Yet Another Value Podcast - Maverick Value's Ron Nussbaum on the legal and fundamental cases for $CPRI / $TPR combination

Episode Date: July 1, 2024

Ron Nussbaum from Maverick Value, joins the podcast to discuss the Capri Holdings Limited / Tapestry ($CPRI / $TPR) acquisition agreement. You can follow Ron Nussbaum @MaverickValue on Twitter/X here: https://x.com/MaverickValue Chapters: [0:00] Introduction + Episode sponsor: Ycharts [2:05] Overview of Capri / Tapestry acquisition and why FTC suing to block the combination [6:01] Capri fundamental value even if deal doesn't go through [11:46] FTC's case [20:06] FTC's raised pricing issue [25:15] Tapestry's response and defining the market / employee side of the antitrust argument [33:01] Why were all five Commissioners (3 dems, 2 repubs) voting to sue (and not voting on party lines) [36:00] Industry uniqueness [40:09] Thoughts on the case's judge [44:14] Industry commentary [46:32] Recut [48:07] Room for settlement possible? [49:02] Deal breaks tomorrow, whats the possible downside / market odds for both deal going through and downside (not going through) [55:39] Biggest discrepancy between Ron's view on the case and the market's view on the case [58:31] HotDocs [1:01:15] Final thoughts / timeline on the case Today's sponsor: Ycharts This episode is sponsored by our friends at YCharts. Taxes—they're inevitable. But, minimizing your clients’ tax burdens is a key part of your role as a financial advisor. If you're tired of the headaches from manual calculations, spreadsheets, and juggling different software during the portfolio transition process, then we have just the YCharts update for you. YCharts has released its new Transition Analysis Tool. With this new feature, you can automate the many time-consuming tasks typically associated with this part of the proposal process, so you can spend more time creating a solid foundation for your new client relationships. Advisors can easily get insights into a client’s current positions, cost basis, gains/losses, and tax implications, making transitions smoother. Clients can adjust portfolio allocations in real time, enhancing trust and collaboration with their advisors. Automated processes that free up time for easily creating comprehensive reports, making client presentations more impactful. Click the link to start your free YCharts trial so you can explore this new tool today: https://go.ycharts.com/yet-another-value

This episode is sponsored by our friends at YCharts. Taxes, they're inevitable, but minimizing your client's tax burden is a key part of your role as a financial advisor. If you're tired of the headaches from manual calculations, spreadsheets, and juggling different software during the portfolio transition process, then we have just the Y charts update for you. Wicharts has released its new transition analysis tool. With this new feature, you can automate the many time-consuming tasks typically associated with this part of the proposal process, so you can spend more time creating a solid foundation for your new client relationships. With the tool, advisors can easily get insights into a client's current positions, cost basis, gains and losses, and tax

implications, all making transitions smoother. Clients can also adjust portfolio allocations in real time, enhancing trust and collaboration with their advisors. It's an automated process that frees up time for easily creating comprehensive reports, making client presentations more impactful. Click the link in the show notes to start your free Y-charts trial so you can explore this new tool today. All right, hello and welcome to the Another Value podcast. I'm your host, Andrew Walker. If you like this podcast, we mean a lot if you could rate, subscribe, review, wherever you're

watching or listening to it. With me today, I'm happy to have on the show for the first time. Ron Nussbaum, Ron, from Maverick Valley. Ron, how's it going? I'm doing well. How are you doing? I'm doing great. I'm laughing because we were talking before and Ron is so excited to get on.

I was like, are you ready to record? And he hopped into it. So I can't wait. Before we get there, let me just start the podcast with a quick reminder, same way I start every podcast. Nothing on the show is financial advice. That's always true, maybe particularly true today because I wore for people on the YouTube, I wore my finest, my finest t-shirt because we're going back to, we're going back to court,

we're going back to antitrust court here, but neither Ron nor I are lawyers. So not only are, you're not a lawyer, right? Am I remembering that correctly? No, absolutely not. Not only should remember this isn't financial advice, but there's extra risk. We're going into a legal case and the difference are lawyers. So we might not have any clue what we're talking about. Who knows?

Please do your own work, consults a financial advisor, all that type of stuff. Ron, the reason we're going back to anti-dress court. The reason you and I are so excited for this podcast is Capri Tapestry. Capri announced a merger. The FTC by Tapestry, the FTC is suing to block. All pause there, and I'd love to toss it over to you. What's going on with Capri? And why are they so interesting right now?

Sure. So in August 2023, Tapestry, which owns the coach, Kate Spade and Stuart Weissman brands made an offer to acquire Capri Holdings, the owner of Michael Coors, Jimmy Chu, and Versace for $57 a share, which is an enterprise value of $8.5 billion. And at today's current Capri share price, that represents a 75% premium. However, the price today is like between $32 and $33 just so people can get the nominal term instead of just the percentage term. Correct. Yeah. And however, the FTC sued a block the deal on anti-competitive grounds, claiming that the combination of tapestry's coach

and Kate Spade brands, along with Capri's, Michael Corr's brands, will create a monopoly in the accessible luxury handback market, and the party's face right now a September trial date basically to argue their case. So I think the FDC's complaint is very weak, and there are many ways to prove that the deal is not anti-competitive, and I'm happy to discuss that. At the same time, and I do need to emphasize, like you said earlier in the intro, I'm not a lawyer, and anything can happen in antitrust trials, and I could be very well, be wrong. But at today's valuation, there isn't really any long-term downside if the judge does block the merger. And at today's price, Capri's market value is $3.8 billion. It's enterprise value is $5.3 billion.

Now, Capri, in addition of Michael Coors, it owns the Jimmy Chu and Versace brands, and they're pretty iconic global brands that could be sold for about $3 to $4 billion, pretty conservatively, too. That would imply that the remaining Michael Corr's brand is only worth $1 or $2 billion.

This seems very reasonable if you look at what other acquires have paid for in the past. You have Exor, Estee Lauder, LVMH, and Caring. In the past, they've paid a lot of money in high multiples for similar types of brands, and I could see them wanting to do the same in the future. It is also likely that Capri CEO, John Idol, met with some of these companies, and this was alluded to in the merger background as well. And a few companies were actually interested in exploring potential acquisition

or taking a major stake in it. So, Jimmy Chu today has LTM revenue of 618 million. And if you just look at what XOR is paid for or values Christian Lubiton, which I think is a great comp. They value them around three times revenue. And another example is even Tapestry's acquisition of Stuart Weissman, which they acquired at two times revenue. Versace has about a billion in revenue. and for the last several years, brands like Bougarie, Christian Dioro Couture,

Laura Piana and Tom Ford and Valentino, they've been acquired for at least three times revenue, if not five times revenue. So pretty high multiples. And basically what I'm trying to get at is even if the deal doesn't go through, you have Jimmy Chuan Versace, which could be sold. And that really leaves the remaining Michael Corr's brand

valued at only $1 to $2 billion. And Michael Coors generated about $400 million, 440 million in LTM EBIDA last 12 months. So it's a really undemanding multiple for basically Michael KORS at three to five times EBDA, even though Michael KORS is in decline, which actually sort of helps the case. So let's hop in here. I thought we were going to start with the legal case, but why don't we start fundamentals since we've kind of started one of the arguments, and you've made it well,

one of the arguments you'll hear is, hey, even if Capri breaks, if the FTC somehow wins the suit and Capri is left to, as a standing of a company, I think we're buying it below standalone value. Actually, you and I are talking Wednesday, June 26th on, I believe it was Tuesday, June 25th. I saw an article as I was prepping for this past my inbox and Wells Fargo upgrades Capri. And they say, hey, multiple ways to win whether or not the deal goes through, right? So they were very much pitching to what you're saying with the downtime.

I guess there's two places I'd push back. You know, in long time listeners will be familiar with the Spirit Airline. merger. There's also the iRobot Amazon merger where these companies enter a deal and then their fundamentals just deteriorate markedly between the deal announcement and the deal ultimately breaking on antitrust grounds. And I guess here, the stock was, Capri stock was 36 before the deal was announced. It's 32 now. A lot of people might come to this and say, hey, you know, it's below that merger price. But what jumps out to me is two things. I just love to get your thoughts on both. The first thing is, as we spit here June 26th, the FTC filed the complaint, tapestry filed the response.

If you read the tapestry response to the FTC lawsuit, which I thought it was smashingly well done. I thought it was so good. I thought it took apart multiple pieces of the FTC's argument, not to give a hint to how I'm leaning in that argument. But it almost was a short report on the Michael Corr's brand, right? They're talking about how much disarray it is, how bad it is, all this type of stuff. So that's number one. And then I guess just number two, you know, just thinking about, and maybe I've just got spirit on my mind too much.

But, you know, when you read the merger background, it's on page 41 of the proxy for anyone who wants to follow along. The company gives their projections. And they do projections in May that say, hey, for fiscal 2024, we're going to do $5.7 billion in revenue and $1.1 billion in EBITDA. By fiscal, by the time they're projecting in August, they say actually $5.5 billion in revenue. and $1 billion in EBDA. They've already reported their fiscal 2024 results.

You know, they've got one of those weird retail things that beginning of 2003 is then to their the actual results were $5.2 billion in revenue and $700 million in EBDA. So kind of from their initial results, they miss revenue by about 10% and EBDA by more than a third, you know, $1.1 billion to $700. I look at that. I look at the tapestry response. And this is not Spirit or I robot where they're in pure distress. But this is, I see those results, say, ooh, it's hard for me to underwrite that, that

fundamental value. Like, this is going to be a big time turnaround. So I threw a lot out there. I threw a lot. Yeah, I know. I just love to toss that over to you. No, that's totally fair. And then, yeah, happy to get into the FTC's argument as well.

But in terms of the projections, you know, tapestry, they make their own projections. Part of the reason for buying Capri was to turn around Michael Cor. So it's no surprise microcores was struggling. That's, you know, that's not news to tapestry. And so they knew it wasn't doing well. And right now luxury in the U.S. and globally is having a tough time. But, you know, it's one year. It typically does well.

It bounces back. And I think consumers have been just a little stretched with inflation. I don't think this is such a drastic change that tapestry is like, oh, my God. They're like, what happened? Like, you know, they have better insight than we do on things. And, yeah, the industry dynamics change. But I don't think they were, I mean, they certainly were aware of Michael Cors' struggles. And I'll be happy also to get into later why I think they can turn around the brand

and how that changes the FDCs arguments and so forth. But, yeah. One thing I think a lot of people have raised, which I think is interesting, is a lot of people, we had this with spirit, we have this by I brought. i robot the fundamentals are deteriorating is the buyer going to claim a material adverse event right a mac are they going to try to walk away and in this case i'd love your thoughts on it but to me i kind of look at could be wrong i kind of look at tapestry uh the tapestry response where they're just dunking on the michael corse brand calling it to turn around the merger agreement makes clear

if you read the background like they're kind of looking at the microcores agreement as a turn around it'd be hard to claim a material adverse effect when you know as you're signing the deal estimate are coming down. You're talking about this brand as a long-term turnaround, multi-year turnaround. So we can, let's just quickly address that NAE point because I do think we're going to talk about it. And then we'll start hopping into the FTC points, if that makes sense. Yeah, and it's certainly a fear. And I remember during the spirit case, or people were worried about that as well. I don't think it's as common as people make it out to seem. And I don't think that this is that material. Then again,

I'm not a lawyer, so I can't sit, but I don't see that being, you know, as material. The other thing is I think tapestry is really focused on closing the deal. I don't think they're right now, you know, they're hiring pretty good lawyers to defend. I think some of their, Amanda Reeves is one of the top lawyers out there in antitrust. I don't see them wanting to now try to back out. I think they want to close this deal because if they can't get this, this deal done, I don't see them or sure they're concerned about getting any deal done. And that's part of their strategy.

So let's turn to let's turn. That addresses the downside. And normally I start with the legal and then we talk downside. But I think that starts to address the downside. We'll probably come back to that later. But why don't we just start with, you know, the FTC is suing, uh, is suing to block this merger? What is the FTC's case? Maybe just quickly walk through that high level. And then we can talk about where you agree or disagree and everything. So the FTC is basically saying that the combination of Capri and tapestry will create a monopoly and accessible luxury handbags via the coach, Kate Spade, and Michael Corse brands.

Together, I think they claim about a 50% market share. They define accessible luxury handbags based on price and materials. And below $100, they consider that. mass market and above one one thousand dollars they consider that true luxury like louis Vuitton chanel and basically everything in between is supposedly accessible luxury um but it's not really clear if it's 100 to 1,000 or 100 to 500 but basically they've kind of alluded to what's not accessible luxury and everything else is supposedly that um and then they also did uh distinguish it based on materials, mass market handbags, they claim, they say are made from man-made materials like

polyurethane and nylon. So that's another feature that they used to describe. And they use some other ones like mass market brands are made in China, but accessible luxury brands are made in Asia and true luxury ones are made in Europe. And I, yeah, those ones are kind of interesting, but in terms of the Asia, China. because I don't see that in too much of a difference or an issue, but basically materials and prices their main thing that they're using to define it. So, you know, one of the things tapestry does, so the FTC's argument is Capri, Tapestry will have a

monopoly, near-monopoly market power, whatever you want to call it, in affordable luxury. And I think Tapestry does a solid job of taking that piece apart. know if you want to talk about the tapestry rebuttal on this specific point, or if you want to go into some of the rest of the FTC's points, and then we can come back to tapestry's response. Yeah, I'd prefer to go into sort of the other points, then maybe get back to that. Just keep going through the FTC's points. That's great. Because, you know, just going back on the materials point, you know, the FTC is essentially saying all Michael Corr's handbags are accessible luxury.

but a significant percentage, about 50%. My estimate of their handbags are actually made from handmade materials like PVC and polyurethane. So that would actually fall into the FTC's mass market definition. And I've checked, you know, you go to the stores, you can find little booklet inside. It's very hard actually, fine, but you'll see one will, if it's leather, it'll say leather. And if it's not, it'll say your handbag or your bag is made from unique materials. And online also, you can find out. a significant amount are actually

not made from leather. So it's interesting that the FTC creeps everything, Michael Korsas, accessible luxury. Let me stop here. So I have done, we can talk about spirits more in a second. I'm worried I'm

like, as I'll tell you, I'm as I told you when we were prepping for this pod and everything, I'm worried I'm seeing my own shadow because people have listened to this podcast for a long time. No, I thought the spirit merger, I thought it was a great risk Ward. Maybe I'm resulting, but, you know, this merger was blocked. So I'm wondering I'm seeing my own shadow here. But I've done not a crazy amount of work, but I've talked to legal people. I've

talked to lawyers. And one of the things, like, when I read the FTC complaint, I was like this is, and especially the tapestry response, I was like, this is crazy. I can't believe the response. But one of the things I've consistently heard from lawyers is, look, A, there was a hearing earlier, I think it was last month at this point, but either earlier this month or last month, where Tapestry went to the judge and asked for the FTC to further define and clarify the market here. And the judge denied them. And several of the lawyers I talked to were like, that was a big denial. That was kind of the judge tipping her hand of how she views the case. And then the other thing the lawyers consistently said was, and this is even some FTC formers, they said, look, we don't

agree with the definition here. We wouldn't have brought the case. We don't agree with the definition. But, and this, like, has shades of what I heard when I was talking to some informers at spirit. They were like, look, the government gets a lot of deference. And if the government is defining the market this way, you and I can disagree. We can think it's crazy. But judges are going to give deference to the government. And the one thing that the government's really good at is defining and getting their market definition in there. And I guess when I look at the judge not forcing the FTC to further define and clarify the market,

and I hear those people I've talked to, I think. keep looking at and being like, look, Andrew, you know, you might not agree with the FTC's rulings. I don't agree with a lot of stuff the government does, but I have to be practical. And just because I don't agree with the case, like, if I'm hearing from all these lawyers, we don't agree with the case, but this is right down the middle, the fairway for the government to decide and it's tough to overturn them. Like, why do you think the, why do you think this is a challenge point? Or like, why don't you think the government win on this case? well so about the the judge not ruling in the defendant's favor you know from what i've read

those to basically claim that the definition is too vague it has to be so unintelligible and the judge was never going to rule that it was like that um the the parties do have enough information basically they they under you like we all understand the gist of the complaint and that's that's enough I think from some people I've talked to, it really has to be just, I don't even understand what the complaint is about. I think Tapestry and Capri knew that, but the reason why they, I think, did a motion was kind of going on the point of the judge deference to the government. I think it's really to poke holes and basically show the judge, like, look, the FDC doesn't know what they're talking about. how many look, look at like some flaws. I don't even know if men are men's handbags are included.

They don't even, they say now duffel bags aren't included. It's basically like little, you know, pricking little holes at the government's case. It was more of a strategy to do that and kind of, kind of taint the, maybe the judge's view, like, yeah, the government doesn't know everything it's talking about. I don't think they, I don't think they actually thought they were going to win that motion. I think it was, that's my opinion. I think it was more of a strategy. But I do get, you know, you spoke with other lawyers.

So, you know, that's just kind of my view on that. This episode is sponsored by our friends at Y-charts. Taxes, they're inevitable. But minimizing your client's tax burden is a key part of your role as a financial advisor. If you're tired of the headaches from manual calculations, spreadsheets, and juggling different software during the portfolio transition process, then we have just the Y-charts update for you. Ycharts has released its new transition analysis tool.

With this new feature, you can automate the many time-consuming tasks typically associated with this part of the proposal process, so you can spend more time creating a solid foundation for your new client relationships. With the tool, advisors can easily get insights into a client's current positions, cost basis, gains and losses, and tax implications, all making transitions smoother. Clients can also adjust portfolio allocations in real time, enhancing trust and collaboration with their advisors. It's an automated process that frees up time for easily creating comprehensive reports, making

client presentations more impactful. Click the link in the show notes to start your free Y-charts trial so you can explore this new tool today. Another argument the FTC makes is the FTC says, hey, tapestry, this is a direct quote, says tapestry's stated and unabashed goal is to raise prices post-merger, right? And I think tapestry says, hey, yes, part of it is raised prices, but it's by reducing discounting, reducing their wholesale. You know, when I read that, I say, oh, like, that's good.

One of the classic things, the way you kill a brand is by doing lots of wholesale and doing lots of discounting. I think Tapestry makes the argument like, hey, you know, going back to market definition, one of the quotes I love from Tapestry is a $2,000 handbag that's on sale for $750. is that affordable luxury? Is that luxury? And what tapestry is trying to do is reduce that discounting. But that is like if I just looked at it as a lawyer like yes or no, is your plans to raise prices? Temperature's answer would have to be yes because they're reducing discounting, even if there's lots of other things. And, you know, maybe again, maybe I'm too gun shy from spirit, but I looked at that piece of the FTC complaint.

And I just wondered if the flat, hey, their plan is to raise prices. if that is an antitrust negative. So I'll tell you, you can talk about the FTC side, the tapestry side, we'll talk about and that like kind of raise pricing issue. Yeah. No, so I think they're completely mischaracterizing tapestry's intentions. Yeah, they are, they do plan on raising prices. They should raise prices.

They should reduce wholesale. And that is actually pro-competitive. I understand in 99% of industries, those things would be anti-competitive, no doubt. The fashion industry is an entirely different industry. For example, Tapestry turned around its Coach brand, utilizing those same exact things, raising prices, reducing discounts,

reducing their outlet presence a little bit. That saved the coach brand. People back in 2014 and 2015 were predicting the fall of Michael Cors because they were discounting, because they were too ubiquitous. those are the exact things that tarnished a brand. I think the FTC is going to have a hard time explaining how coach gained share over Michael Corse, despite coach raising prices and Michael Coors, in the FTC's own words, in the FTC's

words, taking a different path than coaching Kate Spade and using discounts to undercut competitors. How exactly did that happen if coach raised prices and Michael Coors try to undercut their competitors. It's because the fashion industry is completely different. This isn't airlines. This isn't supermarkets. This is, the value is in the brand. And when a brand is ubiquitous, it's, you know, cheap. It tarnishes the brand and people don't want that. So, you know, that's pro-competitive. You know, pulling back from wholesale is not anti-competitive. It opens up more shelf space to the hundreds of other brands. that are in there or trying to get in to wholesale.

You know, customers who shop Macy's, Northstroms, Tjamax, Ross, et cetera, they want a selection of brands and these stores will have every incentive to add more brands. And then just furthermore, Nordstroms doesn't even carry Michael Coors. So, I mean, when they're called up to testify, it'll be interesting they hear kind of why they did that, how that impacted their business, you know, I mean, if Michael Coors is actually, actually so dominant. Why did they do that? You know? So they used to carry them and they dropped them? Yeah. I don't see them online. I've been to the stores. I don't see them. I, yeah. So I was told if they don't have them online, they don't have them in any store, which I didn't. At least the ones I went to,

they didn't have. So yeah, that's that. And, you know, the FTC also characterizes their decision to go more direct to consumer as being anti-competitive. which is just quite odd because that's what brands are doing now. And it's basically a way to, you know, more responsive pricing, direct interaction with your customers. You can explain the product to them, you know, rather than someone going into Ross and trying to ask an associate, is this made from leather or not leather? And like, they don't even know. This is all good stuff for the consumer.

And I, you know, you have every journalist will tell you how coach. it came back, you know, and how did they come back? Well, tapestry will explain that and they'll explain why they're going to do that with Michael Cors. There's two. To your point, there's two quotes in the, is it tapestry? I keep saying tape history. People are. I think it's tapestry, but I'm not, I'm not 100% sure. So I would defer to you. I'm so bad at pronouncing things. People make fun of me all the time online. I won't even yeah, I still don't know how to see the former better yet. Yeah, when people will just make when we were there's anyway tapestry has two quotes in the response that i thought again i felt

the entire response from them was incredible but they've got two quotes that have really stuck out to me one was a hand and this is to what you were saying one is a handbag purchases far more emotional multifaceted and discretionary than the fTC's theory can tolerate which i think is very long lines of like like in the fashion industry you take a bag that takes $20 you raise its price from 40 to 400 and sometimes you'll have demand go up like what's the difference between a $2,000 bag and a $200 bag, aside from LVMH on the side, like, it's very tough to help. And then the other was the FTC fails to address the market realities in any detail on its complaint.

And it does not appear to have inquired to them through any rigorous investigation. And I thought that rigorous investigation was interesting because to your point, I'm not sold on the market definition argument they had earlier being to start poking holes. But when you put in a doc that obviously the judge is going to read, when you say they did not acquire through any rigorous investigation, like. that is that's not just a shot across the bow that that's something and you're going to the judge saying hey if you roll for the government and you get overturned like there's all this evidence comes out that says the STC they weren't investigating they were just kind of going with their

own pet theories it's going to be pretty darn embarrassing for you so i'll pause there and what's your response to anything i just said yeah no i i personally don't think that they i think they just try to sue and then try to find everything that kind of fits their mold i mean You are not the only one who thinks that about this FTC. And I mean, their whole philosophy is you miss 100% of the shots you don't take. And, you know, not to bash on LinaCon, but she, you know, she's, her goal is also to make it just tougher for companies to merge so that, you know, more expensive, you know, they have to go through these lawsuits. So it's kind of like, why should we even merge? Why should we even have to go through this given, you know, they're giving this company, these two companies a hard time.

So I think that's kind of their goal. A few things I noticed in terms of the rigor, their kind of homework, you know, about, well, once, you know, the man-made materials, a lot of the bags are, you know, they didn't even really clearly define accessible luxury or distinguish accessible luxury from mass market. The other thing was they They didn't get a single quote from a customer, competitor, or supplier, and they used a quote from Rebecca Minkoff, but they didn't actually get her quote directly. They took a 2021 podcast interview

titled, ironically, how to build a global fashion brand. And they basically just took a few sentences kind of out of context, and it was more about just how you should focus on profits and enjoy your life versus trying to get big. So, I mean, they literally did not even get a quote from her. They didn't get a quote from anybody.

And also, yeah, there's a lot of errors in there. They said she launched her brand in 2001, and it took her, you know, a while to grow, hence barest entry. But no, she launched the morning after bag in 2005 and achieved instant success. you know so they characterize her story as a case of barriers to entry but i kind of consider it a case of a very dynamic and competitive industry so yeah that you know that that's kind of and there's just several other areas you know they talk about you know the brands won't have access to manufacturing and it'll put or other brands won't have access to manufacturing and it'll put or other

brands won't have access and it'll put tapestry and capri at a huge advantage but the EU antitrust investigation already proved this to be untrue the manufacturers that tapestry and capri rely on serve multiple brands and they strive to build you know diverse customer portfolios and not just rely on a few brands those are direct quotes from those suppliers and they also make strategic investments in nascent and up-and-coming brands so you know they could have just piggybacked off some of the stuff that already came about in the EU antitrust case, but they didn't. And yeah, there's, I mean, there's just a lot of, I think, errors and just things that don't really add up. One thing, and this is new to this FTC, it's not the first time

they've tried to do it. We saw this in Albertson's Kroger's, where they said, hey, the merger of the two largest kind of grocery store players is going to put union jobs at risk. So not only is this a, you know, traditionally it's only consumer harm that the courts look at. They're trying to introduce not just consumer harm, but labor harm. And in this case, again, they say, hey, you know, coach takes up a lot of space in the retail world. Michael Kores takes up a lot of space. You merge the two and they shut one or the other store down. That's going to be thousands of retail, thousands of hourly retail employees are going to be out of work. So not only is this a antitrust problem because you're merging the two dominant forces and accessible luxury,

and I think we've already talked about the issues with the accessible luxury, but it's also an antitrust problem because you're merging two big, you're merging two big retail employers. I'll toss it over to you because I don't want to lead the witness with my thoughts. What are your thoughts on the employee side of the antitrust argument? Well, I think that's already been mentioned that they're not actually pursuing an employment. side of things. Has it been, okay, I did not see that. It was just in there.

Okay. So then I wrote my question. I will just tell you, so most of my interviews I did were on the heels of the tapestry response and the, and the first suit and across the board, whether the lawyer thought the suit was going to get blocked over, whatever was. Across the board,

they were like, this is the craziest thing I've ever seen. Like, I can't believe they even wasted the ink on the paper to put this in. Alverson's Kroger, maybe you have a novel theory with union labor. Like here, are you kidding me?

Like, there are you know hundreds of alternatives they they thought it was crazy and they actually thought the judge might look really negatively on it i don't know if you want to add anything yeah no i i i mean i there's there's nothing there for them to be able to i mean yeah you can go and work at another store if they merge i mean you're still need to represent the other brands the brands aren't going away um so if anything maybe there'll be more employment because are going to turn around Michael Coors, it's not another way around. And that's a very important point.

Michael Coors, the relevance is declining. Like, there's no doubt about it. Revenue is going down. So something is happening. Where is that market share going to? And it's going to companies like Kirk Geiger, Stout, Mancer-Gabriel. You know, you have Stout and Mancer-Gabriel that just started, you know, from Instagram, very quickly limited you know barriers to entry just they got they got looked at um celebrities started

following them they they they got huge you know and you have kirk geiger which is a british brand british band brand sorry um and they're they now call the u.s their largest market um and they're one of the fastest growing accessory brands and you know department stores like bloomingdale's northstroms and dillards and they achieved their success only from wholesale and they're now opening up stores. So, yeah, there. I tried to toss you softball with the employee question, but you just rejected the thing. Let me ask another question. So this is the first worry I had when I saw this. And I continue to have it is the FTC voted five to zero to bring this. Right. And for those who are unfamiliar, the FTC right now has three Democrat and two Republican commissioners

on it. And they voted 5-0 unanimous for this. And I, you know, I kind of thought in my mind, I was like, oh, when I heard the arena, so it was like, oh, clearly this will be along party lines. Democrats will say, hey, we can't let the big get bigger. Like, this is a employment, whatever. Republicans will say free market, let's let them merge. That's not what happened here. They went 50. And, you know, you could say, oh, maybe the Republican commissioners are just voting alongside party lines. But the same thing. that this came out and that they voted unanimously for it, there was, the FTC had a guidelines on non-competes. And in that case, it was along party lines, right? Three Democrats tried to limit or do

away with non-competes and two Republicans said, hey, we shouldn't be poking our nose here. So, you know, I, I keep coming back, one of the things I keep coming back to is I keep wondering, why was this not along party lines? Why were five commissioners okay with suing this company? And, you know, all the commissioners are doing not just trying to pursue their agenda, but they're all doing political calculus. And the two Republican commissioners did the calculus everything and said, we want to put our name alongside of this, you know, the FTC, we've been racking up losses support, but they wanted to put their names alongside the suit. And if the suit's a loser, that's not good for them to put their name alongside it. Like, I have to imagine they see a path

to victory or something that they wanted to sign on. So I'd ramble a long time, but why the unanimous vote and why does that not worry you? Um, it's a good question. I, you know, I don't know. I haven't asked them, uh, but I what I can, from what I know, they know, they've only joined in the two Republican commissioners joined in April, I think, or one end of March, one like early April. So I don't know, I don't know how up to speed they were on that.

But yeah, the fact is they did vote against it. But I think my view is that they saw raising prices, um, you know, reducing wholesale, um, things that are anti-competitive in pretty much every industry. And they were like, ah, this is really bad. They're going to raise prices. And it's littered everywhere. But I don't, I don't know how up to speed they were on the fashion industry. I don't know how much, you know, homework they've done.

But it just, I mean, yeah, it just doesn't seem anti-competitive on, you know, several metrics or ways. So, yeah, it's hard. I don't want to speak for them, but that's my view is maybe they weren't up to speed or maybe they just thought it was because of the price increases or maybe they just want the FDC to lose and they were like, let's try it. Let's see. I don't know. That would be some real 4D chess. Let me ask. So not to bring everything back to Spirit, but you know, one of the things I would consistently hear when I was talking to advisors and Spirit was, hey, look, we wouldn't have brought

the suit. The airline industry is unique because the assets are so hypermobile, right? The airline industry is unique, but you put a unique industry in front of a judge who has no antitrust experience, as most judges do not have antitrust experience because, you know, it's very rare antitrust cases are rare. I believe the judge for, the judge for Spirit had never done an antitrust case before, if I remember correctly, maybe one like years and years before. And this judge, if I'm remembering correctly, has never done an antitrust case. So with Spirit, I kept hearing from his eyes, hey, we wouldn't have brought this, but antitrust is really. you put it in front of a judge between deference to the government, a unique situation.

They're going to look at a lot of the things that make airlines unique and say, oh, class textbook antitrust. And when I hear you say, look, fashion is unique, right? And I agree. And tapestry agrees. But I hear stuff like prices go up and that's actually pro competitive. In the back of mine, I'm just having red flags like, oh my gosh, like something that's pro competitive, but it's hyper specialized to this industry, hyper specialized to antitrust.

A judge who has no experience here might just look at it. And for the reasons you say five FTC commissioners vote for it, they might just say prices go up. Are you kidding me? Block easy next. So what do you think about that? I mean, I think that's why the lawyers are paid the big bucks to convince the judge otherwise. Yeah, I don't think this is spirit at all.

Like, it's very, I mean, it is hard to create another airline. You know, you can't just go on Instagram or social media. That is true, but I do remember Spirit, and there are a lot of startup airlines that I mean, yeah, but you know, airlines don't just scale up and then flame out because they got too popular. Actually, in this industry, if you become too popular, it's kind of offsets it because the more popular you get, the less popularly you're going to be in the future. It's sort of a counterbalancing situation. And you see what happened with Michael Coors. I mean, this has happened with Tommy Hilfiger in the past.

It even happened with Coach. It's happened with Juicy Couture. So many brands. So it's, yeah, it's not the airline industry. It's very hard to, you know, that industry. I mean, planes are mobile. They do fly, but, you know, you can't just park your plane in another gate. You know, you have to get slotting fees.

You have to, you know, there's labor problems there. You don't have, you know, you don't have as many pilots. You need Boeing or Airbus to make it your planes. it's very different. I understand that that deal was a little bit of a shock. But, I mean, it was anti-competitive in a few markets. And the what's called the statute for antitrust is it can't be in any relevant market. So, you know, Fort Lauderdale, LAX to Fort Lauderdale is, it was anti-competitive.

You know, it was just spirit and judgment. blue that flew there and they're getting they were getting rid of spirit so this is all they're getting rid of michael corse they're they're in hand they're elevating it making it a better brand this was we're getting rid of it um we're going to take out some seats a bunch of seats and then we're going to rebrand it as jet blue so now you have you know one airline flying l ax of fort lauderdale for example and um someone who you know that's a very separate market than flying lx to washington dc or I like to New York, you're not like, oh, okay, that's expensive, so I'm going to fly this route, you know?

You know, not to go to Cartier. I do hear you, though, all the advisors talk to were like, look, this is why the airline industry is specialized because what will happen is, yes, JetBlue takes the spirit flights out, but then you'll have Allegiant or any other number of people who will look and be like, oh, this is now a profitable route. Let me redinvest the point. So, like, you really kind of have to believe in the efficiency of markets and whatever. We don't need to go back in spirit. Let me ask you different. Let's go back to judge, just real quickly.

You know, one of the things, the judge is basically God in these cases. Obviously, a judge can get overturned. No judge wants to be overturned. So they're generally not going to make a completely hairbrained ruling. But, you know, as long as the, I think a judge in the antitrust case, for the most part, could write a ruling for either side that will not get overturned if they're careful and they're thoughtful. So the judge and their background and biases matters a lot here. We already talked about the first kind of fight on the motion for the FTC to clarify the market. You've addressed that so we don't have to. But I do just want to get your overall thoughts on the judge and the judge's background here. I, you know, from what I've heard, the judge was formerly a legal counsel for the Girl Scouts.

You know, it was a Biden appointee. Those are kind of the only things I know about the judge. I just know, or I hope in general, judges rule based on the merits of a case. I don't think it's in their best interest to just rule along party lines. I think that defeats the whole point of it being a judge. I think that's damaging to their reputation. So I don't, it's hard. I haven't really put much thought into, oh, what, who the judge is and sort of,

trying to get a sense of how they will rule other than trying to understand more the merits of the case. And I think just generally that seems to be, you know, the lawyers will do, the lawyers will hopefully, you know, argue the points and basically drill it, you know, to judge why this deal is not anti-competitive. But yeah, I haven't really spent much time speculating just on the judge's background or kind of how that would impact their their views. It's just tough, right? Because like, on the one hand, I'm with you, I'm like, look, I think 98% of judges, there are obviously, you know, like there's that one judge in West Texas who will always rule for

Republicans. And I mean, you know, there's another judge in Oregon or something who always refer. But 98% and then they get overturned every time. So whatever. 98% of judges I like to think are like down the middle. And that's what I hope and that's what I expect. But at the same time, you know, like, you'll hear a lot of people say, oh, this is a Biden appointee. And I generally be like, yeah, but I think most people like real down the middle.

But at the same time, you know, I could see a judge kind of doing the political calculus in their head and saying, I am a Biden appointee. That means like if I'm kind of, if I'm on the fence, maybe I nudge myself more the way the administration wants because guess what? If I'm going to get promoted, it's probably going to be by Biden administration 2.0 or the next Democratic administration after the Biden administration, and if I'm consistently ruling for a viewpoint that doesn't gel with them, maybe I get points for fairness, but you know, the points for fairness probably don't boost you to the next level of the judgeship where the points for ruling the way the administration probably would prefer do. So I'm not saying they would always go that way, but maybe if it's like on the fence. But then I come back, I'm like, I don't know, am I overthinking

this? Am I over-gameifying this? So I'm really unsure. Yeah. My, you know, I think maybe on the margin, there's the, maybe a political view, something like sneaks in there, but this case is not, I don't think it's on the margin. I don't, I think it's pretty clear cut. And there, yeah, that it's not anti-competitive. There was a, maybe, but I just haven't spent much time speculating that because I don't even know how I would evaluate that other than just very stupid.

official. He's a Biden appointee, Biden. Ron, this is easy. You've got to go hack for email, read through all of a private message. Exactly. And you'll get a real insight into your mind. You know, go to federal prison for 30 years. Exactly.

What just one last thing I've just got randomly in my notes. You know, one thing that I felt really good about was tapestry mentioned it, but there were tons of industry commentators, you know, like with the spirit, you saw people on both sides coming down and saying this is pro-competitive it should go through this anti-competitive should go through with this i generally haven't seen a lot of industry commentators who would be like michael course plus coach who we're shaking in our boots there was actually a lot of like vogue there were other sellers who other commenters who made the point look the fTC's view of this category is extremely limited and actually neglects how dynamic the industry has been and

how much it's morphed especially over the past let's call it eight years with the rise of Instagram, rise of online shopping, drop shipping, all this type of stuff. So I just thought that was a big point in the company's favor. I don't know if you want to do anything else on that. Yeah, no, I, there, you know, there hasn't been anybody except the FTC, maybe I think Jim Kramer said it's, it's anti-competitive. Other than that, I haven't heard anybody saying anything against the deal, not even, you know, Elizabeth Warren, and she is always, after every deal's announced, comes out against

the merger, and I might be wrong on this, but I haven't seen anything of her. I had completely forgotten about this. I've got it saved in my notes. I'm looking at my notes right now. I could not believe, like, Jim Kramer, I thought he was like pretty right-leaning. I can't remember. I don't know, yeah. I was really surprised when he came out because April 24th, the suit comes down on April 23rd.

I've got a clip and he says, this is a direct quote for the tweet. I'm for the FTC on this. I mean, it's not like he's noted legal scholar or anything, but I think he might have a lot of But I was just very surprised by that. I think he's just a snap judgment kind of decisions. So I don't know. I don't know how much work he's done on this. I'm guessing not a tonne.

Obviously, it's evolved, like he said that the day after. But even there, I was kind of surprised that, you know, you would think a former hedge fund manager who's been on CNBC for 20 years, kind of would probably have a free market lien. I was just very surprised by that. And when something surprising comes up with somebody who, is at least quite plugged in. You do wonder, like, what made them say that? Was there something they were seeing and everything?

Let's see. Where do I want to go? Two quick things. Recut. You know, the results, as we mentioned, have been disappointing. A lot of people, I don't think so much, but people worry about M.A. The stocks at 32. The deal price, if this goes through, would be 57.

Do you think there's room for a recut where maybe tapestry goes to Capri and says, hey, your results have been a disaster. We didn't expect to get sued. I think the suit will, I think the ruling will come before the mergers outdate. Obviously, can always get extended. But do you think tapestry comes to the table says, like, y'all are turn around. This is going to be disaster. We'll commit to a more ironcloth agreement in a strong defense, but we need to cut it from

57 to 47, 57 to 47. Do you think there's any room for a recut here? I mean, I mean, anything's possible. So, sure, it can happen. I don't think it's too likely. I think right now they're focused on the trial and prevailing in that. But maybe, I mean, that I think it's tough to ARP for a cut. And I mean, they weren't paying a crazy price for Michael Corp or for Capri anyways.

I think it was, I mean, nine times even if that does sound higher today. But, you know, there's also rumors that they might sell off for Saatchi and Jimmy Chu. and you know that they're kind of going back to my downside case of you know you could sell those for a decent amount and kind of roll up your sleeves and turn around michael cores so i i don't know i it could happen i i just yeah it's a possible you think there's is there any settlement that would work for both brands like you mentioned could do you think if uh tip tree went to the ftzumr i said look we're just here for the michael course turnaround we're going to sell off every other brand and just do the Michael Coors, let this deal go three. Do you think that would work for both sides,

or do you think the government would kind of say big getting bigger, merger bad? This is all about Michael Coors anyway, and that's actually the accessible luxury that we don't want going through, so that's too much. Do you think there's room for anything here, or do you think we're dead set for court? Yeah, no, I don't think Tapestry would, I mean, yeah, they want to buy it for Michael Coors. I don't think they're going to spin off one of their brands for that. And I don't, Jimmy Chu and Versace are not a problem in the FTC's eyes. So I do, I think they're just going to go. I agree, but you know, you always wonder if there's the room to, room for a settlement or something.

All right. As you and are talking, stock is about 32. Deal goes through. The price is 57. So that's quite a bit on the upside. What, you know, deal breaks tomorrow. I know we started off by talking about the fundamentals and we go back there, but deal breaks tomorrow. What type of downside are you?

you kind of running the math too? Deal breaks tomorrow. It could go to 27. I mean, short term, it could go, yeah, maybe that, maybe even 30. I think it's just priced already, you know, people originally talking about a $30 downside. The results weren't that great in the last quarter, but they were sort of expected anyways, you know, just seeing how other fashion brands have what they reported.

So, you know, could go a little bit below 30, I don't know, but I think, you know, the CEO, John Idol of Capri, he bought shares back in 2013 a few months before this deal was announced, and he was exploring, selling off, you know, the Jimmy Chuan Versace, and I think he'll be motivated to do that and sort of monetize those brands and maybe sell off Michael Coors in the future for choosing with it. So I think there is, yeah, in the short term, it could go to me. Yeah. So I'm looking at that purchase right now. As you said, the CEO, this was not a small purchase, right? He bought $10 million worth at 41 in March of 2023. And this is also a CEO who I think has kind of shown. He's the type of CEO who's insider buys you kind of want to follow because prior to that

purchase, the last time he had bought stock was in mid to late 2019. he bought $30 million worth of stock at roughly $30 per share all in. So, you know, I would just, and then in 2021, he returns on a 10B plan and he sells about $50 million worth of stock in the high 60s to low 70s. So I would just say like, hey, you know, he buys at 30, he sells at 70. He just bought again in the low 40s. And then six months later, the whole company is getting sold for 57. Like, this is CEO who's motivated.

And I think when he buys, he's got an eye towards value, realization, catalyzation. So that makes sense. You know, on your downside point, I do hear you because if the, if this deal is blocked, I would not be surprised if the most companies when deals blocked, they come out with a new plan pretty quickly, right? They understand it's not good to have a company in limbo. And I wouldn't be surprised if they come out with an 8K the next day that says, hey, we're selling Jimmy Chew.

We're selling our luxury brands. These are high multiple valuable variants that people will pay a fortune for. We're going to sell them off to the highest bidder. There's no FC problems there. And then we're going to be a pure play on Michael Corr's in a turnaround. We're going to get it turned around. And then we sell the company or maybe we sell it to private equity before then. And you'd have some of the parts play that would be very interesting.

But, you know, I guess most of the people I talk to based on the results they've seen, you know, as you said, when the deal was announced until the block, most people were kind of running this to a low 30s downside. Most of the people I've talked to recently are running this to a low 20s downside on a break, just given the recent results and everything. And I guess if I run it to $20 per share downside, right now the market is pricing it's at 33% to go through, right? So you lose 12 if it's breaks. You make about 24 if this goes off. If this goes through, that's your 33% chance. I guess how would you assign the odds for the, how would you assign the odds based on the case as you've seen it today, June, is it June 26th?

So you're saying the odds for the case going through? Yeah, so the market odds, right? Like the market odds are your downside and your upside. So your downside is 12, your upside's 24. That's 36 in the pot. So 12 divided by 36 is, oh, I see. I have to do the math. had it before, but then the prices changed. But it really, it seems like the odds are like,

I don't know, maybe 30%. I'd have to run it. I mean, I don't, I think $20 downside is pretty low. I don't, I don't see that happening. But if like the deal, you know, at $25, I think it's just like about, they think there's only 30% chance the deal will go. So if you, we could run it to 25, right? Like the higher the downside, the lower the lower the implied market odds, right? So if we run it at 25, then the market's got this at 23% to go through. If you thought, hey, this whole business is in terminal decline, you know, there is something to it's really hard to run a turnaround while you're in a prolonged merger process and legal battle because nobody, not only is nobody incentivized to because they're hoping to sell,

but legally you really can't do any of your traditional turnarounds while you're under a merger contract. So it's very hard. But if you wanted to go crazy and say the downside's 15, the market's got this at 4. But so either way, the market has this at, let's call it 30, 35% to go through. Like, what are your odds for the steals to go through? I think they're pretty high. I mean, I definitely think it's about 50%. I think, you know, 75%.

It's just, I don't see who's going to testify for the FDC and say, this is so anti-competitive adherers. I, you know, some examples, let's call up Nordstrom's, Kirk Eager. I think even Rebecca Meecom, I think all of those people will be very much, uh, uh, uh, pro the merger. And I mean, they did this in the EU and there were, I know it's a different market, but they, uh, you know, the wholesalers kind of gave their reasons. And I think those apply to the U.S. market why like the merger isn't anti-competitive. I don't know who they're going to. So I think it's pretty high. Um, but then again, you know, I could be wrong. So I don't

to sound like I'm overconfident, but you just said pretty high, right? Let's over 50%. I think you said that we're at 75%, but over 50%. The market, as we're talking, as I kind of lit out the math, is at 33%. So we've already talked downside and how you view downside differently. And I do think there is something to the market's not looking at this as a sum of the parts and the sale and not thinking through what all the levers they have to pull up the sprakes.

But the market's at 33%. the market's below 50, you're above 50, right? What do you think the biggest discrepancy between your view and the market that is just relentlessly negative on this case, this company? What do you think the biggest difference is? I think it's a lot of the points, you know, you said maybe the judge, they're going based off what the judge is, you know, Biden appointee. I think there are a lot of people are kind of hurt from, you know, spirit, I robot, and

some of the other ones that they were surprised got blocked. You know, I think many people view Michael Cors and Coach as direct competitors and which they're really not as much anymore as what they used to be. And I think the price increases, you know, some of the things that the FDCs stated in their document. I think they're worried about that. And then the five to zero vote, I think that concerns them. I don't, you know, but the people I've talked to, I haven't talked to anybody who is worried,

you know, doesn't think, you know, tapestry and Capri have a strong case. I think they're just worried. Some I talk to just don't engage in merger arbitrage, something just fashion is a tough industry. so I don't know I think some of the points you mentioned are probably some of the concerns but I yeah

I haven't heard anything specific about the case that someone has told me that and maybe you could say like any of the lawyers I said like yeah this is a really bad worrisome point people have mentioned hot docs that are sort of a great point yep absolutely a concern And I don't, I mean, obviously I don't have access to the hot docs, but I feel like the FTC and their complaint would have sort of extracted some stuff from the hot docs and kind of tailored their complaint and made it a more compelling complaint without actually stating it said this in the document. But sort of taking learnings or something from there and explain and kind of articulating a stronger case.

they didn't and I I mean tapestry can say we want to corner the market an accessible luxury but I don't think they can't because it's you can't corner the market um so I think it's just hard to yeah I don't know what's in the hot dogs but I think even if they said we want to corner this industry they can't and I I don't know if that how badly that would impact the trial because of the same time, it cannot do that. On the hot docs, I was initially quite worried about the hot docs because the FTC and their initial complaint, they cite some hot docs and there was a lot redacted so you didn't know who or what they were coming from.

I was initially worried about them. And I initially thought, oh, this is why the commissioners voted 50, right? They've got some real hot docs, right? The complete CEO saying, oh, my God, if Tapis revise us, like consumers are going back to the 1800s. No one will have an affordable handbag again. Like I thought they had a hot docs along that level. I kind of had moved a little bit past that because I think some subsequent disclosures, I think the tapestry response. And I think I think all of them indicated it was like lower level employees. And you can correct me from wrong or if I'm mistaken

on any of this. It all indicated it was kind of lower level employees like, you know, your typical mid manager who said, oh, we're buying Michael Coors like no one will be able to compete with our brand of we're going to have the best brands in industry like no one can compete so i got a lot more comfortable on the hot dock line i don't know if you want to add anything there yeah they um a lot of it like what they unredacted a large amount of the original complaint and a lot of it was sort of what you would have expected um you know they've said i think someone at tapestry said kill michael core is kind of anger you know i mean they they do compete they're both they're in the same industry, they sell products, they, yeah, they want to crush the competitor,

but I, yeah, I think things are just kind of cherry-picked and taking it out of context. I mean, it would be weird if they didn't have an eye on anybody in the industry. This episode is sponsored by our friends at Y-charts. Taxes, they're inevitable, but minimizing your client's tax burden is a key part of your role as a financial advisor. If you're tired of the headaches from manual calculations, spreadsheets, and juggling different software during the portfolio transition process, then we have just the Y-charts update for you. Y-charts has released its new transition analysis tool. With this new feature, you can automate

the many time-consuming tasks typically associated with this part of the proposal process, so you can spend more time creating a solid foundation for your new client relationships. With the tool, advisors can easily get insights into a client's current positions, cost-bases, gains and losses, and tax implications, all making transitions smoother. Clients can also adjust portfolio allocations in real time, enhancing trust and collaboration with their advisors. It's an automated process that frees up time for easily creating comprehensive reports, making client presentations more impactful. Click the link in the show notes to start your free Y-charts trial so you can explore this new tool today. The last point, the thing that has been so interesting to me is, again, a long-time listeners know I did a lot of work, particularly on the spirit merger, talked to a lot of people.

I talked to a lot of the same people looking at this merger. And what was interesting is, you know, with this spirit merger, I think they were much more split a lot. Most of them said, hey, this case, we wouldn't have brought it. But several of them said we could see a reason to blocks. A lot of them said we could see a reason not to block. With this, it was kind of unanimous where they were saying we wouldn't have brought it and we think this is a really poor case. And I mean, I talked to people from both sides of the aisle. But what was interesting to me is a lot of them would say, we wouldn't have brought it.

We think this is a poor case, dot, dot, dot, but you've got prices go up. You've got deference to the government. And between those two of those, the fact that this case was brought, it's kind of an uphill battle for the company. So I just, I thought that was interesting because one thing I were here, and I think you might have the same thing. And we've talked about this before, but I don't think this case should have been brought. I think this merger should sail through with flying colors. But I worry, like, I let, I don't even think that's my political lenience. That's just my belief.

Like, I guess it's my belief that in a free market system that two companies should be allowed to merge if there's not huge antitrust issues. I don't know. But I'm worried I let like that belief in my irrational brain take away from like my practical brain of, oh my gosh, like one judge, the judge already ruled against them on one thing. And there is a price go up component. So I'll give you the last one. I don't know if you want to talk about any of that.

Yeah, no, I think, you know, we address them, you know, in terms of this is a very different industry. So I, you know, fashion this operates differently. People like a brand more if it goes up in price and they want to pay more for it because they like it. Some people won't even buy a Michael Corr's bag no matter what the price is. You know, they don't like the brand. It's, it's tarnished in their view. It's a or, you know, it's a $300 handbag and they say that's missing two zeros. I don't wear any bags, I don't have, you know.

So I think this is just a different case than people thought they might have something on the companies through, yeah, price increases. I just think, you know, they need to actually increase prices. Or, you know, the brand's going to go away. And in terms of the judge, I mean, yeah, you know, difference to the government. I think it's, you know, I think you're in.

sit until proving guilty and you know if you're just going to defer to the government just because you think they know best and it sort of comes out in the judge's kind of arguments on why they block the murder. I think it's just a bad look on the judge. And I don't, I just personally believe she'll look at the case and kind of rule based on the merits. And I just my view is just I think that's just where it's best for me to spend my time on just where is the, you know, is there a solid argument for this merger or is a good argument against it. Well, look, this has been great for people who want to follow along with the case. What's the, what's the timeline for the case at this point?

So they're set for a trial sometime in September. So I don't think we'll kind of hear anything until then. And, yeah, we'll see kind of what happens after that. I think it's like one week the trial. Normally, normally September, like you'd, as we talked about earlier, you might have like settlement discussions or something, but to me, this does not feel like a case where there's a settlement. It's, yeah, yeah.

I just, I don't know what settlement the company could offer that the company would take and the government would take. We could be surprised, but yeah, it feels like we're going to court, so we'll have more to talk about. there. Yeah. Any last thoughts or anything? And just, yeah, one more thing.

You know, this is, if this industry, if this deal gets blocked, I think the whole industry is, I mean, pretty much LVMH carrying product, you know, no one's going to be able to make any sort of acquisition. I think, you know, I think they all want this deal to go through. If this is blocked, I mean, forget this industry. I don't know how you ever, if this is blocked, I don't know how you ever merge. competitor again, because with this precedent, you just go to it and say, hey, you've got two competitors, we can define the market as narrowly as we want.

You know, like, maybe that's preferably, but it does, I thought Spirit gave the government a lot of powers and antitrust that I don't think they should have. And this one in particular, if they, if you block this, ignore the employee issue. But if you can define the market that narrowly, and especially in a market that dynamic, I think there's a lot of issues, but, you know, people have said, oh, this really would be terrible for consumers before and somehow we always find a way. So maybe that's, yeah, cool. Well, Ron is at Maverick value, I'll include a link to his Twitter and the notes. If you're interested in the case, you should absolutely follow him because I'm just flipping through.

And I think of his last, let's call it 50 tweets, 47 of them relate to the Capri Urger. And I talked to a lot of people. You were the first person to say, hey, look at the Rebecca. Like a lot of people laughed at Rebecca Minkoff, the quote in the FTC complaint because she's a real housewife. And, you know, it's kind of funny to cite the real housewife for blocking it. But you were the first person. And one of the only people, as far as I know, who actually went and looked at the interview that the FTC was quoting and said, hey, not only is it crazy, like it's pretty out of context here. So I thought that was interesting.

If you're looking at, if you're following the merger, you're probably going to have to follow him on Twitter. And then you can reach out to him there and learn more about him as well. So Ron, thanks so much for coming on. We'll have to do a follow-up in September. Before the trial, there's a lot of filings during the trial, after the trial. But thanks for coming on and looking forward to following up. Thank you, Andrew. And thank you for having me.

A quick disclaimer. Nothing on this podcast should be considered an investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.