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First Move with Julia Chatterley
CNN Goes Inside Beijing's Vaccine Research Labs; Jack Ma's Payments Giant Files To Go Public; Epic's Ongoing Battle With Apple Leaves The Game Restricted. Aired 9-10a ET
Aired August 25, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:29]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR, FIRST MOVE: Live from New York, I'm Julia Chatterley. This is FIRST MOVE and here's your need to know.
China's coronavirus vax. CNN goes inside Beijing's vaccine research labs.
Upping the ante. Jack Ma's payments giant files to go public.
And good night, Fortnite? Epic's ongoing battle with Apple leaves the game restricted.
It's Tuesday. Let's make a move.
Welcome to FIRST MOVE once again, fantastic to be with you as always. Now, today's show might be a bit of a heavy lift and not because I'm already
stumbling over my words. No, indeed. The Executive Chairman of fitness company, Equinox will be here to talk about the safety of your COVID
workout and the future of fitness. What does that look like? Well, we'll be discussing.
No stamina shortage, meanwhile, for global stocks. Wall Street feeling the burn, boosted by news of the U.S.-China trade talks overnight. The Phase 1
deal remains secure for now, it seems.
Plus, optimism over the timing of a COVID vaccine as the research race continues all over the world.
The S&P 500 set to rise to fresh records once again. The Dow begins today's session above 28,000 for the first time since February, just four percent
in fact, from a record high.
If and when that vaccine emerges, travel stocks like airlines, of course, are going to be among the first to benefit. The Dow transports outperformed
all the major averages on Monday. Look at that bounce back since March, too.
EasyJet, Ryanair and AIG are all higher in Europe. Cathay Pacific rallied more than six percent in the Hong Kong session. Now, speaking of Hong Kong,
a whopper of a listing in the pipeline.
Jack Ma's payments giant, as I mentioned, Ant Group has filed to go public in a dual Hong Kong-Shanghai listing. It's expected to raise some $30
billion as soon as October and this of course, comes as China looks to raise the profile of its own stock markets, but also those domestic tech
firms, not a foreign listing mentioned. We will discuss that coming up shortly.
But for now, let's get to the drivers and an update on the global search for a coronavirus vaccine.
A top scientist at Oxford University says trial data on its potential vaccine could be ready to go to regulators by the end of this year. The
university is developing the vaccine with AstraZeneca. The vaccine produced an immune response in its first human trials.
All right. Meanwhile, and also a look at what's going on in China as well because more than a dozen companies are now racing to develop a COVID-19
vaccine.
David Culver got access to a lab where they are in late stage trials, and he joins us now live from Beijing. Always fantastic to have you with us,
David. What did you discover?
DAVID CULVER, CNN CORRESPONDENT: Hey there, Julia, good to be with you as well. This company is called SinoVac and it is in Phase 3 human trials.
In fact, they've got two under way right now, rather large ones at that. They're in Brazil and Indonesia, a combined 13,000 people expected to
participate in these trials.
Now, all of this comes as we've seen from China, a rolling out of vaccines over the past two months. This, according to the central government. They
say they, first, back in June have tried it out and vaccinated several members of the People's Liberation Army, the PLA, the military here. And
they say as of July, they've gone to vaccinate frontline workers, medical staff, and people who work at borders and customs as well as those who are
in so-called high-risk professions.
Now, with this company that we were able to walk through today, they are looking more towards the general public, and they say the rest of the
world.
(BEGIN VIDEOTAPE)
CULVER (voice over): You feel hopeful just looking at the packaging and small vials. Might this vaccine bring us back to our lives before
coronavirus? The Chinese company behind it believes it might.
(BEGIN VIDEO CLIP)
HELEN YANG, INVESTOR RELATIONS, SINOVAC BIOTECH: SinoVac's goal is to provide a vaccine with good quality, good safety, and good immunogenicity
to the people in the world.
(END VIDEO CLIP)
CULVER (voice over): SinoVac is among 13 companies in China working on a COVID-19 vaccine. It is one of just nine that are well into clinical
trials.
[09:05:03]
CULVER (voice over): The biotech company began developing its vaccine in late January. Construction on this, their newest facility in Beijing,
started about two months later.
CULVER (on camera): One of the things we noticed walking in here is that this space is brand-new. It's not even been used. They started building it
in March, and they did that for two reasons.
One, for regulatory reasons here in China. They need a separate space to produce this vaccine, and the other is because of the demand. They need the
production space to meet it.
CULVER (voice over): While its borders remain largely sealed off, life within China has returned to near normal in most places. So much so that
Wuhan has hosted crowded pool parties and in Beijing, no longer are you required to wear a face mask when outside, assuming you're a safe distance
from others. China credits mass testing and strict contact tracing.
But health experts warn those stringent measures impact immunity levels.
(BEGIN VIDEO CLIP)
DR. IVAN HUNG, PROFESSOR, MEDICAL FACULTY, UNIVERSITY OF HONG KONG: In these cases, then, definitely, the way forward is to -- is vaccination.
(END VIDEO CLIP)
CULVER (voice over): In the past two months, the Chinese government has granted two vaccine companies special emergency approval to launch their
vaccines.
Typically, a vaccine takes years to go through trials and reach production.
(BEGIN VIDEO CLIP)
CULVER (on camera): Do you feel confident enough to take the vaccine?
YANG: Yes. I do. Because the vaccine road map we are using is demonstrated and proved technology.
(END VIDEO CLIP)
CULVER (voice over): They estimate they will be able to produce about 300 million vaccines a year. That's why they believe the more vaccines in the
marketplace, the better.
(BEGIN VIDEO CLIP)
YANG: Yes, I think the competition is more like we compete with the virus, right? Our speed should be faster than the transmitting of the virus
instead of competing with others. We like everyone to be successful.
(END VIDEO CLIP)
CULVER (voice over): China has faced sharp criticism from many countries, most notably the U.S., for its initial handling of the outbreak, but some
nations might be willing to look past all of that if China can deliver the solution with a dose of hope.
(END VIDEOTAPE)
CULVER: Touring through that facility, it is a rather strange juxtaposition. You've got construction site and a high-tech lab all in one.
I mean, you've got people in lab coats walking by folks in hard hats and it's a little bit uneasy in thinking about that because it shows just how
quickly they've moved forward with not only trying to construct the infrastructure, but also to produce this vaccine, and to make sure that it
will actually work.
And Julia, the question I've been getting as I've been working on this assignment today, on social media in particular, folks messaging me on
Instagram saying, look, can we trust it? Can we actually believe that this would work?
And I think the reality is, if they are, in fact, Chinese military officials testing on their own members, and if they are putting this out
there to international communities, I mean, the anti-China sentiment right now is so high, given the initial outbreak, that anything less than
effective for this vaccine and even worse if it's damaging, is going to really cause global backlash. So they're aware of that.
CHATTERLEY: The beauty of a command economy, David, is that China works quickly, whatever it's going to do, but I think you raise a great question
about trust and it's not just a question for the Chinese. It's a trust question everywhere in the world when we're operating at this speed and
with this kind of science.
Great to have you with us. Thank you. David Culver there.
And more reasons for why the vaccine research is so critical. Two European patients, one in Belgium and the other in the Netherlands, have been
infected with COVID-19 twice.
This comes as researchers in Hong Kong say they've also identified a patient that caught the virus a second time between four and five months
after his first bout.
Kristie Lu Stout has all the details.
(BEGIN VIDEOTAPE)
KRISTIE LU STOUT, CNN CORRESPONDENT: Julia, researchers here in Hong Kong say that they have the first lab-tested evidence of someone being re-
infected with the virus that causes COVID-19.
According to a team of researchers at the University of Hong Kong, a 33- year-old Hong Kong man became re-infected four and a half months after contracting the virus.
He first became sick in March in Hong Kong and then on August 15th, he tested positive again in Hong Kong after returning from Spain via the U.K.
with a completely different strain of the virus and while he was infected the second time around, he did not show any symptoms.
Up to now, there have been several reports of presumed reinfections, but this reinfection was confirmed in a lab using genomic sequencing.
Earlier, I spoke to Professor Ivan Hung of the University of Hong Kong about this finding.
(BEGIN VIDEO CLIP)
HUNG: Well, I think the most important message is that even though you have recovered from a natural infection, it doesn't mean that you are
immunized for life for that virus, and also that you can see that this virus is very smart because it keeps on mutating.
So, that means that even though you have recovered from a natural infection, you still need your vaccination, and you still need to wear
masks and keep your social distancing.
(END VIDEO CLIP)
STOUT: According to Professor Hung, any potential vaccine may not be enough to provide lifelong immunity. An annual vaccine would be needed --
Julia.
(END VIDEOTAPE)
[15:10:08]
CHATTERLEY: Therein lies the key. All right, let's move on. The man behind Alibaba wants to again say "open sesame" in the world of financial
services.
Jack Ma's Ant Group has filed for an IPO that would list its shares in Hong Kong and Shanghai. Reports say the share sale could raise a whopping $30
billion. Selena Wang joins us now from Hong Kong.
Selina, always great to have you with us. Never been a more potent time, I think, for a financial services, a payment company to list on a stock
exchange but the location, aka not the United States, also important here too, I think. What more do we know?
SELINA WANG, CNN CORRESPONDENT: Julia, this is going to be a blockbuster initial public offering. I was just furiously skimming through the more
than 600-page preliminary prospectus.
Massive parts of it are redacted so there are a lot of key details we still don't know in terms of the timetable of this IPO as well as the size, but
sources have told the financial times that Ant Group could be raising around $30 billion, valuing it at $200 billion.
That would make it the world's largest IPO, surpassing Saudi Aramco's listing last year.
It would also make it more valuable than some of America's largest banks. You referenced the fact that it's doing a dual listing in Asia. This would
be the first simultaneous listing of a company on the Hong Kong Stock Exchange as well as Shanghai's NASDAQ style Star Market.
That is a massive win for both of those venues at a time of rising U.S. tensions and increasing calls from the Trump administration for financial
decoupling between the U.S. and China.
I also want to point out that this is a majorly important company in China. It is the Fintech arm of e-commerce giant, Alibaba. It is the dominant
mobile payments firm in China, but it is much more than that. It's also critical for online banking. It offers wealth management, also insurance.
I want to quickly run you through some of the numbers in that prospectus as well. Revenue for the first half of the year was $10.5 billion, up 40
percent from a year earlier. Its payment volumes were worth around $17 trillion last year.
At these payments, Julia, in China are far more ubiquitous than they are in the west and that is partially because credit cards had relatively low
penetration in China at the time when internet services were really taking off in China. That gave an important window for app-based payments to take
off.
They just want to drive home this point, Julia, and leave our viewers with this. Along with Tencent's WeChat, Ant Group's Alipay are some of the most
critical apps in China for daily life and for its more than one billion users that Alipay reaches.
CHATTERLEY: Yes. It's fascinating, isn't it? Credit cards are so 19th - 20th Century technology. It's all about digital payments. There are things
we can learn from them and should do it fast.
Selena Wang, great job. Thank you so much for that.
China was also a key theme on the first night of the Republican National Convention with Donald Trump, Jr. even coining the nickname "Beijing
Biden."
It was one of the ways the party tried to highlight what it says would be at stake should President Trump not get re-elected.
Jeff Zeleny has all the details.
(BEGIN VIDEOTAPE)
JEFF ZELENY, CNN SENIOR WASHINGTON CORRESPONDENT (voice-over): President Trump kicked off the Republican National Convention with a dark outlook of
how he sees the United States without him in charge.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I really believe this. This is the most important election in the history of our country.
UNIDENTIFIED MALE: Yes, it is.
TRUMP: Don't let them take it away from you.
(END VIDEO CLIP)
ZELENY (voice over): And that theme continued throughout the opening night, with Monday's list of speakers also warning of a Joe Biden
presidency they described as radical.
Among them, the St. Louis couple who waved guns at protesters outside their home earlier this summer.
(BEGIN VIDEO CLIP)
PATRICIA MCCLOSKEY, ST. LOUIS HOMEOWNER WHO AIMED GUN AT PROTESTERS: They want to abolish the suburbs altogether.
So make no mistake. No matter where you live, your family will not be safe in the radical Democrats' America.
(END VIDEO CLIP)
ZELENY (voice over): Kimberly Guilfoyle, a top campaign fundraiser and former Fox News host, amplified the unproven charge that Democrats intended
to abolish the suburbs.
(BEGIN VIDEO CLIP)
KIMBERLY GUILFOYLE FORMER FOX NEWS CHANNEL HOST: They want to steal your liberty, your freedom. They want to control what you see and think and
believe so that they can control how you live.
(END VIDEO CLIP)
ZELENY (voice over): Her words echoed by the President's own son, Donald Trump, Jr.
(BEGIN VIDEO CLIP)
DONALD TRUMP, JR., DONALD TRUMP'S SON: It's almost like this election is shaping up to be church, work, and school versus rioting, looting and
vandalism, or in the words of Biden and the Democrats, peaceful protesting.
(END VIDEO CLIP)
ZELENY (voice over): As the coronavirus death toll in the U.S. continues to climb, the convention portrayed Trump's handling of the crisis as a
success.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE (voice over): One leader took decisive action to save lives, President Donald Trump.
(END VIDEO CLIP)
[09:15:02]
ZELENY (voice over): And showing this video of the President with frontline workers at the White House.
(BEGIN VIDEO CLIP)
TRUMP: We just have to make this China virus go away, and it's happening.
(END VIDEO CLIP)
ZELENY: But there was no explanation how the United States leads the world in total coronavirus cases and deaths, or Trump's repeated downplaying of
the crisis from the start.
The first night also featured two prominent Republicans of color, focusing on the national outlook instead of the President's record on race.
Former U.N. Ambassador Nikki Haley saying the issue is personal.
(BEGIN VIDEO CLIP)
NIKKI HALEY, FORMER U.S. AMBASSADOR TO U.N.: In much of the Democratic Party, it's now fashionable to say that America is racist. That is a lie.
America is not a racist country. We are blessed to live in America. It's time to keep that blessing alive for the next generation. This President
and this party are committed to that noble task.
(END VIDEO CLIP)
ZELENY: And closing the night, South Carolina Senator Tim Scott.
(BEGIN VIDEO CLIP)
SEN. TIM SCOTT (R-SC): This election is about your future. And it is critical to paint a full picture of the records of Donald Trump and Joe
Biden.
(END VIDEO CLIP)
ZELENY (voice over): The only black Republican U.S. senator described how he thinks the Democrats could permanently transform what it means to be an
American.
(BEGIN VIDEO CLIP)
SCOTT: Make no mistake, Joe Biden and Kamala Harris want a cultural revolution, a fundamentally different America. If we let them, they will
turn our country into a socialist utopia.
Instead, we must focus on the promise of the American journey.
(END VIDEOTAPE)
CHATTERLEY: Jeff Zeleny reporting there and the theme for night two will be the land of opportunity and in a major break with tradition, the U.S.
Secretary of State will address the Republican National Convention from abroad in Jerusalem.
All right, let me bring you up to speed with some of the other stories making headlines around the world. Wildfires in California have now killed
at least seven people.
Fire officials say this year's fire season is significantly worse than 2019 with thousands more fires spread over a far greater expanse of land.
Dan Simon is in Napa County, California, and he joins us now. Dan, great to have you with us. What more can you tell us about efforts to get some of
these fires under control?
DAN SIMON, CNN CORRESPONDENT: Hi, Julia. Well, first of all, we are in California's wine country, and this is a neighborhood and it has been
totally obliterated. You can see some of these homes behind me.
The good news is, over the past 24 hours or so, fire crews were able to take advantage of better than expected weather and get the containment
number up for this particular fire. It's now up to 25 percent containment.
Keep in mind, though, they still have a ways to go, and you have so many fires burning throughout the state. Two dozen major fires and it was all
started by lightning. You had -- I mean, the numbers are just staggering. You had 12,000 lightning strikes and it created some 600 or so fires and
then again, you've got about two dozen of them that are considered major.
Now, you have tens of thousands of people, Julia, who are evacuated from their homes and these folks, they really have no idea when they'll be able
to come back to their homes or what the neighborhoods are going to look like.
Over the next few days, it is going to be critical in terms of trying to take advantage of the better than expected weather, so hopefully crews will
continue to make some progress.
And also, Julia, keep in mind this is all happening during the middle of the pandemic. You have a few thousand folks who are staying in evacuation
shelters, and they're taking a risk by going into those shelters, you know, there is a chance that they could contract the virus.
Of course, the American Red Cross is doing what they can, trying to enforce social distancing, telling people to wear masks, doing COVID-19 screening,
but we did speak to some folks who are certainly nervous about going to those shelters -- Julia.
CHATTERLEY: Yes. It's just a monumental challenge and some devastating scenes behind you there. We wish everybody well. Dan, thank you for the
update and for being there. Dan Simon in Napa County, California there.
All right, we're back after this. Stay with us.
(COMMERCIAL BREAK)
[09:21:56]
CHATTERLEY: Welcome back to FIRST MOVE live from New York where the S&P 500 is set to hit fresh record highs in early trading. Today's premarket
advance, I think, driven by positive news on the U.S.-China trade front. Both sides say our Phase 1 Trade Deal remains on track, at least some bits
of that relationship appear to be working properly and that, of course, a relief to investors.
We've also got positive vaccine news helping sentiment. You take it when you can. The A-Team was out in force once again on Monday. Apple now up now
more than 71 percent so far this year with a market cap of more than $2.1 trillion.
All this ahead of its four for one stock split on Friday, an event so big they're having to change the make-up of the Dow.
Dan Ives joins us now. He is the Managing Director of Equity Research at Wedbush Securities. Dan, great to have you with us. Let's talk Apple now
because there was good news yesterday, it seems or at least a sentiment shift. The belief that the administration here in the U.S. saying to U.S.
companies, don't worry, even if there's a challenge with things like WeChat, you guys won't be impacted. It's critical for Apple.
DAN IVES, MANAGING DIRECTOR OF EQUITY RESEARCH, WEDBUSH SECURITIES: Yes, and that's been our stance, really, since this came out is that there was
never going to be any issue in terms of disruption in China for Apple, which is the key. That is 20 percent iPhones worldwide and it continues to
be -- if you look at the last year and a half, and, obviously, me and you have talked about it a lot.
Despite the back against the wall, U.S.-China trade, pandemic, smartphone sales slowing, Cook in Cupertino, Teflon-like model and I think China is
going to be key in terms of this growth story going forward.
CHATTERLEY: So you're simply not expecting any kind of disruption at all or any blowback from the Chinese side because there are many different
angles here. There's not only the steps that the U.S. administration take, but there's also potential retaliation, too.
IVES: In terms of retaliation, remember, Apple is one of the most strategic employers in China. And it speaks to our -- this is really over
the last years, if you go back, many of the haters, the skeptics thought they'd be burning iPhones in the street. Instead, they were going into
Apple stores and buying the phone.
So, I think it just comes down to China has been strong for Apple. If you look, you've got 60 to 70 million iPhones in the window of an upgrade
opportunity and part of our $600.00 bull thesis on Apple, and I think this is a name that on this trajectory could be a $3 trillion market cap by
2023.
China is a lynchpin to the story. We continue to be buyers in any type of headline risk that we see, even over the coming weeks and months.
CHATTERLEY: I mean, you've mentioned it, for you, China is such a critical part of the upgrade story here, but you also say that the iPhone 12 is
going to be a defining moment in the same way that, when we go back to 2014 and the launch of, what -- the iPhone 6 was such a pivotal moment for Apple
at that moment.
Why? And what does your chat with the supply chain tell you about potential demand as well? Because this is critical also.
[09:25:04]
IVES: Yes, it is critical and even over the last few weeks, all of our Asia checks, it's showing an uptick in demand, not a down tick.
In terms of going to iPhone 12, the reason we call it a super cycle, 350 million of 950 million iPhones worldwide are in a window of an upgrade
opportunity.
That means they have not upgraded their phone in three and a half years. You combine that with 5G, that's really a perfect storm of demand for
Apple, which is why combined with the rerating that's happening here, not just for tech stocks but especially in Apple, to me, momentum continues to
be there despite skeptics.
CHATTERLEY: And there will be people going, yes, yes, but it's all in the price, Dan. You're saying actually though, the market is underestimating
the potency of this.
IVES: They said the same thing at $300.00, $400.00, and now -- no, I'm just saying, Julia, forest should be trees. I look at it as the services
business, $700 billion to $750 billion. That's the valuation.
I believe the core hardware business is worth $4.5 trillion. And you look at Airpods, that is going to be $30 billion annual revenue stream today and
that's why I believe it's a rerating that's happening in Apple, very similar to Amazon and other names and based in the momentum, you could, of
course, have selloffs here, but I believe a year from now, stock has a six in front of it.
CHATTERLEY: Wow. Forest for trees, they're definitely apple trees in that case.
I want to move on and talk about Tesla because this is still getting lots of dedicated column inches for the bulls and the bears. Your bear case and
your bull case now, you're a raging bull, $3,500.00? Wowsers.
IVES: Look, it's -- it goes back to probably why it's the most emotional bull-bear story I've seen in 20-plus years covering tech. It is because, is
this is an auto company or is it a disruptive technology company? I believe it's the latter.
I look at China, you know, going back when you talk about Apple. China thinks it is worth $400.00 a share and this goes into the demand they're
seeing, I think, 500 K deliveries and you look at battery day next month, that's the drum roll, million mile battery, I think, announced, and it
comes down to this right now in the EV market, it's Tesla's world and everyone else is paying rent.
CHATTERLEY: A million-mile battery, Dan? How long until we get to that point?
IVES: Well, I think that's something that September 22nd, they unveil in terms of the trajectory to get there. If you look today, an average battery
is about 500 K for tesla, so that would be about double. It's key about price parity. When you talk about EV versus traditional gasoline-fueled
cars.
But I think it just shows in the EV market, a lot of competition, of course, not just domestically but in China and Europe and across the board,
but it all comes down to the battery technology and the brand. That's what Musk and Fremont have built and that's why in terms of the stock, it
continues to move out, a stock split, which I think will put ultimately more momentum.
It comes down to, I think this could be $35.00 of earnings power when you look at 2025. Profitability key and of course getting in to S&P 500.
CHATTERLEY: We shall revisit this, my friend. I know we shall. But for now, your bull case, $3,500.00 for Tesla. It's fascinating.
Dan, always great to chat with you. Thank you so much. Dan Ives there of Wedbush Securities.
IVES: Thank you.
CHATTERLEY: All right, still ahead, working out when things are not working out. We speak to the head of luxury fitness group, Equinox about
the ways COVID-19 has changed the way they operate and what does the future look like. Stay with us.
(COMMERCIAL BREAK)
[09:31:49]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are up and running this Tuesday, and we've got a mostly higher open with economically
sensitive stocks gaining ground once again. What do I mean?
Well, these are the stocks like airlines and cruise operators that will benefit most when and if we get a vaccine. Technology, meanwhile, taking a
bit of a breather, but it is up over three percent through the past week, and more than 33 percent year-to-date, so a bit of a breather is more than
certainly allowed.
Treasury yields, meanwhile, moving solidly higher today, perhaps a sign, too, that bond investors see some firm growth ahead too, that "R" for
recovery word.
In the meantime, big changes are coming to the Dow Jones Industrials. Salesforce, Amgen and Honeywell will be added to the Dow average next week.
They will replace Exxon-Mobil, Pfizer and Raytheon.
Exxon has been in the Dow since 1928 and was once the world's most valuable company. Wow. How things change.
It's all a result of Apple's upcoming stock split, which reduces its weighting in the index.
All right, taking a look at the early trading in these stocks, we're seeing gains for all of those coming in and losses for the names that will exit
the Dow on Monday, as you would expect.
Now, we could talk about markets all day long, but if this year's COVID crisis has taught us anything, actually, it's that the greatest wealth we
actually have is our health.
And this year, fitness firms have suffered for many reasons. Gyms have been closed and a lot of people say they simply don't want to go back,
especially if they found ways to work out at home or outdoors.
So what does this mean for the sector? Well, Harvey Spevak is the Executive Chairman and Managing Partner of Equinox Holdings which is at the top end
of the fitness market, and he joins us now.
Harvey, fantastic to have you with us. Incredibly challenging time for the owners of gyms throughout this sector, I think, dealing with COVID and
trying to keep customers safe.
Talk to me about what you're doing around the world to keep your customers safe.
HARVEY SPEVAK, EXECUTIVE CHAIRMAN AND MANAGING PARTNER, EQUINOX HOLDINGS: So, Julia, thanks for having me, and you mentioned in your opening
comments, and you hit the nail on the head, which is, health had already been the new wealth, and it's accelerated during the pandemic.
People want to live a healthy lifestyle more than ever before, and you're seeing that manifest itself in many ways, whether you're seeing it
digitally or whether you're seeing it physically.
We have opened about a third of our portfolio, our biggest portfolio of Equinox clubs is in New York City. We're opening those on September 2nd and
the response generally has been extremely positive, particularly on our safety and comprehensive plan to keeping our employees and our members safe
and protect their wellbeing.
And so, we worked tirelessly back in April and May with our team of infectious disease doctors, some of them are C.D.C. external consultants,
and we worked round the clock to come up with what is a comprehensive plan to take our high standards to another level.
If you ask our members how they feel about it, 96 percent say they're satisfied or very satisfied with our approach. They already expected a lot
there us and we've taken it to another level.
So those who have come back are very, very satisfied, and what we're seeing is every day, it gets a little bit better. There's certainly still a fear
factor out there, but we think over time, that will diminish. You mentioned a vaccination. Once a vaccination is in place, I think that there will be
big winners, including Equinox and our portfolio of brands as we get on the other side of all of this.
[09:35:26]
CHATTERLEY: Harvey, we're showing images now of equipment in gyms being sprayed. I know you've put in place a number of different steps -- air
purifying filters, the disinfection procedures, health declarations, you name it.
You're also restricting, I believe, the number of people that can come into the gyms. What kind of capacity compared to what we could have seen before
are going to be allowed at any given time in the gym?
SPEVAK: I don't think it is so much what we're restricting, it is what we are requiring our members to protect them and our employees to schedule in
advance when they want to come. And what we have found is we've been able to satisfy as frequently as they want to come or whatever times they want
to come, we've been able to satisfy it because people have different behaviors and some of those behaviors have changed during the pandemic.
So, we haven't seen it be an issue, and actually, our members and certainly our employees are very appreciative that they can schedule in advance
through our app, that we're taking the extra precaution of a health declaration, that we're taking air filtration to another level.
We've introduced Hepa filters in our studios to really protect our employees and our members and what that means statistically is, since we
started reopening in the United States back in May and now we're open around the world in London and Canada, but since we started opening back in
May, we've had approximately a half million visits and the number of people that have been affected by COVID, not necessarily by Equinox or by coming
into Equinox, but just in general has been 0.017 percent.
We believe that is reflective of living a healthy lifestyle, boosts your immune system, but we also believe it's because of the precautions that we
are taking to protect our employees and our community.
CHATTERLEY: And Harvey, I mean that statistic you said is pretty eye- opening. But just give us a sense -- what proportion of customers that you had pre-COVID have either postponed their membership and the gyms now open,
or have canceled their membership? Can you give us some statistics?
SPAVEK: Sure. So approximately 60 percent have come back when we first reopened. The vast majority of them remain on freeze, and during that
freeze period, we keep them engaged through our virtual offering, which we call Variis by Equinox, which offers stream classes of some of their
favorite instructors and their favorite modalities, and so that has been extremely well received.
But they stay on freeze, and when we survey them, you know, close to 90 percent, 80 percent plus will say that they are likely to come back when
they feel comfortable. Now, that could be when there's a vaccination or specific to the local market.
So it does also vary by market. I mean, if you look at New York City, where the Governor announced yesterday the infection rate is extremely low, lower
than any major city in the United States, you know, that might be higher. In other markets like Texas or Florida, it might be a little bit different.
But we are seeing that our members do love who we are and they do want to come back when they are most comfortable coming back. There's definitely
been a relocation issue as well. I mean, it's been well documented there is a little bit of movement outside the cities. I think that will come back
once vaccination is in place, but that is happening as well.
I'll point out one other thing in terms of how excited our members are and our riders are. At Soul Cycle, when they come back, we have had -- we do
outdoor activations at Soul Cycle, and we have had riders literally cry after their first ride because they missed it so much.
They missed the community experience. They missed being with their like- minded individuals and their besties, and so, you know, we've got a lot of work to do, but we're optimistic that on the other side of the pandemic,
most people are going to come back.
CHATTERLEY: I think I might really start crying because I'm so unfit quite frankly. But we'll get back to that.
I do like the point that you made about the -- perhaps, the future of fitness being a combination of these two things, whether you're outside the
gym, but just connected digitally versus actually being present in the gym and being really grateful and excited to be back.
The key question for me, Harvey is, based on what we're seeing so far, and I know it's a temporary normal, we hope, can you be profitable,
particularly given the dominance of branches in New York City, which clearly we haven't seen what the reaction is going to be yet? Are you
profitable based on what you're seeing at this moment?
SPAVEK: So, the simple answer is, we can be profitable, and we will be profitable. We were very profitable before the pandemic.
Unfortunately, we're in some of the hardest-hit categories like, you know, you mentioned airlines, but F&B and hospitality, we have our first Equinox
Hotel which is closed, but it's reopening on September 2nd, and so being closed and doing right by our members and our community, not charging
during that closure, certainly, obviously, leads to losses.
[09:40:03]
SPAVEK: And we're still coming out of that phase, but we do believe very strongly that once we get our business operating fully again and people
start coming back, we will be profitable again.
It will take time to rebuild, but we will rebuild and I think on the other side, I think we're going to have some of our best years.
CHATTERLEY: We shall see. Harvey, come back and speak to us soon, let us know how New York City is going. It's going to be fascinating to see,
particularly for people here, how we get back in action.
SPEVAK: Sounds good.
CHATTERLEY: Harvey Spevak, great to chat with you.
SPEVAK: And you should come work out with us.
CHATTERLEY: I will. Full confession, I am a member.
SPEVAK: Oh, great.
CHATTERLEY: We shall see is my response. Thank you, sir. Great to have you with us.
SPEVAK: Thank you.
CHATTERLEY: Now, a vote of confidence by a mainstream bank in block chain technology. JPMorgan teaming up with Consensys, a developer of Ethereum
based solutions to some pretty old school problems. A big deal in this space today. Details next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Digital assets and block chain technology taking another step towards the mainstream in a further blending
of what I see as institutional finance with 21st century technology.
Consensys buying JPMorgan's Ethereum based block chain unit, Quorum. Now, as part of the deal, JPMorgan will also invest an undisclosed sum in
Consensys. It's a company that develops software based on the Ethereum block chain.
Real life examples of what Consensys has worked on include facilitating faster payment technology and improving supply chains.
Joe Lubin is the founder of Consensys and cofounder of Ethereum and joins us now.
Joe, fantastic to have you on the show. Huge congratulations on this deal. I know it's been rumored for a while, just explain what this means and what
additional powers this will give you to make real world improvements.
[09:45:03]
JOSEPH LUBIN, FOUNDER OF CONSENSYS AND COFOUNDER OF ETHEREUM: Hi, Julia. Thanks for having me on today. As you indicated, Consensys is announcing
today that we are acquiring JPMorgan's Quorum enterprise Ethereum block chain platform.
We additionally will see an investment, a strategic investment from JPMorgan and have a seat on the Board dedicated to JPMorgan.
We'll be working together with JPMorgan to merge the technical road maps of our own hyper ledger base of client which is an Ethereum main net
compatible client with the Quorum technical road map, and under a commercial agreement, we will be supporting JPMorgan's interbank
information network, the IIN, and JPM coin network.
So, we will be bringing a much more comprehensive enterprise Ethereum solution to not just JPMorgan and the hundreds of financial institutions on
their networks, but the additional hundreds of institutions around the world that make use of enterprise Ethereum and that are increasingly
starting to make use of public main net Ethereum.
CHATTERLEY: Oh, so there's two things there for me. Obviously, as you've hinted, the network of payment technology that JPMorgan had already created
that you're, I assume, going to help develop, but I think there will be people watching this going, hang on a second, is this a traditional bank
like JPMorgan perhaps stepping away from crypto, stepping away from block chain technology and handing it over to one of the experts? Is that this?
Or are they as dedicated as ever?
LUBIN: Well, it's not my role to speak directly for JPMorgan, but I can confirm that this step indicates that JPMorgan is doubling down on the
Ethereum technology.
CHATTERLEY: Okay.
LUBIN: They are -- they are a block chain and Ethereum focused team. They're growing it in the direction of building applications on the
platform. JPMorgan is a world class financial institution with a world class block chain practice, but Consensys is a world class block chain
software product company, and Ethereum infrastructure company and I believe JPMorgan felt that trusting the furthering of the protocol and support of
the protocol of this open source protocol to Consensys made the most sense and enabled them to, in collaboration with us, focus on the higher value
aspects of sort of moving up the stack to the application layer.
CHATTERLEY: Which says something in terms of the vote of confidence, I guess, for Ethereum, as one subset of this technology at this moment.
I do want to hone in, though, on the payments technology that you mentioned. More than 400-plus institutional clients all over the world were
transacting on that platform. We've talked about something called SWIFT on this show before, which currently is the standard for payments being
transferred all over the world and it's slow and it's clunky and errors get made.
Do you see potentially what's here and what you can build on as being a replacement for SWIFT? Because there are other challenges out there that
are perhaps looking to do the same.
LUBIN: Yes, so, I think that's a reasonable way to frame this. Payment technology evolved organically. First, there were transaction systems and
then things got complicated and then messaging systems got built as an overlay over the transaction systems and they're often out of sync and
require reconciliation across different kinds of databases.
Paraphrasing Marcia MacMillan that transaction is now the message. And so, the transaction and the message are married on block chain technology, and
block chain technology representing a new trust foundation is going to, whether it's Central Bank digital currencies or commercial bank digital
currencies or pure cryptocurrencies, they will facilitate much more fluid real-time transactions and interactions across trustworthy collaboration
networks. So it's --
CHATTERLEY: We'll see.
LUBIN: It's a revolution.
CHATTERLEY: Yes. Joe, very quickly, because I have about a minute. I want to ask you about the rise that we've seen in digital assets or
cryptocurrencies this year.
Ethereum to Bitcoin, there's been a lot of enthusiasm. I can name them all. I won't. Is this time different from with we saw the rise and fall, if I go
back to 2018, for example, simply because regulators are talking about it more, more people are buying? Is this time different, in your mind?
[09:50:14]
LUBIN: Well, this time represents a quantum leap in maturity for the systems that are being built and utilized. The ICO boom had some problems,
but it also birthed some really great projects.
Many of the tokens associated with those projects are still in use. The projects are -- they constitute what we call decentralized finance, and
bottom line, what's happening is that there are new cohorts of users and developers that are coming online that are seeing real value in the
protocol, in the applications built on the protocol, and they're making use of the token in real-time transactions. They're staking the token in
different networks.
And thoughtful observers are understanding that this is the early days of the decentralizing of the internet and the worldwide web and they are
speculating that Ethereum is going to be a big part of that.
CHATTERLEY: Yes. Decentralizing for finance. We will get you back to talk about this because I know this is super exciting, too. My favorite there, a
quantum leap in maturity.
Joseph Lubin, great to have you with us, and congratulations once again on the deal. The cofounder of Ethereum and the founder of Consensys. Great to
have you with us.
All right, still to come, Epic fails to get a bite out of Apple as Fortnite bans remain in force for now. Details next.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. Apple's 30 percent cut remains in force. The company winning a preliminary court battle with Epic Games over
the hugely popular game, Fortnite. Epic sued Apple after it removed Fortnite from its App Store when Epic introduced its own in-game payment
system cutting out Apple.
But there were also some consolidation for Epic in the judge's initial ruling as well. Anna Stewart joins us now to break it down. Apple Stewart.
Sorry. Quick, take it away from me.
ANNA STEWART, CNN REPORTER: It works, Julia.
CHATTERLEY: What was the consolation prize?
STEWART: Well, the judge said that it wasn't a slam dunk for either side, but perhaps a victory actually for both in many ways.
Apple was not forced to put Epic's game, Fortnite back on to the App Store. That wasn't really a surprise, but I have to say the court's words for Epic
were fairly stern, saying that in order for Epic to bring about this big antitrust case against Apple and its control over the App Store, it didn't
need to breach its contract, using Fortnite, changing its payment process, and trying to dodge that 30 percent fee.
So the court for that said, well, Epic's current predicament regarding Fortnite not being on the App Store, appears of its own making.
However, there was a small victory for Epic as well. The judge said that Apple shouldn't follow through on its threat to remove Epic's developer
status, at least temporarily.
[09:55:21]
STEWART: She said that was an overreach retaliation. Epic software platform, Unreal Engine, isn't just used by Epic to create games, it is
also used by third party developers.
It would have damaged them as well so for that, the court said, well, Epic Games and Apple are at liberty to litigate against each other, but their
dispute should not create havoc for bystanders -- Julia.
CHATTERLEY: No collateral damage. Next date, September 28th, I believe.
STEWART: September 28th. So that's when the preliminary hearing kicks off. Yesterday was just immediate restraining order, so a bit more time to go
before then.
CHATTERLEY: Anna Stewart, the apple of FIRST MOVE'S eye. Thank you so much for that.
Well, that's it for the show. You've been watching FIRST MOVE. I'm Julia Chatterley. Stay safe and we'll see you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
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