snoelts ♪ -- ♪ ♪ good thursday morning. welcome to "squawk alley." i am carl quintanilla with morgan brennan and jon fortt a big show is ahead. awaiting the open of peloton, set to go public at the nasdaq hopefully this hour. in a few moments, ceos of verizon, qualcomm sit down for a conversation about 5g. we begin with peloton. for that, bertha coombs, our eyes and ears today. >> a lot of eyes and ears.

in a down market, the company priced overnight at the high end of the range had been looking for between 20 and $29 a share, 26 and $29, priced at 29, raising $1.1 billion, making it the seventh overall biggest deal this year to go public it has been a rough and tumble ride for unicorn brand name ipos, the ride hailing companies lyft and uber struggled, lyft having seen a new low just yesterday. slack also having seen a new low yesterday. smile direct that went public two weeks ago seeing a new low, down 38% from its debut. among the only ones of the big stellar names that's higher from its ipo is pinterest that one is up 45%

the market continues to be ver cautious on these deals as they go forward the price at the top is certainly encouraging for the company and for the nasdaq which has seen a large number of ipos this year, some 50 ipos, raised more money initially than we have seen from the deals that they saw last year nonetheless, still one of those things people are watching as we see the ipos getting more scrutiny, particularly companies like peloton that are growing quickly. they doubled revenues, doubled ridership, membership, had a billion of revenues last year, still are not profitable we will let you know when things are set to open. they're still trying to settle the book here, we'll get back to you when we have more. >> all right thank you for that bertha coombs. let's bring in peloton investor,

managing partner hans tung and bob pisani bob, can you give us lay of the land what environment they're walking into >> tough one you saw bertha noting decline. it is true, pinterest is up overall, this week, these stocks are being killed pinterest down 10%, 12%. slack had a new low, down 10%. lyft at a new low, down 10%. smile direct, remember, they priced above the range $23, 19 to 22. it is $14 now. we are watching peloton, waiting for that to open here. there are some indications i saw earlier on twitter, maybe 25 we have to confirm that, see what's going on. the point is we're in a tough ipo market my biggest indicator, ipo, big

performer on the year, up 30% is down notably the last several days, up 23% on the year, lowest level since february what we're seeing is push back on valuations and companies that are not profitable and i think we have governance issues, share class, insider dealings, i think that's having impact with some companies as well. >> hans, let's bring you in as well peloton, big brand, big name, but i've got a problem with it maybe you can help me sort through it it is the cost of customer acquisition. here's a company, churn is low, marketing costs doubling every year, $324 million in the last fiscal year for a half million riders if word of mouth is so good, why do you have that spend that much on marketing

>> churn is low, 95% retention rate we haven't seen anything like this before. at the same time, as you know, costs of marketing online with facebook have increased quite a bit. partially due to the environment, not the product itself. >> hans, you have the subscription model that represents revenue, you have $4,000 tread mills, account for the vast majority of sales from an investor standpoint, which is more important? >> i think what you look at the math, you don't want to pay anything up front. it is $50 a month for a bike for 39 months. you look at that, that's essentially the cost of gym membership you split cost of peloton, it is

different with two people, it is a great deal part of the reason people are buying it. and the experience is unique >> i wonder to what degree easy money in this economy is skewing business models. i mean, with peloton, i question is this a niche company? it is a $1200 bike and subscription after that. how many people can afford it. but they're spending all this on marketing acting like it will be a huge audience. they can spend it on marketing, investors have given it to them. if they grew slowly, would the model look different >> this was a lot of the comments over wework situation it was a long path to profitability. we are in a period where investors push back behind higher valuations and companies with very long roads to

profitability. i tauklked to renaissance on th. they lose money and sales, you can get away from it a certain period of time when the market kihits the skid that's what we need to concentrate on there are people, retail interests that will buy peloton, it is a terrific company, they've done a wonderful job building it. the question is what's the right price. nobody says peloton has something wrong with the company, it is what will you buy it at. will it show a path to profitability a few years down the road that i can clearly have confidence in. that's what gets the ipo people going crazy. they have been pushing back for a couple of months, prices are too high smile direct a wonderful company. it has done fine why did they price above the range? they really got slammed. when you see the model is not working, path to profitability is not there, investors pull back see what happens with peloton. it is not the company, it is how

much you're willing to pay for future potential profits that are still not there. >> hans, a lot of focus especially in the last couple days on dual class share structures with everything wit wework, a number of companies went public with this structure in place peloton joins that list today, as someone that's invested in so many startups, peloton included, how are you thinking about the structure, do you think the time is coming where it actually starts to go away. >> i think it works for certain companies. jon mentioned earlier on cnbc that he raised quite a bit of money to get here. 50% ownership in the ipo now -- you want a chance to -- this

market how investors are worried about companies. the one in new york has studios, multiple different devices >> all right, hans, we're going to watch thanks for helping us set the stage. >> peloton is a two time cnbc disrupter 50 company, our team in cnbc, please, making sure, looking out for you guys we know all about peloton and highly recommend check the cnbc disrupter list, a lot of very successful smart companies a lot of people at cnbc worked a lot to get that listto you you want to know what the cutting edge is, i read it, i look at it carefully, you should

too. >> we should mention, comcast is an investor in peloton david faber is sitting down with a power panel, some of the biggest names in tech for a conversation on 5g and whatever else david asks. >> thanks, jon hopefully you'll pay close attention as many will we talk about 5g on our network, focusing on customer applications, fact that you can download a movie more quickly. this is a rare opportunity at the conference and a lot of ceos in attendance. i have the ceo of ibm, qualcomm, and verizon with me today to talk about broadly speaking 5g thank you all for taking some time we talk often about consumer

applications, steve, back to you and i, i'll start with you you and i began talking about frankly enterprise opportunity for what 5g was. the opportunity in terms of the internet of things, how many chips would be in different things for lack of a better term, what it meant for another industrial revolution. let's start there. where are we on that time line as opposed to hans who is rolling out new cities or regions with 5g are where are we on industrial time line for applications >> it comes in a second wave first wave, you're getting the so-called more g phase of cellular, but the real exciting part, and part with huge economic potential is the internet of things or

digitization how do they deal with data and infrastructure, products, customer data. increasingly more is wireless. you look at the economic benefit, did a commission to study something like 12 point something trillion of economic value by 2035 enabled by 5g. the majority outside the cellular space you're seeing a change in technology not unlike electricity or coming into factories, the change in the way industry will work and the way infrastructure will be controlled will be dramatic. that's why you see governments so interested in this transition >> i want to talk about that as well give me an example, give viewers a hard world example, even if it is a number of years away what you're talking about when you talk about that transition. >> connected health care, for example. delivery of health care in the united states, which is a large percentage of the gdp, high to

mid teens of gdp, a small improvement in delivery of health care, just the monitoring of people, how you impact their lives, tremendous economic benefit, tremendous benefit to people because you can connect people you get the telematics off how they're living and control outcomes better. same in transition, same in education, and on top of that, how do i deal with impact of the cloud to business, which i have great colleagues here know better than i do, all enabled by 5g. >> and we're going to talk about the cloud and what it means with lack of latency and the edge hans, how important is this longer term for verizon? you show up with us on air or do an analyst meeting or quarterly call, most are not about this opportunity or we're going to have a phone, when are you rolling out in this area

so what about the larger opportunity? >> i go back because when the design was done on 5g, 2 to 4, was the speed. when five was designed, the idea was how can you enable enterprise and society much of what became enormous latency, battery lifetime, securer transactions on the network, and much of that was designed for enterprises and today we're spending a lot of time on that. you should talk -- one is mobility, that's what we're building out in cities in the u.s. now now there is five years, and the third is clearly will we bring 5g to the edge for enterprises and fourth is cost

talk about 5g mobile edge compute, that's the third. we launched home and mobility and will launch that this year. >> fourth quarter of 2019. >> yes the first mobile edge compute centers based on 5g will be this year we're going to have customers using it then bringing it further out, and customers that -- it is how do you transform a factory, all 5g, how do you do warehousing. with all this ubiquitous coverage and speed and latency i spend a lot of time with large enterprise to understand the platform and partners like ibm, how they come in with software it will be a combination >> a lot of people are trying to

understand the different responsibilities or opportunities. let me come to you, last time we spoke on air was i think mid july, you announced the at&t -- may have been the red hat close, but it was around announcement of the at&t strategic alliance, multi year alliance. you said at the time and in the press release, 5g enterprises will one day rapidly transmit from multiple clouds and billions of edge devices with increased reliability and security, reduced latency as hans indicated, and eventually it will help businesses transform the user experience, optimize processes across industry and retail, transportation manufacturing what does that mean? >> with my colleagueshere and work with hans as well, if you're a company, this does by the way open up two markets for ibm i'll come back to. the enterprise idea, it is convergence of a couple things the 5g which everybody thinks

big band bwidth, but you have networks like hans are cloud fieing they can put software defined services up fast third thing he mentioned which was this edge computing, what does that mean to a company, it means i can almost do real time analytics anywhere i actually believe with 5g, biggest impact probably will be enterprise first and even in an enterprise, some cases would be fixed campus, in a perimeter, easiest way and to me real quick examples of things we're already working on. as an example, steve mentioned health care. my mom was recently in the hospital i spent a week coordinating moving big files from each health care provider, or go to remote surgery internet 4.0, picture walk in a factory, it is wireless. think of the wires, cables, what it could mean to safety and maintenance. that's one they're working on. a retail store

if i could look at all that video real time, i could stock shelves differently. if i am a car, car to car, for safety reasons, two cars are communicating. that's another one we're working on the other is if you think of first responders, working on one with drones and what would you do with wildfires, airports, it is security. i actually see use cases everybody is working on right now, and two big spots for us, one as hans said, these networks, part of it is they have to cloudify >> what that means >> i will give you my simple, he is the obvious obviously every new york is becoming software defined instead of hardware with its own specialized software, difficult to change, they'll make it like a cloud, put up new services easily that's an easy thing to understand networks are something that have

to be reliable big opportunity for us we have never been a network provider, with red hat, they're in 120 telcos. so be the cloudification and you need systems incidetegrr to build these on one hand, he will get productivity in the network, for parts of the cloudification, 50% productivity. >> you explained well. i think it is simple you disconnect hardware and software and do things you've never done on the network before so and that is enabling 5g you need to have it connected to have a chance to have the reliance and security and all the latent speeds. >> steve, you have been sitting here, sort of silently

listening. does it all make sense >> it does what's interesting, there are several hundred billion dollar companies working in hybrid cloud. you should think of that as the first step toward the real dream, how do i get the computing and data close together to make real time decisions. the economic value that will come out of that, business model evolution, the way in which winners and lose,ers, a lot of winners really, it will be tremendous. >> how does that happen. talking about moving computing power to the edge of the network. >> what's interesting, the trend is undeniable. the number of meetings you can have, places like this, everybody is interested in doing it we have been in this industry, i have been in this industry for three generations of cellular. this is the one with the easiest sell with enterprise they all realize the strength of it the point is how do you get technology at scale, get partnerships across companies. no one company can do this

that's where you're seeing excitement and energy. >> and on market size, hybrid cloud is 52 trillion, and new markets like what we talked about to cloudify networks, to us, $50 billion new market out there. this is a lot of new creation. there will be some cannibalizization out there, but there are new markets to be formed i think hybrid cloud is it you're going to connect things across all different points where the data happens to be so much isn't done because of latency. if you do remote surgery, you can't have it pause. this latency, hans, what is the latency? >> down to 15 minutes, you would have on a 4g network 100 at best another thing i agree with both of them, don't understand, i

think we understand, this transformation, g is broader than the previous gs when i talk to enterprises, they see it and understand it >> they do they get it? >> they need a migration, it is a lot to understand. that's why we are dpigiving -- e launched 5g compute now. that's where we talk to enterprise this is transformation of size for a factory, for warehouse, retail store or private 5g network or hospital. all of that is transformation. with technology, service, integration, all of that >> steve, how much time do you spend with enterprises, we talked about ip and how it figures into the business overall. are you there already? things yet to come you're going

to be asked to create essentially in terms of ability of chip sets and ip to accomplish >> we have been spending a lot of time. you look at, it starts with what we put in standards bodies to enable this. we did that five years ago in previous lives. and in addition, there's a reason we have enterprise wi-fi business and strong one, we know those worlds will collide. we assembled assets, partnerships and technology to enable it. that's what we have done in the history of the company, bet on things ten years before they happen we have a lot of conviction that this trend is an attractive one. >> significant trend like this that we are flushing out creates opportunity and also danger to a certain extent, markets can change dramatically. how do you think about it when you are potentially going up against the likes of microsoft and aws who may also choose to

move closer to the edge and offer many of those team services. >> i view it very different. i view it as pure opportunity to us with red hat already in, 120 telcos and operators, you need an open source foundation, i believe you need open foundation here in the network. and then to steve's point, it is hybrid cloud the network has to connect to a lot of other things. this really does give them the base basis to have open, this is not about one company providing all the answers. he has a software network, cloudify it, but you need a base under that which red hat has a foundation for it has something to build on that's pure opportunity. $50 billion segment over years to come. but the other part, both my colleagues said it well, what we are doing with the enterprises now, this is all reimagination

of work. this is all brand new work you're not cannibalizing the goal is get in with design wins in early experimentation, they will have to traverse current operations to the new, which is what comes back into a hybrid cloud you can decide to run work wherever you need to run it when you're ready when i am ready to go to the edge, i can. i can't overestimate enough it's 5g technology, also cloudification of the network, and third he is edge computing it is convergence of the three that make it different for enterprise i think we all agree in the enterprise, some of the first use cases we see that we're working on, calling them fixed perimeter, meaning go to a factory, make it wireless. you realize what that would mean to a factory, the flexibility or p p predicted -- >> what's it going to mean

>> we build the mobile edge compute for the factory, then the factory needs application, which we probably don't have, put that on top in edge, compute and store everything in the factory, you can make quick decisions, reconfigure all your robotics in the factory, et cetera that's first use so that's the first use case, many enterprise say immediately we can do. i want to come back to what steven said about are you ready. i mean, if you build according to standard, not everyone will do, then of course these capabilities come out. the reason i say, if you only have a customer business, you might not build in all capabilities verizon has all of the customers.

we're going to serve all of the customer base. not clear how everyone will do it in our case, we believe in the old currency is important to transform. that goes for consumer as well they want benefits. >> one can understand why it has implications beyond what it means for the enterprise but for national interest. it is an important dialogue going on now in terms of us versus china hans, i would like you to respond. pentagon defense innovation board will release a report that says they have not deployed to deliver to large parts of the population the country that owns 5g will own future innovations right now, with our policy, that country is not likely to be the united states. do you agree with that >> i think in general, remember, we're not building a standard. a standard is based on all the

players in industry. and whatever is built on top of that that's a unique of the telecom industry it is the reason the 4g phone works in any country in the world. you can say that because you're part of that industry. of course, then that's when you win the game, how you build it, create -- >> shouldn't be judging at this point? too early to say >> the first commercial, 5g was verizon. if that's indication where we are, we're doing pretty well next step, enterprise is important how we use 5g and transform. >> this will be an important part of gdp it would seem. you know the chinese well, you do business there. are they ahead of us >> they're going at it with a lot of intensity what's different this time around the speed to which

chinese deploy versus others if you were launching verizon in japan, might be several years before you have intensive deployment in china. not the case this time you're seeing deployment early it is moreau pak as to what is going on, but i can tell you there's a lot of intensity, delay between those two milestones, very short this time that's just indication of how important technology is. >> are we capable of keeping up, given that they have more of a control economy, they order things to happen that here have to go by rule of law. >> there's a lot of activity occurring in the united states, not only by hans but other players, a lot of activity in europe, a lot of activity already happened in korea and happening in japan japan launched this week or last

week with rugby world cup. it is tremendous activity. much more concentrated in time than others. >> do we have the ability, without using, sorry go ahead >> you can measure one element of success how fast does 5g roll out. but to get the real benefit, the reason i am the third partner in this is that as all of the providers have all realized, you've got to then put it to work it is going to go to work, that means companies have to innovate i see the most activity going on, companies trying to change what thiey do in the united states i think asking about deployment is very important and it is one piece, but then you have to use it to get benefit of innovation. i think there are two sides of that coin in the end will determine the winner. >> hans, the inability to use anything from huawei, does that in any way hobble us in terms of deploying in rapid fashion

>> apparently not. we're not using huawei >> right, you're not. >> using providers from europe and it is working very nice. of course we're taking the brunt with other companies, taking technology first, but in the u.s. companies are prepared for that verizon is prepared to work with infrastructure, so we feel good about our basic supply chain to build the network. >> steve, do you agree >> i agree, we probably have a broad broader footprint, see it worldwide. it is a very global business and will be a long time, for decades, will continue to be a global business. >> you three stay there. we're sending it back to morgan in the studio. we're going to continue streaming this interview on cnbc.com, if you're enjoying it, which i hope you are for now, back to you >> we are definitely enjoying it what a great conversation on 5g.

i love that you kicked it off with the industrial internet, which is a big, emerging topic thank you for bringing that to us meantime, an update on peloton as we await first trade. seeing indication of $25 a share, after pricing at $29 a share, at the high end of the range. bertha coombs have the latest from nasdaq. >> interestingly this morning, sara, the ceo john farley told the squawk crew that he thought they left some money on the table in terms of pricing at the top of the range, not going above that range right now, they're looking from indications that we are seeing on trading systems to open down 15% or so, certainly not what farley or most want to see on the debut. don't have a time yet on opening, but we're seeing it is starting to get closer this would not be the first ipo this year, if it does open

lower, to do so. two weeks ago, smiledirectclub which was a big fund-raiser, raised more than a billion, they priced above the range, opened lower, nearly 20%. that stock continues to hit new lows until today as investors are starting to be a little more skiddish about ipos. we had such a flood of them this year the events in the last couple weeks with wework postponing its debut, and the ceo stepping down, making a lot of investor look at some of the unicorns with a lot more scrutiny again, we don't have an exact time line, we're seeing the executives get closer to the trading desk we'll get back as soon as we have two-minute warning that we'll be opening sara >> morgan, bertha. we're in a down day anyway the dow down 144 points now. i wonder, quite a number of

people behind you. as you see the price move lower and now below the range, has the mood shifted at the nasdaq >> i think folks are just kind of waiting around. music has been turned off at the moment i think they're waiting for that indication that it will open we hadn't seen the executives for awhile, they're moving closer to the trading desk for the open they did come with a big crowd they're in the nasdaq's newest space at the very top of the nasdaq tower, taking up the entire space here that they have, public space here for events sounds like the music is kicking off, we may not be ready to open anytime soon >> all right, keep us updated. thank you. sticking with this topic, henry blodget joins us at post nine henry, i can't help but think, john farley earlier said

generally they left something on the table in pricing and didn't want to be greedy. now you see a price of $25, below the range. your thoughts? >> say they misjudged the market's demands, this will be spun as a disaster, it is terrible, they'll never overcome, it is just not the case so many companies have come public in the last few years, historically where they left colossal amounts of money on the table that would have been hundreds of millions for them and shareholders and given it overnight to people that flip it the next morning last couple ipos we have seen, obviously it has gone the other way. i think this is actually healthy for the ipo market this is a good company, but ultimately investors have to be careful what they pay. obviously that has to be the lesson learned here. >> why do you say it is a good company can c company? >> the thing for me in the prospectus, the analysis of the number of workouts people that

joined two years ago are doing the following year and the year after that, it is even or going up that's unusual for exercise. one of the big risks with home exercise equipment is it is tough to be your own trainer they found a bridge of having a trainer, doing it with a class, the thing people like about exercise, think they may have found a good model. >> my problem is that i hear a lot of money has skewed the business model it is not clear to me how big the market is for a $1200 bike with then a subscription fee on the back of that, or $50 some a month if you want to pay that way. people say that's the cost of a gym membership, maybe in new york, not in peoria. when you spend $324 million on marketing the last fiscal year,

say churn is low, people love the bike, which still has a half million subscribers, i wonder how many subscribers at this price have you got already >> on the other hand, i think you can commend them not giving away the bike way below cost there's a nice gross margin there. over time can they make it more cheaply, do you have to have effectively a tesla as a bike or get a cheaper bike and still have the subscription. i think there's flexibility there. >> john foley was on squawk, saying we are prioritizing growth over profitability. that message worked. maybe it is not about this business model, just the market's tastes have changed. >> it has gotten more disciplined. wework was a big wakeup call i have to say, i have never seen a big deal like that, that the market just rejected, flat out, right up front, saying no at any price. and i think you dig into the economics there, it is way harder to see how the model

works than ultimately how this works, which is you back off on marketing, you're doing okay >> do you think there are any reasonable comparables for a company like peloton i ask that, the preipo filing described itself as technology, media, software product, experience, retail, apparel, and logistics company. >> this is vertically integrated, but again, weakness of the home exercise market, you sell a rowing machine or bike, that's it for 10 to 15 years, even if it is unused in the corner, no additional money. if they found a way to actually keep people engaged in their houses, it is much more convenient than a gym, it is social, you track performance over time in a way others can see, that may be the magic formula here. >> at the same time, because they're so vertical, they make the bike, they service the bike, when it breaks, they fix the bike, right, they have to pay for streaming of music, that

vertical structure comes with some risk. >> yes it would not surprise me if they found a way to hook up the peloton service to other folks' bikes, maybe mass produce bikes more cheaply or what have you. in the beginning, they decided nobody can do what we want to, and create the experience, we have to make the hardware to do that over time do they become a platform that hooks up with other hardware, why not. >> it has been more than two hours since opening bell peloton hasn't opened, we're getting indications it might do so soon. how unusual is it for us to wait this long for something and smile direct, you talked about earlier, how unusual is it to see these indications below where the ipo is priced. >> the indication below is unusual. smile direct got attention for pricing above the range and opened down. that was indication of

mispricing there a lot of debate how that happened i'm not worried about length of time this is an important ipo, a big name, well known underwriters want to be sure all possible wibids and offers are n i am not worried about it taking a long time. that's typical if it prices below the initial price, remember, they priced high end, they had opportunity to price at a lower end. if you end up pricing below that number, now you get two notable ipos within two weeks of each other priced for high end or below and then had difficulties at the opening. >> bob, stay close we're going back to the nasdaq and bertha coombs for the latest as we await opening trades >> we're getting a two-minute warning, so folks are starting to get ready, come over. one thing i'll add, we're focusing on these big names that have faltered either on their

debut or since their debut, but there's certainly a number of names that have done fairly well there's pinterest, trade web also traded higher, a number of names quite as much in the top tier, marquise names they may know in terms of household names have done well it is a mixed market this week overall investors seem to be pulling back as we're getting toward the end of the quarter. it may be taking some profits of some winners in particular, may also just be stepping back, re-evaluating these valuations, given that a number of the companies do not have profits like peloton the ceo says that he expects within the next five years, might be some analysts at mkm partners think it may be two or three years as they look at that

recurring revenue, unless people that engage with peloton are very much to a point addicted to it, and they're reaching out to people that don't necessarily have to do it with their bikes they're trying to come up with this kind of amazon model where they give you the hardware but also give you the software, give you more of the experience you can experience, not necessarily just on their bikes and that you can take with you and experience elsewhere, and not just the running but yoga that's a business they're trying to build to keep people engaged. they have strong retention compared to a lot of athletic companies that we've seen. for one, i know in my house growing up we had an exercise bike and that became a coat rack for many years before we gave it away looks like we're starting to get

closer but sometimes you get a two-minute warning and it can still take another five or ten minutes. back to you. >> bertha, with this company going public at the nasdaq, how does it speak to the ever ongoing, ever growing rivalry between the nasdaq and new york stock exchange >> you know, the nasdaq had a number of large deals this year, certainly very proud of the fact that they had more than 50 deals here i think more than half the deals that have gone public this year, and they tended to raise more than last year there is this issue of the follow through some biotech names, adaptive, bio technologies, big winner, did well, is still up since debut. although this week it hit new lows beyond meat is the stellar, the biggest gainer, one of the big

deals and it continues to move forward and see growth that's the difference between the company that's more in the early stages and some of the more developed later stage companies that are going public. people wonder how much is it going to cost them, to your point, jon, to continue to try to drive growth now that they're public. >> yeah. and we have indications at $26 as we look for them to open any moment mike santoli is here as well it has been a rough week for challengers, smaller companies trying to challenge big incumbents does that make it a difficult week to go public, and why the difficulty >> it is a difficult phase to go public now right now i think it is good that investors aren't willing to swallow incredibly aggressive

valuations, being conservative on what business models you bet on, not waiting for the company's next act a lot of ipos, this is what we are now, we will segue to something else something about the pricing mechanism isn't working. smile direct, how do you miscalculate that. ceo says we left money on the table. apparently not if the pop is not there in the indication, backing away index funds are the marginal buyer, they're not players, so it is interesting. >> is it the bank's fault? >> i don't think it is fault, it is art and science they got people to write checks at $29 for every share they looked to sell >> all right mike, i'm curious on valuation on peloton according to one metric it is worth a little under nine times trailing sales how does that compare to other

fliers we have seen? >> again, how you define business the rule has been consistent this year. the more something looks like software and acts like software and is just a software platform, the better the stock is received and more willing investors are to put higher valuation on it. and if you're pretending to be software, have other stuff going on, it is a hardware model, reseller of other people's media, royalty rights issues with peloton, then it is messier. >> going back to the point on pricing, a company at this stage, combined model like this, the reasonable price range is very wide. you can say we're at, i don't know, if it goes public at 25 or 6 to 7 times sales, go up to that, you could make a case from three times to ten times or eleven times so it comes down to sentiment and what the investors' models tell them the next few years look like.

>> what's the lesson from beyond meat's action, it was up around 240 bucks a share at one point, now 150. still kind of amazing. but well off where it was trading. >> just a crescendo of interest in the overall area you saw at the high price, that's just the way it goes. when you have a product that's recognizable, there's only one peer play way to play it in the market, that's when you go to an extreme. you have enough fast money in there, ran out of willing buyers at those levels, but still up tremendously from where it was still has fundamental momentum i think the chart isn't pricing in shape now, the question is if it goes really south from here, it starts to look like go

for fit bit. >> bob pisani, after smile direct, peloton at the nasdaq, that this exchanged? >> not at all. i am not concerned about that. i think the way to look at this, henry blodget had the right tone on this, peloton is a wonderful company, great model great idea the question is not the company. the question is what will we pay for the company, what's the buy side, what are viewers willing to pay for the company that's the issue we are talking about price that's really what's going on. we're in a particular stage where there's significant push back on valuations and push back how long that path to profitability is we are talking about a company specifically that may be profitable, we don't know, three

years, four years, five years. there's push back on that, not just that company, generically few weeks ago, software ipos did well, and people were willing to give everyone the benefit of the doubt. i think it speaks to shorter term investors out there, they're buying at high valuations, high multiples not just on peloton but all of the recent ones, particularly software ipos. they know that these guys get a little nervous when they think we're topping out not just in the markets but maybe multiples. and this is as good as it will get. they'll get out quicker. there's some big macro issues. push back on profitability and overall market issues going on. >> santelli, don't you think beyond this idea of getting more discerning of what they're buying into, that this speaks to

what the broader market is going through in general, whether you talk about rotation, whether that's here to stay, all these macro question marks and uncertainty that increased the past couple of days alone. >> right it is >> it's part of risk appetite as well there's people hearing the ticking clock of this economic expansion. whether it's correct or not, that's where we are in trying to figure out if there's a lulling growth or something more like the end. all that stuff is in the background of every one of these deals. doesn't mean it's going to color their entire life as a public company, but i think that's part of it. it's interesting you want to see the ipomarket hold up as a measure of people willing to take risk in the market, but you don't want to see it get too hot of course that's going to represent excess we're far from the excess part >> what do you think this does to future funding round of private companies? when you see this, we work, the other names that maybe haven't

been as expected >> it should create a lot more discipline around it the thing is it's on the private market right now there's so much money. it is so easy to borrow so many investors are investing in it. big pension funds and so forth because ipos aren't going public early. you've got to get in early so there's so much money and you've got all the firms competing for the hot deals. so you're seeing these incredible valuations. but something like we work where softbank appears to have gotten burned in a major way is going to make people say you know what we let this one go it's not the end of the world. >> all right we will see how peloton continues to play out and our eyes and ears on the nasdaq, what do you see? >> well, john, looked like we were getting close to opening and now we've seen more interest come in in terms of bidders and we're seeing the price move higher still indications look to be below the ipo price of 29.

but it has certainly come up from what we were seeing about a half hour ago. jay heller is the head of a market operation here. and he has certainly seen some activity from what i've seen has really picked up here over the past couple of minutes looks like we're actually moving a little bit further back from the goal line as more people come in here it's also in a sense a testament to the bankers here as well. a lot of folks talked about jpmorgan's handling of smile direct and some of the issues that have occurred with we work. here this is goldman sachs today that is leading this that's part of the sort of thing that you hear about goldman, that they take their time to really let the bidders come in and really square the books. so at this point we are seeing more activity and we'll soo if we're going to get back closer to that $29 ipo pricing. let's listen in and see if we

can see -- glean any more from jay here as he's talking to folks on the desks and of course it's quiet >> yes, you were mentioning the indication moving higher it moved up to $26 now at $27 of course it priced at $29 as we wait for this to open. as we wait for that to happen, bob pisani, you mentioned before a question of how much people are willing to pay for growth and how patient they're willing to be for profitability. but it seems to me that peloton has some -- and companies like it -- have some role in this they chose to spend the amount of money they did on, say, marketing to drive that top line growth to impact profitability they're losing $200 million, but they're spending 320-some million on marketing

what do you think that says about what they thought was important? what they think is important >> it means they're spending an awful lot of money to get and retain new customers customer acquisition causes a major metric for all of these companies and not just peloton, but anyone who is involved in acquiring individual customers so, yes, that becomes a factor and how long they stay with you and how often you can get new people to sign up is a very important issue for them i think one of the things we discussed yesterday with we work, a different company, is perhaps there'll be a better valuation, a better way of looking at those acquisition costs and maybe ratchet them down a little bit. maybe that will not result -- maybe that will result in fewer new people put on. but it will result in lower overall cost that's something a lot of these companies are interested in.

because you're getting pushback on valuations. part of it is based on how much you're spending per customer acquisition. >> henry, there's a number of factors, a number of metrics they could be watching net new subscribers is the one that john foley, the ceo, highlighted as the one he sees as key >> i think it's a good one to follow if you're going to shell out 2 grand for a bike, you're probably going to be a subscriber but to go to john's point and your question to sort of take the view of management here and the existing investors, they seem to have developed a product that people really like. it is not something that is infinitely defensible. they do have an opportunity right now to get as much of the available market as possible before anybody else gets there i would say they're smart to spend a lot on marketing and wake people up to it people don't really know about it take the opportunity now

as long as your customer usage metrics hold in the way their cohorts seem to hold in. they buy the bike, they use it more and more every year >> are you a consumer? you seem really hot on it. >> not on peloton, no. >> the gentleman on the phone is chief of capital markets and ipo execution. obviously trying to get this thing to market. some new stats out of cnbc of the 120 ipos this year, 57 are negative from the offer price. it's about almost half 48%. seem reasonable to you >> it seems reasonable in the sense that the market is picking and choosing i think that at this stage, again, i keep going back to this stage of where we are in this cycle. it makes sense that you're not going to have so many hits just another way to make a distinction between this year and the years like 20 years ago when you had 500 ipos and they were all double on the first day.

>> which was terrible for the company. >> that's the whole point. >> huge amount of great press, everybody loves it what a success no, actually you left hundreds of millions on the table and gave it away to investors. >> just for what it reflected about the environment too. >> yeah. >> bob pisani, you've got some updates? >> well, i just want to note we're hearing something about an i. rks o rks that -- ipo coming tomorrow this is one of the big global entertainment and sports and content companies. part of the old william morris company. looks like they are repricing the terms of that deal so we had 19.4 million shares this morning at $30 to $32 dow jones reporting that is being downsized. instead 15 million shares. instead of $30 to $32, it's now $26 to $27 instead of raising at the mid-point $610 million -- looks like -- >> all right, bob. we're going to cut you off

there. peloton just opened for trading at the nasdaq. >> not sure bertha can hear us, but a little under $27 it is trading now just a bit lower at $26.50 or so. bertha, took awhile to get this one open, but here it is >> it did take awhile to get open and normally you wouldn't hear cheering this loud when the stock opens lower. but in some ways, it's a win because we had seen some indications that were around the $24 range. would have been about a 17% decline. so to open more about around 10% to the downside is actually a win on a day like today. especially as we're seeing a tape in the red overall.

so the company fairly i'd imagine pleased on that. and they did raise $1.1 billion after pricing at $29 a share nonetheless, debut coming in below that price back over to you guys. >> all right bertha, thank you very much. we'll keep our eye on peloton even as dow jones has some wire headlines. bob pisani on endeavor cutting the ipo to 15 million shares cutting the expected range to $26 to $27 something we were talking about in the last hour >> yeah. just to give you an indication as i mentioned before, carl, instead of raising at the midpoint $610 million. it looks like they're going to raise roughly $400 million again, you can argue part of this is pushback about where the overall market should be may not be so much about endeavor maybe a little bit but a lot of this is a clear trend now pushing back against higher valuations, pushing back against past the profitability

although this is a company that is profitable. i want to note that. endeavor is a profitable company overall. we're definitely in a more questioning part of the ipo cycleright now >> all right can we call this within the range of the reasonable? >> it's totally reasonable again, if you bought it last night, that's a bummer but if you believe in the company, you have an opportunity to buy it at a cheaper price this morning and fill out your position looks successful to me >> guys, thanks for that quite a morning. bob, michael, henry, thank you very much. let's get to the half. and sully. >> yeah, carl. thank you very much. we're going to pick up this peloton coverage for scott peloton began trading as an open company. the shares right now bouncing down about 8%. the ipo is priced at $29 per share. once again, the high end of its range. lst