Yet Another Value Podcast - Evan Tindell sees value in $TME

Episode Date: November 15, 2021

Evan Tindell, CIO of Bireme Capital, discusses the value he sees in Tencent Music (TME). Key topics include why he's not worried about TME's controlling shareholder or VIE structure, and why he thinks the stock is significantly undervalued.My Twitter thread on TME: https://twitter.com/AndrewRangeley/status/1458813448217935874?s=20Bireme Capital's website: https://www.biremecapital.com/disclaimer.htmlChapters0:00 Intro1:05 TME Overview1:40 History of shorting Chinese reverse merger4:30 More background on TME7:55 How similar is TME to Spotify?20:00 Why is TME the best way to play the current panic in China stocks?24:30 Can we trust Tencent as TME's controlling shareholder?28:15 The VIE structure risk35:30 How did TME come to be so dominant in Chinese music streaming?38:10 TME's cash rich balance sheet43:00 TME's valuation49:00 Discussing Spotify's valuation in relation to TME55:50 What risk to TME worries Evan the most?57:40 Is Evan attracted to messy ownership / control situations?1:03:30 Brief discussion of Cogeco's current situation

All right. Hello, and welcome to yet another value podcast. I'm your host, Andrew Walker. With me today, I'm excited to have Evan Tindall. Evan is the CIO of Beir. Byron. Tell me, tell me, you told me before and I forgot it. Barum Capital. Evan, how's it going? I'm doing well. How are you? Hey, I'm doing great. Thanks so much for coming on. We're excited to have you on. Let me start this podcast the way I do every podcast. First, a quick disclaimer. Nothing on here is an investing advice. Do you really want to take investing advice from a guy who can't even pronounce his guest's firm name, but just remember nothing needs investment advice. And then second, a pitch for you, my guest, I think you're easily one of Finchwitz's top 100 former poker players turned professional investors. But, you know, we've swapped notes and thoughts over the year. I find you to be a really

thoughtful guy. You bring that poker player, hey, I'm looking for an edge. I'm looking to think rationally. I'm looking to think logically, think to markets. And I think that's going to shine through in this podcast. So excited for our discussion. that out the way, let's turn to the stock we're going to talk about. It's a little bit of a different stock than I think you've generally looked for, but there's all the makings of what you look for here. The stock is 10 cent music. The ticker is TME, and I'll just flip it over to you. Why are we so interested in TME? Sure, yeah. So this is actually the first time I've ever gone long a stock with the business in China. I actually spent a, we didn't actually talk about this before, but I

spent a whole year pretty much spending most of my time figuring out which of the Chinese reverse mergers to short. Which did you end up shorting? Oh, so many. I don't even, yeah, so many. When you look, I can remember all the figures. Let me sidetrack this for a second and ask questions. You know, Chinese reverse mergers, a lot of people made a lot of money on it. And these were, you know, I don't use that word lightly. A lot of these were just out, out and out frauds, right? but a lot of people made a lot of money on it. And I look back on that and I wonder, if that happens in today's market, how many professional investors would have gotten, you know, kind of carried out in a body bag? Because I think of the meme trading in, especially in January and February. And I think of these Chinese reverse merger stocks. As soon as the short interest went up, I feel like you would have seen retail traders just trying to send shorts in a body bag. And you even saw this with like Tal Education and a couple of other things that got squeezed into. 2020, 2020. All of them ended up being pretty much, I won't use that for it there, but they were very shady. And people got carried out in body bags because people were just

gamma squeezing into the moon. Have you thought about that? Yeah. I mean, so Muddy Waters is the research firm focused mostly on shorting, or originally it was just Chinese stocks. Now they knew a little more stuff in Europe, although it's still kind of Asia focus. They were putting out a lot of the research back in the day that kind of was showing, you know, how fraudulent some of the companies were. And so we, we followed them and they, you know, a lot of their research is what got us interested in the space. And so, yeah, they've been, they were short GS. The perfect example is they're short of GSX. Like if you pull up a chart, I mean, it went from, I actually talked about this in some of our letters. Well, the tickers go to now. Yep.

But it went from, it went from like, I think they started calling it a fraud at the summer of 2020-ish. Yep. And it went from 30 to 130, you know? And so, yeah, I mean, if you're the type of like we usually, I mean, like my firm, like we short things and we put on like, you know, 2% positions, you end up having to cut your losses at some point, right? Because it gets, it gets too large and you just can't be having, you know, you can't be having like 8% short positions in one stock. At least that's not how I operate. No. Yeah, you can get crushed. for sure um but uh yeah so who knows i mean it's a perfect example like exactly like the craziness that can go on in today's market it didn't have things that didn't quite happen like that back in 2012 yep yeah i know i agree with you it's just something that i've been percolating as i think through shorts because i very rarely short anymore and this is one of the reasons you know the go-to example you gave is perfect i remember i bought some puts on it and some of them paid off some of them didn't but i remember just being that this is an obvious

and it's tripled on me, like, I don't, I don't see why I'm even playing the fraud game at this point. But anyway, let's go back to TMA. Sure. Yeah, yeah, yeah. So, right. So I always had a little bit of a distaste for anything related to China because of my experience with the Chinese reverse mergers and just like, you know, I'm the type of guy that I'm sort of mostly a guy that focuses on like statistically cheap stocks. Like I like to fish in ponds that I think have where the whole pond is likely to outperform, you know, over time with, you know, the primary example of that being statistically cheap stocks, although that has, that strategy, just buying statistically cheap stocks, obviously has done terribly over the past 10 years, but that's kind of how I think. And so,

like, being invested in Chinese stocks historically has kind of been the opposite of that. It's just fishing in a pond where there's landmines and fraud and, you know, so I never, I never touched it from the long side. But with the sell-off in all of these names, in 2021, I started thinking, you know, maybe it's time. Maybe it's time to take a deeper dive on some of these companies. And I started looking at some of the ones that were down the most and that were the most interesting to me in terms of the business models. And then, you know, I was familiar with Tencent music because we've owned Bulleray for a long

time and their largest asset these days is a stake in UMG, which they got spun off from Vendee, which I know you're well aware of that story. But the reason why universal music is so, well, we can get into the reason why Tencent is so advantage. But, you know, I was just aware of Tencent music because of that relationship. And they actually, they actually own a piece of, I think they own, they net own like, you know, two percent of UMG actually, Tencent. I think that's right. And they own a little bit of Spotify. Spotify and Tencent Music did a little share spot, which for a while when Tencent Music was a rocket chip and Spotify was flat, Spotify would always be like, this is why we're not buying back our stock. Look at the investments we made in

10 cent music. And now Tencent Music's down and Spotify's up and they're buying back stock. It's funny. You mention that because we can talk when we talk about margins, if we talk about margins, like, you know, I think it's, I think Tencent Music should be able to do at least as well as Spotify. over the long term. And actually, if you look at, like, I was reading a letter from a Spotify bull who's made a ton of money on Spotify. And in one of his letters in 2019, he wrote, you know, and with our Spotify investment, we get a nine, I think it was at the time, nine percent. I forget what percentage it was. Yeah, it was a nine percent position in Tencent Music, which is worth, you know, two billion dollars today. And we think it's going to be worth a lot more.

And fast forward to now in Tencent's down, like, Tencent Music is down like 50 percent, despite the the business having grown. And that's actually why I think it's so interesting. You know, like when it's first started trading, it was worth like March of 2019. It was worth like almost $20 per share. And today it's trading at eight something. Actually, yesterday was trading at eight.

Today it's like $870, which I think is, I'm going to give you all the credit there and bumping up. Actually, no, the credits to me because people knew that I was going to talk about the stock. So then they got really interested in buying that stuff. Yeah. I want none of that credit. I never try to pump stocks. I've never heard of my best. So just you take all of it. But you actually touched on just about every point I want to touch on this podcast, but I want to dive deeper in them. So let me start with first question. You know, I had, I was aware of 10-cent music because I follow Spotify very closely. It's one of my favorite companies to think about. I always debate how big my position should be there and stuff. Because I just think that the company is a killer, the Cia's color and everything. When I was aware of 10-cent music because of that, my first thought was, oh, 10-cent music, Spotify of China. Easy done. That's how I mentally model. When I was prepping for this podcast, I was really surprised. They have social revenue out the wazoo, karaoke at. They've got

lots of, you know, in China, the little gifting and many transactions are very popular. And they make tons of money on that, which was very surprising for me, much different than Spotify. So if I had just said to you, hey, Evan, 10 cents, Spotify of China, how would you respond that the business is different and similar in everything. Okay. Well, the first thing is Tencent is a different company. This is Tencent Music. Sorry, I meant Tencent Music.

Yes, yes. That is a very good. But, yeah, so they have two businesses. And today, 70% of the revenue comes from essentially virtual gifting in the online streaming and karaoke business. Now, that business has grown a lot over the years. It's like a $3 billion revenue. $3 billion U.S. revenue business.

And it's a pretty substantial margin business. It's probably like, you know, high teens are 20% EBITDA margin. You know, they have to pay the creators a decent cut. But at the end of the day, it's, you know, it's a pretty good business. However, it's increasing competition from Duyan, which is the TikTok, This is bite dances TikTok-like app in China. Yep. As well as Quaisho, I'm sure I'm pronouncing that wrong,

but just like a bunch of other streaming platforms now in China that have like, those two both have, you know, 400, 500, 600 million MAUs in China and are sort of, you know, putting some competitive pressure on the social entertainment business. So that business is not like Spotify at all. It's more like Twitch or it's more like, I mean, it's more like TikTok live if you ever watch. I don't know if you use TikTok, but I can get very addicted to the phone app. So I generally try not to insult any of them on my phone. But yeah, it's interesting.

Yeah, so I watch a little bit of TikTok. I mean, I look at TikTok a lot and a couple like TikTok live people I look at. And yeah, they're getting gifts all the time like like rocket ships are flying across the screen, which is like, you know, a certain amount of TikTok tokens. Yeah. And so, yeah, so TikTok is a big competitor for them. But I, but what's interesting about TME is the is actually the Spotify like business. I think that that business alone probably supports the market, the whole enterprise value of the company, which is like, you know, on the order of nine billion U.S. dollars today, after, you know, where the stock is. And that's netting out the cash.

And so this business today is 600 million users, which is basically flat because it's like such a high percentage of, you know, just the internet market in China, right? Yep. It's got one major competitor that has like 150 million users. It's Nettys, Nettys cloud music. But they're the dominant player, right, in terms of users and revenue. it's got one one billion u.s of subscription revenue which is up like three x from a couple years ago and only like 10 or 11 percent of their users pay anything which is unlike Spotify where you have 40 40 percent plus of users pay yep right and the reason why no one paid is because

historically they i mean so go back 10 10 years and no one in trying trying to is a few years behind us in terms of willingness to pay for for music yep so you go back 10 years and people didn't really believe that people wanted people would pay for access to music so you could stream anything for free basically and they didn't have you could like on Spotify if you're on this free version there's a ton there's a lot of ads you can't just like unlimited skip you know yep you can't like and you can't um there's basically all these things where they're trying to get you to pay right But TME's app, QQ Music, and the other ones, they didn't have these features. So basically, the only reason why you had to pay was if you wanted to download all your music.

That was like what was what you had to pay for. And so the number of paying users was like 3, 4%. But in Q1 of 2019, they started putting some songs behind a paywall, so they were premium only. And, you know, right now that's at like 25 or 30% of listening hours. are of music that is like premium behind a paywall um you know i mean they saw the number of subscribers that apple music has right and they're like oh this whole thing is behind a paywall like yeah we can we can just do this and people will pay for it i saw the thing where they put music by into paywall to try to get people sign up for premium and i was just curious i don't know how do they decide what

music to put behind paywall do they have data that says it does it have to be 10 cent own music that's actually that's actually a great question i have no idea um no worries yeah i have no idea how they decide what goes behind the paywall. But regardless, it's driven the, it's driven the number of paid users from, you know, three percent of the user base to over 10 percent of the user base. Within three years, right? So they launched it. Yeah, like I'm looking at the numbers in Q1 2019. In Q4, 2018, it was 24 million paid users. And today, it's 71 million paid users. So like literally every quarter they're adding five million paid users like clockwork every quarter i mean first they have a weird they have a weird calendar thing where it looks like it falls in q4 but like on average they're

just adding five million paid users every quarter um and the the you know the subscription revenue there has gone from uh yeah like 400 million to a billion so it i mean i i don't see why as they increase the, you know, the triggers to, you know, to as an increase, like, the friction and what's behind the paywall, I don't see why that doesn't go up to 30, 40, 50% over time, like, to up where Spotify is. I mean, yes, it's in China versus, like, Western Europe mostly. So, like, the price per subscription is going to be lower. But right now, the average price is nine R&B, right? So it's like, it's like you're talking about $1.50. It's basically on, like, a GDP-adjusted basis. I think it's cheaper than like a Spotify subscription for the average like Chinese

consumer. So I don't see why the pay the paying ratio won't be, won't be comparable to Spotify's over time. And if that happens, you're talking about a, you're talking about a four or five billion dollar subscription business and a nine billion dollar enterprise value right now, saying nothing about the social entertainment business, which will continue to throw off cash. Yep. And I just don't see how that can be the right price if they end up getting there. And the frequency, like just the consistency of the growth and paying users in the

online music business. And like if you just look at a chart, it is just really impressive. And I just don't see how that can be the right price if they grow to that size. And meanwhile, yeah, the social entertainment business is going to continue throwing off hundreds of millions dollars in in profits in in the meantime and good and one other thing the most so besides like this like you know clear arc of growth with the paying ratio that's just you know going up and up and up every quarter um they have some interesting they have some interesting advantages over Spotify in terms of the structure of the Chinese market so um one interesting thing

about universal music is the labels have a lot of power over Spotify. Yep. Because, you know, 70% or whatever of listening hours are of the label's content. Yep. And Spotify in a lot of countries in the U.S. and in Western Europe, they have some pretty formidable competitors with YouTube music, Apple music, Amazon music. And so the labels can pretty credibly say, I mean, they're not going to, they're not really going to cut off Spotify, but they can say, you know, you know, they can say to Spotify, you have to have our content. And we can go to Apple Music if you were to die tomorrow, like that would suck for a bit. But, you know, if you were to die tomorrow, we can go to Apple Music. It's a legitimate. It's a threat that will probably never,

it will never be realized. But it's legitimate enough that they get a pretty big chunk of Spotify's revenue, right? Um, whereas in China, 10-set music has 70 or 80% of the paid users. And the labels content is only like the top five labels content according to the annual report is like 20% of listening hours in China. So top five label content is the, so if it's only 20%, who's the rest? Because as you said, those stats are pretty much flipped elsewhere. So is the rest just unlicensed content where people are going? I think it's, I'm actually not sure. I think it's a lot of smaller like Asia-focused labels. Okay.

And some of it is, yes, some of it's probably unlicensed. I mean, I know that Tencent has their own, you know, they have their own, like, you know, kind of like, will be your label thing, I believe. They do. Yeah. They push that real hard in their means calls. Yeah. So they, you know, they have that where they're.

And interestingly, and that actually can get us into some of the regulatory stuff. So originally, Tencent music was the sole, was like the exclusion. like master licensor for all the labels content in China and that actually that relationship got dismantled by the government by during the recent crackdown yeah just kind of interesting and my interpretation of like what was going on there was the labels basically saying you know we don't necessarily want to have to sue people in China like let's just let 10 cent worry about like the you know like we'll let we'll license to 10 cent they'll pay extra because they're going to let they're going to license it back out and if someone if some some app pops up and

is using pirated content we'll let 10 cent sue them because you know they're going to be able to navigate the legal system better than we are that's my interpretation of what was going on there so we talked about a lot of things and i'm going to circle back a lot of it but i just want to one thing one thing i thought was interesting you mentioned 10 cent has their own label and spotify has been very careful not to encroach into labels for a lot of the reasons you mentioned, right? Spotify might have a third of the U.S. market, but that's only a third. Tencent's got 80% of the, in the U.S. Spotify has a third, and the labels control is 80% of music listening or something, right? In China, Spotify, Tencent music has 80% and the labels only control 20%.

And when you get that big difference, Spotify can't have a label because if they did the labels would go ballistic. And Tencent can. And I just thought that was one really interesting thing. thing that shows how power dynamics can flip where if you control enough of the market, you can go and just disintermediate your suppliers. Whereas if you don't control enough, that was one thing that was really interesting to me. I just wanted to harp on for one second. But let me back up and I'm going to ask lots of questions on everything you just covered in there.

Sure. The first thing I just want to start with, we've alluded to it a couple times, right? Tencent music stock is down a lot, 50, 60%. A big part of that is from the Chinese, I'll just call it the Chinese crackdown, the CCP crackdown. You know, they've made noise about eliminating the VIE structure, which we're probably going to talk about in a bit. They pulled the Ant Financial IPO, Jack Ma, is he here, is he not? Like all this crazy stuff is happening over China. So I just want to zoom out for a second.

We can talk about all those risks, but why did you choose TME as your choice? I mean, we talked about a little bit of the Spotify, but, you know, Alibaba, Charlie Munger backs it. That is a great business that's available at a price that makes no sense if you look at their growth rates and stuff, right? That 10 cent, which controls 10 cent music, has some great game business. They're historically very good investors if you look at the game. So just why was TME your pick here? Yeah, so for a few reasons. One is, I think it's probably easier to talk about relative to Alibaba.

Sure. So they, first of all, it's actually down significantly more like if you look back to like you know early 2019 i think alibi was actually up like 20 percent uh and tense music is down like 40 percent so if you just look sort of um you know purely on uh you know what's what's down more and what could go up you know three four times it's a lot easier to see how tme can go up can be like a four five six bagger like you don't have to you don't have to think you know you don't You don't have to stretch the numbers too hard.

Stretch the numbers too much to see how they could go up that much. The other thing that I think is interesting is relative to a lot of operators in China, I actually trust Tencent as a controlling shareholder. And I don't think I trust Jack Maha. Can I pause there? You trust Tencent as a controlling shareholder, and I just want to note the difference. We're talking about TME, Tencent Music. Tencent is a different company, maybe the biggest company, one of the biggest companies

of the road. They are the controlling shareholder of TME. So when you say you trust Tencent, you mean you trust them as a control shareholder of TN. Right. I trust Tencent Inc. Yeah, the original parent company of Tencent Music. More than I trust the board of Alibaba. And I think that's fair.

If you look at Alibaba's history, I mean, they stole Ant Financial. from Alibaba. And yeah, I think that's 100%. Completely. And I remember looking at like Yahoo and over the years, you know, when the vast majority of its value was in Alibaba. And I just never got comfortable with partnering with,

with Jack Maa implicitly. And the other thing that I think is really interesting about having Tencent as your controlling shareholder is 10cent, the Inc. I think it's called Tencent Inc. Whatever. Just like Tencent Holdko owns like a hundred billion or more of minority investments in publicly traded companies across Hong Kong, the US, you know, ADRs, VIEs. So their and their investment in Tencent music right now is like, you know, like a five billion market cap or something. So the idea that, they would try something shady at Tencent music. First of all, it's kind of out of character with, like, the way they've operated their business for a long period of time. Like, for example, Tencent itself has paid a dividend for a really long time. They, you know, they weren't one of these companies that, like, immediately came to the U.S. Tencent to try to, like, arbitrage the

idiocy that U.S. investors were allowing with some of these Chinese, you know, these Chinese reverse murders. They were always listed in Hong Kong, which had sort of. of tighter controls historically. But they own like $100 billion worth of minority investments. Like the last thing they want to do is give anyone ideas about how to screw over like VIE minorities in like they, there's just no chance that they're going to start start, start you know, giving anyone ideas about how to be a poor steward of as the majority surehold. They just have too much riding on it in my.

That is an interesting thought. I don't necessarily, I do agree with you on the point that Tencent historically has treated minority shareholders. I think they've treated them pretty well, to be honest with you, versus especially if you compare them to an Alibaba or just a lot of other companies from minority shareholders. I don't disagree with you that I don't think they're going to start pulling stuff on TME, which is a rounding area to them. But, you know, I always come back to, are you familiar with Brookfield management?

Yeah. Bam. historically, one of my friends, I've invested in some of their minority subs. And every time I do, I just remember one of my friends when I was looking, he was like, look, Bam is a take under artist. If you go invest in something that they've got a control or semi-control stake, when things get rocky, they're going to tank the share price, and then they're going to buy out the whole thing. And three years later, they're going to IPO it for five times what they paid. And you're going to look there and you're going to have said, oh, but Bam's controlling shareholder,

they've got a reputation to protect. They're going to be fine. And they're going to murder you on it. And you're going to be sad. And every time he's actually, proven correctly. And I don't think 10 cents like that, but I'm just saying that always comes to my head when somebody says, they're not going to screw the minorities. Yeah. I mean, it's, but I think it's a little bit, to me, you know, like, like Brookfield, I think, tends to be the controlling operator of most of their stuff. Like, even their listed stuff, they usually have control over it. Most of 10 cents investments, they don't have control over. They do have control over this one, though, right?

Though they do have control over this one. I'm just saying like there are other people that have control over, you know, 90% or whatever, 70, 80, 90% of their investment portfolio. And they're in the minority position in the vast majority of those investments. Gotcha. I think that I think that that is likely. I mean, granted, they could just, they could just steal, they could just try to steal 10 cent music and just like, you know, figure, hey, we're going to do this to our minorities. but like probably no one will know that doesn't mean that someone else is going to do it to us but I just feel like that will put them in a different I just feel like they have a different

mindset with respect to that like they're not structuring everything as like they're they want to be in control you know like they're will the first time that makes total sense especially because a lot of times they'll do a startup business and then they'll merge it with a competitor business and as you said they won't take full control so they probably don't want people starting to think hey if you control this thing screw your minority shareholders up because as you're saying in a lot of cases, their endgame is a minority stake in a combined business. Right. And they have $100 billion on the line with trusting those sort of relationships. And most of those involved VIEs also. Yeah. So I think that that gives me some comfort besides. And the other thing that's

interesting is like 10 cent itself, the company is not a controlled entity. Yep. So like Pony Ma owns like 8% of the shares. Naspers owns 30%, but I think there's like some type of like non-voting agreement with their shares. I forget. But regardless, it's not like a controlled entity where there's one person that can just say, hey, I'm going to do this to benefit myself. Like if Pony Ma says, hey, we're going to steal 10-step music, like, okay, 8% of that value accrues to him. You know what I mean? Like, like 8% of whatever they steal accrues to him. And I just don't see the incentives being there. And then like there's some 10 cent music employees are going to own more

10 cent music stock than they own 10 cent. I just, I don't see the incentives being there for them to not like sort of treat the minority as well. That's perfect. Let me ask a related question. This is just a general China question, right? The VIE question. So all Chinese stocks that are that are traded in the U.S., domestically, as I'll call it,

they're structured as a VIE. Because China says, hey, if you're an external investor in a, basically you can't own stock in Chinese companies. Right. So all these do these complicated VIE structures. Every Chinese listed stock in the U.S. I don't think with any exceptions is a BIE structure. And that's always terrifying, right? Because as many short sellers have pointed out, one day China decides there was some rumors over the summer that China was going to decide the VIE structure was illegal.

And basically every share you owned, every China stock would go to zero. Or one day a company decides they don't want to honor the VIEC structure. and they can basically zero the shares out. So I just wanted to ask on the VIE structure, how are you looking at that risk? Yeah. So I think with regards to the company, sort of trying to use the VIE structure

to let them steal it, I think my comments about 10 cents would apply there as well because everything they own is, most of the majority of what they own is VIE anyway. That's perfect. So let's just talk to general. So my thoughts about what the government, yeah. So my thoughts about what the government

is likely to do. First of all, I don't think that the incentives are really there for the government to do away with the VIE structure in a way that zeroes out existing shareholders. So I know there was talk about changes to the VIE rules and making them stricter and not letting VIE companies IPO in the U.S. and whatnot, I don't know that it follows that the changes would have zeroed out shareholders. I believe my opinion is that if there is ever any changes to the VIA structure, it will be from the standpoint of, yes, let's rip up these VIE structures and let's provide a bridge to like just changing it into normal ownership. Because after all, like these rules aren't being like these rules about foreign ownership aren't mattering anyway like no one cares like

it's not negatively affecting the ability of the Chinese government to regulate these companies right like they're regulating the shit out of them and it doesn't matter that x% of 10 cent music is owned by us investors clearly like that doesn't affect their ability to regulate these companies yeah i i don't disagree you know i just i always did wonder if at some point if the trade like if the trade war between U.S. and China had gotten really bad, right? If China would have just said, hey, all VIEs are completely illegal and there's no going back on this. All VIAs are instantly canceled and international investors screw you, you know, I've always wondered if that was a risk. So the other interesting thing is the VIEs have actually been accepted by the Hong Kong stock

exchange for a long time. And, you know, if you, as a, if you're a investor in mainland China, You've been able to invest in those companies via the Shanghai, Hong Kong Stock Connect for a while, for years. So there's a ton of money of mainland Chinese people invested in VIE structures via Hong Kong that I don't really think the CCP has an incentive to just like transfer to the already. billionaire owners of the, because that's essentially what you're talking about in most of these cases. Like, yeah, the VIE contracts are ripped up. Like, Pony Ma and other, like, four guys who are the VIE owners would just be splitting, like, some, like, insanely huge windfall. And, like, politically, I don't really know if that's actually, like, the best thing, you know? And, like, it's interesting because it kind of flies in the face of the thesis that a lot of people have with regards to the regulations

where, you know, they say, like, well, they're just trying to tear down the, rich billionaires in China and make them less powerful like Jack Ma or whatever. But I mean, ripping up the VI structures would actually make them more wealthy. Again, I think you're right, though. You could always have the rip up the VIE structure and then the Chinese government comes to you and says, nice little business you've got there. Be a shame if we shut it down unless you give us all of those VIE proceeds or something. You could always run into that. But I do agree with you. I do agree. The other thing, the other thing besides just acceptance by the Hong Kong Stock Exchange, The other thing is if you look at, if you look at the regulations that the Hong Kong Stock Exchange has on VIEs, one of the things they require, they have like a long list of requirements with how the contracts have to be, have to be done.

One of the things they require is a plan for when the VIE contracts are no longer needed. And the reason that they have that is because the number of industries that the Chinese government regulates with respect to foreign ownership have. has been shrinking over time. So like in 2017, one count of the like the size of the negative list was 63 different industries. And today it's, today it's 33. And actually like if you look at the Chinese government like PR releases, they actually had for the 2020 rules, they were like, China liberalizes foreign ownership again. Like it's like they're like promoting it as like a positive thing that they're doing. And they actually removed, they removed the, um, the rules against foreign ownership of

investment firms and insurance firms. So, like, you can just go in and, I believe, you can just go in and buy like, you know, an investment firm in China. And it's like, you know, completely kosher. So I think, I think one day we're going to wake up and like the Chinese government is going to say, yeah, the VIEs are, you know, the net, the ban on foreign ownership in this industry just no longer applies. And they've already done that to tons of industries. That's interesting because at the height of the Chinese pessimism, I did hear from a couple of friends who are, you know, kind of China experts. They were like, hey, the market's freaking out, but they might be getting into this wrong. Like, it's not that China's trying to tear up the VIEs.

They actually might be trying to liberalize. Again, I don't know, but that is consistent with what my friends were saying. And there's one one other quick comment. The other interesting thing is that there are actually at least one VIE that trades on a mainland China stock exchange. So I don't know if you've heard of the company NineBots, but they actually are the owner of the Segway brand in the U.S. And they have like a similar like, you know, electric scooter like business that's non, that's not Segway. But they actually IPOed, I think in like, I think in late 2020 or maybe it's early 2021 on the Shanghai Star Exchange. And they're, they're, they operate VIEs.

Like so so VIEs historically have never been allowed in China, but this is the first one. And so I feel like my guess is that that was not done lightly and that, you know, it's just another move towards sort of liberalizing that structure. Perfect. So let me ask you a little bit about the history of this business. This business, Tencent Music, it was originally part of Tencent. I believe they merged it with a competitor, kind of spun it off, all that type of stuff. You mentioned they were four times bigger than their competitor.

I believe for a while Alibaba had a music streaming competitor. and Alibaba actually ended up shutting that music streaming competitor down, which kind of left the field open for 10-cent music. So I just wanted to go through a little bit of the history and how they came to be so much bigger and so dominant because I do think it's a little bit instructive. And I believe they launched the paywall service about a year after Alibaba shut down their music streaming.

So clearly they were looking at the competitive landscape before they put the paywall on. Yeah, I think they launched the paywall in Q1 of 2019. But, yeah, I mean, they actually got, they bought, I forget the name of the other, the other competitor that they merged QQ Music. I think it was like C&C music or something. It sounds about right. China Music Corporation, CMC. But, yeah, I mean, you know, through acquisitions, they came to own like all of the, it's not like they have one app that is dominant.

They have like the top, they have three out of the top four online music. apps, QQ, I think it's Ku'u and Kuo music. And actually, the regulator gave them a slap on the wrist fine for the acquisition of, I think, of the other competitor that was, I think, what the regulator said was that they should have, like, filed it with the competition czar or whatever, but they didn't. And I got fined like a couple million dollars or something. Could you imagine in the U.S. if like Spotify and Apple Music merge didn't notify regulators? And then a couple months later, the U.S. regulators is like, hey, that's going to be two million dollars, Mr. Apple and Mr. Daniel Eck at Spotify. You should have, you should have known someone no.

It's, it's, uh, I mean, obviously they don't care about a couple million dollars. It's a little bit ridiculous. They're just trying to make a point. And I'm sure, I'm sure Tencent probably was like, well, you guys never cared about this type of thing. So we didn't even know we were supposed to notify you. I don't know. Like, I don't know. like, I don't know how that, you know, I don't know what that decision was like back in the day. But yeah, it's pretty clear that they have a almost, it's not quite a monopoly. I mean, Nettys Cloud music has been, has been growing and like cutting into their subscribers a little bit, like the MAUs. But yeah, it's a pretty dominant market position that I don't think would be allowed in Western Europe or the U.S. Yep. Let's talk. So balance sheet here, right? The company,

I tweeted this out. I'll put my links to the tweets and the show notes and everything, all my tweets, which we've covered almost all the questions at this point. But one of the things that jumps out to me is the balance sheet. It's basically $3 billion of cash on their balance sheet. Plus there's a Spotify investment as well and maybe one or two other investments buried in here versus the total liabilities for the company. So not the debt. The total liabilities, which includes, you know, like accounts payable. We pay our employees every is less than $2.5 billion. Right. So this is a massive cash balance sheet. They're starting to address that with share buybacks. I think they did. 200 million in Q3, which is reasonably aggressive for a company of this size. Yeah, I mean, they have, they have a, they have like a $1 billion authorization, which is, you know, yeah, like a little less than 10% of the market capital. Which is starting to, which is great, especially at these prices, you know, it's nice to see a company down 60% actually buying back shares. But the balance sheet is still, it's not crazy out of line with Chinese companies, but when you see a company with this much cash in the balance sheet, your first thought is what the heck is going on. So how do you look at the balance sheet? How do you look at the balance sheet? How do you

look at the, what they're going to do with shareholder returns at the price this low. Yeah, I mean, they, uh, I think they bought 13 million shares in Q1 and 25 million shares in Q2. Uh, or maybe that was Q2 and Q3. I forget. Yeah. Um, yeah, I think that was Q2 and Q3. So, uh, you know, they're putting some capital to work there. I mean, the problem is when you have three or four billion dollars of cash, you kind of need to, you kind of need to, you kind of need to, do, or you kind of have the ability to do more than $250 million of, um, of buybacks per per quarter. I mean, it's just weird when the cash balance is such a large percentage of, yeah, of the market cap. Um, I mean, if it was me, I would love to see them just, uh,

you know, do a tender for, uh, you know, 10% of the, you know, for a billion dollars or two billion dollars. Of course, companies never do that. So, I mean, I don't know why I would expect them to. Can I just jump in here? I just want to explain it for, for, for, for, Listeners, obviously it's weird for a company to have this much cash on the balance sheet. But I think one of the things that would stick in both Evan I's head because we've got familiarity with Chinese companies is one of the old things with Chinese companies when there was a lot of reverse merger fraud going on was they'd have massive cash balances. And either the cash balance, the cash balance didn't exist or the reason they had massive cash balance is they were basically raising lots of cash from investors on their fake business numbers and everything. So they were just raising cash, raising cash, raising cash, and then eventually they'd take the cash or, you know, they'd say, oh, we're a fraud and people try to go recover and it was inside of China so external investors couldn't get access. So I just want to drive home. You know, when I said, yes, it is inefficient for them to have this much cash. But I think lingering in the back of my mind and probably the back of your mind, too, is that risk and that thought process just to drive back. Yeah, certainly. I mean, you've seen a lot of the Chinese, especially the Chinese reverse mergers back in the day, like the cash just wasn't there. Right. I mean, the business wasn't there either. um and so i mean that also happened with wire card right in germany um but what i but i that's

actually one thing i like about the way they're handling it like you know okay the buyback isn't as big quite as big as i like it obviously could be bigger um but at the end of the day i mean a lot a lot most of the of the frauds over the years have not um you know where there was fake cash like they have not instituted substantial buybacks yep like mostly they just you know, they just would make a big stink about how the fraud allegations were unfounded and then they would like slink off into the night, you know? And then six months later, nobody could find the CEO anywhere. Yeah. You said it's not a big buyback, but just to maybe push back on your point a little. I mean, as we speak, it's under $9 per share. This is an under $15 billion market cap.

And I think they bought back $350 or $400 million in shares so far this year, which 10 cents not selling and Tencent owns about 10 or 15% of the stock or something. So 400 million on 15 billion market cap, even smaller free float. It's not the biggest buyback we've ever seen, but it's certainly not small. And by Chinese standards, it's actually pretty impressive. Yeah, I mean, that's, that's, that's a good point. It's actually one of the things that makes me a little more comfortable with, you know, how they're how they're operating things and like confidence that, you know, we're going to be treated well as minority shareholders. It's like when you see, okay, stock is down 60%. What are they doing? Okay, they announced a one billion dollar

buyback at, you know, at pretty low prices. Then you say, okay, two quarters later, what have they done? Okay, they've done three or four hundred million of it. Like, like, let's go. Like, you know, it looks like this is a real, a real thing. Like, it's not all, it's not just like smoke and mirrors. Yeah, they could do more. But it definitely makes me feel good to have at least something substantial going on in that department. Let's talk valuation, because I think we've done a couple of short hands for valuation, right? Earlier you said, hey, This was at 20 a couple years ago, and now it's at eight. The stock's been hammered.

You said, hey, I think the Spotify like business alone could be worth the entire market cap, which would imply you're getting the karaoke business, which might not be the fastest growing business. Sorry, I said karaoke, the social business might not be the fastest growing business. It might be losing shares to TikTok, but guess what? Social businesses with that many users and that much revenue spit off an insane amount of cash. There's a lot of value there. So let's just try to quantify it. You know, how do you look at the valuation for 10-something music right now?

So, I think it trades at, I think it trades at like a high teens multiple of EBITDA right now. And the question is, you know, obviously the two questions are, where's EBITDA going? And where's where our profits going? Always a good question. Always a good question. Where are profits going? So, yeah, okay, let's see. Bloomberg has it.

24 times PE right now. Yep. And I mean, I think even if the subscription business, or sorry, even if the social entertainment business is flat and it declined a little bit in the most recent quarter, even if that business is flat, I think the, you know, the growth of the online music business probably goes from, you know, I'm just looking at this, like my notes, 5.6 billion R&B to like I have it at 40 billion RMB in in 2027, which is a combination of paying user growth, a little bit of R proof growth. And the question then becomes, you know, what are, you know, what are they going to, like what type of margins is that going to generate? I mean, historically, the social entertainment business did like a high teens, the overall business

did a high team's EBITDA margin. And there's a little more. competition these days in the social entertainment business. They increase the payouts to some of their creators on that end to try to like retain them competitively. The online music business, because it's so small, is actually not profitable right now. So that's been also a little bit of drag on margins as they're like been a little bit of a mix shift. There's also a separate story about how they're investing in long form audio. Yep. So they have 140 million. Long form audio is podcasting. I guess maybe audiobooks technically. Podcasting and audio books. Just so people can understand. Yeah, podcasting and audiobooks. And so they have 140 million users of that business

with 5 million paying users already. And they actually, they bought a company for like 500 million last earlier in the year. So they're investing in that. All these things have been a little bit of a drag on the margins in the short term. So the real question is, what's the real question in my mind is what is the margin of the subscription business going to be in the long term? Yep, yep. I think, given the dominance that they have in China, in terms of, you know, their control of the market, as well as the lower share that the labels have in China, I don't see how they don't do substantially higher margins than Spotify over time in that business, just because of the change in negotiating

leverage with the labels. And therefore, I mean, I don't see how it's less than like a mid-teens EBITDA margin business in, you know, once those revenues go from one billion U.S. to five to four or five billion. So that basically means, you know, so if they're doing, if they end up doing $5 billion of revenue in the subscription business and 20% EBITDA margins. That's a billion of EBITDA right there for an enterprise value of less than $10 billion today. And so when you combine that with the, you know, whatever they're doing in the social business these days, seven or $800 million, which gets knocked down to consolidate the level because of the unprofitability of the other stuff. You're basically going to have a $1.5 to $2 billion

EBITDA business in the long term, in my view, with really good economics and sort of a stranglehold on their core market and tons of good reasons why that should generate a pretty substantial multiple, I think. And so I think you end up with something that is, you know, in the range of, I think, you know, 10 times, if it's 10 times, if it's 10 times, then that's 15 to 20 billion, right, of enterprise value, which would be, you know, which would mean the stock would need to go, would need to like double or triple to get there. But it could be more, right? Because like, you know, if you look at where, if you look at where Spotify trades, it's like a $45, I think, billion dollar market cap or enterprise value

right, is that right? Spotify, I think it's a little over 50 right now. Is it a little more 50? Oh, okay. And, oh, yeah. So it's, yeah, 50 billion. I mean, I feel like investors there are probably thinking of like, I mean, you're a Spotify investor, so tell me if I'm wrong, but like two to 3 billion of EBITDA with like, you know, a 20 times multiple, like in the longer term. You know, it's tough because these are online businesses. The way, so the three most interesting tech companies to me right now, U.S. tech companies are Peloton, Twitter, and Spotify, and all of them are just, I think they've got huge potential, let's just focus on Spotify.

Sorry, I shouldn't have even mentioned it. For Spotify, I just look at it and I say, all right, they've got over 200 million monthly active users, right? How many businesses in the world have over 200 million monthly active users of whom over 100 million of them, they have credit card data, people listen to them for multiple hours on end, all this type of stuff? How many businesses like that are there out there? And how many businesses are there that are less? Pintzant music is one of them. Oh, yeah. We're going to, so Tencent, we're going to talk about the risk. Yeah, no, go ahead, go ahead. But for Spotify, I just think it's, look at that, think about all of the optionality they have, which I've mentioned it a thousand times,

but, you know, as they're moving into podcasting, to get podcast advertising, to get owners economics on the podcast. Like, I just, and I, where I was going with Peloton and Twitter are saying, I just think there's this massive right tail because they have so many users, they are by far the best product and the thing that they are playing with. Twitter is a little bit weird in that, but they've got some of users. And for Spotify, they play a little bit on hard mode because the people they can peat with are Amazon music, basically giving it away for free as part of the Amazon Prime bundle.

Apple music. Apple doesn't pay the Apple tax, whereas Spotify pays the Apple tax if you're an iPhone user. So they're really competing on hard mode and they're still winning. They're taking share, they're growing, all this sort of stuff. So if they're winning on hard mode and they've got all this optionality, you can just start dreaming of all these scenarios where Spotify, they don't compete on hard mode anymore, right? The Apple tax goes away and they compete on a level of playing field. Or they continue growing and all of a sudden they've got the most users and they're, you know,

I just see all of these optionalities for Spotify that it's just, and at 50 billion, again, And the argument for Spotify has always been Netflix 2.0. Netflix is a $300 billion company at this point, right? If Spotify is even half that triple from here. And I think Daniel is just one of the best people out there, but probably neither here or there for Tencent right now. Yeah. I mean, I think a lot of those optionalities exist for Tencent music, just constrained to the China market, which I think is very interesting. Agree. And on Spotify, they've got some optionality from all the social stuff that 10 cent music does. I was really impressed and they've got those optionality. But 10 cent, guess what? Tencent music owns 80% of the market. So they've probably got

options that Spotify can't even dream of because they're so dominant. Right, right. And of course, it's mostly restricted to China. I mean, the We Sing app is live in a few other countries. And they cite that as like, you know, one mode of expansion for the karaoke for the live streaming business. But it's mostly China-centric, which is limiting in some ways. But I think if you get past the, I think if you get past the China regulatory issues and the VIE issues and the 10-cent, you know, majority ownership issues, which, you know, admittedly took me 10 years to get over. Just a small issues to get over. You know, then you just see a business that, I mean, yeah, you can it's easy to just look at it and focus on i mean one one thing that um Spotify doesn't their

investors don't aren't super concerned about like next year's EBITDA obviously um and and uh 10 set music because they're posting you know significant EBITDA and like you can you can make an epa dot multiple their uh you know their investor base is a little bit less focused on like the the the right tail optionality and so um it's the classic thing you would hear among already public companies that had profits, they'd see, especially a couple months ago, they'd see the valuations, people were going with SPAC mergers and stuff, and they'd say, wait, we're bigger, we're profitable, they're smaller, and they're unprofitable, and they're going for five times the rate.

Like, I wish we were unprofitable, so people would slap a revenue multiple instead of an EBITDA multiple on us or something. Right, exactly. Yeah, I mean, you know, Spotify trades for five times, four or five, yeah, like almost five times sales. and TME trades for on an enterprise value basis, like two and a half times sales or something. Yeah.

And but they still have, and they still have all of the, it's interesting, they have all the optionality that Spotify has, and they actually have optionality within the core subscription business. Like it's not even, it's not even optionality. It's just like a chart that goes up into the right, and you just have to know that it's going to continue. Clear penetration. So we've talked about a lot of risks here, right? And most of the risks we talked about are more, because they're so dominant, the risk we've talked about are more on the corporate governance and regulatory side. Are there any risk either operationally or corporate governance regulatory-wise that we haven't addressed that you think we should have talked about?

I don't think so. I mean, actually, the most, what seems to me right now, given that I've kind of mentally gotten past and accepted, I guess, the VIE risk and the Chinese regulatory risk, it seems to me the biggest risk is actually competitive for them. I mean, yes, they're dominant now. But if you look at App Store rankings, like Nettys Cloud Music is actually number one in the app rankings last time I checked,

Really? Okay. And, and they're, you know, I mean, it's number one in the like download, like recent downloads, I believe, in terms of music. They've got 600 million users out of a billion people in China. So the issue could just be everybody's already downloaded 10. Right. Exactly. Yeah. So maybe maybe that's an issue. But of course, I mean, I feel like you still see Facebook and Instagram in the top downloads, right? So who knows? But yeah, it's, it's so competitively, I think, you know, there's a lot for like smaller competitors to shoot at. I mean, granted, it seems like Medi's cloud music is the only one that really has a chance to, you know, especially with Alibaba and some other ones shutting down their apps.

That's the only one that has a chance to compete. But there is a big thing for them to shoot at. And separately, separately they have lost some users in the karaoke and live streaming business, right? Like TikTok and Arduyan and Quaisho are like really booming. And it looks like they might be taking. away some users from from we sing. And therefore, and that's their main source of profitability in the short term. I mean, yeah, I can make a good argument about why I think the online music business has a high profitability in the long term. But for tomorrow, their profits are

actually going down a little bit because of the competitive issues in the social entertainment business. I think those two things seem to me the biggest risk. We've talked about a lot risk here. So now we've talked operational risk. We've talked social, the social side risk. We've talked regulatory risk, ownership risk, all this sort of stuff. Of all the risks we've talked about with 10-cent music, which one is the one that personally kind of keeps you up the most at night? It's what is the profitability of the online music business in the long term? Like I tell this big story, you know, I tell the story about why they should theoretically have more negotiating power over the labels than like a Spotify would have. But, but,

at the end of the day, even 30 or 40% of listening hours gives the labels a pretty good reason, a pretty good, you know, negotiating leverage in terms of being able to say, like, you can't really, maybe you can't really have a music app in China without those, without the labels content. And they could just say, hey, your Netis is a growing share every quarter. Why don't we just, you know, we can threaten to cut you out. And Nettis will be happy, happy to take this deal, and then you're done. So I do worry long-term if my story about the negotiating power really translates to double-digit EBITDA margins, which I think are likely, but, you know, I will say, having done a lot of work on Spotify and the labels, I actually think

they have so much share that the labels are going to be really over a barrel, given the share discrepancy between them and the smaller competitors and how little the labels own. I do think that's interesting, though, because I will tell you, you saw the Twitter thread I tagged you on it. People still did my DMs. The big risk I hear, the big risk I hear is the same with every Chinese stock, you know, corporate governance and VIE crackdown and all that sort of stuff. And it's just, it's interesting to me, you obviously have a very divergent view because your big risk is the long-term economics of this business. And the big risk that most people think about are the, are those other things. Let me ask a more general question real quick.

you know 10-cent music i know you're also invested in we mentioned boye which is a french conglomerate controlled by vincent boye some people think he's the carl icon of france or europe or whatever and then you and i've also talked about cojico which is a controlled a controlled Canadian cable company that i'm happy to talk offline or maybe we'll do a second podcast on this or something but that's three companies where i think most people if they looked at them for five minutes would say oh yes those companies are clearly undervalued but they're are controlled companies run by their controlled companies. And to some extent, we have varying degrees of control of how much shareholders will really benefit versus kind of the control shareholders

or if they're really going to do the rational thing, all those types of risk. So you've got three of those companies. I just want to take a second test. Is that the type of thing you normally look for? Did you just find three unique companies here? How do you look at that risk? yeah i think i think these three are you know out of like 10 to 12 stocks that we own are are probably the only three where um where this issue exists i think the rest of them are you know the rest of the companies we own are are not like controlled entities in this way but um i think a lot of times a lot of times the stories about like worries about control and how minorities are going to be treated in certain cases

they flow more from the, like, people, I think what actually happens is people get negative on the stock after it's been underperforming for a while. And then they use the control issue. And they use the control thing to like kind of tell a story about why they don't want to own it. Let me push back on that because Kojiko, right? Cojico had a offer from Altis and Rogers, which I think the offer was too low, but they could have negotiated, right? I think Altis and Rogers were both very clear, hey, come to the table and we'll give you, we'll give you a good deal more than this. And Kojiko just flat out refuse. Boyer, I think, probably not there, though.

I do think Vincent Boyer, it hasn't exactly been super shareholder friendly over his lifetime. But I do hear you on that, but there is some evidence that these guys have not exactly done, done the best, most profitable things for shareholders all. Yeah. I mean, I think with the Kodako angle is very interesting because, um, I don't know. I just like to think, I think with any sort of like non-control situation or where there is a, sorry, I mean, non-control is every stock I'm invested in as a 50 million AUM investor. I'm not controlling too many of the, I'm not controlling zero percent of the

companies that I'm invested in. But as, as while investing in companies that are controlled by other people, I, of course, generally see it as a slight negative because, you know, the likelihood of there being a major buyout is, or, you know, the risk of things that are adverse to your interest is always present. However, I just like to think of the incentives of the people that are operating it. And I think, for example, in the Kodrako scenario, the guy who is the current chairman, Louis Audet, Yeah. Is the, I believe, the son or the grandson of the founder.

Isn't it Loya Aday, like, the third or fourth? Am I remember that correctly? Maybe he's the, yeah, maybe he's the fourth, not the third. I'm not sure, yeah. Oh, you mean his name or the, or the... I think his name is Lueidae, the fourth, or third, and I think he's the third or fourth CEO. I can't remember for sure.

I think it's, yeah, it's something like that. And, you know, they, they see it as, you know, representing their, you know, the thing that their family created. And so there's some pride and keeping in the family and all that. But I think a lot of times those sort of issues can get overplayed in terms of the impact on the valuation. Like a perfect example is we were invested in Fox back in the day. And forever, you've heard that, um, you know, Murdoch will never sell and, uh, you know, he wants to keep it all in the family and, you know, his sons are coming up in the business and, uh, you know, he's got, gotten offers before and blah, blah, blah. Um, and then he woke

up one morning and was like, you know, what, I'm getting pretty old. Let's like, let's sell a huge chunk of this while we can get a good valuation. And then, um, you know, my, my one son can like, you know, go to that company and my other son can go off into the woods or whatever. And he ended up selling. And it's like despite the fact that, yeah, go ahead. No, I was going to, we could have the Fox discussion another day because I don't disagree with you there. Though, if you do think back to the Fox case, they would not talk to Comcast, right? And then Comcast came in and threw in a bid that was like 50% higher than what Disney's original bid was. And then Disney and them got in a mini bidding war, right? So I don't disagree with you, though. It took him much longer. And I think he could

have done a lot more shareholder-friendly things in the meantime before he sold. And even when he sold, it was really inefficient, right? Like, if you sell and then an obvious strategic buyer comes and offers you a 50% premium a couple months later, like, clearly you didn't do a nice job, a good enough job of shopping. And I think he wanted Disney stock and a semi-control, neither here nor there, we could have that conversation. But it's just interesting you chose that case because I'm familiar with it. And Dow Jones right now, or News Corp right now, he controls that and people are still having the same, hey, you know, is this guy going to mind? It's just a really interesting case that shows every story, there's like four different sides

to it. Right. And I think, I mean, honestly, I prefer to own, I like owning things that are undervalued now. And yes, it hasn't been, I mean, obviously any stock that you can buy right now has not been sold yet, has not been like sold in it to a competitor yet. So it's kind of, you know, just part of the equation. But I like owning things that are obviously cheap and where there's like obvious bidders for it in the long term. Okay, yes, the CEO currently is like, no, no, no, we're not going to sell. Like, please don't give us better offers. But in the long term, like if he's in his, if the guy's in his 60s or 70s, I forget how old Louis is.

I think he's like late 60s. In the long term, I don't think any of his sons are like running the business. Like at Buller, this is not true at Bulleroy, but it is true at Kojiko. his sons are not running the business Rogers continues to own 30 plus percent of the shares and Rogers is another one with a very interesting and then Rogers has a whole other has a whole other story but like Rogers is definitely wants to buy cojaco one day right like they've been they've been at this for fucking decades oh they they do but I think Rogers is buying Shaw and we're probably getting way off track here but I think Rogers buying Shaw is them throwing the towel in on cojiko and I think

what Rogers does with the cojiko stake will be interesting because I wouldn't be surprised to see them sell it or dispose of it. Could Kojiko try to buy the whole block, which would be a bonanza for shareholders? I know some people are worried they're just going to sell it on the open market and hit the price for six months or something, which is probably opportunity, but that's an interesting one as well.

The thing is, though, like this combined Rogers shot entity, I don't think the math works on it, that being like them throwing in the towel, just because like the combined entity will have what's like the, so the EBITDA of Rogers is $5 billion. and EBITDA of Shaw is like $2 billion. So it's like seven, but like the amount of free cash flow

that that company is going to have, it won't really take that. Like in five years, they can easily buy Cochrego. I don't think it's a financial capacity situation. I think it's a regulatory situation where they're struggling, they're going to struggle to get the Shaw deal

over the finish line. And I think it's kind of like Comcast and Charter. I think Comcast and Charter should be allowed to merge. And not frankly, I think they should merge. but talk to either of them and they'll be like, yeah, we don't compete with each other, right? Like our cable systems are in New York, their cable systems are in Philadelphia, but guess what? Regulators aren't going to let us merge because we're just going to be too big, and I think they'll run it step.

Last two more quick question that I'm going to let you go. Things that are trading under value. It strikes me, you know, it's always trading under value, some part of Liberty Media. Are you in any Liberty Media stocks right now? I am not. I'm not. I've always watched the, you know, that business unfold over the years. why what's what sort of most catch me oh i'm going to tell foe gregg mafay and foe gregg maffa's going to be mad at you and you're going to have to deal with the wrath of that guy and i

don't know deal with his wrath yeah it's hilarious because i if you looked at my bloomberg right now i actually use one of his uh i use his his alter egos uh f a like custom custom sheet on my bloomberg it's actually stuck i won't reveal the name of the alter ego but it's every day on my bloomberg i see that his alter ego's name uh we'll have to talk about that offline And then, hey, just podcast listeners are you. We're doing a Liberty Media Day is a week from today in New York. If you're up here, I don't know if I, where are you from? I'm in Philly.

Okay. You're in, oh, when I said Philly, you've got the Comcast. If you want to come, me and a bunch of Liberty investors are meeting up after, so that would be a lot of fun. And that would be great. But last question, which wraps up nicely, where can people find you if they're looking for a little bit more? Yeah, my Twitter is at Evan Tyndall. and otherwise Byroom Capital, you know, we write stuff on the blog there, ByroomCapital.com.

I want to spell it out for Byram out for people just in case they were wondering. Sure, yeah, yeah. It's B-I-R-E-M-E. And I assume that your listeners are smart enough to spell capital. I'm hoping so. And I'll have a link to Twitter account and to the website and the show notes. So people who want to follow up, you can follow it there. Evan, it was great having you on. We started the Kojiko talk. Maybe we'll just have to do Kojiko or another one, but looking forward to this time. And thanks for coming on. Yep, thanks, Andrew.