Power Lunch - Private Equity to Boost IPO's, Eli Manning on College Sports 1/7/25

Episode Date: January 7, 2025

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

And welcome to Power Lunch. Another day. Another market move for your money is Big Tech falls over 1%. The entire Mag 7. Losing money today. Can't happen. InVity is down nearly 5% after hitting a new, and it hit a new all-time high right after the open. That's quite a reversal. We also got some huge news out of Meta Mark Zuckerberg making major changes to its content moderation. No more fact checkers. Community sourcing at community notes instead, just like what X is doing. And we are going to put the lunch or dinner in power lunch. The head of the legendary Rios restaurant is here with what he sees as some of the hardest parts of running a big food business after selling off the name. They still run Rios the restaurant. Yes, they do.

But Rios the sauce. Is this all about us just trying to get a seat in Rios for dinner one of these days? Maybe. Maybe it is. But the fact that they've been able to maintain that level of exclusivity is for all of these decades, that's what we have to find out. You think with this, guessless, we could do that anyway, but I think knowing Frankie may not hurt. All right, all of that is ahead. But let us get now right to your top story.

Facebook's big about face this morning. Meta, CEO Mark Zuckerberg, issuing a major announcement. After Trump first got elected in 2016, the legacy media wrote nonstop about how misinformation was a threat to democracy. We tried in good faith to address those concerns without becoming the arbiters of truth. But the fact checkers have just been too politically biased and have destroyed more trust than they've created, especially in the U.S. So over the next couple of months, we're going to phase in a more comprehensive community notes system. Now, there's a lot more to that and more to the announcement. So we urge you all to go and watch it for yourself, decide for yourself.

But the headline is pretty simple. Zuckerberg's companies, Facebook, Instagram, WhatsApp are going to return to what he sees as a more free speech, eliminating third-party fact checkers who you just heard, Zuck said it becomes simply too political to bring in so-called community notes on facts and things that users might find inaccurate or misleading. Meta will also move some jobs to Texas from California, as we said, there is a lot more to that story. Now, right now, the stock down a little bit, along with the entire Mag 7, by the way, but Meta has been on fire.

It's up 75% this year and it's stored 460% off the 2022-2. lows. But here is the question that we start to show with. Is this big move by META just a response to Trump, or is it a move back to where the company should have been in the first place? Let's talk about it all. I'm bringing Omid Malik of Farahar partners. His company's invested firms that have been hit by what might be viewed as overly politically correct environments. In fact, yesterday, company making an investment, buying a retailer of firearms. Omead Malik, Omeet, thanks for joining us. Is this, people, you know what the critics will say, they'll say, this is just Zuckerberg

cowering to Trump. We can look at it that way, or do we look at it like Zuckerberg and his companies cowered to the Biden administration and should have never been in this position in the first place? I don't think those things are mutually exclusive, Brian. They could both be true. I mean, people have said for a long time that politics is downstream from culture, but I like to say that business is downstream from politics. And so obviously this is a response to the Trump win. And he basically admits later in the video, something that I've been saying to you

on air for a couple of years now, that elements of the federal government during the Biden administration were coercing and pressuring big tech companies, including his own, to violate the First Amendment. And that's a huge problem. It's what inspired our fund to be created that you alluded to to to invest in companies that we're not going to capitulate to that level of pressure. So I think embedded in this announcement is something even more troubling, which was that the previous administration was violating our rights. The headlines, some of the headlines you've seen in the moment, are basically like, oh, Facebook and meta, whatever you want to call it,

they're getting rid of fact checkers, which the implication is if you just read the headline that there's no more fact checking and thus put whatever you want on there. And no doubt there will be some garbage that leaks. through even under the community notes system. But it sounds like you don't, as an investor, Omead, you don't believe this is going to be some kind of big negative. Maybe it's a positive for the meta-owned companies. First of all, it's a huge positive. I mean, obviously I have my caveats that I'll offer that I think this is definitely opportunistic, and I can personalize

why that's the case. But putting that aside for a moment, it is a net positive. It turns out that free speech is good business. And I think they see that the American people over overwhelmingly want this. It's also the whole topic we've discussed in the past also about the challenge of legacy media and what happened in this presidential election. So much of the communication with people occurred in independent media on these podcasts. So any big company, whether you're a network or a big tech business, sees where the leaves are blowing and they're trying to go towards where the people are now. And that is a real embrace of constitutional protections, free speech. But of course, the question I'll ask is whether or not this is just opportunistic is the company we took public yesterday, which is, yes, you're right, a gun retailer with our SPAC. It sells guns. Over half the country owns a firearm. Right now, you cannot advertise on meta with firearms at all. It's banned. So my question is if he's rediscovered the Constitution, how far does that go? And I think that remains to be seen, Brian.

That's an interesting question. Omid, it's Kelly here. If I may, actually pick up on that same vein, which is two other possible things I wonder about. Number one, and he admitted this in the video, like, look, there's going to be slightly less ability for us to catch all the bad stuff when we're having a lighter touch about everything. They're already under pressure for whatever's been going on Instagram, child sex trafficking, that kind of thing. So that's one possible issue. Investors might be a little bit squeamish about. The other thing is, I wonder when he says, and to your point about when he says, look, when the American government tries to censor us and emboldens other governments to censor even more. But how much of a fight is he willing to get into with other governments, whether it's the UK or Europe or Latin America, about these free speech issues, which really only apply, those legal protections only apply to Americans? You just picked up on, I think, the most important question we have right now for the future of capitalism. It's a fight that we're having at home. It's the fact that politics has infiltrated, you know, red and blue America. We're one of the only countries in the world that has a bill of rights, Kelly, and that's what I think we really need to understand that if you only look at it

away from that, then you're going to have the kind of authoritarian systems that you have in other countries that, by the way, do fairly well financially. Like, China has social credit scoring, and there's a second largest economy in the world. So we need to be very careful about totally separating those constitutional freedoms from economics. It's why we've incorporated so much into what we're working on. And I think you're pointing out that you need to have a United States government and administration that's in favor of strong constitutional protections that then empowers our multinational businesses to do business abroad. And it really goes full circle, which was the irony that we had where a lot of these big, woke companies would go do business

in China where they have slave labor and then lecture us about, you know, not being progressive enough. I think that stuff's got to stop too. But you know that you know the critics, Omead, what they're going to say is that Zuckerberg is afraid of Trump, that he appointed Dana the White of the UFC, who's one of Trump's biggest friends and backers to the board. And this is, and he's facing a lawsuit in, I think it starts in April, and that this is just Zuckerberg being afraid and responding to the incoming administration. Hey, look, I don't have a lot of issue with that critique either, by the way, because you know what? You've got to judge people when things are hard. What did his company do when it was hard to stand up against an administration?

He totally capitulated. You know who's vindicated here? Elon Musk and what he did when he bought X. And a lot of the mainstream media said he's going to destroy that company. It stinks. And then guess what? It was the most important platform, just like I predicted on your show two years ago, during the election.

And he stood up against the censorship regime. And I think he's been rewarded for it because now it's the most important social media platform in the world. And you see other things like Rumble, or truth social that are all coming around and be able to be successful because they have the following that folks want. I don't see, regardless of where you're on the political spectrum, you should look back at a period of like 2020, 2020, 2021 and be very troubled. Like when one of my partners started that company Parlor that was a social media app that a few big tech companies

colluded to de-platform it, like that's wrong. That's anti-American. So I'm just very happy to see that even big companies are starting to realize the error of their ways. But you're right. There is an element here that could be opportunistic that they're simply responding to whatever administration is in power. So I urge customers and users to really analyze and hold their feet to the fire, which is to say, how are you going to act regardless of who's in power? And I think there's a lot of other companies out there that stood up to the censorship regime of the Biden administration. It also kind of spawn the proliferation of all of those other platforms. So I wonder now, Omead, if they're kind of now saying it's going to be a lighter touch. there's not a lot of publicly traded implications here, but what are the implications for the whole ecosystem? And do you expect, you know, YouTube isn't as much as the spotlight now as it was during that period you referenced,

but do you expect that a few of the last platforms who haven't gone this direction might? Yeah, for sure. I mean, ultimately it's going to be a decision, again, their parent company is Google, as you pointed out. So, you know, but during that period of time, one of the nice things that did occur in our economy is that you started to have these alternatives. Like, we think of what we work on is a parallel economy. because YouTube was conducting themselves in that way, Rumble came around. And now you have these other options. We want to keep presenting those options through every part of the economy. People would critique us and say, well, you're bifurcating things. No, we're actually acting in a capitalistic manner. Ultimately, if people start using these free speech or Second Amendment oriented businesses,

then naturally the incumbents will have to adjust if they see a market opportunity there. I think that's about as capitalistic as you could be. To your point, I think part of what we've done not only the change in the administration, but the fact that there now are options for other customers is changing the behavior if these bigger tech companies want to remain relevant. Well, like it or not, we got the new base Zuck. He's like, you know, he's like ripped. He's big. He's letting his hair go.

He's in like a tight t-shirt. We'll see where it goes. Omead Malik, 1789 Capital, Farver-Hare partners and more. Omead, love having to kick off the program. Thank you for coming on Power Lunch. Appreciate it. By the way, what we care about a lot is the stock. So, of course, what do you do?

You run a poll on the aforementioned X. Zuckerberg's big shift will blank engagement in the stock, increase, decrease, not impact. 54% said increase, 10% decrease, 36% said, eh, it won't matter. Can you even imagine this having happened? Let's ask Ken about this, actually. Ken Squire is our guest host for the hour. He's president and founder of 13D monitor and a CNBC contributor.

I was going to say, can you even imagine a few years back when face, every time you turned around there was another story about bad advertisers on their site and bad content, an offense of this, an offense of that, that this would be the way that story ends. And maybe the story isn't over yet. Yeah, in retrospect, I can imagine it because my main takeaway from this is how incredibly adaptable Mark Zuckerberg is as a CEO of such a huge company. Going back to the Cambridge Analytics stage, which he just kind of got to fade away, to revamping completely Instagram to be able to compete with TikTok to now, you know,

leaving the third-party fact-checkers in such a quick way. It's just to be able to pivot such a large company like that is pretty impressive, and I don't think he gets enough credit for that. But that's fine. And the stock price from that point of view, people will say, investors, again, he controls the company, but they're happy to be along for the ride. But I guess philosophically, now that this has become so philosophical, now that it's about free speech and censorship, I mean,

do you believe that that's what it's really all about, or is that just what it's about for right now? I don't know if we can know his motivations, but he's doing what he needs to do. Some might use the word adaptable in a different way. I thought it was a nice word. It's a nice word because what I'm saying, you know what I'm saying? There's going to be the criticism that he's caving, that he's bowing, that he's supplicating himself at his companies to the Trump administration.

Especially when the first bad thing happens that results from this. That's right. And by the way, there will be bad things that result from this. Well, there could be criticisms, of course, but I think that's what makes it even more of a bold thing to do. And with respect to moving away from these third part of human fact checkers, he was probably going to do that any. way. This is an area where AI can really be helpful. He spent a billion dollars on AI. I wouldn't be surprised if he was already down that room. I love that take, which is basically, and by the way, let's, fact checking became like the new truth telling. A lot of the fact checkers need to be fact

checked. I'm just going to say that. I don't care. That's the reality. But I love your point. You can now say, effectively, I'm going to lay off a bunch of people. I'm going to replace them with computers, but you make it seem like you're doing it for some big moral or ethical reason when a reality, it might just be costs. And he was going to do it anyway. I'm sure at some point, it makes sense. And their AI is very, very good. I mean, I think it's Lama, maybe Grock as well.

They're some of the biggest. I was just using this to come up with images the other day. And it's so using that technology, which they've invested so much money in as a result this way is, I think, a preview of what is more to come. You're right across a lot of the big tech platforms. Ken, stick around. All right. After the break, private equity presenting a big opportunity.

A lot of private back company. companies could make up around 40% of the new IPOs this year. We'll get into that story next on Power Lunch. Welcome back to Power Lunch. The IPO market has been on a little bit of a comeback lately. Well, I mean, nothing like the SPAC craze a few years ago. But this year, 2025, we could see a bigger boost. And perhaps from private equity exits. Nearly half of the IPOs that could come down the pike this year are expected to come from PE-backed firms getting a bit of a shove. Leslie Pickers here now with more on that story. Ken Squire is with us as well. Leslie Dutell, literally. literally a shove. She did this when she was reading that. Yeah. No, no, she's right, though, because they've been sitting in these funds. These funds are aging. And the longer they sit there,

the bigger they get, the fewer prospective buyers they get. Oh, and by the way, there are all these limited partners, investors in the private equity funds that want their money back. They want these realizations in the form of either M&A or an IPO. IPO is becoming an even more attractive option. After 2024, when you saw outperformance, when you look at kind of the class of 2024. The median performance for those that were backed by private equity was about 21%. Those backed by venture capital, the median performance was about negative 8%. So a huge disparity.

So you've got the public market investors who like that performance. They also like the predictability of these companies that have an operating history. And credit spreads are extremely tight right now. But interest rates are still high, though, Leslie. Interest rates are high, but the credit markets are open. And more important for private equity is just a stabilization of interest rates. As they were going up, it was harder to model the businesses, especially during the period of inflation. It was hard to be able to say, here's what the future value of this company looks like,

and therefore this is what I should pay for it or sell it for. Now that things have kind of stabilized on the inflation front, the thinking is. And financing is pretty wide open at this point in time. You also have this boom in private credit. That capital is looking to go somewhere. it kind of opens the whole cycle, and there's a symbiotic relationship between the M&A gears turning on, the IPO markets turning on, and it's something that a lot of people are looking forward to in 2025. Well, we know everyone likes to kind of act together, as we're learning this weekend on a number of fronts.

But can, I mean, the IPO markets have been pretty quiet, considering how strong the stock market was last year. Yeah, well, you know, people that invest in IPOs are looking for that hypergrowth and, like, get in early. And when you can invest in the MAG7 and kind of get that, you know, maybe it takes some of of the some of the allure away from putting into an IPO that might be a little risky or not as established as the Mag 7 company. Especially private equity always did a lot of software as a service and that kind of thing. And a lot of those business models, you kind of go, well, what's going to happen with AI? And we haven't yet seen the round of AI startups.

And those are not going to be venture back, not private equity. Yeah. And that's something we've talked about on this show is that if you are going to the public markets and you're having these conversations on road shows with investors, you have to be able to answer the question, how will AI impact your business? Are you going to be disintermediated? Do you have an AI component that will make you more efficient? Investors want to know that answer.

So until you have it, you really can't go public regardless of the valuation. So you're saying that companies that are spinning off other very, very smart and profitable units should throw AI in their name to get a more warm welcome in said public markets. You know what I'm referring to. Yes. So I think that. This very fine company will be testing the markets this year. You think our spinco should be AI, Spinco, and then it'll be like... CNBC AI, right?

There we go. There you go. You can't spell power lunch, lynch? Lynch. You can't spell market intelligence without a... Thank you. Something like that. Or Brian...

Or Brian Sullivan. Do we know who might be first out of the gate, like what kinds of companies? There are a lot of companies that have filed S-1s. But Pitchbook has a great list of prospective PE-backed IPOs in 2025. And they say some of the biggest allied universal. inspired brands, Panera, What a Burger, for those of us who have eaten a burger in the South in Texas and Kansas City, thanks to Mahomes. I had Panera for lunch.

I haven't had Whataburger. Just to make everybody hungry on Power Lunch. I'm listing all the restaurant companies that I... Hohan, I see. Are these names, Ken, that would inspire you? I don't know if they would inspire me. When you look at what Leslie made a great point, I think, about the venture capital companies, they don't inspire me as much as the private equity wants to have done better.

A lot of the venture capital companies are still founder-led, and these are founders that are brilliant visionaries that brought a company from zero to a billion, but not necessarily the best public company CEOs, whereas you have private equity-sponsored companies that have been built for the public markets. You brought it, I mean, you kind of mentioned very quickly, and the point I was trying to make with Spinco,

our own company being spun off, was a more serious one, which is, if everyone just wants to buy the Mag 7 and the Triple Q or whatever, it is, and there's no appetite for anything else for Cole Hahn or Panera, it won't matter how good the companies are. It's how the stock performs, right, Ken? Well, today, as you mentioned, Mag 7 is down, and if that's a trend that continues, it would, you know, bode well for IPOs stocks that that people aren't investing in the Mag 7 as much. And I think the counter to that would be that if you're a professional money manager and it's your job to beat the indexes,

and then Mag 7 comprise such a large proportion of the indexes, then you have to find other ideas in order to show that outperformance at the end of the year. Yeah, it's true. Guys, thanks. Leslie, thanks. Ken sticks around for the hour, as mentioned. All right, on deck, why Trump's plans, tariffs could add even more volatility to one of the most important commodities in the world. It's coming up in your market navigator. All right, welcome back to Power Lunch. Here you go. Here's how your money looks. We were down at the end of the year. We had a nice pop to start 2025. Now we're down again.

Not down big on the Dow, but do we follow the Dow? We kind of do. But the NASDAQ we know is what you watch. The NASDAQ is down 1.4%. 286, all, as we said, earlier, Domchew, of the Mag 7. Well, I mean, 5950 is the 50-day moving average in the S&P. So we've been coalescing around that level for the last five or six or seven trading days. So kind of up or down above.

59-50. Not just a Van Halifety. album. 51-50. Thank you. All right. Let's turn now to what's happening with copper prices because they rose to a record high last May, June, but then kind of trended lower for the rest of the year, kind of as you're seeing right there. The trade and tariff policy confusion is lingering right now. Global demand for the metal is growing, though, at the same time. So our next guest is here to give us the plan for trading copper in a more risk-managed fashion. So joining us now is Philip Striebel,

the Chief Market Strategist over at Blue Line Futures. And Phil, thank you very much for being here with us. We've turned to you for some of the charts and fundamental stories behind commodities, but is copper still the PhD in global economics that we've talked about over decades at this point? Oh, I think it is, and it's one of our favorite commodities in the metals complex, and it oftentimes acts as a leading indicator for inflation and the economy. We see the decline in prices since the election and the test of long-term support as an opportunity to position for increasing multi-year demand. And, you know, you ask why, the IMF recently put out global demand forecast an expected demand for copper to double over the next decade. Now, listen to your last segment, you guys were talking about AI. AI applications require more energy-intense computing, and it's expected to increase copper demand by 3.4 million tons each year all the way up to the year 2050.

So everything from electric vehicles, electric vehicles use four times more copper than traditional gas vehicles. the grid and renewable technologies. We also expect constant traditional demand to pick up in 2025, construction spending, infrastructure spending, and defense. So, you know, when you do your risk assessment, yes, the biggest headwinds are higher rates, stronger dollar, weaker China, but the biggest tailwinds could be Chinese stimulus, both for infrastructure and development. And I think that these things are going to continue to roll out through 2025. All right. So, Phil, let's take us through the trade then, that downward move, positioning for the long side, how exactly then would you trade it in that risk-managed fashion?

Yeah, so you look at seasonally, we tend to see copper prices rise to the end of about February, about last 13 out of 15 years. When you come out of winter, that's when you get the construction and the infrastructure spending pickup. So you look to buy the March microcopra at 415. You put your stop loss below this recent swing low around 395, so you're risking $500. You look to target a momentum move higher up to $460, which would be $1,1,12. $125. Copper is the fourth best performing commodity year to date and is up 4% right now. All right. So there's the trade. Risk 500 to make 1125 a little better than two for one. Philip Striebel, thank you very much for that copper trade. We'll see you in a bit.

Could I put in a request for market navigator? What's it going to be? We should also do aluminum. I'll tell you why. Aluminium? So aluminum, as Praschaun would say. So here's a thing. Yes, copper goes into electric cars. It goes into a lot of the electrification theme. but aluminum is what's used for a lot of the really high-intensity power lines. So if you are playing the electrification trend, aluminum might be the quiet winner. Or aluminum, Kelly. Either way. Depending on where you live.

Thank you both. Coming up, Lena Kahn's exit interview. The FTC chair weighing in on the growing power of AI. We'll tell you what she had to say next. So we have an ongoing inquiry looking at some of these investments in partnerships between the incumbents and some of the newer startups trying to understand what's really going on here are these investments that are really interfering with the independent decision making and is that going to undermine competition. That inquiry is ongoing. I'm hopeful that we'd be able to share something

publicly before I end my chairship. There's an announcement you think coming in the next week or two. I hope so. I mean, we're a multi-member commission, so we have to vote. That was FTC Chair Lena Kahn, weighing in on artificial intelligence, along with the host of other key issues on Squawk Box this morning. Ken Squire of 13D Monitor is here with us. Ken, I don't know if there's anything policy-wise that jumped out to you, but again, this is her exit interview. Yeah. No, I mean, with me, when I think of Lena Khan, I think about, you know, the future of M&A and the robust M&A markets that might be coming when we have somebody else in that seat. That might be the only sort of place where there's still some questions about how

populist the FTC agenda might be under the Trump administration. Do you think it's possible? be kind of anti-big tech? Anything's possible under the Trump administration. But I don't think it's possible that we have a less robust M&A market. I think there's certainly going to be more M&A over the next four years. We've had a bunch of deals announced already. A lot of them are pretty small, but it feels like there's a lot of chatter suddenly about this and that happening and maybe companies trying to get ahead.

Because once any industry starts having a couple of mergers and everybody else has to react. Yeah, and I think we're going to see that. I think it's going to be a good four years for bankers. Yeah, exactly. And by the way, shares of Piper Sandler, those kind of banks last year. You saw them up 60-some percent. So the bankers are coming. Center view trying to sell itself maybe.

Right, exactly. They would know when's a good time. Yeah, exactly. That tells you something's coming. Well, the bankers got to eat too, Ken Squire. All right. We're going to get a quick check on the markets because we continue to go lower on big tech. I mean, the Dow not getting hit at all.

But again, that's kind of like a headline index like we talked about. We're seeing big tech, the NASDAQ down 1.5% yields also the story. And Rick Santelli is in Chicago, and Rick, it's yields are on the move. This inflation story is a long way from being over. Yeah, oh, absolutely. Just look at what's going on in Europe. Not only do they have really lousy growth. They have inflation that's starting to rise.

And I fully suspect that inflation is not going to moderate to levels. The Fed feels comfortable. with. You know, we had a lot going on today, Brian, jolts over $8 million. Most jobs, job opening since May of 24. Prices paid leaped to the highest levels since Feb of 23. Just put those two together. And if you look at twos and tens for the last three days, tens are like running way past the twos. Right now, they're up five. Twos are up one. We've moved to two, ten spread four basis points today alone, which means it's knocking, on the door of 40 basis points, which is the widest has been in over 32 months on a closing

basis. And finally, this last chart's really interesting. Yes, 10-year note yields at current levels should they close here would be an eight-month high yield close. But we are just a smidge away from the highest yield close going back to November of 23. Back to you, Brian. Rick Centellier, Rick, thank you very much. And very quickly, we got to get a news update. I want to throw up a stock, Jeff Kilberg, thank you. Micro Strategy, MSTR, down 11 percent. Today. Right now. Wonder how much that is from the recent highs now, which we're back in November, by the way. Maybe we'll get Jeff on tomorrow to talk about it. Yeah, maybe 40 percent, last check. Let's get to Pippa Stevens, as mentioned for the CNBC News Update, PIPA.

Hey, Kelly, moments ago, New York appeals court denied President-elect Donald Trump's bid to delay the Friday sentencing in his criminal hush money case. Trump's legal team argued he is already protected by presidential immunity, so cannot be sentenced, and said his conviction should also be thrown out on the same grounds. Trump was found guilty on 34 felony counts for falsifying records in an alleged scheme to cover up an affair with adult film star Stormy Daniels. The Republican-led House passed its first bill of the new Congress today, tightening security at the border.

The so-called Lakin Riley Act is named after a 22-year-old Georgia nursing student who was murdered last year by an immigrant who entered the country illegally. The measure would require federal immigration authorities to issue detainers and take custody of people in the country illegally who commit theft-related crimes, including shoplifting. And folk singer Peter Yarrow died today four years after he was diagnosed with bladder cancer. He was one-third of the 1960s trio Peter Paul and Mary and a co-writer of the group's most enduring song, Puff the Magic Dragon. Peter Yarrow was 86 years old. Kelly, back to you. PIPA, thank you very much, Pippa Stevens.

Coming up a CNBC investigation into what happens when the Silicon Valley dream of big payouts for early investors, well, when that doesn't exactly pan out. Power Lunge is back in two. All right, welcome back. It is time now for another CNBC exclusive, and this time it is the more troubling side of startups. The Silicon Valley story most insiders like to promote has founders and investors teaming up to launch big ideas. And when it works, making millions or even billions of dollars, that's great. But there's also a darker side.

We rarely get to see when startup founders and financial backers clash, going to battle over things like control, money and reputation. John Fort knows that market as well as anybody, and he joins us now with more. Brian, this story is exactly that kind of battle. It's rare the story is because it was exposed in court, captured on camera. The characters are probably going to be new to you, but insiders tell me the plot that unfolds in this battle, all too common. Here it is. At the center of this battle, the startup, Top Top, short for Top Talent. It connects companies with highly skilled freelancers.

In one corner, founder Tasso Duval. I served a Top Talent in 2010. In the other corner, financial backer Dennis Gross. I was also giving them a million dollars at a very fragile point in their history. More than a decade ago, the two men were on a mission together to turn the tiny startup with less than 50 employees into a powerhouse. Years later, Duval says TopTal has about 600 employees. By 2021, court documents show the company was generating more than $200 million in annual

revenue and was valued as high as $3.6 billion. In 2023, the two men became opponents in a courtroom. Behind the scenes, Gross orchestrated what he called a cancer patient strategy. What do you think of these? Making it so crippled that they could steal the company. So this is just a taste. We'll have more in just over an hour on overtime, and you can go to CNBC.com anytime to watch the full story.

It includes courtroom footage, evidence that gives an inside look at this saga. But look, Taso Duval, it's a high school. dropout starts this company as a single member LLC. He controls it, borrows some money that's supposed to convert to equity, right, if he raises around. And the company's growing, but the company's profitable. And he decides not to raise around. So he pays a million dollars back with interest. And Dennis Gross feels like, I help this young company. I deserve a stake. So he starts a rival company secretly, gets the former chief operating officer as part of that company, puts out information about Duval and TopTal that's negative, and then poaches key employees. And all of a sudden, right,

he's competing without saying exactly how all of that unfolded. Tasso sues him wins in court. Dennis Gross is appealing, but we get to see how it all has played out. I can't imagine being like, no, I don't want my million dollars. I'm going to go start a company and go to all of this trouble. I mean, that's a ways to go. That's really interesting. John, thanks. Look forward to it.

Yep, see you next hour. We'll sit down on the other side with the owner of one of New York City's oldest and most exclusive restaurants. Talk the pulse of the consumer and much more. You've probably had their pasta sauce in your pantry right now if you're doing things right. Ken Squire is a regular there too. Power Lunch will be right back. Welcome back to Power Lunch. We have a very special next guest.

who does have a pulse on kind of the high-end consumer and restaurant business, but also made one of the most successful sauces. Well, that's just my personal opinion. He runs Rios, which is widely considered one of the most exclusive restaurants in America. They've been serving classic Italian favorites at their 10-table restaurant in East Harlem, New York, for nearly 130 years now locations in Los Angeles and Miami. Those are okay, but they're not the original. Frank Pellegrino Jr. is the co-owner of Rios.

Can we tell people, Ken, that you're a regular? Frankie, can we tell people he's a regular? We just did. Yes, you can. And thank you so much for having me here this afternoon. It's a real honor and privilege. And all that work is done up by our family, not just me. So my cousin Ron, who's my partner, we got Joe Dino in the kitchen and Tommy and everybody out there who's

dedicating to delivering the best of what it is that we do. And you sold off the name, I want to be clear. So what the sauce that got sold. Which I'm obsessed with. By the way, everybody is, and so is Campbell. And so is Campbell's super paying a couple billion dollars. You're still running the restaurants. And, you know, I'm a big fan of a good friend, Tillman Fertita, who's a huge restaurateur.

I love the lunch and power lunch. What's it been like running a restaurant post-COVID? How have things changed for you? Even at rails. Well, one thing has changed remarkably. The new 8 o'clock reservation is 6 o'clock or 7.30. And that's a trend that we've seen in every region that we're in. whether it be in Los Angeles, Miami, and especially here in New York.

Now, in New York, that helps us out a little bit because then we can squeeze in an extra little table here or there for dear friends like Kenny and, of course, yourselves. So, Ken, will you quickly tell the story? Because I think people think, well, Ken, he's on CNBC. Of course he'd get a table here. No, no, no, no, no, no, no, no. And I think he's like, that's not how this works. How did you become a regular? So I was lucky enough to go one time with Frankie was at the bar, and Frankie,

it sat us like he said, they were able to fit somebody in. How long ago was this? This was in 1998. And we had a great time. It's like you're getting served by family. They're all literally family, and they treat you like family. So 25 years ago, you show up at the bar and you think maybe I have a chance. Well, yes, yes.

And, you know, Frankie had said come to the bar and, you know, we'll see what we can. do. And we ate, and it was just incredible. And we thanked him the next day. And, you know, we were invited back and we just made friendships. It's just, it's just a genuine. Frankie, is this not a handwritten, hand-kept list of some kind of, like, how far in advance? Are you already booked for the entire year for 2025? Well, I think the true reason for the success of Ray, I was on 114th Street and Pleasant Avenue is that it has remained the same since the turn of the century. And what is a paramount, concern to us is our guests and their satisfaction and their well-being.

You got to keep in mind it's ten tables. The kitchen is wide open. When you walk down those first four steps, you see Dino in the kitchen. Back in the day you saw my uncle Vincent, my aunt Anna, or even my father and myself. And so it was a small little team. So my dad would go take the order. I was the bus boy. Order gets passed to me.

I go make the appetizers for the guests who've been coming there now for. 50 years already and I'm 13. They have set tables. They have set tables. Yes. Not that I would know. There's not like a reservation. It's like you have a table and a time. Yeah, it's, yes, that is correct. I'm told. Yeah. So like Kenny, you do what? Quarterly's now? Six.

Yeah. So by his by much. I know my reservations for next year. The most powerful people in the world watch this network. And a lot of them. I mean, these are women and men who are used to getting what they want and what they want to do is to go to your restaurant, Frankie, and they can't get in. What's your advice to them? Patience, perseverance, and persistence.

And comes sit at the bar. And goodwill. But there's another alternative here, and that is the sauce. They're not going to go buy the sauce. But, Brian, one thing that I think is getting lost here, we talk about exclusivity and billionaires that can't get in. And it's more out of loyalty than exclusivity. That's right.

They're loyal to the people that have been eating there for 50, 60 years and their families. And they're not going to let the billionaire or the celebrity in. kick one of those people out. By the way, I like that. That's great. That's great. It's why you should be. That's how it should be. We will never displace our guests. Those are the people who made and helped us make what Reyes is today. And that same philosophy applies to our food products as well and the sauce. And you're going for the indefinite future? I mean, there's no end line to this insight.

We've been so blessed to be here for 130 years. We're hoping to be here for at least another 100. if the heavens so deem it to be. Well, maybe sometime in the next 100. Maybe I'll show up. I don't know. Hey, in a worst case scenario, you can come over to my house and I'll cook for you. I'll make it at home. You make it at my house.

Now we're talking. Yeah, we might be able to do something. Thank you very much. No, an honor. A privilege to be here. Thank you so very much. Thank you, buddy. All right.

Well, Meetown, the ability to pay players has changed college sports forever. Maybe. Alex Sherman sat down with Eli Manning, and we'll talk about what they talked about next. All right, there is a gigantic winter storm. I don't mean hitting now, because we know a lot of you got hit, but I mean later on this week, check this out, Kelly. Dallas, Texas could get a foot of snow just in time, by the way, for the college playoff football semi-final between Ohio State and Texas.

It's happy to be playing the Cotton Bowl, which is in Dallas. Now, storm aside, this new college football playoff format bringing in millions more dollars for these schools and new rules, allowing the players to get their cut has changed everything. And maybe not for the better. A new CNBC sport videocast, Eli Manning, give his take on the changing face of college sports. A little bit worried, and I'm fine that players are getting, you know, paid. And this is a big business. And college football is making tons of money. the players, you know, deserve to be rewarded.

But just the fact that, you know, the easy transferring, and basically that, you know, each player is a free agent twice a year and can negotiate it, I think it's, I feel that there's not a whole lot of loyalty to your college, to your coach, to your school. You're maybe not picking a school based on it being the best fit for you, or you like the teammates, or you like your coaches, or you like the campus. It's all about who maybe is paying the most money and is moving around each year to chasing money. And that's not the idea of sports.

That's not the idea of college football. Wow. Let's pricking the man who did that interview with Eli Manning. That is CNBC's Alex Sherman. I couldn't agree more. A lot of people would disagree, but it's a big interview, Alex. Yeah, you know, I think Eli Manning spoke from a fan perspective, which is interesting because not only was he a high-profile

college football player once himself. But his nephew, Archmanning, is actually currently a college football player, sort of going through the process. And I asked him during that interview, if he's watching. And he said, of course, I'm watching. You know, I'm passionate about the game. I'm passionate about Texas where his nephew was playing. But I think he speaks from a general sentiment of concern that many longtime fans of college

football are now kind of going through mentally, which is that they still love the game. They still love their teams. They're excited for an expanded college football playoffs. But at the same time, this idea of the constant transferring and payment of athletes, it just rubs people the wrong way. And I think concern is the right general word. Yeah. We can watch the whole thing at CNBC.com slash sport.

Great stuff. Alex Sherman. Can we say Eli Manning? The connection? Oh, okay. Forget it. No, we don't know anything about him. But we love him.

And I think he's right about all of this. But what do I know? Ken, appreciate you joining us for a great hour today. Ken Squire has been our guest host all hour long. All right. Thank you for watching Power Lunch. Closing bell starting.