The recent merger between the PGA Tour and LIV golf may be just the latest example of corporate consolidation. David Mazza, Roundhill Investments Chief Strategy Officer discusses how this partnerships is indicative of similar trends throughout the larger economy.
Video Transcript
- A big merger rocked the golf world yesterday, after Saudi-backed LIV Golf and the PGA Tour announced their newly formed identity to unify golf, sending shares of stocks like Topgolf Callaway Brands higher, and ultimately, reducing competition in the world of professional golf. But what does this mean for investors, and how they view market competition? So back with us is David Mazza, who is the Roundhill Investments Chief Strategy Officer here.
And some of the crux of this was applying this type of merger, and essentially now, golf monopoly. If you're looking across some of the different leagues, and how they've come together-- where there once was competition, there is no more. So that, good for, I guess, everybody around the sport in some fashion or another. There are a lot of questions that still linger around it, but, how do we apply that to what already exists in the business world, too-- where, when there is less competition, and that competition falls out-- how does that benefit some of the other players that investors might look at?
DAVID MAZZA: Yeah, no, I think this is interesting, yeah. We could probably spend-- and I'm sure there will be networks spending hours and days talking about this merger. Because there's a lot of juice behind it, right, and I'm sure we'll be hearing more about it. But to apply it to markets-- and I know you all were speaking about that today in the newsletter-- it goes back to the thesis that I've been thinking about that I mentioned a moment ago-- this haves and have nots-- is that we are seeing, either through mergers or just general monopolies, that there is a smaller and smaller handful of companies that are gobbling up everything.
We know that there used to be significantly more publicly traded companies to begin with. The number of companies has gone down by thousands over recent decades. Many of those probably were smaller unprofitable companies that people shouldn't have been touching anyway, but that was the way for companies to raise capital. Now, you go to venture capital, private equity. You don't necessarily have to go to the public markets. And when we see a company-- whether it's Alphabet, Apple, Microsoft, and we can name a handful more-- they touch so many different areas.
And we forget, sometimes, they think that these companies own other companies. They used to be standalones, and now they're owned by someone else. And there's benefits to that. So, you can have synergies with that service model, and again, to me, that's one of the reasons why-- and it's always challenging to say, this time is different, but there has been some structural change that has occurred.
So, if we compare this environment to the tech bubble or other periods, what's different now is that the largest companies are extremely profitable. They have extremely high revenues, and, they're growing those revenues often from smaller portions of companies-- sorry, smaller investments that they own, whether it's Alphabet and YouTube. That's a prime example. And you could go on-- Metaverse and Instagram. We could go through a laundry list of these, but there's some truth to all of this that these single companies have all of these different platforms. And the same is happening, actually, in markets like China too, which is interesting.
- Well, and the other interesting part is, whereas in past eras, even though this administration is seen as being fairly active on the antitrust front, when you're talking about these largest companies, there's more rhetoric than action. In other words, there don't seem to be real, concrete regulatory threats to the absolute domination of those companies, right?
DAVID MAZZA: Yeah, no, I think there's a lot of chatter. I think there was expectations heading into this administration that there would be some break up fears, or other things of that nature. I think there's been a crypto crackdown, as we know.
- And they've been challenging pending deals, right?
DAVID MAZZA: Right, exactly.
- But not things that have necessarily already happened.
DAVID MAZZA: Yeah. And so, when these mergers happened 10 years ago, five years ago, now we're actually just beginning to see how they're playing out. And so, it is difficult to go in and start saying, we're going to break companies up. What I think is interesting, that not a ton of attention is being paid on, is just how different the regulatory environment is with the US and with Europe, especially around things like social media. And now, generative AI.
And that's one of the reasons why we're seeing companies voluntarily put their CEOs and other C-suite executives in front of Congress and say, regulate us, please. Because you'd prefer to be regulated on your home turf than you would necessarily in Europe, where you have less influence and control.
- Yeah. Or, as we saw, GP, GPDR, GDPR--
- GDPR.
- Thank you. And how that started in Europe, and then came here. So, they got a little practice before they had to enact it all here in the US.
Dave, great to see you. Thanks for coming to visit us. David Mazza, Roundhill Investments Chief Strategy Officer. Appreciate your time this morning.
