Fed Cuts, AI Booms & M&A Deal Flow Returns

Hello and welcome back to the Market Maker podcast. And 3 things we're going to have as talking points. Inflation surprise puts the Fed on track for rate cuts. 3 in fact, I think the markets are pricing. And what was the stock's reaction? Record highs. Once again, here we are. Then Wall Street banks in, in turn then are lifting their S&P 500 forecasts, betting on AI earnings to keep the rally alive. I think If we go back, what, 9 months now to our outlook for the year ahead, I think I was the one who said 7,500, baby. And when the market dipped below 5,000, didn't it? Only a few months ago. I do remember a lot of people calling me out, saying, Ant, you're so bad. You're so wrong. Mugging me off. And here we are.

Well, I'll leave that.

This all coming to fruition.

We're not there. We're not there. To be honest, classic.

This rally's too early. I was banking on this rally happening at the end of the year, to be honest, when we eventually top 7,500. But we shall see. It's a bit early for me. So we'll talk about—

that's a good point, actually, just before you go onto the rest of the docket. I was very bearish at the beginning of the year and you were very bullish, and actually both of our calls have played out. Like basically within the first sort of 8 months of the year, basically with the massive bear sell-off in April and now the big bull run. So yeah, we were both right, but it's all just happened way faster than we'd expected.

Yeah. And lo and behold, we'll probably end up exactly where Steven said, which was in the middle.

So we'll see.

But the other thing is big deals are back in the banking space. We've had the eventual listing of Klarna, their IPO. And we've also had a blockbuster M&A deal announced in the commodity space, $50 billion mining mega merger. And so a quick look at some of that, but we're also going to talk about Oracle, about Elon's trillion-dollar pay packet, about copper and data centers. So yeah, lots to come. But Piers, I don't think you own a penthouse apartment, so where are you?

Well, you never know. This is my penthouse apartment Sydney. This is— I'm in Sydney at the moment. Uh, so yeah, a bit of a time zone difference. We just about managed to, um, kind of figure it out and connect. I think I'm 9 hours ahead of you at the moment. But yeah, no, I mean, I'm in Sydney just for a Citadel event I'm running tomorrow. Um, but yeah, Sydney's— have you ever been to Sydney?

No, never, never Australia.

So it's great, great city. Really cool vibe, much smaller than London, but also I would say just way more relaxed. It doesn't feel quite, you know, like the rat race in London can often kind of dominate, but here it's quite chilled, you know, people clocking off work at like half four, you know, it's just a completely different speed.

Question for you, Anthony.

To it.

Sydney or Dubai? Because a lot of people leave the UK or the rat race, for example. Okay. Dubai has a tax efficiency thing and so on, but for lifestyle-wise, people say similar. So where would you go?

I haven't been to Dubai for probably 15 years, but based on that and my experience here in Sydney, I would say Sydney. All day long.

Oh, all right, here we go. There's going to be a poll and comments on the video, please.

Sydney or Dubai?

What, what are you picking? All right, well, look, let's dive into this and perhaps we can talk about some important US data on the inflation side and what that means for future Fed policy.

Yeah, I mean, So we had, and we look, we've got more inflation data actually. I think it's, if my time zone thing isn't screwed up, I think it's later today, right? We've got the CPI report, but what we had earlier in the week is something called the PPI. So remember CPI, that's Consumer Price Index, PPI, that's Producer Price Index. Both are a measure of inflation. It's just a different part in the kind of journey. Of a product. So PPI is earlier on in the journey. This is when a company, so the producer's prices. So what is the producer of the product? What's the prices of the components, let's say, that they are buying in order to then manufacture their product, which when then they sell, of course, that's when it becomes the consumer price when the consumer is buying the finished product. So this is like earlier on in that kind of life cycle. And I would say generally speaking isn't as important. So PPI isn't as important as CPI when we think about economics and when we think about, we'll move on to Fed policy, right? The Fed is more concerned about the consumer end of the price mix because what's happening at the moment, well, let me just say the data that was announced earlier in the week, PPI was way lower than expected. And actually, interestingly, the month-on-month change was negative. So the month-on-month was -0.1%, much lower than expected. The year-on-year also dropped quite sharply from the month before. So in August, year-on-year PPI was 2.6%. What had happened in July, the PPI number jumped quite sharply to 3.1% and everyone's going, oh, tariffs, tariffs, tariffs. Look, Prices are coming through. This is going to result in this being passed on to consumers. So you might hear that terminology a lot. And that's basically, well, if a company's having to pay more for its components, the cost of building its product rises and inevitably the company's going to pass on that extra cost to the consumer by raising the price of the end product to protect their profit margins. So when it jumped to 3.1% in July, everyone's going, oh, tariffs, right? Inflation's coming. Drumming that drum. But now in August, it's dropped back to 2.6% on the year-on-year front, which is very interesting because maybe it looks like, I mean, not only are producers not passing the price rises on to consumers yet, maybe actually the price rises for producers is actually not going to be as bad as everyone thought, right? So that's the kind of general theme here. So really positive inflation print when you are wanting things like Fed cuts, Fed interest rate cuts, and when you're wanting Fed rate cuts to kind of continue to fuel this kind of stock market rally and stimulate an economy. 'Cause we're a bit worried that maybe the labor market's beginning to kind of soften. So this kind of all feeds into the, positive economic and stock market narrative.

So from a reaction function then, I know we are, as you said, recording this before the CPI data comes out. When people listen to this, it's probably going to be after. But yeah, thinking about market positioning then, having moved to record highs, we've kind of just sat there since. And so do you think the market is quite primed from a positioning perspective where now if that does not fall in a line of a similar type of vein, that there could be a decent intraday pullback, not a massive reversal of sentiment in terms of what people are thinking.

Yeah, I'd say with any of this data, the downside risk, let's just talk about the stock market and the US stock market specifically. I'm looking at the S&P 500. Downside risk is much greater than upside risk just because of a function of what's been going on in that market for the last couple of months. Well, if you go back to that low mid-April, right, was at 5,000. We're now at 6,500.

Don't start protecting your call here, Piers.

It's been an epic rally. So the point is to continue to rally, you know, just good data doesn't cut it. You know, it's gotta be like fantastic. It's gotta be much better than expected, right? Which is what that PPI number was earlier in the week. I mean, it really was a surprise in a good way. So, but yeah, I mean, if the CPI data comes out super hot later on, meaning higher than expected, remember the Fed's paying more attention to that consumer side. Well then that kind of positivity off the PPI number earlier in the week will definitely be reversed. Yeah, for sure.

And then under the bonnet, I was just trying to see if I could quickly bring up a bit of a heat map of the year to date, and I was just having a look. Nvidia up 32%. Google up 26, Meta up 28, Microsoft up 18, Apple and Tesla, the laggards of the Mag 7. Apple down 9. You see the new phone?

I did. The new phone. What are they calling it? The Razr or no? Yeah, that's right. Yeah. Using the terminal. Yeah. Because obviously the MacBook Air and stuff like that, they're kind of continuing that theme, right?

Love to hear what the audience thinks. With these monumental leaps in innovation from Apple is the, is the $2,000 new iPhone Pro Max worth it? Or the Air, would you buy it for what it is?

Well, the Air is $999, which was the interesting point from the pricing perspective. It's like, okay, I mean, maybe if you're pro-Apple, you then you say, well, they're listening, they're listening, you know, cost of living crisis. Look, here's a, here's a better phone, but we're not going to put prices up kind of thing. But yeah, I mean, well, their share price pushed higher off the back of that. I mean, Apple have had a decent few months having been, you know, definitely the laggard, you know, earlier on in the year, just from the point of view of them being kind of out of the AI race at this point. But we'll talk about Oracle in a sec because it's interesting about, are you in the AI race or not? And if not, well then just does that mean you are dead and buried?

And being in the AI race doesn't mean you have to be producing these models and on the software side, right?

No, that's right. It can be on that kind of product end, which is kind of coming, right? Where then you have AI-driven products that that people and businesses can use in order to drive efficiencies or drive up productivity. And so obviously Apple are hugely connected business with regards to users of their products, both on the phone side and on the computer side. So they are still in a position where they can benefit from the AI journey, but just a bit further down the track when it comes to actually apps being subscribed to for businesses to use. But still nothing from Apple on this really. So who knows? But the big winner of the week, which kind of ties into this story, was Oracle, where, I mean, Oracle were up 40%, okay, yesterday. Off the back of their earnings that kind of deliver— they delivered on Tuesday night. And it's a classic story of like, if you go back to 2022, Oracle got absolutely slammed. Oracle were down 50%, I think by the sort of latter end of 2022, stock price down 50%. You know, partly that was because of a broader stock market sell-off. We were concerned about the kind of inflation crisis kicking off and interest rate cycle moving to the upside and all the rest of it, right? But also Oracle got double slammed because they just weren't in the AI race. Traditionally they were seen as the kind of databases and businesses, that kind of software enterprise from the past. And then you have the NVIDIAS coming through and they're the future. Right. And Oracle was taken over by Nvidia and was the poster child of that AI boom. And Oracle was thought that they weren't in the race, right? And so they got slammed. But what's gone on since was, well, kind of all came to a head in their earnings earlier this week where they've just announced just spectacular order book growth. And it's kind of come out of nowhere to an extent. Well, I don't know unless you follow Oracle more closely, which I don't. It kind of came out of nowhere from my perspective. But basically in terms of their order book pipeline, they've got bookings of $455 billion this quarter. They have signed $455 billion worth of revenue. Not that it's going to come immediately. These are multi-year deals that have now been signed, right? Signed with the likes of OpenAI, XAI, Meta, Nvidia, AMD, you name it, right? They're all now coming through with monster orders. To give you a context, $455 billion worth of orders. The analyst's expectations was for $138 billion. So it's 3.5x what the analysts were expecting, and that analyst's expectation was a massive jump to the kind of, you know, they were talking about mainly $18 billion worth of revenue in the quarter. So analysts were saying, look, strong order book, $138 billion signed, but it's 3.5x that. So they've just come and absolutely just, it's kind of Nvidia-esque, right? From a couple of years back when Nvidia started to report this just ridiculous revenue growth. And I guess it kind of just, Tells a story, I think, of an, you know, if you are not in this AI race, which Oracle were not, actually doesn't matter. And that's just because the demand side of this compute thing, right? For AI, the demand side is so far outstripping supply that Oracle, even though they are woefully late, they can still turn up now. And the demand is so huge, there's plenty of the cake. There for them to go and gobble up. Is this bad news for Nvidia and the like? No, just because again, the demand is so wildly outstripping the current capacity. So yeah, quite an interesting story. And a couple of side notes. So on the day, their earnings day, that kind of big jump, 40% up in their share price. So actually that puts them as the 6th biggest ever single-day market cap gain. So they added $244 billion to their market cap in one day. Puts them 6th. The top 5, 3 of them are Nvidia, including Nvidia being number 1. They added $441 billion on earnings day back on the 9th of April. But yeah, Nvidia are 1st, 3rd, and 4th on this list. Telling exactly that story of the AI revolution, right? Apple actually is second on the list with their earnings from April 2025, and then Microsoft are fifth, again, April 2025 earnings. So yeah, huge upside for them, really putting them firmly in this race. And then final side note, Ellison, so Larry Ellison, who's the founder, he still owns 40% of this business, which is quite remarkable. So actually briefly, because the stock rallied 40%, then it kind of dropped off a little bit. I think it closed like 30% up, but whilst it was 40% up, Larry Ellison was the most wealthiest man on the planet. Very briefly, his kind of wealth reached $386 billion, which just took out Musk, who's currently on $384 billion. So just for a few hours there, Ellison knocked Musk off top spot.

Yeah. And just on the point of Musk in the news this week, of course, was the, a new pay package which would come in at $1 trillion that Musk has got through, which is obviously record shattering in its size. But here's a couple of, you remember when he had his, this, the, the tension around whether or not he would be paid out on his previous one was these astronomical milestones that were set out, but when Tesla was in its infancy, and I guess the management team were like, okay, you get some really chunky rewards for some really spectacular milestones. And obviously he achieved them all. And so now looking at this, here are some numbers of what this latest package. So if he's going to become a trillionaire, then he's gotta hit a couple of these. So it's approximately $1 trillion over 10 years if Musk hits 12 milestones, some of the 12. So how many robotaxis are they selling at the moment? Just remind me.

Zero.

Zero. Okay. So he needs to be selling 1 million robotaxis as a milestone.

Yeah. Okay. Yeah.

20 million vehicles.

A year. Because that's so that for context, I think they produce 2 million roughly at the moment. Right.

It's going to get up to 20.

And like the biggest, like the big, big, big boys, you know, the Toyotas and the VWs of this world, they produce about 10 million vehicles a year at the moment.

No problem for Elon.

Okay.

400 billion EBITDA and a market cap So their market cap at the moment, I mean, look, it fluctuates. By the time you even listen to this, it's probably going to be different, but let's say it's around $1 trillion. So that market cap milestone is $8.5 trillion.

So they're like the most expensive business in the world is Nvidia, which is like just, it's like between $4 and $4.5 trillion, isn't it? So yeah. Okay. So it needs to be double the market cap of the current largest business on the planet. Yeah. No pressure.

Yeah. Well, look, these moonshots come through. It's all gravy, baby.

Yeah. Well, but to be fair, like his package he had last time, which they kind of rolled out, I think it was like 2018. Everyone at the time was like, what? It's just absolutely ridiculous. Obviously it's not going to happen. Than it did. So it's kind of like déjà vu here with this package.

But yeah, so talking of interesting to see, you mentioned there about with Oracle really smashing the street. So a couple things to segue. One, how do these analysts get it so badly wrong? Because I thought that their job is to look, the financial metrics aside, I thought they're supposed to stay pretty close to the pulse. By talking to business executives of the firm to get the headwinds, to pick up those soft signals so you don't get caught with your pants down and missing by such a whopping margin. So I guess that, and then maybe we could talk about the Wall Street upgrades, like how meaningful are they, if anything at all?

I think to be fair to the analysts, I would say two things. Number one, we are still at the very beginning of what is a multi-decade global secular shift to AI, right? And it's right at the start. It's equivalent, and many people say it will be much bigger, but it's equivalent to the internet, right? So at the end of the '90s, again, analysts had a shocking time. Trying to value businesses that were online because it was so new and it was impossible to kind of really foresee how this is all going to pan out. And so you had massive valuation errors back then though, valuation errors as in overvaluing businesses. I think what you've got here is perhaps the opposite. But again, it's the same function around just so difficult to really know how this is all going to shape up and pan out. And let's learn our lessons from the dot-com bubble bursting. And so perhaps they're just a bit more cautious. Secondly, I would say businesses like Oracle, you know, when you're talking, I guess they don't want to announce or even talk or whisper about a mega deal being discussed because the last thing they want is to start talking about it, people start getting excited, and then the deal not happening because the share price is just getting slammed. So I think they're just kind of holding back info until there's ink on the paper, and then it's like, surprise!

I find it so hard when you're talking about a couple of hundred bill. And so let's say I'm an employee at Oracle, like the vibe in Oracle, that sales floor in my Oracle office. And I'm like, Jesus, what is, what's going on up there? It's like, it's like a party every day. And they're like, all they're doing is getting drunk every night. And then they're just That's like, what is going on? Like, surely like there's, that gets out to an extent. Yeah. And then the employees, and then there's some options trading and then there's some flow being seen and then the word's out.

Right.

Because forget the analysts, because the analysts are going to be slow to the party. What about those sophisticated people who are, who are, who do have their ear to the ground?

But we're talking about handful. Of deals that are mega in size, right? So like who's going to be brokering the deal with Meta? It's probably Ellison himself, right? Or if it's not, it's like his absolute, absolute senior top dog salesperson. So it's only happening right at the very top, I would say. So again, maybe they're just trying to be cautious and not letting that flow down to the wider employee base.

Okay. I've got a strategy for you. So I reckon we should put some sort of tracker and, and watch Ellison's movements to see geographically what is his actual physical location. And so we could see where he's going, who he's meeting, what's his patterns.

Who are you gonna, who are you gonna send in? Who's gonna plant the tracker?

Oh, why are you in Sydney? Like, I mean, yeah. Okay, well, Wall Street analysts then, I mean, they have upped the ante. It's the first time of the year that the 7,000 figure is now on the table. So yeah, any thoughts on that? I mean, A, why have they done this? Like, what are the main predominant drivers? And then, yeah, I mean, we've still got a whole 4 months to run yet. So how valid are these at this point?

Yeah, there's plenty of time. I mean, the drivers are very clear. Its Fed rate cuts, which is a function of the inflation situation, like the PPI data that we had earlier this week and the labor market softening. So right, those two economic measurements are dropping, which it's a tricky one to really explain, right? Because then the Fed are going to cut rates. And we're even now pricing 3 rate cuts before year end. But you can flip it and go, well, hang on, that labor market softening, that looks quite alarming, the rate at which it suddenly dropped off. So isn't that bad news economically? Aren't we going to get a recession? But I think, right, and we may well do, but at the moment there's enough uncertainty there. And look, the immigration situation has meant the labor force has kind of shrunk. And so maybe less jobs being created actually is fine for a smaller labor force. There's all these counterarguments you can put forward. So right now we're in that sweet spot where the economic disaster can't be seen on the horizon. It's possibly just over the horizon, but we can't see it yet. So in the meantime, we just got more rate cuts and it's like, well, hey, let's go. That's number one. And then number two is the AI story and Oracle. Perfect. Another kind of validation point in that. Thing around AI, the AI boom is ongoing. It's not slowing, right? We were worried the whole Nvidia story was going to stumble this year. That growth rate couldn't be sustained. Well, it was and it is, and Oracle are now further evidence for that point. So they're the two factors, Fed cuts without an economic crisis on the horizon and the AI revolution full steam ahead.

So with the banks then, so Deutsche have got 7,000 by year end. Barclays just, well, around 6,500. Well, then they're saying it's going to go, so there's just a timing difference. So they're basically saying 6,450 now and then up to 7,000 in 2026. Again, undefined what that means in terms of 2026. And then Wells Fargo, Well, I guess they're saying plus 11% on the current price by the end of '26.

Yeah. I mean, look, I mean, 7,000, sure. I mean, look, we've gone from 5,000 to 6,500 in 3 months. What's another 500 points when you've already done 1,500, right? So I think we can get to 7,000. Barclays are interesting. So they're basically saying we're going to get a drop Because we're at 6,500 now, they're saying 6,450 by year end. So I guess they're saying this rally's done, but we're not going to get a sell-off and maybe a consolidation here before then another push 2026. Yeah, maybe that's being a bit more cautious and conservative, I would say. But I mean, I wouldn't be surprised if we saw 7,000 before year end, given these key drivers of the Fed cuts. Next week and they're dovish in terms of their rhetoric towards the direction of travel into year-end, meaning are they going to really confirm, or as far as they can, that they're going to cut rates at least once more, if not twice before year-end? Well then that story's great. As long as we don't get a continued collapse in labor market data, then I think you've got that nice sweet spot from a stock market's point of view, where you're getting rate cuts with the AI boom, as I've said, ongoing. And so, I mean, remember that it's the tech firms that are fueling this S&P rally, right? It's only going to get to 7,000 if the tech giants continue booming. And if they do, you can easily get there given how much of a dominant force they are in that index.

So rather than these banks' outlook on the US stock market. How about the banks in themselves? So it does feel like general market environment is still fairly, well, I say that the VIX wouldn't agree with me, but it feels like volatility. We're out of that volatility peak that we were in prior quarters, which we saw these record-breaking trading revenues at a lot of these investment banks. But at the time it was the banking part of the business, which was pretty slow going and didn't live up to the beginning of the year expectations because of Trump and tariffs and inflation and so forth. What is it looking like now? 'Cause I know there was a few little leaks in the press about how some of these big banks are getting on, on the banking side, which seems seemingly is livening up because as I said at the top of the show, you've had pretty much the biggest listing had a massive blockbuster M&A deal. So what are we getting as signals as to how they're performing?

Yeah, I mean, look, the banking side is starting to rev up and you know why? It's hard to, I mean, deal flow is increased, right? And we're going to talk about a couple now in a second, but more broadly, remember going back to the start of the year, we've had a weird year thinking about deal flow, right? At the end of last year, Trump's coming, deregulation, right? Deals are back, baby. You know, Trump's all about the deal, remember? And so we were really optimistic about investment bank revenues in 2025. Then we hit Q1 and it just didn't happen. There was nothing and it was dire and everyone reversed their expectations. But actually, as we've come through the summer, you're actually starting to get some big deals. Starting to come to the docket. And so actually fees are really starting to pick up now. It's why now rather than at the start of the year? I think that we've gone through the tariff sort of speed bump, let's say, from a confidence point of view. And don't forget deals require financing and financing costs money. And look, if we're in a rate cutting environment, well really in the end that's going to be the biggest catalyst. Deal flow, right? So if we are now in a, if we can see 3 rate cuts before year end, well happy days from a kind of financing cost perspective, which is going to drive more deals, right? So, and then there's so much pent-up demand. We'll talk about Klarna's IPO in a minute, right? But they were wanting to IPO back in 2021, right? And here we are 4 years later. So the queue is just ridiculous in terms of companies that have been wanting to get something done and just haven't been able to for years now. So I think that kind of pent-up demand there is starting to come through as well. So yeah, it's actually looking really good from a sort of banking, investment banking fee generation point of view.

Yeah. And some of the, I think it was a Reuters article that was listing some of the early numbers saying that Citi IB fees are seen in the mid-single digits, JP low double digits percentage, and Bank of America IB fees up around 10 to 15%. So yeah, pretty decent. But let's talk about two of these deals then. I mean, one was, I guess the troubled route to listing of what was Klarna, but it did start trading from the day we were recording this yesterday. And I think they initially shot up 25% and I think they finished the day up around 14% or so. So really positive first day, so to speak, on what was otherwise looking like a really quite challenging process to get to this point.

Yeah, you've gotta, you've gotta go back in the Klarna story to really get it all into context because if you just look at this IPO only, it's like, okay, demand was like off the scale. I think 25 times oversubscribed, which is obviously huge. And as a result of that demand, they ended up pricing the deal at $40, which was above the initial range. Okay. So from an IPO perspective, right, really strong. Then the market, you know, what happens on an IPO of course is that this is where the company issues shares and sells shares in the IPO to investors, right? At $40. Okay. Bang. Then what happens is you then list on a stock exchange. So you then, these shares become freely tradable. On a stock exchange. Okay. So you then get the market open the following day or that morning, the stock opens for trading on the stock exchange for the first time. And then that's the next measure of demand. So those that missed out on the IPO issuance directly can then get involved just in the secondary market. Right. And so the stock price popped another 25%. So they priced it at 40, which was above the range because of super high demand from the $40, it then popped 25% in trading on the stock market on day one, right? So this is all super strong and it's like, wow, amazing Klarna, awesome story. What you got to understand if you go back in time, so this put them at a $15 billion market cap, okay? Based off the $40, that is. So obviously they went up a bit, Can I just quickly ask a question? Yeah.

You've mentioned already on this conversation about tech giants are booming and they're really important. And then I was thinking about the, you said there's a bit of pent-up, a lot of companies want to come to market, let's say do deals. That deal could be listing transactions, whatever it might be. If I was the banker leading this, if I was the lead runner on this deal and I knew that there's a pipeline and it's predominantly tech orientated, like all of these deals are predominantly tech. That's where the biggest value is. The biggest fees for me as the banker. Surely I'm going to lowball this. So there is way overbid so that yes, someone could criticize that we could have juiced this for more fees, but I'm thinking about the other 10 deals I've got in the backlog that once they see this success, they're going to be like, and when can we go? And I'm just going to queue those up. And so do you think this is, do you think that rationale is a bit of engineering going on here on the banker's side?

I do. And that all makes sense. But one thing to add, don't forget that it's been a, it has really up until maybe now, it's been quite a cautious market, the IPO market, right? It, For those reasons I've said, right? Earlier in the year we were hoping for a big wave and then it just didn't happen. And we had some IPOs that kind of failed. So I think these bankers are tiptoe, they're still tiptoeing towards these deals, preferring undervaluing them, or at least the range they put up to start with is on the cautious side. 'Cause remember, the last thing they want is a failed a marquee failed IPO because it's just going to collapse confidence, right? So it's just tiptoeing and being cautious. And then yeah, if they can get a nice story with a great successful launch, then great. That kind of feeds into their order book that they've got packing up. Absolutely. So, you know, I think, yeah, they're playing a strategic game here. But yeah, I mean, look, let me go back though because Klarna. So they took investment from SoftBank, okay, back in 2021. 2021 was the post-COVID bubble, the tech bubble, right? And a lot of these firms went to crazy prices and SoftBank, you know, took on, or sorry, stepped in and invested in Klarna, valuing Klarna at $45.6 billion. Okay. 45.6. They've just done an IPO, which has priced them at 15. 45.6 in 2021. By 2022, literally 12 months later, they had to take on more funding because they were running out of cash basically. And they did a private funding round at 6.7 billion. So that's the tech bubble bursting. 2021 peak to 2022 trough, like Klarna was like the most extreme example of that, 45 billion down to 6, right? So now they've kind of doubled in a bit more from that trough, right? It was 6 and now look here, we're at 15, 3 years later. So they're kind of climbing out of that hole. SoftBank is still staring at a like 60-odd percent haircut. On their kind of deal they did in 2021. Who knows, maybe they'll kind of take a scratch on that trade in a few years' time if Klarna can now kind of generate some good growth, obviously. But yeah, there's a big backstory here. But still, that aside, yes, it was a successful IPO and the bankers are very happy.

Yeah. And those bankers being Goldman Sachs, JP Morgan, Morgan Stanley, and there was actually 11 11 other firms working on that deal. So it was a big job to get done. So final one, just before we wrap, is talking about, yeah, one of the largest mining deals in over a decade. I mean, this is a big one. So yeah, tell me more about the Anglo American-Tech Resources merger.

Yeah, well, this is such an interesting story. This, you might have been tracking, well, partial, well, you and Steven did, I think more than one episode tracking the Anglo or the BHP Billiton bid for Anglo America, which, I mean, when was that? Last year? Or maybe even was it even into the start of this year? I will have to check on that, but this is really interesting. So you've got two companies here, Anglo America and Teck, right? The two big mega miners, and they are now merging like a merger of equals, roughly. I mean, I think Anglo will take about, I think it's 63% of the merged business will basically be owned by Anglo. But let, roughly a merger of equals. But both of them have had to fend off quite hostile bids over the last sort of 12 to 24 months. So tech They got approached by Glencore and Glencore were trying to buy Teck. Okay. They fended them off. BHP Billiton were trying to buy Anglo, fended them off. Why are these two attractive targets? Copper. They've got huge copper mine reserves in Chile. Okay. And copper, look, it's the prize metal, right? It's the metal of the AI revolution. Copper is needed for electricity and for chips and all this power, right? So this is why Anglo and Teck separately were seen as quite attractive strategic moves for Glencore and BHP Billiton to try and kind of future-proof their kind of business. Right now, both of them got fended off these attacks. And look, there's even, I don't want to delve too much into this, but there's there's specific reasons like complexity of the deal. So BHP wanted Anglo to kind of divest certain parts of their business and streamline it to copper. But then there's regulatory hurdles to that because South Africa, where Anglo do a lot of their non-copper mining, Anglo's a huge employer of South African people. And so the South African government were like, hang on a sec, No chance, Anglo, you are not divesting these parts. We're not happy with that. Right. And it was a very complex deal. And anyway, Anglo thought, hang on, BHP, you are massively undervaluing us. So the valuation wasn't there either. So it was an undervaluation. It was a deal complexity. It was a regulatory scenario that kind of really kind of prevented that from happening. And look, Teck batted off Glencore as well. So now you've got these two coming together in actually what's a quite nice defensive play is to say, hey, you big boys circling, back off because we're kind of grouping together and becoming a bit of a giant ourselves, right? So it's a great defensive play. Also, there's some awesome kind of synergy cost savings here. These two, so Anglo and Teck, They've got two mega copper mines in— they've each got a copper mine in Chile, but they're right next to each other. So they reckon they can save $80 million pretty much in year one on the kind of costs of running these two mines given their adjacency geographically. There's a really interesting kind of cost saving synergy story as well as a defensive play. So from a kind of deal strategy perspective, There's so many different angles to this, and it's actually a really good one if you're thinking about applying for roles in the M&A space and you're looking to go into interviews and so on. If you want a story that covers so many different kind of strategic angles, then there isn't a better one than this.

Yeah. And actually in your notes, you've got this really great 5-point kind of strategic theme plan, and I think I'll try and share that where we put this episode. Kind of breaking down what you said. Copper is the prize, as you're explaining about critical for EVs, AI, data centers, and so on. Defence by focus, streamlining portfolios, focusing on what you're good at as a business, doubling down, friendlier mergers win, more of equals, and then national interest. You mentioned South Africa and then complexity killing bids. So yeah, that's great. And I'll look to share that, but look, My headphones have just died according to the AI voice in my ear. And so with that, thank you very much, Piers, and everyone else for listening. And yeah, safe trip back from Sydney.

See you later.

Thanks a lot.