Power Lunch - Big Tech CEO's Meet with Biden & High-Risk Tourism 6/23/23

Episode Date: June 23, 2023

CNBC’S Seema Mody reports on Biden’s meeting with big tech CEOs. Danielle Shay, Simpler Trading VP of options, discusses big tech, opportunities in India, and more. CNBC’s Phil LeBeau reports on Ford’s plan to cut more jobs and his discussion with Fisker CEO Henrik Fisker. Plus, Boston University’s Arun Upneja and WSJ’s Allison Pohlediscuss the rise of high-risk tourism and more. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunge. I'm John Ford, along with Morgan Brennan, a combination you may have seen before. Here is what's ahead on the show. Another company caught in the middle of a controversial social issue. This time, Starbucks workers threatening to strike if they're not allowed to hang pride decor. And we'll take a closer look at what's being called extreme tourism, a growing business as people seek memorable experiences. But first, to check on the markets, stocks are lower again today, wrapping up the worst week since early March. shares of 3M are flat, as the company agrees to pay $10 billion to settle claims that chemicals contaminated drinking water. But that's only a part of the litigation that's still facing the company. Three key stories across the market today with major implications for the related

stocks. Big Tech and India's state visit, strikes at Starbucks and FinTech red flags. We're going to take you through the rundown of stories with our reporters and then get reaction from our trader. Daniel Shea, Vice President of Options at Simpler Trading. Let's begin with India's Modi meeting with tech executives to talk regulation, AI, the supply chain, and more. Sima Modi joins us from Washington. John and Morgan's CEOs on Microsoft, Google, among other tech executives, spend over an hour inside the White House with the Indian leader alongside President Biden and U.S. Secretary-Advisor Jake Sullivan. Topics including technology transfer, artificial intelligence. making supply chains more efficient and solving some of the issues U.S. companies face on the ground there.

I did ask Apple CEO Tim Cook on his way out of the meeting what he discussed with Modi, and he said it was, quote, an incredible discussion and that India remains a huge opportunity. Apple did open two stores in the country this year after investing in iPhone production on the ground, and that's widely seen as a prerequisite to doing business there, guys. Now we'll wait to see if today's discussion will lead more tech companies to move operations from China to India. Morgan and John? Yeah, Simi, you've been covering this so closely all week,

and certainly tech is very much in focus right now, but that hasn't been the only industry and the only type of CEO that's been having meetings and announcing investments in that country. I guess just walk us through how tech compares to things like aerospace and other types of manufacturing and some of these other news announcements we've gotten. Yeah, that's a great point,

because there is some differentiation between the deals that we are seeing, Morgan, And for technology, companies like Micron and applied materials saying that they will invest significant amount of money in building chip plans and engineering centers in India, whereas companies like GE have already gotten to the place where they're signing a deal with an Indian aircraft maker to co-produce military jet engines on the ground in the country,

which does require technology transfers. So that seems to be where we're at in terms of new deals. But defense clearly an opportunity, Morgan, as India looks to buy more U.S. equipment and wean off of Russia. All right, Seema, thanks. Danielle, now let's talk about tech and let's talk about India more broadly.

So India's past China is the world's most populous country and it's going to need big companies to invest there and grow the middle class. So is there a long-term investor play here? Yes, absolutely. There's a great long-term investor play here. And when you look at India, there's just so much potential,

especially with these mega-cap tech names. I mean, you look at Microsoft, Google, AMD, these are the perfect companies to be there. And they've been incredibly strong this year. Specifically, when you look at this quarter and you compare last quarter, you know, Microsoft had an incredible breakaway gap post earnings. It was up 7.7% and it's just continued to trade higher. This is very bullish going into July.

You know, typically the last week of June, it can be a little bit soft in the stock market, especially in tech. But into July, this is an incredibly bullish time. So I'm looking at Google, AMD, and Microsoft to trade higher into their earnings reports. Okay. Danielle, stick with us. Some Starbucks stores across the country organizing a strike over claims by the union representing the baristas that the company is not allowed to display Pride Month decor and cafes. Kate Rogers has the details. Well, Morgan, after a public clashing over displays of Pride decor and cafes, Starbucks Workers United says over 150 stores have pledged to begin a week-long,

of strikes across the country kicking off just in the last hour in Seattle. Now the stores that have pledged to strike represent nearly 3,500 workers, several dozen more stores will be voting on strikes in the days to come. Not all of the stores were impacted by those allegations of changes to policy over pride decorations, but they are striking in solidarity with the other stores, the union says. Now Workers United has alleged instances in 22 states pointing to social media where baristas claim evidence of a policy change on decor. Starbucks, for its part, has maintained there has been no change to its policy on pride decorations and says it has unwavering support for the LGBTQ plus community.

Adding in a statement, quote, Workers United continues to spread false information about our benefits, policies, and negotiation efforts, a tactic used to seemingly divide our partners and deflect from their failure to respond to bargaining sessions for more than 200 stores. The company says local store leaders have the ability to make their own decorating decisions within the company's security. and safety manual. So a lot of back and forth between the two parties there, guys. Back over to you. Yeah, Kate, this is in a way a replay, right, of what we saw happening with the NFL and other sports leagues, the kneeling controversy, you know, as patches and things like that, where once this is inflamed, both the workers and the customers, right, everybody sort of wants to weigh in. Do you have a sense of what's the truth here? Has Pride Decor at Starbucks been a thing that they've been doing for a

time and they're stopping now because now, you know, some customers are reacting to it in a way that they didn't before or something else? That's not the sense that I'm getting, John. So Starbucks has said it has unwavering support for this community. It's allowed decorations in the past, and the company really does maintain that there has been no policy change. But we've gotten some instances from baristas across the country, and once again, the unions been really good about documenting this on social media, saying that they've heard from

regional managers, that there needs to be, you know, uniform decorations across stores that they're going to decorate differently this year. There have been some instances of pride flags being taken down from windows. Starbucks says that its safety guidelines don't allow for things to hang in windows because that would block views and obstruct views from in and out of the store. So it can't hang in the window, but perhaps it can hang elsewhere in this store. So it's once again an instance of the union saying one thing, the company saying another, there's social media documentation of different things going on around the country.

The union says this has happened in 22 states. That's quite a large presence. And obviously, these strikes across the country now in response, this is gaining momentum regardless of who says what, right? This is already a thing. We've got some footage, I believe, on the ground from what's happening in Seattle. They're about two dozen workers or so, but that one location where the first strike happened today did have to close.

So that does have an impact there as well. So we'll see how this plays out over the next week. But both sides are kind of really digging into what they say their side of the story is. Okay. Kate Rogers. Thank you. Danielle, how do companies handle growing social unrest? And what's your take on Starbucks specifically? I mean, there have been a number of companies where we've seen these types of back and forth really just in the last couple of weeks. So, you know, the issue with these companies is that regardless of which side they take, they cannot win because they're going to be alienating half of their consumer base.

And so when you look at something like Starbucks and then you compare that to what has occurred with Target, Anheuser-Busch, we saw, pretty significant downward price action in both Target and Anheiser-Busch. And regardless of what they do, they haven't been able to recover those losses in the stock market. So I think that investors need to be concerned whenever a company is experiencing these kind of social issues. And specifically with Starbucks, Starbucks has broken down on a technical basis. It broke down below 100. You're in a bit of a short-term, bearish pattern. And I think that below 100 is a short.

And if it falls below about 97, it could ease. gap down to 85. And you have Disney in there as well, you know? So if you look at Disney, Target, Anheiser-Busch, I mean, all of these companies, it's a little bit problematic for shareholders. Danielle, and yet, I think back, you know, history to the 60s and companies that stood up for issues then, and maybe that was a good thing. Isn't the real issue here consistency? Disney's dealt with these sort of issues for years and been able to grow and do well. Nike shrugged off the Colin Kaepernick controversy over its act. and actually outperformed under armor, as I recall.

So is it so much about avoid companies that take a stand? Or is it avoid companies that are sort of chameleons and are trying to be popular with everybody? You know, I think it's not so much about avoiding companies that take a stand. It's more so avoiding companies that are taking a stand in something that is incredibly political at this moment in time. Because especially if you look at this month, in particular,

it's Pride Month, if you look at, for example, Twitter, you know, Elon Musk with Twitter, what he's doing, we've got a situation where now we have Spotify and Twitter on one side of the issue, and we have a lot of talk with this go-woke, go-broke crowd, and they're driving share prices lower. Yeah, happened to Nike for a bit, but I don't know. If Twitter and Elon Musk are enough to knock you off your culture, maybe it wasn't much of a culture anyway. Okay, FinTech having a big year, especially by now, pay later names like a firm, the group outpacing the overall S&P, but now they're growing concerns about increased delinquency rates and credit losses. Christina Parts Nebless has some details.

Christina. Well, we have the American consumer that keeps spending, even as consumer debt hits a high of $17 trillion. A rising number of people have been 30 days late on their auto loans and credit card debt, that's according to Bank of America. and now student loan payments are set to resume in October. So the over-leveraged consumer has helped consumer lending and by now pay later companies like a firm, Upstart, SoFi, PayPal, all up more than 60% year to date. With the exception of PayPal, you can see that one's down. But you can see Upstart up over 100%. That's because it incorporates AI into its lending platforms.

But all of these names, with the exception of PayPal, are outperforming the S&P 500. much of Wall Street, though, right now is cautious, saying a lot of that student debt, the over-leverage consumer, is already priced in. Compass just today put a cell rating on SOFI. They have a $5 price target. The stock is trading at $8 right now, and that's why you're seeing it down 8%. They're saying student load and pause was already scheduled to end on June 30th, so there's nothing new here, even as the Supreme Court weighs a loan forgiveness plan. And then you've got PayPal, the one darling over there that hasn't been doing as well. This week, it announced a deal with private equity firm KKR to buy its European buy-now pay-later debt,

which is good news to externalize the credit portfolio, bad news that the company still has a name to CEO, CFO's successor, and is facing increased competition from the likes of Apple. That's why Credit Suisse is still neutral on the name, and Atlantic Equity says move to the sidelines on PayPal. And then you've got a firm seeing total delinquencies rise in May, but Mizzouo says that name is still a buy. And then I have to stick with Fintech,

an honorable mention to Robin Hood, since Kathy Wood's, ARC snapped up the dip just yesterday and bought half a million shares. And I only named a few names because there's so many in this space. That's part of the overhang. Saturation in the market and much of the levered debt is already priced into, according to a lot of traders. All right. Christina Parts and Avelas, thank you. He ran through quite a number of names right there. Danielle, what's your view on fintech? What names do you like right now? Which would you avoid? I mean, it's worth noting not all names in the sector are created equal. Yes, that's true, but when you look at fintech, it's already had this massive run.

And what I don't like about it is that it has lost momentum. I love trading momentum stocks and specifically SOFi and upstart, they have a lot of high short interest. And so when they do trade up into an area where they have a previous high with that high short interest, these can be great stocks to trade. But when they lose momentum, they fall far, they fall far and they fall fast. So I'm avoiding these names right now. But what I do like about this overall narrative is I like the payment processors.

You have Visa and you have MasterCard. These companies are much more stable. And they also have that pattern where they trade higher going into earnings as well. So I'm looking at Visa right here. I like Visa up into 240 into the July earnings timeframe. Okay. The original Fintech. Danielle Shea, thank you for joining us.

And I thank you to our reporters for kicking off the top of the hour as well. Well, coming up, the business of business. We're going to take a look at one startup taking a swipe at expense management, partnering with MasterCard and Visa. Working lunch is next. Plus further ahead, after two years of promising to build an electric SUV that would attract those who want the look, space, and capability of a traditional SUV. Fisker is going to deliver the first models here in the U.S.

We're going to hear from the CEO when Power Lunch returns. Welcome back. Financial Technology is still an important factor in enterprise software. These days, companies are especially eager to save money. So today's working lunch is with Ariel Cohen, CEO of Navan, a business travel and expense startup, formerly known as Trip Actions. The late stage company has raised more than $2 billion, competes with the likes of SAP's concur.

I actually mentioned them last week on working lunch. Arrow has a reputation for being intense. He was born in Israel. His father was an entrepreneur. Back in 2018, as he was raising Navon's crucial series C, where he achieved unicorn status, Ariel was. also grappling with travel industry forces that were pushing back on the bond's model. When he got it all done, he was spent.

I remember eventually we solved it, but I remember that at the end of it, you know, talking about mental and mental health, I was done. I was like I couldn't do anything. I couldn't almost see people anymore. And I remember that the best thing that I did, I actually went for a trip by myself to Japan, kind of isolated myself in the mountains there. I'm not kidding.

By myself, really almost like clearing my mind. I was like thinking about it as some cleansing thing. And I came, when I came back, I was completely different. I think I again back my strength. And by the way, I'm now doing it every year. Every year I'm going one week somewhere. Nobody can contact me really clearing my head. A week alone every year.

Now, he says Navon is ready to go public, but the market isn't giving software's assertive startups the right kind of valuation right now. Meanwhile, Navon's system gives companies real-time insight into how employees are spending money on travel and expenses can alert employees if they're planning something that's out of compliance. That won't necessarily stop them from doing it, but it will inform them that management will have questions. At the same time, Ariel says AI saves time filing expense reports.

Are you allowing your employees to go to an extremely fancy hotel or restaurant generally or in these times? And when you deal with these things, only 30 days, 60 days afterwards, it is very hard to then give the feedback to the employee, hey, this restaurant was too expensive. Hey, this hotel was too expensive. So companies that are using Navan are seeing between 10% to up to 30% savings or their entire T&E, travel and expense budget. This is massive. So this creates a business case for the company to actually move to us right now. So Morgan, there's a lot of talk about crypto and blockchain

being the future of finance. But I'm seeing a lot of talk about AI being used on the discipline side within companies to save money and then also on the sales prospecting side to identify the warmest leads. I think in some ways that's more interesting. It's fascinating. It's this idea of offensive and defensive where AI is concerned and being able to sort of pinpoint areas to cost cut. And it sounds like not only the cost cutting becoming more efficient, but the process of cost cutting becoming more efficient. Also for investors here, just rethinking what fintech is. You just alluded to that in the last segment. Are MasterCard and Visa fintech? Of course they are in a way. There are also certain types of enterprise software companies that are working on financial technology. problems and challenges, but because they aren't doing crypto and blockchain, investors might not be used to thinking of them that way, and they should. Yeah. It'll be interesting as you continue to talk to him if there's a point later this year or beyond where he says, you know what, maybe we are

ready to go public, because I know this is something you've been, you and I have been talking about this, we've been following it closely. And from the tech side, specifically, if you start to see those floodgates open, that can be very meaningful. A lot of companies, yeah. All right, great stuff. As usual. Thank you. The tragic incident involving the Ocean Gate submarine unveiling concerns around the so-called extreme tourism industry, as well as the large price tags that some wealthy individuals are willing to pay for the experience despite the risks. We're going to discuss that. We'll be right back.

Welcome back to Power Lunch. Let's get a quick check onto the bond market. Bond yields falling today right now with a yield on the 10 years sitting at about 3.74. and not just lower today, but down on the week as well. That's despite hawkish comments on inflation from Fed Chair J. Powell to Congress, but other Fed speakers indicated less urgency to move quickly on rates. And it's also worth noting, John, you saw some hawkish moves and commentary from other central banks around the world, but investors do seem to be taking it all in stride.

Yeah, indeed. All right. Oil also lower once again today. Closing out a down week, Pippa Stevens, joins us now with more. Hey, John, while the weakness this week all about demand concerns with traders fearing that actions by central banks worldwide to tame inflation will ultimately curtail demand for oil and petroleum products, U.S. oil finishing the week right around 6925. Now, energy stocks also seeing a losing week led to the downside by the drillers with the XOP underperforming relative to the OIH and the refiners ETF. And investors are not loving this trade. according to the latest data from Bank of America, while hedge funds and institutional investors were overall big buyers last week, they dumped energy names.

The sector saw the largest outflows with the four-week average flow, now flipping to negative. Morgan. All right, Pippa Stevens, thank you. Let's get to Contessa Brewer for the CNBC News update now. Hi, Contessa. Hi there, Morgan. Tomorrow marks one year since the Supreme Court overturned Roe v. Wade. And today, New York's governor took steps to protect medical providers.

in the state. She signed a bill into law that shields them from prosecution if they prescribe abortion pills in states where abortion is banned. Meanwhile, an NBC news poll found a year later, six in ten voters remain opposed to the Supreme Court's decision. Traffic once again is rolling along that critical stretch of I-95 that collapsed 12 days ago after a fiery tanker truck crash. Officials initially thought it would take months to repair this, but then they just came up with a temporary fix that means traffic can travel on the overpass again months ahead of schedule. And SpaceX launched 56 Starlink satellites into orbit today on top of its Falcon 9 rocket. The satellites will help provide internet service to remote areas across the globe.

SpaceX still has more than 50 missions planned for the second half of the year. The company is aiming to hit 100 total launches in 2023. And for more on this, we go to our space correspondent, Morgan Brennan. This really was a story for you, Morgan, to deliver, but really an impressive launch there. I appreciate that this showed up in the news update, Contessa Brewer, and it's hard to overstate the equivalent of two launches a week, how unheard of and unprecedented that is when it comes to space flight, John, and just it goes to show just how dominant they are globally in terms of their ability to send things to space. Yeah, and that's a lot of satellites. Ahead on Power Lunch, two key auto stories on the dashboard to reports Ford preparing for a new round of layoffs for U.S. salaried workers. Plus, we'll speak to the CEO of Fisker as that company delivers its first U.S. EV.

We'll be right back. Welcome back to Power Lunch. Ford shares slightly lower today as the company is reportedly about to cut more salaried workers. Phil LeBoe has more on that story, Phil. John, this is not a huge surprise. Over the last year and a half, we've seen a number of moves by Ford to cut its white collar workforce, and this is another one. According to the Wall Street Journal, they will be announcing salary job cuts, an undetermined number of employees who will be cut, primarily in North America, the target, according to the journal, those who work with internal combustion engine vehicles, as well as those in software positions. It's not a surprise that they're doing this because Ford has said, and they said it last year, they need. to cut about $3 billion in annual costs by 2026. And one way to do that is really slimmed down as much as possible when it comes to salary jobs. Remember, they announced earlier this year. They're cutting 3,800 jobs in Europe. So we don't know when this will be announced. We reached out to Ford. The company says it has no comments on this report. They have about 28,000

white-collar workers here in North America. Again, shares of Ford slightly under pressure. Now let's pivot and talk about Fisker, the electric vehicle company delivering its first vehicles here in North America. Let's bring in Henrik Fisker, the CEO of Fisker. In Southern California, Henrik, where you are making those deliveries of these ocean SUV electric SUVs. What's your expectation from here, Henrik, in terms of the cadence of deliveries, how they will ramp up from here? Well, first, I'm super excited that we actually are delivering vehicles today. It's really exciting. My expectation is that I would say probably in July we start getting up to shipments of 200 vehicles per ship. And then as we ram further up, eventually we'll probably do a shipment every day of at least 200 vehicles.

As we have said by the end of this year, we hope we can deliver around or at least we'll produce around 32,000 vehicles. If we can deliver all of them most likely not because you never deliver sort of the last vehicles of each. quarter because they obviously have to get transported, but we have a very good dynamic between U.S. and European deliveries. We already started European deliveries, and the last few days in every quarter we'll focus on delivering into Europe to get as many vehicles out in the market as possible. Henrik, we were with you over in Graz, Austria, where the ocean is built. And because it's built in Austria and will be then exported here to the United States, doesn't qualify for the $7,500 IRA tax credit. Now, obviously through leasing, you can offer buyers some of that $7,500

discount. But do you believe that's much of a headwind in terms of making people think twice about ordering an ocean SUV? I think at this point not. And the reason is that we're still in a price segment of, you know, $68,000, $69,000, where a lot of the people who's buying our vehicles actually earn more money than they would need to actually get this incentive. So I actually don't think it matters right now. I think what matters most of people, what we have seen is that they have to wait a year to get our car. That's something that I think is a little more annoying for people.

When it comes to the point where we next year we'll start selling higher volumes of our lower cost vehicles, which starts just under 40,000, then I think it'll obviously be a benefit. and that's why we are in final negotiations right now to look at manufacturing here in the U.S., not only of the ocean, but also of several other models we are planning in the next couple of years. Henrik, I want to clarify something. You said earlier you're planning to produce at least 32,000 vehicles. Your guidance and your last call was for 2023 deliveries of 32 to 36,000 vehicles. Are you saying you will not be able to meet the lower end of that expectation? Like you just said, 32,000 to 36, yeah.

So that's what I'm saying. I hope we will at least do $32,000 as we had guided. And I think that right now, it's looking pretty good. Magna is able to really catch up a lot later in the year. I mean, they have a giant facility where ultimately we can go up to 120,000 vehicles per year. So I think that once we get up and running, we can increase the weekly or even the daily volume quite a lot. Henrik, it's Morgan. Thanks for joining us here.

I want to get your thoughts on the competitive landscape, not just here in the U.S. as you make these first deliveries, but globally when there is so much focus on China and the fact that China is the top exporter, at least right now, of EVs and how you're navigating that. Yeah, in fact, it just came back from China and took a look at a lot of the products over there, and I just came back from Europe as well.

In Europe, we are doing really well. I think, first of all, because we got the longest range of any SUV in the market, and that's something I think was important for a lot of the European buyers. We also price really well, and of course we get the same incentives as anybody else in Europe. So we have actually seen an uptake in our vehicle in Europe. But most importantly, I think we offer something that nobody else has.

So it doesn't really matter. Whatever vehicle you look at, nobody can say they make the world's most sustainable car. We can. We have over 100 pounds of recycling biodegradable materials. Nobody has California mode and solar power on the roof. So we have several features which makes our vehicle. different and I think that's why we have seen a really good record of reservations. Henrik, you guys use the CCS charging standard. As you know, Ford and GM have both said that

they will make their vehicles compatible with the Tesla NACS charging standard. Have you talked to Elon Musk and the people at Tesla about possibly going to the NACS standard? Well, at this point, what we see is that over 90% of the charging is actually done at home. And there is a, broader market now for EV charging not only in the US but also in in Europe they use the CCS 2 plug is still by far the most used plug let's see what what happens in the future I wouldn't you know exclude anything but at this point in time we haven't done any specific deals on that and with regard to your next product the the pair model that will be built at the foxcom plant in lordstown ohio what where do things stand in terms of the production plans

for that and how confident are you that that Foxcon plant will be up and ready to go and to build the pair? In fact, just a couple of weeks ago met with the chairman of Foxcon and we had a really good discussion and we are now in the final negotiations of the production plan or actually the production agreement. So I'm very confident that we're going to be up and rolling. We are taking, of course, a more active engagement in that facility. we have hired a head of manufacturing that ran the BMW plants here in the US and in China. So we've got a really good manufacturing team as well. So we will be more involved than we were with Magna.

But I'm very confident that we'll have the pair up and running in production by mid-2020, as we announced already. And in fact, we're looking at producing another vehicle in that plant already end of next year that will be based on the Fisker Ocean. So that's somewhat, I would say, a little bit of a news here. And that's something that I talked with the chairman of Foxcon around. And he's really excited about that to get something in production in that plant ory end of next year. It will not be the pair.

It will be another vehicle. Small crossover, Henrik. And are you looking at a lower price point? Won't be a crossover. It'll be something that can carry a lot of stuff in the back. And maybe it's opened in the back. Ooh, nice little tease. Henrik Fisker, founder and CEO of Fisker.

You see all those vehicles behind them? Henrik, by the way, thank you very much. John and Morgan, you see those vehicles behind them? Those oceans, those are the first ones being delivered here in the United States. So you see that the people who have been waiting a while for those oceans are finally getting them. Yeah, a milestone for the company, Phil LeBoe. Thank you for bringing us that interview. Shares of Fisker are down 2% right now, nonetheless.

When we return, a look at the big money flowing out of real estate. We'll be right back. Welcome back to Power Lunch. It is time now for the weekly ETF tracker. And this week, we're looking at real estate funds. Net outflows of $191 million in the latest week. That's according to our partners at Track Insight. The hawkish comments from Fed Chair Powell, adding to weak housing numbers in recent days, and concerns about commercial real estate. Reit funds from Schwab, I shares, and the spider all down right around 5% this week, as you can see, or more. Information is available. on the F.T. Wilshire ETF Hub. So check that out, John. Yeah. And coming up, Virgin Galactic down 18% today. We will explain why next. And join Captain Morgan and I at 4.

Captain Morgan, that's my new nickname for you. Closing Bell overtime. Get it because of space. We will talk to Carolyn Everson. She's on the boards of Coke and Disney. We'll be right back. Welcome back to Power Lunch. Virgin Galactic down double digits today. the spaceflight company successfully raising $300 million via an at-the-market offering of comet stock.

Also disclosing, though, that it now aims to raise an additional $400 million through a subsequent stock offering to fund expansion of its spacecraft fleet. The company founded by Richard Branson currently has a single-carrier aircraft and one operational spacecraft, which it is said can conduct flights as frequently as once a month. Well, all of this, as Virgin Galactic prepares to finally launch its commercial space service, next week with a suborbital mission for the Italian Air Force. The reason, despite today's losses, the stock is still up about 25% so far this month. If that goes according to plan, the next will occur in August,

and then you're going to see monthly flights following. But right now, John, stock is down almost 19%. It's on track for its worst daily performance in something like a year and a half. Okay, so we're going to talk more about this later, but I've got to ask about the space tourism aspect of the business models here because this submersible tragedy, I imagine, is going to have some people thinking about the risks involved in a different way. Yeah. And I think that's the thing. I think whether it's spaceflight or whether it's deep sea exploration, you're talking about some of the other types of extreme travel and adventure and expeditionary type things that we see deep-pocketed individuals strike out and do. There are risks associated. I think a lot of the risks associated with spaceflight are pretty well known.

It's also the reason why this is such a key moment, and I will be on the ground covering this space flight next week in New Mexico, because it is publicly traded, and it is pretty incredible to be talking about sending. And next week, it's the Italian Air Force, but this idea of paying customers to space, whether it's suborbital, or in the case of some of the missions we've seen SpaceX involved in. Orbital, very high risk, but also very high reward. And I think a lot of the individuals that do get involved in this, I mean, I don't want to speak for them. But they're paying a lot of money knowing what those risks, at least where spaceflight is concerned, are associated. When you've got just brand new ways of doing it, though, it's a little different than, well, we're going to talk more about this.

As a matter of fact, the big money in the space race does highlight a key desire to adventure where none have gone before. Despite those risks, it goes beyond space. We recently saw, so we're just talking about the tragic loss of those on the Ocean Gate sub, not exactly a submarine, but vehicle. People are willing to pay a huge sum for extreme tourism. Tickets for the Titan were around 250,000 each. Blue Origin charges a few hundred thousand for its suborbital flights. In some ways, these wealthy patrons are funding the development of these technologies, but could this disaster lead to increased caution for some?

For some more, let's bring in Allison Poll of the Wall Street Journal and Arun Abneja, Dean of the School of Hospitality Administration at Boston. University. You know, Allison, to you first on this, this tragedy marks a moment for this industry. What do you think the financial implications might be? Well, a lot of companies that I talk to are trying to distance themselves from what's happened with the Ocean Gate. And they say, well, submersibles are one thing, but what we do is completely different. But I do think wealthy individuals who are taking these types of trips will be thinking twice, if not three times before, taking these types of expeditions.

You know, there is a lot of risk involved, and unfortunately, we saw what was one of the more tragic outcomes of this type of travel. Arun, I mean, when we talk about some of these extreme tourism and expeditionary opportunities that are available out there, I mean, how do we define it? How big is this market? How quickly is it growing? Why is it growing? So, you know, interestingly, the adventure tourism has been there for thousands.

thousands of years. And recently it has seen a very big explosion because a lot of things that were previously only under the preview of the rich now are accessible to a lot of people. But there are also regulations that bring in. So skydiving is an example where it is now increasingly accessible to a lot of people. You know, there are people who are going to want to distinguish themselves. There are bragging rights. There are, you know, for prestige factors. So they will always be a huge big market for adventure tourism. Alison Polly, again to you, does this raise the question of what sorts of assurances are adventure tourists going to need before embarking with a particular method? There were questions here with the Titan within the industry about, well, is this

really safe. He's breaking some rules. He's not going with certain certifications. Do you think that the ultra-rich are going to require certain checkoffs now, unlike before? Because with skydiving, I mean, that hasn't changed that much in the last few years. It's not like people are insisting on doing brand new methods of that. I do think it will change, though, because they'll think more about who the providers are for these types of services. So what is the history behind the company have they gone through some of the regulatory approvals to be doing these types of activities as well? So I think travelers are thinking more carefully about which companies they will do business with. And I spoke to passengers who had previously been on the Titan, and they mentioned that death is mentioned three times on the first page of the waiver.

And so I think there is a high risk involved, and people will be thinking, you know, if there's a waiver that is mentioning that, that it's an, and. you know, exploratory type of vehicle, then there will be a lot more hesitation on their behalf. Arun, you mentioned it, but regulations and the regulatory environment, does that change now? And if so, when you're talking about something like going out into the ocean and into parts of, you know, territories of the ocean or into space or wherever it is, parts of Antarctica, et cetera, I could go down the line. How do those regulations, if they were to come, how do they potentially take shape?

if it's going to require more than one country to be involved. Right. And, you know, what is interesting about this expedition was that it was in the open ocean. Now, the ship that launched the submersible came from Canada. Now, Canadian regulations, I'm sure, require the ship to be seaworthy, to be able to carry all of the equipment that it is carrying. But it doesn't drill down into, is the submersible capable of going to the depths? For that, the company needed to go through different certification,

which it didn't. Now, as opposed to you were earlier talking about space travel. Space travel has to happen within the boundaries of a nation. And so each nation has regulations on certifications and all kinds of equipment testing that has to be done. In the U.S., we have sent so many rockets up in space that our regulatory environment is very strict and very clear. So anyone being launched into space from U.S., you know, at least there's a lot. There is minimum amount of credibility of the regulations at stake. But this was in the open ocean. There was no regulation there.

Allison, do you know how insurance works here? Like, are insurance companies life insurance going to say, and that's important for wealthy individuals, you know what, there need to at least be certain certifications if you're going to do something like this, or maybe you just can't do this and expect for your family to collect on your insurance? It's probably a little bit early to tell on how insurance policies might change in regards to this, but I do think in terms of thinking about the companies and what type of insurance they carry in a worst-case scenario like this,

you know, if you're traveling for Antarctica to example, for example, it is a lot more accessible. There are companies that will take travelers there on a private jet, and they might be staying in glamping type accommodations. but if they do get injured while they're going on an excursion, there is some liability there. So I think it's something they'll be looking at more closely going forward. All right. Thank you. Alison Polly and Arun Upnasia.

Difference, Morgan, between Antarctica, at least for me, and like going up to space or 13,000 feet underwater. There's a very big difference. And to Arun's point, there are a lot of regulations that are in place, and there have been calls for even more regulations. But it is a very, yeah, it depends on what type of advantage. venture you're looking to have and what type of company you're looking to go with and what the country is, right? We just learned that. All right. Well, still to come, we'll run through some of

the other stories that we're watching. Closing time. It's next. All right, we only have three minutes left in the show and a bunch more stories that you need to know. So let's get right to it. Treasury Secretary Janet Yellen saying more banks will probably seek to merge this year as higher interest rates and recent banking turmoil are making it more expensive for them to hang on to depositors. Also pointing out higher rates for deposits are denting profitability, which we could see when banks start reporting results in just a couple of weeks. Leslie Picker was pointing this out in the midst of the regional bank turmoil that this is probably going to happen. That's right.

And we've heard these types of comments from Yellen before, too. Yeah. Now, Elon Musk and Mark Zuckerberg are absolutely dead serious about trading blows in the octagon. Fans will have to pay up, though, if they want to watch. That's according to UFC president, Dana White, who says he spoke with both billionaires. White says he would charge $100 to watch the fight if it happens, thinks it could bring in a billion dollars in revenue, Elon Musk must have a death witch. I don't know if you know this, but over the pandemic, Zuckerberg was training in Brazilian jiu-jitsu. He's been doing

military-style endurance workouts. Elon Musk has not. Well, maybe this is Musk's own inspiration to start training more aggressively right now, but I would totally watch this. I'd pay a hundred bucks a pay per view to watch it, too. A lot of the odds are on Elon here. By the way, Musk is much taller than Zuckerberg. It doesn't matter when you're on the ground. It doesn't matter. This is a bad idea, Elon. All right. A law firm is being fined $5,000 after one of its lawyers used to chat GPT to write a court brief,

riddled with errors. The lawsuit was on behalf of a passenger claiming they were injured on an airplane. But when the attorney fed prompts to the AI chatbot, it responded with court cases that didn't exist. Hallucinations. Yeah. The first warning to students out there, right, who have been reading these reports, oh, it can pass the exam. Yeah, be careful.

Yeah, be very careful. All right, an IPO for a painting. A company named Artex is launching a roughly $55 million initial public offering of Francis Bacon's three studies for a portrait of George Dyer. I don't know it. Shares in the portrait will be sold for around $100 a piece, so you could do that or watch the fight between Zuckerberg and Elon Musk. And they're going to list on a specially created art stock exchange based in Lichtenstein. that would give regular investors the ability to buy and sell shares in a famous artwork on a stock exchange for the first time. I don't like it. Sounds like NFTs.

Listen, I mean, we know there's growing popularity in ALTS, and we know that there's this whole democratization in terms of access to some of these more unusual types of asset classes. But to your point, it does feel, especially if we're talking about Lichtenstein, it does feel a little kitschy. Yeah. All right. A bidding war. Breaking out for a car that no one has yet. It's featured in the new Magic, The Gathering game from Hasbro, which is based on the Lord of the Rings series. A card shop is Spain is offering $2 million for the extremely hard-defined card. I got to see it.

Precious. Good one. All right. Thank you for watching Power Life. We'll see you at 4.