caroline: i'm caroline hyde at

bloomberg's world headquarters in new york. ed: and i'm ed ludlow in san francisco. this is "bloomberg technology." caroline: federal regulators looking to block the microsoft acquisition of blizzard, saying that the tie up between the companies would harm competition. ed: plus the ftc has opened their campaign to block the meta acquisition of a virtual yet -- reality company. caroline: pressure builds on elon musk and his bankers as they look at potential margin loans to replace the riskiest twitter debt. details on that, later. first, scoop after scoop after scoop coming from bloomberg, we have to get to the macro markets. the s&p 500 is pushing higher. a change of tune in risk assessments. why? is it the change in the data around jobs weakening somewhat? more people are filing for

claims and we are seeing perhaps a rollover with a cautious spread going into that. the nasdaq is where the money is moving. i know you do the micro that you always do so well, up to more than a percent, it's the best date since november 30. not backdated that long but the volatility vix index is still languishing at 22, many feeling the fear gauge will have to push higher and go back to the more 2530 range at the moment. perhaps it's just complacency within the market as we see the volatility pullback. flick it on, is it volatility managing to avoid what's happening in the? bitcoin is getting a nice rally over the last day. up, relative to the volatility we are use to in the crypto market. the og crypto space is having it push up higher largely on the back of dollar weakness again reassessing where the federal reserve might go meaning a

dollar weakness for the first time in five days with coin on the outside having its best day in a month. ed: it's interesting, we have been so focused on the news cycle driving stocks, as earnings continue, broadcom is bucking the trend in the chip space. they did it last quarter, the strong quarter is just gone a fiscal outlook slightly above what the street was looking for, but they would liked it, up 2.6%. looking at data centers as well, some areas are holding up better in terms of the end i'll ask a lot of these chips go into to continue to monitor this throughout the show in case we get commentary on the earnings call about what's happening out there with some of these and markets that we don't necessarily talk about as much but there is individual pressure with tesla continuing to basically face a flurry of headlines. the one that we are going through that we think is putting pressure on the stock is that cut in production in shanghai

that is interesting. data of a percent after a board member bought $13 and shares with microsoft activision being the really big story here, reacting positively to the idea that the deal may not happen because some investors may not think it's the financially best decision. the ftc did what we thought the ftc might do. caroline: yeah they stuck to their promise to go big on m&a in the tech space. let's dig into all of this in d.c., following the news where the regulators are looking to block that $69 million deal. it's all about a question of competition and whether or not it would be harmed by the deal. we had the scoop in fact before we got that announcement from the ftc. talk to us about the reasoning behind the decision. >> it's really interesting, a lot of this focus has been on the console market the ftc said

they are not as worried about that as they are about where gaming might be going in the future into subscriptions in the cloud. they said that's a major reason they had concerns about the deal , acquiring activision is going to give microsoft a great library of games that will give it an insurmountable lead in these emerging markets. given that microsoft already has some advantages with their cloud-based, cloud-based service, making it a little bit cheaper for it than other gaming companies to offer this kind of service. caroline: and yet, and yet microsoft has been trying to get ahead of this. doing deals, did a decade yesterday for access to call of duty for nintendo. we understand that they sat down yesterday for reasoning but seemingly they haven't learned it. leah: the ftc has been very, very worried about the sort of deals the tech giants are doing. today the ftc started their lawsuit against meta over the

acquisition of a virtual reality start up. the microsoft folks came to d.c. and had offered a lot of concessions. not just of these 10 year deals with other console makers. they had reached an agreement with the communication workers of america to offer labor neutrality if any of the gaming studios wanted to unionize, which they thought the ftc would look kindly upon. they also offered some conditions related to employment that they thought the ftc would like but that wasn't good enough to do it. ed: in the end i guess those conditions or offers from microsoft were academic, they weren't enough. what's the timeline at this point given that the ftc voted in this direction doesn't mean the deal is dead. leah: no, they voted for an administrative complaint. meaning that from here it goes to a trial before the ftc in-house administrative law

judge. that sort of process is going to take several months. probably we would not have an initial decision until next summer or next fall and from there you know microsoft can still appeal several times. this is by no means the end, they say they intend to litigate and this is not the only regulatory approval they need. they still need approval in the u.k. and the eu, the two main other ones. none of those jurisdictions are going to make a ruling on the deal until spring. march or april. they will move forward as they try to litigate the deal in the u.s.. ed: i love this, there's a process that happens but there's also fighting talk. i saw headlines from the activision ceo, for example. what is their public position, the companies, about what they want out of this? leah: both companies have said

they want the deal, they said they think it's good for consumers because it expands access to gaming through cloud and subscription products. right now activision does not have games on any of the subscription-based products and also obviously this would expand access. both of them say that they are committed to fighting for now. the deadline for the deal isn't until next summer so they will probably have to look at extending it because of the length of the process, but you know, they might be willing to do that. ed: leah nylen, fantastic reporting, thank you. federal regulators in san jose are opening their campaign to block the meta acquisition of the company within. alex has been at the courthouse all day long. what is the story of the day and how did things play out?

alex: they started opening statements and the big story of the day is the ftc is trying to push this novel argument of to prove the deal could hurt future competition in the virtual reality fitness space. you were talking about microsoft activision looking at future competition. this is kind of the torch the ftc chair has been taking, saying look, we need to get the regulations right now before the company has a monopoly. they tried to make that argument . the ftc laid out resting evidence showing their case that meta had been building the fitness up internally and they scrapped that when apple had interest in the company they ended up acquiring, they scrapped it instead to acquire the company called within and in doing so they basically told a potential future rival that the internal potential meta app that

meta was off the table and that hurt competition. back and forth sides in terms of what the answer to the question was for. caroline: talk to us about the back-and-forth from the meta perspective about how they were not building things internally. alex: they basically threw up the org chart showing that it was in no at every step in terms of the effort to build internally and that it was only a brainstorming exercise and that building it internally, it was too hard to do in the best course of action was to go out and acquire. we heard mark hansen come out and say -- look, the nascent competition argument made by the ftc, they think there's no evidence here and it could have a chilling effect on any vertical deals in the future. companies might be afraid to go out and buy companies they don't eat with just because they are big because the ftc might and

get involved. real pushback they're saying look, the core of the argument isn't true in terms of the argument over the last eight days. caroline: that's so important, this is just about the nascent see -- nascency about that also them being pegged into that space. what does it mean for them doing organic growth in it? alex: they have pushed into companies through integration. we saw that with whatsapp. you can imagine them going through the oculus acquisition. they are one year into being renamed meta after the metaverse that they are working on building, the virtual reality world. it's a strategy where mark zuckerberg has caught a lot of detractors coming his way.

this is a test for them in the court. they say the judge will access the award for the injection and its high stakes for meta in terms of what they are trying to build, not only the future of meta but the future of computing in general and the next generation of the computing era. caroline: alex barinka, it has been so good to have you on the ground there. thank you so much. ed, we've got to break it down and go through the ftc's focus on m&a. diana maas, down in d.c., diana today is just emblematic of what it currently feels like the focus on his -- with m&a. we shouldn't be surprised we were steered in this direction by the ftc. what you make of them doubling down at the moment? diana: this is very much in keeping with the chair's, says. the promise was to take a hard look at the digital sector and

for good reason. the digital sector has grown dramatically in the last 20 years. they are coming off acquisitions , a spree that peaked in 2014. it's absolutely a growth by acquisition model as opposed to a do it yourself model. it's the buy or build question. with the digital ecosystem, that's the name of the game. meta within is a good example of this growth by acquisition strategy. because they are very large companies with dominant positions. ed: that word, competition, that's the bit i think consumers and investors struggled to understand or sympathize with the ftc with, right?

are they doing this because they want to foster competition? have many players in the metaverse which, let's be honest, isn't a thing yet, or do they want to prevent monopolies? or is it the same idea? diana: they are the same idea. antitrust laws in the united states are designed to promote and preserve and protect competition. workers in businesses that might be trying to get a foothold in expand those markets. of course that rationale, its consumer facing, smaller business facing, it can run up against the rationale for why companies might think they need to be bigger to innovate more, or innovate more quickly and be more dynamic to ultimately bring new products to market and serve consumer demand. it's a strong tension there. in the digital sector i think the balance has tipped. as we have seen in these cases,

such as in the doj, google, facebook and several state cases , there is a dominance problem in the leading tech players where the competition needs to be scrutinized carefully and m&a is of course one of the leading ways that these companies grow. ed: diana, do you have any sympathy for within, the start up this instance? we have learned that the metaverse is a nascent idea. it needs capital access to talent to grow and continue. are you worried that there could be stacking add stag -- stag plating innovation -- stagflation of innovation? if they can't acquire smaller companies? diana: that's a good question that comes up a lot in discourse.

what is the better pathway to innovation? to encourage competition by rivals and independent market players and have them grow into significant market players that could challenge these incumbent companies? or is it -- and we do that through promoting antitrust enforcement. or is it to provide a pipeline or a feed of these startups and smaller companies into the big digital ecosystems knowing that they will be acquired and claiming that that somehow will increase the ability of companies to increase innovation? there's a real tension there, but yeah, i think the balance has tipped. in the matter within case, the purchase has a leading vr fitness app, supernatural, taking out an important source of competition. in a market that already doesn't have much competition.

in the microsoft activision case, also different from the competition in the digital ecosystem. you worry about that when there already isn't a lot of competition. if you are in the camp where competition serves the interest of innovation or the other camp where we need big companies to acquire smaller companies to continue to innovate, it really frames out the debate. caroline: it's also an interesting debate to be having in terms of a real pullback in funding and the free money that we are also used to. i'm wondering, in what ways do we tend to see big companies sitting on a ton of cash be able to foster innovation in a space they want to see grow if it isn't just by doing deals to acquire them outright? diana: right, very good

question. the growth by acquisition model really serves as a funnel for a lot of the free cash that companies have. but i think you have to look for at the culture of the company's, at the way the digital ecosystems are structured with lots of cloud technology where we have seen a lot of acquisitions over the last few years and these constellations of apps in the complex business model that is supercharged. if you have market power in a platform or in cloud technology, all of those pieces of the ecosystem work together where, where, where market power can be leveraged throughout the ecosystem. so that complicates the story as well. it might supercharged incentives for smaller rivals because by buying a new application like

gaming content or vr app content, fitness content, we are able to then connect to that nnt to the platform, a platform, to supercharge it with value with cloud technology. so it's a very complex business proposition. a value proposition that poses really complicated problems to antitrust enforcers in crafting complaints. but the ultimate concern i'm sure you know is that all of this gets locked up in a single ecosystem that makes it harder for smaller rivals to get into the markets. ed: we are just starting this conversation. diana maas, thank you. -- diana moss, thank you. elon musk, after the billionaire promise to turn around their finances, looking into antitrust now. this is bloomberg. ♪

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caroline: elon musk's bankers are considering replacing the riskiest costliest debt that he took out on twitter that he's personally responsible for repaying, just one of three pretty big tesla scoops today. as always, ed, you are behind a couple of them. give us some of the other stories at play. ed: the debt burden is important, right? they certainly had to give that. tesla is cutting production in shanghai, the market is worried about demand in china, the biggest market, apparently. second, we reported the china

chief has moved to austin to get things going there, everyone questioning what elon musk is doing it in any given day. caroline: rumors swirling as to his leadership in these various companies and we want to get back to the reasons people think he is distracted, twitter. sonali basak had that scoop line from last night and it has continued to fascinate us, this data. talk to us about how much pressure it shows they are under at the moment. sonali: unsecured is the part the bank is most worried about. they thought they had 11 points at 5% but we know that junky debt has gotten much more expensive for banks to be carrying. they could take real losses here because of that promise. remember there is a benefit here potentially and this is just the discussion the bankers are having for them to be doing this and the benefit would be to

start to lower the burden of that $1.2 billion in interest a mince that would have to be made annually. caroline: that's more than twitter revenue. sonali: right if you were paying more than they were making it would be difficult for them to take it on. i wanted to shadow this a little bit with the scuttlebutt going on in wall street right now, why it matters so much. as the banks try to offside the debt, they have to negotiate so hard to bring the costs of it down. a lot of big firms would love to be buying the debt cheek -- cheaply. it's like no way is that happening in our lifetimes, hopefully. if they did that they would have to take bigger and bigger losses but the negotiation if they sell the debt low par, which might happen, that's one option, but the other option could be these market loans. ed: sonali basak, thank you very much.

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ed: the disney plus ad supported service has strict rules. caroline: interesting. it's about a month on from the netflix adf sponsored one and they do have a beer add. --ad. ed: but they learn from their experience with hulu, just half as much ads. this is bloomberg. ♪

>> 2021 was a record year. not only in terms of the amount

of funding going to private companies, but the number of deals done. almost 100 companies were being funded every day. in ways it felt like there was too much money chasing despite the number of deals, few deals. caroline: as we talk about the slow down in vc funding, we learned phone pay is seeking $1 billion from katter investment authority and microsoft. it seems some deals are still being done in the right size and space. ed: right. it value deals down. we learned from cv insights in the last 24 hours that it depends on geography.

in china the dollar value is down 50%. usa, 45%. but those are just two markets. so where is money still flowing, where is the opportunity? we could talk about this all week. caroline: we will talk about it the rest of the year. it's perfect to talk about here and now. our guest is here with more. what are you learning and seeing in terms of the highs we came from and what things will look like for vc checks. >> it has been an astonishing number of years and over the next 18 months the most important thing to do is look backwards and get a sense of what has happened in the venture markets the last few years. it has led us to where we are. talking about the money that has not been investigated vehicles, there is $560 billion globally.

even with a downturn you will end up in a world where there is enough money to prop up the industry. if you pull back a layer and look at fundraising numbers, the majority is in vehicles. we raised more in the last five that we did in the 20 before that. an enormous run of capital has bottlenecked so the story of adventure today is one of concentration. when you have money raised in the later stage in that capacity, if you think about where it will go, it will have to flow into larger check sizes. in the last seven years the average check size has tripled. where the money is flowing from a company size perspective, 46% of the entire market cap of venture capital in unicorn

companies. relative to 16% one decade ago. if you take the total value of unicorn companies and run it against net asset values of the entire margaret, the value is twice the size. -- the entire market, the value is twice the size. so you have corporate's -- close to half of these are being led by corporate [inaudible] caroline: microsoft is getting in there and phone pay, backed by walmart. talk about where the money that is sitting there will go. will it spread out and will they get more excited, or will they have to look for bigger more assured deals in this nervous market? >> the interesting thing about

the dynamic today is that there is not an incredible amount of money ready to be deployed. the pace of investments was masked by capital coming from corporate balance sheets so today i think you will see a shift not in terms of opportunity, how fast money gets deployed, but people will look for a different dynamic. you might have early, made, and late stage round spat the capital will not come to market and less money is put to work efficiently. i do not think in the next 18 months people will deploy in different sector areas. i think it will shift in the operational capacity of the teams and the ability to manage capital at scale. ed: we have been asking about

valuations. a lot is top of mind. higher rights that higher rates, cost of capital. valuations for companies have come down but when you look at the nasdaq 100 and see the performance to date, how are we valuing growth companies and benchmarking what is out in the companies yet to go public? >> great question. the pace at which private companies are marked down are a testament to what we see in the public market right now. it creates noise for partners trying to invest in new funds. one thing we talk about a bit is in times of market distortions or access, every sleeve of the market operates in its own

little silo. i think what you see today is markets are operating similarly. they take cues from each other. other index down 60% relative to nasdaq down 30%. if you were to run a sales number for the aggregate of each company and that index, you would see it go three times today. if you looked at the index for companies that had free cash flow and were at the same metric and price of the sales, you would see them trade at 22 times. so the market is telling you we need profitable growth and those companies will end up with higher marks on a relative basis and those without that, valuations will decline. ed: going back to what caroline

and i were discussing, not all markets are created equally. we asked our audience what 2023 looks like for start ups for fundraising. these are the results. 47% bleak. 44% depends on sector and size. which one? >> sector and size. and the difference between bleak and not bleak will be bigger for companies. ed: we are watching another story. peter thiel placing a bet on a venture debt fund to core capital that was started by carrie finley, a former partner. it targets private companies and industries like fintech with predictable cash flows. it is an unusually large

investment by peter. what is interesting is i have come across venture debt in the past and done some stories where it is included alongside traditional venture equity investment but usually what happens is the venture debt part will say we are lending this money to you based on the money you raise in the future to pay us back. think about what we just spoke about. caroline: i think a lot of people are being attracted. companies are attracted if they need money to go the debt route so they do not have to mark down valuations. this really speaks to pitchforks entire point and the idea that people are going to have to think more creatively i ways they want to invest. different ways in which money will be operationally used and which capital structural you want to be in -- structure you

want to be in. it is interesting. 250 million dollars coming from peter meal -- peter thiel. ed: and look around the world. it is not just u.s. and china. caroline: sadly i'm not hearing much about being deployed in europe now but let's talk about areas where money has been drying up a little. remember how excited we got in the world of e-sports and how much we thought the industry would boom and how people were diverting funding to that space? and now there are signs that things are dwindling. video games do not have nearly the earning potential originally anticipated. we have a great story on the

terminal that you can read. cecilia is here with insight. talk about the deep dive. money went to the space before covid and then covid shut down all of the gatherings where you would watch e-sports. then it picked back up. what is going wrong? >> 4.5 billion dollars was invested in e-sports in 2018, much from sports billionaires who believed e-sports would one day scale on -- with the likes of the nba. however, there have been trouble with it becoming as profitable. partly because of covid and lockdowns that restricted fans from watching e-sports live at stadiums. some analysts say this is something masking a greater problem, which is the challenge of structuring a business that

allows a company to turn a profit off of ip that publishers own. caroline: talk to us about where money is still potentially going . people still see opportunities in e-sports but it feels more like individuals rather than teams. >> e-sports players are earning large salaries playing competitive games. but a small percentage. if your kids are thinking about it, tell them there are slim chances. james like -- gaming like league of legends. there is franchise use. teams might offer payments as large as $20 million. ed: i flew into a city that has a stadium. i think it was vegas.

you ask what the stadium is for. they say it was built for e-sports but now it is not being used. that's not necessarily the tech side of the story. it is the tragedy. what is the future of these stadiums that were built to house the thousands of screaming fans? >> i recently attended a tournament in new york for league of legends. it was fun and packed and people were buying merchandise and having a great time. but it was a theater, not a dedicated e-sports arena. there was one in philadelphia for philadelphia fusion but developers moved it to a multiuse arena over covid. that could be because of lockdown challenges. it could also be that e-sports fans on average spend $5.30 per

year on fandom. that is tiny compared to sports fandom. sports arenas received government subsidies and e-sports arenas don't. so finances don't necessarily way out in everyone's favor. caroline: cecilia, thank you. coming up, we have to do it. ftx drama continues. the new ceo and bankruptcy lawyers are set to be meeting with federal prosecutors. and some are seeing money to be seen in that space. this is bloomberg. ♪

ed: ftx and many other crypto companies are feeling the heat. there is a daily short digital economy and soaring more than 20% since the inception. sylvia from the ceo of ftx, joins us now. what is the etf and why is it benefiting? >> thank you for having me. what our etf does is give investors access to the inverse performance of some of the stocks correlated to or represent the crypto ecosystem.

like galaxy, robinhood, these are names highly correlated to the price of bitcoin and really popped when bitcoin popped. but since bitcoin has fallen, these names have fallen in tandem. many know about short bitcoin funds but there is a bigger picture because there is so much contagion between equities related to crypto that really generate revenue from crypto as it rises. if it is going the other way, there has to be a product to capture that strength and that is what we are trying to do. ed: what happen if the market pauses and over a longer term started to see crypto related equities and digital assets rebound? >> in that case, you want to

look at a fund when you have a feeling it will fall. if crypto rebounds, you think about it as a hedge for a portfolio or you could transition to another etf. there are some crypto etf products that are single stocks and investors can get back into robinhood or whatever they like if there view is changing. but there are tools representing both sides of the trade and that is what we are trying to do, give investors access to the products. they are typically hedge fund so it democratize is this. the average retail trader who is highly interested. ed: -- caroline: these are publicly traded and regulated companies. what has demand been like beyond the sector? you speak much about where

assets are currently trading and where they should be trading. from your perspective, our people about to expect some sort of pop back? >> yes. you just made a great point. the other benefit at looking at shortening equities versus cryptocurrency itself is it will take a lot of these companies a while to recover. even if crypto starts inching up, and less -- until tech and the broader market recovers, the companies like robin hood will have a lag it in crypto because of inflation. so i think there is time. in terms of investors coming in, absolutely. the time for value creation is when markets are dismal. because of ftx, there is so much apprehension to get back into the sector for some retail traders that dove in heavily

until we get some regulation and clarity around crypto and how investors are protected. so i think it will be a slow roll. longer-term i am fully bullish on blockchain technology. but short term i think it will be a little tough and you might benefit more on the short side than the long side. caroline: we are a bit worried about the lack of ways to gain perspective. >> there are actually a lot of good ways to gain exposure but they are not all cost-efficient. looking at the short equity fund a good way to do it. in terms of short futures funds, as long as there is enough supply to build the fund and rebalance it on a daily basis and we have clarity and transparency on what is in the fund and how much of it is bitcoin or filled with something else, you want to make sure you

want to make sure you're getting shorter exposure. it's important and there are great options. investors can also short single name stocks if they want. the broader picture about if products will be approved in terms of ether etf or some different types of cryptocurrency, i have the sense regulators might pause because of the ftx issue and they might seek to come up with rules and stabilize the industry before approving the more nuanced products. caroline: sylvia, always so great to get your perspective. and while, we have to talk about it. brittney griner finally free.

president biden: this is a day we work toward for a long time. we never stopped pushing for her release. it took intense negotiations and i want to thank all of the hard-working people across my administration who worked tirelessly to secure her release. caroline: president biden on the release of brittney griner. this of course is going viral. she has been treated for the so-called witness of death. brittney griner pleaded guilty to drug smuggling last year after drug cartridges test cannabis cartridges were found in her luggage in moscow. ed: i have google trends on my

screen. brittney griner is number one by a factor of millions. everyone has been tracking this case. it's not the first time she has been high on the charts. caroline: isn't she the seventh most searched athlete in 2022? and great video from a local sports team. ed: everyone is talking about it. that is what matters. caroline: that is going to do it for bloomberg technology. don't forget to talk about us. ed: don't forget to look for us on twitter. this is bloomberg. ♪

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shery: you are