Tesla Regret Doesn't Move Markets, Banks Try to Offload Twitter Debt

Published Jan 28, 2025, 10:16 PM

It’s that time of year: quarterly earnings for Tesla are tomorrow. Regular Elon, Inc. listeners will know that means a new bingo card is here (and you can play on the Bloomberg Terminal at BNGO). But that’s only one of the many breaking news items about Elon Musk—another is today’s announcement that Visa is partnering with X to deliver banking services to the social media platform. To discuss all of this, host David Papadopoulos is joined by Max Chafkin, Dana Hull and editor Craig Trudell to talk Tesla, and senior banking reporter Sridhar Natarajan to unpack X’s new debt deal.

Bloomberg Audio Studios, Podcasts, radio news.

Well, Elon Musk is now the richest person on the planet.

More than half the satellites in space are owned and controlled by one man.

Well, he's a legitimate super genius.

I mean legitimate.

He says he's always voted for Democrats, but this year it will be different.

He'll vote Republican.

There is a reason the US government is so reliant on him.

Alon Musk is a scam artist and he's done nothing.

Anything he does, he's fascinating people. Welcome to Eylan Ink, Bloomberg's weekly podcast about Elon Musk. It's Tuesday, January twenty eighth. I'm your host, David Papadopolis. It's Tesla Earnings Week, people, which means, of course, earnings bingo. You know that, get out your popcorn. But it'll also give us a fresh window into the financials of a company that is absolutely taken off in the stock market since Trump's selection. So the question is are the fundamentals catching up to these growing expectations of what Tesla can be in the Trump era or are they falling further behind. We'll dive into those numbers with our regulars here, Max Chafkin and Dana Hull. Hello to you both.

Happy almost earnings day, David, and.

Happy earnings day to you Max. Dana, Hello, Hello, Hello, and we have our global autos are beaming in from London. Craig Trudell. Craig, Hello, sir.

Thanks for having me.

Then we're going to talk about Muskin is Wall Street bankers who suddenly and finally see an opportunity to unload the thirteen billion dollars of loans they doled out the finance's purchase of Twitter. After two years, the stars seem a ligne to make a sale happen, unless that is the out of the blue emergence of deep seek scuttles the whole thing. We'll talk about all that with one of our top Wall Street reporters, Shredar Naderjan Okay, Dan, I start with you, though tomorrow is Tesla earnings Day. Remind us what we know so far in terms of how the fourth quarter went for Tesla and what you're going to be looking for the most in the numbers that come out and in the conference call that follows the release.

So Tesla earnings, we know how many cars the company delivered in the fourth quarter. We know that for the year, sales were down roughly one percent, and so the big thing for earnings is the growth outlook, And you know, Elon Musk is going to do whatever he can to kind of take control of the narrative and promise Wall Street that everything is great, that they are making progress with FSD, that the Model Y Refresh is happening, And this is going to be the first call since Donald Trump was elected, and so I expect there's going to be a lot of questions about Doge, about tariffs, about you know, is Tesla ever going to build a Mexico plan or not, And so it's really more about the call than the numbers itself.

Right by the way, just for the record, my bet on the Mexico plant is we never see that, at least not over the next four years. Craig Danna mentions the Model Why Refresh, which reminds me, I don't know that we've talked about it on this show. Tell us a bit about it and how high expectations are for it in terms of driving sales of Tesla's top model.

So I guess the first thing to start with is the look of it on the exterior. It's got a sort of cyber truck like face. It's got a light bar running across the front, very similar to the cyber truck. Otherwise, there's honestly not that much to say about it. I mean, there's in the rear seat you now have a screen, you know, along with the screen that you know, folks are used to up in the front row. There's some interior changes in terms of, you know, number of speakers. They kept a turn signal stock which they took out of the Model three when they refresh that, and Tesla owners didn't particularly care for that, you know that. I mean, that's the sort of level of of you know, lack of newness that actually.

So it's it's pretty it's pretty minor stuff. So you don't seem to expect necessarily that that refresh is going to make an enormous difference. But tell us what you're most looking for tomorrow in these numbers and in the call that follows.

Yeah, I mean, I think I agree with Dana that the outlook is going to be what's most important. But I also think that it will be interesting to see, you know, just how much of a of a you know, hit they potentially took in the fourth quarter, they did deliver more evs than in any quarter than they ever have, but they really pulled out all the stops to get there. So you know, they did you know, big discounts, they had you know cut rate loan and lease offers, they had you know, free charging deals, and so you know how much did they sort of need to give away in terms of you know, profitability to get a result that honestly was a bit disappointing even for for Tesla. Think they you know, guided to this idea that they would be able to grow for the year, and as Dana mentioned, they actually ended up even despite all of those you know, promotions and efforts, actually having a down year for the first time in more than a decade.

Craig, not to belabor the point, but just give us, give our listeners a cent. So, when margins were at their highest and just spectacular for Tesla, a standout in the auto industry, what exactly were they and where are they now? What do folks expect for the fourth quarter?

Yeah, I mean during the pandemic, I think we saw, you know, across the industry this huge run up in margins, and so you know, we saw for everybody you know, a big you know bump in terms of you know, they had plenty of demand but not enough supply. And so for for Tesla, we were seeing you know, more than twenty percent margins on a quarterly basis of you know for some time, and that was as sort of as good as it gets aside from you know, a brand like a Ferrari, right, and so we've seen now that come back down into you know, into the double digits still, but in terms of having profit margins more in line with what you would expect to see from other carmakers you know, in the past, at that margin used to be much better than their Detroit competitors.

You know, Max. This company is and I'm not saying this just because we're doing this podcast, you know, but it really is one of the most fascinating stocks out there right now, and fascinating companies right now, because the stock is still even after a recent selloff, up like crazy. It's up more than fifty percent since Trump was elected. But the sales numbers, as these guys are saying, are just margins are shrinking. And there's this growing sense out there that the more Elon gets involved in politics, the more he's alienating a big chunk of his potential customers. So, you know, unless this dream and this vision of the robotaxi and the AI future comes to pass, I don't know that the math gets tricky.

So like with Tesla, and I think this is true about basically all of Musk's companies. You have kind of like the business and the story and at times they've been kind of pointing in the same direction, and at times they've kind of diverged over the course of the company's life. And you know, since we've been doing this podcast for like two years, almost the business of Tesla has been kind of the same.

You have an.

Aging product line that people are not that excited about. Craig mentioned the refresh of the Model three, which I don't know if we've actually ever mentioned that on this podcast. Maybe we have and I've just forgotten it. But like, they went and refreshed the Model three, and it doesn't seem to have made a huge difference, or if it did make a difference, it was you know, helping from a place of weakness. The growth story that you're hitting on the AI robotaxi. Somehow Trump's gonna do something amazing. He's going to bring the good vibes back or whatever. He has a lot of ways to go on the Ernie's call to do that, and I think he will try. Right, He's going to try to talk about robotaxis and the potential for the regulatory environment to change. The problem is, of course, you need an actual working robotaxi to be able to take advantage of a favorable regulatory environment, which is not clear they have. And then the other problem is there are sort of headwinds or whatever you want to call it, you know, sort of blowing in the face of this story. One of them is that we've seen a sudden kind of correction in AI, so like we have investors reacting to the release of this Chinese large language model Deep Seek and suddenly devaluing a bunch of AI stocks. That potentially hurts, you know, the AI story that Elon Musk is going to try to tell. And the other thing is these regulatory credits, which has been a big source of Tesla's profit, as well as the tax subsidies. Trump in an executive order has basically said he's gonna get He's gonna get rid of these or at least begin considering getting rid of these which arguably would hurt other EV companies more than it would hurt Tesla, but it will also hurt Tesla.

I noticed that, I mean Tesla when the deep Seek news came out yesterday and much of the tech complex absolutely collapse. I mean in Nvidia, you know fell I don't know fifteen percent or something like that. Tesla didn't move that much. But it does strike me that if Deep Seek was something of China spot Nick moment in terms of AI, there could be a potential warning sign there for Tesla and its plans going forward.

Yeah, I think that's right, and I do think that Tesla did sort of take it on the chin. It was certainly no Navidia in terms of how much of a hit they took yesterday, But they too, you know, did have a rough day in the market, along with a lot of other companies. I do think that, you know, to Max's point, you know, we've also just generally seen challenges that companies that have gotten much further in actually commercializing robotaxis. We've seen a major player in that field already fall by the wayside, right and GM's you know, Cruse, and today they're out with their earnings and sort of beating their chests about the fact that they're going to lose a whole heck of a lot less money on that business that they've decided to just fold in into the car company. They're happy about that. So I think we've also seen, you know, companies that didn't get so far as Cruise fold I'm thinking rg AI, which Volkswagen and Ford acquired. We've seen some people start to commercialize the robotaxi business, but nobody's making any money, so it remains to be seen how anybody's going to actually earn anything here.

Yeah, I think one of the big questions that investors are hopefully going to ask is, you know, the Trump administration has alluded to this idea that they're going to have a federal framework for AVE, so rather than this patchwork of state regulations, there could be sort of a federal framework that would make it easier for Elon to get his robotaxi approved. So if anyone asks Elon about that, I mean he could say, oh, yeah, like I was just talking to Emil Michael and blah blah blah. I mean, he is part of the govern now, and there's a reason why he donated so many millions of dollars to Trump. There are things on his ask list, and so av regulation or lack thereof is one of them, and so I think that's going to be a big part of the call tomorrow as well.

One thing, aren't they supposed to have an affordable car like now, Craig, weren't we promised to twenty five thousand dollars car? Like shouldn't this whole podcast just be like, when's the twenty five thousand dollars car coming?

My best guess to that is is it's never coming. And the only way I could see, you know, some potential for them actually making good on that is actually sticking a steering wheel in that cyber cap that they showed a few months back and selling it as a human driven car for some time. Maybe they could make that sort of you know, smaller sized car at least, you know, closer to that price point. But I think from what we've sort of gathered over the last year, it looks like that's been abandoned for self driving purposes.

Craig. I wanted to go back, though, for a second, to the topic of how Musk's politics are alienating potentially a chunk of his customers. We have seen signs of late of resistance of sorts or to the company and people lashing out at the company and its products. And you guys also had an interview with a Tesla rival where he spoke to this topic. Tell us a little bit about that.

Yeah, we met with the CEO of Polestar, which you know, of course, any company that is trying to compete with Tesla is you know, of course incentivized to talk about, you know, ways in which they could potentially benefit from any setbacks at their rival. But I did find this conversation with Michael Loschler, that the relatively new CEO of Polestar, really interesting because he's German and as we know, you know, Elon has been inserting himself in German politics to this really significant degree and throwing his weight beyond the a f D, which is, you know, a far right party in Germany with a lot of skeletons in its closet. And he said in no uncertain terms that you know, the way that Musk has inserted himself into the sort of political conversation in Germany is unacceptable and is not going to fly. And you know, I think that we've seen some indications that you know, he's he's right to say that. We've seen protesters project the emotion that Musk made at last week's Trump event that you know, people saw as a sort of Roman salute, you know, that projected onto Tesla's factory outside Berlin with the words kile Tesla. We've seen in Poland, which you know, this week is commemorating eighty years since Auschwitz. You know, a minister call for a boycott against the company. We've seen you know, vandalized cyber trucks in the Bay Area, and just this morning I saw something about, you know, a store in Seattle that was tagged with you know, references to Hitler and so.

Yeah, I know that vandalized storn Seattle really jumped out. I mean it was the language that was sprayed on the window was aggressive, Nazi scum golf. Well, and that's what it says.

Well, you know, we can get to this, maybe we talk about X, but like we're seeing a lot the backlash has been much much more pronounced since the quote unquote awkward gesture. You know, we've seen Reddit, lots of boards on Reddit spanning X links like and you're just seeing like it's more than just like a bumper sticker or two. You're seeing more people pushing against it. On the other hand, of course, like America's polarized country. You know a lot of Tesla sales.

Or something, but it's not just America, it's the world, Yes is pointing out.

It definitely seems like this is going to be bad for business in Europe. It does seem like Tesla sales have suffered from Elon Musk's political turn. I don't think we know yet just how much.

Yeah, I mean, and Dan, I know I've already got you in my year saying, oh, you know that that's anecdotal evidence. You know, I won't show it to me in the macro numbers. Given that there are some people who feel so strongly about it that they're willing to go out and vandalize private property in multiple countries, is that not a window into a broader sentiment among a much larger percentage of potential Tesla customers who you are driving away.

Listen, there's no question that Elon's politics are hurting sales. I think that's irrefutable, But there's no hard data that ties the two together. Because people don't buy Tesla's for any number of reasons. And like you know the person who went out and spray painted a Nazi scum on a store, Like do they own a Tesla? Were they about to buy a Tesla and then they weren't. Like a lot of this is like performative outrage, and I mean I get it, Like the outrage is real, but like it's the same thing of like everyone's saying they're going to move to Canada if Trump is reelected. These are not people who necessarily owned a car or were in the market for a car like so and like I see the same thing. Like all there's lots of people that are like, oh my god, I know I'm embarrassed to drive my Tesla and it's like, well you're still but you're still driving it. And like the biggest thing is the stock. Like if you're so upset about Elon and his and his behavior, then sell the stock. Like like the biggest example is California's pension fund is a huge shareholder of Tesla. They have sold off their position a bit, but they are still like a top holder. So I'm not like a big fan of like this performative outrage. Like if people were really upset the stock valuation would not be as high as it is, and the fact that the stock has remained so high despite all of his shenanigans over the past six months is really telling. So I think you know, you will continue to see Tesla lose market share in states like California, you will continue to see brand erosion, and like you know, surveys about the value of the brand erode. But Elon is a financial engineer, and as long as that stock price stays hi, he is going to be fine. And like no analyst on Wall Street is calling out this.

No, no, Dana. That's a good point. But I will I will note that in speaking with Esha Day, our Tesla stock reporter this morning, she did say to me that she and her conversations with analysts that they at least they are bringing it up more with her than they ever have before in the past. Perhaps not to the point indeed of penning it into notes, but there at least it's something that can.

Because they're afraid. So if you, if you really care, then put it in a.

Note, put it in Wall Street, put it in a note. Otherwise we don't want to hear about it.

Max tell Us Bingo about being I mean, you know, the best time of the year. We have huge news here in elin Klan tell us Bloomberg Terminal subscribers. I'm sure that most of our listeners already subscribe to the Bloomberg Terminal can now play Bingo on their terminal and it's interactive.

You have there's a leaderboard. The card will change. We are very Dana and I are very excited about there.

There's a leaderboard wayman, so everyone's not getting the same card anymore.

You got a different car gives its shuffled.

We have we have, we have, we have iterated our product and it is soft launch.

This is all human labor as far as I know. But but we are very excited.

About it and to you by deep seek.

I do think that like this is really just from a pure Bingo perspective, leaving out politics or money. Just like the question of how trumpy does this earnings call get to me is like it will be interesting. We've got a few trumpy categories on the Bingo cards. Some i'd say some reaches. First Buddy Greenland are both potential squares.

All right, So you like First Buddy as a Bingo as a Bingo square. You also like Greenland Fun Dana, what are your favorite squares out there?

Oh?

Deep Seek, Come on, this is gonna be all about I mean, I'm waiting for you Deep China questions, Deep Seek, cybercab Tariffs. Let's go Geo, I want, I want full on geopolitical Elon.

You all can still download the card, and this is for those who are not Bloomberg terminal subscribers. That's small universe out there. You can download it at Bloomberg dot com backslash Elon Inc. And play with everyone here.

The terminal handle b NNGO.

Go.

By the way, no I b n g O. Isn't that what I said? I'm just just for emphasis, right, Craig Trudell Dan out. We say goodbye to you, but enjoy Bingo, enjoy the earnings, and we'll talk next week.

Thank you, Thanks much.

Okay, Max and I are now joined by shred Ar Nadaijan, one of our crack Wall Street reporters. Here, Shri, Hello, welcome to the show. Hello. Now listen, Max. Shre's got this story that he likes to periodically through out there that I just want to just debunk from the get go. He alleges that at some point in early on his career, I tried to fire him. That's not true, because had I tried to fire him, he wouldn't be here today. But Shre is a non mitigated superstar. And that's why we have used.

To believe this story because it's funny.

True, it is not, it's bold, all right, So Shre, We're going to talk about Musk and his bankers and his acquisition of Twitter for our listeners out there who've forgotten a bit about this, which may be a number of them. Not they haven't certainly haven't forgotten about Twitter or X, but they've forgotten about, perhaps about the way the deal went down. Let's go back to the beginning and remind them the way, remind him about how this deal was financed.

So we're in twenty twenty five. You want to go back to twenty twenty two, I'll take you further back. I'll take you back to twenty ten. That's the first time Elon Musk ever tweeted on Twitter. Twenty twenty two. Elon picks up this crusade of Twitter is not doing enough for free speech and what starts off or at least looks like and sounds like a joke. Idea of him wanting to buy Twitter, wanting to pull his user and wanting to see if he could take over the platform actually becomes something serious. Management is rattled by it. They even offer him a board seat. But soon things are scalid and he just straight up says I want to buy Twitter. Comes in with a pretty premium on what was then a public company, so forces Twitter management and the board to consider his offer pretty seriously. All in that was about forty four billion dollars and after a little bit of push and pull, I think at the end of the day, Twitter, advised by Goldman Sachs, JP Morgan, two of the premier investment banks, who have to do their duty and do tell the management that this is a pretty good deal, like the man or not. You can't say no to this because your shareholders will be upset, and they approve the deal. That sounds simple enough. Now we should move on to the chapter where Elon owns Twitter. But with everything Elon thinks are not quite that's simple. Two months later, he tries to find a creative way to get out of the deal. However, the courts force him to go ahead with that deal. And so he does front up the money.

That forty four billion, which comes from both a group of equity investors who put up money to buy a stake beside him, and also these Wall Street bangs.

Correct cash from Elon margin loans extended next to Tesla stock collateral, a group of equity investors that includes people like everyone from Larry Ellison's to Prince Alwalids. So you have an eclectic mix there backing this deal, Mark and recent sequoia. So all of these players who put in some of the equity city.

I believe right that. I'm not sure that's right.

He was in there.

It was a.

Colectic It wasn't czy.

A part of the mix is.

Cz Yeah, you know, yes, right, So that was right, eclectic mix of investors. So you have a situation where when you still need about thirteen billion dollars of debt.

Thirteen right, So he's picked up with so it's a forty four billion dollar purchase. They've come up with thirty some odd in cash money they need financing of about thirteen billion.

And thirteen billion on a company like Twitter, which if you go back to twenty twenty one, look at the finale Fullier twenty twenty one. I think they were projecting EBITDAF something like a billion in Jeta.

You got to help us out here.

IBITDA fancy earnings metric, but it's a metric that dead investors live by. It's it's a measurement of profit, not necessarily pure profit, but it is a key metric for Wall Street investors. And by that metric, keeping on thirteen billion dollars of debt on that company is a risky, risky maneuver. And if you go back to the environment at that time, in the years leading up to that deal, and you know this very well because we've worked in so many stories about this over the years, that it's the kind of risk that banks were not in a position to take, or at least didn't want to dig because regulators were not happy with it. They didn't want to have to run around with that kind of risk. Except the X factor here, the literal X factor here is you're dealing with someone like Elon Musk. Help him out on one deal and it could pay off brilliantly on so many other transactions and financings that brings to the market.

You help him come up with this money, even if you're not crazy doing the deal. You can help them come up with the money the thirteen billion dollars which you lend to him and then he's going to cut you in and other deals in the future, maybe an IPO of SpaceX SO and so forth. So the group of the banks are names like Morgan, Stanley, Bank of America, Barclays, among others. Their normal mo shre is they make a loan like this, it's a risky loan, it's called a leverage loan, and they want to get out of it. They want to sell these godforsaken loans, or at least the vast bulk of them. Two clients are theirs. They don't want to get stuck with it on their books. The financiers who are just for a second, who are typically those kind of buyers who would buy those loans from banks.

Think of large institutional investors, Think of people who are big in credit markets. You can go from a Blackstone to Apolo, to Pimco to Hatch Funds. A lot of these institutions who themselves have come up with the money because pension funds and retirement funds and sovereign wealth funds have invested in them. They have this treasure trove. They can use the cash from that to buy into these deals and the deals that the banks bring into the market. So these are the kinds of people that they will approach and should have been a cell They recognized from the outset was going to be a hard sell back in twenty back in twenty twenty two, because everything constant of Twitter's earnings was going on the same path that it was at. This was a difficult deal. But if you remember the noise at the time and all the changes that Elon made, all the massive staff cuts, that was chaos, and that chaos meant was advertisers were the first ones to flee. That was the lifeblood of revenue of Twitter. That's how they made a lot of their money. And when that happened, the earnings profile, the forward earnings profile, suddenly looked very shaky, and revenue did slump, earnings did slump, and that suddenly became a very very difficult ask when you go to investors and say, can you please take this dead off us.

Not only that, but you had Elon Musk in the months before the deal was closed trying to get out of it and going around telling everyone that forty four billion dollars was way too much money.

This thing was actually mad.

Yeah, like basically doing the worst sales job ever when you're trying to unload some corporate debt, right, And so yeah, I mean it's like as soon as the deal closed, even if he hadn't told the advertisers to go f themselves as he did eventually, I think it would have been a difficult You just don't want to climb like that actually going out that making life so difficult for you. They wouldn't say that because they also know he's the man behind SpaceX and Tesla and Lincoln.

You get to be the client from hell though if you are.

A whale, Right, It's like it's like the guy in the casino kind of abusing all of the you know, the dealers and the person bringing the drinks or whatever, and is still being treated super well because everybody there knows that he cow.

They'll put up with a lot of a lot of your bs. If you're not, they won't. And even the other thing tre that went against these bankers after this deal was cut to finance the purchase is the interest rate environment changed quite a bit. You went from a world in which interest rates across the globe and the US and other places benchmark rates were close to zero, they surge up to over five percent. So all that goes against them. They've been sitting on these things forever, nursing losses. I think some of them have booked, have written off losses on it. But again, all of a sudden, they're in action, They're in play, they're trying to sell these things. What is given them this wind at their back?

Well, the noises died down around Twitter, the.

Platform we like to never for do it as X.

And now we have to call it X, so that not only has the noise died down around Twitter, Twitter itself has died down, and we talk only about X. It does seem to have maintained a core group of users. And we have gone through this very very busy cycle which otherwise is known as a US election cycle, which has meant that that platform has been more active and more busy than usual. That is a good time for a social media platform, and especially good time for a social media platform that's sort of news focused, right, And also a lot of the advertisers who initially fled Twitter are back on X. They are advertising on that platform. Are they there are certain Twitter has said that this is.

What the bankers are telling shre.

We don't really know what that means. Does it Does it mean.

That like the advertisers who were there before are spending at their previous levels?

I would I would guess.

The answer is now, does it mean that advertisers who were like completely staying out of x because they were offended by Elon Musk or actually just didn't think Twitter was good enough business have decided, Hey, you know this guy is at the arm of Trump. Maybe it makes sense to like throw them a couple bucks and avoid getting into a Twitter war with one of the most powerful people, if not the most powerful people on the planet.

Like, it's it's more the latter.

If you bail, that is an improvement. Arguably, Yeah, bankers are telling you that advertisers are bad. No.

But but more importantly you also have to slice and dicee that a bit. You don't have to worry about the absolute math here. I don't need a company that is worth forty four billion dollars to make this debt feeling to invest us. I just need to make sure that this company is strong in enough that your money good on the thirteen billion dollars. So from that perspective, that has been a bit of a rebound. It's the revenue of this company is certainly not what it was for fullier twenty twenty one. We're still way of that mark, is my understanding, based on our conversations with bankers and investments.

It's going back up.

It is improved from say, twelve months ago, from eighteen months ago. So that's a helpful sign. Add to that two very distinct factors. Not the kind of things you keep in mind when you're thinking about leverage, finance, when you're thinking about risky corporate debt, but here it matters. Elon played a key role in cheer leading Trump's return to the white.

And access kind of, as Max calls it, the media arm to a certain degree of the Republican Party.

I mean, the risk here, right, if you hold their debt is that Musk says, f this, I'm done. I'm worth three hundred billion dollars. I don't want to run this thing. I've been threatening bankruptcy for a long time.

Forget it where bankrupt's not happen.

There was a world where that year ago we were talking about world right, now is unfreaking thinkable total because for all the things that Sria is saying, for the things you're saying, this thing is maybe it's on the rebound, maybe it's not.

But it's certainly useful to Elon Musk now and will be useful to Elon Musk in the foreseeable future. There's no universe where he's gonna walk away from it. And you have the fact that like every anything that's even like kind of tangentially connected to Trump or Trump vibes has seen like a fifty percent increase in its valuation or more, and so like, clearly this thing is is on the come up in terms of its value, in terms of its lasting power and so on, even if like the revenue is not there, and I don't think the revenue looks great with.

The business rebounding, What is important is you don't need to sell to investors an equity investor leg dream. You don't need to say that something that's well one hundred dollars today will be one hundred back then. You just need a principle that's all that that investors care about. So from that perspective, things that are improving. From that perspective, the Trump linkage, the Trump halo is helpful. And then there's this complete wild factor here of what we now know as Xai Corp. Two years ago, that is Elon Musk's artificial intelligence startup. We have been caught in this cycle of craze in the AI world that has drawn all sorts of investors to it. Now, what has happened is Xai and x have a lot of interconnections. It has trained its models off of the data set on x use the chips and service and instead of paying money like you.

Would do another intercompany border.

So the barter almost in this case is x has gotten an equity stake in Xai, and like all things Ai, in a span of two years that stake that x has an Xai has become quite valuable.

Reports say that Xai is that awesome man. Look.

Last valuation for Xai is roughly fifty billion dollars. Now we've reported this, which gives x is excess take in Xai is about six billion dollars.

So if you're a banker trying to get rid of these loans that have been stuck on your book for two years, that is something that you are saying to possible buyers of these loans. Hey, by the way, you buy this loan from me, you in park get a claim or a lean on X, which gets you a lean on the great XI.

So David the optimistic banker is going around to all the investors and saying, not just improving fundamentals in the business doesn't have to go to the peak levels of where Twitter was, but X has seen its business rebound. But on top of that, what you will have a lean on that is, if you're a secure investor, if you're someone who has collateral against the money that you're lending to this company, you will have a claim on X is stick in XAI, which is worth six billion. So take whatever earnings X has, apply an eight times, nine times, ten times multiple, whatever's the going right in the market. On top of that, add the value of this stick and then see that the loan that you're putting up, what is the loan to value? Is that about fifty percent sixty percent? At that rate, it will draw in a lot of people. Again, we don't know if it's a done deal. We know there's a lot of.

Have they sold any of it? Have they sold any of these loans? Yet?

They sold a small piece. They went out there and sold about a billion dollars of day.

Do they is their plan among these different banks to sell all thirteen billion or they I think the.

Goal will be, of course, to get that. I don't think all thirteen billion gets off their balance sheet anytime soon, but you know, you start one is off, another three three and a half in the coming few weeks. It at least sets the stage for a lot more to be done.

Which, by the way, mact, if that's right, that would be more or less in line with your everything in the must complexes up fifty percent now since the election.

People shouldn't listen to this podcast, you know, we would we call this like months ago of the podcast.

Well, I am an ardent listener of everything you said podcast or not.

The other thing I'll say is like I don't think the valuation fifty billion or whatever for Xi Xai crazy given open AIS valuation, which is something you know, it was like one hundred and fifty two hundred billion dollars somewhere in that in that range. But like we are in the middle of an extremely frothy period here, we're also living through a sudden kind of re evaluation of just how much those things are worth. I mean, if deep Seek does everything that all the people are excited about it believe it's gonna do, that's gonna really hurt open AI's business. Open A is not gonna be worth as much, and frankly, x Ai probably be worth the whole.

Complex has gotta has gotta be devalued quite a bit, which is what we saw in the stock market yesterday. I mean, you could argue obviously ultimately really good for the broader economy and really good if you can suddenly access this technology deep That.

Said, like in certain ways, Xai is a little bit like deep Seek in the sense that this is something that Elon kind of slapped together.

Remember like when this was launching, he had like, you know, it seemed like a handle of engineers.

Audio clips of uh, you know react.

In a matter of months, he he did manage to build something that like, is I don't know, is it as good as chatch ebt?

Probably not?

Is it? Does it get pretty close to how most people use that chatbot?

Yeah, probably does.

And so so in that sense, like this is maybe arguably another sort of lower cost chappot that is also eating away at open Ais. You know, potential, you know, market share.

Before we let you go, just to ask you, because you're a star banking reporter for US here, are you ready to bank on X? Are you gonna do your Are you gonna?

Because just made a face. I almost don't even know how to It.

Seems like.

I'm not even gonna deign to respond to that question.

Max tell us, tell us about the news today.

The news is that X has a banking partner X, the Everything app, which you know again from the jump, basically with the take over, Musk has said he wants this to be basically like a we chat, so there would be banking on this, there be all sorts of things. X has some sort of partnership with Visa that is going to allow you to at least maybe send money on X. Finally, after two years, everyone's been collamoring for this. I mean, I actually don't think anyone has, but of course except for Elon Musk, because he sees this as a potential way to expand the utility of this app.

And all I would say is, don't dismiss it offhand, because for a while, the chatter and the talk in the banking sector, in the banking world, the Jamie Diamonds of the world have talked about this idea, the specter of tech companies with hundreds of millions of customers and whilst amount of resources at their disposal, having the ability to create a competitive mode where they can actually compete against banks. They have the technology, they have the platform, they have the users, and find a banking partner and suddenly you can have an Apple credit card, you can have a fintech that sits inside Walmart, and you can have X Money where you are, you know, zipping money back and forth between users on that social media platform. So it certainly has value and potential. Now can Elon drive up the hype and the hoopla around it to convince people to actually partake And the answer is knowing Elon and knowing his legions followers. It's quite possible that happens, and if that takes off, that will be another crucial leg to the X story that will make it more appealing to invest These loans.

Aren't worth ninety ninety five. You're saying these loans are worth one hundred and ten cents onund the hour. That's what you're telling me.

Can I just say, first of all, by now I'm saying this just purely as a long time Twitter user, someone who's been on this thing forever. No One, no one wants to trust this thing with their money, Like I barely trust it with my like bad jokes and and and that has been true before and after Elon Musk bought a bought it. I mean, there's some universe, right, the Elon Musk is a great market or whatever. Maybe he somehow convinces people, but you're starting from a very poor base, which is this is not an app that is like broadly trusted with anything other than to entertain.

Oh no, And that is a good point, and we will end on that. The only thing I'll say, though, because I don't want to. I don't want Tree to leave here totally dispirited. Is his point on not dismissing something that Musk has come up with. I think it's fair. We've learned the hard way not to out of hand dismiss anything he dials up.

That's true.

Yeah, And I feel like we actually have all along been been articulating on this podcast saying that you know, this X thing, there are ways that it can make.

The money back.

We've been talking about this AI thing for like a year.

I'm glad we all end an agreement.

I don't know about that tree. Thanks for joining us. Thank you, Max Greator is always pleasure to be here. This episode was produced by Stacy Wang and Masa Rakas is our editor, and Rayhan Harmansi, our senior editor. The idea for this very show also came from Rayhan. Blake Maples handles engineering, and Dave Purcell factchecks. Our supervising producer is Magnus Henrickson. The elon In theme is written and performed by Taka Yasuzawa and Alex Sugiura. Brendan Francis Newnham is our executive producer, and Sage Bauman is the head of Bloomberg Podcasts. A big thanks to our supporters Joe Weber and Bradstone. I'm David Papadopolis. If you have a minute, rate and review our show, it'll help other listeners find us. See you next week.

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