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First Move with Julia Chatterley
China Hits Back After Trump Threatens More Tariffs; JPMorgan Goes Neutral On Beyond Meat After Its Sizzling Post-IPO Stock Surge And Styling The Next Unicorn, Poshmark CEO Discusses The Firm's Plans To Disrupt Amazon And Pinterest. Aired: 9-10a ET
Aired June 11, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is First Move and here's
your need to know.
Fiery rhetoric. China hits back after Trump threatens more tariffs, investors yawn. Beyond its valuation. JPMorgan goes neutral on Beyond
Meat after its sizzling post-IPO stock surge and styling the next unicorn, the CEO of e-retailer of Poshmark joins to discuss the firm's plans to
disrupt Amazon and Pinterest. All in a day's work. It's Tuesday. Let's make a move.
A warm welcome to the show where I tell you, morose May has turned into jubilant June. Thanks very much to Jay Powell, of course, stocks up for
five straight sessions in a row here in the United States. And it looks like we could add to that, too, at least at the market open.
Right now, U.S. futures are in the green. The NASDAQ outperforming -- keep at least half an eye on D.C. today as Congress begins hearings on the
antitrust concerns later on today. My read on this, wake me up in a few years when you're ready to act.
Someone who is wide awake though, right now Fed Chair, Jay Powell, as I've mentioned hopes that the Fed will make a so-called insurance rate cut. The
S&P 500 is now just two percent, away from recent record highs.
My question remains can the Fed cut rates when we're just two percent away from record highs? Particularly when consumer confidence is so pivotal to
the economy here. It's held in pretty well.
Goldman Sachs agree they said in the last 24 hours that they don't believe the Fed will even cut rates this year, then you watch the markets.
Speaking of markets, Chinese stocks also had a great session overnight. Beijing announcing fresh measures to help fund local infrastructure
projects starting at what's additional here, and what's already been some has allocated to these kind of projects.
So I may be a bit skeptical on this one. A lot, of course relies on progress being made between the two Presidents at the G-20s as we've
discussed timeless -- on timeless accounts and occasions on this show.
The Commerce Secretary, Wilbur Ross saying on CNBC earlier today that a deal will eventually be made. As I mentioned yesterday, though, the fact
that the U.S. is using trade tariffs to tackle other issues like migrant flows from Mexico could make a deal harder to reach.
Check this, the Chinese Ambassador to India said overnight that Southeast Asian countries should support what he calls the global trade order and
pushback on quote, "The United States' abuse of terrorist measures." Interesting.
On that note, let's get to the drivers because Christine Romans joins me now. Christine, more rhetoric flying quick and fast between China and the
United States. It could be any day over the last three months, and yet stocks just two percent away from record highs. A stock investor is losing
it, or are they just too reliant on Jay Powell here?
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS CORRESPONDENT: You know, they're too reliant on Jay Powell here, but also the American economy while
showing some signs of fraying at the seams is still over -- well, moving nicely here.
I mean, you've got more open jobs in America than you have job seekers by the biggest margin ever. So the American labor market even with that weak
jobs report on Friday is still strong. You've got inflation low as the President was tweeting about this morning.
And you make a very good point, Julia. Does the Fed have justification to cut interest rates here, when you're just so close to record highs 10 years
into an economic recovery with still all of that stimulus in the system still?
You know, I mean, I just think that maybe taking a step back and looking at the bigger picture here, and the Fed doesn't just operate for the benefit
of the stock market. Right? I mean, it just doesn't. It benefits for the overall economy here, and so I think that maybe patience might be a little
bit warranted.
Seventy percent -- if we look at Fed Funds futures, and they're betting out what? Like a 70 percent chance of a rate cut in July. That seems pretty
optimistic.
CHATTERLEY: Yes, and I couldn't agree more with you. I'm being a bit facetious here throwing it around. But as you point out, the stock market
here is not the economy and we have to bring it back to the fundamentals.
My fear is that Jay Powell has kind of backed himself into a corner here or at least being backed into one by the markets.
One of the interesting data points I saw this morning, the NFIB Small Business Optimism Index, the best reading since October, but within the
details, many observers arguing that the economy needs another artificial stimulus from the Federal Reserve.
[09:05:03] CHATTERLEY: So even when the data looks good in terms of optimism, the sort of counter to it is again, they're relying on the
Federal Reserve hereto. It worries me if the Fed don't act.
ROMANS: Ironically, the President of the United States today when he was a candidate complained about the sugar rush of artificial stimulants in the
economy, that it wasn't fair and that it was going to lead to problems down the road.
Today, he is all about the sugar rush in the economy, the lower rates. A very different, that-was-then-this-is-now kind of a story here. But think
about it. For 10 years, the market -- the stock market has been addicted to cheap money. Right? And the Fed was trying to orchestrate first
through Ben Bernanke, and then through a Janet Yellen, and now through Jay Powell, kind of a reordering of what's going to be normal in Fed policy
vis-a-vis the economy in the U.S. and we're still not there yet.
CHATTERLEY: Yes, we are certainly not willing to let go of that punch bowl right now -- that stimulus punch bowl -- firmly within our grasp.
Christine Romans, thank you so much for that.
All right, let's move on to Huawei caught at the heart of the battle over trade between the United States and China. The company overnight saying
that it will have to, quote, "wait a little longer to overtake Samsung" as the world's biggest smartphone maker.
Sherisse Pham joins me now. We've got some mixed messages, some bravado from Huawei in the past, but at least on this metric, they're acknowledging
that actually, this is just going to push the timetable back some.
SHERISSE PHAM, CNN BUSINESS REPORTER: This is really one of the first times I've heard them acknowledge that their bottom line is actually
hurting from this U.S.-led campaign against them.
They had said back in January that they were going to overtake Samsung by the end of the year. And now to say that they'll have to wait a little bit
longer, is actually pretty optimistic.
I was talking to an analyst today, and she said, if Huawei gets off the entity list or if there are positive developments by August or i.e. after
the reprieve from the Commerce Department expires, then maybe Huawei could hold on to its number two position above Apple and below Samsung.
But if it's on that entity list for much longer, it could slip, so it could slip down to third, fourth, or who even knows, even further, because Huawei
smartphones will be a lot less attractive to international consumers if it doesn't have access to that U.S. tech -- if it doesn't have access to the
software like Google and Facebook and Instagram -- all those companies saying that they have to restrict Huawei's access to their tech now, so we
shall see.
And again, Huawei admitting that this is hurting their business, it's quite a development here.
CHATTERLEY: You make a great point about Google and even Google or Alphabet themselves are pushing back here and saying look, not allowing us
to push forward with these kind of updates and have Huawei accessing the infrastructure that they provide here could introduce back door security
risks here.
Do you think that kind of pushback clearly argues the point that Huawei is making that they continue to want to be able to use this technology, but do
you think that is in some way listened to by the U.S. government here? That they recognize the risk of introducing dangers hereto?
PHAM: I mean, I think there are probably some reasonable people in the Trump administration that are acknowledging that that is a potential risk,
right? If Huawei is -- and this is the argument that Google has reportedly made -- if Huawei is allowed to build a hybrid version of its operating
system, which will most likely rely on some version of the open source Android operating system, that will be something that will be even more
vulnerable to hackers because Android's operating system is already much more vulnerable than Apple's iOS.
So it really puts the Trump administration between a rock and a hard place and it certainly puts the Commerce Department in a difficult position when
President Donald Trump is continually coming out and saying that a deal for Huawei could be included in a broader U.S.-China trade deal.
So it makes everyone wonder, is the campaign against Huawei really about national security? Or is this just a geopolitical move? We'll have to
wait and see if Huawei gets off this entity list because they should be kept separate, they should be in separate lanes. But that is like you
said, Huawei is sending mixed signals about its business, the Trump administration is sending mixed signals about its stance on Huawei.
CHATTERLEY: You make such a great point and Steve Mnuchin, the Treasury Secretary over in Asia in the last 24 hours saying that these two things
are separate. We'll see. Sherisse Pham --
PHAM: We'll see.
CHATTERLEY: Thank you so much for that. And we got the dress memo once again today.
PHAM: Oh my goodness. I can't believe it.
CHATTERLEY: Yes, we did. I know.
PHAM: Thank you.
CHATTERLEY: Mind readers. Let's move on. Beyond Meat under pressure premarket, down some 11 percent following a downgrade to neutral from
JPMorgan, but it's okay because the stock has risen almost 70 percent -- seven zero -- in the last two sessions.
[09:10:03] CHATTERLEY: Paul La Monica has all the details. Paul, the technical term for this is squeezy. More than half the floats of these
stocks have been shorted now with investors thinking it's just moved too far too fast. What is JPMorgan saying?
PAUL LA MONICA, CNN BUSINESS REPORTER: Yes, JPMorgan has been bullish on Beyond Meat. They've raised their price target just last week. And keep
in mind, obviously, it makes sense that they're bullish, because they were one of the underwriters for the IPO.
But the analyst at JPMorgan, writing in his report today, saying that, basically, the stock price has now valued in bullish projections for the
next 10 years; that might be unreasonable.
He said that, you know, at this valuation, you're assuming that Beyond Meat can generate $5 billion in sales in 2029, and he is not comfortable saying
that the company is definitely going to be able to do that.
So this is a stock that I think has been gotten to be beyond bubblicious, if you will.
CHATTERLEY: Beyond bubblicious, I agree. I mean, we're now talking about a company that has got more than a $10 billion market cap. And I look at
some of the people that are looking at the broader industry, even the growth prospects to 2025. And they say this is a $22 billion industry,
more than $10 billion, $22 billion, entire industry in some seven, eight years' time.
I mean, even just when you look at that metric, however excited you are about the prospects of this company, you surely have to be a bit cautious
here.
LA MONICA: Exactly, it really is all about valuation. The stock price is ahead of itself based on the projections for the growth of this industry.
And don't get me wrong, the growth rate for plant based protein is phenomenal. And I am not being a bear on that particular business, per se.
I enjoy Impossible Burgers, and I think that's a key issue here.
Everyone latches on to anytime Impossible has made an announcement that has been good news for them; Beyond Meat stock goes up. I'm not so sure,
Julia, that's rational. At some point, especially if Impossible goes public at one point down the road, you have to look at the two companies as
being competitive.
So in the same way that you know, if Coke does something positive, that may not be great news for Pepsi; you might have to feel the same way about
Impossible gaining momentum that could hurt Beyond Meat.
CHATTERLEY: Yes, it's not about shifting market share right now. It's all just a big PR opportunity and announcements of floating all boats here.
It's going to be interesting to see when that stops happening to your point. Paul La Monica, thank you so much for that.
All right, let me bring you up to speed now with some of the other stories that we are following around the world.
One of Hong Kong's biggest trade unions is urging people to take to the streets Wednesday. It wants members to strike against to build up with
allow Beijing to extradite fugitives in Hong Kong to mainland China.
The move follows massive demonstrations on Sunday. Matt Rivers joins us once again on this. Matt, great to talk to you about this again. I mean,
you were on the show yesterday, and we were talking exactly about this risk. And now the trade unions are coming out and going we recognize not
only their potential human rights implications, but the perceptions that this creates for Hong Kong for workers for trade conditions is critical.
MATT RIVERS, CNN INTERNATIONAL CORRESPONDENT: Yes, absolutely. I mean, I think -- and that's the big difference, I think, between this particular
movement that we're experiencing in 2019, than let's say the last real big protest movement, the pro-democracy movements of 2014.
2019, you've got serious buy in from communities outside just young liberal students, which generally made up the bulk of the protesters in 2014. Fast
forward to now, and you have buy in, from business groups, from trade groups, from people who are saying, "You know, what? We're not going to
allow this bill, if we can help it to impact the business community."
And what we saw during the day today and what we are kind of waiting to see happen is, well, what kind of concrete action would the trade unions take?
Would they encourage their workers to strike? Would businesses here in Hong Kong allow their workers to walk out in solidarity? And it does
appear, both anecdotally and through official statements, that there will be people who are walking off the job tomorrow.
Everyone from, you know, service workers to teachers to -- we've even heard rumblings in some of the larger financial firms here, they might, you know,
turn a blind eye of some of their employees walk out during the day.
So there is going to be an impact in the business community here and it just shows you that this particular movement has a wider cross section of
the Hong Kong citizenry than I think, protest movements in years past.
CHATTERLEY: Does it make a difference, Matt, is there any indication that the executive in Hong Kong will change their mind when faced with pretty
high pressure no doubt from the Chinese who wants to do this?
RIVERS: Yes, it's a great question and there there's no way we can answer as of yet. We're not sure if this will ultimately change anything.
However, though, Julia, I didn't just try and ask that question to Carrie Lam, the Chief Executive of Hong Kong.
[09:15:10] RIVERS: She was walking into a public event that she was at tonight, and I threw the question at her. She didn't respond. So we're
not sure if she has any sort of indication that she might try and repeal this bill.
But publicly even this morning in a press conference, she said she is moving forward with this. And I think that is generally the feeling you
have amongst average Hong Kongers. You know, we were out on the streets today and I talked to one guy who was very in favor of the protest.
But he said, "Look, I don't ultimately think it's going to change anything. But that's not going to stop me from protesting." That said, if you talk
to protest organizers, they are saying we have more buy in from ordinary Hong Kongers, from people in the business community that we have had
before. And they think that that could make a difference. We're not going to know for a little while, but the fact remains that this movement
certainly has some more cross sectional buy in than we've seen in the past.
CHATTERLEY: And we're going to be back with you tomorrow for those latest protests. Of course on Wednesday, Matt Rivers, great job. Thank you so
much for that.
All right. Let's move on, "The Wall Street Journal" is reporting that the half-brother of North Korean leader was a CIA informant. Kim Jong-nam was
killed at the airport in Malaysia's capital in 2017 when two women smeared his face with a nerve agent. South Korean and U.S. officials have blamed
North Korea, but Pyongyang has repeatedly denied any involvement.
A helicopter crash-landed on the roof of the New York City high rise on Monday. Office employees say they felt the building shake and that the
stairwells was so packed it took up to 30 minutes to evacuate.
The pilot, Tim McCormick was killed in the crash. Police say McCormick was waiting out the rain, but for some reason decided it was safe to fly.
All right, still to come here on the FIRST MOVE, a bolt out of the blue, Uber's newest rival his streets of London. And have investors lost their
appetite for Beyond Meat? We will be speaking to a stakeholder to get his take. I tell you what, no. That's the cheat. Stay with us. We're back
in two.
(COMMERCIAL BREAK)
[09:20:18] CHATTERLEY: Welcome back to FIRST MOVE live from the floor of the New York Stock Exchange where we are looking like a further addition to
the gains that we've seen so far this week.
We have positive stock for U.S. markets expected here. New stimulus measures kicking in from China, of course on the infrastructure helping to
boost sentiment globally, I think at this moment.
We are looking to add to a six-straight session of gains if we manage to close in the green territory today. We've gained around 70 percent back of
what stocks last month, as we were discussing earlier on in the show.
The President also adding an interesting mix to the equation here today saying in a tweet this morning that "the euro and other currencies have
devalued against the dollar," quote, and that of course, adding to problems for the U.S. economy looking at currencies though they are gaining some
safe havens, like the yen and the Swiss franc this morning.
We also saw the yuan strengthening after hitting the lowest levels of the year on Monday, that tweet by the Chinese Central Bank government.
Let's talk through -- some interesting comments in the last 24 hours. Steven Englander is the Global Head of G-10 Ethics Research at Standard
Chartered Bank and joins me now. Great to have you with us.
STEVEN ENGLANDER, GLOBAL HEAD, G10 FX RESEARCH AT STANDARD CHARTERED BANK: Pleasure to be here.
CHATTERLEY: Let's talk about the President's tweets to begin blaming the devaluation of currencies like the euro, but other nations as well against
the U.S. dollar for some of the challenges of the U.S. economy. Thoughts?
ENGLANDER: Well, other administrations have made similar comments, and so has President Trump, but he has actually been much better on the rates than
he has been on FX in terms of current directions.
CHATTERLEY: Interesting. You mean, in terms of the follow through that you see from Central Banks and in markets.
ENGLANDER: And the follow through that you see in markets indeed.
CHATTERLEY: So let's talk about rates then. I mean, is the President right, when he is saying actually that he believes the Fed should be
cutting rates? The markets arguably believe him at this stage, too? Do you think we get rate cuts this year?
ENGLANDER: Well, I think that the Fed looks to be pretty close. They are going to be preemptive, in case there's any downside. But you can't forget
the tariffs that they actually don't do anything if the numbers come in, okay in July, and if the June G-20 meeting is fine. So there's no abrupt
trade issue.
The Fed might take a pass in August, and then question is what follows after that?
CHATTERLEY: I know. I mean, we had guests on after the payroll's report on Friday saying, "Look, that's a smoking gun effectively for the Federal
Reserve here. And we could see them at least signaling in June that they plan to cut in July.
I mean, we've got a sequencing problem here because if the Federal Reserve don't give a signal that perhaps they're willing to cut rates in, in July,
and then nothing comes at the G-20, then the market is going to be rattled.
ENGLANDER: Indeed --
CHATTERLEY: How does the Fed play this? Because it's been backed into a corner by market expectations. And here we are with stocks two percent off
the highs?
ENGLANDER: Well, I think that we would be very careful. They are going to say that they are ready to move preemptively in case there are signs of
weakness.
I don't think the data have been quite weak enough for them to move in June. And the market would be very disappointed if they didn't give an
overt signal. There's about an 85 percent move priced in. So those they'll have to be very careful. But there's room for disappointment.
CHATTERLEY: Goldman Sachs came out this morning and said, actually, we don't believe they'll cut rates at all this year. I feel like the range of
possibilities here even as far as analysts' expectations is incredibly wide here that I guess, the only thing perhaps you could predict here for
investors is volatility because the range of options here are so wide.
ENGLANDER: Well, it is -- look, it is a plausible story that says trade talks go okay, inflation edges up again. And the economy is fine, and they
don't move.
But if inflation keeps falling, or if one of the trade negotiations go poorly, or if it turns out that the economy is soft, any one of those would
lead to the Fed easing.
So the probability weight across scenarios seems to be leaning a little bit towards ease.
CHATTERLEY: But that's a lot of awes, but when we wrap them up, that the greater likelihood is easing here. Talk to me about your call on the U.S.
dollar because despite the fact that we have seen the rate expectations coming down that the dollar has remains pretty strong here on a relative
basis. Why are you now saying actually that could continue and actually -- a fall in the dollar could be delayed or pushed back.
ENGLANDER: Well, there are two scenarios that could lead to dollar weakness. One is the straightforward scenario that the rest of Europe in
particular isn't as bad as it looks, and the Fed, you know, moves and Europe doesn't and you know, we have rates convergence.
[09:20:07] ENGLANDER: The second story is that if there is actually a trade war, I think that if it turns out that the U.S. moves to the next
round of tariffs.
CHATTERLEY: Yes, escalation, yes.
ENGLANDER: I think that there would be massive risk off and all the good news we've seen over the last week or so would be --
CHATTERLEY: Filter away again.
ENGLANDER: Well, it would collapse entirely. So I think both, you know, in one case, it's like a friendly story, that the world is catching up to
the U.S. and it's probably good for emerging markets. The trade war cases full on risk off.
CHATTERLEY: Do you buy the dollar in worst case scenario, if we saw no conclusion from the G-20? We saw the President saying fine, we're going to
add tariffs to the remaining $325 billion. Does the U.S. dollar get stronger in that scenario relative to just about everything else?
ENGLANDER: When you get tired of buying yen, you'll turn and buy dollars as well. But I think yen would be the first winner on that scenario.
CHATTERLEY: Traditional safe havens.
ENGLANDER: Yes.
CHATTERLEY: The Swiss franc, perhaps, even gold, I guess in that circumstance.
ENGLANDER: Unclear on gold. But I say --
CHATTERLEY: Stay away the way from gold.
ENGLANDER: We like gold in general. But you know, on the risk off scenario, it's unclear how it will trade.
CHATTERLEY: Well, there you have it, Steven England, the worst case scenario played out. We will see.
G-20 is going to be incredibly important. I think that's the message. Steven Englander, thank you so much.
ENGLANDER: Thank you so much. The Global Head of G10 FX there at Standard Chartered Bank. Stay with us. We're back after this with the market open.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE. That was the opening bell at the New York Stock Exchange this Tuesday and we are seeing a higher
open for stocks as anticipated if we can add to the gains that we've seen, this will be sixth straight sessions of gains just two percent away from
record highs as we were discussing.
Watch the tech stocks today given the noises and conversation in Congress regarding potential antitrust actions. Yes, yes, I say.
Let me walk you through the global movers and move swiftly on there. I am a skeptic on regulation, at least in the short term.
Broadcom in focus entering into a statement of work with Apple revealed in an SEC filing. It's a two-year deal where Broadcom will supply Apple with
radio frequency parts to use in iPads, iPhones and Apple watches.
Barnes and Noble also in focus. It looks like a bidding war for this one. Remember, the bookstore is looking to go private here. Book distribution
company Readerlink is adding its name into the mix here according to "The Wall Street Journal." It said last week it was going to hedge fund Elliott
Management for some 618 million. The breakup fee $17.5 billion.
Beyond Meet under some pressure today. JPMorgan Chase downgraded the stock from overweight to neutral. It's kept its target price of $120.00. Shares
are currently trading around $150.00. JPMorgan saying, "Look, this is purely a valuation call." The company is also releasing a new version of
its meatless burger this week. It said it looks, tastes and cooks even more like beef.
Gregg Smith is an early investor in Beyond Meat and has increased his stake since the IPO. Fantastic to have you with us, Gregg.
GREGG SMITH, FOUNDER AND CEO, EVOLUTION VC PARTNERS: Good morning. Thank you for having me.
CHATTERLEY: How excited are you by the prospects of the company announcing -- and even meatier no meat burger?
SMITH: I'm very excited. I think it's an incredible company. I think in 10 years, people are going to look back at May 2nd, the IPO date of the
company and say this was "peat cholesterol" in America.
I think that we're going to see a secular shift in the dining patterns of Americans over the coming years to more of a plant-based diet. And I think
Beyond Meat marked the beginning of that shift.
CHATTERLEY: Peat cholesterol.
SMITH: Kick cholesterol without Pfizer and its work.
CHATTERLEY: Yes, interestingly.
SMITH: Yes.
CHATTERLEY: That's an alternative option for -- JPMorgan this morning saying, "Look, it's a bit over its skis in the short term." I was making
the point that we've got a $10 billion plus valuation on the company now when the market in eight to nine years is expected to be some $22 billion.
Even just on that metric, would you agree that perhaps it's a bit lofty at these levels?
SMITH: I disagree. I've been a buyer since the IPO. I've continued to add to my position even from the private market. I'm taking a long gain
view here, and I look at the plant-based dairy market and if you witnessed what happened in plant-based dairy in the country, there's currently 13
percent of purchases are for plant based dairy alternatives.
CHATTERLEY: Right.
SMITH: If you were to extrapolate that to the meat market, meat market is 17 times that of dairy, so $1.4 trillion market. If Beyond Meat and the
competitors that will come as the category broadens were to get even 10 percent of that market, it's $140 billion market.
My personal view is I think we could see Beyond Meat trading at three to five times levels in the next several years. It's going to be a massive
category. There will be many winners. And I think Beyond Meat is a leader.
CHATTERLEY: We can go back and forth on the numbers, and I do want to do that. But just in the short term, just if we look at the technical here,
and I think this is the point that JPMorgan is making.
When you know that over half the float of this has been shorted. So people are saying actually look, they think it's a bit bubblicious here. Are you
just saying as an investor, "Look, I've averaged in here on the way up, even if this thing falls back 30 percent in the short term, I liked the
story so much, I'll sit on that, I'll wear it and I'll just perhaps even buy and average in a bit lower here."
SMITH: I do. I'm taking, again, the long view. I look at it as I'm probably buying a $500.00 bill with maybe $400.00. I know that the stock
is going to go to 80 tomorrow or 200, but I do know in the next several years, it's going to be a massive company. And I believe it will be much
significantly higher than where it is today.
CHATTERLEY: And even if it goes to 80 in the next week, you'll be like, "Look, that it's a real bargain at 80."
SMITH: I think it's an opportunity, yes.
CHATTERLEY: What's the level that you've got in there on average? I mean, I know you're buying, you were a private investor earlier on. So it's post
IPO that you've had it.
SMITH: Look, I'm fortunate enough to have probably an average cost below the IPO price, so I'll leave it at that.
CHATTERLEY: Nice. Okay, that's a key point.
SMITH: Yes.
CHATTERLEY: Yes. So you're smiling all the way to the bank here. You said about the numbers the guidance that you think the company provided was
light.
SMITH: I do.
CHATTERLEY: Talk to me about how light because that's also going to be important, I think when we get around to the next quarter and the numbers
and justify what we're seeing right now.
[09:35:00] SMITH: Well, look, I think you look at the landscape they are on 30,000 points of distribution today. I personally believe that could
triple in the next several years. So if you look at 30,000 points of distribution today, I personally believe that could triple in the next
several years.
So if you look at 30,000 points of distribution doing, let's say my estimates are $250 million in sales this year, multiply that by three, you
can pretty easily get to $750 million in sales.
Most of their sales have predominantly been their burger patty.
CHATTERLEY: Yes.
SMITH: So most of the sales and sales growth, I think what people need to look at is the sausage which is coming on strong, and many would argue it's
even a better product than the burger.
And also, you're going to see the one pound ground beef packet coming out. Don't forget ground beef is probably the biggest seller in the meat
department in a store. So if you triple their points of distribution in the U.S. and internationally, you have the sausage, you have ground beef
package, so that should be bigger than the burger, which could go into tacos and meatballs, as well as the sausage patty, the breakfast sausage
patty.
CHATTERLEY: Okay, awesome sales pitch. The counter to that would be Nestle, Tyson Foods -- all the big names that are looking in on this and
what we see right now is when we get an announcement from the likes of Impossible Brands that has Impossible Burgers, it floats all boats,
everyone benefits, it's seen as a sort of PR opportunity for the sector right now.
How long does that continue? And my other challenge here would be supply because when we spoke to the CEO on IPO day, we talked about pea protein
and the supply issues that they've had in the past and the risk -- given the kind of growth that you're talking about, those supply issues become a
factor again, and in a way more material way again.
SMITH: I think so. I think the company is taking the necessary steps. I'd like to see them continue to invest in more manufacturing, acquiring
work ex-traders, growing their international presence, and I think supply will come on.
I've been involved with other high growth situations where companies have had a high class problem meeting demand, and I think we will witness Beyond
do it.
As it relates to competition, I think competition is good. It's going to broaden the category. Personally Beyond Meat is my preference over
Impossible, which has different health attributes to it.
The Impossible has soy, it's non-GMO. It has gluten. So it's going to put that in a different category. But I think they'll be multiple winners.
Ultimately, if you look at the CPG category at large, and you see massive competition, most of the big brands might have market share in the 30s.
So if Beyond Meat were to get market share of $100 billion plus market in the 30s, it's a pretty large business and it makes the stock today look
cheap in my view.
CHATTERLEY: For now, there's not too many players that they're competing with each other.
SMITH: No. They have a lead, and they're going to continue to invest in R&D. And frankly, I look at my two teenage children, they don't want our
parents or our grandparents' products. They want new, modern day, millennial products that were built for them.
So I look at Beyond Meat as meeting the needs of the new millennial generation.
CHATTERLEY: Gregg Smith of Evolution VC Partners, great to have you with us.
SMITH: Thank you for having me.
CHATTERLEY: Thank you very much, peat cholesterol. That was my take away from that conversation. Thank you.
All right, at the Economic Club in Washington, Uber's CEO has been giving his view on why the company's IPO flop. Wow, there's a real tale of two
halves here. Uber's stock is still slightly below its IPO price of $45.00 a share.
Clare Sebastian joins us now with all the details. So some justification here on why the IPO struggled. Market conditions, it was sort of peak
tension between the United States and China. I guess we give them that, Clare. What else did they have to say?
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia. We've heard Dara Khosrowshahi of Uber talk about the IPO before in a widely reported memo to
staff after the event and in the earnings call just recently saying that, you know, he urges people to look to the long term and beyond that initial
problematic start that they had.
But we've never had him go quite this far in addressing what else was going on, as you say, in the market at that time. Take a listen.
(BEGIN VIDEO CLIP)
DARA KHOSROWSHAHI, CEO, UBER: The timing of our IPO was very much aligned with our President's tariff wars the same day. So I think we got caught up
in a bit of a market swirl. And there's nothing you can do about that. And what I tell the team is, in the short term, the market can be a voting
machine, but long term, it's a weighing machine. And we are focused on the weighing.
We have a six-month mock up, so no one at the company cares anyway what the stock price is now. It's a bunch of traders going in and out. So just --
it doesn't really affect us.
(END VIDEO CLIP)
SEBASTIAN: So yes, as you remember, Julia, May 10th was the same day that that tariff increase on $200 billion of Chinese goods went into effect that
was also the date of Uber's IPO. So this definitely was a market swirl, but that doesn't take away from the fact that Uber still has an uphill
climb on many fronts.
The path to profitability is something you and I have talked about before. He addressed this. He said the next two, three, four years are going to be
about growth, but they're confident they can be profitable in the long term.
He is confident the company is extremely well capitalized and he talked about his broader vision to become a platform, an Amazon for mobility,
essentially a one-stop shop for all your transportation and some of your food needs. So it was really a very forward looking speech there.
CHATTERLEY: Yes, and of course, losing the CMO and the COO in the last few days as well. Leadership going to be interesting here. Clare Sebastian,
thank you so much for that.
[09:40:10] CHATTERLEY: All right, we are going to take a quick break here on FIRST MOVE, but when we come back, call it the power of Poshmark. I'll
talk to the CEO of the innovative social network e-retailer that encourages you to clear out your closet and make a few dollars in the process. Stay
with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE and we're in the "Chatt Room" with the popular mobile shopping app Poshmark, which is disrupting the norms of
traditional retail.
Poshmark is a social network, similar to the likes of Instagram or Pinterest, except here, everything is for sale. This is important.
It launched eight years ago as a way to make money selling extra items that allow people to make extra money from selling their items in their closet.
So that's grown into a community of 40 million users, five million of which are sellers on the app.
The company reached $1 billion worth of transactions and it's reportedly worth $650 million. Today, Poshmark is announcing that it's now expanding
beyond fashion, and making its first move into the home goods sector.
Joining me now in the "Chatt Room" is Manish Chandra. He is founder and CEO of Poshmark. Great to have you with us.
MANISH CHANDRA, CEO, POSHMARK: Thank you for having me.
CHATTERLEY: Try to encapsulate what Poshmark is, but in your own words, how do you view the people that are using the app at this moment, but also
what you represent for users and people that access the app.
CHANDRA: Well, for us it was always about combining people and technology to create a place where people can buy and sell and make it very simple.
We started with a focus on fashion and today, we are expanding to home decor.
CHATTERLEY: Yes, why?
CHANDRA: Well, we follow our users. So when we started, we were focused on the women's market, our users wanted to sell men's clothes and kids'
clothes. And now they've been asking us an extra secretly listing on products. So it's time to support them.
[09:45:04] CHATTERLEY: So under the guise of their closets, they were listing all sorts of things.
CHANDRA: They are.
CHATTERLEY: Well, I make the point and I want this point in the interest of -- we talked about it. For me one of the biggest differences when we
had the Pinterest CEO, one was the fact that you can go on Pinterest, you can find an item that you like, but there's no access link to actually
buying that.
Whereas in your site, everything that you see, you can acquire. And I think that's very important.
CHANDRA: Yes, absolutely. Everything is for sale, but more importantly, everything, there's a human being attached to it. What is missing in
commerce today is people, and what we've brought people to your products -- if you go back to the old school stores, there was always somebody there to
help you. Where is that in e-commerce today?
CHATTERLEY: Well, it's quite fascinating that as we've seen commerce itself get disrupted and the shift to e-commerce, we are now seeing
companies say, "Hey, bricks and mortar still matter here." It's just about a better customer experience.
CHANDRA: Yes.
CHATTERLEY: You're arguing that, too.
CHANDRA: It's basically about empowering the sellers to have those conversations to really service their customers. But at the same time,
providing them with all of the services that big e-commerce retailers have, you know, standardized shipping, so everything ships to their priority,
customer dispute management, payments, payment processing, so they don't have to worry about anything. They can focus on their customers.
CHATTERLEY: So how do you make money as the app? Talk me through this because you take a cut of the sale price, basically.
CHANDRA: Yes, we take a cut of the sales price, so our philosophy from day one was, we want to make money when our sellers succeed; we don't want to
make money off them. And so we have a partnership with them. We call it the 80/20 partnership. For every sale they make, they keep 80 percent and
we take 20 percent, but in return for 20 percent, we provide them everything that they need to run their store, to market their store, to
actually sell.
And the result today is that 80 to 90 percent of their shoppers are repeat shoppers and customers are spending somewhere between 23 to 27 minutes a
day on the platform. So you have this pretty hyper-engaged community, which is very unique about Poshmark.
CHATTERLEY: Okay, the only, I guess, other cost is if you're going to ship something, you as the seller pays the shipping. Is that right? Me, as the
buyer?
CHANDRA: No.
CHATTERLEY: No.
CHANDRA: So we take care of -- we give you the shipping label. You just ship. The buyer pays for shipping, and we take care of providing with all
of the infrastructure.
CHATTERLEY: Okay, okay, that's important, too. Okay. So that's how, in essence, you make money. Where's the value here then? Because you just
said there is really high engagement for people that are using the website? So is the monetary value for you and the money that you've been raising
about the sheer financials of what cut you're taking on, what's selling here, or is it the fact that you have 15 million registered users, five
million sellers here? Is this all of the data?
CHANDRA: Yes. So for us, the focus has been really partnering with our sellers and monetizing on the transactions. But as you bring a lot of
users together, there's tremendous value in the level of engagement and interactions they have, which allows us to really expand.
So if you think about where we're expanding, we're expanding to the home decor market. But really, that's not the limit of social commerce, we feel
that we can solve problems in many other categories.
And today, we are only in the U.S. We also want to go beyond the borders and really start to launch into different countries.
CHATTERLEY: Where next?
CHANDRA: So for us, we've taken a baby step in Canada and the goal is to really use that as a launching point for hopefully many other countries,
including U.K., Australia, maybe Asia, and certainly Latin America.
CHATTERLEY: Talk to me about some of the people that are using this as an entrepreneurial opportunity as well, because you've got sellers on your
website, and it's a mix of their closets because their closets aren't quite this much, but also wholesale products as well, and they're making six,
seven figure salaries.
CHANDRA: Yes.
CHATTERLEY: So our sellers have scaled up their businesses. They are now running legitimate boutiques, and they've created new fashion brands. For
example, we have a seller Suzanne Cannon, who has created three brands, and she is doing over a million dollars in sales.
We have another seller, Evelyn, who has created a very large boutique out of North Carolina, she has both physical stores and a very large business
in Poshmark that's almost touching seven figures.
So you start to see sellers innovating, and the reason they're innovating is that they're creating a new kind of, what I would call direct to
consumer businesses on Poshmark, where they are going direct to their shoppers.
CHATTERLEY: The obvious couch to this would be, look, eBay, Amazon, the stores are on there. What makes you different from the ability of even
those sellers to go on these places and sell what they want?
CHANDRA: We really bring people into the forefront. So for us, the social aspects of our platform are really critical. I mean, if you think about
it, let's say you're about to buy a shoe or a shirt or a dress, the ability to have that conversation interactively ask the seller, the seller being
able to customize your preferences and bundle things for you is unique.
And if you could think about that in the home decor market, imagine being able to get advice live, I mean, it's not possible.
CHATTERLEY: Bring it back to the consumer. Very quickly, we're at the New York Stock Exchange, eyes on an IPO at some point in the future?
[09:50:11] CHANDRA: We certainly continue to look at growth and all kinds of future possibilities, but no comment on that for now.
CHATTERLEY: Not ruling it out. I love that response. Manish Chandra, thank you so much, the CEO of Poshmark. We look forward to watching your
progress and getting you back here at the New York Stock Exchange Park sometime soon.
All right, we're going to take a quick break. Up next, getting into gear, can Elon Musk get investors charged up again? We look ahead to Tesla's
annual shareholder meeting. That's today.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE and a look at today's "Boardroom Brief." Shares in retailer Ted Baker down over 25 percent in London, after
the British firm issued a profit warning over what it called quote "extremely difficult trading" in early 2019.
The morning highlights the challenges facing its new CEO after the company's founder and longtime head resigned in March over misconduct
allegations.
Starbucks wants its cups to go further so it's taking them to the airport. London Gatwick passengers have been given a choice. Take your reusable cup
or pay extra for a paper one. Customers return the reusable cups at drop off stations. Starbucks hopes to eliminate 7,000 paper cups during the one
month trial. That's a brilliant idea.
Can Elon Musk get investors charged up again? That will be the key question at Tesla's Annual Meeting after what has been a pretty rough ride
for the company shareholders. The stock is down 33 percent since this time last year.
CNN's Matt Egan has the details. I mean, that's a pretty big gripe for investors. Never mind anything else, Matt, it's been a pretty turbulent 12
months. What are we expecting from the AGM?
MATT EGAN, CNN BUSINESS LEAD WRITER: That's right, it really hasn't been a wild ride for Tesla and its shareholders over the last 12 months.
It was just last summer that Elon Musk sent out that infamous tweet saying that the company could possibly be taken private for $420.00 a share. And
obviously that deal never materialized. Musk was fined. Tesla was fined. And Musk had to step down as Chairman.
And as you mentioned, the stock has performed really poorly over the past year as well. So I think that today's meeting will be an opportunity to
gauge just how frustrated shareholders are with Tesla and Elon Musk.
So I think there's three really important things to watch for as far as the votes go. Now, one institutional shareholder services, this shareholder
watchdog group, is urging investors to vote against Ira Ehrenpreis he is a Tesla director. He is also sitting on the compensation committee and ISS
is citing concerns about Tesla's pay practices.
It seems unlikely that he will actually get rejected, but if he gets a low level support, I think that would be pretty telling. Now, also the ISS and
Glass Lewis are actually urging shareholders to reject Tesla's plan for 2019 equity incentive.
[09:55:12] EGAN: Tesla wants permission to issue 12.5 million shares to use to pay employees and executives. But that would actually dilute
current shareholders by almost 7 percent. And Glass Lewis said that would be excessive. And the third thing to watch is there is a shareholder
proposal to form a new public policy committee that would oversee Tesla's environmental regulatory policy.
So we'll have to see how all three of these things go because they all speak to putting greater oversight on Tesla and Musk.
CHATTERLEY: Yes, it's going to be fascinating to see. The stock has generally rallied quite dramatically after these AGM's, the thing is, can
Elon Musk pull something out of the bag this time? We shall see. Matt Egan. Great job. Thank you for that.
All right, a quick look at how the equity markets are performing as we wrap up the show here.
We are in the green. Can we make it six straight sessions of gains for U.S. majors? We shall see. We are what back in a couple of hours with
"The Express," but for now, you've been watching FIRST MOVE. Time to go make yours.
(COMMERCIAL BREAK)
[10:00:00]
END
