Prof G Markets
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.
00:14:48 · Ed Elson, Steve Eisman, S6
[00:14:48] S5: That's all I want. [00:14:49] S3: Me too. I don't know how people are gonna react. I never know. I absolutely... Love when people... You know, some people they'll they'll always say, it's in the price. It's in the price. [00:15:01] S6: And I always want to say, how did you know? Like, who did you ask? [00:15:04] S3: Did you [00:15:04] S6: take a poll? Like like, what basis do you say that? But people say this [00:15:08] S3: all the time. [00:15:09] S6: And I and I [00:15:10] S3: always say, I don't know. [00:15:12] S5: Just as we start to wrap up here, any other things that you're looking at in AI world, things that you think are especially important that we should keep track of? [00:15:20] S3: Well, the other big thing to keep track of, obviously, is the price of CoreWeave's debt. You know, at 15%, I I think, although I can't prove it, I think it's prohibitive for them to raise debt at 15% and build AI data centers. But, you know, if it gets worse, then they're really out of business. You know, they... Their their business model is basically we raise debt. We build AI data centers. That's it. That's the entire business model. And if they can't raise debt, they can't build AI data centers. That's really the... Now maybe, you know, NVIDIA will come in and backstop the whole company. You know, it's certainly possible. But barring that, you know, I I would be watching the the debt markets.
00:15:20 · Steve Eisman, Ed Elson
[00:15:20] S3: Well, the other big thing to keep track of, obviously, is the price of CoreWeave's debt. You know, at 15%, I I think, although I can't prove it, I think it's prohibitive for them to raise debt at 15% and build AI data centers. But, you know, if it gets worse, then they're really out of business. You know, they... Their their business model is basically we raise debt. We build AI data centers. That's it. That's the entire business model. And if they can't raise debt, they can't build AI data centers. That's really the... Now maybe, you know, NVIDIA will come in and backstop the whole company. You know, it's certainly possible. But barring that, you know, I I would be watching the the debt markets. [00:16:04] S5: Steve Eisman is the legendary Big Short investor and host of The Real Eisman Playbook, which is a great podcast. I highly recommend it. Steve, always appreciate your time. [00:16:14] S3: Thank you. [00:16:18] S5: After the break, the state of play in the autonomous vehicle race. And for even more markets insights, you can subscribe to my weekly newsletter. Simply put, go to edwardelson.substack.com.