00:00You think about this specific IPO, unusual from many different angles, just the sheer size of it,
00:06as we've been discussing. But the fact that, you know, it was a fixed price, it wasn't a range here.
00:12You think about the fact, of course, that you do have this sort of staggered lockup release.
00:16When you add it all together, I do wonder what your thoughts are just on the way that this was
00:21put together.
00:23I would say the cult of Elon is singular.
00:26I don't think we can read anything about the rest of the IPO market from this particular transaction.
00:32It's been put together in ways that are very, very different from most IPOs.
00:37Maybe some of what's happened here will prevail for others.
00:40But this is a one-off. Kind of exciting to watch it, but it's a one-off.
00:44That's interesting to hear you say that because, you know, we have been talking about the fact that, you know,
00:49what we can extrapolate out for other companies in the pipeline, whether or not this is going to create a
00:54sort of halo effect.
00:55When you think about other tech names, other AI and space names.
00:59But it sounds like what you're saying is that, you know, this is an Elon Musk creation, hard to really
01:05build too much on top of it.
01:07Yeah. Clearly we have three names, SpaceX, Anthropic and OpenAI, that may be different from most of the IPOs that
01:15hopefully will come afterwards.
01:17But this one in particular is both because of its scale and because of some of its rather unique governance
01:26or lack thereof policies.
01:28And the way that it looks like it had a pretty light hand from the SEC going through the process
01:31should not be taken as the norm going forward.
01:35Yeah, absolutely. That might be the understatement, Liz. I am curious, though, too, about the idea.
01:40And there was a lot of talk about them trying to sort of bring in more retail investors.
01:44And obviously it was a little bit less than maybe what was first telegraphed.
01:47But we've seen other companies do this, this idea of trying to disintermediate Wall Street,
01:51the institutional side of Wall Street, and go a little bit more directly to the fans, if you will.
01:56Well, obviously, to a certain extent, the Google IPO was some sort of attempt at that.
02:01You've advised certainly a class fee helping, you know, what was it, like Square and Pinterest and a few others
02:07I'm probably forgetting.
02:08Is this going to be more of the trend where we start to see these companies kind of say, OK,
02:13we know we need Wall Street,
02:14but more importantly, we need the people, the real people, the retail investors to make this work?
02:19I think it depends on the company.
02:21And frankly, it depends on how much money they've already raised in the private markets.
02:25To some extent, some of the private investors and some of the big institutions, those wells are beginning to run
02:32a little dry.
02:33And when one well runs dry, you might want to go tap a different one.
02:37So in some of these cases, I think reaching to retail is because that's the next enormous pool of assets
02:43that may come in.
02:44In other cases, it's up to the founders.
02:47If you are a consumer-based company, if we go all the way back to Google,
02:50the founders felt very strongly that individuals who were the ones who were clicking on the ads and helping the
02:56company grow should be entitled to get into the stock at an early point or an earlier point.
03:01So I think it very much depends on the company.
03:04We will see some that go strongly to retail and some of the more esoteric companies probably will not.
03:09Another thing that kind of came out of that Google transaction back in the day was kind of the idea
03:14of these sort of dual-class share structures.
03:17And I know Google wasn't the first, but it was certainly probably one of the more prominent ones at the
03:21time.
03:21And I am curious what you think of the evolution since then.
03:25Obviously, again, SpaceX now the extreme case of that, that dual-class share structure.
03:31But did that sort of – I mean, I'm not saying I blame you, but did you kind of like
03:36let the genie out of the bottle with that?
03:38Yes and no.
03:40It had existed for media companies for a long time, and the point was separating editorial from advertising.
03:45And that was much of Google's thinking also.
03:47If you recall, some of our competitors at the time had very busy front pages, and Google had a very
03:53blank front page except for the search box.
03:56And the founders believed strongly that they wanted to keep control so that no investors could force them to monetize
04:02that front page, which might have been a short-term good thing to do.
04:05But in the long term, Google did itself so much of a favor by just keeping it straightforward on that
04:10front page.
04:11We've looked – if you look at the data since then, tech companies in particular, those that are founder-led
04:16and have a dual-class stock, have tended to outperform those that did not have a dual-class for the
04:23first 10 years as a public company.
04:25Now, there's a question as to whether they outperformed because of dual-class or whether they could have dual-class
04:30because they were the stronger companies anyway, and we can always debate that.
04:33But it does give a founder or an early management team or an early public company team the opportunity to
04:40take a longer-term perspective on certain decisions without fear of activists or others coming in and shutting them down.
04:47So, yes, but with limits.
04:49I think the SpaceX is an extreme.
04:52That's one of the perfect stats because, I mean, you can come at it from many angles and find a
04:58bunch of different reasons for why that's the case.
05:00But we're touching on governance a little bit here, and you did make the point that you think about this
05:04IPO.
05:05It sort of stands alone in its own league.
05:07It's hard to extrapolate too much out of it for other IPOs.
05:11But that's one of the things that has been raised.
05:13You think about how Elon Musk has sort of structured it so that he is completely in charge, virtually completely
05:21in charge, and it's going to be very hard for anyone to sue this company as a shareholder.
05:27Does that extend to governance?
05:29Do you think that this sort of total control, other founders might try to adopt a similar structure?
05:35I'm going to stick Anthropic and OpenAI in a different category.
05:40I think for everybody else, no.
05:42And while new shareholders of SpaceX will basically have no recourse except one, they can always vote with their feet.
05:50They can always sell the stock.
05:52But I do not expect this sort of flexible governance that we see with SpaceX to prevail in many other
06:01companies.
06:01I won't say none other, but I don't think investors, frankly, will accept it for many.
06:06Well, I am curious, though, too.
06:07I mean, you bring up this idea of the founders being able to have some sort of control and sort
06:12of carry out their vision without too much meddling.
06:15I've covered Wall Street for 30 years, so I understand how they meddle.
06:18I understand why a founder wouldn't want that.
06:20I mean, Google was a relatively young company when it came to market.
06:24I mean, I think, forgive me, I think it was less than 10 years old.
06:27I mean, SpaceX has been around for 24 years.
06:29You know, this is a relatively mature company.
06:32Its founder is a known quantity.
06:34And I understand there are some people that are going to buy this stock for no other reason than who
06:38the founder is or who the CEO is rather than the fundamentals.
06:41But is there argument to be made that even if you want that vision from the founder, there still needs
06:47to be some sort of guardrails or a leash, if you will, to ensure that you as an investor are
06:55actually protected?
06:55I would think particularly for institutional investors, because they have a fiduciary obligation to all of the investors in their
07:02funds.
07:03And so, yes, there are still definitive and important reasons to have some guardrails.
07:10And this is just this is just an outlier because people are betting on Elon.
07:15And nobody's noticing, by the way, that Tesla, which has obviously been a terrific stock lately, didn't do anything for
07:21its first 10 years as a public company.
07:24Different story.
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