Prof G Markets
00:07:41 · Steve Eisman, Ed Elson
[00:07:41] S3: Yes. Not intentional. Very intentional. [00:07:47] S5: I guess this gets to sort of a larger question about this filing, which is like, how much does it actually tell us is really the question that I'm trying to get at. Because you point out the future compute commitments, which for me, that was the most important thing that I read. I'm like, okay. They have narrowed their losses. They're getting to a better place. That's good. Oh, but hold on. $800,000,000,000 coming down the line. And in addition to those $800,000,000,000 in compute costs that we're going to see at some point, They also say that they're going to significantly significantly increase capital expenditures, which to me tells me they're gonna just build data centers, which seems like a massive pivot, a massive, change to the business. [00:08:30] S3: I don't know if they're gonna build data centers, but they're certainly gonna be spending a lot more money either, maybe they'll rent, and that'll cost them a ton. I don't know, but clearly, I agree with you from what you're saying that, put it this way, when you commit to $800,000,000,000 your expenses are going up. How much they're going up? We don't know, because I'm not the CFO of the company. I don't know, you know, how this is all gonna play out. I read one report from someone who argued that by next year, they'll be spending 80 to $100,000,000,000 in CapEx. So so, you know, I I don't... But I don't even know what that... Is that expensed, or does that go on the balance sheet? You know? It's unclear.
00:08:30 · Steve Eisman, Ed Elson
[00:08:30] S3: I don't know if they're gonna build data centers, but they're certainly gonna be spending a lot more money either, maybe they'll rent, and that'll cost them a ton. I don't know, but clearly, I agree with you from what you're saying that, put it this way, when you commit to $800,000,000,000 your expenses are going up. How much they're going up? We don't know, because I'm not the CFO of the company. I don't know, you know, how this is all gonna play out. I read one report from someone who argued that by next year, they'll be spending 80 to $100,000,000,000 in CapEx. So so, you know, I I don't... But I don't even know what that... Is that expensed, or does that go on the balance sheet? You know? It's unclear. [00:09:16] S5: But it it seems as though eventually that's going to have to show up in the income statement in some way, whether it's through depreciation or whatever it is. It's going to show up, and it's not showing up right now. The way it shows up is at the very bottom of the document as basically like a footnote. So that's gonna be a massive change to the business. And then as you say, it does seem that the current revenue is a pretty important, or current q three revenue is a pretty important item that tells you something about the future of this business over the next, you know, near future, over the next twelve months. What I can't tell is, did did this s one... Did it really tell us much about this company?
00:10:00 · Steve Eisman, Ed Elson
[00:10:00] S3: I think it's very, very backward looking because it's giving you a snapshot of the company at the height of token maxing, and before Chinese open weight models really started to take market share. Imagine, I only heard a, I found a report that said that Anthropic cut prices by 50% to gain back market share. I don't know if that's true. Let's assume it is. That's an incredibly important data point before you go public, that you just cut prices by anyway. You know, this is not... It's 47th Street, you know, we cut prices in half, and we're bragging. Cutting prices in half could be dangerous. The question then would be, okay, you cut prices in half. How much more market share did you get? Did your revenue go down? Did it go, did you take so much market share that your revenue went up? I don't know, but, you know, that would seem to me to be the most important question to be asked. [00:11:02] S5: I mean, the question for investors, the ultimate question is, do you invest in this thing? [00:11:07] S3: Oh, I have an answer for that. That I can answer you. [00:11:13] S5: Tell me. No. He's trying to got to the point quickly. I was gonna ask you, would you need to know the answers to the questions that you just brought up before investing? I assume the answer is yes, you would.
00:11:13 · Ed Elson, Steve Eisman
[00:11:13] S5: Tell me. No. He's trying to got to the point quickly. I was gonna ask you, would you need to know the answers to the questions that you just brought up before investing? I assume the answer is yes, you would. [00:11:28] S3: Oh, yes. But I think... Look. To me, the bigger... The the the bigger, bigger, bigger question is it just seems, you know, that there are no moats around this business. I mean, if it's the case that they actually did cut prices by 50%, that would reinforce the concept that there are no moats and that the only way you're gonna gain share is price. Being in a business where you are committed to spend $800,000,000,000 where your entire franchise is just simply based on price is dangerous. [00:12:00] S5: There is another interesting angle on this S1, which was the governance structure. [00:12:07] S3: Oh, please. It's ridiculous. I mean, what's there to talk about? You're a shareholder in this company. You have no rights. Okay. Let's move on. You wanna if you wanna invest in that company, that's up to you. You know, it's it's it's been disclosed. You have no rights. Zero rights. And you wanna play? Play. You don't wanna put... You know, if you think that's very important, then you won't play.
00:12:07 · Steve Eisman, Ed Elson
[00:12:07] S3: Oh, please. It's ridiculous. I mean, what's there to talk about? You're a shareholder in this company. You have no rights. Okay. Let's move on. You wanna if you wanna invest in that company, that's up to you. You know, it's it's it's been disclosed. You have no rights. Zero rights. And you wanna play? Play. You don't wanna put... You know, if you think that's very important, then you won't play. [00:12:32] S5: Just to clarify for our listeners. So there there are multiple classes of stock here. You've got you've got the regular voting shares. You've got the regular nonvoting shares. Then you have this class t share, which is controlled by the, what they call, the long term benefit trust. And, apparently, this is sort of this committee that gets to choose the board of directors. But most importantly, there is also a class f share, one single class f share, which is controlled by the seven cofounders of the company, and the share, most importantly, carries 50.1% of the vote. How much does that matter, when evaluating an investment like this? Like, you know, beyond if you would like to have a vote, does it tell you something larger about this company and whether it's investable? [00:13:18] S3: I don't think so. Yeah. We could make the same criticism of Meta, and, you know, Meta as a stock generally has done very, very well. But this is what goes on in tech world. They don't like their own shareholders. Right. It's basically what's what's happening.
00:13:18 · Steve Eisman, Ed Elson
[00:13:18] S3: I don't think so. Yeah. We could make the same criticism of Meta, and, you know, Meta as a stock generally has done very, very well. But this is what goes on in tech world. They don't like their own shareholders. Right. It's basically what's what's happening. [00:13:35] S5: Founder worship, institutionalized. It's supposed to go public $2,000,000,000,000. That has been the expectation. There has been some debate as to whether that price might be cut. People were talking about 1,500,000,000,000. What is your expectation for when this thing goes out? [00:13:53] S3: I have no expectations. I have no information on what I read in the papers. [00:13:58] S5: Do you have a a a view on investor sentiment? I mean, one thing that I can't quite figure out myself is, did this filing make investors more or less confident in the business? [00:14:10] S3: I think it actually made it more confident because people weren't pointing out that it's only going through the second quarter and what that meant. So it's gonna be very interesting to see what sentiment looks like if, and I don't know if this happens, they have to drop third quarter numbers in before they go bubble. [00:14:27] S5: Yeah. The third quarter numbers could potentially change the game. If that happens, would you expect that the sentiment will turn quite precipitously? [00:14:39] S3: I mean, it should, but, you know, we're not conducting a group therapy session with the investing world, so I don't know how people [00:14:48] S5: That's all I want.