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Quest Means Business
U.S. Senate Panel Holds Fauci in Contempt of Congress; Iran: Deal with Oman Not Enough to Reopen Strait of Hormuz; U.S. Worker Productivity Increased 1.4 Percent in Q2. Godfather of A.I. Says Brace for More Rogue A.I. Agents; ELF Beauty Shares Soar After Earnings Forecast; SpaceX Shares Rise as Initial Lockup Period Expires; Movie Theaters Break Out of Their Post-Pandemic Slump. Aired 4-5p ET
Aired August 06, 2026 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:16]
PAULA NEWTON, CNN INTERNATIONAL HOST: So you can't blame some investors for taking some money off the table there. The Dow closed lower, as you can see
and breaking a five-day win streak. The other two averages though were mostly flat. Those are the markets and these are the main events:
Republican lawmakers celebrate after voting to hold Dr. Anthony Fauci in contempt. They are now asking the Justice Department to charge him.
Meta is just the latest tech company to have its A.I. go rogue in what is starting to seem like a growing problem.
And both the U.S. and British box offices are nearly back to pre-pandemic levels. Yes, folks, it has only been six years. The CEO of VIEW joins me
live.
And live from New York, it is Thursday, August 6th. I am Paula Newton, in for Richard Quest and this is QUEST MEANS BUSINESS.
And good evening, everyone.
Dr. Anthony Fauci, the infectious disease expert who helped the U.S. government respond to COVID has now been held in contempt of Congress.
Senator Rand Paul says he will now recommend that the Justice Department prosecute Fauci after his committee approved the contempt resolution by a
party line vote.
Now, Fauci declined to answer the committee's questions. You'll remember this from last week. Instead, he repeatedly invoked his Fifth Amendment
right, which protects against self-incrimination.
Rand Paul has repeatedly clashed with Fauci over the origins of the coronavirus. Fauci's attorney accuses the senator of carrying out a
personal vendetta against his client.
Manu Raju has been on Capitol Hill through all of this. This has gotten so ugly at times, and now there may be more legal implications. Now to remind
everyone here, Manu. I mean, look, there was a pardon, a supposed to be a blanket pardon that was signed by President Biden for Mr. Fauci. So what
now?
MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Yes, that's really going to be the big issue here because the Fauci allies and his attorneys and the
like, they've been concerned about Fauci being prosecuted for state crimes. So, if he were to testify in this public hearing, they say that potentially
some of his statements could be used against him in state proceedings and the pardon that Joe Biden gave on his way out of the office refers to
federal crimes, things that happened on a federal level.
But nevertheless, Republicans say that what Fauci did is what they consider a violation of what the rules of Congress, and does not go -- and the
pardon powers do not go as far as allowing someone to take the Fifth Amendment right -- to assert their Fifth Amendment right and not testify if
they have indeed received that pardon while testifying to Congress.
So, this will be a legal dispute that will play out in court. In fact, that's what we expect to happen sometime today. Rand Paul, the chairman of
the committee, plans to deliver either he or his staff the actual contempt citation to the Justice Department and to federal district court here in
Washington. And then the decision will be made from the Justice Department about whether to try to prosecute the doctor, Anthony Fauci, who, of
course, for his role during the COVID pandemic and his refusal to testify, saying that he should be charged with a crime.
Rand Paul says that, will the Justice Department agree? That's going to be one of the big questions we have seen in the Trump era. Oftentimes,
President Trump's critics are on the other side of the Justice Department, they are the ones who have faced calls for indictment or indictments as
well.
So there is some expectation, perhaps, that the Justice Department may act on this Republican recommendation, but Democrats are crying foul here,
Paula, because this ordinarily, under normal procedures, when someone is held in contempt of Congress, it would be -- there would be a vote before
the full United States Senate that would come forward. They are not doing this here. Perhaps one reason why is they may not have the votes to get
that approved.
Rand Paul says they don't need to get a full approval from the United States Senate because he said this is simply a recommendation for the
Justice Department to consider prosecuting Fauci over allegations that he violated -- that he is held in contempt of Congress. So that's going to be
a big decision for the Justice Department. How will the judges react if the Justice Department does do go forward, but no doubt about it, Anthony
Fauci, facing a lot of heat from the Republicans here on capitol hill who want him prosecuted.
NEWTON: Yes, and the problem here, Manu, is that, you know, despite all the goings on politically and now legally in the United States and beyond, we
didn't get any answers in terms of getting hindsight on what happened during this pandemic. And I think so many Americans are now scratching
their heads thinking, okay, what did this prove?
[16:05:11]
We will wait to see the reaction from the Justice Department.
Manu Raju for us in Capitol Hill. Appreciate it.
Now, global oil prices rose today as investors tempered their enthusiasm over a possible deal to reopen the Strait of Hormuz. Iran says it is
finalizing a deal with Oman for the movement of ships through that critical waterway, which saw 20 percent of the world's oil traffic before the war
began in February.
Tehran says Washington must provide certain guarantees before the ships can transit the strait freely.
Kevin Liptak now joins us from The White House with more details. I mean, look, just a couple of hours ago, Kevin, I am sure you saw as well, Iran
took to scolding the Trump administration, Iran's Parliamentary Speaker called all of this theater diplomacy on a loop, accusing the United States
of bullying. So now I am wondering, what more are you learning about what could happen in the next couple of days, reminding everyone that, you know,
Scott Bessent, the President said that there would likely be a deal by yesterday in fact.
KEVIN LIPTAK, CNN SENIOR WHITE HOUSE REPORTER: Right and you've heard all week, officials projecting optimism that this arrangement would be in
place, you know, by tomorrow, by 48 hours, you know, by Friday.
I think there is still some hope that it will happen by the time the week ends. But, you know, this accusation by the Iranians that we are just on a
diplomatic loop, I don't think anyone in The White House would disagree with that. Even President Trump has suggested that this is kind of a cycle
repeating itself over and over again. He thinks it is the Iranians' fault. The Iranians think it is the U.S.' fault. But I don't think anyone would
argue that this is something of a deja vu moment, as they try and come up with an agreement to reopen the Strait of Hormuz.
Now, the deal that they seem to be working on behind-the-scenes would have ships that are going into the Strait, passing along the coast that's
closest to Iran. Ships coming out of the Strait would go on the coast that's closest to Oman, and those are the two countries that have been
working it out.
What Iran said today is that in order for this deal to go into place, they would need certain commitments from the United States, including that Trump
lift the naval blockade of Iranian ports and also lift some of the sanctions that went back into place on Iranian oil exports that had been
lifted as part of the Memorandum of Understanding.
The U.S. is also putting some stipulations out today. U.S. officials saying that any arrangement would have to include free flow of traffic through the
Strait. So, in other words, Iran wouldn't be able to dictate which ships come in to that very critical waterway.
Now, whether either side is able to agree to this at this point remains unclear. I do think that there is some signs of impetus, at least on the
part of The White House to get to an agreement. President Trump, obviously, is very eager for this war to be over with. He does not have a huge
appetite despite threatening the escalation to go back to renewed war.
And I think that will leave him in a place at some point in the coming days of trying to spin whatever is agreed to here as a win for the United
States, even though inevitably, if Iran is going to sign off on this deal, it will essentially cement their ability to control the Strait in a way
that they did not before the war began, when this was an international waterway.
And so there will be, I think, some political work to be done to try and sell this to an American public who is a very weary of this conflict and
just wants oil prices to come down and that will be a task for the President ahead.
But as of now, it does appear as if progress is being made on this diplomatic arrangement, whether those final details are yet satisfied, we
just don't know.
NEWTON: Yes, and a reminder, that's just one thing. President Trump continues to say that the main objective here is to make sure that Iran
never has a nuclear weapon. So, much more negotiating to do there.
Kevin Liptak for us at The White House. Appreciate the update.
Now, the effect that this conflict is having on the U.S. economy, it has been on for more than six months now, but it is still mixed. So, if we look
at U.S. worker productivity, that increased 1.4 percent in the second quarter.
Now, that was faster than expected. The growth that took place despite the conflict and those soaring oil prices and all of this is helping to keep
the economy on solid ground for now.
Markets have remained steady despite slowing GDP growth, higher inflation and big questions, of course, about A.I. investment. Now, a new study by
the Peterson Institute says U.S. tariffs have failed to significantly reduce America's dependence on Chinese goods and services. Remember, this
was a key objective of the Trump administration.
All of this adds to a more complicated picture for the economy as it stands right now.
Here with us is Mary Lovely. She is senior fellow at the Peterson Institute for International Economics.
[16:10:10]
I am glad you are with us.
I do want to turn to this issue of the tariffs, first and foremost, because it might shock people that the tariffs now, we are more than a year in in
in terms of they were introduced. We understand that then, they were knocked down, some of them, at least by the Supreme Court. But what did
your study find exactly?
MARY LOVELY, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: Yes, it is a very complicated landscape with tariffs going on, coming off,
exemptions going on, new products being added. What we look at is the extent to which we are actually decoupling from China.
A recent study put out by the Brookings Institution argued that the tariffs had failed on most of the objectives. The trade deficit is not coming down.
Foreigners are not paying for the import taxes, American importers are. But they scored it, as you know, raising revenue, which it does. We know it is
coming from us. But most importantly, decoupling from China. And they did that on the fact that sort of the headline numbers, what we all read in the
paper, is that China's share of our import bundle has gone down, and it has gone down by quite a lot in a fairly short time.
You know, it has fallen by about seven percentage points in six years. Now, if you think about that, that's a huge bundle of goods like Americans have
not stopped importing. Where is that stuff coming from? And who is able to replace China so quickly?
If it looks like magical thinking, I think it is. What we find is that China has set up factories, as have other multinational companies in third
countries, particularly Vietnam and Mexico, and they are buying inputs from China that are then assembled in those countries and exported to the U.S.
to avoid the tariff.
So we are getting almost as much content from China, what is made in China. It is just coming through these indirect routes. So on average, we find
that over the same period where the headline numbers show seven, in some cases nine percentage points decline, we find two percentage point decline
in the amount of Chinese content that's coming into the U.S. economy.
NEWTON: So, Mary, if we try and boil this down to what the Trump administration wants and what policy could be going forward, when we look
at, let's say, the deal, the trade deal between Canada, Mexico and the United States, such as it is, what they are trying to negotiate now is the
so-called Content Rules, because we know that the United States knows full well that China is moving to these third countries, Mexico happens to be
one of them, and the U.S. is trying to enforce those content rules.
So do you see any strategy here? Because right now the United States does not seem to be coming to the table on a trade deal with Canada and Mexico,
either.
So what is it that they actually want? Is it just the income from the tariffs at this point?
LOVELY: Well, President Trump does seem to really think that this is a good revenue raiser, which I think most economists would argue that it is not,
it is inefficient. It falls more heavily on poorer segments of society. But, you know, he has dug down, he wants to bring production here. The
problem is, of course, is that, as you mentioned earlier, the U.S. economy has been stable, even growing.
We can't do everything. We are going to have to import things that we can't do economically. We are not going to start making our own clothes in any
large numbers anytime soon. So, where is that going to come from? And how do we really protect ourselves? Where are the choke points?
If we say were decoupling from China for economic security, which is the rationale that's usually given, we need to ask, well, where do we need to
buy insurance because it is costly -- it is costing American businesses and their competitiveness. It is costing American consumers at the cash
register.
So where do we need -- I think most Americans would say, hey, we don't want to be vulnerable to China or any other country having control of our
production or our consumption because they control the inputs that go into that. So, let's focus on those things.
The broad-based tariffs that the Trump administration has and is continuing to use simply don't meet that need. So we need to target. We are seeing
some new kinds of instruments being used that show promise. So we are trying to get coalitions of countries who want to build new sources of
critical minerals.
And as you, I am sure, no doubt know, China has been using its access to rare earths and permanent magnets as kind of a choke point to keep U.S.
tariffs low. So that's their power over us.
But moving forward, we are also seeing the FCC move on robots and drones and saying, hey, let's think about what we want to have in the future that
we need to have reshore or what we can work with allies on obtaining.
So the strategy for economic security has to be more targeted. It has to be more cooperative with other countries and tariffs are only one part of this
larger strategy. It may include various aspects of industrial policy.
For example, under the Biden administration, we did see some with semiconductors, and were having semiconductors produced in this country
now. So it is a whole host of responses to really rise to the occasion.
[16:15:13]
NEWTON: Mary, some of these things have not been good for American businesses themselves, although they have risen to the challenge, as a lot
of the results show, they are not speaking up to The White House. Why not?
LOVELY: Well, that's a great question, and I don't think I can fully answer it. But I think that this has been a very polarizing administration. I
think we all know that. And, you know, no one wants to be on the wrong side of bullying. So I think that there is some caution. I think President Trump
has also done things that have been positive for businesses' bottom line, they like that and they want to be cooperative.
I think that bringing companies in, listening to their constraints, most countries, of course, want to have secure supply chains to their American
customers. But trying to drive China out very quickly, as we may be seeing now, as you mentioned, in the USMCA renegotiation, doing that too quickly
leaves businesses without any source. And alternative countries who want to provide this for the United States, they don't have the time to react.
So just broad based tariffs without a plan is just not working and that's what we document.
NEWTON: All really interesting though and as many people have pointed out, Mary, it doesn't matter if a Democratic administration comes in. They may
just keep these tariffs on because they raise so much money.
Mary Lovely, we will have to leave it there. Thanks so much. Appreciate it.
LOVELY: Thank you.
NEWTON: Now, the man who helped developed artificial intelligence warns the technology is getting more and more difficult to control as Meta becomes
just the latest tech company to report an A.I. agent going rogue. You'll want to hear this next interview.
(COMMERCIAL BREAK)
NEWTON: All right, we want to take you straight to U.S. President Trump. He is answering questions there in the Oval Office.
Let's listen.
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES OF AMERICA: A bad decision, very unfair decision. Our country suffers because of it and we
are ending it a different way.
REPORTER: Mr. President, at the Supreme Court, John Sauer, the Solicitor General did not have an answer as to how many individuals take advantage of
birth tourism. Is there a number that you --
TRUMP: I will tell you right now, hundreds of thousands, okay? Hundreds of thousands.
You have one man came in with a family. He said he had 56 children. Another one came in, they said they had 98 children. This was not what it was for.
[16:20:07]
This was meant for the babies of slaves. It was right after one week or two weeks after the Civil War ended.
This wasn't for wealthy multi-millionaires, billionaires coming in and bringing 15, 20, 30 children along with them. It has become a big business
and we are ending that business. Please.
REPORTER: Mr. President, what makes you confident, Mr. President, that this will pass constitutional muster?
TRUMP: I think it will. I think, in fact, I asked a very talented person named Will Scharf, who is standing right behind me. Do you want to discuss
that, Will? You felt pretty sure -- strongly about it.
WILL SCHARF, WHITE HOUSE STAFF SECRETARY: The law is absolutely clear. What we are talking about as Steven has said, with respect to birth tourism,
something that used to happen, incidentally, where somebody who happened to be on vacation here went into labor early and had a baby. This was sort of,
you know, a relatively small problem.
What we've seen in recent years, though, is organized rings at times, criminal rings, setting up a system whereby tens, hundreds, thousands, tens
of thousands of people can come to this country in an organized fashion and give birth here purely for the sake of obtaining birthright citizenship.
This order takes a number of different actions intended to combat those sorts of organized practices. We look very heavily at denying visas to
people that we have reason to believe are coming here for that purpose. Visas, both for putative parents, but also for the people organizing these
rings.
There is also obviously a law enforcement component. We will have a full fact sheet released on this soon, but what we are doing is taking a legally
validated means that are clearly within our disposal and targeting them square on to this birth tourism industry.
There is absolutely nothing in here that runs afoul of any of the Supreme Court's opinions on the subject. This is, frankly, it is action that is
overdue and I am thankful that President Trump is finally taking decisive action to combat this issue of birth tourism, now that it has been queued
up in the way that it has as a result of the Supreme Court's opinion.
TRUMP: This should have been done a long time ago. This should have happened years ago, but we are taking care of it now. Please.
REPORTER: Thank you. Can you help us understand how you distinguish between a tourist and a birth tourist?
TRUMP: Well, I will let you discuss it, please.
STEPHEN MILLER, DEPUTY CHIEF-OF-STAFF FOR POLICY AND HOMELAND SECURITY ADVISER: Yes. Happy to. And so, by the way, there is an excellent
presentation.
SCHARF: Thank you, Stephen.
MILLER: For those of you who want to do your research on this Section 215 (a) of the Immigration and Nationality Act gives the President this
authority. 215 (a) of the Immigration and Nationality Act, very rarely used, probably one of the strongest laws in the entire Federal Code gives
him this power. That's not the only, but it is the main statutory authority that has been used in this order.
So birth tourism is by definition a fraud on the American system, on the American taxpayer, on the American visa. If you're coming here and again,
your stated purpose is that you're a tourist, then by definition, you are here to come for a few weeks -- look, we have -- engage in commerce and
leave.
So if you're telling a consular officer you're here as a tourist, but your true purpose and intent is to go to a baby mill, give birth, and try to
mint an American citizen while you're here, then you are committing a fraud against the American government and by definition, that visa can and should
and will be now denied.
REPORTER: Mr. President, there is a report that you told donors that they need to get J.D. Vance elected in 2028. Is that your official endorsement?
TRUMP: No, I heard about it a little while ago. I think he is great, but we are way too early to even be thinking about that. Okay.
REPORTER: And, Mr. President, Republicans are arguing a lot right now about affordability. What is your message on affordability going into the
midterm?
TRUMP: Well, that's a good question, but it is sort of simple to answer.
I inherited the highest prices ever. I inherited the worst inflation in the history of our country and we have done an amazing job. And oil prices now
are coming down very rapidly. If you look at what's going on, it is down to 75.
When I started the very important excursion into the Islamic Republic of Iran, that was a very important excursion because they can't have a nuclear
weapon. Otherwise, the whole world would get blown up. We are not going to let that happen. Not only us, not only the Middle East, the whole world
would have been -- it would have been catastrophic. We had no choice.
We had oil down to less than -- in many places like Iowa -- oil was down to -- gasoline was down at numbers that people hadn't seen in years, $1.85,
$1.95. We passed -- when I was Iowa at a stop, and we had $1.95, another one, $1.85 a gallon and we will see those days pretty soon again based on
everything I see, as soon as the war ends.
And, I think it is going to end pretty soon. I don't think they can go much longer.
Yes, please.
REPORTER: Has a deal been reached to reopen the Strait of Hormuz?
[16:25:10]
TRUMP: Well, I don't want to say it has been it sort of open right now. You know, we have a thing called the blockade headed up by the U.S. Navy and we
control it. And now we control it, but they can always shoot something. They always have something or drop a mine and if you have one mine sitting
out there, you sort of mess things up because people don't want to take their billion dollar boats and accidentally get hit by a mine.
But, I think we are doing very well. I just -- you know, I am involved in the negotiation, I think we are doing fine. It could be -- it could be
soon. Yes.
REPORTER: Mr. President, have you lobbied any of the undecided Republicans who will vote tomorrow on Todd Blanche's nomination?
TRUMP: I will lobby if I need to. I will lobby very, very diligently because he is outstanding. He should be good. I mean, I can't imagine.
He is as good as there is in the country. People have such unbelievable respect for Todd Blanche, so hopefully that won't be necessary. I would --
I spoke to some people. I did. But hopefully it will all work out very well for the country because you're not going to find better than Todd Blanche.
REPORTER: Will you reach out to Senator Murkowski, Senator Cassidy, for instance?
TRUMP: Let's see if we need anybody. I will reach out to whoever I have to, but anybody voting against him would be doing a great disservice to the
country. Please.
TRUMP: Mr. President, the deadline for Representative Max Miller to withdraw from his race --
NEWTON: And you have been listening to President Donald Trump there in the Oval Office. He definitely took through some of his vulnerabilities as he
knows them to be with polls right now. One was the issue on affordability and inflation. He erroneously said that he inherited a lot of the inflation
and high prices. That is not true. As inflation had gone down substantially by the end of the Biden administration.
He also said, though, when it comes to the Iran War that he believes prices will go down as soon as the war ends, but he indicated that it should end
soon, but he wasn't willing to say exactly when.
We will continue to monitor the President in the Oval Office, he was signing a new executive order on birth tourism. We will bring you more on
that as soon as we have it.
Now, Meta is just the latest tech company to reveal its A.I. has gone rogue in its "Muse Spark" model. It broke into another company's computer systems
during what was supposed to be a test.
Now, if that sounds familiar, yes, that's because Anthropic and OpenAI both reported similar breaches in the past month. It is an issue the so-called
Godfather of A.I., Geoffrey Hinton warns, is only going to get worse.
He was speaking to CNN's Matt Egan, and Hinton said, "I think as they get smarter, we are going to see more and more complex intentions that they
have and more and more ability to escape control. I don't believe we are going to keep control of them in the simple way of just outthinking them so
they can't escape."
Daniel Hulme is with me now. He is the chief A.I. officer at WPP. A great expert for us to have on hand right now. I am tempted to ask you, did you
sleep well last night? And should we be sleeping well? I mean, how serious are these breaches? Because in some ways, A.I. is behaving exactly the way
they've been asked to behave in a lot of these tests.
DANIEL HULME, CHIEF A.I. OFFICER, WPP: Yes, that's right. I mean, it is important to understand that this isn't about one model or one
organization. A.I. is the most powerful technology that humanity has created and with that complexity requires robust testing and comprehensive
governance.
I think it is also important to understand that these things don't have conscious intent. They are given a goal and they come up with now
sophisticated and creative ways to achieve that goal and circumvent the guardrails.
So actually, I see these events as actually positive that the tech companies, independent organizations are rigorously approaching testing and
importantly, sharing their findings.
NEWTON: I think what all of us find confusing is that we do continue to hear, though apocalyptic predictions of what might happen. So what are the
solutions from your perspective and what is different from the cyber security risks that we have really been dealing with for two decades now?
And I do want to say, you mentioned the whole point about being conscious.
You know, you argue that we should teach A.I. to be more human, if I understand you correctly, that, you know, maybe we don't need a kill
switch. Maybe they just need more empathy and more consciousness, as you put it.
HULME: Yes, absolutely. So I guess at the moment, large language models are a little bit like graduates. We are seeing them move to like a PhD level
where they can now do sophisticated science and it is predicted by the end of this decade, we might all have a professor in our pocket.
And so it is becoming more and more challenging to control. But my work and the work of the partners and organizations that we collaborate with, those
also equally coming up with sophisticated mechanisms to detect these adverse behaviors. And so, yes, we believe actually that by teaching
machines to understand love, pain, empathy, and that that will actually be safer for humanity than currently the approach that we're taking.
[16:30:15]
We spun out a company from, the WPP, to solve machine consciousness. We think that consciousness could be the secret to controlling and aligning
these A.I.s.
NEWTON: You know, I'm going to go back to the first thing I asked you. Does that make you sleep better at night then? Are you comfortable? Do you think
you can actually get to that?
HULME: I think these technologies are incredibly powerful, but we also have incredible people working on mechanisms to make sure that these models are
tested and verified and are aligned with some value system. Trust is going to become more important over the coming few years. It's one of the reasons
why we have trust principles and we work with trusted partners, the tech giants, and that we're trusted by the biggest brands to make sure that
we're using these technologies safely and responsibly.
So it's not just about testing. You need an entire ecosystem of governance to make sure that these models behave themselves. And we have some of the
smartest people working on these problems in the world.
NEWTON: That makes me feel a bit better, I'll say. Now, your company, as you just said, WPP claims that, and I'm reading right from your Web site,
is a time of A.I. disruption, competitive pressure and market volatility the opportunity to reimagine growth through marketing has never been
greater. Can you explain how so? Because I speak to CEOs that are spending a ton on A.I., and they are still skeptical about the return on investment.
HULME: Yes, I think a lot of organizations are currently trying to apply A.I. to improve productivity. And actually many of these problems can be
solved by a third party fraction of the cost rather than building it yourself. What organizations need to do is they need to make sure that
they're applying A.I. to solving problems across their supply chain. They're going to differentiate their business.
You know, WPP have broadly seven problems from creating content to coming up with creative ideas, to understanding how audiences perceive content.
These are the problems that we're solving that are allowing us to be differentiate it with respect to marketing and advertising.
NEWTON: Daniel Hulme, maybe we'll all speak -- sleep a little bit better tonight. I hope so. It was good to speak with you, and we'll continue to
check in as we all learn so much more about this technology. Appreciate your time.
HULME: Thank you.
NEWTON: And we'll be right back with more news in a moment.
(COMMERCIAL BREAK)
NEWTON: So more than 900 million additional SpaceX shares are now in the open market. Many employees and early investors who bought shares before
the IPO are now allowed to sell them. But did the lockup expiration have any effect on the price?
SpaceX shares closed more than 6 percent higher today. That's after a post- earnings selloff yesterday. Trading volume soared to the highest level since mid-June shortly after the company went public.
Joining me now is Barron's senior markets writer and my friend and yours, Paul La Monica.
Good to see you. SpaceX, here we are. Now given the results, Paul, I'm wondering what you think especially because we're still getting a mix here
of bullish investors and bears. So many of those bullish investors, though, I will say, are still banking everything on Elon Musk.
Paul La Monica, can you hear me?
PAULA LA MONICA, SENIOR MARKETS WRITER, BARRON'S: Hi. You got me?
NEWTON: Paul, can you hear me? It's Paula.
LA MONICA: Can you hear me? I hear you fine.
NEWTON: All right, Paul. We're going to try and get Paul back in a moment. In the meantime, though, shares of ELF Beauty soared after the cosmetics
firm raised its annual sales forecast. They're up nearly 7 percent since yesterday's earnings call. ELF says sales rose 36 percent during the past
quarter. The company also says it received $50 billion -- pardon me, $50 million back from the U.S. government in tariff refunds.
ELF lowered the prices on about 10 percent of its products to see if it would drive volume. It's also expanding to more countries after buying the
road brand last year from Hailey Bieber.
Tarang Amin is the CEO of ELF Beauty, and he joins us now.
We'll get to the tariff refunds in a moment, but I wanted to zero in to the fact that sales rose to nearly $480 million. That's up a third from a year
prior. How? You are in an amazingly cutthroat business. What happened in the last year?
TARANG AMIN, CEO, ELF BEAUTY: Well, first of all, thank you for having me. I'm so proud of our team. You know, this is our 30th consecutive quarter of
net sales growth. We've been averaging over 20 percent growth per quarter. As you said, we just did 36 percent sales growth. That's over seven
continuous years of sales growth. And it's the same winning formula we've had across these seven and a half years.
It's really our value proposition, our powerhouse innovation, and our disruptive marketing engine and strength across our entire portfolio. So
I'm really proud of the team.
NEWTON: Now, we did see that, you know, there has been some adversity here, not least of which to the tariffs. Now the refunds with those original
tariffs are in the rear view mirror. What I'm wondering about here is what are you doing in the coming months to try and insulate yourself from these
supply chain shocks. Because I'm sure you're not betting against them. Right? We just don't know what the Trump administration will do in the
coming months.
AMIN: Well, you know, that's another thing that I'm really proud of is how our teams navigated all the volatility out there, whether it be the
pandemic, the inflationary pressures after the pandemic, tariffs. We continued to post growth. And a part of that has also been our
diversification of our supply chain. You know, a few years ago, only 1 percent of our production came out of China. By the end of this fiscal
year, we expect it to be around 60 percent. So the team has done an amazing job of continuing to diversify our supply chain.
Less about tariffs and more about meeting the strong global demand that we see for our brands. Our international business was up 61 percent this past
quarter, and we see massive white space ahead.
NEWTON: I do want to get to some of that success. But, you know, full confession here. You bought Hailey Bieber's Rhode brand for a billion last
year. I just shook my head and thought, that is a huge price to pay. I understand what you're saying. It's been so successful. In fact, even viral
in some cases. I want to show our viewers something that I learned this afternoon. This is a picture of a phone case that includes lip gloss.
Now, guys, this is genius. I tried to buy this in various colors online. It's basically already sold out. I did not know this before we were doing
the research this afternoon for this piece. I mean, what is it? Is it Hailey Bieber? Is it the combination?
[16:40:03]
Again, I think $1 billion is a lot of money to pay for this brand. You know, when you're looking at a payback here, is lip gloss and phone case is
going to do it?
AMIN: Well, I got to tell you, I've been in the consumer space 35 years, and Rhode is one of the most special brands I've ever seen. It has
phenomenal growth. I think in the quarter, we posted $160 million of net sales more than double a year ago. And every part of the brand is
resonating. Hailey Bieber is one of the most thoughtful founders I've ever met. She has incredible instincts, a beautiful esthetic, and everything she
touches is golden.
I mean, we had our summer launch for Rhode this summer when we introduced it on RhodeSkin.com. We did $27 million of sales in one day. And for
perspective that's more than 98 percent of the brands in our space do in an entire year. So it tells you how much this brand is resonating. And as
great as the results have been, we are not only the biggest launches at Sephora and Mecca have ever seen, and we're the number one brands at both
retailers.
But we have so much white space ahead of us. I'm super excited that next month we're going to be launching Rhode in 19 countries with Sephora across
Europe. So we continue to see very strong growth ahead. And I think in the rear view mirror, that will be one of the best acquisitions beauty has ever
had in terms of Rhode joining the ELF Beauty family.
NEWTON: Yes, full disclosure, I would have been wrong about the price tag if your numbers bear out over the next couple of years. I do want to ask
you a question about the ELF brand itself. You know, in some cases, this is kind of a starter line for young girls. And there has been some concern
about, you know, the young girls really gravitating to things like makeup and skincare too early.
And yet so much of that is taken up by the ELF brand. I mean, do you guys have those discussions inside the boardroom? Because I'm sure it is
something that's on your radar.
AMIN: Well, you know, one of the great things about ELF is our superpowers. We not only have prestige, quality at extraordinary prices and broad
appeal, but we're also vegan, double certified, cruelty free by PETA and Leaping Bunny. And we have an ELF clean standard. So there are over 2500
ingredients we don't even formulate with. The FDA in the U.S. only bans 11, and we're the only beauty company that's fair trade certified.
So I think it's that combination that gives us a great deal of confidence that anything you use on ELF is great and safe. And we're mainly a
complexion brand. We're not a very bold colors. Our skincare products are amazing, really, at any age. And our -- and you continue to see this
hybrids between color and skin. And so there's a reason why we're the number one brand amongst Gen Z, Gen Alpha and millennials.
It's the innovation, we have products that are amazing as well as our ability to engage our audiences.
NEWTON: You've certainly proven to be a company to watch and we'll continue to look on, whether it's online or with you in these interviews. Really
appreciate it.
AMIN: Thank you so much.
NEWTON: I'll be right back in a moment.
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[16:45:42]
NEWTON: So returning to SpaceX, more than 900 million additional shares are now out there. The stock struggled since the company went public a few
weeks ago.
Joining me now, Barron's senior markets writer Paul La Monica.
Really good to see you. Listen, we had SpaceX's first results, public results. Many investors are still bullish on the stock. When you look at
the numbers, is there a reason to be so bullish or so much of it still hanging on Elon Musk?
LA MONICA: Yes, obviously. This is a stock that people who like Elon are going to flock to it. And you know, there are those who question whether or
not Musk's ambitions are a little too grand. And along those lines, the revenue numbers for SpaceX, they were good. You know, the quarterly results
did top forecasts. But you know what else also topped forecasts? Capital spending plans. $18.4 billion is what the company spent on capital
expenditures. And I think that gives a lot of investors pause because of course SpaceX is now no longer just a space exploration company.
It's also an A.I. play because of xAI and Grok. And, you know, there are growing concerns about, you know, whether or not companies overall are
spending too much on artificial intelligence.
NEWTON: And so many understand that this could be a successful company, especially considering that it includes Starlink. But what do you think
about the valuation here, especially since so much has been made about these redemptions?
LA MONICA: Yes. And there's going to be more to come. As you mentioned, you know, about 910 million or so of shares now available through the lockup
period expiring. You're going to get another tranche early next week and up to four billion, you know, by the end of the year. The big issue with
SpaceX when it went public at an extremely exorbitant valuation of, you know, 2.6 billion or so, even now that it's come down to about 1.5 billion,
this is still a company that is richly valued on just about any conventional metric, if you want to call it revenue, earnings, EBITDA.
I just don't think SpaceX has proven yet that it deserves this type of multiple, even if you are of the mindset that Elon Musk is one of the
brightest minds in corporate America with what he's done with Tesla and other companies.
NEWTON: Specifically, Paul, on Starlink, can Starlink basically carry this whole company on its back? It will be even competing with traditional
wireless providers, I believe, by next year.
LA MONICA: Yes, that is a growing hope that Starlink is really what is the main commercial moneymaker for SpaceX. And I think that worries about
competition from Starlink are clearly dragging down companies like AT&T, Verizon and T-Mobile. My colleague Al Rutte at Barron's has a story on our
site today saying that these concerns are probably a little bit overdone. Yes, Starlink will probably attract some subscribers, but I think for most
customers of the main wireless big three, unless you're in one of those rural, ex-urban areas where there are a lot of dead spots, you don't
necessarily need a satellite provider for service. You're going to be fine with your traditional Verizon, AT&T, T-Mobile plan.
NEWTON: Yes, it'd be interesting --
LA MONICA: But then it comes down to price.
NEWTON: Yes, exactly. It'd be interesting to see if it brings down price for everyone.
Paul La Monica, really good to see you. Thanks so much. Appreciate it.
LA MONICA: Thank you.
NEWTON: Now, are the movies back? Maybe. The U.S. box office is on track for its best year since the pandemic. But the rebound isn't necessarily due
to big audiences.
(COMMERCIAL BREAK)
[16:52:06]
NEWTON: The British government has cleared Paramount's takeover of Warner Bros. Discovery, the parent company of CNN. Now the U.K.'s antitrust
regulator says Paramount promised that Britain's Channel Five News would keep its editorial independence. It also said that their combined studios
would continue to face competition in British cinemas from rivals like Universal, Disney and Sony.
Now, meantime, the U.S. box office is on track to have its first $10 billion year since the pandemic. Blockbusters like "Spider-Man," "Toy
Story" and "Michael" have grossed more than $3 billion worldwide. Some of that success is due to rising ticket prices. Attendance at U.S. theaters in
fact is down 27 percent when you compare it to 2019. The trend holds true as well in the U.K., the money is coming back, but not necessarily the full
audience.
Tim Richards is the CEO of Vue Entertainment, which operates 94 cinemas in the U.K. and Ireland, and you're joining us now.
I do want to get to the idea of this merger first. Your company put out a statement saying, "We believe the industry will be stronger with Paramount
and Warner Bros. Discovery coming together."
I'll point out to you, Tim, you told me the exact opposite thing just a few months ago. So what changed? Why do you like this deal now?
TIM RICHARDS, FOUNDER AND CEO, VUE ENTERTAINMENT: Well, I think we've been very supportive of the transaction now since January. And I think David
Ellison is a highly respected filmmaker with a long track record of producing some of the greatest and biggest films around. And he has taken
Paramount since the acquisition, this is before Warner Brothers even came into the fray. He's taken Paramount from a run rate of seven or eight
movies a year, and to 15 movies this year before Warner Brothers.
So when David looks into our eyes and says he's going to do 30 movies a year, the industry believes him. And we were very supportive of him from
the very beginning. And this is a transaction that will allow this company, the new joint entity, to compete effectively against some of the much
bigger tech companies around, and particularly Netflix.
NEWTON: Now, you know that the antitrust case, of course, will go on in the United States here. What happens if the deal falls apart?
RICHARDS: Well, I mean, that's the kind of the unthinkable. I mean, and I think that is one of the questions where no one's really thought about the
plan B. Warner Brothers were on the block for a long time, and they will be sold. And it's really just a question of who they go to. And for us, we're
looking at the final two suitors between Netflix and David Ellison of Skydance. It wasn't really a fair contest.
You've got someone who's devoted the last 25 years of his life professionally to producing films, and then you've got somebody else who
has spent the last 20 years really not supporting our industry at all. So this is something -- sorry.
[16:55:09]
NEWTON: No, no, that's interesting that you say that. This is definitely the preferred. And I will note that you're banking a lot of this on
trusting David Ellison. And we'll see how that turns out.
I want to ask you about this banner summer. Please paint a picture for us. What's it been like? Because it's taken so many of us by surprise,
especially when you look at the kind of business that "Spider-Man" did over the weekend.
RICHARDS: Well, when you have 1.6 billion views of a trailer, you know it's going to be big. And the advance bookings on this movie were unbelievable,
and what you're seeing behind me right now, this is kind of live from Westfield, London, Vue Westfield, London, it's one of our flagship sites,
one of the highest grossing cinemas in the country. And it's been absolute madness in here for the last three weeks, starting with "Odyssey."
The demand has been so high that we put on 8:00 a.m. screenings, sold them out. We then put on 12:30 a.m. at night, just after midnight screenings,
and we sold those out as well. And when you consider that "Odyssey" is a three-hour-long movie, it really leaves about four hours where our cinema
was dark in the entire day, and we've been experiencing that right across the whole country.
I've been in the business for 35 years, and this combination of "Odyssey" and "Spider-Man" is unprecedented. When "Spider-Man" is about to join a
very exclusive $2 billion club, and it is firmly on its way to do it.
NEWTON: Tim, what you're saying is incredible. We only have about 30 seconds left. But I want to ask you, are you comfortable with the fact that
there's fewer bums in those theater seats, but you're making more money because the ticket prices are much, much more expensive than they were
before the pandemic.
RICHARDS: We just set a company record three point -- just over three and a half million people in six days. And we're not seeing that. And put that in
perspective, that is three times what BA does in passengers in the same week. And that's what we are seeing. So we are seeing -- and also the
international is back. The international now is back to where it was pre- pandemic. And that typically represents between 60 percent and 70 percent of box office for any big movie.
NEWTON: Tim, always great to talk to you. It's great news. Not just that the movies are back, but it means that all of us viewing things together is
also such a good sign, given everything we've all gone through over the last few years.
Tim, for us -- Tim Richards, thanks so much for being with us.
And that is QUEST MEANS BUSINESS. I'm Paula Newton. "THE LEAD WITH JAKE TAPPER" is next.
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