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First Move with Julia Chatterley
Coronavirus Fears And D.C. Dramas Send Global Markets Lower; TikTok's Chinese Owner Says It Is Still In Charge Despite The Oracle Deal; Shares In Truck Maker, Nikola Plunge After The Exec Chairman Resigns. Aired 9-10a ET
Aired September 21, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:22]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from New York, I am Julia Chatterley. This is FIRST MOVE and here is your need-to-know.
Stocks slump. Coronavirus fears and D.C. dramas send global markets lower.
ByteDance bites back. TikTok's Chinese owner says it's still in charge despite the Oracle deal.
And electric shock. Shares in truck maker, Nikola plunge after the Exec Chairman resigns.
It's Monday. Let's make a move.
A warm welcome, as always, to our FIRST MOVErs around the globe. It's good to be with you this Monday. It's also a somber day here in the United
States as Americans pay tribute to the late Supreme Court Justice Ruth Bader Ginsburg and that includes Wall Street.
Take a look at this, a poignant reminder of RBG's outside stature and influence. The Fearless Girl statue outside the New York Stock Exchange has
been fitted with a Ginsburg style lace collar. They will also be a moment of silence inside the New York Stock Exchange for her this hour.
The latest on the Memorial and the battle over the future of the U.S. Supreme Court in just a moment's time. For now, the impact already being
felt, I think, on Wall Street. One of the natural assumptions here is that added tensions in D.C. of whatever kind will make any agreement over more
financial aid before the election even more remote.
We are seeing sizable losses as you can see in front of you premarket. Europe down over three percent for the majors here. Lots more at play, too.
Increasing talk of a return to lockdown style measures and restrictions across parts of Europe. Cases of COVID-19 rising here in the United States,
too.
Then we can add in serious new money laundering investigations or allegations -- apologies -- against some of the world's biggest banks, too:
HSBC, Deutsche Bank, Barclays, just some of the stocks under pressure.
HSBC now trading at more than 20-year lows. JPMorgan Chase and Bank of New York Mellon also mentioned in this big report. A number of banks are
already saying this is old news, but at the very least, a reminder of previous bank bad behavior.
Financial stocks already, of course, down some 30 percent to 40 percent this year. We've got all the details on that. Let's get to the drivers. Is
it only Monday? Yes, it is.
Christine Romans joins me now. Christine, great to have you with us. September is always traditionally a tough month for stocks. Let's be clear.
We're off some nine percent more from the highs, but I just mentioned there a smorgasbord of issues for investors and that's clearly playing out right
now.
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: And they are historic issues. I mean, we're talking about a Supreme Court vacancy, at
the very moment we've been months into wrangling over what the next fourth pandemic relief fund is going to look like. There's a feeling, the
conventional wisdom this morning throughout the markets is that Washington can't handle all of this. This will be Supreme Court focused. It will be
divisive. It will be chaotic and it will consume the oxygen in D.C.
So don't expect the stimulus checks, the state and local aid. Don't expect any of the things that were in the House Bill that was passed more than
four months ago now to come to fruition.
Now, Washington can always surprise you, especially on the eve of an election. But the feeling this morning is that the tone has really shifted
in an already tumultuous election season. We've got this big surprise that makes things even more tumultuous and on top of that, some of those losses
in Europe are quite frankly tied to the fact that there are big fears in the U.K. and parts of Europe about a resurgence, a second wave of the
virus. Will there need to be new lockdowns?
Another reminder, Julia, as you and I always say, the virus is in control here. The virus is going to determine what kind of recovery we're going to
have and how fragile that will be.
Even in recent days, we've had signs that the crash was not as bad as we thought worldwide, the recovery is still fragile.
CHATTERLEY: Yes, the recovery is still fragile. The virus remains in control, and that's one of the huge uncertainties. And for investors, never
mind for the real economy and real people that continue to struggle. We don't like uncertainty here.
Christine, the other thing that I -- I spotted this, if you look at the performance of some of the biggest tech stocks, the pillars of the strength
of the market over the last six months since we bounced from the lows: Apple, Amazon, Facebook, they had a really bad September.
So if you knock them out in aggregate for all the stimulus that's come from the Federal Reserve, you're losing one of the underpinnings of the market.
[09:05:06]
ROMANS: That's a very good point. And, you know, I think a quarter of the advance of the S&P 500 could be attributed to just five stocks. So when you
have the President of the United States saying that the stock market was at record highs and it was because of confidence in the economic recovery, the
Super V, as he called it, I kept going back to the same five stocks that had been so much a part of the run up that are now so much of the run back
down.
When you strip them down, what is the stock market telling us about the economy? It is still telling us that the future is uncertain. Jay Powell,
the Fed Chief last week, again reminded everybody that, look, there is a near-term and a medium-term and both of those still depend on the virus and
how we get the virus under control.
So, I go back to what you and I have been saying for months. This depends - - for the broader economy, for how real people feel, not just investors who have an awful lot in stock investments, how real people feel will depend on
how we grapple with the virus in the months ahead.
The calendar is not going to be very helpful here because we are heading into flu season and so now, we have this concern of flu season with a
second wave of the coronavirus, even without any more stimulus. So this is bad for small businesses, people facing eviction. We've got a real problem
here in the United States right now getting this economy stabilized heading into the fall.
CHATTERLEY: Yes, the stock market is merely a reflection of some of the biggest winners as a result of the pandemic and does not reflect those that
are struggling most in the underlying economy.
Christine Romans, thank you for that.
European stocks falling as we've mentioned, as Christine was talking about there. Shares of major banks dropping amid money laundering allegations.
It's based on leaked suspicious activity reports filed by banks themselves to the U.S. Treasury Department's Financial Crimes Enforcement Network. So
we are talking Deutsche Bank, Standard Chartered, Barclays, HSBC, as well as several U.S. banks all named in the documents first obtained by
BuzzFeed.
Anna Stewart has all the details. Anna, you get all the easy jobs on this show. This is really complicated. Just explain, first, I think what the
Financial Crimes Enforcement Network is and what the scale of these allegations are. Because these banks have paid a lot of fines in the past
and it's tough to see what is old and what could potentially be new. Give us the deets.
ANNA STEWART, CNN REPORTER: It's incredibly complex and I think we will be teasing this out over many days as you get into individual banks and
stories and so on. But at the heart of this, it shows that the world's biggest banks flagged around $2 trillion worth of transactions as
suspicious to the U.S. Financial Crimes Authority, FinCEN and this is between the years of 2000 and 2017.
The banks that get the most mention in these reports include, by are no means limited to JPMorgan, Deutsche Bank, Barclays, HSBC, Standard
Chartered and so on. We're talking about all the major banks you can really think of.
Now, the fact that they flagged some of these transactions, $2 trillion worth as suspicious doesn't mean all of them were. It also shows that the
banks were flagging these transactions as suspicious. But, Julia, what's so interesting and worrying in many ways as we start understanding a little
bit more about the different angles of this story is how long it took some of the banks to flag certain transactions as suspicious, despite maybe
other regulators already investigating certain crimes taking place, but also not just how long it took to flag it, but how long it took to make any
kind of real action to stop money, dirty money, filtering through banks, to stop people, real people being scammed out of their savings.
So I think this is something we will be talking about for probably days and weeks to come.
CHATTERLEY: I couldn't agree more with you quite frankly and I can give you a whole host of reasons why banks would be under pressure today, going back
to the fact that we're in a pandemic and there's real fears about how we tackle that in Europe going forward.
What are the banks saying about this? Because the data, as you've pointed out, 17 years' worth of potential reports. What are the banks saying about
this leak?
STEWART: Well, the banks really, all of them very uniform. The ones we've spoken to today have said this is historic. This dates back in some cases
by 20 years. So we're talking some time ago.
And in that time, many of these banks have been faced with billions of dollars' worth of fines and settlements they have made with U.S. regulators
on various money laundering and other probes. So they have tackled in many of these cases, but there is so much to go through in these papers.
How much of it was known by the public? Well, we're not quite sure. But certainly, the regulators knew because the fact of the matter is, these
leaked documents were from banks to the regulators, so they can't be blind- sided by this.
But as I said, I think what we might see is a pressure to really increase and enforce and strengthen the process by which banks and regulators act on
this information -- Julia.
CHATTERLEY: Yes, I couldn't agree more. Yes, and I think the investigative journalists are now going to be pouring over the details of this to see if
they can find anything additional on top of what they banks have already been fined for, and as they were saying, nothing to see here, but we'll
take a good look. Anna Stewart, great job. Thank you so much for that.
[09:10:07]
President Trump has signed off on a deal for TikTok by Oracle and Walmart, averting a Sunday ban on the app. Under the agreement, TikTok will be
restructured as TikTok Global. Oracle and Walmart will hold a combined 20 percent stake in the new company.
Selina Wang joins me now. Selina, didn't have to debate whether or not I downloaded the TikTok over the weekend as we were discussing, but you know,
I was looking at this now and it's like, what do we get? We've got a Cloud computing deal for Oracle and we got a merchandising deal, it seems, for
Walmart. Is the data safe? Selina, talk us through this deal. What are your observations?
SELINA WANG, CNN CORRESPONDENT: Julia, I've been asking that question to security experts myself and they say it's not entirely clear what we get
from this deal when it comes to the security standpoint. You have Oracle managing the U.S. data. They also have the ability to oversee the source
code. But the algorithm and the technology is still squarely owned by ByteDance.
This is a far cry from what President Trump had initially asked for. He had asked for this company initially to be completely sold off. I just spoke to
a Director at CyberTrace, which is an AI cybersecurity company, and the Director told me that there are a number of unanswered questions here.
For one, if the algorithm is still owned by ByteDance, it is unclear if and how that algorithm could still be manipulated. Secondly, it is unclear if
this data in the U.S. is going to be completely firewalled from ByteDance.
And when it comes to the specifics of this deal, Julia, it pretty much tracks with what I've been reporting on your show over the last week. You
mentioned the Walmart and Oracle stake adding to about 20 percent. You have the fact that that data is managed by Oracle. You also have the company
saying that they are going to be creating Walmart and Oracle in this TikTok Global entity, they would be creating 25,000 new jobs.
But, again, it's not a hundred percent clear if this answers the core question that set off Trump on this path in the first place, which is
around national security.
CHATTERLEY: Yes, I mean, we could debate this until the cows come home, quite frankly, but there are two other things that stand out to me. TikTok
is going to be paying $5 billion in new tax dollars to the U.S. Treasury.
Now, my understanding of how this works, you only pay taxes on profits and as far as I can see, TikTok doesn't make any money at the moment, which is
an interesting one. But the second thing is how ByteDance itself views this deal. What are they saying?
WANG: There has been so much confusion around this deal, it's been so messy that ByteDance actually put out a pretty lengthy statement batting down
what they say are rumors about the company.
And in fact, many of the rumors that they are addressing were started actually by the President. Because throughout this process, he has made a
variety of comments that have brought more confusion to an already very complicated deal.
You mentioned this $5 billion. President Trump made a comment that as part of this deal, they would be creating a $5 billion education fund for what
President Trump called in order to teach people about the real history of our country. That seems to be Trump trying to get extra mileage out of this
deal by tying it together with what he sees are his attacks on interpretations of American History that he thinks are un-American.
It seems he is conflating that with this $5 billion that a statement said, which is an estimate of how much ByteDance would pay in corporate taxes.
Again, ByteDance says this is just an estimate of how much it would pay in U.S. corporate taxes. It does not have to do with this education fund and
it also doesn't have to do with the terms of this deal.
CHATTERLEY: Yes, so everyone is a winner and everyone else is just deeply confused. The end.
WANG: Deeply confused, indeed.
CHATTERLEY: Selina Wang, we'll continue to discuss. Thank you for that.
All right, let me bring you up to speed now with some of the other stories making headlines around the world.
An explosive showdown over the future of the U.S. Supreme Court is under way in Washington. President Trump is vowing to nominate a woman to replace
the late Justice Ruth Bader Ginsburg and he says he will likely do it this week.
Joe Johns joins us know. Joe, Oh, boy. Two months before a presidential election, we lose Justice Ginsburg and that opens up the Republicans
attempt to try and replace her and the Democrats using everything they can to try and prevent it.
JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: Absolutely, and to be quite honest with you, if the Republicans have the votes, because they control
the United States Senate where the confirmation would occur, the fact is the Democrats wouldn't be able to do so much, other than try to apply
political pressure, which they are trying to do already.
So here is what we know right now. We know it's a fairly fluid situation as to timing. However, there was one huge indication of just how fluid it is
earlier today right out here on the driveway at the White House. The White House Press Secretary speaking on another network, said that in her view we
would see the name of an individual released by the White House who the President wants to fill the seat in the Supreme Court by Wednesday.
And then not 30 minutes later, the President himself speaking in a telephone interview on FOX News told people there that it would be on
Friday or Saturday.
[09:15:30]
JOHNS: So obviously, the President's word goes on something like that. Now, what's going on behind-the-scenes, it's not just an issue of mixed
messaging or the right hand not knowing what the left hand is doing.
In fact, it's pretty clear through our reporting that there were two schools of thought on when to release the name of an individual. The first
school of thought suggested the President needed to move as quickly as possible to lock in any support up on Capitol Hill and sort of still the
political waters.
Others said the President needed to wait at least until after a Memorial Service for Justice Ginsburg, and apparently those who suggested that are
the ones who won the day, because the President apparently sees this as a situation that he doesn't want to mess up.
He wants to do no harm. He wants to not further inflame those voters who are going to be going to the polls in November over his own personal
behavior and practices and the concern would have been that he might have created some type of a front, if you will, to people who love, adore and
respect the memory of Justice Ginsburg -- Julia.
CHATTERLEY: Yes, Joe Johns, thank you so much for that.
The U.S. National Cathedral marked nearly 200,000 American lives lost to the coronavirus pandemic. The bell there tolled 200 times on Sunday, once
for every 1,000 deaths.
The impact of the coronavirus pandemic in the U.K. also showing no signs of slowing. The government considering fresh restrictions with new infections
doubling in numbers every seven days. Medical officials say that if that goes unchecked, Britain could see 200 or more deaths per day by November.
Still to come here on FIRST MOVE, the devil in the detail as President Trump blesses a deal for TikTok. We take a look at what remains a little
hazy. There's more.
And first it was the truck, now the heads roll at Nikola as the battle with the short seller intensifies. That's coming up. Stay with us.
(COMMERCIAL BREAK)
[09:20:49]
CHATTERLEY: Welcome back to FIRST MOVE live from New York, where it's still looking like a pretty tough start to the trading session this week. Tech
has already fallen actually for three straight weeks. Apple down some 17 percent so far this month. Amazon and Facebook down around 14 percent.
The S&P 500 has fallen more than seven percent since hitting all-time highs a few weeks ago. So if you add what we're seeing today, some nine percent
from the highs.
Meanwhile, things to watch this week, too. Fed Chair Jerome Powell testifying numerous times on Capitol Hill on the U.S. emergency response to
COVID-19. The outlook, however, for fresh fiscal aid from Congress continues to look bleak at least in the short term.
Returning now to TikTok, which lives to see another day in the App Store at least with President Trump saying he will approve the deal with Oracle and
Walmart as we've discussed.
Leland Miller is the CEO of the China Beige Book International which operates the largest private in-country data collection network to track
the Chinese economy. Leland, always fantastic to have you on the show. We were discussing this earlier and I pointed out that there's a very
different take if you look at the U.S. reading of this deal versus what ByteDance, the owner of TikTok is saying about this deal. Should we be
surprised?
LELAND MILLER, CEO, CHINA BEIGE BOOK INTERNATIONAL: I don't think we should be surprised because the entire deal is a head-scratcher. We set out
national security considerations that needed to be met and it's very unclear how those considerations will be met by the deal that's unfolding
in front of us.
You had several different considerations. You had access to front door data, the user data that the company manages. You had a potential back door
that the company could grant to the Chinese government, and then of course you had the potential for there to be subtle manipulation of the media
environment, the political environment using the algorithm.
The solution as it looks right now doesn't seem to address most of this. There could be some monitoring or regulation on the part of Oracle, but
it's a very, very dicey proposition to be giving Oracle a stake in the business and thus a financial incentive for not cracking down on TikTok.
The whole thing just looks icky.
CHATTERLEY: Icky. Is there a silver lining here, and I'm using the term loosely, that it prevented what would have been a further dramatic
deterioration in relations between the two or should we still expect perhaps fireworks as we head towards the presidential election? China
arguably is one of the few things now that the President can say, look, tackling them has been a success.
MILLER: You know, except that this wasn't really attacking the Chinese or at least, it wasn't following through as an attack that started. There's a
lot to be said for this deal in terms of it being worse than had we never attacked TikTok in the first place.
If you look at what is happening with the Chinese state media right now, they're glowing over this. They're claiming their precedent has been set.
This is the way to solve these national security problems. It's going to end up biting this administration and future administrations hard when they
try to crack down on apps for very legitimate security considerations.
And I think despite even what's going on with TikTok, you've got a presidential election and as long as there's a presidential election coming
up in a matter of weeks, things with China are going to still to get hairier over that. And so this is just one box checked in terms of tamping
down the rhetoric. Another one is about to fire off any day now.
CHATTERLEY: I mean, that's a fascinating point to make about how this is being portrayed in China. The message here is that, this is perhaps a
template for how we handle divisions over technology in the future and it simply isn't.
MILLER: Well, it's critical. ByteDance continues to control 80 percent of the company. ByteDance continues to control the algorithm. I mean, this
isn't a best case scenario for the Chinese, but it is pretty close.
CHATTERLEY: Where are we? You said a firework could go off in the next few weeks. Biden has been very quiet about China over the last few months. How
does he handle China in the presidential debates if this comes up?
MILLER: I think what he has to do is go right at President Trump. President Trump has run as, you know, the anti-China guy, the strong on trade guy.
And I think that when you have Phase 1 objectively failing the way it is right now, it leaves the President open to accusations that he treated
China with a soft hand.
And I think that right now Biden's own record hasn't been very strong on China. So I think what they are going to be doing for the next several
months is jockeying over who is tougher, who has been weaker recently?
But I think this is -- a lot of what happens obviously, coronavirus is number one, but tied into that very closely is what will the next
President's policy be on China? And I think they are going to be fighting over for who is tougher.
[09:25:35]
CHATTERLEY: What does this mean for China and what are you seeing? Because I mentioned that you have a broad sense of what real rebound and what real
recovery looks like in China. Many challenges, even if they are leading in terms of recovery. What does that mean in practice?
MILLER: Well, there's going to be two types of people looking at the economy. Those that think that China is not recovering all that well and
those that think that the Chinese government claim that you're seeing tremendous year-on-year growth are legitimate and impressive.
I think both of them are wrong. I think you've got something in the middle where you're continuing to see a recovery -- an impressive recovery in that
it is stronger than what you're seeing anywhere else in the world. But it's a month-on-month recovery, it is a quarter-on-quarter recovery. You are not
seeing an economy that's returned to year-on-year growth across any of the metrics we are tracking quite yet. The Chinese government will claim it is,
because they have to have a political line that they vanquished the virus, but none of that is showing up in the data yet.
CHATTERLEY: Leland, what does the future look like for China? Because we have seen sentiment shift. It's not just a battle now between the United
States and China, as a result of COVID-19 and the challenges, the global challenges that's presented, the sentiment around the world towards China
has shifted. It's palpable. What does this mean for China over the next 12 months? Twenty four months?
MILLER: Well, it means that it's really going to feel some strong pushback from around the world. There are a lot of people who thought that maybe
with President Trump's nationalistic push that he would not be able to gain allies and others would sort of jump on the China bandwagon and push back
against the United States.
I think what Beijing is realizing right now is that based on some very faulty diplomacy and also the fact that people are becoming wise to this
sort of unfair trading environment that they've produced over the last several decades, that now China is not going to be -- they're going to be
held accountable. They're not going to be pushed out of the spotlight anymore and I think they're going to have to answer for the fact that the
state is an important part of their economy.
And that's very difficult for firms abroad to compete inside the Chinese market and against firms that have state backing. So there's a lot of
questions they are going to have to answer to going forward regardless of who the next President is.
CHATTERLEY: Yes. The playing field needs some further leveling. Leland Miller, always a pleasure to talk to you, sir. Thank you so much for your
insights.
The market opens next. Stay with us.
(COMMERCIAL BREAK)
[09:31:09]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stock markets are up and running this week. It's the last full trading week of the third quarter and
we're lower.
The S&P and the NASDAQ sinking close to correction territory once again. That's 10 percent away from recent highs. Political uncertainty, rising
COVID cases in Europe and cautiousness about the United States, not to mention fresh money laundering allegations against global banks all playing
into today's pullback, I think and the softening of sentiment.
U.S. banks mentioned in the report, just as a reminder, JPMorgan Chase and BN Mellon both in focus. Relatively unchanged but lower for JPMorgan as you
can see. Both stocks though gaining ground today, Oracle and Walmart. They have the go ahead to take a 20 percent stake in the new entity TikTok
Global, as we've discussed throughout the show.
Another stock in focus, the founder of truck maker Nikola, Trevor Milton stepped down as Executive Chairman, this after a short seller accused the
company of misleading investors. Milton also resigned from the Board.
Paul La Monica has been covering this story for us. Wow, Paul. This is an electric shock, an electric stock shock. How intrinsic is he to the
functioning of the company?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, it is interesting. I mean, I think that Trevor Milton was the face of the company, much like Elon Musk
is with Tesla, but it's important to point out that he is not the CEO, that's a guy named Mark Russell who is still the CEO of the company. You
now have Stephen Girsky, a former GM exec taking over as the Executive Chairman at Nikola.
So it's still in good hands, if you will, with regards to management. The problem, though, Julia, is that clearly you have Hindenburg and they're
backed by another short seller, Citron, who also thinks that the claims have merit, that Nikola is not exactly -- it's just hot air, so to speak.
It's a company that is not going to be the next Tesla, not going to be the next big electric giant and there are legitimate concerns about the
technology, about whether or not they had one of their electric trucks that was a forerunner to the one that they are trying to market now, big demo.
The short sellers alleging that they just had it roll down a hill instead of actually going on electric power.
So there are legitimate concerns about the validity of this company's financials and business model and GM has a big stake now in Nikola and I
think there are worries about whether or not this is going to turn out to be a bad investment for GM.
CHATTERLEY: Yes, admittedly, they said, look, we did the due diligence here, but I think you make a great point. In the words of Andrew Left at
Citron Research ringing in my ears, where he said don't confuse Tesla and Nikola and don't confuse Elon Musk with Trevor Milton here, and for all the
controversies that were in many ways created by Elon Musk, he never stepped away from the company.
I have just pulled a quick statement from the 10Q which is the quarterly filing for Nikola and they say, "We are highly dependent on the services of
Trevor Milton, our Exec chairman and largest stockholder. Mr. Milton is the source of many, if not most of the ideas and execution driving Nikola. If
Mr. Milton were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged." Is that
negated by the GM investment, Paul, or is that a reason why investors are going ah today?
LA MONICA: I think -- it's really hard to say. I mean, obviously the fact that he is stepping back I think has people wondering if there is more --
it's a classic case of when there's smoke, there's fire and it may be, the shorts are onto something. You don't really step down, even though he is
claiming he doesn't want to be a distraction.
If he really wanted to fight this, and he's going to fight it still. He claims that the Hindenburg allegations are wrong and that Nikola will fight
back, but you could fight back from a position of strength by still being in charge of the company. If he sees himself as a distraction, obviously
that's not good news. I think it helps explain why the stock is tumbling premarket.
[09:35:26]
LA MONICA: And you point out, the Elon Musk, you know, comparisons, if Trevor Milton isn't really the next Elon Musk, he clearly has duped a lot
of people because it's not just GM. You look at the industrial conglomerate CNH, they have a big stake in Nikola as well and their shares are tumbling
today on this news also.
So a lot of big money got wrapped up in Nikola. So whether or not -- it remains to be seen whether or not the shorts have meritorious claims or if
Milton will wind up being vindicated, but right now, I wouldn't want to be long on this stock at all.
CHATTERLEY: Yes, and Dan Ives also another one saying just deliver the cars. Well, Trevor is not going to be around to help do that now. And
Hindenburg Research, the short seller of course said, this is just the beginning. Wow.
Paul La Monica, thank you so much for that.
All right, let's move on. The New York Stock Exchange was really the center of the IPO universe last week as Cloud software firm, Snowflake made its
debut, among others.
The largest tech IPO of the year, just the latest in a successful string of successful public offerings at the NYSE. Now, some $19 billion was raised
in the first half of the year alone. A lot of that cash flowing into the hot new investment vehicles called SPACs that are giving firms new pathways
to go public.
Let's talk this through. John Tuttle is the Vice Chairman and Chief Commercial Officer at the New York Stock Exchange, and joins me now. John,
great to have you with us. Are you surprised by how busy you've been this year? I think people thought when the pandemic hit, 2020 was going to be a
write-off.
JOHN TUTTLE, VICE CHAIRMAN AND CHIEF COMMERCIAL OFFICER, NEW YORK STOCK EXCHANGE: You're exactly right. If you asked me the same question six
months ago, I would have said, 2020 would be a quieter year when compared to 2019 or 2018.
But certainly, it's been a busier year. In fact, if you look at August, it was the busiest month we've had in over a decade and if you look at
September, it is the busiest month we're going to have on record.
And you raised the point about SPACs, they are accounting for a significant part of the market and it's a new pathway to the public market, and so,
there is a robust pipeline of companies and SPACs set to come this month, next month and all the way into Q1.
CHATTERLEY: You know, these special purpose vehicles or SPACs as we keep calling them, in the past was seen as something that was used by companies
that weren't strong enough to do the longer route to listing their company. It was sort of a back doorway to get onto a stock exchange. Has perception
changed or is this a sign of the times, perhaps, a frothiness, John, in the market?
TUTTLE: Well, it certainly has changed. You know, companies are focused on finding a pathway to the public markets that best suits their objectives.
So for many companies, it is that traditional IPO, for some companies, it's going to be the direct listing or the direct listing with a capital raise,
which we just launched.
But for some companies, it's going to be a SPAC and if you look at the Special Purpose Acquisition Companies that have come to market over the
last few years and contrast that with those from a decade or so ago, these are much larger special purchase acquisition companies.
The management have deep experience in the public markets and in business, and it's an option for companies that are looking to have certainty around
execution of their public listing. So it's changed quite a bit over a decade and it's a new pathway to the public markets or a revived pathway to
developed markets.
CHATTERLEY: So there are people that are looking at this revised path, I'll use your words, and then tying that to what we saw with Snowflake and this
dramatic price rise when the stock actually began trading, and they said actually the traditional IPO method is flawed because you have a situation
where there's simply not enough stock available and the smaller players, the retail guys, have to chase the stock to try and own it higher and
higher and end up paying way too much.
And actually today, we're down five percent, so they've lost a bit of money if they paid at the peak. John, your view?
TUTTLE: Well, that IPO works for a lot of companies and is the preferred pathway for a lot of companies. What we've been focused on at the New York
Stock Exchange for the past few years is finding alternate pathways to the public markets.
So companies are going to value different things. Companies that value efficiency of pricing and maybe just want to be a public company, but don't
necessarily need to raise capital at the time of their listing will now take the path of a direct listing.
We've also recently launched a new pathway where we take the best of the IPO, the capital raise, we take the best of the direct listing and brought
them together in a new product as well.
So every company's objectives are different. For some, that IPO is the best path for them. But we're focused on creating more options. And if you look,
more options have been created in the past two years than in the preceding two decades.
[09:40:11]
CHATTERLEY: But do you think the process is flawed, John? Because there will be a lot of people that paid a lot of money and based on the valuation
could lose money now?
TUTTLE: Again, it's tough to paint with a broad brush, because again, the IPO works for many companies, and in the case you're referencing
particularly, you have a very sophisticated and experienced management team that decided that that was the best route for them and their investors.
Every company is going to look at it different, but what we're focused on is making sure that there are options. There are options for companies and
investors, which didn't exist just a few years ago.
CHATTERLEY: Yes, so there is greater flexibility. I will give you that point, even if I'm being objectionable and arguing.
Now, I have to point out you're clearly not at the New York Stock Exchange, though I did see you doing interviews in there last week and I should point
that out. We're clearly not at the New York Stock Exchange where we would ordinarily have been pre-pandemic.
How long before you get everybody back? What are the conditions that you're attaching to life back to normal at the New York Stock Exchange at this
moment? Does it require relaxing --
TUTTLE: Well, I've spent a lot of time back at 11 Wall Street and in fact, we started welcoming back our trading floor community just after Memorial
Day, and so we've put in place a set of precautions and protocols to make sure that we're mitigating any risk from COVID.
And of course, you know, it's tough to eliminate all risks, but we're very much focused on making sure we minimize that risk. We've been welcoming
more and more people back to 11 Wall Street. We look forward to welcoming you back there soon and I'll be there next week myself.
CHATTERLEY: Good to know. Timing of a full return, though? Very quickly. Tough to --
TUTTLE: Well, we're going to continue to monitor events and make the decision when the time is right. And it will be a phased return, not an
all-at-once return.
CHATTERLEY: Yes, we hear that a lot. John, great to have you with us. Come back soon, please. John Tuttle, the Vice Chairman and Chief Commercial
Officer at the New York Stock Exchange.
All right, up next, not an impossible task, or beyond the realms of possibility, you have to look for the cues of the words there. The battle
to produce plant-based meat alternatives just got bigger. We speak to the CEO of Chile's NotCo.
(COMMERCIAL BREAK)
[09:45:27]
CHATTERLEY: Welcome back to the show. Chilean food tech unicorn, NotCo, takes on Impossible Burger and Beyond Meat. The Jeff Bezos's backed start-
up just raised $85 million to break into the U.S. market. It already works with U.S. brands on its home turf, Papa John's and Burger King both serve
its plant-based meat and dairy replacements in Chile.
Joining us is Matias Muchnick, the CEO of NotCo. Great to have you on the show. Firstly, I love the name, Not Milk, Not Meat. It makes perfect sense
to me. Just explain the vision.
MATIAS MUCHNICK, CEO, NOTCO: Sure. Thank you, Julia, for having me here. Well, the mission is to really take the animal out of the equation in the
production of food. Generally we love meat, cheese, eggs, and dairy, everything that comes from animals. Generally, we grow out plants and feed
them to animals to produce our traditional food and now we have -- we want to take the animal out of the equation to really create a more efficient,
better, and more sustainable, but also very, very delicious food system, everything coming from plants.
CHATTERLEY: Yes. It's got to taste good. Explain the science, because this is not about genetically modifying foods that create texture, that
replicates biting a burger, or non-milk products that taste like milk. Explain the science.
MUCHNICK: Yes, so for us, taste is king. It would always be the king when it comes to food. So in our sense was, what do we have to do really to
create a product that would appeal to the market, but would be coming from plants, from a more sustainable source?
So first and foremost, in order to replicate something, you need to understand it. One of the things that we learned a lot in the food industry
is the understanding of food. We don't understand why milk has the taste it has, you know, with the functionality. We did it with color, and so on and
so forth.
So one of the most important things that we did was to really understand food at a molecular level and then we turned it into this more than 400,000
species of Plant Kingdom that we have and we haven't explored. So there are many, many plants out there that we have no idea what they do.
So what we created was an algorithm that would allow us to predict which combination of plant-based ingredients should result in the same experience
as a traditionally animal-based products such as milk for example.
So the algorithm basically generates recipes that our chefs at the machine learning department just try and test in the lab and then we went -- we go
through a sensorium panel and we feedback the algorithm. So the algorithm keeps getting smarter and smarter and starts to understand the underlying
patterns between the molecular components in food and the human perception of taste, texture, smell, and color, right?
Yes, and that has given us the chance to really become -- or to produce food formulations faster and better and more accurate than anyone else in
the space. That's a new bit and we call it juice and that's the technology.
CHATTERLEY: Wow. Okay, so let's talk mayonnaise, because I do believe that Chileans do like their mayonnaise and you managed to bump up in terms of
popularity your non-dairy mayonnaise alternative.
MUCHNICK: Actually, it is a replacement of egg, so we don't use egg in our mayo. Basically mayo was our first success case, right? We launched the
product in March of 2017, it was called Not Mayo, literally. It became something that we never expected.
We did in-store trials. Eighty percent of the people that tried the product bought it and 83 percent of the people that bought the product repurchased.
So it was an exponential growth. We achieved eight percent of market share in the mayo category, so we have again 90 percent of the consumers who
weren't vegan or weren't vegetarian. So this was kind of like accomplishing the mission of the company, which was to move the needle to really access
the mass market.
So we did that with Mayo first, then we did it with milk, with ice cream, with burgers in Chile, Argentina and Brazil, and now going forward into the
U.S. expansion as well.
CHATTERLEY: Yes, I mean, this is what got you noticed by Amazon's Jeff Bezos, who I believe wrote you a check and invested within three days. Talk
about that and talk about your plans now in the United States. Where do you think you have most strength and potential in the United States?
[09:50:10]
MUCHNICK: Sure. So Jeff Bezos participated in the second round of funding. It was a $30 million round of funding and now in the newest, the $85
million, he continued investing in the company. Basically, the story goes where I did a postgraduate program at Stanford and one of the MBA
Professors asked me, Matias, if there was a guy that you wanted, you know, to become a partner with in this world, who would that be. And I said, of
course, I took one second to answer that question, which I said Jeff Bezos.
And he was like, okay, let's try to get him. And so the incidents of life, he went through the Doctorate at Princeton with a woman that actually
managed Bezos' expeditions, you know, his family office. He connected me with her. I talked literally one hour in the video call and he said I'm
going to run this through, Jeff, and he will focus on three things, technology -- the technology, the team and the execution.
And, you know, literally three days later, I received an e-mail saying, okay, we're in. So that's why we did the deal with Jeff Bezos, which of
course is one of the key milestones of this company in terms of fundraising, and when it comes to the U.S., really what we've done in Latin
America, we have to consider that we have a consumer that is way less sophisticated, and maybe doesn't cherish this a lot in terms of, you know,
consider this is a lot -- the sustainability side of products, when it comes to the decision making in the grocery store.
So it's a very challenging consumer to really convince, and we've got to the mass market. We created the success case in four different categories
of products. We want it to become the recipe for millennials, right?
And when we come to the U.S., we see Beyond and we see Impossible, we see all of them really doing amazing stuff, but still they don't -- or at least
we have something that they don't that we are playing in these four massive categories and in a very short period of time because we have a technology
that is allowing us to do products faster and better and more accurate than everyone else in the space.
And there's a big opportunity in the U.S. When we analyzed how it tastes, the execution, I think Beyond Meat is one of the companies that really sets
up the bar in terms of execution and technology and we are really up there. So we think U.S., I think it offers a broad range of opportunities that we
are ready to take.
CHATTERLEY: Come back and talk to us. I was going to ask you whether you'll be in Whole Foods, but I've run out of time. So you're saved, you could
think about your answer. Come back soon, Matias. Well done. Thank you for that. The CEO of NotCo there.
All right, we're back after this. Stay with us.
(COMMERCIAL BREAK)
[09:55:07]
CHATTERLEY: Welcome back to FIRST MOVE. I want to give you another look at what we're seeing for U.S. stock markets in this session. We're down some
one percent for the NASDAQ, just over two percent for the Dow.
It's a whole host of things, and we're being led lower by some of the banks, a few things. One, concerns about rising COVID cases, of course, not
only here in the United States, but fears of potential further restrictions, even a lockdown.
The word lockdown or the phrase lockdown being used over in Europe. We've also got concerns over the Supreme Court, the risk that this means no
financial aid is forthcoming in the United States.
And of course, the gains that we've seen since March, consolidation. I'll keep using that word. We're down around eight percent to nine percent from
recent highs at this level. We'll continue to track the markets throughout programming today for you.
For now, that's it from FIRST MOVE. Have a great day. Stay safe and we'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
