Anthony Scaramucci: Don’t Bet Against Elon — And Don’t Ignore The Next Oil Shock

Maggie, it's good to be on. It's good to be back on the Wealthy on Network. How are you, Maggie?

I think it can long term. You know, this company went from a $45 billion total market cap valuation in 2020 to $1.75 billion. Just think about the magnitude of that. So, it's like 48 times. And so, it's a very big move. Some of it is justified. By the way, I think if you look at the Goldman Sachs research report in terms of the revenue growth and the run rate of where SpaceX could be and you think about what they're about to do with the iPhones, Visa versus Starlink, the next generation of iPhones, you could have a situation where there's several billion phones hooked into Starlink. I think most of the airlines will be hooked into Starlink, cruise ships, etc. I use Starlink. I have it at one of my houses. I find the thing to be exceptionally fast and very reliable, particularly if you ever have a weather incident and you have a generator backup, you're good to go on Starlink. I think the big thing for me with SpaceX is Elon Musk. And I will just step back and say this, and Elon Musk probably wouldn't like this, but he's a human meme, Maggie. Okay, I don't think people should be betting against him. I think they've found themselves betting against him and getting destroyed, frankly. So, one, I wouldn't bet against Elon Musk. Number two, I believe in the long-term SpaceX story. Could it chop a little at this valuation? Sure. Did Facebook when it came public, now known as Meta, chop a little? It did. Google chopped a little. Amazon, it's probably the most dramatic story, dropped eight or ten times, at least 50%. But yet, if you owned Amazon over the last 30 years, you became wealthy. I mean, you only had to have a $10,000 investment in Amazon on its IPO to have $20 million today. So, again, I'm a big believer in these companies that have these types of management teams. And I'll just point out if you said to me over the next 10 years, will we need satellite technology, satellite delivery, commercialization of space, will the military and the defense industry be an important component of US economic output and also needs, national security needs? I think all of those answers bode well for SpaceX and for Elon Musk. So, I'm a big believer and again I fully disclose I'm an owner for a long period of time.

And this is what was the precipitation to putting together these Skybridge unicorn return funds because I looked at the landscape and said, 'Okay, wow, there's a lot of private companies because of regulation where they made a decision.' You know, when I was younger, you would have a small company have some revenues and then they would go public and then the retail markets would be able to participate in that. That would include Microsoft when it went public in 1986. It would include Google when it went public in August of 2004. And I can give you many examples, but the regulations got very, very tight, Maggie. And so a lot of companies said, you know what, I'm going to wait until I'm a monolith. Uber waited. SpaceX is waiting. Anthropic is waiting. It's going to be a trillion dollar market cap. Open AI is waiting. And so we tried to create a vehicle a few years back that would give clients access to these near-public offerings, these late-stage companies that have exceeded and succeeded, but they're not yet public. And there is usually a successful arbitrage between the private market capitalization and the public market capitalization. Now again, not always, just want to warn investors everything comes with its inherent risks, but the notion that we could put a portfolio together using our access, our 40 years of experience on Wall Street, and our ties into the venture capital community. Could we cherry-pick a portfolio of great names? And so thus far we've been able to do that. I think you've seen our deck and happy to share our deck with individuals that have an interest, but we've got some great names in there including OpenAI, SpaceX, Anthropic. We have some other nifty companies in there. Epic Games. Maggie, if you have sons, mostly sons, I have some daughters, but mostly sons are playing all the Epic Games programming and Disney just did a big deal with Epic Games about two years ago. We actually have Liquid Death. I don't know if you know that name, but it's a very young hip brand. They make these beer-like looking cans that serve non-alcoholic beverages. Started with water, it's moved into other beverages, but it's a unbelievably fast-growing brand. And so we bought a piece of that as well.

So I mean that's the big question right because there's a tremendous amount of capital expenditure that has to go into AI. You saw these equity offerings. Now I think Google did an $80 billion net equity offering. Meta formerly known as Facebook is about to do a $50 billion equity offering. Why are they doing these offerings? They feel they need this capital to deploy into compute power, into data systems and so forth. And so one has to say wow we're putting a tremendous amount of money into the systems and processes of AI. Are we going to get the return from that? Now, to be cynical, I could be like a swashbuckling real estate developer. How many deals do you know where the real estate developer descends into the area, he builds this beautiful monolithic structure, but he's got too much debt, he ends up going bankrupt, somebody buys it at pennies on the dollar, and ends up becoming the winner. So we always have to be careful about things like that. But for me, I'm in the camp. I wasn't in this camp 30 years ago. I think as an investor, you have to evolve, Maggie, and you have to deal with the world the way it is, not the way you want it to be or not the way you think it should be. And the way the world is right now is that we have these monolithic power structures in the market. We have the Magnificent Seven. We have the big industrial oil companies. We have some great energy companies, utility companies around the country. And when I sit back and I look and I say these guys have the ability to win because they can clear regulatory battles. They've got great lobbyists inside of Washington. Again, whether they should have that or not, it's not for me to say, it's for me to just observe it as an investor. Second thing I would say to you which is also very important when you think about all this stuff is, is Google going to be here 10 years from now? Is some form of Meta going to be here 10 years from now? I think the answer to those questions is yes. And so for me when I look at revenue growth numbers of Anthropic, revenue growth numbers of ChatGPT or OpenAI. I was with one of the board members at OpenAI for brunch this past Sunday and again these are all publicly available information, not saying anything that's private, but if you look at these numbers and you think about all the people, when you survey people and you say are you using AI, are you using AI in your job, is your company using AI, if they brought it into your law firm or they brought it into your consulting firm, the numbers are very low, Maggie. And so for me I think the next 10 years are going to be explosive for this and it's very reminiscent of Web 1.0. And again I'm old enough to remember Web 1.0 and old enough to have been destroyed in Web 1.0 and some of the stupid investments that I've made. But I think if you're with the top companies, the Dell Technologies, the Nvidia, the newer companies like OpenAI, we're not even building into the SpaceX component, the xAI, the Grok technology. I'm really just looking at the satellite technology, the Starlink, the commercialization of space in terms of getting the revenues. If they get Grok right and Grok becomes one of the industry standards, well again, that's another layer of revenues that we didn't fully anticipate. But before you ask me another question, I just want to say three things to investors thinking about this. And I always say to people, listen, you have a portfolio, maybe you have stocks, maybe you have bonds, maybe you have gold in the portfolio. This would be like a smaller pizza slice in the overall portfolio where you would want to have some early-stage things that could potentially become heirlooms for you. In Salt Surf One, we put something called Astera Labs, which is a brand new software system related to AI. It went public at 15. It's now trading at over 300. And again, I'm not saying that happens with everything, but I'm an investor in that. I got my shares. I put those shares in my stock brokerage account and I'm hoping to leave them there until something happens. I believe that company will be taken over by one of the other companies. But I'm just pointing out that this is a great opportunity where you can buy things at low basis. You can get the distribution once the lockup is over. We hand over the securities to you, you can hold them, you can sell them. And so I think you're getting what I would call low entry valuations or at least lower entry valuations than where the IPO is going to happen. That's number one. You have, I think, for us, we've reduced the early-stage risk. So this is not angel round investing. It is even A or B round investing. This is late D or E investing for us. And sometimes I get a call from somebody, they're going through a family transition. Maybe they're going through a divorce. It's an executive at the company. He needs to sell shares for financial planning purposes. We're sitting there with the fund. We're able to snatch those and we usually get those at a reasonable discount to the current pricing valuations. So our team does all the due diligence, all the legal processing. We're doing the triple verification to make sure that the ownership is real. Sometimes we're in an SPV that doesn't charge fees. Other times we're on the balance sheet of the company. We're actually there. You'll see us on the cap table. But excuse me. For me, I just look at this and say this is a lower risk, less daily volatility strategy where people like Skybridge because of our experience and our network, we have a little bit of an information advantage. So we're able to see things before the public sees them primarily because we're trafficking in that space.

Yeah, I think this is a different sort of a fund, but yes, I think that and I think the reason why they structure those things where they're able to reduce redemptions is to slow down the potential liquidity disconnects that can happen. I mean I can tell you March of 2020 when the world came to an end during COVID and we experienced a breach in the mortgage-backed markets, the private equity markets, it was better served for investors to have longer lockups because unfortunately we go against our rational thing to do sometimes in a breach like that is to sit tight and hold on. Our expectations are though with our monies we get very, very nervous and we end up selling at low points. So those systems that are put in place. I can go back way back to 2008. Everyone was very critical of people that either locked people up or they reduced their redemptions but lo and behold by doing that the performance of the fund and everybody was well served. Now, someone could say, well, you know, it's my money. Give me my money whenever you want. Yes, but don't make that investment then in that type of a fund. Right? That's the buyer beware. And that's the buyer beware getting into this. I want to give some buyer beware because I want to be very balanced here. You do have a liquidity. If you come in our fund, it's a three to five year hold. You have to think about it that way. If you, there's limited disclosure because they're private companies. You're not going to get the full transparency of a public company in terms of the S1 registration. I mean, we learned a lot about SpaceX in the S1, frankly, that wasn't available to us in the private markets and some of it wasn't great. I mean, they have some steeper losses due to capex expenditure in the AI systems that they're building at Grok, etc. But then the other thing is you're dependent upon a successful exit. So you're dependent on the management team. Hey, we're going public. We're not going to wildly overprice it so that it crashes in the public markets. We're going to try to be disciplined with it. You know, one thing Musk said, which I had an enormous amount of respect and appreciation for, he said, 'Hey, you know, this is my opportunity to open the door to my investments on this particular piece of my business to retail, and I want to make sure that they're being treated very fairly.' I mean, the guy's on his way to becoming a trillionaire. I don't think he wants to take out widows and orphans by overpricing his IPO. But again, that's just me. Let's see what happens. I always want to be fair and balanced. One of the things I love about Wealthy on and the things that you guys do is you're educating investors. You're trying to provide them with opportunity, but you also want them to understand the risks. So I'm going to give you the assets and liabilities here very quickly. Number one, these are a portal into some of the finest newest technologies and some of the best new companies that are emerging in the United States. But they're coming as they're still private but a little later stage. Why is that valuable to people? Because we've already screened out the ones that have failed on the way out to the public offering. Number two, I think it makes you better as an investor because if you're an investor of ours in these things, you're learning about the new things that are happening. Sure, we can own Exxon, it's a great company, and we can own the Dow 30, all great companies, well-established, but I think owning things that are in this genre are very helpful to us because if you look at the Dow 30, it's a very different Dow 30 than it was 30 years ago. They constantly recirculate. And you need newer companies that are taking advantage of the new economy that's happening out there. So to me, it makes you a better investor. Up against it, you do have the illiquidity issues that you're talking about. You do have some limited disclosure. And you do have a timeline issue. You got to look at this investment and say, 'Okay, I'm giving these guys the money over a 3 to five year period of time. I'm expecting them to return better than the stock market because I'm taking on more risk. I don't have liquidity, well that's a risk in the equation and I think we do a pretty good job of that and you can see it in the first two funds in terms of our returns and the sort of IRR that we've developed so far for our investors.

Such a great question. So let's talk about things like Cisco and Global Crossing. In the first wave of Web 1.0, these were infrastructure plays that were helping to build out the data and what I would call the highway system. Sort of this information superhighway system. Of course, Global Crossing was laying cable, underground cable all over the world to connect the different countries and collect the different data centers. Interestingly enough, some of those cables are actually in the Strait of Hormuz, which is another potential issue for everybody because we want to try to get back to peace there because you certainly don't want those cables damaged in addition to the other things that are going on there. So I would say this about this and I think this is where it's different. Those companies had no portal into the retail or hoipolloi consumer. So that was sort of a B2B thing. I'm buying the cable to hook up these two computers. Cisco, I've got the data switches that I'm going to use to interface with the two consumers, but individuals weren't calling up Cisco and saying, I want to buy this. What's different here is Google has a market of 8 billion people. It has an 8 billion person addressable market. What's different here is that you should push back on me right now and say there's only about three and a half billion people that have access to the internet of the 8 billion people. But I'm telling you over the next five years that number is going to go up a lot because of Starlink. Starlink, the threads are coming together. So we're sitting here where there's going to be another one to two billion people coming in. Whether it's Google's Gemini, it's Copilot from Microsoft, you pick the AI mechanism. I have two or three of them that I subscribe to, but I think the individual, particularly the white collar individual, maybe even the blue collar individuals, will be subscribers to these things. And so that's where I think it's different. This is B2C. Business to the consumer.

Yes.

Yeah, really good question. So I think it is. I think you're seeing a great sucking sound out of crypto. I think you're seeing a sucking sound out of other capex in the country. I think that there's a wheel of capital and there's only so much inside that wheel that can go around and so people are like hey this is the hot dot right now. So let's just push this as aggressively as we possibly can at the detriment of other things. And that does happen in market cycles and that does cause levels of mania and there may be pockets now, Maggie, of underinvestment in other areas of the country as a result of this. So, yeah, I think that's a legitimate issue.