January 7, 2026 • 28 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
President Donald Trump said he would move to ban institutional investors from buying single-family homes, part of a push to address housing affordability ahead of this year’s midterm elections.
“People live in homes, not corporations,” Trump said in a social media post Wednesday announcing the effort, adding that he would expound on the plan at the World Economic Forum in Davos, Switzerland, later this month.
The news sent shares of homebuilders, including Toll Brothers Inc., Invitation Homes Inc., KB Home and PulteGroup Inc., down. Shares of Blackstone Inc. — a major investor in single-family homes in the US —fell by as much as 9.3%, though later pared some of those losses.
The initiative comes after Trump’s allies have repeatedly raised alarms that affordability has become a political albatross for the GOP heading into the November elections. Trump urged Republican lawmakers Tuesday to avoid losing control of the House this year, saying it would lead to his impeachment. There’s reason for the White House’s concern: Just 36% of Americans said they approved of Trump’s job performance in a Gallup poll released in December, about 2 percentage points higher than his personal low before his first term ended in January 2021. Nearly half of adults described current economic conditions as “poor.”
Today's show features:
- Bloomberg Intelligence Senior REITs and Commercial Real Estate Analyst Jeffrey Langbaum on President Donald Trump’s move to ban institutional investors from buying single-family homes
- Bloomberg News Corporate and Economic Statecraft Reporter Joe Deaux on the US seizure of a Russia-flagged ship and renewed concerns about potential action toward Greenland
- Francisco Rodriguez, Senior Research Fellow at the Center for Economic and Policy Research at the University of Denver’s Josef Korbel School of International Studies, on the future of Venezuela’s government and the administration of its oil assets
- Bloomberg Intelligence Senior Media Analyst Geetha Ranganathan on Warner Bros. Discovery’s rejection of an amended takeover offer from Paramount Skydance and Versant’s shares facing pressure after its spinoff from Comcast
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business
Week Daily, reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business, finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
All right, so what does this all mean? We know
that President Trump, as you said, would move, said he
would move to ban.
Speaker 3 (00:37):
Institutional investors from buying single family homes to address housing affordability.
So let's see what Jeff Lingbaum has to say about that.
He's Bloomberg Intelligence Senior Reats and commercial real estate analysts.
He joins us from BI headquarters in Princeton. Happy New Year, Jeff,
Good to have you back here on Bloomberg Business Week Daily.
Speaker 2 (00:56):
Yeah, what's your initial.
Speaker 3 (00:57):
Take off of what we got from the president? Out
of details, we'll see where it lands.
Speaker 2 (01:01):
But your initial.
Speaker 4 (01:03):
Thoughts, Well, my initial thought was that I assumed that
once he posted something separate about the defense companies, that
this would already be out of the news cycle.
Speaker 2 (01:11):
But I guess that's not the case.
Speaker 4 (01:13):
You know, it remains to be seen what exactly he
can do and then really what the impact of that
will be. You know, I don't think that he can
just outright ban companies from you know, private market business,
but he certainly can, you know, push Congress to try
(01:34):
and do something. He can push the regulators to try
and do something. He can push the DOJ to investigate
business practices. I mean, there's a lot I was going
to say to make life uncomfortable.
Speaker 5 (01:44):
I was just going to say, he can't Maybe he
can't ban private companies from doing a certain business, but
he can make it very difficult for them to exist
through a series of things. I mean, we've seen this
happen with with certain individuals too that have come to
the administration's iire been the administration's ire. So, so talk
a little bit about what would happen to a company
such as Invitation Homes. I mean, we're not talking at
(02:05):
this point about that company no longer being able to
do what it does, which is buy and manage rental
homes for people around the country.
Speaker 4 (02:14):
Well, you know, all we have right now to go
on is the language of the true Social Post, which
specifically said would ban them from buying more homes, so
the portfolios that they have now theoretically wouldn't be touched.
The questions revolve around whether you can build homes, whether
you can buy portfolios of homes that were built specifically
(02:37):
for the intention of renting, as opposed to buying individual
previously owned homes. You know, but if at the end
of the day, these companies that you know are largely
largely grow by buying new rental homes, if they're prohibited
from doing that, that takes away a big part of
their growth engine. And then you know, it raises the
(02:58):
question of whether they're a viable business model there. If
if the government is anti institutional ownership of rental homes, yeah.
Speaker 2 (03:08):
And you just wonder, then what's next?
Speaker 3 (03:10):
What might they not want institutional investors to buy next?
Speaker 2 (03:13):
But Jeff, how much how institutional investors? How many homes
do they really own?
Speaker 3 (03:18):
What percentage of the housing stock that's out there?
Speaker 4 (03:22):
It's a tiny part. I've seen somewhere along the lines
of two percent of the overall housing stock owned by
large institutions, and the two reads you mentioned invitation homes
in amh you know, where that's their sole business is
owning rental homes. You know, they're a small part of that.
Speaker 2 (03:38):
So you know, another way to look at.
Speaker 4 (03:42):
It is, you know, Blackstone obviously got beat up a
lot today they were very early in the business. They
still have an investment in it. But not only is
it a small part of the overall housing stock, it's
a tiny part of their overall business. So it's it's
not nearly as big a problem as you would think
based on this being the proposed solution, But clearly there
(04:07):
are political points to be won by talking about improving
home affordability and going after the big private equity guys.
Speaker 2 (04:16):
Well, Jeff, that's what.
Speaker 3 (04:17):
I want to ask you, because when we talk about
you know, we can tell now we've got midterms, right and.
Speaker 2 (04:23):
To be fair, we should be talking.
Speaker 3 (04:25):
Many would argue about affordability for a lot of Americans
that are having a really tough time and cannot afford
a home. What is the real reason that Americans can't
afford a home? I mean, I'm just curious if you've
come across anything in terms of your research.
Speaker 4 (04:38):
Well, mortgage rates are still high, and you know that
has a compounding effect. Obviously it increases the cost to
buy any home.
Speaker 2 (04:47):
But it also.
Speaker 4 (04:47):
Precludes people who have a low mortgage from selling their
home because then they're going to have to roll it
into a higher one. And so you know, inventories of
for sale housing are are you know, the stuff's not
selling and.
Speaker 2 (05:03):
Prices need to come.
Speaker 4 (05:04):
Mortgage rates are going to be the primary driver of
that if rates come down. But this you know solution
may not even wouldn't even necessarily do what he wants
it to do, because just like you know, in some
cases rent control, rent caps. You know, while it sounds
good and it sounds like it's going to reduce pricing,
it just you know, part of it is stifles new construction.
(05:25):
And you can see that happening here, depending on how
exactly it shakes out.
Speaker 3 (05:30):
You know, some.
Speaker 4 (05:31):
Amh American homes. Their sole expansion business right now is buying,
is building new homes for rent. If they're precluded from
owning those types of properties, you're going to have less
construction and less supply means you know, that doesn't necessarily
mean lower pricing.
Speaker 5 (05:46):
I just want to go to some data points here.
Mike McKee sent me this earlier, sent me this report
from the American Enterprise Institute. They argue that the market
share of institutional investors is less than one percent nationally,
though there are twenty two counties, which is seven tenths
of one percent of counties that have a percentage as
high as five to ten percent. I wonder if the
(06:09):
concern from the people have and this again, this politically
seems like a populist, a very populist thing to do
and thing to say conflates the idea of institutional investor
with the idea of a landlord who's also an investor,
because it does say that twenty five percent of homes
in the fourth in the twenty in the first quarter
(06:30):
of twenty twenty four were actually purchased by investors of
all sizes. So it's sort of a narrative issue here.
Speaker 4 (06:39):
It's it's definitely a narrative issue, but there's a bunch
of different components of it. You know, we've talked about
how the large institutions don't own a lot of these homes.
They have been a large buyer of homes over the
last couple of years, but recently they haven't been because
homes aren't for sale. The pricing doesn't work for somebody
who's an economic byre where you need to get in
(07:01):
at the right price and be able to charge a
rent to generate a return. The pricing hasn't been there,
and the transaction activity has actually been pretty low. So
you know, there's there's a lot of different angles that
you can look at this and you know, wonder whether
or not actually would accomplish what it sets out to accomplish.
But it does sell, you know, it sells the point
(07:24):
of working for the you know, the someone who's looking
to buy a home but can't afford it at the
expense of the you know, the big institutions with all
the money, and you know, it's it's that inequality issue
that that I think is trying to trying to earn
political points.
Speaker 2 (07:41):
Jeff, just to be fair and just got about twenty seconds.
Speaker 3 (07:43):
Is it safe to say that investor money also institutional
money provides funds to build homes, just quickly.
Speaker 4 (07:51):
Sure, And it's unclear whether his you know, his posts
didn't address that, but it's unclear whether the target will
go towards institutions building in addition to buying all.
Speaker 2 (08:02):
Right, good stuff. So glad we could check in with you.
Speaker 3 (08:04):
Jeff langboun He is Bloomberg Intelligence Senior reats and commercial
real estate analyst joining us from BI headquarters in Princeton.
Speaker 5 (08:11):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (08:19):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five e's during
this Listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us Live on YouTube.
Speaker 3 (08:33):
We turned to Bloomberg News Corporate and Economic statecraft senior
reporter Jodo right here in studio. The seizing of the
sanctioned oil tankers, the US energy quarantine of Venezuela, that
along with the US planning to control future sales of
oil from the country and then taking in the money
and splitting it between the US and Venezuela.
Speaker 2 (08:54):
What is that about? What is the kind of end
goal here? So your benefits by all of this.
Speaker 6 (09:03):
It's unclear. You have an extraordinary action taken by the
United States of America as a direction by President Donald
Trump to remove President Maduro from Venezuela, quite literally remove him,
which in normal times would seemingly leave some sort of
a vacuum. But we did quickly see the Vice president
step in and take over.
Speaker 2 (09:24):
A friend of the oil industry as we know.
Speaker 6 (09:25):
Right, and the question has been what do we do
with the oil? What do we do with the natural resources?
The real question is what about the oil?
Speaker 3 (09:33):
Right?
Speaker 6 (09:33):
And we've seen all the actions that you saw play out.
What we've seen in the four or five days since
is a lot of here are the ideas that we
have over how we're going to handle the infrastructure of
the oil. And we've been talking to oil majors like Conico,
Phillips and Exon and Chevron. But it's a lot of talk,
(09:54):
it's not a lot of clear action.
Speaker 5 (09:57):
How does it typically work when it comes to natural
resource so as you've spent years covering levels and mining,
for example, how does this split typically work when it
comes to natural resources when a company that is maybe
from another country goes and extracts those natural resources from
a different country.
Speaker 6 (10:14):
There's all sorts of different things. There's like you have taxes,
so like okay, you have to pay a certain amount
of tax. Like nickel in Indonesia, for example. Years ago,
it used to be the Chinese would just take extract
nickel out of Indonesia, bring it back to China and
process it. The government got smart call it twelve years
ago and said, okay, well, the value add is the processing.
So you can continue to extract, but you also have
(10:36):
to process within the nation, and so there are certain
fees or taxes that go along with that, so that
the state can actually say to its taxpayers, to its citizens,
we are making money off of this as well, even
though it is an extractive industry. This thinking of it
this way is a fair way to think of how
different nations work with foreign corporations that are in big
(10:57):
extractive industries.
Speaker 5 (10:58):
Well, let me ask the question in extreme way then,
because I think there would be some people who perhaps
are watching or listening right now saying, okay, well, if
this is Venezuela's if this oil is in Venezuela, yeah,
it belongs to Venezuela and it's people, what right does
the United States have to take that oil?
Speaker 2 (11:15):
Right?
Speaker 6 (11:16):
I think there are a lot of fair legal, philosophical
arguments that are probably ahead of us. I think that's
a really important thing to point out, like, this is
uncharted territory, and while it seems like a plan is
being developed by the United States and by Venezuela and
by others, it is not clear what that plan is. Obviously,
(11:38):
we hear the Energy Secretary saying today, well, it's going
to be split and it's going to go into US
accounts and will kind of oversee those accounts and make
sure the money gets to who rightly has should be
giving that money. But like, how are they going to
execute that.
Speaker 3 (11:52):
So that two point eight billion dollars at current market
price of the thirty to fifty million barrels of oil
from Venezuela to the US.
Speaker 2 (11:59):
Yeah, we're not saying like half of it goes to
the US government. I mean does it chevron on it?
Speaker 3 (12:04):
Or who gets that money? Because it sounds that's where
I think people are saying, is this transactional.
Speaker 6 (12:10):
Right Chevron by the real major actively operating in Venezuela
right now?
Speaker 2 (12:15):
Correct?
Speaker 6 (12:15):
The reporting that we had today was that there are
talks to try to get Conical, Phillips and Exon back
into the country to also help develop the oil deposits.
They're talking about everything from developing to infrastructure. I mean
we have a quoted one of the Rice University professors
who says, to do this, we're talking like ten dollars
(12:36):
a year that has to be spent to build this out,
and then your question is, okay, say it happens, who's
getting the money? Well, it's hard to understand if the
Energy Secretary is saying it's going to be split. There
are obvious questions in the market that you are asking
right now. How does it get split? What do those
accounts look like? Who actually controls them? Like the question
(12:58):
I have is the United States president currently has a
golden share over United States steel. He has shown that
he will on certain things right have direct say one individual,
and so does he? He said I will take these accounts.
So will he? I don't know.
Speaker 3 (13:13):
I want to roll into this Greenland because we did
have the president talking about that European leaders istioning a
joint statement warning that President Trup needs to respect the
territorial integrity of Greenland and Denmark. I do wonder. It
almost feels like is this kind of like the British
Empire that the US is looking to be in terms
of natural resources? Or is that the wrong read on it?
(13:36):
Like how do you see it again? And I go
back to is this transactional? The president wants one thing,
You're going to get it and then back off.
Speaker 6 (13:43):
Here's my reader in Greenland Greenland is part of the
Western hemisphere in our national security strategy. Venezuela is part
of the Western hemisphere international security strategy. Questions came up
to the President over the weekend, if you're doing this
with Venezuela, what about other things things? And the President
mentions Greenland. Greenland has not been discussed by the President
of the United States since the summer. It was striking
(14:06):
that he brought up Greenland. And we've seen all the
news that's come out the Danish officials who have said
whoa wo woe, the points that, hey, if the United
States launched an attack on Greenland, that would effectively end NATO.
I think we need to pump our breaks for a
second see what plays out. We do know that the
President of the United States sometimes is a little bit
loose with his words, but behind his words there is
(14:28):
some meaning. And I think the market's trying to find
out what is that meaning. I think European officials are
trying to figure out what is that meaning. And I
do bring it back to connecting the dots. The President
is not telling us directly why he's talking about Greenland,
but there is a connection of this is part of
the Western Hemisphere, and he just had in his mind
a massive victory of extracting the president of Venezuela and
(14:50):
apprehending bringing him back to the United States. So on
some level, don't forget Greenland has always been a priority
for President Donald Trump. It's just that lately it hasn't
been at the time top of the pile.
Speaker 3 (15:01):
It's just fascinating, and I just want to say the
news fast and furious. We do have a headline crossing
President Trump will not allowed dividends buybacks for defense companies.
So an interesting development there as well. And I'm just
looking at Lackey Martin for example. It just dropped about
one percent here, So the defense sector now also on
(15:22):
our radar. Toodo, thank you so much. I know we'll
be coming back to you because this story certainly continues.
Speaker 5 (15:28):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (15:36):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Apple Karplay and Android Otto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (15:50):
Tim We're going to stay in Venezuela.
Speaker 5 (15:51):
Yeah, and what's needed to make this country viable. If
that's the goal of all this US action for that,
we welcome Francisco Rodriguez, Senior Research fellow at the Center
for econ and Policy Statecraft at the University of Denver's
Joseph Corbell School of International Studies. He joins us from Denver. Professor,
good to have you on the program. You write in
Foreign Affairs about Venezuela after Maduro, the current government, it's
(16:13):
still the former government of President Nicholas Maduro. The acting
president is Delsea Rodriguez, his vice president. Is this current government?
Is this current setup good for Venezuela and its people?
Speaker 7 (16:26):
Well, the question is what's the alternative and what was
the US willing or able to do. I mean, what
we saw over the weekend was the extraction of Nicolas Maduro,
but not a regime change. The regime remains in place.
What would have been necessary to change the regime that
would have been a very different operation. The US would
(16:47):
have had to carry out a land invasion of Venezuela,
would have had to occupy the country, It would have
needed to get involved in state building, and the US
clearly decided not to do that. So then it has
to deal with the authorities that actually have control over
the territory. What the US is trying to do is
to say, well, to those authorities, what you're going to
(17:07):
do is going to be circumscribed by the pressure that
we're putting on you. Will allow you to sell your
oil under certain conditions, but you have to comply with
what we're asking you to do. For example, you can't
sell the oil to China. You have to sell it
to the US, or you have to translate it to
the US in some way.
Speaker 5 (17:26):
Professors, it notable to you that there aren't necessarily humanitarian
elements that are tied to this. That's something in the
past that we've heard about nation building, the idea of democracy,
the idea of human rights, those sorts of things.
Speaker 7 (17:40):
We don't necessarily there's humanitarian and democracy. I mean, there's
one problem in Venezuela is that this country has undergone
a massive economic collapse. It suffered a contraction of seventy
one percent of its GDP, the largest ever peacetime economic
contraction in world history. And this country has been under
(18:02):
a blockade of oil like sports by the US, a
total blockade for approximately one month. And this country depends
only on oil revenue. That's its only source of revenue
to fund its economy. So we could be looking at
a situation in which the economy suffers another major humanitarian
crisis and another major economic crisis, and we have migration
(18:24):
out flows, we have our food shortages, we have quite
possibly a famine. Then there's another issue, which is the
issue of human rights and democracy. The US government has
not talked about human rights, it hasn't talked about democracy.
Secretary of Rubio said, on very vague terms, well, after
we stabilize the economy, where there's can be a transition
that can be done by the Venezuelan people. But this
(18:47):
is very vague. There was an election, it was won
by the opposition last year, but that doesn't seem to
be part of the plans of the US government to
bring this into the picture.
Speaker 3 (18:58):
Yeah, I guess I just do wonder is energy, a
focus on energy really the path forward to creating a
sustainable economy in Venezuela longer term?
Speaker 7 (19:10):
Well, I think that right now you have to worry
about the short term more than the long term. I
mean the Venezuelona economy.
Speaker 3 (19:16):
So is oil the answer short term? Because we've all
talked about the infrastrategy.
Speaker 6 (19:21):
It has to be.
Speaker 7 (19:21):
The Venezuelan economy has more than ninety percent of its
exports have been oil for the last one hundred and
ten years. You're not going to transform this overnight. This
country is in the midst of a massive humanitarian crisis.
What you have to do is recover the economy with
the anchor of that economy, which is oil. Venezuela used
to produce two and a half billion barrels. I'm not
(19:42):
talking about ages ago. I'm talking about twenty fifteen, before
sanctions were in Post was producing two and a half
billion barrels. Now it's producing around nine hundred thousand barrels.
That is the driver of the Venezuelan economy. You have
to increase that oil production, and that has to generate
royalties and revenues for the Venezula's so that it can
fund public spending, so that it can fund imports of basics.
(20:04):
This is a country that does not produce enough food
to feed itself. It buys that food with the revenues
from oil exports. So those oil exports have to be
directed primarily at making sure that Venezuela's basic needs.
Speaker 2 (20:18):
Are meant, Francisco, we've only got about a minute left. Unfortunately.
Speaker 3 (20:22):
I mean, what actions by the US will actually help
the company? Do you agree with what they've done so
far is big steps forward and will put the company,
put the company, put the country on the right path
to economic viability.
Speaker 7 (20:38):
Well, we're not sure what they've done right now. I mean,
we know that they hated the country and took out
the president, but we're not sure what it is that
they're doing in terms of this oil deal. The only
point is that I want to make is that this
money has to come back to Venezuela. This money has
to be able to fund the functioning of the Venezuelan
and economy. Otherwise you're going to have a massive humanitarian crisis.
(21:00):
And what's going to happen is that millions of more
Venezuelas are going to show up in other countries and
ultimately in US borders unless you stabilize the Venezuela economy.
Speaker 3 (21:10):
All right, we got to leave it there. Thank you
so much, really appreciate it. Francisco Rodriguez, Senior Research Fellow
at the Center for Economic and Policy Research at the
University of Denver's School of International Studies.
Speaker 5 (21:22):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (21:30):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five East during
this listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (21:44):
Hey, let's get to it with Gita ringingoth On. She's
Bloomberg Intelligence Senior Media Aly. She joins us from BI
headquarters in Princeton.
Speaker 2 (21:49):
New Jersey.
Speaker 3 (21:50):
All right, Gita, let's go to just the nuts and
bolts at this point. So Warner Brothers rejecting this amended
takeover from Paramount Skuydance. I mean, is it just increasingly
looking like this is a deal that's not going to happen,
or is it just Warner Brothers saying show me the money.
Speaker 8 (22:06):
It is a case of show me the money, Carol.
So the thirty dollars. Obviously, we've been through this now
at gazillion times. It's just not going to cut it.
With David Zasla, he obviously wants something higher. In fact,
he almost i think, kind of lays it out in
the letter that they sent the board of Warner Brothers
Discovery send to Paramounts Guidance, So they lay out something
like one dollar and seventy nine cents a share that
(22:28):
they would need to be compensated for terminating the agreement
with Netflix as well as you know, kind of going
good on some of the financing costs. So they obviously
do want paramount to raise the offer. We're thinking they
you know, it needs to be raised to at least
thirty two dollars a share to kind of bring the
Warner Brothers board back to the table.
Speaker 5 (22:51):
So what's the next move then? Does does Paramounts Guidance
come back with more money or with a different deal structure.
Speaker 8 (23:00):
So I don't know if the different deal structure is
actually going to work then, because that was what you know,
they did in the December twenty second amended offer. So
one of the big points that Warner Brothers Discovery had
raised initially was that, you know, they were talking about
whether Larry Ellison and the Allison family was actually personally
guaranteeing the bid. They did amend that, you know, they
(23:22):
did raise their termination fees, so they addressed some of
the concerns. But I think Warner Brothers is really looking
for a suite and bid, and of course, as you
just mentioned a little bit earlier, they are talking about
very very high leverage, kind of again pointing to the
uncertainty with the deal, basically just indicating that they need
to be compensated for all of that risk and uncertainty.
(23:44):
And they talk about like the difference between Paramount and Netflix,
Paramount being you know, a fourteen billion dollar market cap
company versus four hundred billion dollars for Netflix, So just
kind of talking about the quality of the company's you know, again,
it all comes down to David Zaslav's deal making skills.
I think they're absolutely probably Lodge. I mean, we've seen
this company go from seven dollars a share to you know,
(24:06):
what is it now twenty eight dollars, So well going
to try yeah, so he is going to try and
extract as much as he can. But definitely they need
a sweetened bit.
Speaker 3 (24:17):
You know, with any investment, though, you got to know
when to like kind of say this is good enough.
What I'm curious about, though, Larry Ellison, I'm looking at
Rich Gooe on the Bloomberg He's worth about two hundred
and forty five billion dollars, So but.
Speaker 2 (24:29):
A lot of that I think is tied to shares,
and we.
Speaker 5 (24:32):
Know historical ownership specifically.
Speaker 3 (24:34):
Exactly what I'm curious about though, and we know getha
that media deals can have a lot of leverage. But
again going back to that paramount, is what about a
fourteen billion dollar market value company you were just talking
about this and this acquisition, we're talking about almost ninety
five billion dollars of debt and equity financing.
Speaker 2 (24:54):
Is that is it too much? Is it manageable?
Speaker 8 (24:58):
It is way too much where we're talking about something
like seven to eight times leverage. You know, that's what
that's the pro forma gross leverage ratio that we're going
to be looking at if this deal were to take place,
which just basically puts the combined company at a lot
of risk, right, so you know, all of their cash flows,
all of their EBIDAH will basically go towards debt financing.
(25:21):
So it really definitely puts too much pressure, which is
one of the points that Warner Brothers Discovery keeps raising.
And you know that any company with a huge amount
of leverage and with the declining EBITDAH profile, well that's
not a good situation.
Speaker 3 (25:36):
To be in.
Speaker 8 (25:36):
And that actually we've seen that actually play out with
Warner Brothers Discovery itself, you know, which when the deal
was announced with the Warner Brothers and the Discovery companies
coming together, they had, you know, promised something like fourteen
billion dollars in EBITDAH with over fifty billion dollars in debt.
That never really happened. You know, EBITDAH fell shot by
something like fifty percent. And so that's kind of the
(25:58):
risk that we run in this case as well.
Speaker 2 (26:01):
Although one can argue.
Speaker 8 (26:01):
That there are synergies and all of that good stuff,
but again, you know, David Zaslav only knows too well
what the problems are with too much of leverage.
Speaker 5 (26:10):
Okay, Githa, what we have you? I want to talk about.
Vers In shares down another six and a half percent today,
down about twenty five percent just in the last three days.
That's when it officially began trading as an official spinoff
from Comcast. It's the parent of ms NOW, CNBC and others.
You have a note doubt that says you think the
legacy challenges will remain in overhanging a sale or combination
(26:32):
with other cable networks. Seems inevitable. Is this just a
little stopping point or a holdover until this is part
of some other company.
Speaker 8 (26:42):
Yeah, I think you know, the writing is on the wall.
T I mean, we've seen this now play out for
years and years where you know, we had PTV legacy
PATV assets, especially the cable network business, really in secular decline,
and what we thought was kind of this drip drip
of this whole melting ice cube has now kind of
turned in this avalanche. And that's exactly what we're seeing
even with Versuen, because if you just you know, kind
(27:04):
of heard their projections for EBITDA, we're kind of looking
at about a ten to twelve percent EBITDA decline year
after year. And that is really what is reflected in
those multiples. I mean, this is a stock that should
you know, just kind of given its debt profile, the
fact that it has a really clean balance sheet, the
fact that there's visibility into affiliate fees, should be trading
at least at about six times, just based on historical multiples.
(27:26):
It's trading right now at less than four times. So
just again goes to reflect all of the uncertainty and
the nervousness that investors have about assets like this. So yeah,
there's absolutely no doubt that this needs to combine, needs
to be part of some bigger umbrella, maybe Discovery, if
you know, that's the Netflix deal goes through and they
actually spin it out.
Speaker 3 (27:45):
That's again it's a lot, right, a lot of fear, Yeah,
you know part of Yeah, I mean, does that something
like that maybe happen? Then, Gita and just got about
twenty seconds.
Speaker 8 (27:57):
Yeah, if Warner Brothers, Discovery kind of keeps pushing on
this Netflix deal, you know, one of the things they're
really hoping for is then that they do, you know,
that they are able to kind of spin out that
TV network business, and then of course that then becomes
a major roll up vehicle for you know, VERSU and
four other table network owners.
Speaker 3 (28:15):
Amazing as always must read research on the Bloomberg terminal, Giita,
Thank you so much. Githa ringingath On, She's a Bloomberg
Intelligence Senior media analyst.
Speaker 1 (28:24):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot Com.
The iHeartRadio app tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
(28:45):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business
Week Daily, reporting from the magazine that helps global leaders
stay ahead with insight on the people, companies, and trends
shaping today's complex economy. Plus global business, finance and tech
(00:23):
news as it happens. The Bloomberg Business Week Daily Podcast
with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2 (00:32):
All right, so what does this all mean? We know
that President Trump, as you said, would move, said he
would move to ban.
Speaker 3 (00:37):
Institutional investors from buying single family homes to address housing affordability.
So let's see what Jeff Lingbaum has to say about that.
He's Bloomberg Intelligence Senior Reats and commercial real estate analysts.
He joins us from BI headquarters in Princeton. Happy New Year, Jeff,
Good to have you back here on Bloomberg Business Week Daily.
Speaker 2 (00:56):
Yeah, what's your initial.
Speaker 3 (00:57):
Take off of what we got from the president? Out
of details, we'll see where it lands.
Speaker 2 (01:01):
But your initial.
Speaker 4 (01:03):
Thoughts, Well, my initial thought was that I assumed that
once he posted something separate about the defense companies, that
this would already be out of the news cycle.
Speaker 2 (01:11):
But I guess that's not the case.
Speaker 4 (01:13):
You know, it remains to be seen what exactly he
can do and then really what the impact of that
will be. You know, I don't think that he can
just outright ban companies from you know, private market business,
but he certainly can, you know, push Congress to try
(01:34):
and do something. He can push the regulators to try
and do something. He can push the DOJ to investigate
business practices. I mean, there's a lot I was going
to say to make life uncomfortable.
Speaker 5 (01:44):
I was just going to say, he can't Maybe he
can't ban private companies from doing a certain business, but
he can make it very difficult for them to exist
through a series of things. I mean, we've seen this
happen with with certain individuals too that have come to
the administration's iire been the administration's ire. So, so talk
a little bit about what would happen to a company
such as Invitation Homes. I mean, we're not talking at
(02:05):
this point about that company no longer being able to
do what it does, which is buy and manage rental
homes for people around the country.
Speaker 4 (02:14):
Well, you know, all we have right now to go
on is the language of the true Social Post, which
specifically said would ban them from buying more homes, so
the portfolios that they have now theoretically wouldn't be touched.
The questions revolve around whether you can build homes, whether
you can buy portfolios of homes that were built specifically
(02:37):
for the intention of renting, as opposed to buying individual
previously owned homes. You know, but if at the end
of the day, these companies that you know are largely
largely grow by buying new rental homes, if they're prohibited
from doing that, that takes away a big part of
their growth engine. And then you know, it raises the
(02:58):
question of whether they're a viable business model there. If
if the government is anti institutional ownership of rental homes, yeah.
Speaker 2 (03:08):
And you just wonder, then what's next?
Speaker 3 (03:10):
What might they not want institutional investors to buy next?
Speaker 2 (03:13):
But Jeff, how much how institutional investors? How many homes
do they really own?
Speaker 3 (03:18):
What percentage of the housing stock that's out there?
Speaker 4 (03:22):
It's a tiny part. I've seen somewhere along the lines
of two percent of the overall housing stock owned by
large institutions, and the two reads you mentioned invitation homes
in amh you know, where that's their sole business is
owning rental homes. You know, they're a small part of that.
Speaker 2 (03:38):
So you know, another way to look at.
Speaker 4 (03:42):
It is, you know, Blackstone obviously got beat up a
lot today they were very early in the business. They
still have an investment in it. But not only is
it a small part of the overall housing stock, it's
a tiny part of their overall business. So it's it's
not nearly as big a problem as you would think
based on this being the proposed solution, But clearly there
(04:07):
are political points to be won by talking about improving
home affordability and going after the big private equity guys.
Speaker 2 (04:16):
Well, Jeff, that's what.
Speaker 3 (04:17):
I want to ask you, because when we talk about
you know, we can tell now we've got midterms, right and.
Speaker 2 (04:23):
To be fair, we should be talking.
Speaker 3 (04:25):
Many would argue about affordability for a lot of Americans
that are having a really tough time and cannot afford
a home. What is the real reason that Americans can't
afford a home? I mean, I'm just curious if you've
come across anything in terms of your research.
Speaker 4 (04:38):
Well, mortgage rates are still high, and you know that
has a compounding effect. Obviously it increases the cost to
buy any home.
Speaker 2 (04:47):
But it also.
Speaker 4 (04:47):
Precludes people who have a low mortgage from selling their
home because then they're going to have to roll it
into a higher one. And so you know, inventories of
for sale housing are are you know, the stuff's not
selling and.
Speaker 2 (05:03):
Prices need to come.
Speaker 4 (05:04):
Mortgage rates are going to be the primary driver of
that if rates come down. But this you know solution
may not even wouldn't even necessarily do what he wants
it to do, because just like you know, in some
cases rent control, rent caps. You know, while it sounds
good and it sounds like it's going to reduce pricing,
it just you know, part of it is stifles new construction.
(05:25):
And you can see that happening here, depending on how
exactly it shakes out.
Speaker 3 (05:30):
You know, some.
Speaker 4 (05:31):
Amh American homes. Their sole expansion business right now is buying,
is building new homes for rent. If they're precluded from
owning those types of properties, you're going to have less
construction and less supply means you know, that doesn't necessarily
mean lower pricing.
Speaker 5 (05:46):
I just want to go to some data points here.
Mike McKee sent me this earlier, sent me this report
from the American Enterprise Institute. They argue that the market
share of institutional investors is less than one percent nationally,
though there are twenty two counties, which is seven tenths
of one percent of counties that have a percentage as
high as five to ten percent. I wonder if the
(06:09):
concern from the people have and this again, this politically
seems like a populist, a very populist thing to do
and thing to say conflates the idea of institutional investor
with the idea of a landlord who's also an investor,
because it does say that twenty five percent of homes
in the fourth in the twenty in the first quarter
(06:30):
of twenty twenty four were actually purchased by investors of
all sizes. So it's sort of a narrative issue here.
Speaker 4 (06:39):
It's it's definitely a narrative issue, but there's a bunch
of different components of it. You know, we've talked about
how the large institutions don't own a lot of these homes.
They have been a large buyer of homes over the
last couple of years, but recently they haven't been because
homes aren't for sale. The pricing doesn't work for somebody
who's an economic byre where you need to get in
(07:01):
at the right price and be able to charge a
rent to generate a return. The pricing hasn't been there,
and the transaction activity has actually been pretty low. So
you know, there's there's a lot of different angles that
you can look at this and you know, wonder whether
or not actually would accomplish what it sets out to accomplish.
But it does sell, you know, it sells the point
(07:24):
of working for the you know, the someone who's looking
to buy a home but can't afford it at the
expense of the you know, the big institutions with all
the money, and you know, it's it's that inequality issue
that that I think is trying to trying to earn
political points.
Speaker 2 (07:41):
Jeff, just to be fair and just got about twenty seconds.
Speaker 3 (07:43):
Is it safe to say that investor money also institutional
money provides funds to build homes, just quickly.
Speaker 4 (07:51):
Sure, And it's unclear whether his you know, his posts
didn't address that, but it's unclear whether the target will
go towards institutions building in addition to buying all.
Speaker 2 (08:02):
Right, good stuff. So glad we could check in with you.
Speaker 3 (08:04):
Jeff langboun He is Bloomberg Intelligence Senior reats and commercial
real estate analyst joining us from BI headquarters in Princeton.
Speaker 5 (08:11):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (08:19):
You're listening to the Bloomberg Business Week Daily podcast. Catch
us live weekday afternoons from two to five e's during
this Listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us Live on YouTube.
Speaker 3 (08:33):
We turned to Bloomberg News Corporate and Economic statecraft senior
reporter Jodo right here in studio. The seizing of the
sanctioned oil tankers, the US energy quarantine of Venezuela, that
along with the US planning to control future sales of
oil from the country and then taking in the money
and splitting it between the US and Venezuela.
Speaker 2 (08:54):
What is that about? What is the kind of end
goal here? So your benefits by all of this.
Speaker 6 (09:03):
It's unclear. You have an extraordinary action taken by the
United States of America as a direction by President Donald
Trump to remove President Maduro from Venezuela, quite literally remove him,
which in normal times would seemingly leave some sort of
a vacuum. But we did quickly see the Vice president
step in and take over.
Speaker 2 (09:24):
A friend of the oil industry as we know.
Speaker 6 (09:25):
Right, and the question has been what do we do
with the oil? What do we do with the natural resources?
The real question is what about the oil?
Speaker 3 (09:33):
Right?
Speaker 6 (09:33):
And we've seen all the actions that you saw play out.
What we've seen in the four or five days since
is a lot of here are the ideas that we
have over how we're going to handle the infrastructure of
the oil. And we've been talking to oil majors like Conico,
Phillips and Exon and Chevron. But it's a lot of talk,
(09:54):
it's not a lot of clear action.
Speaker 5 (09:57):
How does it typically work when it comes to natural
resource so as you've spent years covering levels and mining,
for example, how does this split typically work when it
comes to natural resources when a company that is maybe
from another country goes and extracts those natural resources from
a different country.
Speaker 6 (10:14):
There's all sorts of different things. There's like you have taxes,
so like okay, you have to pay a certain amount
of tax. Like nickel in Indonesia, for example. Years ago,
it used to be the Chinese would just take extract
nickel out of Indonesia, bring it back to China and
process it. The government got smart call it twelve years
ago and said, okay, well, the value add is the processing.
So you can continue to extract, but you also have
(10:36):
to process within the nation, and so there are certain
fees or taxes that go along with that, so that
the state can actually say to its taxpayers, to its citizens,
we are making money off of this as well, even
though it is an extractive industry. This thinking of it
this way is a fair way to think of how
different nations work with foreign corporations that are in big
(10:57):
extractive industries.
Speaker 5 (10:58):
Well, let me ask the question in extreme way then,
because I think there would be some people who perhaps
are watching or listening right now saying, okay, well, if
this is Venezuela's if this oil is in Venezuela, yeah,
it belongs to Venezuela and it's people, what right does
the United States have to take that oil?
Speaker 2 (11:15):
Right?
Speaker 6 (11:16):
I think there are a lot of fair legal, philosophical
arguments that are probably ahead of us. I think that's
a really important thing to point out, like, this is
uncharted territory, and while it seems like a plan is
being developed by the United States and by Venezuela and
by others, it is not clear what that plan is. Obviously,
(11:38):
we hear the Energy Secretary saying today, well, it's going
to be split and it's going to go into US
accounts and will kind of oversee those accounts and make
sure the money gets to who rightly has should be
giving that money. But like, how are they going to
execute that.
Speaker 3 (11:52):
So that two point eight billion dollars at current market
price of the thirty to fifty million barrels of oil
from Venezuela to the US.
Speaker 2 (11:59):
Yeah, we're not saying like half of it goes to
the US government. I mean does it chevron on it?
Speaker 3 (12:04):
Or who gets that money? Because it sounds that's where
I think people are saying, is this transactional.
Speaker 6 (12:10):
Right Chevron by the real major actively operating in Venezuela
right now?
Speaker 2 (12:15):
Correct?
Speaker 6 (12:15):
The reporting that we had today was that there are
talks to try to get Conical, Phillips and Exon back
into the country to also help develop the oil deposits.
They're talking about everything from developing to infrastructure. I mean
we have a quoted one of the Rice University professors
who says, to do this, we're talking like ten dollars
(12:36):
a year that has to be spent to build this out,
and then your question is, okay, say it happens, who's
getting the money? Well, it's hard to understand if the
Energy Secretary is saying it's going to be split. There
are obvious questions in the market that you are asking
right now. How does it get split? What do those
accounts look like? Who actually controls them? Like the question
(12:58):
I have is the United States president currently has a
golden share over United States steel. He has shown that
he will on certain things right have direct say one individual,
and so does he? He said I will take these accounts.
So will he? I don't know.
Speaker 3 (13:13):
I want to roll into this Greenland because we did
have the president talking about that European leaders istioning a
joint statement warning that President Trup needs to respect the
territorial integrity of Greenland and Denmark. I do wonder. It
almost feels like is this kind of like the British
Empire that the US is looking to be in terms
of natural resources? Or is that the wrong read on it?
(13:36):
Like how do you see it again? And I go
back to is this transactional? The president wants one thing,
You're going to get it and then back off.
Speaker 6 (13:43):
Here's my reader in Greenland Greenland is part of the
Western hemisphere in our national security strategy. Venezuela is part
of the Western hemisphere international security strategy. Questions came up
to the President over the weekend, if you're doing this
with Venezuela, what about other things things? And the President
mentions Greenland. Greenland has not been discussed by the President
of the United States since the summer. It was striking
(14:06):
that he brought up Greenland. And we've seen all the
news that's come out the Danish officials who have said
whoa wo woe, the points that, hey, if the United
States launched an attack on Greenland, that would effectively end NATO.
I think we need to pump our breaks for a
second see what plays out. We do know that the
President of the United States sometimes is a little bit
loose with his words, but behind his words there is
(14:28):
some meaning. And I think the market's trying to find
out what is that meaning. I think European officials are
trying to figure out what is that meaning. And I
do bring it back to connecting the dots. The President
is not telling us directly why he's talking about Greenland,
but there is a connection of this is part of
the Western Hemisphere, and he just had in his mind
a massive victory of extracting the president of Venezuela and
(14:50):
apprehending bringing him back to the United States. So on
some level, don't forget Greenland has always been a priority
for President Donald Trump. It's just that lately it hasn't
been at the time top of the pile.
Speaker 3 (15:01):
It's just fascinating, and I just want to say the
news fast and furious. We do have a headline crossing
President Trump will not allowed dividends buybacks for defense companies.
So an interesting development there as well. And I'm just
looking at Lackey Martin for example. It just dropped about
one percent here, So the defense sector now also on
(15:22):
our radar. Toodo, thank you so much. I know we'll
be coming back to you because this story certainly continues.
Speaker 5 (15:28):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (15:36):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five eas during
Listen on Apple Karplay and Android Otto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 2 (15:50):
Tim We're going to stay in Venezuela.
Speaker 5 (15:51):
Yeah, and what's needed to make this country viable. If
that's the goal of all this US action for that,
we welcome Francisco Rodriguez, Senior Research fellow at the Center
for econ and Policy Statecraft at the University of Denver's
Joseph Corbell School of International Studies. He joins us from Denver. Professor,
good to have you on the program. You write in
Foreign Affairs about Venezuela after Maduro, the current government, it's
(16:13):
still the former government of President Nicholas Maduro. The acting
president is Delsea Rodriguez, his vice president. Is this current government?
Is this current setup good for Venezuela and its people?
Speaker 7 (16:26):
Well, the question is what's the alternative and what was
the US willing or able to do. I mean, what
we saw over the weekend was the extraction of Nicolas Maduro,
but not a regime change. The regime remains in place.
What would have been necessary to change the regime that
would have been a very different operation. The US would
(16:47):
have had to carry out a land invasion of Venezuela,
would have had to occupy the country, It would have
needed to get involved in state building, and the US
clearly decided not to do that. So then it has
to deal with the authorities that actually have control over
the territory. What the US is trying to do is
to say, well, to those authorities, what you're going to
(17:07):
do is going to be circumscribed by the pressure that
we're putting on you. Will allow you to sell your
oil under certain conditions, but you have to comply with
what we're asking you to do. For example, you can't
sell the oil to China. You have to sell it
to the US, or you have to translate it to
the US in some way.
Speaker 5 (17:26):
Professors, it notable to you that there aren't necessarily humanitarian
elements that are tied to this. That's something in the
past that we've heard about nation building, the idea of democracy,
the idea of human rights, those sorts of things.
Speaker 7 (17:40):
We don't necessarily there's humanitarian and democracy. I mean, there's
one problem in Venezuela is that this country has undergone
a massive economic collapse. It suffered a contraction of seventy
one percent of its GDP, the largest ever peacetime economic
contraction in world history. And this country has been under
(18:02):
a blockade of oil like sports by the US, a
total blockade for approximately one month. And this country depends
only on oil revenue. That's its only source of revenue
to fund its economy. So we could be looking at
a situation in which the economy suffers another major humanitarian
crisis and another major economic crisis, and we have migration
(18:24):
out flows, we have our food shortages, we have quite
possibly a famine. Then there's another issue, which is the
issue of human rights and democracy. The US government has
not talked about human rights, it hasn't talked about democracy.
Secretary of Rubio said, on very vague terms, well, after
we stabilize the economy, where there's can be a transition
that can be done by the Venezuelan people. But this
(18:47):
is very vague. There was an election, it was won
by the opposition last year, but that doesn't seem to
be part of the plans of the US government to
bring this into the picture.
Speaker 3 (18:58):
Yeah, I guess I just do wonder is energy, a
focus on energy really the path forward to creating a
sustainable economy in Venezuela longer term?
Speaker 7 (19:10):
Well, I think that right now you have to worry
about the short term more than the long term. I
mean the Venezuelona economy.
Speaker 3 (19:16):
So is oil the answer short term? Because we've all
talked about the infrastrategy.
Speaker 6 (19:21):
It has to be.
Speaker 7 (19:21):
The Venezuelan economy has more than ninety percent of its
exports have been oil for the last one hundred and
ten years. You're not going to transform this overnight. This
country is in the midst of a massive humanitarian crisis.
What you have to do is recover the economy with
the anchor of that economy, which is oil. Venezuela used
to produce two and a half billion barrels. I'm not
(19:42):
talking about ages ago. I'm talking about twenty fifteen, before
sanctions were in Post was producing two and a half
billion barrels. Now it's producing around nine hundred thousand barrels.
That is the driver of the Venezuelan economy. You have
to increase that oil production, and that has to generate
royalties and revenues for the Venezula's so that it can
fund public spending, so that it can fund imports of basics.
(20:04):
This is a country that does not produce enough food
to feed itself. It buys that food with the revenues
from oil exports. So those oil exports have to be
directed primarily at making sure that Venezuela's basic needs.
Speaker 2 (20:18):
Are meant, Francisco, we've only got about a minute left. Unfortunately.
Speaker 3 (20:22):
I mean, what actions by the US will actually help
the company? Do you agree with what they've done so
far is big steps forward and will put the company,
put the company, put the country on the right path
to economic viability.
Speaker 7 (20:38):
Well, we're not sure what they've done right now. I mean,
we know that they hated the country and took out
the president, but we're not sure what it is that
they're doing in terms of this oil deal. The only
point is that I want to make is that this
money has to come back to Venezuela. This money has
to be able to fund the functioning of the Venezuelan
and economy. Otherwise you're going to have a massive humanitarian crisis.
(21:00):
And what's going to happen is that millions of more
Venezuelas are going to show up in other countries and
ultimately in US borders unless you stabilize the Venezuela economy.
Speaker 3 (21:10):
All right, we got to leave it there. Thank you
so much, really appreciate it. Francisco Rodriguez, Senior Research Fellow
at the Center for Economic and Policy Research at the
University of Denver's School of International Studies.
Speaker 5 (21:22):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 1 (21:30):
You're listening to the Bloomberg Business Week Daily Podcast. Catch
us live weekday afternoons from two to five East during
this listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 3 (21:44):
Hey, let's get to it with Gita ringingoth On. She's
Bloomberg Intelligence Senior Media Aly. She joins us from BI
headquarters in Princeton.
Speaker 2 (21:49):
New Jersey.
Speaker 3 (21:50):
All right, Gita, let's go to just the nuts and
bolts at this point. So Warner Brothers rejecting this amended
takeover from Paramount Skuydance. I mean, is it just increasingly
looking like this is a deal that's not going to happen,
or is it just Warner Brothers saying show me the money.
Speaker 8 (22:06):
It is a case of show me the money, Carol.
So the thirty dollars. Obviously, we've been through this now
at gazillion times. It's just not going to cut it.
With David Zasla, he obviously wants something higher. In fact,
he almost i think, kind of lays it out in
the letter that they sent the board of Warner Brothers
Discovery send to Paramounts Guidance, So they lay out something
like one dollar and seventy nine cents a share that
(22:28):
they would need to be compensated for terminating the agreement
with Netflix as well as you know, kind of going
good on some of the financing costs. So they obviously
do want paramount to raise the offer. We're thinking they
you know, it needs to be raised to at least
thirty two dollars a share to kind of bring the
Warner Brothers board back to the table.
Speaker 5 (22:51):
So what's the next move then? Does does Paramounts Guidance
come back with more money or with a different deal structure.
Speaker 8 (23:00):
So I don't know if the different deal structure is
actually going to work then, because that was what you know,
they did in the December twenty second amended offer. So
one of the big points that Warner Brothers Discovery had
raised initially was that, you know, they were talking about
whether Larry Ellison and the Allison family was actually personally
guaranteeing the bid. They did amend that, you know, they
(23:22):
did raise their termination fees, so they addressed some of
the concerns. But I think Warner Brothers is really looking
for a suite and bid, and of course, as you
just mentioned a little bit earlier, they are talking about
very very high leverage, kind of again pointing to the
uncertainty with the deal, basically just indicating that they need
to be compensated for all of that risk and uncertainty.
(23:44):
And they talk about like the difference between Paramount and Netflix,
Paramount being you know, a fourteen billion dollar market cap
company versus four hundred billion dollars for Netflix, So just
kind of talking about the quality of the company's you know, again,
it all comes down to David Zaslav's deal making skills.
I think they're absolutely probably Lodge. I mean, we've seen
this company go from seven dollars a share to you know,
(24:06):
what is it now twenty eight dollars, So well going
to try yeah, so he is going to try and
extract as much as he can. But definitely they need
a sweetened bit.
Speaker 3 (24:17):
You know, with any investment, though, you got to know
when to like kind of say this is good enough.
What I'm curious about, though, Larry Ellison, I'm looking at
Rich Gooe on the Bloomberg He's worth about two hundred
and forty five billion dollars, So but.
Speaker 2 (24:29):
A lot of that I think is tied to shares,
and we.
Speaker 5 (24:32):
Know historical ownership specifically.
Speaker 3 (24:34):
Exactly what I'm curious about though, and we know getha
that media deals can have a lot of leverage. But
again going back to that paramount, is what about a
fourteen billion dollar market value company you were just talking
about this and this acquisition, we're talking about almost ninety
five billion dollars of debt and equity financing.
Speaker 2 (24:54):
Is that is it too much? Is it manageable?
Speaker 8 (24:58):
It is way too much where we're talking about something
like seven to eight times leverage. You know, that's what
that's the pro forma gross leverage ratio that we're going
to be looking at if this deal were to take place,
which just basically puts the combined company at a lot
of risk, right, so you know, all of their cash flows,
all of their EBIDAH will basically go towards debt financing.
(25:21):
So it really definitely puts too much pressure, which is
one of the points that Warner Brothers Discovery keeps raising.
And you know that any company with a huge amount
of leverage and with the declining EBITDAH profile, well that's
not a good situation.
Speaker 3 (25:36):
To be in.
Speaker 8 (25:36):
And that actually we've seen that actually play out with
Warner Brothers Discovery itself, you know, which when the deal
was announced with the Warner Brothers and the Discovery companies
coming together, they had, you know, promised something like fourteen
billion dollars in EBITDAH with over fifty billion dollars in debt.
That never really happened. You know, EBITDAH fell shot by
something like fifty percent. And so that's kind of the
(25:58):
risk that we run in this case as well.
Speaker 2 (26:01):
Although one can argue.
Speaker 8 (26:01):
That there are synergies and all of that good stuff,
but again, you know, David Zaslav only knows too well
what the problems are with too much of leverage.
Speaker 5 (26:10):
Okay, Githa, what we have you? I want to talk about.
Vers In shares down another six and a half percent today,
down about twenty five percent just in the last three days.
That's when it officially began trading as an official spinoff
from Comcast. It's the parent of ms NOW, CNBC and others.
You have a note doubt that says you think the
legacy challenges will remain in overhanging a sale or combination
(26:32):
with other cable networks. Seems inevitable. Is this just a
little stopping point or a holdover until this is part
of some other company.
Speaker 8 (26:42):
Yeah, I think you know, the writing is on the wall.
T I mean, we've seen this now play out for
years and years where you know, we had PTV legacy
PATV assets, especially the cable network business, really in secular decline,
and what we thought was kind of this drip drip
of this whole melting ice cube has now kind of
turned in this avalanche. And that's exactly what we're seeing
even with Versuen, because if you just you know, kind
(27:04):
of heard their projections for EBITDA, we're kind of looking
at about a ten to twelve percent EBITDA decline year
after year. And that is really what is reflected in
those multiples. I mean, this is a stock that should
you know, just kind of given its debt profile, the
fact that it has a really clean balance sheet, the
fact that there's visibility into affiliate fees, should be trading
at least at about six times, just based on historical multiples.
(27:26):
It's trading right now at less than four times. So
just again goes to reflect all of the uncertainty and
the nervousness that investors have about assets like this. So yeah,
there's absolutely no doubt that this needs to combine, needs
to be part of some bigger umbrella, maybe Discovery, if
you know, that's the Netflix deal goes through and they
actually spin it out.
Speaker 3 (27:45):
That's again it's a lot, right, a lot of fear, Yeah,
you know part of Yeah, I mean, does that something
like that maybe happen? Then, Gita and just got about
twenty seconds.
Speaker 8 (27:57):
Yeah, if Warner Brothers, Discovery kind of keeps pushing on
this Netflix deal, you know, one of the things they're
really hoping for is then that they do, you know,
that they are able to kind of spin out that
TV network business, and then of course that then becomes
a major roll up vehicle for you know, VERSU and
four other table network owners.
Speaker 3 (28:15):
Amazing as always must read research on the Bloomberg terminal, Giita,
Thank you so much. Githa ringingath On, She's a Bloomberg
Intelligence Senior media analyst.
Speaker 1 (28:24):
This is the Bloomberg Business Weekdaily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot Com.
The iHeartRadio app tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
(28:45):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!