Ep.61: What Does Elon Musk Want With Twitter, Macron Gets The Sweats & Porsche IPO Explained

Okay, hello and welcome to episode 61 of the Market Maker podcast. It's Friday, and as ever, I'm joined by Piers Curran to just talk over the main topics of the week. And some of the three key themes we're going to delve into, of course, Elon Musk and getting onto the board of Twitter. What's the rationale? Why has he done that? Is he going to get in trouble again with the authorities? We'll discuss. Also want to take a look at the French election. Because if you're a student or a trader in the UK, you probably really haven't paid too much attention to what's been going on there. But I'll explain the process and I'll explain, uh, kind of what to look out for going forward because we have seen some sensitivity in the French markets this week on the anticipation of that event. And then gonna flip over to the Porsche expected IPO and talk about that in a little bit more detail as well. But to kick things off, Piers, as ever, how's it going? How's your, how's your week? How's your quarter been, just in general? I know we're, uh, 8 days in, but how's my Q2 been so far? How's the Q1 session been?

Um, yeah, intense. I mean, I think there's so much going on, I guess, on Amplify's side, you know, they're not— obviously not to mention everything going on out there in the world of geopolitics and economics and markets and stuff. But yeah, it's been super intense on the Amplify side.

Yeah, quite—

we've got some cool new stuff coming down through the pipeline.

Give me one of the cool conversations you've had with anyone over Q1.

Well, okay. Well, something quite interesting. We've been Partnering up with the MOD, the Ministry of Defense.

So, so what, they want me back? My time at Amplify is done.

Anthony Cheung, black ops guru.

People can't see this, but I'm always dressed in black.

Um, no, we're doing quite a cool new thing with, um, basically trying to help ex-armed forces or current armed forces people pivot out of the armed forces and into financial services. So the MOD, uh, we've done a deal with the MOD whereby the MOD are sponsoring, uh, the training of armed forces personnel. They're sponsoring the Amplify training, um, and you know, it's about these, these guys, obviously they've got some great core skills that are transferable to Well, any sector, right? But certainly finance being one of those. Being able to work under pressure, being super organized from an operational point of view, got some phenomenal talent. And so, yeah, it's just about upskilling them on the finance side. So getting crash course through all of our simulations to lift the lid on what goes on over here in the financial sector. And then yeah, looking to get, get them placed, um, at some of our partner, partner banks. Yeah, yeah, it's pretty cool.

I mean, I'm excited for that. I'd love to get involved and see what they're, they're like. I know over the years I've had, um, I have had some interactions with training with some, well, kind of different officer, uh, infantry and SAS. So it's been interesting to see, uh, over the years how they've, how they've performed. And thankfully they've all gone on to do actually quite different things. Some, some data security. Uh, one chap which we both know has a, has a new app that he's, he's just released, so he's getting into the tech side. So yeah, it's great. But, um, yeah, well, look, look forward to that. And, uh, great to be spreading the mission then just beyond our kind of typical student university type demographics. So yeah, all for that for sure. But, um, look, let's get to the, to the highlight reel of the week, and gonna start off with the Russian ruble, because, you know, you called this last week, you were talking about the rationale. And if you didn't catch that, just go back to the last episode and listen to Piers. He explains very eloquently how and why the Russian ruble has been recovering from the absolute bloodbath that ensued on the initial round of the first sanctions that hit, the banning of SWIFT and so forth, that we had a couple of weeks ago. Because the ruble, actually, by Wednesday, it already retraced all of its losses. So this comes as well despite NATO foreign ministers being meeting this week in Brussels. They're talking about coordinating a new round of sanctions on Russia, just given some of the pretty awful things that were coming to light this week. So yeah, at the moment, that's kind of, I guess, as it was from a— looking at it purely from a market's perspective at this point. Obviously, the sanctions that come out of this as a potential response could be quite interesting. I did see turned on my screens this morning and I was like, looks a little bit risk-off initially. Dollar strength, the euro is coming off a bit. So I had a quick scan on the headlines and actually, um, apparently the latest now is that the talks— the mood has changed given some of the developments that have come to light after the Russian exit around the capital of Kyiv. So it looked like we were heading in positive direction. Perhaps this has been a bit of a bump and there could be sanctions on the horizon. So we're still keeping an eye on that. The other thing though, looking— let's, let's stick with a macro view for a moment. Um, so away from geopolitics was the Fed. We had the minutes, Fed officials weighing shrinking the balance sheet by $95 billion a month. So a little bit more aggressive than on the historical kind of patterns that they've done with this. However, market reaction pretty tame, I would say. Not too much of a lasting impact. Primarily because Lael Brainard, who's the Fed governor who sits just under— if you remember, she was actually tipped as a potential replacement for Jerome not that long ago. She's a well-known leaning dove. And for anyone not aware of all the clunky market language, dove just essentially means she would sit on the side of a board of individuals, in this case the US Central Bank, who would err on the side of just being more cautious, more stimulative to the policy in action to support the economy. But she came out and essentially said on Tuesday, day before, of course, the minutes came out, that the central bank could start reducing its balance sheet as soon as May and would be doing so at a rapid pace. And so the markets definitely reacted to her.

Yeah.

So I guess it was— the blow was softened when, when the, the finer detail came out the day after. Um, so the final two to touch on, um, in China things are kind of unfortunately going from bad to worse. The China Services PMI fell to 42 in March from 50.2. That's a pretty sizable decline there, um, and that was for the month of February, so it's gonna get worse at this point. And actually it's the lowest level since since the depths of the lockdown that we had on the initial outbreak in Wuhan back in 2020. So I, I've been saying this for a couple of weeks now. I definitely think the markets are a little bit complacent about the disruption, the effect that this will have, um, because as we always— we've discussed this many times on the podcast of the reasons why. But yeah, I still think people should keep an eye on the developments there. Shanghai obviously has gone into citywide mass testing, kind of full-on lockdown at the moment. We've got a team out there. I spoke to some of them this week. They were saying— how they were explaining to me was really interesting, put me right back in that, um, that manic period of when I remember going down. At the time, it was, uh, I was in East Dulwich in, in London, and it was— I was— I remember, I think I text you, and I was like, everyone's gone mad. Like, people were frantically shopping and like just grabbing anything they could get because it was like, it was sheer panic. Um, kind of like the toilet roll situation. And, um, apparently in China, um, I probably shouldn't say this on air because the Chinese authorities might, might find me, but cancel you, it might cancel me. But, um, Yeah, apparently because of the fact that they've never really, you know, had to respond in the same way because it's always been quite, uh, kind of very surgical and specific in their lockdowns. But actually now it's just citywide and people have panicked, and you're getting that play out on a local level, I think. And yeah, it's— I think this—

well, apparently, just to add to that, apparently, like, if you live in a kind of high-rise building Apparently government officials are just coming along and literally just locking the front door. Like, you literally can't get out. You, you can move around in the building, I guess, but you can't get out, like, at all. And so from a food point of view, you just get what you're given. And apparently it just depends what— I don't know, weirdly they had a massive rock load of celery. So apparently there was just suddenly everyone was trying to figure out, yeah, trying to do cooking search. I got recipes for using celery. And, uh, yeah, but yeah, I do agree that I, I guess here in the West we're not, we're not really getting much coverage of this. I mean, I guess it's a function of the Ukraine-Russia thing, which is kind of just dominating and saturating the media, so you're not getting their news from other parts of the world. And so yeah, I do think it's going under the radar and it will probably progressively, or, you know, as the economic data starts to filter through for the months that we've already had, like you've just said with that PMI, then I think people are going to wake up and go, oh, actually, hang on, this is a bigger issue than perhaps we thought.

There was an interesting measurement, just to finish on this, this story about monitoring of truck servicing data between, I think it was distribution centers and the airport. And it wasn't so much about the manufacturing of these goods. It was about getting them to the relevant ports for then distribution internationally. And the rate of those at the moment is at 3% of what is a normal tracked rate. Oh, wow. So it's like your supply chain problems It's still quite clearly evident. It's just so— this inflation situation, central banks having to go hard and doves flipping and all these types of things. I mean, yeah, going quick.

My bigger concern is the Fed going super hawkish, but the Fed raising rates is not going to solve supply chain issues. I mean, that's just not— doesn't have an ability to control that. So yeah, you might end up with super hawkish, much higher rates, but actually inflation just stays high through the summer, let's say. So it's definitely— it's a very bad cocktail of negative forces for economies and markets.

Okay. Well, look, let's talk Meta Platforms, and then we'll move on to Twitter. Meta drawn up plans came to light this week. They're going to introduce virtual coins, tokens, and lending services to its apps. Otherwise internally said to be known as the ZuckBuck. That's just tragic. I'm sorry, that's just, that's just bad PR. Whoever said that should have had a word with marketing and they should have locked that down.

You know, the guy is just not Just, you know, he should be the face of this, like the Daily Star kind of headline writer that has kind of come up with that.

Yeah, well, hit me, what's the deal? What's going on here?

Well, there's a couple, a couple of angles I want to touch on. There's just— I wasn't going to, but now you've gone there— the Zuck buck. Um, I don't know, when I read that, I thought, yeah, tragic was definitely probably the first word that sprung to mind. The second thought process I had was, hang on a minute, that— and I've got such a negative bias towards Facebook, right? That's my default position is a negative bias. And I've had that for quite a long time. And actually, maybe this is an interesting point to make and where you need to be careful with that, or I need to be careful with that, because I'm now conscious I have a negative bias. So therefore, I force myself to try and view new information about Facebook, and try and judge it on merit first, rather than just my subconscious default— well, hang on, I'm going to take the negative angle on everything. But I feel myself— my subconscious kind of kicking in and going next. So when I saw ZuckBuck, I was like, oh, here we go, another— and actually I thought, well, actually this is a good example of like a dictatorship where you've got this guy at the top running the show and basically all his minions sit underneath and try and make him happy. And so some, some of the minions have come up with this great idea, let's call it the ZuckBuck, and Zuckerberg sat at the top going, ah, yeah, yeah. Great idea. Let's go with that. Literally, that was the first set of thoughts that ran through my head. And then I thought, hang on a minute. I'm victim of my own negative bias here. I need to pull myself back from that and try and view this. And look, the Zuck Buck thing, it's actually just a nickname for it internally. They're not going to call it that. Well, I hope they're not going to call it that. I think that there's a bigger story here, because the other thing that I saw, again, where I immediately went, oh, God, this is just— is the fact that this isn't going to be a proper crypto, decentralized cryptocurrency. It's going to be a currency that's controlled by Facebook. I thought, well, again, that's just another massive error. You've got it all wrong, initial reactions. But looking into it more deeply, basically Facebook have been forced down this path. Earlier in this year, they tried to create a crypto, proper decentralized cryptocurrency called Diem, but they had to wind it down earlier this year. They actually sold the assets in that to a Californian bank called Silvergate. But basically they, they were forced to shut it down because the US regulator refused to give that project the green light, and the regulator were concerned about monetary stability and competition concerns. So basically Facebook have tried to create a full-blown cryptocurrency for the metaverse. The regulator has clamped down and prevented it. It could be argued that Facebook are being unfairly dealt with by the regulator compared to the regulatory oversight that the other big tech firms are getting. But that's a whole different can of worms. So let's perhaps not go down that path today. So let's wind this back. So Facebook tried a cryptocurrency. They got blocked. And actually, so Meta's financial division, basically all the staff walked out after that. They're like fed up. We literally can't, our hands are tied. The regulator won't allow us. They had a big team and apparently they just all walked out. We can't do anything, we're out. So what's left is the kind of skeleton staff that were left. And I'm sure maybe they've rehired, but now it's like, well, okay, we need to repivot and what can we do? What will the regulator allow us to do? And basically, this is now that first kind of foray down that path. So, and then the other thing I've read, can you believe, and I forgot about this, do you remember something called Facebook Credits? I'll forgive you if you don't.

No.

They launched this in 2009. And it was a virtual currency that enabled users to make in-app purchases. So you could use this in games like FarmVille. I don't know if you ever came across that. They created Facebook Credits in 2009, a virtual currency. And actually, when they IPO'd in 2012, their Facebook Credits virtual currency made up 16% of their revenues. But they then shut it down in 2013 because it was too costly to maintain. So A, genius. I mean, so far ahead of its time. But then B, what an error closing it down.

I wonder when they shut that down, who was head of that division and where that person is now.

Yeah.

That would be interesting to see what they've gone on to do. Because surely they learned the structure, the technology, the implementation. The team, they must have gone on to do something.

That'll be a worthwhile half an hour trying to dig into that and find that answer. All right. Let's give our listeners that job.

Yeah, a bit of homework.

Yeah, message us. Who used to run Facebook credits back in the early days?

OK, email me, a.chung, C-H-E-U-N-G, at amplifiedtraining.com.

We want name and current, current role, current position.

Yeah, could be a little bit of merch in there for the, for the best response.

All right, now we're talking.

Well, let's leave, uh, let's leave the Zuckerberg and talk about Elon. So jumping out of the frying pan, um, into another, another heated, uh, situation. This week because it was quite shocking really. Twitter shares, they just spiked. I mean, pre-market, they were about 30% early in the week. They went about 25%. I think they've gone up about 50%. It's transpired since this stake accumulation coming from the Tesla CEO. Elon Musk has tweeted his way onto the board as well of Twitter, and he's taken a 9.2% stake in the company. Now, I've read all sorts of headlines I've seen going around about why has he done this and suspicious options activity and some irregularities in filings to circumvent certain responses from the SEC and things like that. Talk to me. What's going on? I shared a tweet that he did. He actually tweeted a meme, a very popular one of him, So he tweeted a meme of himself. Yeah, just saying Twitter's next board meeting is gonna be lit. It's him smoking a big cigar. I was just like, this guy is just another level. And this week, let me just get the percentage just for— yeah, Tesla shares are down over, over 10% this week.

Tesla shares are Oh, wow, I didn't even look at Tesla shares. I was so obsessed with, hang on, what's going on with the Twitter share price? So Tesla are down 10%. Well, makes sense, right, in that he's— wow, he just— I don't know. He's either just a rich dude who's bored. That's one angle. Or there's something more. I mean, look, he's a clever guy, so I'll give him the benefit of the doubt and say there's, there's something more to this, some kind of thought-out strategy.

But so before you give me the details and some of the stuff I mentioned, one thing I did read in Politico, um, which I like getting from a slightly different, a non-financy type angle, they were looking at case studies of previous people like Bezos, for example, and others and they were looking at this pattern that people like Elon, who are very wealthy individuals, tend to have with— they get to a point in their professional corporate life where they start to then move into the media sphere, right? Start to pick up then and become this kind of media mogul force, because then that gives them influence beyond that of which money can buy. And so with Bezos buying— was it the Washington Times or Post?

And then Washington Post, yeah.

And then so they was kind of speculating that instills then a longer-term immortality in their legacy because they then have this media outreach and control. And so that's what people at that level, when you've got $300 billion in the bank account, that's how they think. But I thought that was quite an interesting spin and one that makes sense, I guess.

Yeah. Very interesting. I mean, I think the other angle to this Twitter thing is or the Musk Twitter thing is— I mean, he's got— I don't know. It just looks really dodgy on one— if you're looking at it from one angle. And he might have multiple bill, but you can't spend it when you're in jail. He's got to be a little bit careful here when— because the way he went about accumulating his— what is it? 9.2% stake in Twitter. I don't know, when you look into it, it's— there's some pretty dodgy— well, all I'm going to say is the SEC are definitely going to be very carefully looking into this. Um, and I, I would probably say quite seriously, because back on, um, the 31st of January, um, Elon Musk owned zero Twitter shares. Okay, he now owns 8— over 800 million Twitter shares.

That's insane.

And he started on the 31st of January, started buying, and he pretty much was buying shares every single day all through February, all through March.

What, what, what, what What clip sizes are these? Do we have—

Right, so I've got the full list here. So he started off, he started off small, right? Inverted commas. On the 31st of January, he bought 620,000 shares at $36.83 per share. So I mean, you do the math on that, um, what, what is that? That's like $18 million worth, is it? Um, So he started off with clips around $500,000 to $600,000, right? Then he got the bat out, and on March 2nd, he bought 3.6 million shares. He bought another million on March— oh, sorry, February 3rd, 3.6 million. February 4th, he bought another million. February 7th, he bought 4.8 million. So really getting the bag. But all the clip sizes, bearing in mind he's buying every single day, the smallest clip size was 300,000. Uh, the next smallest then is a jump to like— there's a few at 500,000 and 600,000, but mostly it's over a million shares per day.

There's a question then. If you're a, like, uh, flow trader and you're looking at a stock like Twitter, surely it's quite evident there's a player in the market who's just absolutely building, accumulating estate. How did this not come out in the trading community for those stock watchers who are looking at this stock price? I mean, surely this is abnormal behavior that would trigger a flag.

It's a good— that is a very good question.

Maybe there were, and maybe they made— they just wrote— exactly, I'm just going to get behind the whale. Yeah, and let's ride it.

I mean, the share price, I mean, it did, it did, it was dropping Certainly when you get to the start of March, it was on the decline. Obviously we had that. It was the phase where tech was getting— it was on a downtrend for sure. And obviously he was just propping up that slide. I mean, who knows? I think it bottomed out, Twitter bottomed out at about $33, right? If he hadn't have been buying, obviously it's hypothetical, but we will never know how much lower it would've gone in that downtrend, but he certainly was kind of putting the brakes on that downtrend. But it was buying about—

do you have any data on his tweets over these periods?

Well, this— exactly. So this is where it's super dodgy. Um, if I was the SEC, I'd just be putting my best team on this because here's the sequence, right, in terms of his tweet— his tweets and so on. Um, so Well, look, on March 14th, this was quite a key day because that was the day where his stake crossed the 5% threshold. Now, there's certain regulatory filings you've got to do. If you buy up more than 5%, you've got to submit these various forms. You're supposed to do it within 10 days. So on March 14th— so it should have been submitted on March 24th. He should have disclosed. His 5% plus holding on March 24th. He didn't disclose it until April 4th. Now, during that period, he's still buying and buying and buying and buying, right? But he's also tweeting. So remember, he's got 80-odd million people on Twitter, right? Followers. So let me just see. So Like, for example, there's a few things here. Um, so on the— on March 24th, for example, he's tweeting, um, well, he, he asked his Twitter followers for, for a poll basically on whether Twitter algorithm should be open source. Um, he tweeted on the 25th, um, uh, Musk polls his followers on whether Twitter rigorously adheres to the principle of free speech.

I remember that.

Then he, as he's tweeting that, he's buying 3.5 million shares, I think. Okay. Um, he then, he then said, um, he, uh, hang on here, uh, a day after tweeting. So he then, he then tweeted that he's giving serious thoughts to building a new anti-censorship social media platform. Basically, I'm going to launch a rival to Twitter. He bought 2.6 million shares in Twitter the day he tweeted that. Now, I'm sorry, but that is seriously dodgy. You cannot tell me that he's not manipulating the share price using his platform And then on the side, just hoovering up. Then of course, on April 4th, it's announced, he files late, discloses, I've got more than 5%, share price up 20, 30%. His average position, buying through day after day after day, accumulating 800 million shares, his average purchase price was $35.89 per share. The news then comes out, the share price pops to $49.97. So he's in at 35 and it's trading at 49. What's really interesting then, so there's different filings you've got to do, right? So there's something called a 13D filing. And that revealed that he had, well, he had a certain number of shares. And then there's another filing called the 13G filing, which he filed later on April 4th, which actually showed he had less shares. So on April 4th, news comes out, it looks like then the number of shares he owns is starting to go down, i.e., was just starting to book profit. It looks like from one angle, this looks like he's just played the entire market. I mean, Incredible. It's either the stuff of legend or he's going to prison. I'm not quite sure which one yet.

I just wonder, if I was him, I'd be looking at the state of the US political system at the time of where we are at the moment, about to go into midterms, and I'd be saying, they can't touch me. Yeah, because they're in disarray and they're going into a period where there's so much stuff to just— they have to do now, and it's so fractured on Capitol Hill. I'm gonna do whatever I want, and you know why? Because I can do whatever I want because I'm the richest man in the world, right? And it's gonna be lit. I mean, I, I can see the attraction. Because, you know, I think you're right. I mean, it's pretty obvious what's happened here, but I don't think they can take him down.

Yeah, maybe he's above them.

Why not? I mean, it's not right, but hey, I mean, how do you get your kicks when you're that rich?

Oh yeah, exactly.

Right, so well, look, on that, on that bombshell, um, let's move on. What we'll do is we're going to dip into some politics and then we'll come back out and then talk a little bit corporate finance, just to cover all bases. So what I'll do is I'll run through this quite briefly just to give you an overview of what's going on. And the reason why I wanted to cover this is that you're probably going to read about this at the weekend because it's the first round of the French election. French bonds slid quite sharply earlier this week, sending the benchmark 10-year yield in France to its highest level since 2015. Uh, the CAC 40, which is the main stock index in France, was also underperforming the rest of Europe. They all came because obviously there's a lot of focus on polls. We all know how inaccurate they tend to be, but yet human behavior dictates that we're all drawn to it like a moth to the flame. And those polls have basically seen the two main front runners converge, and that being that Macron's lead over the far-right National Rally leader Marine Le Pen has narrowed to just 5 points. Polls prior to this, the gap was +10 points. So this is— I would say though, this is, well, a couple things. This is quite normal in a sense of, in the French system, which I'll talk about in a moment, there's 2 rounds and it's kind of an elimination process where they then go into a final presidential runoff. Now, one of the things here is that at the beginning, so let's say a few weeks, months out, Everyone's kind of got a shot, and in the polls, it's kind of like the start of a horse race. Everyone starts at the same point. Then as you get closer to the finish line, you start to see a dispersion of the, the main kind of front runners in that sense. All the others who might look quite hot at the beginning and you think, wow, there's going to be a big upset— voters' minds tend to get more channeled and focused as we start to get close to the day of which then they get asked, who are you actually going to vote for? And people tend to kind of fall in line. And that's where more familiar characters often— I must say Macron was an exception to that with his new party when he last won.

Oh yeah.

But generally speaking, that's where more familiar characters tend to come to the forefront, just more broadly in politics. So a couple of other things. The first round then on Sunday, it's very much expected Le Pen will make it through to the 24th of April runoff. So the next part of this is not till the 24th of April. And a poll by The Economist has had her going through because Macron is expected to go through. He's far ahead of everyone else in the polls in terms of— bar Le Pen. They had Le Pen going through at 89%. So it's pretty much a— not going to say a done deal, not that naive to say it's a done deal, but it's looking that way. Now, a couple of things then, I guess, of, of why we've had a convergence in the polls, because this is what I— what must be some something going on here. And his position as president, I was reading, has prevented him from really campaigning. In fact, he only actually had his first campaign about a week ago. Why? Well, there's this problem in Ukraine that he's had to deal with, and he's been one of the main brokers of the conversation. So he's been absolutely engaged on the geopolitical front, which has meant that He hasn't really been able to speak a lot to the electorate back home in France. While he's dealing with that, he's also like every politician, every incumbent is dealing with this incredible problem of the cost of living debate, which is really the main talking point for every base in Western Europe at the moment, feeling the plight of just this rampant inflation that we have. That's him. What about her? So, um, the— her rise is linked to the situation of, uh, Éric Zemmour, uh, and who also comes from a similar political position, perhaps a little bit more far-reaching, let's say, in terms of views. But in January, February, he was credited with around 15% of voting intentions, but he's since fallen sharply. Zemmour's candidacy tended to demonize Le Pen. But basically, this is the risk, I guess, you run as a candidate when you go down that angle. You either capture, really capture, an unearthed feeling and sentiment, some might say, kind of like Trump might have done previous years, or you go a step too far and people go, oh my God, this is just too much. And actually then, as a strategic move, Le Pen can appear as a more moderate right-leaning candidate. So now she becomes not the— even though she is the far-right leader, she's a moderate far-right leader in comparison to now a reference point of someone who's way more out there.

Well, and Eric Zemmour also, I mean, he's so extreme. He, you know, he was convicted for hate speech. I mean, he's, he's proper super far right. And I think perhaps what unstuck him, other than maybe going too extreme, he, he, he loves Putin. He's a big Putin fan. And it's not a great period of time to be a Putin fan in, you know, in the West. Yeah.

And on that point, I'll come, come back to that in a moment because that's a key thing that will come up in a few weeks. My mind's thinking though, and I haven't researched his background enough, but if I was working for Le Pen as a strategist, I would be very much talking backdoor to Mr. Zemmour. Yeah, going, okay, yeah, you talk like that, that's fine actually. Yeah, go for it, you have my backing.

In fact, carry on.

Yeah, and then let him do his thing to the benefit of— I know then I'll play tactically my card to my favor. So it'd be interesting. I wonder— these political things do make my head spin sometimes about all the backdoor deals that get cut. But yeah, tactically, Le Pen though is said to have ran a pretty solid campaign. So this is the double whammy kind of problem that Macron has. He's been distracted. She's had more time, more planning. She's had more ability to hold big rallies. She specifically toward towns and villages of France. Kind of similar, I guess, to— if I think back, because what's clear to me, it was 2017 when Macron won last time. And that was just on the coattails of the EU referendum of Brexit. And everyone was panicking about France. Frexit, at the time, which we thought was a credible risk, turned out not to be the case. But now, part of the disconnection, I guess, between big cities comparative to then more, let's say, Middle England in the case of what we had, in this case towns and villages. So she definitely knows her audience in that sense, and she's tried to connect with ordinary people, fundamentally different from Macron. And this is then the next interesting part, because let's say the two go through to the final runoff, which is very much expected to be the case. So current polls What's important, the current polls do not say anything about the second round, because what happens here is now this is when the horse trading happens between the fallen candidates, and Macron, Le Pen need to be thinking, right, who can I strategically get to now vocally back me so that their supporters then fall under my wing? So that's point one. Point two, there's going to be debates between Macron, Le Pen. And again, I still remember those ones between Clinton and Trump. You remember when he was like stalking her around the stage? But the debates are always, always interesting. And in the Macron-Le Pen one, it's basically going to be played on two fronts from— strategically, president of the rich versus the Putin sympathizer. Right now she's backed off that. Very like recently, obviously she's now the moderate far right. Yeah, but she's been a sympathizer in the past for some time. He has struggled for throughout with this kind of association with being friendly to the rich and himself being of that particular elite, let's say. And so this is the battleground, and that's really going to get quite dirty as it normally does. Interesting fact here is that no sitting president has been reelected in France for 2 decades.

Wow.

So, um, I know I, I thought Nicolas Sarkozy was around for a long time, but he was '07 to 2012, and then he came— then François Hollande came in, did his 5 years. So Sarkozy '07 to '12, Hollande 2012 to 2017, Macron, okay, 2017 to now. So yeah, time— well, time flies, obviously, but, um, but yeah, so it's not that— so I guess the point I'm making from that statistic is that in recent times, right, the French public are not afraid to shift leadership, um, in that sense. Um, final points here, and then, then we'll jump to Porsche, but it's worthwhile remembering them— the analysts at ING were pointing out that presidential elections are followed by legislative elections on the 12th and June 17th, and that will determine the parliamentary majority and whether the president-elect will actually be able to implement their program. And at this moment, this is what people, I think, forget, because the media have such a fanfare. If Le Pen wins, it's like, oh my goodness, like, you know, she's going to withhold payments in the EU budget, she's going to question the supremacy of EU law, she's going to intensify border controls. That will be the spin. Yeah, but in actuality, what can she do if you haven't got control on the, the legislative kind of, um, elections and you don't have power? You can't do anything. So that's quite key. And actually, at this point in time, Marine Le Pen's chances of having parliamentary majority which is what you need to have passage of your proposals, is extremely low. So just a caveat there. But from a trading investment perspective, that doesn't mean that in the interim period you don't see increased positioning for the prospect of heightened volatility. So typically, you know, if she wins, you would anticipate euro weakness, an increase in French spreads. Or widening in French spreads against the benchmark and high yield, so forth in the interim period. So yeah, hopefully that just gets— that's just a short soundbite to get everyone on point of what's going on with that. But let's get you back involved and let's talk about Porsche, poised to be one of Germany's biggest ever IPOs. But I was kind of like, okay. And then I saw they've chosen Goldman Sachs, Bank of America, JP Morgan, and Citi. How has that happened, firstly? But look, talk to me about why these book coordinators are important, that process. And then let's talk a little bit about the deal and rationale itself.

Well, so when you decide, right, let's go public, let's list on the stock exchange, let's have an IPO, then of course you know, you need some bankers to help facilitate that process. Now, when you're a company the size of Porsche, then you don't just need one bank, you need several, because the amount of stock that you're issuing and selling is so huge that you're going to need multiple banks to kind of mop that up and kind of get access to multiple banks, you know, customer books and so on. So, you know, it's about Choosing the right banks. And historically, the big European IPOs, historically, you choose European banks, you choose your home team. And especially in Germany, by the way, especially in Germany, Deutsche Bank, I mean, Deutsche Bank would've been like a shoo-in given right there, actually the lead. Going back through the years, Porsche IPO, Deutsche Bank, right? Bang, done. It's not even up for discussion, except that Deutsche Bank are not involved at all. Volkswagen have said, well, you know what? Forget geography here. We've just gone, right, leading investment banks of the world, pitch to us what have you got, and we just chose it on merit. They chose 4 Americans. So they chose Goldman's, Bank of America, JPMorgan, and Citi. So quite amazingly, not one Euro— so no Deutsche Bank, obviously, but then no Barclays, no BNP Paribas, the other big kind of European giants. No. And I guess there's a couple of reasons why Deutsche Bank quite controversially haven't been in the running here. Number one is, and I guess this is a function of where European banking has suffered more than US banking since the financial crisis in '08 and '09. Okay. And that's because Europe almost like had a double crisis. It wasn't just the financial crisis then, there was a eurozone debt crisis. And so it's almost been a double whammy. And as part of that, these banks have had to divest a lot more than US banks. There's been a lot more bad debt, there's been a lot more restructuring, there's been a lot more divesting and streamlining. And so what you're ending up with is these big European banks that are a lot slimmer, like Deutsche Bank now, they don't have an equity trading division. And that right there is a big problem if you're trying to shift a massive IPO. Having an equity trading division is pretty critical. For facilitating that smoothly. Right? So that's probably the biggest reason why Deutsche aren't in it here. They've had to streamline themselves, so they're not really fit for purpose anymore. Secondly, it's about, I guess, Deutsche are— well, they've had a go at trying to get rid of some automotive IPOs in the past, and let's just say it hasn't been particularly smooth. So for example, they floated— they were in charge of floating VW's truck unit Traton in 2019, and the share price is way below what the IPO price was. Secondly, Deutsche were one of the lead runners on Aston Martin's IPO which has quickly become the perfect case study, like the masterclass in value destruction. It's definitely like, go to business schools now, MBAs, it's like the case study of a disaster of an IPO, like up there with Facebook's actually, but that's for different reasons. But so reputationally, Deutsche trying to lead automotive IPOs, they don't have a very good track record. So it's anyway, so these are the reasons. And actually, just step outside of this one deal for a second. This is crazy, this stat. JPMorgan has acted as a bookrunner on 223 European IPOs with a combined deal value of $45 billion since 2008. Okay? So since 2008, 223 IPOs, $45 billion. Deutsche Bank over the same period, just 131 deals worth $28 billion. And these are European IPOs. So JP Morgan have almost doubled Deutsche Bank's activity in European IPOs in the last 14 years, which tells you the whole story. That the US banks are bossing it, and they're on a level about And the Europeans can't really do much about it.

So, so one of the things that I was looking at was how I think it was Fiat spun off Ferrari to become— listen, I actually remember one of our, our summer analysts that we had, probably 2015, he went to Goldman's and he was working, he was an equity research analyst On Ferrari, on that, you see that you've pretty much landed it there, haven't you? Come out to Italy, come and meet the team, tour of the factory, you know, get the merch.

It's like, let's hit the track, do you want to test out some of our kit?

Yeah, but yeah, because that's why I remember that, that period. But I was looking at, because I guess one of the things when it comes to listing is about timing. And I know we've talked a lot about the EV, but I guess, look, top level, is it— I guess, is it a better time? Because the EV boom has kind of come off the boil a bit. The EV direction of travel is still the same, we're definitely heading that way, but is it better value now to, to, to go now specifically, or the next?

Yeah, I think— and well, so we don't know when it— exactly when yet, but now, you know, it's, it's is much more likely to happen now, 2022. We're not quite sure when, but yeah, I reckon they— I think it's perfect in that they're kind of buying the dip, so to speak, from a sort of valuation point of view. We've been through the initial EV valuation bubble that has burst. Just go and have a look at Rivian's share price.

What are they trading, Rivian, these days?

That's a good question. Why don't I quickly look it up whilst I'm talking? But So they've kind of ridden through the bubble bursting. And now it's like, right, valuations are now— investors are now, right, let's now take a little bit more time over our due diligence and analysis. And let's— they've had their fingers burnt on the more speculative stuff. And now they're looking for proper automotive companies with a track record, with an infrastructure in place to manufacture and distribute. And this is where the likes of Porsche are perfect, right? And secondly, the valuations are more modest, which in the early days is good, right? Because what you want when you're IPOing is, all right, a valuation, but you want to make sure that then you're beating forecasts. After year 1, do you beat forecasts? Great. If you do, investors are keen, they'll buy more. This is how you get an upward trending share price. Post-IPO, it's about a more modest— well, modest, it's just a realistic valuation.

Just looking at Rivian, oh my goodness.

Oh my days.

That is— I didn't realize.

Yeah.

Oh my, that is—

Well, IPO, I'm looking at now IPO'd at $100, right? Or sorry, it hit the stock market at $100, spiked to $170, Are we looking at the same chart here?

Uh, yeah, well, I've got it up at 130 initial pricing, and then it's down at, well, sub-40.

Sub-40. So that's, that's what I mean when the bubble has burnt. Look, I was talking about it at the time, you know, go, go and listen to our podcast. I mean, it was one of the most— it was the most visible bubble I think I've ever seen. Um, anyway, it burst. So now it's good timing for, for Porsche.

Um, and then strategically, for Volkswagen, I should say, right?

We were talking—

or is it Porsche? So we were talking about, um, during the bubble, we talked about Volvo and Polestar. And I mentioned Polestar to you offline because I got pushed some adverts. Kind of shows my age, I guess. They're pushing Volvos at me. Shows I've fallen now into the 40-year-old demographic. But we were talking at the time that Polestar was going to list and be valued at more than actual Volvo Group, which is insane. But one of the things I saw in a Bloomberg article just when I was kind of researching for this pod was that Ferrari's enterprise value trades at more than 22 times earnings. VW's 1.8.

That's crazy. That's crazy. One— so, well, this is— so why are VW looking to kind of spin off or IPO Porsche? This is for one, one reason. It's about trying to, you know, really access those much higher valuations that, you know, publicly listed more premium brand automotives are seeing, and especially with their EV play. Porsche is the most profitable part of Volkswagen, by the way, just a great story. And they've got history here in reinventing themselves. They pivoted towards the SUV early on before any other kind of more, let's say, luxury brand automotive did. And they make, you know, more than half of their revenues through their SUV series, Porsche. And they were trailblazers ahead of the game, and now every, every other luxury brand has an SUV as a result of the success that Porsche had. Now they're kind of pivoting to EV, which is, which is looking like obviously a very successful, uh, strategy. Um, so this is kind of why, but what's What I really like, or what's really interesting about this, is that it's like kind of the backstory and the company structure. Like, who owns Porsche? Well, it's Volkswagen, right? But then who owns Volkswagen? Well, it's Porsche. And you're like, what? So basically in the 1930s, the Porsche and Piëch families started an automotive company called Porsche. This is back in like 19— they founded Porsche in April 1931. Okay. But then also the— so there's a difference between the Porsche family— let's just separate this out. There's the Porsche family, and then there's the Porsche automotive vehicle company. Okay, the Porsche family have the majority control of Volkswagen. They don't— they own— well, they own 31.4% of Volkswagen, but they've got 53.3% of the voting rights. So the Porsche family control Volkswagen. Volkswagen owns 100% of Porsche. So it's a bit incestuous, let's just say, right? The Porsche family own Volkswagen and Volkswagen own Porsche. What's happening here is Porsche— sorry, Volkswagen are now spinning off Porsche. Well, they're selling 25% Well, they're going to if the IPO happens, I should say. So they're looking to list and sell 25% of the Porsche Automotive company, which means Volkswagen will still wind up owning 75%, and the Porsche family, I guess, will end up owning 25% of the Porsche Automotive vehicle company. And you can see straight away, this is already getting massively messy. So from a corporate governance point of view, this is their one banana skin. This is a really tricky one, because when it comes to the investor roadshow, you want to set out a great sort of opportunity for investors. It's got to be all clean cut. You've got to be— all your ducks have got to be aligned. There's got to be no kind of skeletons hidden in any closets and clean governance structure. Really helps with that. But this governance structure is super complex, and so that'll be their headache. But I don't think it's going to scupper the deal by any means. Porsche is a great company. They've got great performance down the years. They've got a great lineup of exciting— an exciting pivot to EV. It's Volkswagen's golden child. And there's going to be plenty of demand for this. But yeah, there's just that slight governance risk lurking in the background.

Well, on that note, let's wrap up this week's episode. Thank you, everyone, for listening as ever. And yeah, thank you, Piers. Have a great weekend. And I'll see you next week.

Yeah. Have a good weekend. See you.