Morning Brew Daily - SVB finally acquired, Twitter $20B valuation & ChatGPT dinner reservations

Episode Date: March 27, 2023

Episode 25: Neal and Toby break down First Citizen's acquisition of a large chunk of Silicon Valley Bank and what it means for the banking ecosystem. They also discuss the political crisis and protests in Israel and what it means for the economy. And twitter is now less than half of what Elon purchased it for? Plus, ChatGPT has plugins now for your favorite apps! No excuse to not make a dinner reservation now. And is work from home dead? Or are we bullish on WFH? And of course, a look ahead at what's happening this week. Learn more about our sponsor, Huel: https://huel.com/dailyshow Learn more about our sponsor, Fidelity: https://fidelity.com/stocksbytheslice Listen Here: https://www.mbdailyshow.com/ Watch Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

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Good morning, Brew Daily show. I am Neil Fryman. I'm Toby Howell and Neil. I was perusing some news over the weekend as we do and something stood out to me. It was a headline that said in spring New Yorkers thoughts turned to pickleball, which got me really excited because I'm a big pickleball player. So basically what's happening is a ice skating rink in Central Park is being converted into 14 pickleball courts for the spring and summer period.

I'm very, very excited for this. I'm excited by any sports venue in New York. I always think to myself, this is going to be sold out. I'm never going to be able to get a court. I have to wait five hours. It's going to cost you an arm in a leg, too. It's $80 to $120 per hour per person. Oh, my God.

Or maybe just for the court. But whatever it is, you're going to have to pay to play. It should be cool. I think the best better bet is probably just buying a pickleball net and going up to a random parking lot and just playing there. A little cheaper there. Pickle ball is super fun, though. I used to play tennis competitively, and I'm just completely done with tennis.

I'm in my ball era. You're in your shrunken down court era. Yeah. I don't want to move. I don't want to move too far anywhere. All right. What are we talking about today? It was a really big, busy week and weekend of news.

There's a lot of unrest in Israel, and we're going to talk about what that means for business and the economy. We'll also tell you about these chat cheap ET plugins and how you can use them. And then we'll also close with the persistence of remote work. Again, another. hack show to start of Mondays. I'm very excited. But first, I want to take us to our top story, which is the world's least eligible bank bachelor, Silicon Valley Bank, has finally found its perfect match. So late yesterday, news broke that First Citizens Bank has agreed to pay to buy a $72

billion chunk of Silicon Valley Bridge Bank. Real quick, it's called Bridge Bank, because that's the entity that was created after the FDIC kind of took over. So that's why you might see Bridge and some of the headlines today. So what does this mean? First off, customers of SVB will automatically become customers of first citizens. And then also 17 former branches of SVB will open as first citizen branches today, which honestly, that's quick moving on first citizens. That is the funniest part of this all to me that you can, today you can actually walk into a Silicon Valley bank branch and just conduct business. Right. It's actually very impressive. So obviously these talks have been going on in the background, but I want to touch on the price real quick. So the FDIC said that SVV had approximately

167 billion in total assets and about 119 billion in total deposits as of March 10th. So if you remember the deal size, though, it was only about 72 billion. So that's the portion that First Citizens has purchased. And that was at a discount of about $16.5 billion. And so you might be wondering, like, wait, where did the other half of the bank go? And the FDIC will retain about $90 billion of Silicon Valley Banks, $167 billion in assets. So that's kind of like the whole puzzle of what has happened to SVB. One final piece I want to bring up is that this 90 billion in question that the FDIC is holding onto, that's not the assets of Silicon Valley Bank or the equity assets. So the company itself is going through a bankruptcy

proceeding, there will be no, like, made whole bailout of, like, the equity portion of the piece. It's just the assets and the deposits that we're talking about. So the equity holders are still wiped out from this. Still wiped out. It is the end of kind of a chapter of this banking saga. I know. We'll see if it calms all of the jitters. The regional lenders, like First Republic Bank, are surging this morning in a sign that maybe

that this acquisition of SVB, which was the biggest bank failure since 2008. is kind of, we're kind of putting this a little bit behind it, but I have said that before, and then the next day another bank collapse. So I'm going to definitely withhold on calling an end to this because there clearly are still a lot of jitters and a lack of confidence in the banking system. But this, it seems like a pretty key step forward to moving past this particular chapter. Yeah, you're totally right with the jitters portion. Like, if you look at the premarket trading, First Citizens jumped as high as 26% pre-market. First Republic, which is not First Citizen, and jumped 28%.

So yeah, you can clearly see that this is kind of investors breathing a side relief because it's kind of... Are they threading the needle? Yeah, they're threading the needle. They just showed a path forward for what would happen to a bank like this. If depositors have been made whole, obviously the equity portion has been wiped out, but like it wasn't Armageddon at the end of the day. So just some high-level stats of the fallout from this. The deposit insurance fund, which was the fund that the FDIC was using to guarantee

everyone's deposits beyond that 250,000 number, the estimated cost will be around $20 billion. So that's the ultimate price tag from this, is that $20 billion in deposits had to be shorted up from the FDIC. So yeah, not as bad as, I mean, it was $190 billion in assets. So $20 billion, not bad, all things considered.

Okay. Finally, we'll just do a little rundown of who is first citizens. Because everyone, I'm sure, as soon as they saw this news, Googled what the hell is, or chat GPTed, what is for Citizens Bank. It's out of Raleigh. It's a pretty mid-sized bank.

So some people were surprised that it completed this acquisition. But apparently, it is known to do this. It's actually bought, you know, 20, I just want to get the stat right. It bought 20 FDIC assisted banks since 2009. So it's kind of this white knight that has a history of doing this. And combined, the new bank will be one of the top 25 biggest banks in the country by assets. Right. And one final note on that is that one of the reasons why I was interested specifically in SVB is because SVB still has those relationships with the venture capitalists, with the private equity world.

So it is like this tasty little, it's almost like a networking event for them where they get introductions to all these, this clientele that they probably didn't have access to before. So yeah, it looks like a good deal, all things considered. You would have done it? I mean, yeah. I'm bullish on Raleigh as a startup. Oh, that's an interesting hot day. So bullish. Research Triangle, I would buy property in royalty if it already wasn't so expensive, but I'm just,

the place is going to explode. And now that they have SVB, this powerhouse bank. All right. All right. Let's move on to Israel. So this morning, you've probably woken up and seen headlines about there's this crisis in Israel this morning. I'm just going to briefly break it down and also explain why it's a big business story that

you should be paying attention to. So Toby, just interrupt me whenever you feel like. So Israel is essentially at a standstill today as mass protests have been going on for months reached a climax. The country's largest trade union group, which represents hospital workers, airport staff, all of it is on strike. There's no departures at Ben-Gurion Airport. Mals are closed. Hospitals have reduced staff. The country's research universities are also suspending classes.

So basically, this country is absolutely shut down. Why is this happening? So the immediate cause is that Prime Minister Benjamin Netanyahu, who has the nickname Beebe, sacked his defense minister yesterday after the minister criticized him. And first of all, I just love the word sack. They use it in European football all the time. I was going to give you props for that. I'm not going to say fired, sacked overfired. So the criticism that the defense minister lobbied at BB was, is about this, everything ties back to this overhaul of the judicial system that Netanyahu's government has proposed.

it would weaken the court system and hand more power to his government. So critics, which there are many, are saying that this limits Israel's checks and balances, which were already fragile. And in general, that's a threat to democracy. So talking about the business angle, Israel is known as this startup nation because of its high-tech sector and the many unicorn tech companies that produces. So a few of those, Waze. Have you heard of Ways? Yeah, I know Ways. So Google Maps bought.

It's an Israeli company. bought it for $1.3 billion many years ago. Then there's Autonomous Vehicle Company, Mobile Eye, that Intel bought for $15 billion. And then there's so many other ones, but Wix might be another one you've heard up, like the web hosting platform. But basically the CEOs and founders and all of the tech communities warning that this judicial overhaul will lead this startup nation reputation to kind of crumble. Yeah.

No, that was well done. It is a big, there's a lot of moving parts that both politically and then, yeah, the business side. I just want to touch again on how shut down the country really was. So I saw that 600,000 people were out demonstrating over the weekend in one night, which means approximately 6.5% of Israel's entire population was out protesting. That is crazy. Obviously, Israel's not the largest country in the world, but it's still pretty amazing. I don't think we've ever seen a single night of protest in any one country.

That's 6.5%. That is a bold claim. No, people were asking this on Twitter. And yeah, it's like a real, it's a real thing. And then also, yeah, obviously the business angle, this is a big deal because you need the confidence in the judicial sector. We were talking about this earlier, that if you don't have the confidence in the legal system to sort out business disputes, business claims, then you're going to see it drying up in investment, which is a huge deal for Israel because 90% of the tech investment in the tech sector is funded by people outside of the country. So you really need foreign nations, particularly the U.S., have confidence in the legal fortitude. Yeah, the independence of the legal system.

So 56 leading American economists wrote to Netanyan said, you're basically going to tank the economy because of this, because we're Moody's, which offers credit ratings for sovereign nations, is going to lower your credit rating, which means that it will make you less investable than it is right now. I think Israel has the top credit rating right now. But if that's lowered, that sort of reduces investment because it shows that your country is at increased risk of political instability. And foreign investors are just like, look, there's some weird stuff going on.

If I invest in there and something goes wrong and then I can't trust the court system because it's sort of compromised by the government and it's corrupted by the government to get my money back, then I'll just take my money elsewhere. I'm not going to fund these startups. And you have the startup founders that are leaving. There are a couple that have said, I'm not going, like, I'm just not dealing with this. Right. I'm taking my money. I'm not paying taxes anymore. So this is like a major political crisis.

And I guess what we're watching today is to see if BB will kind of delay the implementation or else, you know, something seems like it's going to break. Yeah. No, it's definitely a situation to monitor, like one of the most real-time, unfulying situations that we've had since Silicon Valley Bank. Yeah. Okay. let's move on to another startup founder. It's a weird way to describe them, but let's talk about

Twitter and Elon Musk again, Neil. It's actually been a minute for us. I know, which is, so it's refreshing. It's good to get back in the saddle. So basically, the headline news is Elon Musk wrote an email to employees over the weekend, kind of offering stock grants at a valuation of nearly $20 billion. That's big news because it's the first concrete acknowledgement of how much Twitter's value has fallen since his takeover. He paid $44 billion for the company, and now it's worth less than half of that. And here's the crazy part, according to the information who broke this story. The valuation should probably be even lower.

So here's a quote from the article. Indeed, if Twitter was valued at the same multiple as its public rivals, its equity would be close to worthless. So how the mighty have fallen, you know? Who is mighty? I mean, Twitter, Elon. I don't know how mighty Twitter was. But yeah, he had some great quotes from this article.

He sees a clear, or from this email that he sent giving these stock awards, I see a clear but difficult path to a greater than 250 million valuation. Okay, but he's only been going in reverse. And speaking of reverse, he's calling Twitter, it should be thought of as an inverse startup. Which I don't understand what that means. Maybe that just means a shrinking company. Right. Right. It is a way of saying it's shrinking because, yeah, he has slash staff by over 75% since being there. And ad sales have fallen roughly 40%. So that is an inverse startup. It is doing, it is not growing. It is shrinking in hyper speed. It's getting smaller. Not. He's also admitted that this, the valuation was less, right? Like, he's tweeted things like, if you want to let your money on fire by a social media company.

Right. He knew he overpaid, but this puts it. This is the first time we got a number. Right. And on top of this news, things couldn't get even worse for Twitter, its source code was leaked on GitHub, which is a popular place for developers to kind of share bits of code that they write. And it was leaked by someone with a username Free Speech Enthusus and has a jab at Elon's position in this whole thing. Twitter saw it issued a takedown request. They did take it down. But it's just kind of crazy that the hits keep coming for him. Yeah, I didn't really totally understand what a, how important the source code was to a software company, but it seems like the most valuable piece of IP that they have. For sure. And people have gone to jail over this. There was Anthony Lewandoski, remember him?

He was this engineer, this self-driving engineer at Google and took the somewhat, lifted some of the code with him to his own auto truck startup that he founded. And he's going to jail for 18 months because of the theft of trade secrets. So this is a big deal. And I'm just surprised this didn't happen earlier, given how many people Elon Musk. I know. I know, truly. And as always, I just want to finish with one funny nugget is that I love in journalistic stories where they have to say that they've reached out to the company.

And so I was reading a BBC article, and it was in requests for comment, Twitter's press office account automatically responded with a poo emoji, an approach that Elon has announced in a tweet. So every time you email the press inquiries, you get a poop emoji. Just funny to see it in print. Okay, that was Twitter, but before we jump into the next story, we're going to take a quick break. It's time to refresh your yard during spring backyard days at the Home Depot.

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game pass ultimate with a custom color Xbox wireless controller. Learn more at Windows.com slash student offer. While supplies last ends June 30th, terms at AKA.m.m.S. slash college PC. All right, Neil. Open AI is back at it again. And by back at it, I mean

releasing updates to chat, GBT, that simultaneously amaze and terrify us in equal measures. So the latest news is that there's now a library of plugins that users can add to the chatbot in order to give it access to information that wasn't included in its original training data.

The exact words that Open Eye used to describe this announcement of the plugins is that it is the eyes and ears for language models. I'll give you a quick example of what I'm talking about by that. So say you want to book a table for Mother's Day in New York City, you can ask Chatsy BT, my mom is coming into town next weekend, she loves Italian food, can you recommend any highly rated places for us in New York City? And then here's the crazy part. not only will give you some recommendations with places and also give you some information about

like why it's recommending that, it will also now give you the link to OpenTable to actually book the reservation. And so that's the big difference is that you can now interface with the web in a way that you previously couldn't. It used to be chat to BT used to be in this bubble that if you wanted to do anything outside the bubble, you would have to go to your web browser. Now it's kind of merging those two worlds together. And it's, it's really, really important. impressive, also a little scary. I mean, we can take this in any direction you want, Neil. Like, are you impressed or scared by this?

I am, my brain is too mush from all the AI news to know whether it be impressed or scared. I just kind of like absorb it. And I'm just, I just nod my head. And I'm like, okay, this is the way the world is going. Better get used to it. But it reminded me of the most similar to what a search engine would be doing. Because these seem like questions that I would be asking a search engine. but instead of it giving me a long list of links and a lot of trash that I had to sort through, it's way more targeted and just gives you, and I can talk to it in a language that I'm used to like chatting with a friend because your example, you know, hey, my mom is coming into town. I probably wouldn't put that into Google, but I can put that into chat GPT. So that seems like an improvement. And then just being able to narrow down stuff and not have me scroll through a bunch of different results from my query that I,

I also had to think about a little bit more might also improves it. We were talking before because I was asking whether it will actually take action on your behalf, but it seems like it's still providing links to particular website so you can book your, you know, flight or your reservation. But that seems a little terrifying if, you know, you make a mistake and it books this thing for you, or goes rogue and spends your money on things that you don't want it to. No, so it still has that safeguard. Yeah, you are doing the one.

actually doing the booking. You mentioned travel a little bit. I'm going to, there's only been a limited rollout of plugins that Open AI is offering right now. Some of them are Expedia kayak, which are two travel companies. Fiscal note, which actually gives you real-time market data, which is good for, if you want to check in on like how a stock's doing. Instacart and open table, kind of in the grocery and making reservations. And then a lot of people are really, really bullish on Zapier, which is this automation tool that can perform 50,000, they call them productivity tasks. And so basically what that means is that Zapier, you can actually, you don't have to leave ChatGBT

GBT in order to have it do something for you. So you can ask a ZAP, which is what they're called, to draft and send an email from you, all from ChatGBT, and that's huge for productivity boost. instead of having to copy and paste it, going over your Gmail, select the sender, you can set up an automation through Zapier that will do that for you. So that is truly expanding the reach

of ChatGBTBTBT beyond anything it's ever. Zapier is dope. Yeah, it's very cool. Everyone here should look and do it. Have you seen this South Park ChatGPT episode? I have not yet. Is it very good? Yeah, they just capture the essence

of what it is so well because the students are using it to cheat, and the teacher is using it to grade papers, and one of the characters is using it to chat with his girlfriend who he doesn't want to text with. That's funny. They just captured the moment really well. That's good stuff.

All right, final, next to final thing, is about work from home. And more than three years after the pandemic began, because we're in March, we're March 20, 23 right now. Work from home is still a thing and is actually growing, according to new research. In some major U.S. cities, The job postings for remote-friendly roles is hitting record levels and trending even more up.

These are cities like New York, Chicago. So it's crazy. They're more open postings for remote-friendly positions in these cities than there were at any point in the last three years. So the most remote-friendly cities, they are mostly college towns with a large share of white-collar government workers who usually get to stay home more than anybody else. East Lansing, Michigan, home of Michigan, and Lansing is the capital of Michigan, is the top where 39% of all job postings are remote-friendly. Then you get Topeka, Kansas, San Francisco, a couple towns in Northern Virginia like Rustin, Ann Arbor, another college town, D.C., college, and government.

It makes sense. You see these names, and you see the reasoning behind it, that, of course, the places that have are home to most jobs that don't need to be in person are going to have higher. And then, I mean, on the flip side, I guess we'll just go. to the towns that have the... This one's personal for it, yeah. The lease, yeah. So the worst place for work from home

in the entire country is my hometown of Bradent, Florida, with only 2.5% of job listings list remote work as an option. What do you describe that to? What's the culture of Bradenton? I mean, I honestly probably didn't see this coming because the culture of Brayton,

there is not much culture. It's a little soulless. It's bad to say, but a lot of strip malls, a lot of, not a whole lot of... not a whole lot of tech or, I don't know, informational jobs there. But yeah, just the South in general tends to have lower rates of job openings with remote or hybrid work options just because there's more jobs there that you have to do in person,

like construction, food service industry. So to me, I don't know if this is necessarily like a crazy, I don't know, realization or trend that we're seeing. It's just jobs that have always had to be in person, will stay in person. and then jobs that probably should have always had a flexibility will continue to have that flexibility. And yeah, that bifurcation is only going to get broader as we continue. Yeah, I guess my takeaway is don't believe the headlines all the time because if you look at the headlines, you see Starbucks, meta, Amazon, all JPMorgan, all these companies are bringing more their workers back to the office for three to five days a week. But then when you actually parse through the data, you see that they're more of the outliers and the trend is actually going in the other direction.

So same with the layoffs thing to it, where all these companies laid off workers, but then the unemployment rate kept dropping and you're just thinking to yourself, wait, what's going on here? But there is a world outside of the tech giants. Yeah. Although it does seem like if the labor market does kind of cool off as it maybe has been in the last few months, that gives bosses a little greater leverage over what they can and can't tell their employees to do. So I do wonder if we will see this kind of the broader matter. macro environment of cooling labor market will actually cut down on work from home. That's something that makes sense logically, but we'll see if it actually follows that trail of thought.

Well, we're not working from home anymore. Yeah, we're working from studio, baby. But it's good. I like to bring my lunch. Yeah. Prep it the night before. Okay, final thing. Let's preview the week ahead.

There's this Trump indictment possible. It didn't come to pass last Tuesday, which he predicted. And so the only time you saw Trump indicted was an arrested was in these AI-generated videos. Oh my God. These AI images, did you see the Pope one where the Pope was wearing like this sick like that? That was an AI one. See, you don't even know that. I had no clue. I know. See, it is a real issue. We're going to talk to us on a future show about like how difficult it's going to be to determine what is a real image and what's fake these days. Literally had no clue. Right. That the Pope thing was fake. I'm, I can't even continue that I got duped. This is scary. We also have some inflation data

coming out on Friday. This is the Fed's preferred measure of inflation. It's called Deep Breath. The Personal Consumption Expenditures Price Index, and it's what the Fed uses. There's the consumer price index, which we use to learn about inflation, but the Fed uses this. It's still expected to come in hot. Tough job for the Fed. Yeah, seriously. There's a lot of sports going on, which we're excited about. The Women's Final Four begins on Friday. And Caitlin Clark from Iowa. Oh, Steph Curry. She's Steph Curry. She's unbelievable. 41 point triple double.

I love her. She's unbelievable, yeah. All right. So then I guess we can talk about the men's too, but that one's kind of weird because it's the second highest average seed ever. Yeah. The only one with like the VCU year and I think VCU and Butler were in there. But yeah, unbelievable. Our brackets are all busted. I said Yukon on this show three weeks ago that I had Yukon going. All right.

And I got the receipt. So that starts on Saturday. and then baseball opening day is on Thursday and that's always just one of my favorite days of the year because spring has sprung. Anything else you should pay attention to? The House Financial Services Committee

is holding a hearing on the collapse of SVB and Signature Bank tomorrow. So that's probably one of as many fireworks as the TikTok one, but it'll be interesting nonetheless. And then April Fool's Day is on Saturday. And I want to make April Fool's great again. Should we do something?

I mean... Well, we don't say it. Yeah, okay, never mind. Pretend I didn't say that. So if you get fooled, pretend you're... I got to do the credits. Yeah. Email us at Morningbrewdaily at Morningbrew.com.

There was something I wanted people to email about, but I forgot. Maybe April Fool's ideas. Yeah, maybe April Fool's or anything else. Here's a shout out to our amazing crew in the back. Our producer and editor is Emily Milliron. Our show's technical director is Elias Alba. Our supervising producer is Bryce Belloff. Our VP of Technical and Production Operations is Dan Bousa.

Hair and makeup text said can't come in. today leaked Twitter source code and now feds are after me. Good luck. Good luck. Devin Emery is our chief content officer and our show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow. All pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Buckslot machine by Aristocrat

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