Richard Branson Is Taking Space-Tourism Unit Public

at Bloomberg dot com. But we are awaiting a conversation with Virgin Atlantic CEO Richard Branson and Social Capital CEO Chamas Polly Hapat and he is coming to speak with the Bloomberg's Body Queen and Guy Johnson to talk about a new venture to take space tourism public. That is, a Virgin Galactics effort to bring people to space who want to just experiencing it, experience it. How there could be an initial public offering and raise equity in it.

It'll be interesting to see whether there is a big profit to be made here, as well as what the links will be between the public venture and the private in the private endeavor to try to go to space and the NASAs type of agents in the government. In other words, how much will the US sort of lean on private companies or in this case, public companies, to influence their decisions with respect to UH with with respected

decisions with respect to space exploration. Joining us now to talk about that, as Christopher Jasper, transport aviation reporter for Bloomberg News. Christopher, what are we expecting to hear and what have we learned so far about Richard Branson's Virgin Galactic space tourism venture going public? UM? Well, it's using

a somewhat unorthodox method to do this. Rather than going down an I p O route, He's going to accomplish a listing through a merger with a listed shell company in New York UH, which will hand over stake in the enlarged group and raise about eight hundred million dollars to take the project further. That seems to suggest that maybe an I p O might not have been a good idea. There's still quite a lot of skepticism out there,

perhaps about whether UM space tourism really can work. We know that he's got about six people signed up, having paid eighty million dollars in deposits to travel, but the whole plan suggests, by his reckoning, that there may be millions of people who would be interested in flying to the edge of space if the price can be brought down enough, and if you're going to invest in Virgin Galactic long term, then that's really about that you're taking.

Would you want to go to space, Well, I would like to go to space, absolutely, But I think people need to understand that this isn't a trip to the Moon. It's not it's not even a trip into higher Earth orbit where you can see the entire planet beneath few. This is essentially to the edge of space, where you get to see the curvature of the Earth and your

experience weightlessness for a limited time. But you know you're you're you're not sort of going to feel like you're in Apollo eleven all the all the International Space Station, which perhaps is what people are looking for. Christopher Jasper, thank you so much for being with us. Christopher Jasper as Transport and aviation reporter for Bloomberg News. We are going to hear from Virgin Atlantic CEO himself, Richard Branson,

as well as Social Capitals CEO. They're going to be talking about this joint venture space tourism going public with an I p O. Take a listen. We'd like to welcome now our Boomberg Radio and TV audience, as billionaire Richard Branson's Virgin Galactic is becoming the first ever space tourism venture to hit public markets. This after receiving an eight hundred million dollar investment from the publicly traded Social Capital. We joined now by Richard Branson and Social Capital co

founder tell us. How are you happy, dear gentlemen, Thank you so much for joining. Richard? How did this meeting come about? I know that you had been in talks with the likes of Saudi Arabia and possibly other players as well. You pulled out of those after the death of journalists Kahog, for example, and that brought you to

this meeting. Explain the origins of this investment. Well, when we sadly couldn't go ahead with the studies, um, I decided that I would found Virgin Galactic to profitability myself through through the Virgin group. And then we got a call from Shamath who said that he was keen to have a look and he went to see our space people spent some months looking into it and let why

didn't you carry on from there? Well, I mean I've been an admirer of the business from afar Um and then we had a bunch of mutual friends who were early customers. Um. So I was always wondering what's really under the hood, And when I got to see the business, I was floored, quite honestly about what they built and the quality of the business that it would become. And so it took us nine months, but we got here and you were going to be chairman of the board

with one million dollar personal investment as well. So Richard, did you talk with other funds? Did you look for other backers in Asia, for example, or in the Middle East? No? Um we we um. Yeah, as I said, I mean that that we did have the deal from the studies that that was not possible um and uh. And you know, if we were to actually take this public ourselves, it would take a long time. So I think that the

Chamas approach seemed to work very well for us. Shamas, was this the last roll of the dice for you? My understanding is that the fund would have had to return investment money in September m Richard talked about the fact that this has been nine months. In the jest station it was it was you were kind of get a bit fine, weren't you. I don't think so. Um. You know, we've met more than two under companies over

many many countries over the last two years. Um. It did take us nine months to do the diligence required to really get under the hood and understand what they've built and to feel comfortable across all aspects of the business.

Could we have done another one, sure, Could we have invested in something else, yeah, Um, but I think that we found the absolute best company, something that will thrive in the public markets and frankly, something that's going to capture an enormous amount of consumer interest, giving the average person a chance to own a bit of space. And I think there's frankly nothing more exciting than that, Richard. The average person is going to own a bit of space.

When is the first flight gonna be? Let's try and nail that down. Um. Now that we're a public company, I'm gonna have to be very circumspect on what I say. Um, So, what's happened. What's happening at the moment is we're moving the whole operation to New Mexico and uh, that's where the space sport is. We're moving our rockets there, We're moving our spaceships there. We're moving up mother ships there.

Then we'll do a few final test flights from New Mexico in the new in the new situation um and then I'll go up and then and then we'll the public will go up. I'm not going to give us specific date because I'm told I'm not allowed to. But we're we're, you know, we've had two very successful flights into space recently. We've made five astronauts, the first five astronauts to being made in America since two thousand and nine.

And so we're, you know, after fourteen years of hard work getting this far, we feel we're on on the verge of something very special. Now. It's very exciting because you specialize in sub orbital flights slightly different from Jeff bezos outfit and also Elon Mosque's outfit. They're looking at slightly other segments of space. If you like, fifty six miles above the Earth and three times the speed of

sound which you have now hit. You did say that you will go up in will you uh if the if if our brave test pilots are ready to say to me, they've now tested the craft through and through, I will I will go up when they tell me to go up. But whether it's whether it's by the end of this year or slips into next year, we'll see how many customers have paid what a quarter of a million dollars? What's it up to now? So we we closed out booking people five years ago because we

had six hundred customers. We've got eighty million dollars on deposits since the flot test flight, We've had two and a half thousand more people saying they want to come in. And you know, our research indicates that there's a very large number of people. This is a this is an incredibly capacity constrained market. Um. Just servicing the customers we have will take two two and a half years. Once you convert some of these people. The first three or

four years of operation is already mostly spoken for. Okay, But to math, let me just kind of I'm gonna try and kind of after what you just said, what Richard said, I'm gonna try and nail down a little bit more detail and when this is all going to happen. Is are there any closes in the deal that you struck with Richard about when that first flight has to

happen no. UM. The model that we are operating from, the operating model around which we're building the business, shows that we're going to be in commercial operations within a year. In the first half of next year is when we'll start to see the really ramping of of customer flights, of revenue generating flights. We expect profitability in mid UH two thousand and twenty one UM, and it's a business that frankly UH should achieve real scale by math. We

will leave it there. Thank you very much, indeed math Richard, gentlemen, thank you very much, indeed, good luck. We've been listening to a conversation with Virgin Atlantic CEO Richard Branson as well as CEO of Social Capital about venture to take the space tourism business of Virgin Galactic public. As an increasing number of people seek to pay tons of money to just get a glimpse of the edges of space.

There is a big question today how best to adapt to the radical changes currently that are happening in technology and frankly every single field, whether it's the consumer goods industry. When we see with Amazon, healthcare or beyond joining me now, I'm so pleased to say as Thomas Siebel. He is founder, chairman and CEO of C three, A long time innovator in the technology space. He's also the author of a new book, Digital Transformation, Survive and Thrive in an Era

of Mass Extinction. Hydro Mamma, thank you so much for being with us, Tom, I want to start with why

did you write this book? Well, it I've been in the information technology industry for four decades, and in the last decade I've seen as I go from boardrooms in Shanghai, Paris, Rome, New York, the CEOs and the chairman are all talking about this mandate for digital transformation, and candidly I couldn't figure out what they were talking about, and like as opposed to what analog transformation and uh so I spent about years thinking about it and and talking with these

executives about what they were thinking about, and then the last two years writing about it to distill what the essence of digital transformation is all about. And the answer well, as we power into the twenty one century, we have a new step function of information technologies that are becoming available, including elastic cloud computing, big data, the Internet of Things, and artificial intelligence, and these technically. At the convergence of

this technology. Of these technologies, we find this phenomenon called digital transformation that changes everything about the way that companies operate, the way that they manage themselves, the way they produce products,

in the way they serve customers. And we see innovators in this field like Amazon is using ai IoT and cloud computing into completely revolutionized retailing, or Tesla ai IoT on wheels revolutionizing the automotive industry, or Airbnb doing the same thing to the hospitality industry, or you know, Uber no cars, no drivers, and yet they're you know, dramatically changing transportation, and so um companies that seem to be adopting these technologies are going to be in a position

to thrive in this century, and those that don't will go the way of General Electric and Westinghouse and treasure Us. It seems like in a lot of conversations that we've had on this show, a lot of executives understand this and are highly focused on artificial intelligence cloud computing that is where their energies are going. But do you think that people are thinking abstractly enough about it, In other words, how to deploy some of this information or or do

you think that they're not applying it enough. I think there's a recognition that it's urgent and whether and then we see leaders at companies like World dout Shell or a NOL in Europe, or CAT or three M or even the United States Air Force that seemed to understand it, get it or taking very concrete steps to realize this future. And then there are nine out of ten companies that are still floundering with it and haven't quite figured it

out yet. And that's the mass extinction part UM. I think out of those nine out of ten companies, probably UM six or seven out of ten will figure it out and three or four will go out of business. So your company C three dot AI is working with Baker Hughes, which is a GE company, on a venture to use artificial intelligence in the energy space. Can you

talk a little bit about that. Yes, we formed a joint venture with Baker Hughes, which one was one of the world's largest oil service providers, to bring an entire to bring AI and IoT to the entire value chain upstream, midstream, downstream of UM petrochemical UH and chemical UM exploration, production and delivery in a way to increase safety lower cost,

increase liability, and decrease environmental impact. So one thing that I was struck by that you highlight in your book is that you actually think that big companies have a leg up when it comes to innovation in this space because they have access to the money that they need to put into it as well as the data. And I'm wondering how you think that will skew things going forward if sort of the small startups don't have as

much of a chance to succeed. Oh, I think the small startups are very well positioned to really prosper by providing the enabling technologies for these big companies to realize their vision. When we get into AI. You know, data is the lifeblood of AI. Okay, and the more data they have, the more the more the more powerful you can be, and more precise you can be in using AI to customers advantage, to society's advantage, and to the environment's advantage. So I think there's a win win here.

There's a win for small companies to develop the enabling technologies, and the big companies have the data and the CEO of the management teams with the will and the vision. I think everybody wins So it's one thing when we talk about corporations, but what about governments? What where are say where what's the government of the United States doing in terms of trying to adopt artificial intelligence and how

that's going to shape their policies and uh surveillance. Well, I think the most extreme case, in the most important cases probably defense, and there is I mean, we are candidly at war today with China, and the first front is a I okay, and alex sorry Vladiman Putin said, whoever wins the battle in AI dominates the world. And

it's true, and it won't be Russia. And so there is a dramatic acceleration going on between China that's spending between twenty billion dollars a year now and sixty billion dollars a year soon in this kind of top down to talitarian command and control state to um really advanced AI for events purposes. In the United States, we're doing the same thing in a much more messier way because we have a free market economy. So this is happening

in garages in Silicon Valley and storefronts and Bronx. But you know, leaders like Heather Wilson, the Secretary of the Air Force or Ryan McCarthy, the Secretary of the Army. I mean these people get it. I mean they know John Murray, the head of the Army Futures Command. They get it. They know exactly what they're doing, and they're applying AI in UM in very effective ways to increase of efficiency, lower cost um uh, more efficient uh logistics, to be able to engage in cyber defense and in

fact cyber war if they have to. One that I'm struggling to understand is what sort of the next iteration of transformation or disruption is to happen. I mean, we talk about Amazon, and we talk about the retail apocalypse that ensued based on the fact that they became less relevant because of the online marketplace. Is there some other industry that you think is next to be disrupted at a similar level due to the increasing use of artificial intelligence.

I think there's no industry that isn't disrupted travel, transportation, financial services, government services, UM, police services, retail. I mean, you name it. There's no sir, there's no industry uh that isn't affected. This is a this is a quarter of a trillion dollar software market in three It's an entire replacement market for everything that's happened in the last thirty years and enterprise application software. So there's no industry

that is an upend. Is there is there any truth to the idea that with the increasing use of artificial intelligence, it will make human beings less relevant as employees. Oh? No, I think there will be more opportunities for for people. There will be more interesting jobs. Okay, I think things will change. It's just like jobs changed when we move from you know, horse drawn carriages to automobiles. But more

jobs were created, not less. And I think more jobs will be created here, but there will be different kinds of jobs, and there'll be more interesting jobs. But we're not marginalizing humans. There's just I mean the idea that you know, that that we're going to have you know, these you know, killer robots that are going to be embedded in your refrigerator. They're gonna take all over the household. You know, I think this is pretty far affected. I

don't think we need to worry about that anytime. So we're not We're not heading to a full doctor who type scenario. Um. I do want to wonder what you think the government should be doing. So you talked about the army in the United States and how they seem to be very aware of the AI war that they're

at with China. I'm wondering whether there is more that should be done, whether it's in the United States or Europe or in China, to fund different artificial intelligence incubators or other other factors that would actually give give people like I mean, do you feel like there's enough of an investment right now in a government level? Do you think they should be more involved? Well, I don't think

there's any problem of shortage of investment in China. I canna. Shoot, they're doing it, and I think that the free market can take care of this, Okay, in the United States and Europe very well. I think a proper role of government, however, relates to social media. I think what's going on in social media is very troubling, okay, And these these companies are not regulating themselves. They're misusing personal and private data

in in kind of very nefarious ways. Um, they are, you know, controlling the nature of speech and the Internet. They're controlling what's news. They're allowing these systems to be weapon I used to buy bad actors and you know this, This gets to very fundamental issues like whether or not we're able to conduct a democracy. So I think this is a proper role for government, and government government does not regulate, I think we're gonna have a problem. Tom Siebel,

thank you so much for being here. Tom Siebel is founder and chief executive officer of C three dot AI based in California, but he joins me here in New York. He is the author of Digital Transformation, Survive and Thrive in an Era of Mass Extinction, with a forward by the Honorable Condolza Rice. Another slew of companies in the news are boutique investment banks Piper Jeffrey saying today it was agreeing to buy Sandler on neil and Partners for

four hundred and eighty five million dollars. What does this mean for the boutique broker dealer space joining us now? I'm so pleased to say, as Chris Whalen, chairman of Whalen Global Advisors, Chris, I just want to start with what your first impression was when you saw the news that Piper Piper Jaffrey had agreed to buy Sandler O'Neill. Well, I think it's a great transaction for both firms. I've worked with Sandler for many years, going back to when

I was at CROWL Bond Ratings. UH. They came in and were able to execute multiple transactions I think well over a hundred for small to midsize banks that we were rating at crow These were banks that it had no chance of being rated by the other agencies. And once they came in and they actually earned an investment grade rating, they could selp that to insurance companies. And the guys at Sandler jumped on this opportunity. They had historically been really an equity shop, and they came in

and very effectively pursued that. They have wonderful research in that sector, both bank inks reads small non bank financial companies, and I think I hope that the guys that Piper are going to build that business because it's an area of the market that is not well followed. Is virtually nobody writing research about small banks, and I think it's

an opportunity for them. So one thing that I'm struck by is back in two thousand twelve, even two thousand thirteen, actually two thousand and eleven, going back as far as then, UH, there was a wave of consolidation and talk of much more to come among smaller broker dealers, and it was sort of the which you kill kinds of shops that started up outside of the in the aftermath of the crisis, And I'm just wondering that kind of tapered down and

what are we left with here? I mean, do we have another wave of M and A that you're expecting to see in some of these smaller broker dealers. I think the consolidation has to come in part because, as you know, the business is extremely competitive, and larger firms have been just hammer and tongue in combat over larger mandates because that's how they survive. Five they tend not

to chase the smaller deals. But over the past few years you've seen the Goldman's and you've seen the JP Morgan's actually chasing deals that five years ago, ten years ago, they wouldn't have even looked at. So I think this is good because again, if they can take what they've built a Sandler, both the research and the execution capability and the investment bankers and grow that they have the space to themselves well, the small firms eventually have to

compete with the larger firms. Yes, once the deal sizes get up in the hundreds of millions of dollars. But if you're doing a hundred hundred fifty million dollar UH subordinated dead issues, for example, for a small bank, you pretty much have that business yourself. I'm wondering what you're expecting in terms of potential tie ups. Are there any firms you're setting your eyes on to see whether they

might join forces? Well, among the smaller ones are all private first off, so you don't have a lot of visibility into them. The boutiques tend to fall into a couple of different disciplines. Just pure investment banking with no execution, because that's a relatively easy broker dealer to run. Once you start touching money and you have customer accounts and you do sales trading, it's a much more complicated business and it requires capital. So it really depends where you're

going to focus. I think the advisory business is going to remain a boutique because you know, people like myself. I'm affiliated with a little broker dealer in New York called jvb uh Securities. It's part of Cone and Company, and I focus on the mortgage market. That's just my specialization. There are a lot of other boutiques in the in the market to do the same sort of thing, but the execution side is hard because it's not particularly profitably.

So you've covered this, you know, is anybody out there trading uh, you know, fixed income? And that's and that's actually what I want to ask you. I mean, given the fact that we have pretty narrow spreads uh in credit, when you're talking about potential for profitability, and then you're also talking about increasing use of electronic platforms and and other sorts of services, what's left Well, that's exactly right.

The boutiques and even some of the larger independence both equity and fixed income, have been getting their market share taken away by the platforms. But you know, platforms can't make markets. Platforms don't sell. And I can't tell you how many times I've had clients who've been trying to use a platform come to us and say, hey, can you help us sell this? Because there's no one they're acting as their agent. That's the difference. So I think

there is a role for the street. But the technology is changing rapidly and a lot of people get lured away with the illusion that they're going to get liquidity off of a passive platform that's just a bunch of investors facing one another. And I think the reality is you need help. If you want to sell a concept, sell a security, you have to have somebody to make the case for it who's knowledgeable enough to convince an investor to say yes. And that's a role that I

think is going to remain. Thank you so much for joining us today, Chris Whale and as chairman of Alien Global Advisors. Earlier in the show, we were speaking with Thomas Siebel, the author of a new book Digital Transformation, Survive and Thrive in an Era of Mass Extinction, which raised a question how does one invest in the upcoming wave of transformation stemming from artificial intelligence and cloud computing. Here to give us a sense, at least from one perspective,

is Bill Studebaker. He has President and Chief Investment Officer of Robo Global, with its flagship Robo et F, investing in UH some of the companies behind robotics and some of the technological advancements that are increasingly popular. So Bill, I just want you to first describe what it is that you're trying to identify in companies in terms of how to decide what to invest in. Okay, good morning, UM. Simply put, we're trying to identify the companies of the

highest revenue threshold. The corresponds directly to selling technologies and robotics and AI. So we're going basically to the gold rush. These are the picks and shovels is either are the technologies that are enabling this revolution to happen. We're looking for companies that we think have high revenue purity. Importantly, also have you know, a high technological sort of moat around their business. And in doing this we employ a specific industry focus on robotics and AI. We have a

team that's focused exclusively on this. We also have seven pH d s and our team that the who's who in robotics and AI. Please look at our website robo global dot com to get more insight, UM. But these are people that have created technologies, that have done research in academia for the better part of decades, that have an amazing perspective on the history. This gives us a real competitive mode around our business. We apply in E

s G filters to the process after that. So this part of the index constitution is very industry, research driven, fundamentally focused. Okay, then we pass on to our calculation agent that that looks at for more you know, passive filters, minimum market gap, exchange rate eligibility, and we can own no more than five percent the Free Flow OUTPOPS Index now of eight eight companies, they're domiciles and fifteen different geographies.

And the fun thing about this is less than two percent of these companies are in the SMP and in most critialencies. So these are, you know, investments that investors don't own yet, but I think they're gonna want to have a stake in as we go forward. So you're making a pitch, and you're making it strong. I'm sure a lot of people listen because right now, artificial intelligence and robotics certainly some of the biggest buzzwords out there.

I'm trying to figure out how some of the trade war landscape and they tech war between the US and China affects US. I'm looking right now at your biggest holdings. Oceaneering International is a Houston based energy company, and then you have uh human to Tchnology, which is based in Taiwan. That is a company that I don't even know ball screws. Maintains ball screws in linear guideways. Is the description here I'm trying to figure out, I mean, does it affect anything, Well,

clearly it does. I think there's a short term impact that there was an adjustment as we were exiting the end of two thousand eighteen early nineteen, and there was an impact there. Clearly this produced some slower economic activity. Roughly sixteen percent of index is industrial, so there was UM clearly slowed down in some capital spending there. You know. Having said that, we think the focus here must be on the long term. Okay, I'm sort of indifferent to

what's happening in the market on any given day. If we go down the world where there's a resolution here, these companies are really gonna take off. However, you know, if the situation where there's more isolationism that goes on, UM, countries are going to have to employ more automation to supplant you know, what they would have been importing from before. So there's going to be continuing investment in robotics and

AI regardless of what happens politically. That's my perspective. So I'm looking at your robo e T F, which managers they believe has one point three billion dollars of assets Center Management UM in North North North America. I'm just I'm wondering whether an E T F rapper is the correct rapper. If your view is the long term, well, we definitely think so. I think that active management has struggled for the last decade really because people sell what works,

they sell what doesn't work, and stuck with what's in between. Okay, Um, when you look at this evolution that we're seeing, I think everyone always looks back in hindsight, look at the Internet, how amazing and disruptive that was. People that you know, wanted to pick what were the obvious winners. Think back in the late nineties two thousand, it was companies like AOL and Netscape and into Me and some of these

companies that aren't even around. We now look at, you know, all the bank companies UM with a lot of envy going you know how and why wasn't I there? So it's easy to sort of recognize the winners after they happen. You know. We think, as you look at this indext here, we're at the front end of the most transformation period of time, probably the history of humanity and to pick the obvious winners and losers right now, we think is

really difficult. I think the key is getting invested and staying invested, and looking back in three or five years, I think investors are going to be very well rewarded. Thank you so much for being here. Thank you. Bill Studebaker is President and Chief Investment Officer of Robo Global. UH shares up of that fund, particularly fund the Robot. The ticker is Robo r O b O, up at nearly twenty percent year to date. Thanks for listening to

the Bloomberg P ANDL podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woyd's I'm on Twitter at Lisa Abramowit's one before the podcast. You can always catch us worldwide on Bloomberg Radio.