certain companies like Dick Sporting Goods or Abercrombie and Fitch that have the power to keep their margins.
Yeah, it's so. I think sort of what happened is, you know, in the pandemic, when we saw a surge for in demand for a lot of these categories, sporting goods and like athletic wear being one of them. You know, these companies saw where their margins could go when demands spike like that, and I think a lot of them made a proactive decision that they would never go back to that level of promotion that they had done before
in order to protect that profitability. Coming into twenty twenty four, just broadly in retail, you know, profitability margins are majorly in focus across the board because there is still pressure on sales and everyone is looking to see how are these companies managing margin, how are they managing costs? And
Dix has stood out there. I would say it's easier for a company like Dix who has a higher income customer base, or anybody that sort of has an assortment that includes like a higher level premium type brand than the retailers that are really trying to compete on value, because if you have a value focused consumer and they are only looking for the lowest price or the best deal, it's very difficult to compete and you're going to have
to go back to that promotional environment. So you're sort of seeing a split in strategy depending on what category you're in. You know what level of assortment you have, and you know whether you're going after that value customer or whether you kind of hold firm try to protect that margin and get that better sale, maybe more longevity with a better consumer over time.
And for the retailers that you talk to in including Dix, is there are there any supply chain issues left or that is that all fixed?
I guess I think in sporting goods we're not really seeing a lot of supply chain issues anymore. We've seen transportation costs start to come down actually in the second half of last year. Many retailers in the space are still benefiting from those lower costs again helping the margin this year, and that is where we're seeing some of the improvement on that profit line.
All right.
Thanks to Lindsay Dutch Bloomberg intelligence, consumer hardline senior analyst.
Return now to Elon Musk and the ev giant Tesla. The company appears to be in disarray as its stock has been creatoring, sales have been weak, and some investors say it has a distracted leader.
But what about some of the other companies that CEO Elon Musk runs, like X and SpaceX. This is the subject of a big Take piece this week titled Tesla's Slump Exposes Elon Musk's distractions across his empire.
We were joined by one of the pieces co authors, Bloomberg Tech reporter Kurt Wagner. We first asked Kurt for more context on his story.
A big part of what you know working for Elon is all about, is sort of working for Elon everywhere he needs you, right, So you might be employed technically by Tesla, but you might show up on you know, a SpaceX project or an X project. And I think, you know, not only are the people that he works with sort of hovering around and all these various roles, but I think his companies are becoming closer and closer together.
And that's why it's so important that you know when Tesla is struggling, it has this trickle effect because that's where he gets his wealth to fund XAI, to to you know, deal with X, to deal with SpaceX, and so, you know, what we wanted to sort of do is show people that all of these different companies and all the people who work them are interconnected. And we try to do that with a pretty cool visual graphic that folks can see on the website.
Kurt, what is the musconomy to find that?
Yeah, it's a term that represents or reflects these six different businesses that he's running at any given time, and again, sort of this idea that they all work together. They they you know, in X's case, the data from X which used to be called Twitter, is now sort of powering XAI his startup.
Right.
The money from Tesla has historically been used to help fund SpaceX and his purchase of X. And again, you see the musconomy as this collection of businesses that Elon runs and how they are all intertwined with one another.
Do the people in his orbit do they like this? Like that to me sounds terrible.
Like I like predictability, which I know as funny as I work in news. I like predictability. I like to know what I'm doing. I do not want to be pulled in seventeen thousand directions. Do people in his orbit like.
That, Well, I think the people at the very center of this universe, the people who are closest to Elon. Whether they like it or not, it's sort of a necessity, right, because that's what it takes to be close to that center of power. And so we've seen, for example, his business manager Jared Burchell shows up pretty much across all of these different companies. His lawyer Alex Spiro shows up across all of these companies. So if you want to be at the center of this universe, you have to
be willing to go where Elon go. And as we know, he not only has these six companies, but he's doing a million other things as well. And so whether they like it or not, I'm not sure if it really matters, because that's just what it takes to work for Elon Musk.
How do they all?
How do all the businesses though intersect? Because from a broad look they don't. But then if you dive a little deeper like they do, like X, you can use all that stuff for large language models, for his AI stuff and the AI stuff goes into the car stuff, and the car stuff I guess goes into the rocket ship stuff.
Yeah, I mean you kind of hit on it. Like the connective tissue between these companies can be somewhat small. In X's case, as you pointed out that data there is being used to train a chatbot called Grock within XAI. We know that, for example, the corporate plane, like small things, the corporate plane that Elon uses at Tesla's the same one that's used at SpaceX. We know that they share certain employees, so you know, I mentioned Jared Burchell, his
business manager, Alex Biro, his lawyer. Like these are the types of connective things that bring these companies together. Is the people and and sort of you know, the smaller parts of their business that are intertwined. And I feel like Tesla is sort of the engine behind this whole thing. If Tesla is humming and doing well, it kind of enables everything else to grow too.
How about Twitter? You bought that for forty four billion dollars. Kurt and a lot of analysts says the value of Twitter's declined dramatically as advertisers have fled. Is there any pushback from anybody or or folks just saying, hey, it was his money, he can do with it what he wants.
Yeah, I mean, I do think it poses a challenge because of this distraction with Elon's time, right. I think, especially if you're a Tesla investor, you have to be scratching your head and saying, what are you doing? You know, why are you spending time on this money losing business when you could be sort of you know, making money for shareholders over here. And I think it's you know, becoming a bit of a problem. I think what will be interesting is to see whether X sort of gets
folded into x AI at some point. I could see those two companies sort of merge so that you know, again X provides the data for these large language models, but it sort of gives him some cover to spend time in X because now it's part of the AI business, which is much more exciting, I think, for people than the free speech business, which hasn't been very lucrative for him.
The free speech Businessho's in the free speech business? Like, what is that mental lawyers?
That is Elon? Elon is the is in the free speech business.
I guess.
So in your reporting, what emerges the biggest problem or the biggest question.
Yeah, I think really it comes down to kind of this we I haven't really talked much about this yet, but Elon's pay package at Tesla is sort of up for debate.
Right.
You may remember he was supposed to be paid I believe it was fifty six billion dollars and that pay package was I believe set up in twenty eighteen. It's been challenged in court and a judge basically said this isn't a fair you know, compensation, and Elon is fighting this in court. But it's a huge deal, not only because it's you know, his own net worth, but because that money is then used to fund many of these
other projects. So if he's not able to secure this pay package that he thought he had, it impacts the loans that he takes out and impacts his liquidity to be able to use on these other companies. And I do wonder if he starts to lose a lot of his net worth, his value, if that's going to have an impact on XAI, Twitter, SpaceX and others.
All Right, Thanks to Kurt Wagner, Bloomberg Tech Reporter.
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