OpenAI’s $500B Valuation + Key Takeaways from Disney and Uber Earnings

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2:16Welcome to ProfG Markets. I'm Ed Elson. It is August 7th. Let's check in on yesterday's market vitals. The major indices all rose as investors digested the latest round of earnings. Apple drove some of the rally, climbing 5 % on news from the White House that the company will boost its investment in US manufacturing by$100 billion. Meanwhile, the dollar and short-term treasury yields fell as traders bet on the possibility of imminent rate cuts. And finally, Trump's extended tariff deadline has officially arrived. Tariffs on more than 60 countries plus the EU are set to go into effect today. Trump raised the total levy on India to 50 % yesterday due to India's purchase of Russian oil.

2:59He also said he would impose a 100 % tariff on chip imports, but companies moving production back to the US, or promising to do so, Apple, those ones will be exempt. Okay, what else is happening? OpenAI is in talks for a potential share sale that would value it at$500 billion. It was a massive jump from the$300 billion valuation it secured earlier this year. And this new deal would be a secondary sale with current and former employees selling shares. So OpenAI has hit a half a trillion dollar valuation. That makes it the most valuable private company in the world. Also the most valuable private company of all time.

3:46Well, if this isn't proof that the public markets and the IPO is just becoming increasingly irrelevant, I don't know what is. And the fact that there is enough money in the private markets to invest in a company at half a trillion dollars, the fact that there is enough private investor demand, not for a proper funding round, but for a multi-billion dollar secondary sale, that is evidence to me that the public markets are just kind of irrelevant at this point. I mean, think about why the public markets even exist. I mean, it's for one, to raise capital. If you want to raise tens of billions of dollars, you need to find the money somewhere.

4:25The public markets are supposed to provide that for you. Two, brand awareness helps get your name out, helps when you're ringing the bell on CNBC, everyone's talking about you. And three, most importantly, liquidity. If you're a founder, if you're an employee, if you're an early investor, this is how you sell your shares and you cash out. You IPO. You go public. But what this secondary sale proves is that the private markets are now more than capable of checking all three boxes. Capital raising? Done. This company has raised$60 billion in its lifetime. There is more than enough capital in the private markets now.

5:07Brand awareness, also done. OpenAI has Twitter and Instagram and podcasts. You don't need the NASDAQ to get the word out. And three, most importantly, liquidity, done. Why is OpenAI doing this? According to the reporting, this is exclusively for the current and former employees who want to sell their stock. In other words, this isn't even about investment. This is all about liquidity, which is the one thing we used to think the public markets were supposed to be really good at. If you want to get your bag, if you want to cash out, you go public. Now, why should we care about this? Why am I speaking in this semi-aggravated tone right now?

5:48Well, for the same reason we've discussed when we talked about SpaceX and Anthropic and Stripe. This is a potentially once-in-a-lifetime company in which retail investors cannot invest. And that is even at this crazy valuation of$500 billion. I mean, this makes OpenAI more valuable than Coca-Cola, more valuable than Johnson & Johnson, more valuable than Netflix. This makes it the 19th most valuable company in the world. It's just a few billion dollars shy of MasterCard. You know, this company has every reason to be a public company. And yet, at the same time, it doesn't. Because in 2025, the private markets can do everything the public markets can do.

6:32minus the scrutiny from the SEC and minus the hassle of regulation. So you can't really blame them. I mean, why go public when you can just do this? No one loses, not your investors, not your founders, not your employees. If they want to sell, they can. Plenty of buyers out there. So the only loser here is the retail investor who doesn't get access to any of this. I mean, if you're a retail investor and you want to participate in this thing called AI, you basically have three options. One, you can keep investing in the chip stocks like NVIDIA, which are already worth trillions of dollars. Two, you can keep investing in big tech, which are building data centers, but are also already worth trillions of dollars.

7:14Or you could try to find some AI alpha in the public markets, and maybe you invest in Palantir, for example. But oh, wait, That's what everyone's doing. Hence why the company is valued at 600 times earnings. And so what we have created here is a world in which assets in the private markets are extremely accessible and liquid for the private investors. But as soon as you're in the public markets, ironically, the dynamic flips. And that's exactly what we saw, by the way, with the Figma IPA, which as you probably remember, we were very bullish on, but only at$33 per share because remember, that was the IPO price.

7:55That was the price at which certain people were able to get in. And allocation at that valuation was very scarce. If you tried to buy the Figma IPO on Robinhood, for example, you probably got either zero shares, or if you were lucky, maybe you got one. And what happened as soon as the company started trading, it shot up 250%. Put another way, in the private markets, where the demand was artificially constrained, the price was a lot lower. It was a lot more accessible. And then in the public markets, for which this was basically the only exciting IPO of the year, you had this gigantic flood of demand.

8:37The price went way up. And suddenly, you could only buy Figma at$100 a share. So what we have here is this growing rift between the private markets and the public markets, where not only do the private markets have greater access to the most valuable companies, they're also getting lower prices because there is less demand. But again, not so little demand that there isn't enough liquidity. There's plenty of liquidity. It's just the right amount of demand such that you know the price will go up, especially if the company does go public. And you also know that you can sell whenever you'd like. I mean, it's basically an investor's dream.

9:15And it's why these venture-backed companies keep pursuing the same strategy, because they know that it works. And they also know that if anything goes wrong, they can always just pull the cord on the parachute and take the fallback option of the IPO. And that's what we saw with Figma. Put another way, there are too many good companies in the private markets and too many shitty companies in the public markets. such that when the one good company goes public, it's like getting into a nightclub at 1 a.m. on a Saturday. You can't really do it. The only ones who can do it are the ones who are buying tables.

9:52It's the ones who have$10 ,000 to spend. So look, congratulations to OpenAI and to the employees,$500 billion, the most valuable startup in history. Good on you. But just remember, there is a reason why the rest of America isn't celebrating here. They're not celebrating alongside you. And it's because the rest of America can't buy. All they get to do here is sit around, read the news, listen to this podcast, and watch you get rich. That's what's happening. But the same isn't true of public companies. If OpenAI goes public tomorrow, suddenly there's a chance for regular investors, for retail investors, to have a stake in this thing, to participate in the upside.

10:39But that's only going to happen if you IPO. And I don't see that happening anytime soon.

10:50Disney stock fell yesterday, despite beating expectations. Revenue came in just shy of forecasts. And while Disney raised its fiscal guidance for the full year, some analysts were still underwhelmed. The experiences segment was a standout, with revenue up 8%, thanks to strong performance from the domestic parks and the Disney Cruise Line. However, revenue for its entertainment segment rose just 1 % and was dragged down by a 15 % revenue drop in the traditional TV business. No surprise there. One bright spot in entertainment, though, Disney Plus and Hulu added 2.6 million new subscribers. Now, the company also made two very interesting strategic announcements.

11:30One, it will sunset the Hulu app and roll it all up into Disney+. And two, they also unveiled a new deal between the NFL and ESPN, which Disney owns. Under the deal, the NFL will take a 10 % stake in ESPN. And in exchange, ESPN will get control over the NFL network, the NFL Red Zone channel, and also NFL's fantasy platform. They will also get licensing rights to three additional games, meaning ESPN now has the rights to 28 NFL games per season. Disney's stock declined as much as 5%, but it ended up closing down roughly 3%. Okay, a lot there, a lot to unpack. So let's bring in Jason Bazinet, Managing Director of Media and Entertainment Research at Citigroup.

12:27okay jason thank you for joining me on the podcast yeah happy to do it um so we'd love to just get your initial reactions to uh disney earnings what were your initial thoughts what were your biggest takeaways uh from the earnings we saw well to set the stage i mean the main fear the street had coming into this earnings result was um what they call the experiences segment which is really theme parks to layman um there's a few competitive jitters because of comcast epic universe and a little bit of macro fears that wall street has um so that's that's where i zoomed in first and i would say the numbers were actually quite good at experiences um the second thing the street was expecting was uh for the firm to raise their earnings uh guidance for the full year so they over$5.75 was the guide for this fiscal year.

13:17The street was looking for them to raise it to six, and they only raised it by about a dime to$5.85. That's really why you saw the weakness in the shares today. It was just a miss versus those buy-side expectations. Was any of this, do you think any of this had to do with the other announcements we saw? These were the things that at least we were most interested in. One was Disney Plus merging with Hulu, and perhaps what that would say about the company. It seems like a significant strategic move. And then the second, which has been getting a lot of coverage, is this deal between ESPN and the NFL.

13:55And I'm just wondering if, in your view, the market's reaction might have been reflecting that or if it's largely, as you say, to do with the guidance. Well, no, I don't think it reflected either of those things. I say that for two reasons. The first is Disney has been somewhat hamstrung in terms of what it could do with Hulu until it bought the 33 % that was owned by Comcast. And so they sort of finally settled that a little bit earlier this year. So this is sort of the first sort of flexibility that Disney had to do whatever it wants to do with Hulu, which includes expanding it globally. So that was sort of viewed as table stakes and largely expected, and it was more mechanical in terms of the timing.

14:41Regarding ESPN and what happened there, I would say that the street has almost removed all of the direct-to-consumer business from their valuation calculus. Why do I say that? The way you should, I think, most investors think about the direct-to-consumer businesses, you have the 800-pound juggernaut with Netflix. and then you have a bunch of sort of small apps, Max, Hulu, Peacock, that are really too small to really matter. And Disney's sort of stuck in the middle. They're not really sort of really big, but they could be relevant someday. And so what the street's been looking for for some time is just healthy subscriber additions.

15:25And Disney hasn't had healthy subscriber additions for some time. So it's almost been removed from the way the stock, the way the buy side thinks about the stock. So it's really much an earnings story. It's about experiences. What the Bulls hope for is that the streaming business begins to accelerate. And if it begins to accelerate, it can sort of help Disney's multiple more than it will help the earnings. And that's really the thing that they're looking for. But I don't think, I felt today was just a building block and moving in that direction, right? Beginning to put, you know, the flagship service as part of streaming, to bundle what they call flagship, what we all think of as the real ESPN, with Hulu, with Disney Plus all together.

16:09And those are all just sort of building blocks, laying the foundation to accelerate streaming growth. And so it could become more important in the future. But it's not why the stock was down a couple percent today. Yeah. It's interesting how with Disney, increasingly the story has become about the parks and the experiences and making sure that there is real growth there. I assume because it's sort of their greatest differentiator in the entertainment space. I mean, it seems increasingly that that is what investors are most focused on. How are the parks doing? How is the cruise line doing? Is that something that you would say is happening?

16:45It's 100 % true, and there's a delicious irony embedded in all this. If I rolled the clock back 15 years ago, investors would say to me, oh, I love Disney, but I hate the theme parks because they're cyclical and capital intensive. Yeah. It really speaks to just how much damage has occurred inside the media ecosystem, where now what you have essentially is this declining legacy linear business. You have a somewhat growing direct-to-consumer business, and the two just sort of net out where people don't really get super excited. And that's why all I shift towards experience is where it's viewed as sort of better.

17:20Yeah. Why do you think that shift has really changed? I mean, thinking about it just from a purely business perspective, as you say, 15 years ago, the view is it's too capital intensive, it's too expensive to build these parks. You know, I'd rather a software application like Netflix that can just sort of quickly and easily and cheaply distribute the content. Now it's almost reversed where it's like, well, because it's so capital intensive, that's your moat. And then, you know, everyone can build a streaming service. So we're not as interested in that anymore. That's exactly right. That's exactly right.

17:56I mean, it's what was considered sort of a negative is now actually a positive. I mean, you have some other tailwinds. I mean, to Disney's credit, the parks have become bigger because they fortified it with a lot of the recent intellectual property. You know, the Pixar that they bought in 2006, Lucasfilms, which they bought in 2012, Marvel in 2009. So they really refreshed the parks. That helped. You have a long secular tailwind where younger consumers are just valuing experiences over things. That's been another tailwind for the business. So there's some other vectors to it. But I would say the central one is really just media has just been walloped by all these digital changes that have happened.

18:36And it's been very difficult for traditional medias to navigate that shift. Yes. Just going back to this deal between ESPN and the NFL, at the very least, whether or not the market really cared about it, it's a new kind of deal. I mean, the idea of having a sports league taking this pretty sizable ownership stake in the network that's going to distribute its content, I don't think I've seen that before. I'm just wondering if you've ever seen a precedent for this. Have you ever seen an agreement that looks like this, or is this pretty new? It's absolutely new. I mean, there are some examples in the sports betting world where leagues have taken stakes in the data companies that feed sports betting apps.

19:24So it's not totally unusual for the leagues to take equity stakes in their intellectual property as opposed to just selling it for cash. But you're right that it is certainly unique to take one in a video distributor. And I think the reason I would sort of offer up one primary reason for that, if you think about what allowed ESPN to become ESPN, they essentially had deeper financial moats than a lot of the other sports channels because they'd been around the longest. Therefore, they got the largest affiliate fees from the cable companies that allowed them to bid more than anyone else. right? As we move into this new world of mega tech companies with, you know, trillion dollar market caps and much more free cash flow, the calculus has sort of changed where you can have a big tech company, you know, outbid Disney for rights.

20:14So if you're Disney, what do you do in that world where you're no longer the biggest fish? Well, you start tethering yourself to the league where at least if a league takes a larger cash payment from a tech giant, they're going to at least think about the diminished equity stake in their existing partner, if that makes sense. And that's sort of how I would think about it and why Disney was probably willing to sell some of ESPN today where they probably wouldn't have in the past. Yes, it sounds like the way Disney feels about it is, what can we do? Well, we can make sure that the NFL has an upside in doing business with us by literally giving them a stake in the upside.

20:54It almost reminds me of what we've seen in big tech, where big tech will establish these contracts with these AI startups, and then also invest in them. And basically make sure, like, we're both on the same team here. We're doing business together, but ultimately we're on the same team. We're both going to share in the upside here, which makes a lot of sense. Yeah. And also sort of inflict some pain, potentially, where if the NFL goes with someone else, they They may get a larger cash payment, but their equity stake in ESPN will be worth less. Yes. Yes. Which sounds a little anti-competitive the more I sort of think about it in real terms.

21:36But perhaps 10 % is small enough of a number. Yeah. Well, we really appreciate your time, Jason. Yeah, absolutely. Thank you for joining us on the podcast. Thank you, Ed.

21:49that was jason bazinet managing director of media and entertainment research at citigroup so this nfl disney deal we tried to sort of identify a winner maybe it's not as clear the nfl maybe it wins maybe disney wins here we'll see how things shake out however there is one loser that we can identified to a certainty here, and that is the viewer. Because if you watch football, well, the long and short of it is this deal is going to make it even harder for you to access games. In fact, to watch every game in the 2025 NFL season without cable, you would need subscriptions to at least half a dozen streaming services and YouTube TV, which will run you up as much as$1 ,500.

22:36And by the way, that was before this deal. After this deal, it's going to be even more. Now, you might say, well, why wouldn't I just watch the whole season on cable? And the answer to that question is, you can't. Because Amazon now owns the rights to Thursday Night Football, and Netflix also now owns the rights to select games too. So, if you're a serious football fan, basically, you have to stream now. This is the net-net of the streaming wars. And if there's one thing that you want to take away from this deal, it's that yes streaming just got even more expensive after the break a look at uber's earnings stay with us

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25:40We're back with ProfG Markets. Uber reported strong earnings yesterday and announced one of the biggest buybacks in tech this year. Revenue was up 18 % year over year and beat expectations. Monthly active users grew 15 % and they issued this$20 billion buyback. So you would think that that is all great news, a huge buyback, strong revenue. You'd think that's a recipe for a pop in the stock. But no, the markets actually didn't like it that much. The stock fell as much as 5 % on the day and then partially recovered by market close. So for more on these earnings and why Wall Street reacted the way it did, our producer Claire spoke with Mark Mahaney, Senior managing director and head of internet research at Evercore.