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First Move with Julia Chatterley
The NASDAQ Set to Stabilize after a 10 Percent Sell-Off; AstraZeneca's Vaccine Trials Delayed Over Safety Concerns; Why LVMH Might Be Skipping Breakfast at Tiffany's. Aired 9-10a ET
Aired September 09, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:34]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I am Julia Chatterley. This is FIRST MOVE and here is your need-to-know.
Pullback paused. The NASDAQ set to stabilize after a 10 percent sell-off.
Study suspended. AstraZeneca's vaccine trials are delayed over safety concerns.
And a diamond-sized disaster. Why LVMH might be skipping breakfast at Tiffany's.
It's Wednesday. Let's make a move.
A warm welcome once again to all our First Movers around the globe. We have a truly electrifying show coming up for you this Wednesday. Uber's CEO Dara
Khosrowshahi who will be joining us in an exclusive interview to discuss the company's bold new push towards electric vehicle adoption for its
drivers and of course, what the future of the gig economy may indeed look like.
And now, speaking of power moves, too, Trevor Milton, the Executive Chairman of Nikola is also coming up, the firm announcing a major
investment from GM as we discussed yesterday on the show. That sent shares up some 40 percent.
Yesterday's trading session, and they are up again premarket. Now, after some high voltage market moves, too, the tech sector seems to be back on
the grid. As you can see there, NASDAQ futures higher this morning after plunging 10 percent in three days. That was the fastest move into
correction territory on record for that market.
Tesla also falling more than 20 percent in yesterday's trade. Its worst day ever as a public company. Context though, as you can see by that chart, is
key. The stock is still up almost 300 percent this year.
Though, other notable losses, too. The energy sector had its worst day in almost three months on future growth fears, I think, reports say Saudi
Arabia is now cutting prices to supplies to the United States and to Asia and sticking with Asia, too, a quick look at the session there. All the
major markets in the red.
The red hot Chinext Index jam packed of course with Chinese tech startups falling near five percent on fears that regulators could move to limit
speculation as valuations heat up.
Oh boy, there's lots to discuss. Let's get to it. Paul La Monica joins us now. Paul, when you have some of the biggest tech names contributing almost
a quarter of an index like the S&P 500, when they lose ground, the aggregate stock market falls.
But when I look beneath the details, people are dipping their toes here into other stocks, recovery stocks. We need to point this out at the same
time.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, I think you are exactly right, Julia, and what's been interesting is you're seeing some of the companies
in the travel and leisure sectors that have been really hard hit due to COVID-19, they were leading when the broader market was falling.
Companies like Royal Caribbean and Norwegian, they though, are down in early trading this morning because now, it looks like we're going back, at
least for one day or at least for the open to those high-tech stocks that people have been infatuated with. I dub them the Magnificent Seven, you
know, the top five companies in the S&P 500. You throw in Tesla and Netflix as well, and you have these tech companies that investors just can't seem
to get enough of.
Tesla is back up in early premarket trading. Apple is rallying once again. So, I think investors are wondering maybe we've had this correction, we've
had this dip. Valuations still may not be totally reasonable, but they're more cheap now than they were a few days ago, even though they're not
inexpensive by any stretch of the imagination.
So you might see some of the proverbial buying on the dip finally happen.
CHATTERLEY: Five horsemen of the tech apocalypse for three days only, it seems, Paul. Is this the fear of missing out, kicking back in? Because
beyond perhaps some concerns over valuation, nothing really has changed. If you like the tech trade going forward, if you keep looking back at the
Federal Reserve stimulus, it's all still in there.
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, the Fed is not going away any time soon. I think that Jay Powell will continue to be the market's friend.
And I know this is something that we've harped on, but I don't think we can stress it enough, tech in 2020, the tech leaders are in much better
fundamental shape than they were when we had the dot-com bubble burst 20 years ago.
All of those five tech giants -- Apple, Amazon, Facebook, Microsoft, Google and Alphabet -- you could quibble with the valuations, but you cannot
really take any pot shots at, A, the demand for all of their products and services, which is robust, and their balance sheets. A lot of them have a
very nice fortress of cash and very little debt.
So these are companies in healthy financial position that should be able to snap back once the economy does rebound, whenever that happens.
[09:05:51]
CHATTERLEY: Yes, the last six months proved we simply can't live without them. The Amazons, the Apples, the connectivity, the working from home,
can't live without. Paul La Monica, thank you for that.
Shares of AstraZeneca are lower in London after the pharmaceutical giant temporarily halted its Phase 3 trial of a possible coronavirus vaccine.
This comes after one of the volunteers had an unexplained illness.
CNN's senior medical correspondent, Elizabeth Cohen has all the details. Elizabeth, I have so many questions on this. It is one of the mostly
scrutinized scientific sprints ever. Is this a sign that safety is being put first?
ELIZABETH COHEN, CNN SENIOR MEDICAL CORRESPONDENT: It is, and that's a good thing, Julia. This is the way these trials are supposed to happen.
When you vaccinate tens of thousands of people, you are going to get, just by -- it could be by chance -- some people are going to get sick. Could it
be because of the vaccine? Maybe. Could it be a coincidence and it's not because of the vaccine? Maybe. But that's why you stop down the trial and
you see -- you try to get a look at what's going on.
And I'll note here, Julia, that if you remember last spring, we heard so much enthusiasm from the University of Oxford, which is associated with
AstraZeneca. Now, they are working together. We heard so much enthusiasm about their vaccine. They said we're going to finish first.
This is why you have to have humility in vaccine trials. They are very unpredictable. You never know what's going to happen. Let us take every
comment from a pharmaceutical executive saying, "We're the best. We're the best." Take those with a grain of salt.
CHATTERLEY: Yes, we just have to wait to see what the results of this full scale trial look like, and there is no getting around it.
COHEN: Right.
CHATTERLEY: Elizabeth, great to have you with us. Thank you. Elizabeth Cohen there.
American businesses are resisting President Trump's calls to recouple from China. A new survey found that 92 percent of U.S. firms that operate in
China intend to stay, despite the trade tensions.
David Culver joins us now. Interesting analysis here. They may be staying, David, but it has changed their investment priorities and their thinking.
DAVID CULVER, CNN CORRESPONDENT: And it is so telling when you look at this geopolitical sphere that we're in, what some have described as an
absolute mess between the countries and what is a deteriorating relationship between the two largest economies in the world.
But Julia, you look at the survey coming out of the American Chamber of Commerce Shanghai, 92 percent, the overwhelming majority of the American
companies that were part of that survey saying that they are committed to staying here within the People's Republic of China, despite what we have
seen: the pandemic, the trade tensions, and the trade war.
And then as you mentioned, President Trump being highly critical of China and even calling for companies to decouple. They seem to be resisting that.
So what is it that is keeping them here?
Well, for one, they obviously see the advantage of the consumer market and what has been a growing one at that. Demand here certainly even in the
midst of coming out of the outbreak lockdowns, which were brutal at times, people are spending a good amount -- this revenge spending as it has been
described.
The other thing that's been cited is that as they've emerged from the pandemic, no question, there were cases such as Wuhan, the original
epicenter of this in which case, they had 76 days of really sealing off the entire city, a city larger than New York, larger than 11 million people,
population-wise, and what we saw when they made our visits to Wuhan were businesses, the vast majority, not able to reopen. They were struggling.
So, they took that and they learned from it in other cities such as Beijing and even in Shanghai and they were determined to have local government work
with some of these companies so as to figure out a way to come back online, to bring back the supply chains, as well as simply open up offices,
especially when you look at a financial hub like Shanghai.
So that's what was cited as part of the reasoning for their commitment to staying here, but there are still struggles ahead. I mean, a quarter of
those surveyed suggested that they think the U.S.-China trade tensions will go on indefinitely, Julia. And they also say they're worried about domestic
competition, because we've seen that growing here as well as just an overall economic slowdown.
As we've seen, China has had really rapid growth in recent years. It's obviously slowed because of the pandemic. But also because they're starting
to realize that they're facing more competition globally, too.
[09:10:15]
CHATTERLEY: Yes, there's no easy decisions here. But for now, at least, it seems standing part. David Culver, great to have your analysis on that.
Thank you so much.
All right, let me bring you up to speed now with some of the other stories making headlines around the world.
A massive fire has destroyed Europe's largest refugee camp. Fast moving flames tore through the Moria Camp on the Greek Island of Lesbos overnight,
where an estimated 13,000 people were living. That's more than six times its maximum capacity. There are no reports of injuries so far. The cause of
the fire also not yet known.
More than 10,000 kilometers way, dozens of fires still burning in the Western United States, and with hot dry weather in the forecast, there is
no relief in sight. In California alone, wind and extreme heat is stoking the flames that have scorched nearly 900,000 hectares. The massive Creek
Fire still completely uncontained.
As Europe struggles with a surge in new coronavirus cases, the U.K. tightening restrictions. The government says social gatherings can include
no more than six people, instead of the previous 30 allowed.
Official figures on Tuesday showed more than 2,400 more coronavirus cases in Britain in the previous 24 hours.
All right, still to come here on FIRST MOVE, Uber's electric charge, the firm promising every car on its platform will be electric by 2040. Wow. The
CEO, Dara Khosrowshahi joins us next for an exclusive interview. Stay with us, that's up.
(COMMERCIAL BREAK)
JULIA CHATTERLEY, FIRST MOVE HOST: There is plenty to discuss in an exclusive interview. Joining us now, Dara Khosrowshahi, CEO of Uber. Dara,
fantastic to have you on the show. Thank you for getting up so early to talk to us this morning.
DARA KHOSROWSHAHI, CEO, UBER: Happy to be here. Thank you.
CHATTERLEY: Two words come to mind, bold and ambitious. The closest comparison perhaps I could make is Microsoft, but they have nowhere near
your footprint. How are you going to do this?
KHOSROWSHAHI: Well, it's going to take a lot of work, and if you don't start today then you're losing another day to prevent climate change, which
is an incredibly important issue for all of us. And we decided that we have to take a responsibility, and essentially we're doing it by bringing Uber
Green, expanding the product all over the world, bringing it to the U.S., and using the power of the consumer to be able to make choices as far as
hailing green cars and using that to help drivers on the Uber network make that transition from gas-powered engines to hybrids and ultimately
electric.
So we plan to be electric by - all-electric, zero emissions by 2030 in major U.S., European, and Canadian cities. And by 2040 we hope to be all-
electric all over the world, but this is a team effort. We need help and we need the infrastructure that is required to go all-electric, especially in
the large cities of the world.
CHATTERLEY: Yes. You make the point here there is no way you're going to achieve this without support from national governments, from local
governments. Is this basically Uber throwing down the gauntlet to these governments and saying, look, we want to help the environment. We want to
help people individually, but you're going to have to play ball with us, too.
KHOSROWSHAHI: Well, I think that climate is a team sport, right? Any benefit that you get from climate essentially accrues to everybody else.
And if you're going to play a team sport, you've got to be - make a contribution. Otherwise, you're not part of the team. And I do think that
the investments we need to continue to make investments to make electric cars cheaper. We especially, I think, need to focus on going electric not
just for individual car ownership but especially for fleet ownership where the cars are used so much more often, and one gasoline-powered car that
goes electric essentially has five times the beneficial effect to the environment than let's say a personally-owned vehicle.
We have made progress with personally-owned vehicles, but I do think that we need to make a lot more progress with fleets, and we decided to step up
and plan this step up in a big way.
CHATTERLEY: You said the onus is on customers here, too. I mean, they'll pay I believe a dollar extra more per ride if they're going green. Half of
that will go to the driver. There's a supplement, a further $1 for the driver for being green already. At least in the transition phase do people
simply have to wait longer perhaps to get a car to them if they want to be kinder to the environment? Is that part of the sacrifice?
KHOSROWSHAHI: Well, it is. It is, and we've seen the evidence in Europe that consumers are willing to wait longer, and if consumer demand comes in
for green - Uber Green, then essentially the drivers will see their incremental demand come in. They will see the incremental earnings
opportunity in going hybrid and ultimately going electric, and the fleets will move over.
If you want to make big moves in the environment, you have to create market economies that incentivize those big moves into electric. And what we're
creating with Uber Green is an incentive for users to essentially vote with their time, and we think that as the users vote with their time and go
green, the fleet and drivers are going to respond because honestly the earnings opportunities are going to be higher with electric. We've seen
this work in Europe, and we think it's time to roll this out all around the world.
CHATTERLEY: You called it a team sport. You're also teaming up with GM in the U.S. and Canada, with Renault and Nissan in the U.K., France,
Netherlands, and Portugal. Just talk us through some of the financial incentives that those companies are saying, look, they're going to -
they're going to provide here in order to help you achieve this because this is vitally important I think, too.
KHOSROWSHAHI: Well, the issue that we're facing today is that owning a gasoline-powered car or even a hybrid car is more affordable than owning an
all-electric car. So, you need to bridge the gap, and the drivers who drive on Uber, they're doing so to make money. They - the economics have to work
for them. So, what we're trying to do is through a combination of our network demand and through a combination of discounts that we have
negotiated with Renault and GM essentially help bridge that gap from gasoline power or hybrid to all electric.
But, we do need governments to step up, governments also need to be part of the solution, to give tax breaks, et cetera, and we think the combination
of private markets, the combination of Uber stepping up, car manufacturers and governments together can make very, very big things happen.
CHATTERLEY: You know there will be people watching this going, you know, Uber can afford more than $800 million if they really want to be committed
to this and one of the other issues here, perhaps, and you've pointed to it already, it's expensive technology in a weakened economy globally. Only
wealthy households that are Uber drivers are even going to be able to consider going electric.
And again, this is a -- it's a great idea, but it's not going to accrue to some of the poorest households around the world. How do you respond to
that?
KHOSROWSHAHI: Well, I think 800 is a beginning. Remember, we're committing to $800 million between now and 2025. We'll see where we are in 2025 to
bridge a gap to 2030.
And ultimately the investments that we're making now are accruing to wealthy -- to the wealthy and to the non-affluent, that is the
environmental gain, which is the investments that you have to make, people who are better off, people who live in large cities, people who are in the
West that have a greater energy footprint actually have to be the first to make the sacrifices in order for everyone to benefit.
And again, we're stepping up in a way that no other company has in the mobility space, and we're hoping that others will follow, including the
vehicle companies and including governments in the cities in which we operate.
CHATTERLEY: And this is such a huge important point, I think, by 2040 net zero emissions. This is the message from Uber today, if you hit these
targets, it's going to mean a decade early in hitting Paris climate targets.
There's a big and bold message there from the company, but also perhaps a bold message to national leadership about how invested we have to be in
climate change and doing more to protect the environment.
KHOSROWSHAHI: Yes, and time is our enemy here, right? It -- the amount of infrastructure that you have to build, the charging infrastructure, for
example, having fast chargers in the middle of the city, so that drivers who need to recharge don't lose too much time, making sure that the
charging infrastructure isn't just in the wealthy parts of the neighborhood, there are -- you know -- folks in America take garages for
granted, but a lot of people don't have garages.
So, you need the charging infrastructure to be all over the city, including less affluent neighborhoods as well. These are investments that you have to
make now because the infrastructure has -- takes time to develop and we want to be a positive catalyst in making this happen.
CHATTERLEY: I'm going to put you on the spot now Dara, because I know your pay, an exec payer to Uber is tied to diversity, inclusion metrics. At what
point are we ready to have the conversation with action points and progress on climate change perhaps should also be tied to exec pay?
KHOSROWSHAHI: Well, I think it's a -- it's an interesting idea, and I certainly would not be against it. It's -- I think the difficulty around
climate change is, it's difficult to score a company, right, as far as exactly how you're doing on -- on climate.
So, I think you need a big, bold action forum, a few companies who are stepping up. We are one of those. And as you get the flow of other
companies stepping up, I think you'll have standards.
We are going to be very transparent with our own scorecard, et cetera, and as you build a scorecard, I think that scoring on climate could be a way of
judging how executives are doing at companies. I certainly wouldn't be against that.
CHATTERLEY: I want to move on and talk about how Uber's being scored on taking care of its workers, because you're coming under pressure clearly
where you are in California, but also around the world to -- to do more for your employees.
Some of the loudest calls, I think, are saying, look just make these drivers, these contractors employees. Dara, what are you own drivers
telling you? Do the majority of them want to be employees of Uber?
KHOSROWSHAHI: No, they don't. So, the -- the employee independent contractor system is outdated and was built for the last 200, 300 years of
work. Our drivers are their CEOs, they're their own bosses, they make their own hours, they decide when they're going to take vacation, when they're
not going to take vacation.
They do not want to be employees who have to check in, clock in and clock out the traditional way. And they love the control that they have. And if
they work and they do well, they make more, and they can make the trade-off between earnings and flexibility.
Now, what we recommend is that independent work has to get to the next step and has to have the kinds of protections that employees have, health care
protections, accident protections, minimum earnings and those kinds of protections.
So, actually what we're proposing is what we call an IC plus model, where you retain the flexibility of work and at the same time, you get some of
the benefits associated with full-time work without the responsibilities and the restrictions of full-time work. So we put that forward to
California voters in prop 22, 71 percent of our driver base do not want to be employees, and we don't think going backwards 200, 300 years is the
answer.
Chatterley: Yes, it's interesting. You wrote an article, an OpEd for "The New York Times" talking about this third way that gig economy companies
should put cash into a fund that can be used for these kind of benefits and protections, but the workers get to choose, effectively, how they can spend
the money.
I mean you did the math and you said in 50 states in the United States you would have contributed $655 million to benefit funds alone. Dara, why can't
we get to that point?
KHOSROWSHAHI: Well, we need the legal framework to get to that point.
CHATTERLEY: Right.
KHOSROWSHAHI: We need the law to get to that point. Right now the law is very strict in terms of employment or independent contractor and in a
twisted way the more help you offer independent contractors for using your system, the more legally you look, at least from the legal system, like an
employer.
So, companies today, based on laws today, are incentivized to do very little for their independent contractors, for fear of reprisal in the
courts. And what we think should happen is let's change the system clearly, gig work, technology based, earnings opportunities, it's a new thing.
So, let's build laws for the new thing and let's make it better for those, for folks who choose gig work, so that they get earnings opportunities and
they have flexibility as to how they want to use the benefits. The majority of our drivers actually have healthcare already, either through a spouse, a
family member or through some other means.
So, for example, they may want to use it to take paid time, they may want to use it for sick leave, et cetera. What we're proposing is flexibility in
the way you work and flexibility in the way that you use benefits that accrue to you.
CHATTERLEY: The pushback you've had, I know, is that people have said, look, you can make these contractors, these drivers employees and you can
still give them flexibility. You can do that, but you choose not to.
Your chief economist wrote, I found a pretty interesting article suggesting how that would operate in the real world for a barista at a coffee company
like Starbucks and you could just wander off the job and go make a latte somewhere else if you had that kind of flexibility. Do those two things
work for a company in practice in your mind?
KHOSROWSHAHI: They don't, but the point that the critics make is it's perfectly legal for us to employ someone and give them maximum flexibility,
but that's not how the real world works. You can't have a barista come and make their own hours, decide to take off during the busiest time, and then
on their way home work at another coffee shop for a couple of hours whenever, however they want to and decide to pour lattes, but not
cappuccinos.
That, while it may be legal for companies to allow that, it doesn't work economically. So, what we're proposing is that if gig workers want
flexibility to be able to get on an app and earn at any point, then they can't be employees because once someone becomes an employee, the company
has to essentially take responsibility for their productivity, has to set the hours, has to set the terms of employment.
So, the two don't get along, and what we're trying to do is propose a new way where independent workers retain flexibility, but they get benefits.
And again, we need some changes to the law, we need kind of a new way, a third way going forward to achieve that, and we think it's the best of both
worlds.
The Uber drivers can get jobs elsewhere, right? It's -- there are plenty of jobs available, although now with corona, COVID going on, there are less.
But two years ago, three years ago, there were plenty of earnings opportunities.
They choose to drive on Uber for the freedom. And during this unbelievable economic calamity that we have with COVID, having flexible earnings
opportunities available for folks who need to make money and want to do so in a flexible way is all the more important, and we absolutely think this
third way's a better way.
CHATTERLEY: That's interesting. If you had the right, the ability to do it for the 15, 20 percent that would like to be an employee, would you make
them permanent and let everybody else be flexible? If you could do that, does that work?
KHOSROWSHAHI: I think - yes, it doesn't work right now legally because either workers have to be employees that they're doing the same work
they've got to be employees or independent contractor, so it doesn't work. I do think that there's a group of Uber - of drivers who use Uber who do so
on a full-time basis. Now, because of their experience, because of their expertise, they earn much more on the system than let's say the casual
driver. So, actually the system works for them.
The more they put into the system the more they get from the system, but it's something that we would look to, but there would be a trade off in
flexibility. Again, if we were allowed to legally employ a set of drivers, we would want them to drive during certain hours. We would want them to
drive in certain locations, and we would need that improvement in productivity essentially to pay for benefits and other protections
associated with full-time employment.
So there's no such thing as a free lunch, right? And there is a trade off, and my guess is you would have a subset of drivers who use Uber right now,
a very, very small subset who would choose to be employees because it does come with restrictions on time and place. But the vast majority of drivers
would choose to be independent, and they've told us that over and over again.
CHATTERLEY: It's a fascinating discussion. I wish we had more time, but we don't, but we will continue the conversation. Great to have you on the
show. Thank you so much, and thank you for the bold strategy on improving the environment. Dara Khosrowshahi, the CEO of Uber.
KHOSROWSHAHI: We all have to contribute and we're happy to. Thank you.
CHATTERLEY: Yes, we do. Thank you.
(COMMERCIAL BREAK)
[09:35:13]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are open for trading this Wednesday, and just take a look at this from September splat to
September surge.
Oh dear, I can't get my words out. All the major averages are rallying today after Tuesday's sizable selloff. Tech, of course, the big focus after
its four percent drop. The NASDAQ falling out of correction territory, almost as fast as it fell in. Wow. We are currently up almost two percent
there.
In terms of individual names, shares of luxury goods retailer, Tiffany, have a hollow ring to them, however. Shares are tumbling on fears that its
massive $16 billion merger with LVMH may be falling apart. LVMH says it can't complete the deal because of the ongoing threat of U.S. tariffs on
French products. More on this developing story later in the program. I know what I think is going on.
In the meantime, riding high together, Nikola and General Motors, shares of the two companies are up again after popping higher on Tuesday. That's
after they announced a deal which sees seasoned carmaker GM take an 11 percent stake in Nikola. The electric and hydrogen vehicle startup, the
stake were some $2 billion. No cash changing hands though.
In exchange for the equity, GM will engineer and produce their hydrogen electric pickup truck designed by Nikola called Badger, generating total
cost savings and benefits of some $9 billion, according to the two firms.
I'm pleased to say Trevor Milton is the founder and executive chairman of Nikola Corporation, and he joins us now from the company's headquarters.
Trevor, congratulations on this investment. Investors clearly looking at this as the catalyst to get Nikola vehicles on the road. Why GM?
TREVOR MILTON, FOUNDER AND EXECUTIVE CHAIRMAN, NIKOLA CORPORATION: Yes, it was a pretty incredible process to come to that point. You know, we had to
decide who was the best OEM for us, to not only build the Badger, but to help us engineer it and also to help us drive our costs down across our
platforms.
And with GM, they have a battery that's now sub $100.00 a kilowatt hour in production, which is probably amongst the cheapest, most well-built battery
in the world for the cost, and if we apply that across the board on our other applications, we're going to see a minimum of $4 billion savings for
our company, just in battery costs alone, not including the fact that they're going to provide the entire factory for our pickup truck.
They're going to help us engineer, design and validate our pickup truck. So we're coming to market with the most advanced electric pickup truck in the
world with probably the top pickup truck manufacturer in the world. So it's just an incredible story.
CHATTERLEY: When? Because this was the big skepticism and you and I talked about this on the show. When do we get the Badger on the road? Are we still
looking end 2022? Because that's kind of the ballpark that we were talking about or does this bring that time horizon forward?
MILTON: It will be sometime in 2022. Their certification process is a lot more strict than ours, so even though it's about the same time period we
were originally thinking, there's a lot more work that's going to be done and a lot more strict testing and validation done with them during that
period as well.
So when it comes out, it will be a whole lot better truck than we could do on our own and it will be up to GM's standards, which is pretty incredible.
CHATTERLEY: So you said GM is supplying the fuel cell technology, except in Europe, just reading through the notes I was taking there. They are
going to be doing the production, actually, and the manufacturing. You get the benefits of their scale.
What is left for you guys? It sounds like sort of sales and PR and the design of the body itself. What is left?
MILTON: Well, actually -- what a lot of people may or may not know is Nikola built the Badger from the ground up already. We're going to be
unveiling that in a couple of months to the whole world. So, we designed the whole vehicle ourselves, right, so all the controls, the inverters, the
drive train, the body and the interior -- everything was designed by Nikola.
Now, what we've done with GM is we said, look, we sat down with both of our teams and we said, what parts can we commonly share and what are we each
paying for the stuff.
So working with GM's platform on the bottom, like using their batteries and some of their drive terrain platform on the bottom, we've been able to
reduce that cost big time. So I would say most of the core IP is all Nikola and all the design, the interiors, the controls, over the year updating the
infotainment system, all of that stuff is Nikola's IP.
So GM is just helping us build it and they're helping us drive down our costs.
CHATTERLEY: Yes, and in the end, keeping those costs down in this kind of industry, in this specific sector is key. Trevor, I just want to get your
view on Tesla. Does this say something about Tesla, the fact that they actually didn't have to go to a traditional car company and get their
manufacturing, get their production and get those costs down? Is it a timing thing? What is the difference here?
[09:40:20]
MILTON: Yes, so when Tesla -- Tesla was a first mover, right? They've been here for 10-plus years, if you think about where they came from. And
they've also borrowed and raised tens of billions of dollars. That was not our desire.
So for Nikola, I mean, theoretically anyone can do it if they want to borrow or raise tens of billions of dollars. Our idea was how do we get to
market faster? How do we get to market with a quality product? How do we get to market to be cost competitive with everybody?
And our idea that was to work with one of the largest OEMs in the world like GM, and we did it. We landed GM, which was the best OEM in the world
for us, and we just took a different path than Tesla. We just didn't want all of that debt and we didn't want to have to dilute the shareholders in
tens of billions of dollars.
CHATTERLEY: Yes.
MILTON: They've done a great job because the valuation is huge, but that was because they were a first mover in that industry. So we just didn't
want to have to try to compete with that.
CHATTERLEY: Yes, I think that's a perfectly honest and reasonable answer, quite frankly. What are your early investors saying?
MILTON: They're excited. You know what I mean. I mean, look, the savings on this alone are going to be into the billions and billions, probably
closer to $10 billion for Nikola. The investors love that. They love the fact that we can use their battery, their fuel cell and other technology
throughout our different supply chains and drive down the cost.
They manufacture it. It saves us a bill or two on the factory, you know, years of hiring people for that factory. I mean, the investors love it
because it becomes an asset to the company rather than a liability, the Badger. So that's great. That's why the stock performed well and everyone
was excited.
CHATTERLEY: Right.
MILTON: It's rare you get both companies to go up, right? So both GM and Nikola both raised, which means the financial community was very excited
about it.
CHATTERLEY: Yes, we are going to be watching this space. Come back to talk to us soon, because I do remember you talking about an electric personal
water craft and a four-wheeled electric off-road utility vehicle, in which case we should reconvene on those because I want to see the IP put to good
use.
Trevor, great to have you with us.
MILTON: Let's do it. Sounds good. Thanks.
CHATTERLEY: Thank you. Congratulations. Trevor Milton, founder and executive chairman of Nikola Corporation there.
All right, coming up on FIRST MOVE, the world's newest stock exchange up and running today. The long term stock exchange says, well, it is in for
the long-term. We'll tell you more, next.
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[09:45:45]
CHATTERLEY: Welcome back to the show. Call it the stock exchange that holds or encourages companies to a higher standard after years in the
making, the brand new long-term stock exchange has finally gone live.
The LTSE trades all the U.S. exchange listed securities, but the similarities to other exchanges really ends there. LTSE wants listed
companies to consider strategies that will strengthen their operations for the long-term, for example, like tying exec pay to some of those longer-
term goals.
In line with that aspiration, 80 percent of LTSE's Board are women. Joining us now, Eric Ries, the CEO of LTSE. Eric, huge congratulations. I remember
our conversation a year ago. It feels like five years ago.
ERIC RIES, CEO, LONG-TERM STOCK EXCHANGE: Tell me about it.
CHATTERLEY: This is 10 years in the making. It's also been decades since we saw one launched. Talk us through this.
RIES: Yes, thank you. This has been a 10-year journey for me since I first wrote about the idea in the book "The Lean Startup" and there hasn't really
been a new option in terms of corporate governance for companies to list since the creation of NASDAQ in like -- what -- 1972. So, I feel like the
economy has changed enough since then that we can have one more option.
CHATTERLEY: I mean, I know it took you six years to work out even whether this could be done, but this is not about stealing business from the Stock
Exchange or the New York Stock Exchange or the NASDAQ, it is -- you're going to encourage people to make a secondary listing. It's just a
different way to think about the long-term for companies.
RIES: Yes, the stock exchanges have always had a dual role in corporate governance, in setting standards, as well as in stock trading, and we
really think this is a bit of a throwback idea to the old-fashioned idea that stock exchanges should encourage companies to hold themselves to a
higher standard instead of a race to the bottom.
So, yes, we're not really competitive with the incumbent exchanges. We encourage companies to dual list. We don't affect liquidity or the open and
close price. Instead, our listing standards require companies to take that longer-term view, to align themselves with their long-term investors, their
employees and other stakeholders.
CHATTERLEY: So talk about the principles. We're talking, I mentioned the tie exec pay to longer-term goals. So it's avoiding short-termism in terms
of strategy, diversity, another one.
RIES: Of course, sustainability and then there's also this question of how can companies make promises that their employees, the public, their
communities that they operate in can trust? So this is about making sure that all of those stakeholders are represented in corporate decision making
and making sure that everyone who has a fiduciary duty to the company understands that that duty extends not quarter to quarter, but over decades
and generations.
CHATTERLEY: How does it work in practice, Eric? Because you want people to come and list with you. Other companies on the NASDAQ and the S&P 500 that
might come to you, and can you go, look actually, you know, when I look at the way you operate, I'm not sure I agree with it, you're not signing up.
Would you ever do that?
RIES: That's a hundred percent right. This is not for everyone. There are legacy companies out there that need somewhere to list and that's not our
aspiration to have the whole market. This is a mission based reform. We want companies that genuinely share these values, and it is our job, you
can read our regulatory filings. They run to like 400 pages with the SEC.
They will walk you through exactly how we do the evaluation process, how we select which companies are permitted to list and not. One of the
innovations involved is what we call principles-based listing standards, so rather than having a one size fits all kind of check the box exercise,
every company is required to design policies that are responsive to our five principles.
You can see the principles and of course all the details on our website, ltse.com. So for those policies, we then lock it in and enforce that the
company really is doing what it said.
CHATTERLEY: I'm really now going to put you on the spot because I am just going to pick two companies that are relatively controversial, Facebook,
Exxon, would they be welcome?
RIES: Well, I am not allowed to comment on specific companies because there is a process. It has its own process, but let me just say that to me
the acid test of a company is, if it were to ever be revealed that there was evidence that a company's product was harmful to its customers, to the
human beings that it does business with or the societies that they inhabit, the question we've got to ask ourselves is does anyone in the corporation
did have a fiduciary duty to care or does everyone have an economic incentive to kind of sweep it under the rug and just leave it to next
quarter to next quarter, to next quarter, to next quarter to make it somebody else's problem.
And if you judge companies by that standard, I think you'll see some companies have fallen short.
[09:50:18]
CHATTERLEY: Yes, I couldn't agree more, quite frankly. Is this going to be a problem, getting companies to list? Could it be a challenge?
RIES: I hope so. I think if it's too easy, then we haven't done our job. I think this is a test. I can't say for sure whether companies will list or
not. I obviously believe that they will and I believe that in this next generation of companies, there are some bold leaders who are ready to take
this step; to say, no, our corporation can be a force for good in the world.
But at the end of the day, you know, this is a decision, this is not in my hands. But if companies are not willing to make these commitments, then can
we please have an end of pledges and promises and the lofty rhetoric they put in the S-1s and these other filings? You know, I think like if we want
to say that we're changing the world for the better, we've got to actually make that real.
CHATTERLEY: Yes, it has to be real. Eric, congratulations. What are you going to do tonight at the end of trade?
RIES: I have no idea. We have to get through the day. We'll see what kind of transaction volume we manage to process today. We're hoping for zero
percent. We're the stock exchange with zero percent market share. We're proud of that. But not zero transactions. We'll get through the day and
then, hopefully have a chance to exhale.
CHATTERLEY: Yes, well, I am proud of your commitment to this. It is going to be fascinating to see how it all works, and I know the conversations
begin today with these companies. So it is great.
Eric, great to have you with us. Congratulations.
RIES: Thank you.
CHATTERLEY: Eric Ries, the CEO of the Long-Term Stock Exchange, now up and running.
All right, a deal to buy Tiffany's was set to be the world's biggest acquisition of a luxury brand, but the deal comes apart at the seams over
trade disagreements between France and the United States, and I'll suggest other things, too. We're back after this.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the show. The largest ever deal for a luxury goods company seems to be falling apart. France's LVMH says its planned
takeover of New York's Tiffany and Co. can't go through.
The owner of the luxury brands Louis Vuitton and Bulgari included a trade disagreement with the United States among circumstances it says undermined
the sale. Anna Stewart is outside a Tiffany's store in London. Ana, nothing to do with COVID and a business collapse it seems. What other reasons did
they cite?
ANNA STEWART, CNN REPORTER: Well, the marriage is off, of course, unless Tiffany can force it through the courts. The message from LVMH was very
simple. It was succinct. It says that the French government wrote to them and said they needed to delay their deal until next year due to the
imposition of U.S. tariffs on French goods next year, and it says and I quote that, "It is just not able to conclude the deal."
Now, Tiffany seriously disagrees on a number of counts. First of all, it says it could have asked for a further extension on the deadline.
[09:55:10]
STEWART: It says LVMH doesn't have to listen to the French government. It's not contractually obliged to do so. It says that LVMH didn't tell them
about this letter until a week after the event and it also says that it has been dragging its feet when it comes for applying for antitrust approvals
in various jurisdictions like the E.U.
All in all, it says LVMH's actions are illegal. It is suing them and its Chairman says that LVMH has unclean hands -- Julia.
CHATTERLEY: Diamonds are a girl's best friend, but not at any price. Just looking at the share price since this deal was announced, LVMH bought this
at the highs.
STEWART: At 16 times EBITDA, this was going to be one of the biggest purchases of all time. But it was worth it perhaps at the time. Now, if we
were going to be cynical, I am not saying necessarily we should be, but what was bought then, the deal signed pre-pandemic is looking very
different now.
There's no doubt Tiffany is not nearly as valuable a company right now, looking at its results from the last quarter where sales were down over 40
percent. The luxury sector has been decimated by the pandemic, lockdowns, global travel pretty much coming to a standstill, all of these things.
There will be some recovery and that's what Tiffany points to. However, it won't be a bounce back and analysts have been telling me that luxury
personal goods sales won't recover, in fact, they'll be down 25 percent to 30 percent at the end of the year. And look at those COVID-19 cases rising
again in many parts of the world.
So if you're feeling cynical, and certainly one analyst I spoke to at Bernstein is, you could say that frankly Tiffany is just not as attractive
a proposition post-pandemic.
CHATTERLEY: Yes, serious digestion over that breakfast at Tiffany's. Ouch. Ana Stewart, thank you for that in London there.
All right, that's it for the show. You've been watching FIRST MOVE. I'm Julia Chatterley. Stay safe, as always, and I'll see you tomorrow.
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