♪ announcer: from the heart of where innovation, money, and power collide, in silicon valley and beyond, this is "bloomberg technology" with emily chang. ♪

emily: i am emily chang in san francisco. this is "bloomberg technology." it is the biggest ever takeover of a private software company, adobe buying figma, $20 billion. we will hear from executives. the merge is here. success. we will hear from a ethereum developer about what is next. climate tech investor and entrepreneur david friedberg is with us. we will ask him about his tech emanate, new spac, and elon musk. first, ed ludlow. another seesaw session. economic data at the heart of it. what's going on? ed: yes, showing data jobs holding up, retail sales,

factory output increasing. why do we care? were looking for signs about with the fed will do next wednesday with rates. that is a real underperformer down. the s&p 500, the main gauge, lowest level since july. semiconductors weaker, yields push higher. breaking news. after the market fed x has scrapped its full-year earnings guidance for 2023. fedex is not a company we track, but look below it. that is why we care. amazon down 2%. there was a feeling that amazon would be resilient in the second half of this year. this has been putting in place cost-cutting measures. there was hope the consumer, particular in the u.s., would remain resilient, but fed x said that while they have also cut costs, there is a real slow in activity from the consumer globally, so lots of

conversations to be had in the next 24 hours about what that means for amazon at a time when we are positioning ourselves for the holiday season. we are also thinking about crypto, either lower thursday, bringing other digital currencies down with it. the merger. i know you will talk about this during the stroke, but there was a feeling this was a cell the news event on finding the merge happening, the major upgrade to the underlying network behind ether we have been waiting so long for. there is only one stop contracting on thursday, adobe, buying figa, $20 billion, stock and cash. that is the market reaction. really big drop in the stock. analysts say this was expensive and they paid a lot of money for this company. it was defensive. it is trying to do something and there is execution risks or adobe.

emily: all right. ed ludlow, thank you. another headline and other stories. a number of social platforms will announce new actions to combat hate crimes and racially motivated violence at the summit hosted by president biden at the white house. instagram, facebook, twitter, youtube, microsoft planning to attend. the company's efforts will be unveiled alongside initiatives to address hate-fueled violence. meantime, hundreds of workers at an amazon warehouse in england are striking overpay. they have been threatening strikes across the u.k. after a major rise in the cost of living

and protesting against pay packages, likely to take place in november, according to the union. the use cable open and in-depth probe of microsoft 69 billion-dollar purchase of activision blizzard. regulators save the deal could hamper competition, and microsoft turned down the chance to address its concerns. if the merger goes through, it will make microsoft the world's third-largest gaming company. we will be right back. this is bloomberg. ♪

emily: a brazilian agricultural company is planning to list in the u.s. via spac with one of the most prominent climate tech entrepreneurs. it offers key ingredients like seeds, fertilizer, and more.

i want to get to a longtime founder and investor focus on climate technology, the ceo of the production board, which does merge with lavaro. great to have you with us. big listener here. talk about the thesis behind this back deal. why spac? why now? david: we set it up to seek a business that operates at scale in a market we know well, food, agriculture, life sciences, and where we believe technology that exists in our portfolio could be added and accretive to their operations. we know as very well. we came across lavaro, the largest in brazil, leading importer in latin america. this business has an incredible opportunity to transform how farmers farm in this market.

latin america is the largest market globally, the largest provider of calories around the world. and so this is a massive opportunity. farmers locally in that market don't utilize the best technology. they don't have the greatest productivity, and using a tag retail, we can access that farmer to new technologies like biologics, software, and other tools that can improve more calories, sustainable food production, and so important because that is the region now. emily: i am curious about the

decision to do a spac in general when they have been under pressure. they have almost disappeared in the last few weeks. why do you choose that is the vehicle? david: we set up a spac last summer, so we have been, it is the only off-balance-sheet vehicle we have. the rest are balance-she driven capital, and we build and invest in businesses off balance sheet. we did this because they were public market investors interested in partnering with us and we thought this could be a really great mechanism to find a business we could be useful to pay her and that is exactly what we are doing, so investing $100 million off of our balance sheet into the transaction and several of our businesses will be partnering with lavaro in the future and we do hope, as a way to bring new technology to that important market, so this is a really great strategic vehicle, and a spac is a mechanism for doing that, and forgiving a meaningful ownership stake at scale.

this is we show in the presentation, it would do $1.16 top line this year, and doing $172 million pro forma adjusted ebitda this year, growing two to 77 year, so it is a business of scale, profitable, and i think there is a real way to drive further margin improvement and further revenue growth with some of the technologies we can bring to bear here. emily: talk to us about deep tech investing, which has been your thing for so long. how it is different enabled market and bear market. these are companies that need funding, but it can be a harder sell when times are tough. david: yeah, so, it is exactly, which are saying is exactly right. deep tech investing invests, milestone program, so you look at some technical breakthrough, proving something works, then you raise more capital, then you prove the next thing works, and eventually you have a product, and eventually you can sell a product and make a product and eventually scale into the market. so that takes several years, and capital needs to be unlocked and milestone increments.

a market like this you can buy u.s. treasuries and make 4% whereby a great stock that has a 5% dividend yield and is a growing business, it is really hard to find capital in highly speculative, long-range investment cycles, so the interest rate environment challenges deep tech. you have seen it that late in the biotech market. i don't know the latest statistic, but a few months ago on the biotech, roughly 40% of public issues work trading below cash, so it speaks to the challenge that deep tech businesses face. what we are doing with lavaro, for example, in what happens often nowadays in biotech and will continue to happen with other more deep tech investing cycles is to partner. so you partner with a large business, a business that has scale, reach, distribution, cash flow, and can benefit if you are deep tech pursuit unlocks value our opportunity for the customer base, and so i think that is what we would see more of likely

going forward. less of the vcs making big investments early-stage hoping for something to hit, and likely much more strategic partnership to get these things across the finish line. emily: i am so curious what you make of the patagonia founder giving away his company to fight climate change. what do you think about it? is that something that more silicon valley founders should be doing? >> he has always been an interesting guy. he operates his business in a different way than a traditional capitalist. so, it does not seem surprising knowing the personality and the way he has talked about things in the past and the decisions he has made. i think he banned putting

financial services for his logos as part of their custom embroidery programs a few years ago. look, it will go into these blind, your revocable trusts, and i'm sure the trustees will continue to operate this business in a smart way. i doubt the trustees will basically shred it and give it away. i'm sure they will continue to run the business and that the dividends on the profits generated from that business over time can be used to fund, you know, initiatives in climate change mitigation, and i think that is a noble way to transfer the ownership of your business, rather than just give it away to ngos and nonprofits that let the trustees you know and trust operate the business for you, generate cash value over time, and decide where that cash value should be allocated to drive impact in the world, so it is a great, noble decision and fits well with the way he's talked about what he is done in the past. emily: meantime, i have to ask you since the twitter/musk

dispute has been a running topic on your podcast. do you think this deal goes through? does elon musk end up buying twitter? how do such change the social media ecosystem? david: i think, book, there are probably two key things at play here. the first is what ends up happening in the courts as they go through this legal process. i saw a great post by a legal analyst a few weeks ago and i wish i could remember the person's name in reference them, but they said the delaware court is less likely to try and force a deal to close, because then if the parties do not actually close the deal, it really damages the reputation and integrity of the court, and there is a case to be made that elon musk might say do what you want, give me a fine of $1 billion, i am not closing the

merger on these terms. this legal analysts pointed out it is unlikely they will close the deal. the court will try to force the deal. on the other side, he's of volume in the community, the user base, the social network, and i'm sure he still does. regardless of what he has identified with respect to the bot problem, as he calls it, there must still be value there. so based on those two conditions, there is probably a gap that gets met. i would envision there is still a motivation to do something here that is probably a function of the true size of the true network of users on the platform, because it is such an important platform. deep down he probably still wants to do something.

on the other side, the court may say there is some weight you guys will be charged a fine, which forces twitter to the table to negotiate price, and maybe something happens. that would be my middle of the a little -- the middle of the aisle decision or perspective of what might be happening over the next couple of months here. emily: will be listening. we will be listening to the podcast for more commentary. great to have you with us. thank you so much. this is bloomberg. ♪

emily: let's get back to the adobe deal to buy the software design startup figa, valued at $20 billion from the biggest ever takeover of a private software company. i want to bring in the cofounder and ceo of figa and the president of the digital media business for adobe for more on this ordeal, exclusive interview. kind of a silicon valley dream

coming true here. you stick with your idea and develop it for a decade and sell it for billions of dollars. there are still people out there asking, $20 billion? what do you think is the potential figa figa and why is worth $20 billion? >> i want to give a giant shout up and thank you to the figa team. i am on this interview today. there are so many other people that have been involved in the success of figa along the way. i want to thank all of them. this is about moving forward now and how much potential there is in a combined figa-adobe combo. we believe there is potential, whether working at figa and thinking about how we can accelerate our efforts through adobe acrobat and their giant install base and productivity case. whether it is the figa design platform and how we can bring capabilities from adobe in, whether imaging, vector illustration, videos, or more, or thinking outside the box about where we are currently at and thinking about developers.

we were not planning to serve those such as trade does, and how do we bring the capabilities of adobe onto the figa platform and make sure collaboratives and have more workloads, web-based, so creativity is a design, and software developer and are more people. we are truly excited about what could become possible in our combination with adobe. emily: david, we thought we were in a downturn, and here you are doing a $20 billion deal. the stock had a rough day as investors digested the number. what is your response to that? >> adobe is entering our 40th year and we are aggressive about the opportunities we see. if you look at the opportunity ahead and you look at what they have built, they have built a company that will add $200 million this year, crossing $400

billion by the end of the year, and addressing a tam that is $16.5 billion, and when you put it in the efficiency of the business, castro positive, net retention rate over 70%, there are very few companies with that profile. in the context of what we see in something dylan talked about when we look ahead at the synergies we can do to accelerate figa's move into that $16.5 billion tam, to accelerate our core creative flagship applications reimagine with the technology running on top of the figa platform, and when you think about it in the context of how dylan was talking about acrobat, coming in at the cross intersection of creativity and productivity. we think the market opportunity here is massive. we think this was a great time to do that. emily: right.

dylan, there was a great tweet from ruben harris, another startup entrepreneur who compared figa to instagram. well, if you think about it, when you hit the numbers that david just rattled off, cash flow positive. you could've gone public. why see? why not go public on your own terms? >> we are super thankful we had our own ability to control her destiny. we have to think about the community of the impact, and the timeline. we believe that as it accelerates the impact we have, as it broadens the impact we can have, and by leveraging and utilizing the expertise of adobe, the capabilities, the technology they built, as well as the amazing people they have, and they have attracted over the past few decades, we think we are able to basically scale the

impact we have beyond design and move into new areas and be able to have more impact faster, and that is why we have done this deal. emily: david, i know you are the architect of this deal. you also sold a couple of companies, including one to adobe in your earlier days. what kind of advice did you give dylan through this process, you know, personal advice, and the best interest of figa and his company and not necessarily the company you work for now? >> i look at it as a shared common interest and shared objective. dylan and i have known each other for a few years. we started having this conversation in earnest a few months ago. having gone to this process, being acquired through

macromedia into adobe, if you have a shared purpose, shared passion, and in terms of how you operate and go after the market, great things will happen, because there is some which we have in common in terms of how we want to approach the market, and it dylan and i have been clear on how were planning to run this. dylan will remain ceo of figa, and he and i will be working closely to make sure the decisions he makes with the economy he needs to keep the thing special about figa special, combined with the things we can do surgically to accelerate the business, accelerate our technology vision, and accelerate the move into new markets. that is the foundation. the most important thing, and we talked about this in the process, shared vision and trust. i certainly have a term of this amount of respect for what dylan and the team has done. he knows me well enough that he knows i am a person of my word and we would do great things together. >> it is mutual. emily: dylan, you know, figa was making a adobe sweat. what will it be like joining your competitor and how do you preserve the culture?

>> yeah, the more we learned about adobe, the less we thought about them as a competitor. we are in the product design and software creation space, and adobe is in the marketing space when it comes to digital media, so we see this as a way to broaden our opportunities. the more we got to know adobe, the more we saw a shared vision, shared purpose, shared values, and at figa, one of our values are craftsmanship. these are values adobe has in spades. because of the ability to build our culture and our team, we think we will be able to accelerate our culture, and i am excited to explore with this acquisition means to the team and figure out how we can have more impact on our community. for me, i grew up using adobe software. it is a chance to help adobe think that the next generation of creative tools and how they

are used collaboratively, and what that means. that is a dream come true. i am excited for this. emily: all right. thank you both for sharing both sides of it. coming up, were talking everything merge and whether ethereum's energy consumption will decline by 99%. this is bloomberg. ♪

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emily: ethereum has just been repaved. the blockchain network just

completed its largest software update to date. the upgrade is called the merge. sonali basak has been covering this for us. have you been up all night? >> i woke up at two a.m. to see what it happened. while it was successful, also one of the biggest upgrades in the cryptocurrency industry, it is still the beginning of any changes for ethereum to get to those ultimate goals they are looking for. what is changing? now, we are moving to the proof of stake model. they're looking to become more scalable, improve transaction fees and gas fees. that is not going to happen right away. there are things that will be talked about today on twitter that will get closer to that, but there are concerns right now

as we look at the merge and how the next couple of days and weeks work out. those concerns include scammers attentively appearing and creating forks that look like the ethereum chain as it continues through the merge. also the impact on layer two tied to ethereum. also any unanticipated glitches that are not tied to this merger, but other upgrades that will continue to do the things that we want to see from ethereum which is improved transaction fees and speeds. to your point, this is not really all about the merge. this is about the ties to a lot of other issues happening in a macro environment. the merge was why a lot of people were buying it leading up to this news. there was a lot of education going around in terms of future for etherium and what it will look like as people start to see this model.

while we have other mobile issues going on that are headwinds including hiking interest rate cycle around the world. that can put pressure on crypto assets including ethereum. a lot more ahead, but the next two weeks will be pretty critical as this happens. >> i want to bring in our next guest. thank you for joining us. i would love to get your technical perspective. it seems like a success so far. when will we know for sure? >> the switch from proof of work to proof of stake -- we have seen that has had consistent

block reduction, consistent bounty so far. everything is a success. i think what we will see over time is do we continually see nearly 100% participation? and a healthy network in the coming weeks and months. emily: looking out longer-term, what are you going to be watching for? are there any potential red flags that you are looking out for? >> that is a great question. with these kinds of upgrades, it's really important that everything stays online. it's a really hard thing to do. with these upgrades, they are also so complex. there's a lot of things that can go wrong. we do a lot of testing to make

sure things are working well before we do the upgrades. things were looking for, making sure we have the same uptime as before. one of the cool benefits is proof of stake is a much smoother blockchain. blocks are delivered at a more consistent fashion. really to maintain software stays online, the participants stay online and the network remains healthy. emily: when will you know that this remains successful? the market was down today, but you did see it rising's frequently until this point overall before you hit the crypto winter. there's a lot of excitement around this. when will you see the benefits of the new economy of the system? >> we are seeing the benefits today. the switch is immediate. the energy efficiency gain that we have realized 99.9% more

efficient model is in effect immediately today. we already see that benefit. we see the benefit of increased utilization. there are way more actors in ethereum producing blocks today. the proof of stake is successful now and it is running smoothly. emily: somehow pandas have become the signature meme of the ethereum merge. can you explain that? >> it is a meme. there is only so much i can explain. the idea it was for a polar bear and a black bear and representing the two layers that are merging together. apparently, those two things make a panda.

i'm not sure that's totally accurate in terms of science, but it is fun. emily: what comes next? this is very much a step in a series of more steps that will presumably give or people who are related to etherium lower transaction fees, faster transactions. when will you see that happen? >> the switch to proof of stake has unlocked the next stages of upgrades. it still has a very ambitious roadmap and a large amount of work to do in the coming years. there is already scaling. what we want to do is increase the security and data availability guarantees. that means to provide more data

securely for things like layer two to provide the transaction scaling. at some point, we will be working on the idea about charging and having more transaction throughput on layer one, the base protocol of ethereum. the switch is helping etherium come a global settlement leader that it needs to be. emily: longer-term, how do you think this could impact the broader ecosystem? in terms of just the lesson that we see or the broader technologies? >> i think that the energy efficiency of proof of work is rightfully criticized by many. that may have been preventing developers from building on ethereum and participating in the network. now that that is out of the way, we can start to see more builders and bring on more developers.

emily: thank you so much for giving us your technical view. we will continue to cover the merge. we will talk about it from a crypto exchange perspective. our next guest talks to us about stock trading and more. ♪

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emily: back to the big story which is the ethereum merge complete. with the transition to proof of stake, some prefer to keep supporting that proof of work. some crypto exchanges were prompted to adapt. ftx is one of them. let's bring in the ftx u.s. president. talk to us about the dynamics at play with this spot trading and does it just undermine the merge overall? >> with proof of work, to be able to support the computational puzzle solving in order to receive the mining awards from network, you have to create these giant rigs of servers. the energy to do so is very

expensive. all of these companies spent an enormous amount of money into these mining rigs. there has been a consortium they have banded together to create an entire copy of the ethereum network to create their own proof of work classic version of ethereum and try to keep that going. i agree that it sort of undermines the whole purpose which is that ethereum moving to proof of stake means the entire network is the most popular network for contract-based computation is transition completely to an energy efficient world and hopefully into a faster transaction speed and lower transaction costs in the future. this new token is not going to have the same properties. however, the operators of this network are air dropping these

tokens on existing ethereum holders and they will want to deal with the ethereum w token. we have many concerns over actors trying to put themselves in the middle of unsuspecting consumers not being completely sure which etherium chain they are interacting with. as a result, to steal money from people who don't know what's going on and that's not good. we are in full support of this move to proof of stake. we have also supported other networks in that model. >> on one hand, there is a potential about potential scamming as people moved to the wrong areas. while the actual technological change worked well today, how much does something like that undermine any ability in the system.

>> a very small amount of power and transactions are happening on the new proof of work chain or although some mining activity has moved to ethereum classic and other proof of work chains that still exist, everything is happening on ethereum. over time we expect the activity is allowed. we expect people will give up the old way of proof of work, transition completely to proof of stake because it's a superior system and a lot of ways. there are always trade-offs. security, liability, speed, the kind of investment you need to get into the network in the first place. that is still open for debate between proof of work and proof of stake.

we and the ethereum community as a whole really do support this new proof of stake post merge world and we expect 100% of the activities move there over time. emily: what is your response to the sec chair's comments on the merge in particular? he has been pretty clear doesn't think the coin falls under securities regulation but that post merge the ethereum network could? >> there are many complicated legal analyses involved in trying to decipher which assets of the system might be securities and which might not. for example, the cftc already regulates the ether futures on many venues. basically lays claim to that being a commodity.

perhaps the staking in such a system might be considered an investment contract of some kind and that's an open question. there is you delegating your token to a validator to get the rewards from staking. there's also investment staking which is none of the above where you delegate your tokens to a protocol which comes to certain yield. all of these had different characteristics that may or may not pass the four prongs of the howey test. there are other risks involved. for example, the price action that can occur between now and when -- etherium unlocks. that it won't unlock for people to reap those rewards for six to 12 months. also if an operator fails to properly validate a block, it could have some tokens taken away.

>> with those risks plus regulatory overhang, to what extent is that a problem when you have a new model that is contingent on staking? ftx doesn't really offer this as a business yet. coinbase is making it a much bigger part of their business but there are still these big open questions about it. >> staking and proof of stake networks are a huge part of the crypto ecosystem and while it is extremely significant that ethereum has finally moved to proof of stake, it's not the first. most other popular blockchain's other than bitcoin are already on stake. they already have this validator set up where by staking a certain amount of tokens in the network, you are guaranteed some amount of the fees from the transaction and block validation awards. where already well in this problem and industry. what we hope to see is regulatory clarity and productive discussions with the sec.

they will start to get better clarity over different products whether they are considered securities are not, whether they're a clear path to registration for crypto lending or crypto staking activities and that will be able to properly register proper if there are ones or maybe not if they are considered non-securities and offered by exchanges such as ourselves easily. emily: so much to continue to follow on this historic day. thank you for breaking that down for us. coming up, a conversation with the european commissioner for competition. it what she has to say about her historic win against google

next. this is bloomberg. ♪

emily: a fine of 4 billion euros upheld for google's treatment of services on the app store. earlier, my colleague spoke with the executive vice president of the european commission where she is in charge of digital and communication policy. >> this is a win. a huge majority of the case is completely upheld which means the court has confirmed our view and because of that, we also feel the encouragement to continue enforcing when it comes to big tech. we have a number of

investigations ongoing. three apple cases, one facebook and a big google case is also coming up. >> with regard to the google case, do you think that helps you with some of the other antitrust cases? >> we get the guidance from the court on our approaches. one of the major things for us is to prove dominance. if you have that kind of market power, then our rules kick in. if you are just a small guy, you can do so many different things. if you're the big guy and you have the market power, it becomes much more strict. >> we know that google is going to continue to fight this as long as they can. even if you end up with a victory in the traditional sense, does the prolonging of this fight maybe give the other companies more encouragement to fight back in their cases as well?

>> i don't see it this way. also because we have regulation coming in to complement what we do with a case-by-case enforcement. the digital markets act was just signed yesterday. it will enter into force mid-october. by early 2024, those who are designated as gatekeepers, they will have to comply to quite a number of provisions but also things they must do for instance share data with some of their customers. >> the threats of fines have changed behavior to a certain degree.

the u.s. has welcomed as positive some of the changes google has made. it's interesting when you look at some of the reporting on the google story from u.s. print. they call you big tech's tormentor. i wonder if you are finding that the u.s. is becoming a tormentor when you hear talking with your counterparts from a competitor perspective did the united states back you on some of the moves you made on these big companies? >> the first time i came to the u.s. as commissioner for competition with my google case, they said what's she talking about, crazy woman. that has changed completely. those public opinions, the legislature and their approach, competition enforcement now that cases are being brought, the state is very active. it's part of a global development. we've seen australia, around planet people say come on we need at open marketplace, we need drive for innovation, we need people to have choices. that has changed enormously. we follow very closely what happens in congress and we are working very closely with our colleagues here.

emily: that does it for this edition of bloomberg technology. friday, we have the ceo of grindr. also don't forget to check out our podcast. i'm emily chang in san francisco. this is bloomberg. ♪

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