June 5, 2021 • 27 mins
This week, Roshun Patel, vice president of institutional lending at Genesis, a full-service digital currency prime brokerage, joined to talk about the asset class that never sleeps: crypto, and its wild weekend trading. Chad Beynon, a senior gaming, lodging and theatres analyst at Macquarie Capital, joined alongside Bloomberg cross-asset reporter Katie Greifeld to talk about AMC embracing its meme stock status. Yoni Assia, the founder and CEO of eToro, an Israel-based competitor to Robinhood, came on to talk about how his platform has benefitted from the retail frenzy, and why he thinks this is a generational buying moment. Then Doug Merritt, the CEO of infrastructure software company Splunk, joined after the company's first quarter earnings results.
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Episode Transcript
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Speaker 1 (00:08):
Welcome to What You Missed This Week? I'm Joe Wisenthal.
This podcast has some of our favorite interviews from the
Daily Market Clothes show that I co anchor along with
Romane Bosti and Caroline Hyde. What Do You miss It's
the perfect way to kick off your weekend. This week,
we circled back with a guest we've had on before,
Rossan Patel, vice president of Institutional Lending a Genesis, a
(00:28):
full service digital currency prime brokerage. We talked at roll
about crypto trading and why it gets so wild on
the weekends, because you know, crypto never sleeps, it's seven,
So we asked him why it feels like the weekend
has a different flavor of trading. Um, you know, the
weekend in crypto, it's you know, there's lower liquidity, they're
(00:49):
still very human driven market to it, so you know,
there's like less market making going on, less for algorithmic
trading happening, So it just tends to kind of lead
to moves that can be a little bit more drawing outwards.
Is there an argument to be made to actually shut
things down on the weekend. I wouldn't mind, honestly, personal
life wouldn't at least I hate um second that from
(01:13):
my stude of the equation, but I'm interested throwing what
the force of the selling is like and who is selling.
I'm hearing a lot of we were just hearing from
Katie Graydfeld at the side of the show being like, oh, well,
people are getting out of crypto and they're going into
mean stocks. I mean, is retail to answer for this
or what is actually the pressure downwards? Do you think, yes,
(01:34):
that's it? You know, that's like the age old question here.
Every time the market sells off, it's like who's responsible,
what what's causing it? And people really like to have
like an answer for that. The flows we're seeing on
the Genus Dusk are extremely step terms of my style,
both like high net worths institutions, but also the retail
apps that we're kind of hyping into in terms of
aggregating club So really we're just seeing buyers down here.
(01:56):
So I was talking to Joe about this the other day.
I'm like, Sunday when we were working there, I was like,
who's selling and everyone kept asking it on the desk,
kind of what's causing that's this sort of moved down.
So it's really hard to point to like any one
given aspect of the market, whether it's retail traders moving
out of stocks or miners in Asia that you know
need to you know sell for whatever reasons. But um,
(02:19):
I would just say, you know, there's there's it's really
difficult to kind of nail down why this is moving
like this, but crypto is not really you know, uh
foreign to kind of having moves like this, and if
you want to and I'll caveat that with like you know,
that's like, you know, we don't really know. You could
theorize some extra spot pressure in the market for a
variety of reasons. Um. One is that basis trade that
(02:40):
we were talking about in like maybe a month ago
from here on the show, that's come in a lot, right,
So it's collapsed a lot. So a lot of people
that are long spots short features, how do they sort
of unwind that trade? They have to sell spot by futures,
So that leads to a little bit of an extra
offered spot kind of hangs over the market a little
bit there. Granted, you know that buy is still there
in the future life, so it's not like a you know,
(03:02):
net selling by any means, But definitely impact spot a
little bit, for sure. So this morning you tweeted something, um,
you said, post exprey cell pressure for the first time
in a while, And of course there is this explosion
and proliferation of um bitcoin and crypto derivatives, futures, swaps,
other forms of you know, very sophisticated instruments. To what
(03:22):
degree are those becoming like in the stocks or like
a quadruple which ing and stuff like that. To what
degree are key moments in the expery of derivatives becoming
um key flips in price trends. Yeah, there's definitely little
bit more activity on the juror's experise. Uh. You know
this morning I tweeted that, granted it's inn ma expery,
so it's like it's not as big as the June
(03:43):
one or the March one, so matters a little bit less.
It's just like kind of after the ones that we
saw in March and even April. Um, you know, the
general trend is after expert you know, kind of happened
that there's a little bit of lid kind of lifted
on price obviously this time if it went the other way.
But granted, given this experty is not a huge o
(04:03):
I one relative to June or even suffardees when those
roll around. Um, you know, I I don't think it
matters too much for for the direction of the market.
I think, yeah, you know what we'll see when it
when it hits one of the bigger quarterly experties. Yeah,
so we probably speaking these things are you know, much
more important now than the arepore. Yeah. So we were
just showing a chart of some of the thirty day volatility.
The most interesting thing about that charter, of course, is
(04:25):
that while volatility is picked up, there's nowhere near where
we saw all back in that era here with regards
to how Genesis sort of keeps itself prepared for these
types of movements and uh maintains liquidity here, what's the
general preparation right now? Yeah, so Genesis right now, in
this moment has never had as good as a sort
(04:46):
of asset basis times across bitcoin dollars eave um. You know,
we're not really shy about our long bit value right now.
It's around nine ten billion dollars in active loans outstanding,
but the reserves across the top three are you know,
north of billions of dollars. Some you know, quite quite
a bit higher. So in terms of like a balance
sheet health perspective, this is the strongest we've ever been.
(05:07):
And we're pretty much prepared for an eight percent moved
up for an eighty percent moved down. It doesn't really
matter to us, obviously, I think probabilistically, you know, one
of those more likely than the other. But um, you know,
we're really ready for both sides and for all sides
of it. And you know, kind of when we sold
off last week, um, and the week prior even to
the nature of the deaths, kind of like the frenzy
(05:27):
of it. Yeah, it was hectic. You know, everyone's really
focused and bired in, but you know, we don't really
have that many panic selling going on. You were seen
buyers of the way through then we drove more to
crypto and adoption of the asset class by retail traders.
We spoke with you as the founder and CEO of
a Toro and Israel based competitor to robin Hood, which
builds itself as the world's leading social training platform. To
(05:51):
registered three point one million new users in the first
quarter of the year and executed two hundred and ten
million trades two hundred increase over last year, driven by
strong demand for stocks in crypto. In Toro Group just
filed confidentially with the SEC for its proposed business combination
with the Blank Check Company Fintech acquisition Corps, led by
the serial dealmaker Tin Cohen. I think, first of all,
(06:16):
every asset is distinctive and every asset classes is different.
I think there are sort of confluence of circumstances that
are combining both of these very interesting trends, and that
is generally a generational buying moment where you have customers
(06:36):
from a hundred different countries. We see customers from a
hundred different countries that are interested whether it's in these
meme stocks or in Tesla, or on Facebook, or in
Apple or in bitcoin or indulge. So you see these
global movements of people talking about the markets and understanding
that they have that sudden impact on the markets as
(06:58):
a group um and I think can generally again, it's
caused by the fact that there's zero interest rates UH,
and there's a wide knowledge and a wide discussion over
the fact that people now understand better what is the inflation,
and that governments are printing unprecedented amounts of money. People
are buying dog because of that, I think again, you know,
(07:19):
different trends, different communities. Uh, you know, we've seen a
search just in Qan this year. We we just publicly
announced we we saw three point one million new registered
users into our social investment platform in QA this year
versus the best year we've ever had, which was twenty
where we saw five point two million incestory users. So
(07:40):
there's a definitive trend of retail investors from all around
the world who want to find interesting investments. Now, some
of them are are really interesting around their communities, are
around their value, whether it's text talks or translate renewable energy.
And some of them might have to admit, you know,
it's hard even for me after twenty five years in
(08:00):
capital markets and now ten years in crypto markets, it
took me a time to understand the phenomena called coage coin.
But but each of these are very interesting as you
dive that that dip dive in and learn about them. Well,
so what do you say to some of the critics
out here. I mean, you mentioned doge coin and the
idea that investors are sort of looking for something creative
(08:21):
to get into. There are a lot of people, particularly
those who come from maybe a different generation of a
capital market saying, oh, these retail investors, they need to
be protected from themselves. You need more regulation to sort
of stop them from taking these types of risk here,
I mean, do you have an argument against that type
of call? I think again, we've been promoting for the
past fourteen years, then with twenty million registered users, the
(08:45):
democratization of wealth management and democratization of investing. I sincerely
believe it is important for retail investors and generally for
the public to invest in the market and to participate
in the market. I think the fact that more people
are participating in the markets, that we see a rise
in the volumes of retail investors in the market, I
(09:07):
think that's a very positive thing for the markets. It's education.
People learning how to trade and invest is a part
of their education. I think as part of that, they
also need to understand risk management and diversification. There's are
key elements that we're promoting. Some aspects of the meme
trading are wrong or people of misconceptions. People think there
(09:30):
are some conspiracies about you know, halts and short selling
and stuff like that. Do you worry that people get
really invested in some story and then if they lose money,
that that will leave them with a sour taste on
the market, that what looks like say education is going
to end up backfiring. Uh. I think there is a
there should be a general concert of what happens in
(09:52):
case of a bear market. I think all all of
the trading platforms and investment platforms that have searching their
growth are thinking when happens if this dot com bubble burst? Right,
I think we're in a different place today than the
year two thousand. I fell in love in capital markets
and started trading in ninety six and ninety seven and
(10:14):
traded through the dot com era. And I think the
differences today that we were all in people's phones, were
able to communicate with people. And again the most important
them and people need to remember is diversification. Is is
bitcoin and interesting trade, yes, but you need to understand
need to be a part of a diversified portfolio. Uh.
(10:38):
You know, I admit and you can secret because my
portfolio is public as well, so you can see it.
Toni Toro. I bought some gm E, I bought some
em C, I bought some douch coin. But we're a
small part of my portfolio to follow that trend now.
This week was another big one for the meme start.
(10:59):
AMC went all in in its chief meme status, embracing
the retail trading army the movie theater chain, announcing rewarded
small time supporters who have been instrumental in AMC's wild
logic define rally with perks such as special screenings and
free popcorn. The company is taking advantage of these meteoric
gains by raising two thirty million directly from one of
(11:20):
its main creditors, Major Capital Management, and showing up with
its finances. We all got some perspective from Chad Binnen,
a senior analyst at mcquarie Capital who covers gaming, lodging
and theaters as well as Bloomberg cross As the reporter
Katie Greifeld, we spoke with them on Wednesday ahead of
AMC's announcement that is planning to sell up to eleven
point five five million shares to raise hundreds of millions
(11:41):
of dollars, which since shares folding by a bunch on Thursday,
triggering multiple halts, although it then eventually gained a lot
of it back, and we started by asking Chad, if
Wednesday's gain there's a result of investors seeing the net
present value of AMC's future cash flows thanks show, I
(12:01):
don't believe so. Although the Memorial Day weekend, uh, you know,
results were actually encouraging and we were excited to talk
about it and write about it, and then you know
that really didn't matter after we saw twenty five percent
games yesterday and then today is obviously block plus performants. Chad,
I mean, in all seriousness, I mean there is obviously
sort of a rebound play that a lot that some people,
I should say, are banking on here with regards to
(12:24):
this stock. There's also an opportunity here for management given
the run up and share price, and I'm wondering if
you see ways that they could maybe leverage this opportunity
to actually ensure that this is more than just a
meme stock and that it is an actual viable growth business. Sure, yeah, no,
I think I think that's a great point. You have
Adam Aaron, who you know, everyone knows as a great
(12:44):
marketing officer. He's the CEO of the company, has been
there for four or five years. He was actually chief
marketing officer at United and he was chief marketing officer
at Hyatt. He actually claims that he created the loyalty
program at Hyatt. He went on to run Norwegian Cruise
Lines and Philadelphia seventy six, So he certainly understands the
consumer and he understands marketing. Today's announcement in terms of
(13:07):
connecting with the shareholders potentially giving them discounts on popcorn,
maybe tickets at the movie theaters, getting them to come
to the box office. I think that was a huge positive.
And then the bigger point is can you take advantage
of where the stock prices right now? Obviously they raised
equity earlier this week about two d fifty million dollars.
They have four hundred fifty million of deferred leases that
(13:31):
their landlords have let them differ. And then they have
about five billion dollars of conventional debt. And then the
last thing is this could be an industry right for consolidation.
So if he could raise equity and solve one of
those three problems, I think he would come out of
this in a very good position. Katie, I want to
go to you. I mean, how much of your analysis
(13:52):
now is sort of just trying to pick up on
the social media. I mean, it's sort of nice, you know,
to hear like O their dead position and people have
back to their theaters. But so much of this seems
to just be driven by cheer obviously, like sentiment absolutely,
I mean, I think a MC was trending again. So
if you look at the shares at sixty two dollars,
(14:12):
that's pretty cheap. But at this point we're really just
trying to track the mechanics. So if you look at
short interests, for example, a S short interest is still
at twenty percent of shares outstanding, that's lower than it
was in January, but it was only or it's today,
it was twenty yesterday, so you weren't seeing really seeing
short sellers capitulate yet here they're in a lot of pain,
(14:34):
but they're not backing down. So if they did capitulate,
you know, take down some of that those that short interests.
That could add another leg to this rally. So there's
still multiple cylinders that could fire here. Okay, the multiple
cylinders I like the way you put it here. There's
also a course, the potential of this could sort of
fall back to earth pretty quickly. Here. There are a
lot of people, I mean, we talk about the muder
(14:55):
capital the other day. Here the idea that they basically
jumped in this basically for a quick flip. It benefited
a MC as a company, and it benefited Modrick. I'm
wondering how many folks here are just looking for a
quick flip and then this is now goes back down
to being whatever it was you know three months ago.
I wish I had firm numbers on that, but I
would imagine it's something like nine percent of people are
just looking to flip this. And I mean there's some
(15:18):
fundamental case you could say with Modrick, you know, the
share sale, maybe they'll be able to trim their debt load.
But I really maybe the fundamental picture might have changed
a little bit for AMC, not you know what, three
thousand percent in the share worth. But we'll see if
this thing comes down to earth, because we were saying
it would in January and February. We weren't, but people were,
(15:39):
and here we are. You said it was going to
go to sixty eight dollars seventy nine cents. A good
call by you, Chad. I want to bring you back in.
You know, how do you approach your approach to this
dock I mean, obviously, like we can talk about the
fundamentals and a hundred out of a hundred people will
say it's hard to justify the price. So like when
you're like even the clients like, what is the sort
(16:02):
of useful insight that you can when sort of like
this mob takes over a stock and it seemingly disconnects
it so far from anything resembling the traditional fundamentals that
an analyst would look at. Sure, it's difficult. Last year,
it's it's crazy heading into into the pandemic. And actually
at the beginning months of the pandemic, I was the
(16:23):
bowl on the street and I have a six dollar
price target. But my fundamental views and you know, I
don't think the box office is dead. Actually heading into
the pandemic, the nine months prior to that, the emission
revenues were almost records setting. So that data, if you
look at it tells me that Netflix and Amazon and
streaming hasn't killed the industry. So we expect to actually
(16:47):
look like twenty nineteen maybe record levels, and if someone
like competitors are much more bearished, they expect a ten
to climb. So that's the fundamental view. But to your point,
you know, how do we help out institutional and masters
understand what to do from here. Generally, what we do
is we point them to other companies in the sector
like CINEMRK and Imax that we think are very cheap
(17:09):
on a free cash flow and an EVDOT basis, and
they're going to ride a similar tie. So we hope
that there would be a re rate up for some
of those versus recommending and see. Yeah, there's a lot
of talk about comparing sort of this rebound in terms
of theater going rebound to the sort of pre pandemic
levels in twenty nine, but this really wasn't necessarily a
(17:30):
healthy industry in twenty nine. There was a lot of
talk here about the need for consolidation, the idea that
a lot of these companies didn't really have the pricing
power either with consumers or the power with regards to
the studios that supply their films here. So I'm just
trying to figure out what's really changed. We're coming in
an environment now where we do have a lot more
options on streaming. A lot of us are perfectly fine
(17:50):
paying Disney thirty bucks to watch the latest new release
at home on the couch rather than going out to
the theater. What's changed. I think the big thing in
the way that we approach it is there's companies that
obviously put on more conventional debt and more importantly, um
egregious leases that they just can't get out of. So
operating any business in Manhattan or l A or San
(18:14):
Francisco or Chicago is certainly an expensive business. Sinemark decided
to go kind of outside that bulls eye, so they
have smaller rents as a percentage of the revenue. So
one we look at companies that haven't put themselves in
that position. Again, AMC could improve that if they raise
equity and decide to give some of those landlords. Secondly, um,
you know, we think that emission revenue trends actually haven't
(18:36):
been that bad. And then if you look at concessions,
a company like CINEMRK, they've grown concession per head for
almost fifty quarters in a row, so thirteen or fourteen
straight years every quarter people who have walked in the
door have spent more at the concession counter. And I
don't think there's many restaurant companies that can, you know,
(18:58):
say the same thing. So we on us look at
some of these companies as restaurant companies in some ways,
as long as it's much too much of a bleed
from a studio standpoint. But that's kind of you know
how how we're thinking about the industry. Uh, Katie, what
happened to games stuff? Do people still talk about them?
I don't know, not really this sort of like they're like,
I mean that was you know, so a few months ago.
(19:19):
I mean for a while you did see the two
trade in tandem. And certainly if you look at the
entire Meme universe, it's been rallying along with AMC. But
really it's AMC in charge here. And uh, I mean
that announcement from AMC today that it was going to
have special screenings free popcorn. I mean that just solidified
a m c's placed at the top. So game stuff
(19:40):
it's still rallying, but it's it's no AMC. Well, I
want to then chat. The last question is going to
go to you chat. And this is partly the Katie's
point here too, the idea that the management has actually
sort of embraced this. Uh, they've got to embrace this
frenzy and leaned in to the retail investors. Here we've
seen this to a smaller extent with Elon Musk and
Tesla and a few other companies out there that have
(20:00):
basically said, you know, we don't necessarily need to sort
of bow down to the institutional investors and the hedge funds.
Maybe if we just bow down to the retail traders,
that's enough to keep the energy going. Do you think
that's a smart strategy. I think it's the right strategy
for them. Adam Arena actually conducted an hour plus long
interview with Trey from Trades Trades, who has a lot
(20:22):
of followers. I found that interview to be pretty fascinating.
I think he's choosing those things over traditional UM you know,
sales side broker conferences because over eight percent of his
clients are retail. We'll see what happens with this, UH,
with this big vote in July. You know, he's looking
to add to UM you know, five hundred million dollars
(20:42):
to a shelf filing here five times start five million shares.
If he's able to get that done, which the way
to get that done is through the retail vote, then
you can start doing some things and kind of bring
me instose back in. But I think right now your
audience is the retail customer, retail investor, and that's you
cater to and you feel that that six dollar prize
targreet here. All right, We're always reevaluating. And we wrapped
(21:09):
up the week by talking with Doug Merritt, the CEO
of infrastructure software company Blum. That's off the back of
its first quarter earnings. Revenue came in above estimates with
strong growth in air Are and cloud a Are, but
it's outlooked for the second quarter. Annual recurring revenue was
below expectations, which sunk the stock. Shares fell about eight
percent on Thursday, splunk down thirty three this year, making
(21:32):
it the weakest performer of the Nasdaq one index. Uh
we were incredibly excited about the quarter that we just posted.
We have showed very strong growth eighty three percent. Cloud
growth getting to US eight d seventy seven million, and
cloud air are over two other customers that are paying
(21:53):
US a million dollars more a year in cloud to
compliment the almost five and forty customers you're paying US
a million a year or more overall for our services.
So super high growth three n a. Our growth for
the company as a whole eighty three percent for cloud UM.
I focus on customers that the stock I cannot control,
(22:14):
customer purpose I can, and customers are voting for Splunk.
We are. We're doing extraortly well in the market. All right, Doug, Well,
let's talk a little bit more about those customers. I mean,
you did see some ability I guess to shift a
lot of those customers into the cloud services that you're
offering here. I guess some of the concern amongst investors
is the cost to do that here, when do you
still expect to see maybe a little bit more right
(22:34):
sizing versus with regards to costs versus the actual revenue
that you'll be taken in from the new services. We've
been able to take our cloud margins are rural footprint
from very low to over sixty in the past two years.
We remain committed to a seventy percent target, exciting this
year seventy or higher overall. So we're driving efficiencies with
(22:58):
the cloud. Some of the spend this quarter was really
very proactive. We did some polland spend on cloud infrastructure.
We had a really good quarter that surpassed or expectations.
UM that had some commission expense as the m r
task commissions over the year in front of us, which
which ultimately is a positive sign. Right, the reps are
doing well, They're doing better than the plan. UM. So
(23:20):
I think it was a blip on the on the
spend side, based on the strong Q one that we
kicked off here with. You said, there's a blip, but
the stock it's not just today, it has faded for
a while. And again I go back to, you know,
thinking about this time last year, we just said this
incredible boom and anything that was related to tech, cloud, anything,
(23:40):
corporate capex. Are you seeing any just general slowdowns or anything,
or is it full speed ahead, the likes of which
was really hot prior to COVID hitting and for many companies,
UH seemed to accelerate in we we actually saw the
bit of a slowdown, a few more checks before doing
purchases more Q two, Q three. What we've seen in
(24:01):
Q four and now Q one, and what we're seeing
into r Q two, which we're a month in two UM,
is that continued tail winds post pandemic of the realization
that you have to be digital, you've got to get
your business online, and that has to happen much quicker
than people thought UM and some general loosening as we
all get to see the shortages that we're dealing with
supply chain issues as economies are opening back up around
(24:24):
the world. So this shift to cloud UH is propelled
by data. We are the absolute king in bringing together
massive amounts of data so that we can help cybersecurity teams,
infrastructure management teams, application development teams do their critical work
of getting their business online and keeping it safe as
they do that, which, sadly we've seen is harder and
(24:45):
harder with all the hacks that are happening with regards
to your own UH employee base here, with regards to
just recruiting here, what type of challenges, if at all,
have you seen there? Yeah, that actually was another super
strong highlight for us past couple of quarters. We recently
added Theresa Carlson and as our president to go to market,
literally one of the best go to market leaders in
(25:06):
the history of the industry. She took the A two
BS public sector business from zero to ten billion dollars
to her tenure there. We just announced the edition of
Shaan Weiss, who is the leader on top of all
the data products across the ABS backbone. Again running a
ten plus billion dollar business, world class product leader. And
that's just two of the fifteen to twenty key executives
(25:28):
that we've been adding not just made a Bus, but
from salesforce, from Google, from Octa, from vm Ware, from
really really great companies that also are highly cloud savvy
as we continue to meet the demands of scale as
we grow this company. Dogument, I'm glad you brought up cybersecurity.
Of course, there have been several incidents in the news
(25:49):
lately about ransomware and other vulnerabilities that we've seen the
key companies and infrastructure. News events like that create a
sort of how quick is the feedback between awareness of that,
everybody realizing perhaps that they're more vulnerable if anyone can
get hit, and then uh more spend on areas related
(26:10):
to security pretty quick, Pretty quick. People are pretty tuned
in the news right now. UM. I do think that
with the Colonial pipeline and now the meat uh ransom
or issue, um, we're seeing companies that may not have
been as focused on cybersecurity now realize that everybody is
underable and that there are some significant impacts if you
do not have the right data framework to help give
(26:32):
you visibility pre during a post attack. M within our
current customer base has been to help as well. Most
of them have been able to get through this much
more quickly, um and it has resulted in a little
bit of an increase for many of them US and
I realized, oh geez, I didn't have those data elements
going through Splunk. Maybe I should add those also, um
as I'm waiting through the after effects of the solar
(26:54):
winds issue or but one of the other horrible instance
that we've all been reading about and dealing with. And
it is. And that's it for what you missed this week.
If you like to show, make sure to subscribe and
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You can catch our show every weekday from three thirty
(27:14):
to five pm on Bloomberg TV and from four to
five pm on Twitter. Thanks for listening and have a
great week.
Welcome to What You Missed This Week? I'm Joe Wisenthal.
This podcast has some of our favorite interviews from the
Daily Market Clothes show that I co anchor along with
Romane Bosti and Caroline Hyde. What Do You miss It's
the perfect way to kick off your weekend. This week,
we circled back with a guest we've had on before,
Rossan Patel, vice president of Institutional Lending a Genesis, a
(00:28):
full service digital currency prime brokerage. We talked at roll
about crypto trading and why it gets so wild on
the weekends, because you know, crypto never sleeps, it's seven,
So we asked him why it feels like the weekend
has a different flavor of trading. Um, you know, the
weekend in crypto, it's you know, there's lower liquidity, they're
(00:49):
still very human driven market to it, so you know,
there's like less market making going on, less for algorithmic
trading happening, So it just tends to kind of lead
to moves that can be a little bit more drawing outwards.
Is there an argument to be made to actually shut
things down on the weekend. I wouldn't mind, honestly, personal
life wouldn't at least I hate um second that from
(01:13):
my stude of the equation, but I'm interested throwing what
the force of the selling is like and who is selling.
I'm hearing a lot of we were just hearing from
Katie Graydfeld at the side of the show being like, oh, well,
people are getting out of crypto and they're going into
mean stocks. I mean, is retail to answer for this
or what is actually the pressure downwards? Do you think, yes,
(01:34):
that's it? You know, that's like the age old question here.
Every time the market sells off, it's like who's responsible,
what what's causing it? And people really like to have
like an answer for that. The flows we're seeing on
the Genus Dusk are extremely step terms of my style,
both like high net worths institutions, but also the retail
apps that we're kind of hyping into in terms of
aggregating club So really we're just seeing buyers down here.
(01:56):
So I was talking to Joe about this the other day.
I'm like, Sunday when we were working there, I was like,
who's selling and everyone kept asking it on the desk,
kind of what's causing that's this sort of moved down.
So it's really hard to point to like any one
given aspect of the market, whether it's retail traders moving
out of stocks or miners in Asia that you know
need to you know sell for whatever reasons. But um,
(02:19):
I would just say, you know, there's there's it's really
difficult to kind of nail down why this is moving
like this, but crypto is not really you know, uh
foreign to kind of having moves like this, and if
you want to and I'll caveat that with like you know,
that's like, you know, we don't really know. You could
theorize some extra spot pressure in the market for a
variety of reasons. Um. One is that basis trade that
(02:40):
we were talking about in like maybe a month ago
from here on the show, that's come in a lot, right,
So it's collapsed a lot. So a lot of people
that are long spots short features, how do they sort
of unwind that trade? They have to sell spot by futures,
So that leads to a little bit of an extra
offered spot kind of hangs over the market a little
bit there. Granted, you know that buy is still there
in the future life, so it's not like a you know,
(03:02):
net selling by any means, But definitely impact spot a
little bit, for sure. So this morning you tweeted something, um,
you said, post exprey cell pressure for the first time
in a while, And of course there is this explosion
and proliferation of um bitcoin and crypto derivatives, futures, swaps,
other forms of you know, very sophisticated instruments. To what
(03:22):
degree are those becoming like in the stocks or like
a quadruple which ing and stuff like that. To what
degree are key moments in the expery of derivatives becoming
um key flips in price trends. Yeah, there's definitely little
bit more activity on the juror's experise. Uh. You know
this morning I tweeted that, granted it's inn ma expery,
so it's like it's not as big as the June
(03:43):
one or the March one, so matters a little bit less.
It's just like kind of after the ones that we
saw in March and even April. Um, you know, the
general trend is after expert you know, kind of happened
that there's a little bit of lid kind of lifted
on price obviously this time if it went the other way.
But granted, given this experty is not a huge o
(04:03):
I one relative to June or even suffardees when those
roll around. Um, you know, I I don't think it
matters too much for for the direction of the market.
I think, yeah, you know what we'll see when it
when it hits one of the bigger quarterly experties. Yeah,
so we probably speaking these things are you know, much
more important now than the arepore. Yeah. So we were
just showing a chart of some of the thirty day volatility.
The most interesting thing about that charter, of course, is
(04:25):
that while volatility is picked up, there's nowhere near where
we saw all back in that era here with regards
to how Genesis sort of keeps itself prepared for these
types of movements and uh maintains liquidity here, what's the
general preparation right now? Yeah, so Genesis right now, in
this moment has never had as good as a sort
(04:46):
of asset basis times across bitcoin dollars eave um. You know,
we're not really shy about our long bit value right now.
It's around nine ten billion dollars in active loans outstanding,
but the reserves across the top three are you know,
north of billions of dollars. Some you know, quite quite
a bit higher. So in terms of like a balance
sheet health perspective, this is the strongest we've ever been.
(05:07):
And we're pretty much prepared for an eight percent moved
up for an eighty percent moved down. It doesn't really
matter to us, obviously, I think probabilistically, you know, one
of those more likely than the other. But um, you know,
we're really ready for both sides and for all sides
of it. And you know, kind of when we sold
off last week, um, and the week prior even to
the nature of the deaths, kind of like the frenzy
(05:27):
of it. Yeah, it was hectic. You know, everyone's really
focused and bired in, but you know, we don't really
have that many panic selling going on. You were seen
buyers of the way through then we drove more to
crypto and adoption of the asset class by retail traders.
We spoke with you as the founder and CEO of
a Toro and Israel based competitor to robin Hood, which
builds itself as the world's leading social training platform. To
(05:51):
registered three point one million new users in the first
quarter of the year and executed two hundred and ten
million trades two hundred increase over last year, driven by
strong demand for stocks in crypto. In Toro Group just
filed confidentially with the SEC for its proposed business combination
with the Blank Check Company Fintech acquisition Corps, led by
the serial dealmaker Tin Cohen. I think, first of all,
(06:16):
every asset is distinctive and every asset classes is different.
I think there are sort of confluence of circumstances that
are combining both of these very interesting trends, and that
is generally a generational buying moment where you have customers
(06:36):
from a hundred different countries. We see customers from a
hundred different countries that are interested whether it's in these
meme stocks or in Tesla, or on Facebook, or in
Apple or in bitcoin or indulge. So you see these
global movements of people talking about the markets and understanding
that they have that sudden impact on the markets as
(06:58):
a group um and I think can generally again, it's
caused by the fact that there's zero interest rates UH,
and there's a wide knowledge and a wide discussion over
the fact that people now understand better what is the inflation,
and that governments are printing unprecedented amounts of money. People
are buying dog because of that, I think again, you know,
(07:19):
different trends, different communities. Uh, you know, we've seen a
search just in Qan this year. We we just publicly
announced we we saw three point one million new registered
users into our social investment platform in QA this year
versus the best year we've ever had, which was twenty
where we saw five point two million incestory users. So
(07:40):
there's a definitive trend of retail investors from all around
the world who want to find interesting investments. Now, some
of them are are really interesting around their communities, are
around their value, whether it's text talks or translate renewable energy.
And some of them might have to admit, you know,
it's hard even for me after twenty five years in
(08:00):
capital markets and now ten years in crypto markets, it
took me a time to understand the phenomena called coage coin.
But but each of these are very interesting as you
dive that that dip dive in and learn about them. Well,
so what do you say to some of the critics
out here. I mean, you mentioned doge coin and the
idea that investors are sort of looking for something creative
(08:21):
to get into. There are a lot of people, particularly
those who come from maybe a different generation of a
capital market saying, oh, these retail investors, they need to
be protected from themselves. You need more regulation to sort
of stop them from taking these types of risk here,
I mean, do you have an argument against that type
of call? I think again, we've been promoting for the
past fourteen years, then with twenty million registered users, the
(08:45):
democratization of wealth management and democratization of investing. I sincerely
believe it is important for retail investors and generally for
the public to invest in the market and to participate
in the market. I think the fact that more people
are participating in the markets, that we see a rise
in the volumes of retail investors in the market, I
(09:07):
think that's a very positive thing for the markets. It's education.
People learning how to trade and invest is a part
of their education. I think as part of that, they
also need to understand risk management and diversification. There's are
key elements that we're promoting. Some aspects of the meme
trading are wrong or people of misconceptions. People think there
(09:30):
are some conspiracies about you know, halts and short selling
and stuff like that. Do you worry that people get
really invested in some story and then if they lose money,
that that will leave them with a sour taste on
the market, that what looks like say education is going
to end up backfiring. Uh. I think there is a
there should be a general concert of what happens in
(09:52):
case of a bear market. I think all all of
the trading platforms and investment platforms that have searching their
growth are thinking when happens if this dot com bubble burst? Right,
I think we're in a different place today than the
year two thousand. I fell in love in capital markets
and started trading in ninety six and ninety seven and
(10:14):
traded through the dot com era. And I think the
differences today that we were all in people's phones, were
able to communicate with people. And again the most important
them and people need to remember is diversification. Is is
bitcoin and interesting trade, yes, but you need to understand
need to be a part of a diversified portfolio. Uh.
(10:38):
You know, I admit and you can secret because my
portfolio is public as well, so you can see it.
Toni Toro. I bought some gm E, I bought some
em C, I bought some douch coin. But we're a
small part of my portfolio to follow that trend now.
This week was another big one for the meme start.
(10:59):
AMC went all in in its chief meme status, embracing
the retail trading army the movie theater chain, announcing rewarded
small time supporters who have been instrumental in AMC's wild
logic define rally with perks such as special screenings and
free popcorn. The company is taking advantage of these meteoric
gains by raising two thirty million directly from one of
(11:20):
its main creditors, Major Capital Management, and showing up with
its finances. We all got some perspective from Chad Binnen,
a senior analyst at mcquarie Capital who covers gaming, lodging
and theaters as well as Bloomberg cross As the reporter
Katie Greifeld, we spoke with them on Wednesday ahead of
AMC's announcement that is planning to sell up to eleven
point five five million shares to raise hundreds of millions
(11:41):
of dollars, which since shares folding by a bunch on Thursday,
triggering multiple halts, although it then eventually gained a lot
of it back, and we started by asking Chad, if
Wednesday's gain there's a result of investors seeing the net
present value of AMC's future cash flows thanks show, I
(12:01):
don't believe so. Although the Memorial Day weekend, uh, you know,
results were actually encouraging and we were excited to talk
about it and write about it, and then you know
that really didn't matter after we saw twenty five percent
games yesterday and then today is obviously block plus performants. Chad,
I mean, in all seriousness, I mean there is obviously
sort of a rebound play that a lot that some people,
I should say, are banking on here with regards to
(12:24):
this stock. There's also an opportunity here for management given
the run up and share price, and I'm wondering if
you see ways that they could maybe leverage this opportunity
to actually ensure that this is more than just a
meme stock and that it is an actual viable growth business. Sure, yeah, no,
I think I think that's a great point. You have
Adam Aaron, who you know, everyone knows as a great
(12:44):
marketing officer. He's the CEO of the company, has been
there for four or five years. He was actually chief
marketing officer at United and he was chief marketing officer
at Hyatt. He actually claims that he created the loyalty
program at Hyatt. He went on to run Norwegian Cruise
Lines and Philadelphia seventy six, So he certainly understands the
consumer and he understands marketing. Today's announcement in terms of
(13:07):
connecting with the shareholders potentially giving them discounts on popcorn,
maybe tickets at the movie theaters, getting them to come
to the box office. I think that was a huge positive.
And then the bigger point is can you take advantage
of where the stock prices right now? Obviously they raised
equity earlier this week about two d fifty million dollars.
They have four hundred fifty million of deferred leases that
(13:31):
their landlords have let them differ. And then they have
about five billion dollars of conventional debt. And then the
last thing is this could be an industry right for consolidation.
So if he could raise equity and solve one of
those three problems, I think he would come out of
this in a very good position. Katie, I want to
go to you. I mean, how much of your analysis
(13:52):
now is sort of just trying to pick up on
the social media. I mean, it's sort of nice, you know,
to hear like O their dead position and people have
back to their theaters. But so much of this seems
to just be driven by cheer obviously, like sentiment absolutely,
I mean, I think a MC was trending again. So
if you look at the shares at sixty two dollars,
(14:12):
that's pretty cheap. But at this point we're really just
trying to track the mechanics. So if you look at
short interests, for example, a S short interest is still
at twenty percent of shares outstanding, that's lower than it
was in January, but it was only or it's today,
it was twenty yesterday, so you weren't seeing really seeing
short sellers capitulate yet here they're in a lot of pain,
(14:34):
but they're not backing down. So if they did capitulate,
you know, take down some of that those that short interests.
That could add another leg to this rally. So there's
still multiple cylinders that could fire here. Okay, the multiple
cylinders I like the way you put it here. There's
also a course, the potential of this could sort of
fall back to earth pretty quickly. Here. There are a
lot of people, I mean, we talk about the muder
(14:55):
capital the other day. Here the idea that they basically
jumped in this basically for a quick flip. It benefited
a MC as a company, and it benefited Modrick. I'm
wondering how many folks here are just looking for a
quick flip and then this is now goes back down
to being whatever it was you know three months ago.
I wish I had firm numbers on that, but I
would imagine it's something like nine percent of people are
just looking to flip this. And I mean there's some
(15:18):
fundamental case you could say with Modrick, you know, the
share sale, maybe they'll be able to trim their debt load.
But I really maybe the fundamental picture might have changed
a little bit for AMC, not you know what, three
thousand percent in the share worth. But we'll see if
this thing comes down to earth, because we were saying
it would in January and February. We weren't, but people were,
(15:39):
and here we are. You said it was going to
go to sixty eight dollars seventy nine cents. A good
call by you, Chad. I want to bring you back in.
You know, how do you approach your approach to this
dock I mean, obviously, like we can talk about the
fundamentals and a hundred out of a hundred people will
say it's hard to justify the price. So like when
you're like even the clients like, what is the sort
(16:02):
of useful insight that you can when sort of like
this mob takes over a stock and it seemingly disconnects
it so far from anything resembling the traditional fundamentals that
an analyst would look at. Sure, it's difficult. Last year,
it's it's crazy heading into into the pandemic. And actually
at the beginning months of the pandemic, I was the
(16:23):
bowl on the street and I have a six dollar
price target. But my fundamental views and you know, I
don't think the box office is dead. Actually heading into
the pandemic, the nine months prior to that, the emission
revenues were almost records setting. So that data, if you
look at it tells me that Netflix and Amazon and
streaming hasn't killed the industry. So we expect to actually
(16:47):
look like twenty nineteen maybe record levels, and if someone
like competitors are much more bearished, they expect a ten
to climb. So that's the fundamental view. But to your point,
you know, how do we help out institutional and masters
understand what to do from here. Generally, what we do
is we point them to other companies in the sector
like CINEMRK and Imax that we think are very cheap
(17:09):
on a free cash flow and an EVDOT basis, and
they're going to ride a similar tie. So we hope
that there would be a re rate up for some
of those versus recommending and see. Yeah, there's a lot
of talk about comparing sort of this rebound in terms
of theater going rebound to the sort of pre pandemic
levels in twenty nine, but this really wasn't necessarily a
(17:30):
healthy industry in twenty nine. There was a lot of
talk here about the need for consolidation, the idea that
a lot of these companies didn't really have the pricing
power either with consumers or the power with regards to
the studios that supply their films here. So I'm just
trying to figure out what's really changed. We're coming in
an environment now where we do have a lot more
options on streaming. A lot of us are perfectly fine
(17:50):
paying Disney thirty bucks to watch the latest new release
at home on the couch rather than going out to
the theater. What's changed. I think the big thing in
the way that we approach it is there's companies that
obviously put on more conventional debt and more importantly, um
egregious leases that they just can't get out of. So
operating any business in Manhattan or l A or San
(18:14):
Francisco or Chicago is certainly an expensive business. Sinemark decided
to go kind of outside that bulls eye, so they
have smaller rents as a percentage of the revenue. So
one we look at companies that haven't put themselves in
that position. Again, AMC could improve that if they raise
equity and decide to give some of those landlords. Secondly, um,
you know, we think that emission revenue trends actually haven't
(18:36):
been that bad. And then if you look at concessions,
a company like CINEMRK, they've grown concession per head for
almost fifty quarters in a row, so thirteen or fourteen
straight years every quarter people who have walked in the
door have spent more at the concession counter. And I
don't think there's many restaurant companies that can, you know,
(18:58):
say the same thing. So we on us look at
some of these companies as restaurant companies in some ways,
as long as it's much too much of a bleed
from a studio standpoint. But that's kind of you know
how how we're thinking about the industry. Uh, Katie, what
happened to games stuff? Do people still talk about them?
I don't know, not really this sort of like they're like,
I mean that was you know, so a few months ago.
(19:19):
I mean for a while you did see the two
trade in tandem. And certainly if you look at the
entire Meme universe, it's been rallying along with AMC. But
really it's AMC in charge here. And uh, I mean
that announcement from AMC today that it was going to
have special screenings free popcorn. I mean that just solidified
a m c's placed at the top. So game stuff
(19:40):
it's still rallying, but it's it's no AMC. Well, I
want to then chat. The last question is going to
go to you chat. And this is partly the Katie's
point here too, the idea that the management has actually
sort of embraced this. Uh, they've got to embrace this
frenzy and leaned in to the retail investors. Here we've
seen this to a smaller extent with Elon Musk and
Tesla and a few other companies out there that have
(20:00):
basically said, you know, we don't necessarily need to sort
of bow down to the institutional investors and the hedge funds.
Maybe if we just bow down to the retail traders,
that's enough to keep the energy going. Do you think
that's a smart strategy. I think it's the right strategy
for them. Adam Arena actually conducted an hour plus long
interview with Trey from Trades Trades, who has a lot
(20:22):
of followers. I found that interview to be pretty fascinating.
I think he's choosing those things over traditional UM you know,
sales side broker conferences because over eight percent of his
clients are retail. We'll see what happens with this, UH,
with this big vote in July. You know, he's looking
to add to UM you know, five hundred million dollars
(20:42):
to a shelf filing here five times start five million shares.
If he's able to get that done, which the way
to get that done is through the retail vote, then
you can start doing some things and kind of bring
me instose back in. But I think right now your
audience is the retail customer, retail investor, and that's you
cater to and you feel that that six dollar prize
targreet here. All right, We're always reevaluating. And we wrapped
(21:09):
up the week by talking with Doug Merritt, the CEO
of infrastructure software company Blum. That's off the back of
its first quarter earnings. Revenue came in above estimates with
strong growth in air Are and cloud a Are, but
it's outlooked for the second quarter. Annual recurring revenue was
below expectations, which sunk the stock. Shares fell about eight
percent on Thursday, splunk down thirty three this year, making
(21:32):
it the weakest performer of the Nasdaq one index. Uh
we were incredibly excited about the quarter that we just posted.
We have showed very strong growth eighty three percent. Cloud
growth getting to US eight d seventy seven million, and
cloud air are over two other customers that are paying
(21:53):
US a million dollars more a year in cloud to
compliment the almost five and forty customers you're paying US
a million a year or more overall for our services.
So super high growth three n a. Our growth for
the company as a whole eighty three percent for cloud UM.
I focus on customers that the stock I cannot control,
(22:14):
customer purpose I can, and customers are voting for Splunk.
We are. We're doing extraortly well in the market. All right, Doug, Well,
let's talk a little bit more about those customers. I mean,
you did see some ability I guess to shift a
lot of those customers into the cloud services that you're
offering here. I guess some of the concern amongst investors
is the cost to do that here, when do you
still expect to see maybe a little bit more right
(22:34):
sizing versus with regards to costs versus the actual revenue
that you'll be taken in from the new services. We've
been able to take our cloud margins are rural footprint
from very low to over sixty in the past two years.
We remain committed to a seventy percent target, exciting this
year seventy or higher overall. So we're driving efficiencies with
(22:58):
the cloud. Some of the spend this quarter was really
very proactive. We did some polland spend on cloud infrastructure.
We had a really good quarter that surpassed or expectations.
UM that had some commission expense as the m r
task commissions over the year in front of us, which
which ultimately is a positive sign. Right, the reps are
doing well, They're doing better than the plan. UM. So
(23:20):
I think it was a blip on the on the
spend side, based on the strong Q one that we
kicked off here with. You said, there's a blip, but
the stock it's not just today, it has faded for
a while. And again I go back to, you know,
thinking about this time last year, we just said this
incredible boom and anything that was related to tech, cloud, anything,
(23:40):
corporate capex. Are you seeing any just general slowdowns or anything,
or is it full speed ahead, the likes of which
was really hot prior to COVID hitting and for many companies,
UH seemed to accelerate in we we actually saw the
bit of a slowdown, a few more checks before doing
purchases more Q two, Q three. What we've seen in
(24:01):
Q four and now Q one, and what we're seeing
into r Q two, which we're a month in two UM,
is that continued tail winds post pandemic of the realization
that you have to be digital, you've got to get
your business online, and that has to happen much quicker
than people thought UM and some general loosening as we
all get to see the shortages that we're dealing with
supply chain issues as economies are opening back up around
(24:24):
the world. So this shift to cloud UH is propelled
by data. We are the absolute king in bringing together
massive amounts of data so that we can help cybersecurity teams,
infrastructure management teams, application development teams do their critical work
of getting their business online and keeping it safe as
they do that, which, sadly we've seen is harder and
(24:45):
harder with all the hacks that are happening with regards
to your own UH employee base here, with regards to
just recruiting here, what type of challenges, if at all,
have you seen there? Yeah, that actually was another super
strong highlight for us past couple of quarters. We recently
added Theresa Carlson and as our president to go to market,
literally one of the best go to market leaders in
(25:06):
the history of the industry. She took the A two
BS public sector business from zero to ten billion dollars
to her tenure there. We just announced the edition of
Shaan Weiss, who is the leader on top of all
the data products across the ABS backbone. Again running a
ten plus billion dollar business, world class product leader. And
that's just two of the fifteen to twenty key executives
(25:28):
that we've been adding not just made a Bus, but
from salesforce, from Google, from Octa, from vm Ware, from
really really great companies that also are highly cloud savvy
as we continue to meet the demands of scale as
we grow this company. Dogument, I'm glad you brought up cybersecurity.
Of course, there have been several incidents in the news
(25:49):
lately about ransomware and other vulnerabilities that we've seen the
key companies and infrastructure. News events like that create a
sort of how quick is the feedback between awareness of that,
everybody realizing perhaps that they're more vulnerable if anyone can
get hit, and then uh more spend on areas related
(26:10):
to security pretty quick, Pretty quick. People are pretty tuned
in the news right now. UM. I do think that
with the Colonial pipeline and now the meat uh ransom
or issue, um, we're seeing companies that may not have
been as focused on cybersecurity now realize that everybody is
underable and that there are some significant impacts if you
do not have the right data framework to help give
(26:32):
you visibility pre during a post attack. M within our
current customer base has been to help as well. Most
of them have been able to get through this much
more quickly, um and it has resulted in a little
bit of an increase for many of them US and
I realized, oh geez, I didn't have those data elements
going through Splunk. Maybe I should add those also, um
as I'm waiting through the after effects of the solar
(26:54):
winds issue or but one of the other horrible instance
that we've all been reading about and dealing with. And
it is. And that's it for what you missed this week.
If you like to show, make sure to subscribe and
rate us at Apple podcast or wherever you listen to podcast.
You can catch our show every weekday from three thirty
(27:14):
to five pm on Bloomberg TV and from four to
five pm on Twitter. Thanks for listening and have a
great week.
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