Paramount’s Deal Playbook, Trump Opens Nvidia’s China Door, Saudis Loosen Drinking Laws | Diet TBPN

Just a few days until Christmas. We're so excited. We're live from the TVP Ultradome, the temple of technology, the fortress of finance, the capital of capital. No travel until Christmas, baby. No travel until the new year. We're in the ultra dome, hanging out. We're monitoring the situation. We're monitoring the Paramount, Netflix, Warner Brothers situation because this is one of the most fascinating deals. The. The deal has gone hostile. Paramount has launched a hostile bid to acquire Warner Brothers. That's an all cash offer. 77 year, 9 billion. Really? Really. And it's a fun one because I feel like it's obviously tech adjacent, but it's not the story that people have been monitoring all year. We've been talking about foundation models. That whole story has just gotten a little bit.

Legacy media. They got tired of not getting enough attention.

Exactly.

Let's spice it up a little.

Spice it up. Here's something new to learn about. So everyone's having fun. Everyone's learning new things. And I could tell because when I came in today, I had a bunch of questions that people were throwing at me about how all of this works.

Why isn't Warner Brothers just going with the highest price? Like, when I sell a stock, I don't care if Citadel or Jane Street's buying it. If I'm selling 80 bucks of stock, just give me the best price. But when you're selling an $80 billion company, there are other considerations, and it goes beyond just maximizing shareholder value. And so I wanted to break down a few of those. So I did that in today's newsletter. We can run through that, and then we can run through some of the news. This question, you know, it seems obvious. The board has a fiduciary duty to maximize shareholder value. That's legal requirement to take the higher offer. And yet that's not what's happening. Like yesterday, we saw that Ellison and Paramount came in with over 100 billion. Of course, that included the CNN, the TV assets. But even when you broke it out, it seemed like it was very clear that Ellison was willing to pay more money and make a higher offer. So under what circumstances can a board whose job it is to maximize shareholder value, not take the higher offer? They can't just. It can't just be whoever we had the better dinner with. Right. Which is part of the news, of course. They. They went out to dinner and Paramount CEO David Ellison sent a text to David Zaslav, who's running Warner Brothers, after they made a hostile bid today to buy Warner Brothers. And David text the Other David and says David, but I guess he misspelled his name, even though that's his name, which is just funny. But anyway, he says, I appreciate your underwater today, so I wanted to send you a quick text. Know that despite the noise of the last 24 hours, I have nothing but respect and admiration for you and the company. It would be the honor of a lifetime to be your partner and to work and to be the owner of these iconic assets. He's talking about Foghorn Leghorn. He's talking about Porky Pig. He's also talking about Batman and Superman, obviously, and Harry Potter and Lord of the Rings and a million other iconic assets, which is true. If we have the privilege to work together, you will see that my father and I are the people you had dinner with, which I like that. I think that's cool. They had dinner.

It's a fantastic text.

Yes, yes, yes. It's a great one. There are two main reasons why you don't just take. Why your size might not be size. Directors at a company like Warner Brothers, they have to maximize shareholder value, but maximizing shareholder value is an expected value calculation. So if you come in with $100 billion offer, and I think there's a 75% chance that you're going to deliver that, and someone else comes in with an $80 billion offer, and I think there's 100% chance that they're going to deliver that well, the expected value of Your bid is 75 billion. The expected value of their bid is 80 billion. I go with the 80 billion. Even though it's like a lower headline number, it has a higher.

How much of the calculus do you think is just a deal that will actually get done?

A deal that doesn't get done could still have value because of a breakup fee. You could, in theory, go into a deal that, you know is impossible. And the example that I gave is, what if bytedance came in and they were like, hey, you know, we're 400.

We'd love to.

Media companies.

We'd love to own Porky.

We'd love to own these iconic assets. Let's pick up Warner Brothers. We'd love to own cnn, too. You know, who knows what we'd put on the TV.

We already own TikTok.

We already own TikTok. Why not CNN? Also, why not Shark Week? But obviously the government would block that. And we have cfius, which is an organization in the US Government that determines whether or not an international buyer can take an American company because of intellectual property. All sorts of geopolitical considerations. We don't want another country cornering a market on a really key piece of the supply chain like the Nvidia H200 for example. Then there's also just the FTC. So certain deals, like I gave you the example yesterday, like Disney, Disney would be so blocked. I think that that deal doesn't even get kicked around. No one even talks about it because it would get blocked by the ftc, but it would maximize shareholder value. If Disney came and said, yeah, we'll give you a $10 billion breakup fee and we wanna try and buy you for 200 billion or a trillion or 200 million. Like you would immediately say yes, because you just want the break. Having being in this turmoil and being in this limbo and not being able to sign deals with other. That has an opportunity cost. Right?

Yeah.

And so you might want to back off of that. And so basically the.

Yeah, look you, you look back at the FIGMA acquisition. Adobe paid a billion dollar breakup fee. So it's effectively like non dilutive financing for figma that has a happy ending because they were able to, you know, re accelerate, get out into the public markets. But there was another situation where they went through a rough patch and actually really needed that capital to get through.

There's basically two buckets of risk that I think most dealmakers would be considering in this situation. First is financing risk. So will they come through with the money and what money are they paying with? Because the initial offer, this is the history. There's actually been six offers put forward by Paramount. David Ellison is putting on a clinic of just not taking no for an answer. Because all the way back on September 14th he offered $19 a share and 60% of that was cash. So 60% cash offer. Then September 30th, two weeks later he comes back $22 a share and ups the amount of cash to 66.7%.

Zaslav is doing a masterclass in making your opponent negotiate against themselves.

100%.

It's actually great.

And so October 3rd, 2350 a share, it's 80% cash. Then November 20th, 2550 a share, 85% cash. Then finally December 1st, 2650 per share, 100% cash. December 4th, $30 a share, 100% cash. Now why does this matter? Well, it's because you get locked into owning the shares of 40% of the shares is Paramount. And then while it's closing, the stock trades down, you wind up getting less value. And so the 80 billion today might wind up being 70 billion like and that doesn't maximize shareholder value. There's also just the question of, like, can you actually marshal the cash? Just like, if somebody comes to you and you're about to sell your house to them and they say, yeah, I'm definitely going to get a loan for this, well, that's a financing risk. Maybe they don't. Maybe they back out of the deal.

That's why cash offers often times.

Exactly. If you can prove that you have the cash, that makes difference. And I mean, he's effectively gone and done that because he's teamed up with Jared Kushner reportedly and gone around the world, got a whole bunch of different sovereign funds. And just really, people, anyone with big, deep pockets has kind of said, yes, I'm down to come along on this ride and put up a bunch of the capital. The capital has been marshaled. It seems like it's ready to go. And then also you have Larry Ellison, who has three times as much money, I think, than the whole deal value, something like that, 275 billion to his name. And he's only trying to put together assets, not cash assets, not cash.

But he should not just, I know they want it, but do not market. Sell your Oracle position, please.

Yeah, he's like, I'm actually, actually going all cash now, but. But he's. He's effectively acted as backstop. And so everyone who's come in and said, okay, who. I guess I'm good for 10 billion of that 80 billion, but only if everyone else is in. Larry Ellison reportedly has come in and said, well, you know, if there's one person in the bunch that backs out of their slug at the last second, I'll jump in and get that. He's not saying he's going to put up the whole 80. He's just saying he's backstopping it. David Ellison feels very good because he's done what Zaslav wanted him to. He said, hey, they wanted an all cash offer. I brought them an all cash offer. I brought them an offer that's higher. And we believe that there's no reason why factor number two should come into play. And factor number two is regulatory approval. And so there's been this question about will Netflix get approved? If there was a different buyer, it would have even more regulatory risk. And so you don't want to. Even if the price is higher, you don't want to accept a higher price with a lower chance of actual conversion.

Bobby thinks NLE Choppa might up his offer to 100k of cash and get.

Back in the mint. In that scenario, at least you know that the 100k cash is real and it's going to be delivered on the day of close.

Maybe in actual cash, probably.

I think that was the. That is funny because that was the joke of that meme was that he was giving like actual cash. When we're saying cash offer here, of course we are not talking about physical cash. Is Tyler doing money spread? What does he got? Did Christmas come early for you?

So I had a question though. What makes the Paramount offer, like, hostile? Is it that it's like reacting to the Netflix office?

Is that the Netflix board already or. Sorry, the Warner Brothers board went with Netflix and they're coming. It's hostile because they're saying, screw the board decision. We want to go to the shareholders. Okay, yeah.

Because it sounded like they had a nice dinner and the texts were like, kind.

Yes, yes, yes. No, no.

They sound very hostile.

No, no, no. Hostile in the sense of like, of like not accepting the final, like the final decision there and then. And then also there is a. There is a point where you can appeal directly to the shareholders and make the. You can actually make the legal case that the board is not acting in their fiduciary duty and in their. In the interest of shareholders. But again, these to be argued in shareholder lawsuits because it is fuzzy. Like if I say I'm offering you 100 billion and someone else is offering 80 billion and the board says, yeah, but that hundred billion has only a 75% chance of going through. You have to discount that. Now the board says it's worth 75, but whoever made that offer can say, no, we're actually good for it. You should apply a 10% discount rate and treat our offer as if it's 90% or 100%. And so all of those arguments, those can be made in the court and the shareholders can react to that. And if the shareholders align and say, yeah, actually we think we'd be getting more money here with this, with this deal, then they can push back against the board at a certain point.

But yeah, friend of the show, high powered media exec says Zaslav has been architecting this situation for the last 12 months. Sitting pretty. And he's a wild, wily old fox and has what he has been shooting for. Two heavy hitters fighting over a deal. Don't doubt there will be a couple more turns here with the price or even another bidder coming in sideways, which.

Is remarkable because the price is so high already compared to where it was six months ago. Zaslav. It really feels like it's coming together that he will be remembered as like an incredible business executive for this deal.

Possible deal guy of the year, possibly.

He's definitely in the was. Sam looked like he was running away with it over the summer.

That's true.

Early fall and he lost ball control.

He lost ball control, yeah. There is a wrinkle that people haven't really been considering which is the fact that Warner Bros. Discovery holds a massive, often underrated vault of masculine cinema. And if this falls into the wrong hands.

What is masculine cinema?

Masculine cinema would be dudes on film. So they own. They own a bunch of Clint Eastwood films. Dirty Harry, Magnum Force, the Enforcer, Heartbreak Ridge, American Sniper, Letters From Iwo Jima, Unforgiven, Gran Torino. They also own Rambo, the whole Sylvester Stallone, the Cobra Wing, Cobra, Demolition man, the Specialist Tango and Cash, Bullet to the Head, get Carter, the 2000 remake. They also own Mad Max, Lethal Weapons, all of the lethal Weapons. The Matrix, blade, Mortal Kombat, 300, Rush Hour, Pacific Rim and a number of dad and military shows. Band of Brothers, the Pacific Generation Kill. There's a whole host.

They should release the full DVD set. Just called Guys Being Dudes.

Yes. They also own some Jason Statham properties. The Meg franchise, where Jason Statham fights a big shark.

Whoa.

Wrath of Man. I guess most of the Guy Ritchie films are actually with Lionsgate or mgm, but. And I think this could be a, you know, a big political hot button of what happens to the Rambo franchises. The Hollywood hunks. No one's talking about the Hollywood hunks. Everyone's focused on Looney Tunes characters. But if the Hollywood hunks fall into the wrong hands, it could be. It could swing our entire culture potentially. You're hiding inordinate amounts of Middle Eastern funding sources in your takeover bid, are you not is boring business and not hiding it. It's out in the open. Like this is. This is. This is like the playbook for these deals.

But again, double, double that of the amount of equity that the Allisons are putting in. Putting in around.

Yeah. I mean, I think everyone assumes that there'd be a lot of Middle Eastern funding in this. That has become the standard funding instrument these days. Like EA Games. We just followed that story a little bit. That was obviously. It's like 93% Saudi money. And that is part of the modern deal making playbook these days. A lot of venture funds have raised money over there. A lot of the big AI companies have raised money over there like that Seems like a foregone conclusion. If you need money, you go where the money is. Why do, why do bank robbers rob banks? Because that's where the money is.

Trump says that the United States will allow Nvidia H200 chip sales to China and get a 25% cut. This is a pretty big change. I mean, we were talking about.

Not selling. I mean, I guess it's not Blackwell, right? It's Hopper. So we're still a generation behind, but was this, it was like a pretty nerfed chip before. We're getting less nerfed. We seem to move, we seem to be moving in a, in a more thumbs up direction, more. Let's, let's actually get the chips over to China at the same time. AI is fake, so it doesn't matter. Right? That's the take. The pro China take is that it's Sass, it's SaaS, or it's not, it's not like this nuclear bomb that's going to destroy everyone. So it's harder, it's getting harder to make the.

Manhattan Project argument, and it.

Feels impossible to make the argument that we're going to get them addicted to the US AI supply chain and they'll never develop their own capabilities and so we want them.

Well, I disagree with that. I think that, that, I think that that argument actually holds. That argument holds for sure.

I mean, I totally disagree. I think they're, I think China's smart enough to know they don't want to be dependent on any foreign country to produce any critical.

Yes, but I still think there's enough of like a market force within China that if we flood the market with cheap Nvidia chips, there will, it'll just be expensive for them to keep propping up their local industry. Even if they are aware of it, even if they know that they have to. It's a cost. And it's something that a lot of AI researchers over there will just say, you know what? I'm already. It's so much easier. The Nvidia ecosystem is so great. I'm just gonna stick with that. I'm a little bit skeptical that, like, there isn't, there's no advantage to selling Nvidia chips there. I've become more receptive to that argument, particularly even though you have not. Tyler, what were you gonna say about this?

Yeah, I was just gonna say, I mean, we kind of joke about this, but it is kind of crazy the extent to which you can basically break down all like, AI policy questions to like, if you are AGI pilled. Yeah, because like, if you are, if you're Dario.

Yeah.

I mean, you shouldn't be giving stuff to China. You also shouldn't, like, if you are AGI peeled, you should be thinking about safety, all these things. Like we had Keith Raboy on. He doesn't seem super AGI pilled. He's also like, oh, safety is a hoax, etc. Stuff like this.

Well, let's read through this Wall Street Journal article on the. On the details of the new Nvidia deal.

Notable that this seems to have been complet priced in already because Nvidia is actually down half a point today.

Yes, it's been such a dramatic story all year and yet it's always felt like a complete footnote in the overall financial performance of Nvidia. They're growing so fast that, you know, I don't know how many we're going to get into figuring out how many H2 hundreds they sell, but they would need to sell a lot to actually move the needle on this behemoth of a business. What is the world's largest company in the world? President Trump said he would let Nvidia export its H200 ship to China and that the US would receive a 25% cut. His latest bid to make money for the government in an unusual agreement with a private company. I have informed President Xi Jinping of China that the United States will allow Nvidia to ship H200 products to approved customers in China and other countries under conditions that allow for strong national security. 25% will be paid to the US of A. The move is a boon for Nvidia, which has fought for months to maintain access to the world's second largest economy. The company had agreed earlier this year to give the US 15% of China's sales from a lower performing chip, only for the Chinese to scuttle those plans. As part of continuing trade talks between the two sides. Chips from the world's most valuable company have become a prized geopolitical tool. The H200 has higher performance than the H20 that Nvidia was previously allowed to sell. Even with the US Government taking a cut, the decision could be worth billions of dollars in sales to Nvidia. In the most recent fiscal quarter, Nvidia reported gross margins of 73.4% on $57 billion in sales. That is crazy. They can totally afford 25% for the big guy.

Yeah. Right around that quarter, Lutnick was on cnbc and this was the quote that originally ticked off the Chinese. He said we don't sell them our best stuff, not our second best stuff, not even our third best. He said you want to sell the Chinese enough that their developers get addicted to the American technology stack. That's the thinking. CCP basically immediately said, we don't want any of them. Now.

Trump said that the government would take a similar approach to exports from Nvidia competitor AMD as well as intel, in which the government now has a 10% stake. We exported a ton of Teslas to China and BYD and Huawei have now arguably completely leapfrogged. Completely leapfrogged. They did not become addicted to the American.

That's what I've, that, that was the point I was making earlier. You can make the art, like almost with every single product. They've said, we'll work with you to make this thing that you want to make. We're really good at making things. And then they ultimately just make a better version of said product and make it for cheaper. And in the case of cars right now, we're obviously not allowing these cars to be imported into the us they can simultaneously say, we're happy to keep making you these things. We're also going to compete with you directly.

You don't and you don't allow Tesla to export the amazing Model s or Model 3. Does that slow down BYD's development of their car or.

My understanding is they were able to basically get a paid education making Teslas and they were able to leverage that into making.

But that's about making the car there.

Nvidia has a Shanghai, but that's research art.

It's not made there. That's not made there. It's very different when you're, when you're saying, okay, we're going to go and we're going to go and produce this product there and like you are going to get educated there and the world's different.

But, but you remember we've gone through this before. China's like five year plans to create a domestic chip industry.

You've been doing five year plans for 60 years.

I know they're building. That's what I'm saying. And I would argue that it's working. They're not caught up, but they are certainly made, you know, massive amount of progress. They've made more progress than any other country on earth.

I think if you want to think about like getting the Chinese addicted to our chips, it's like, how addictive are the chips?

Yeah.

Because if you can make a comparison between like you have the Nvidia Chips and then you have the Chinese or like tpu, right? Because the TPU is like, in some ways it's, it's harder to use. The open source is not as good, but if it's just more economical, like if the actual hardware is just like a little bit cheaper, then it doesn't really matter how worse the software is, people will eventually move to it. So it's like the. I don't think there is actually that much like soft power in the kind of general open source stuff like that. In regards to, like Nvidia, it doesn't seem very addictive outside of it just.

Being cheaper at the same time. Like, like we are. America is very much like addicted to Chinese solar panels right now. Like the Chinese solar panels come here, they're cheap. And so we don't wind up buying or building a domestic solar panel industry because just to get anything off the ground, you have to go in and say, okay, we're going to deal with having no margin forever, and no venture capitalist can underwrite it and no private equity firm can underwrite it. And so it just doesn't really happen.

Gavin, it's too far out. Gavin knew we needed a new narrative. He said after the fateful BG2 episode ended, the AI trade, we needed a new trade. And now we're getting the space data center trade.

Okay, let's hear the space data center.

I think the most important thing that's going to happen in the world in the next three to four years is data centers in space. If you think about it from first principles, data centers should be in space. What are the fundamental inputs to running a data center? They're power and they're cooling. And then there are the chips, the inputs to making the tokens come out of the magic machine. So in space, you can keep a satellite in the sun 24 hours a day.

Pretty cool.

And the sun is 30% more intense. And this results in six times more irradiance in outer space than on planet Earth. So you're getting a lot of solar energy. Point number two, because you're in the sun 24 hours a day, you don't need a battery. This is a giant percentage of the cost. So the lowest cost energy available in our solar system is solar energy in space.

Second, for cooling in one of these racks, a majority of the mass and the weight is cooling. And the cooling in these data centers is incredibly complicated. I mean, the H vac, the CDUs, the liquid cooling in space, cooling is free. You just put a radiator on the dark side of the satellite.

It's fucking gold.

And it's as close to absolute zero as you could get. So all that goes away. And that is a vast amount of cost. We're going to connect those racks. Well, it's funny, in the data center, the racks are over a certain distance connected with fiber optics, and that just means a laser going through a cable. The only thing faster than a laser going through a fiber optic cable is a laser going through absolute vacuum. So if you can link these satellites in space together using lasers, you actually have a faster and more coherent network than in a data center on Earth.

Okay.

The user experience. You know, when I asked Rock about you and it gave the nice answer.

This is crazy though. They've done a podcast together five times. Why is he asking about Patrick? I was like, what is going on?

I would like to know how much SpaceX exposure Gavin has. You just put a radiator on the dark side of the satellite. Thermal engineers in absolute shambles right now.

Yeah, people are not. I don't know, people are.

So Stacy Hammer says to be fair, this is a big satellite. You need basically a lot of mass in order to dissipate enough heat.

There's some massive news from Gulfstream Aerospace. The G400 introduces next gen Gulfstream tech to its class. How is Mark Burns not been on the show yet? Here we go.

Clearly don't have a no render policy over here. They're. They're render racks in.

This.

They're just not out. You think they could just be adding special effects?

What do you mean? This is the most rendered video I've ever seen. This looks like it was rendered okay. But here he is 2010.

You think this is real though?

Bring Gulfstream performance standards. This is on a green screen cabin class fulfilling our customers needs for a product line.

I knew it was too good to be true.

Like, this is real. This is what it looks like. With Gulfstream's signature combination of range, speed and cabin comfort, the G400 will provide unrivaled efficiency thanks to the combination of the advanced practices. This is going to be a hot Christmas gift this year.

Absolutely.

People have been wondering. I think this will be top of. This will be under the tree for a lot of people. Marc Benioff says LLMs are the new disk drives commodity infrastructure. You hot swap for whoever's cheapest plus best the fantasy that the model is the moat just expired. Marc Benioff having fun on the timeline. I love that he's having fun. I love that he's taking shots.

Don't they have an AI lab?

To be clear, they were working on Einstein for a while, but I think that they are very much happy to be a rapper, happy to be a buyer of LLMs at this point. Everyone that knows anything knows this. OpenAI is the next Netscape doomed and hemorrhaging cash. Microsoft is still trying to keep it afloat while keeping it off balance sheet and sucking out the ip. So why do they keep getting funded? The whole industry needs a $500 billion IPO ASAP.

This post would go super hard if you don't understand the Microsoft OpenAI relationship.

The dynamics of the, of the, of the competition here feels like there will still be a lot of value even if it is somewhat commodity infrastructure. It's like, you know what else is commodity infrastructure? Aws, gcp, Azure. You get.

A server with some hard disk on it that is commodity. And yet they all have 30% margins.

Yeah, it's interesting too. I mean Burry has positioned himself of just hating any company that's overheated chatgpt having close to a billion weekly actives and ultimately even if they just compete in search right? At least it's a multi trillion dollar opportunity. Whether or not they fully execute against that is another thing.

Hedge fund was ordered to pay a bonus to a trader who made 97% of its revenues. This is hilarious because when I read this at first I thought it was he had made like his target bonus was let's say 10 million and he brought in 9.7 million. And they were like you didn't, you didn't hit your bonus buddy, you don't get the bonus at all. And I was like oh that sucks. But like that's kind of the deal. That kind of makes sense. But Evolution Capital Management has to pay him because.

Yeah, so a hedge fund that was sued by a trader for refusing to pay a performance related bonus despite him making 97% of its revenue has been ordered to pay him 5.4 million plus interest by the High Court in London. When I read the headline of the story, I expected it to not be in the mid seven figures would you expect? I mean figures? I was hoping at least eight, at least.

Not getting the G400 off of this.

Robert Gagliardi sued his former employer Evolution Capital Management in London, alleging that it acted in bad faith by denying him a seven and a half million dollars discretionary bonus after he had generated more than 60 million for the firm.

Wow, there are some harsh words here. Gagliardi, a block trading specialist, alleged that he was told in early 2021 that a return of $10 million over the rest of the year would be an excellent result. When Gagliardi asked the fund's founder, Michael Lurch, for the payout in 2022, he responded, I'm not going to pay you the bonus if you sue me.

So Gagliardi did and he won.

Saudi Arabia is loosening alcohol rules, letting non Muslim foreign residents earning over $13,000 you can buy alcohol.

This is such a galaxy brained idea. It could only come from a mind totally disconnected from normal material reality. It is interesting. Imagine being like, hey, if you want to do, you know, drugs, if you want to consume alcohol, that's fine, but you have to be putting up numbers. Cannabis should be like $10 million a year on your W2, I was about.

To say, but you know what happens then? Everyone in America, you know, you turn 17, 18, 19, you're not 21 yet, you get a fake ID to try and buy some booze. You're going to need a fake W2 as well. You're going to need to fake your.

Income statement, your fake W2 corner liquor store just being and just like looking.

Through every line in Saudi Arabia. So you're in Saudi Arabia and let's say you're making $1,000 a year USD or you know, you're making Dh10,000, you need to go and set up a circular contract where you're a 17 year old, somebody else's. I pay you 10,000, you pay me 10,000. And then we did it a couple of times. Exactly. Do it a couple times. Then we're earning enough to go buy alcohol. We can go get drunk together.

That is crazy.

That is truly galaxy brained.

Nazari says they got their hands on some North Korean cigarettes.

They did.

They got them in a DPRK state owned restaurant from a waitress who was from Pyongyang. Basically impossible to find any background info on them online. They taste and look 100%. But I like the packaging. The packaging goes pretty hard. It feels does, but I can't support.

It because I don't support North Korea.

Thank you for being with us today, folks. We love you dearly and we will see you tomorrow. We hope you have a fantastic evening.

Goodbye.