tv Taking Stock With Pimm Fox Bloomberg May 6, 2014 9:00pm-10:01pm EDT
>> this is "taking stock" for tuesday, may 6, 2014. i am pimm fox. the theme is balance. the hotel bel air los angeles is trying to find balance between politics and business as protesters, including jay leno, take a stand against the owner of the property, the sultan of brunei. we will tell you why there is a boycott. finding a balance is a way of life for professional bike riders. the business of being a bmxer.
a navy seal who uses balance to create a multimillion dollar business. all that and more over the next hour. first, let us get headlines from carol massar. >> very busy in the after-hours. alibaba filing today for what could be the u.s.'s largest initial public offering ever. they did not specify how many shares it will offer in its ipo or what the evaluation will be. the market value is estimated at $168 billion. "frozen" continues to sizzle for disney. they saw quarterly profit at 27% because of the megahit. disney reported second-quarter income of $1.92 billion. groupon transition to e-commerce retail is hitting bumps along
the way. they forecast second-quarter earnings that trailed estimates. shares are falling in the after-hours. that is the top headlines at this hour. >> i thought you're going to sing the theme song from "frozen." joining me to discuss alibaba, cory johnson joins us from san francisco. eric jackson from ironfire. lay out the numbers we understand the scale. >> $5.5 billion in revenues last year. 5.6 billion dollars in revenue. a lot of profit out of that. i'm looking at the income statement. $1.4 billion. very profitable penny here. >> 20%? basically taking home 20% of
sales and sticking it in the piggy bank. >> i will look to see how they categorize sales. it is an ebay like business. they don't take ownership of the things that they are selling. what they count of revenue is already the prophet there. a big business and the business that is growing. compared to the previous year, it looks like sales were up 70% year-over-year. business that is growing, has been profitable for a while. profits nearly doubled year-over-year for this company. a very positive leverage story there in terms of generating more profit and revenues. the operating profit margin's getting better even as the revenues are growing fast. you don't see that often at this scale. >> eric jackson, ironfire capital. what is your reaction to the information you have been able to glean? >> alibaba is a juggernaut.
a lot of americans are familiar with it because it hasn't been traded over here and it is not a site that we go to every day like amazon or facebook. but, it it is one of the top five internet properties in the world. the ipo roadshow that is going to play out over the next few months is going to be a coming out party globally for alibaba for the rest of the world. i think it is going to be a mega company. it is going to have profound impact on the world of tech over here. it is going to give amazon competition in the years to come. it is an enormously important company that now people are starting to pay attention to. >> scott kessler of s&p, i want to bring you into the conversation. if there is a valuation in the range of $170 billion, what does that do to all of the potential indexes that it would go into? >> i think that is an interesting question.
i don't know the answer. it is reasonable to think about ali baba as kind of eric indicated. one of the seminal internet companies to come public over the last 10 years or so. when we look over the f-1 filing, which became available in the last few minutes, the number that struck me was over a quarter of a trillion dollars in gross merchandise volume. that is what the company was responsible for in terms of sales over the last year. that is a very large number. >> $250 billion. >> right. exactly. a large player. the other data point we thought was interesting, understandably alibaba is a dominant provider
when it comes to the chinese e-commerce market, which is big and growing substantially. what is noteworthy is they broke out their chinese e-commerce revenues and international e-commerce revenues. internationally is accounted for 15-20% of overall revenues. it is already big and growing substantially. we think alibaba wants to become more than the dominant chinese e-commerce company. they have aspirations well beyond that as well. >> cory johnson, i want to bring you back in here because if scott was describing this as a 20% share of non-chinese revenue, that is a selling point of imagine for the roadshow. >> this thing is chock-full of selling points for the roadshow. exciting about the unaddressed market so far.
things they haven't done yet. that is the hope they're going to try to sell. you would think that i would do anything to look down on this parade of adulation for alibaba, but you wouldn't, but since i'm here. >> go-ahead. >> $5.6 billion in revenue is a lot. it is probably a gross merchandise number. that is smaller than ebay. it was doing $11 billion. we are talking about a proposed valuation greatly in excess of companies of similar business models. i think we are going to struggle with words to describe this business for u.s. investors and consumers. there is no comparison. it has bits and pieces of payments like a paypal. bits and pieces of an auction like ebay. bits and pieces of commerce like we do not have in the u.s. >> yahoo! has bits and pieces of alibaba. they have a 24% stake.
>> indeed. the stock was selling off low after the filing came out. knee-jerk reaction by the rumor of the ipo, because there is nothing fundamentally that says it is a great surprise from the numbers positive or negative. a great big company with a great big opportunity. a lot of profits and free cash flow. that is a thing you like to see. that growth rate going from $20 billion to $35 billion in a year. it is a very interesting and impressive filing. >> eric jackson of ironfire, what do you want to know on the roadshow that would make you favorable to buying the shares? >> two big questions are the international story, which you guys of talked about. getting more color on that and what their lands are.
that is something novel for most investors. most people who know alibaba think of it in terms of a big play within china. now they get to think of the rest of the world story it is obviously much bigger. secondly, the whole ali-pay part. there were rumors whether it will be part of the filing or wouldn't be, or would comeback in the future. that is a huge part of the story as well. not a lot of people have been paying attention to because it hasn't been formally part of the group until now. >> i want to bring in david garrity, they had of gba research. you have been following ali baba. what are the numbers you want to learn? >> one, basically. what price talk we are going to be seeing in terms of
evaluation. >> no mention of that. >> we haven't seen that yet. you want to know how much people are being asked to pay for the company. clearly the ipo has been wide open for the last year or so. we're getting to the point now where high percentage of companies are unprofitable. alibaba is profitable. the question is, how much of a way this is going to put on the sector. this is a large transaction. people are going to have to sell stocks to buy this deal. clearly there is after hours correction. even though we have seen a big pullback in terms of amazon given the fact that alibaba is a competitor and will be a competitor globally, are we going to see a pullback in terms of other large cap stocks around the filing here for the ipo? >> i would to pick up on something you said. people would have to sell one thing in order to allocate
capital to alibaba. is this a fact of the social media online retail come and technology world? you have these companies that come to market with such big valuations that they just skew all the metrics you see, because they need money to buy this, this could really throw things out of balance. >> what you're looking at is a situation where they generally operate in large institutions with a 100% invested portfolio management rule. from that standpoint if you're 100% invested at all times, inevitably to buy something new you have to sell something old. at the same time, yes, given alibaba's size there is going to be a significant retail component coming into the transaction which will force retail and investors to move away from other names that may not have done as well and look at something new. again, valuation will always be important.
>> bloomberg talking about alibaba. the company has filed for its initial public offering. here to tell us more, cory johnson from san francisco. the a telephone, eric jackson from ironfire capital. scott kessler, s&p capital iq. cory johnson, come in on alibaba. people have to sell something to buy something else. >> these guys know the game. i'm curious what they will say
about this. as far as portfolio allocations, david knows his stuff better than i do. you would want to own the best thing out there. one thing i will say, the 2013 numbers are actually, we talked about the 25% net profit margin, it is better than that. there was a one-time payment to yahoo! of $561 million. that comes out of their net profit. it is a one-time item. there is no associated costs with that. using my adjustment, that is a 35% net profit margin that is impressive for this business. it is such a large scale. >> david garrity, what you make of this?
1.4 billion as listed as the profits, sales at high point -- you had in this additional $500 million payment to yahoo!, you have margins which may be enviable margins? >> one have to look at the cost of how they are allocated and accounted for. on an ongoing basis, as investors look at this on the institutional side they're going to strip out this. that is going to find the basis for comparison. investors are looking at the gross prospects going forward are going to set the prophet bar that much higher and adjust for this one-time payment because that is the basis which the company is growing. >> scott kessler, go ahead. >> i wish is going to say, first of all, i was looking at the numbers over the break. it seems like nine percent of the revenues are related to
international commerce. a little lower than my initial calculations. that is a very healthy sum. the company has 140 million active users on mobile. you can look at twitter. they are 200 million mobile users for active. pretty comparable. the last thing to thing about is something that we thought about following yahoos results that included recent alibaba data as well as facebook's results. both for the fourth quarter of last year, comparable numbers in terms of size of numbers and revenue gross, and terms of operating margins. >> thank you gentlemen very much. in the filing for alibaba they do not mention an exchange they'll be traded on. thanks to scott kessler of s&p capital iq, eric jackson of ironfire capital, our own cory
>> a boycott in beverly hills. nine entertainment events have been pulled from the beverly hills hotel and the hotel bel air. why? both properties are part of the dorchester collection owned by the brunei investment agency. the sultan just enacted islamic criminal law. it will include death by stoning for rape, adultery, and sodomy. united nations has criticized the code. jon erlichman is standing by.
jon? >> thank you. our thanks for joining us. your reaction to the boycott? >> i think it is a misdirected at the beverly hills hotel the dorchester collection. we are international company incorporated in great britain and owned by a sovereign wealth. last year, the sovereign wealth fund accounted for $5 trillion worth of investment around the world. 75% of that investment came into the united states and was very much crucial in stimulus. >> it is true there are a lot of investments in u.s. companies. we are talking about a specific issue that has raised concerns among many people who have
decided as a result to not stay at hotels like this one until the matter is resolved. does that not require a specific action on your part? >> the code by which we operate this company is very clear. the code is what i introduced two years ago. it is endorsed by our ownership. it is equal opportunities for every member of staff, and we highly respect everyone who works for us. if you get that into perspective, that was endorsed by our ownership. we operate legally in the country's we have hotels. >> i'm wondering, are you feeling like you are in between a rock and a hard place. you have employees that depends on spending at the bel air and beverly hills, and there are
people, like jay leno who believes strongly in this issue. >> as far as our employees are concerned, our goal is to ensure we are delivering the best of service and to looking after our employees. that is why our reason for being here is to support our employees through this situation. people have the right to make comments. i asked them to direct their comments, if it is of a religious or political nature, which this is, the channels for communicating that are directly through the state department and the president of the nine states. not to boycott the beverly hills hotel, where they're going to the fact the livelihood of the 650 people that work for us. >> you're not having a direct
conversations with those high-profile people? >> no. we've had a few conversations with people within hollywood. jay leno has not approached the hotel. >> in terms of anybody who is canceling, some nonprofit groups as well, are they getting their money back? are you helping facilitate that? >> yes. we have given the money back. what is important, we support this local community very strongly. all the people have had support, charitable support from the beverly hills hotel. that is why this is wrongly directed. >> thank you for your time. the ceo of dorchester collection. back to you. >> thank you, jon erlichman. it is 26 past the hour.
>> this is "taking stock" on bloomberg. alibaba filing today for what could become the largest initial public offering ever. leslie has been reporting on this story all day. she joins us from the newsroom. great to have you with us. what have you gleaned from looking at the filing? >> 250 pages of a filing. they want no stone uncovered. they want to make sure everything is in the open in the beginning. we expect a series of revisions between now and when it actually prices and starts trading.
in the filing there were some interesting points that we learned. we learn details about their cash. they have $4 billion in cash. we had some insight into their earnings through yahoo!. now we know much more. the fiscal year ends in march. we don't have many details on how they did in 2013. that will be clarified with revision. >> who is going to make money bringing ali baba public? a banks? >> they have six banks right now. let's see. credit suisse, morgan stanley, jpmorgan. those banks could receive about equal share of the economics. alibaba is providing an incentive fee for those banks to work in favor of alibaba as
opposed to their institutional [indiscernible] >> they can get the more money? >> they can get the more money. one third more of the total fee will go toward the performance the which incentivizes them to keep up the hard work during the ipo process. this is something that is more common in hong kong than the u.s. it is a baby have chosen to do to make sure that their bankers are working in favor of them. >> yahoo! has 22.3% of alibaba. they're going to receive the shares. do they have to sell them? what happens to that stock? >> we are told yahoo! will sell on top of its stake in alibaba. it looks like on the filing and
from what our sources are telling us, they will sell shares to the ipo and use the proceeds according to filing for general working purposes. that could be anything from expanding headcount to across the border services, other initiatives they have laid out. it is unclear at this stage how much exactly they will be selling relative the yahoo!. we should find that. >> what about the competition between the nasdaq, nyse? >> in this filing we are not told exactly which one alibaba is choosing. that is still to be determined. we should find that out in the next couple of weeks or months. that is having that will show up in revisions. twitter went public in november. they didn't list with exchange
-- which exchange it was listing not in its first perspective. that is something that companies saved until after they get their first perspectives out. then they can focus on which they will look on. >> from one marquee to another in the world of entertainment, and actor director, dan fogler, he has won a tony award for a show about a spelling bee. he helped to make it. it was his voice. he is directing and starring in a film that brings attention to the multibillion-dollar marijuana industry. he joins us now in new york. they key for being here. don peyote is the name. he is a person, right question mark someone who starts off as warren. >> my character goes through this transformation where he becomes this modern don peyote,
who is kind of preaching peace and joy, and that kind of vibe. what happens is he bumps into the guy with the [inaudible] >> literally? >> they have this visceral moment. he get so obsessed with what that means. the end coming? he gets obsessed with finding the answer he goes on this journey and becomes the guy with the end is me sign. he is more the guy with the durable peace sign. >> his fingers seemed to have been broken in the salute. >> that was the universe putting
its stamp on trying to figure out what his message was. >> one of the messages is from jack kerouac. crazy people. in a good way. you mentioned this idea that those individuals that break the rules and change the world. what is it that attracts you about jack kerouac? >> galileo he falls in that category. there is a lot of people who push the boundaries, who helped us get farther in our evolution as a human species, who were so ahead of their time that they were looked down upon for having to do. there are so many people like that are out our history. don peyote is another version of that.
>> well what his view of a current marijuana laws be? >> he is of the mind of legalization. he says let the weed be freed. he thinks, he sees a future of thc real green technology, and reverse engineering the planet like they did before it became illegal. before was marijuana it was cannabis. a lot of people were using it for different reasons. healing people. clothes. fuel. george washington used it. >> he certainly grew hemp. rope making, peril making at the time. >> everyone knows this. they are thc molecules fighting cancer. it just seems like this well of
miracles that can solve a lot of problems in the world. he is an advocate of it. >> let me ask you. you are an author. your book, what would you like to do next? you are an actor. you have your theater company. actor, director. are you going to turn into a multimillion dollar conglomerate soon? >> amen. >> you like that idea? >> a franchise is an idea i've been formulating. there are possibilities there. all the short stories that come out of this one arena. two graphic novels i have out now, or making a tv show out of it. i have a lot of ideas. my film company has a lot of ideas if don peyote does well. if i get half of the ideas in my lifetime, i will be a happy guy.
their start by finding shelter space at whole foods. one of them, lenny & larry's. they make all-natural cookies and muffins. joining me, it the company cofounder and chief executive, barry turner. there is something different about your cookies. it has to do with protein three tell us about it. >> yes. thank you for having me. we have been baking with protein since 1993. we were the original, we wanted a different way to get protein into our bodies versus egg whites and chicken. me and my original partner were former bodybuilders. it was an alternative protein vehicle. >> you are and 15,000 doors? >> that is correct. >> how difficult is it to get into a new market, to bring something like a high-protein
bakes good into a traditional grocery environment? >> i think it is very difficult. probably more so today than it was when we started in 1993. people were more open to trying different things at that time. starting out where we did, a coffee shop and then a gym. our next account was acquired by whole foods at about the same time we got on shelves. whole foods all the creativity behind our brand and like our loyal following. we were able to remain on shelves during the transition. it was seamless. >> do you ever have to channel your inner american gladiator to make this business come together? howdy do that? -- how do you do that? >> that was my claim to fame. it was short-lived. i did eight shows.
from that, it spawned lenny & larry's. i wanted to work for myself. i wanted to go and create something that was different. we were able to do that with lenny & larry's. it was a play on names. my original partner was benny. we thought lenny and larry was funnier than benny and barry. i'm proud of those accomplishes. >> how many grams of protein, and what is your favorite? >> my favorite is one that is not the market as much as it should be. it is a high-protein muffin called m muscle muffin. it has 15 g of protein rate my favorite flavor is pumpkin. our cookies carry 16 g of protein. our fit brownie, a gluten-free cinnamon brownie, has 16 g of protein.
we try to do something for everyone. we have begin products. we have low sugar items. we have the high calorie, high energy items as well. we have something for everybody. >> thank you for sharing your story with us. larry turner, the cofounder of lenny & larry's. now from organic food to a sport that shows great organic growth, well done. if you have ever seen bmx, it is amazingly athletic. one of the top riders, daniel dhers. he has just opened a new sports complex in north carolina. thank you for being here. 37,000 square feet. >> so, i did the largest bmx facility in the world. action sports is the
fastest-growing sport in its last 10 years. kids from eight years old in 21 years old want to do something different. sports is exciting. i had to do something for everyone. >> why north carolina question -- carolina? >> i lived in greenville. one of the best writers lived there. i trained there and did most of my competing years there. when i was looking to move and starting a new complex, where should i go? i looked into raleigh. they are one of the fastest-growing economies in america. it is the number one place in america for families. it just made sense. when i moved in december, i drive around my street and i see kids. this is a sport that might be intimidating for some just because it is not well-known
like football or basketball, but i made sure that when i chose the complex, it was something that i can build and have medical staff on site at all times. we have first responders. for someone who has never touched a bike or skated before, to someone who can compete professionally. i'm happy it is finally open. >> you didn't do this alone. yep sponsors and other organizations helping you. tell us about that. >> when i started they come when -- the complex, join with two other partners. they have been great help. chelsea has lived there for a long time. they helped me understand the area. when we were talking about what
i wanted to do, i said i wanted to do a family facility. i don't want this to be like any other park around the country or around the world. i want to be top-notch. i want it to be clean. i wanted to be neat. people walk in, they will be like, whoa. it has been great. we have been able to make that. >> what is the most amazing trick or move that you have done with bmx? >> in maybe three or four years i invented a trick. it is hard to explain. i will do a 180, a backflip, then another 180. it is an intricate move. i don't bring it out often. it is hard and confusing when you are in the air.
>> this is taking stock. i'm pimm fox. alibaba filed what could be the largest u.s. public offering ever. they didn't specify how many shares it would offer in its ipo or what the ultimate valuation is. the filing has a $1 billion placeholder amount which is used to calculate registration fees. that will change. the market value estimated to be about $170 billion. that is larger than 95% of the s&p 500.
you're going to see full coverage of the filing on bloomberg west coming up at 6:00. that is tonight. according to market data, enterprise, there will 108 million americans that hope to lose weight. one company looking to help you lose weight, trx. it uses your own body weight to help you shed those unwanted pounds. i'm joined now by the founder and chief executive, randy hetrick celebrating the company's 10th anniversary. happy birthday. >> thank you. it is a meaningful one. >> tell people how you started the company. >> i was a navy seal for 14 years. on a mission, because we deployed a lot, we need to stay at the pro level of training. with no place to train, when you deploy, i was on such a
deployment looking for a way to keep my guys and myself in shape for a mission. i turned out to come with this strap system that uses your own body weight and gravity to create a functioning training system. >> you brought the original straps with you. these are going to end up in the trx museum one day. >> from your lips to fortune's years. >> from those straps, what business have you built? >> it's funny. it is a simple system. who knew 10 years after i came up with this we would be tapping on the door $60 million a year. >> $60 million a year. >> that is what we are shooting for. i think we will get to it. >> one of the areas you been focused on is the electronic connection. describe what you are doing. >> we figured out early that no one knew how to use straps.
we figured out that education and content for the end-user and our first line customers, the training pro from physical therapists, chiropractors, strength and conditioning, trainers, the key was educating the user on how to use the thing. we became a content company, then with the rise of digital technology we invested heavily on delivering digital technology to the end-user. >> you have some celebrities that use this. >> we have had good luck in this business. everyone from, -- >> jennifer lopez. michael phelps. >> not so bad. they become aggressive advocates and it takes off on its own. >> peggy for sharing your story with us. randy hetrick, thank you. thank you for your taking stock. good night. ♪
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