#1453 David Steinberg | How Short Sellers Attack Public Companies

David Steinberg is the founder, chairman, & CEO of Zeta Global. In this conversation, we talk about the brand new ever evolving financial market where short sellers are going after companies and the companies are fighting back, why David continues to buyback stock, narratives, truth, execution, structure of the business, and what is next for Zeta Global. ======================= The Pomp Podcast is powered by BetOnline.ag, the premier crypto-friendly place to gamble on politics and sports, casino, poker and horse racing. BetOnline.ag gives you the ability to use Bitcoin and more than a dozen altcoins to make deposits and withdraw your winnings. There are no crypto transaction fees, and processing is instantaneous and secure. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://promotions.betonline.ag/pomp⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and use PROMO CODE: POMP100 to receive a 100% matching bonus on any crypto deposit. BetOnline.ag is available in nearly every country around the world, making it the top global gaming destination for crypto users. ======================= Pomp writes a daily letter to over 265,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/ ======================= View 10k+ open startup jobs: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://dreamstartupjob.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Enroll in my Crypto Academy: https://www.thecryptoacademy.io/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. What's going on guys? Today I've got a very special episode. It is with David Steinberg, the founder, chairman, and CEO of Zeta Global. In this conversation, we talk about a brand-new, ever-evolving financial markets where short sellers are going after companies and the companies are fighting back. In this new world,

• 0:46Anthony Pompliano?

  these financial battlefields are all about who has the narrative, who is allowed to bend the rules to their advantage, and then who is able to actually come out and use truth and execution to push back and say, "No, we are doing exactly what we said we were going to do." This conversation is fascinating because the public company CEO, who recently had a short report come after him, he personally lost over $1 billion during this short report. But now he is proving that by executing, a company can simply ignore the noise and come back. Anytime that you get somebody who's in the heat of the moment and comes in and understands what's going on and is able to explain it to us, I guarantee that there's something here for you to learn. So here's my conversation with David Steinberg.

• 1:26Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 1:51Anthony Pompliano?

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• 2:35Anthony Pompliano?

  All right, David, I thought a great place to start this conversation is, I feel like financial markets have turned into these battles between buyers and sellers, companies and short sellers, et cetera. It's not a news story necessarily, because we have seen this over time, but now with the internet, information travels much faster, there's the ability to do research, there's the ability to fight back, et cetera. You seem to be in one of these showdowns right now. Let's walk through, maybe, let's start with the company. You guys just produced the best quarter, I think, in company history.

• 3:06Speaker 02

  By far.

• 3:07Anthony Pompliano?

  Massive growth.

• 3:08Speaker 02

  Yes.

• 3:09Anthony Pompliano?

  But the stock is down.

• 3:10Speaker 02

  Yes.

• 3:11Anthony Pompliano?

  And there's a short seller who's coming after you. So like, let's just get into, what does the company do? And talk about the performance before we get into what this short seller's saying.

• 3:17Speaker 02

  I mean, Anthony, talk about going deep early. I mean, we're not even getting gentle here. What, listen, we are an artificial intelligence platform that helps very large enterprises to better manage their marketing. So we use AI and data to help very large enterprises create, maintain and monetize customers at a substantially lower price by using our software and our data than they can without it. The business has grown greater than 20% organically now for four years in a row. This past quarter, the third quarter of this year, we put up 42% organic growth, 49% EBITDA growth, and 92% free cash flow growth.

• 4:02Speaker 02

  Our stock was trading at 37 at the time, it traded to 44 in the aftermarket, and then a group of shorts jumped all over our stock. A report published within the next 48 hours that...

• 4:16Speaker 02

  Quite frankly, accused us of some bad practices and data and financial reporting. Unfortunately, as a public company, we exist in a world where anybody can say anything about anybody at any time and post it on the internet. What we did was we fought back because to your point, you're in a battle here and we filed an 8K with the Securities and Exchange Commission, which is a much higher barrier of truth than just posting a report online or posting a comment on a social media platform. And we went point by point, going through how everything they had done was false.

• 4:56Speaker 02

  Then this week, we did a three-hour Investor Data Summit, talking about all of our data uses, our data sources, our data policies, just systematically going point by point by point and showing that this short report is completely fraudulent.

• 5:18Anthony Pompliano?

  So what are the shorts doing? Like when you've got them coming after you, I think you get a sense of what they're doing rather than thinking about it theoretically.

• 5:25Speaker 02

  Yeah.

• 5:26Anthony Pompliano?

  Is they go, they do, quote unquote, I'll put in research, maybe it's real research, maybe it's not.

• 5:30Speaker 02

  Well, the research shops are, there's been a few of them. The average have one employee. The employees have no real track record. They've never been investors. They're generally very, very young and usually they are more of a shill to the firms that are trying to short you.

• 5:50Anthony Pompliano?

  Got it. And so when they put out these reports, my understanding is that a short seller can put a short on, they can release the report, and then at any point, they can sell regardless of whether the report ends up actually being accurate or not.

• 6:05Speaker 02

  Totally. Yes. And they can make tens of millions of dollars doing it. But it's, it's, listen, shorting a stock is not in and of itself a bad thing. In many cases, it's a good thing. It keeps companies healthy. It keeps companies focused. But when research...

• 6:26Speaker 02

  Is reported that has total lies in it and makes things up and they're short before they do it. I don't even see how that's allowed, but it's to me, it's not right.

• 6:42Anthony Pompliano?

  If there was a hedge fund that was not affiliated with your company, but they went and they put a long on and then they went out and said a bunch of things to make people think the company was seen in a good light and then they sold. Is that legal?

• 6:55Speaker 02

  No.

• 6:55Anthony Pompliano?

  No. So you can't do it to the long side, but you can do it to the short side.

• 6:58Speaker 02

  I guess. I mean, they could probably put out a report that had only, you know, publicly available information. In this case, this report accused our company of doing many things that were not publicly.

• 7:10Anthony Pompliano?

  What was like the most egregious thing that they accused you of?

• 7:13Speaker 02

  They said that we were running a signup farm for our data cloud that was immoral and illegal, neither of which are true.

• 7:22Anthony Pompliano?

  So I'm going to do my best to describe what you guys do as a business, but you know, I'm like the idiot in the room because you're actually the expert. But basically, I think that the number that I saw publicly was 2.4 billion profiles of people. And what you do is you're trying to understand who they are, what their preferences are, all this stuff, and then help companies better communicate with these people based on a whole bunch of factors. And one of-

• 7:45Speaker 02

  By the way, you did that shockingly well.

• 7:47Anthony Pompliano?

  Well, if you have a small brain, it's real easy to describe things simply.

• 7:50Speaker 02

  There's a little more intricacy to it, yet globally, we have-

• 7:53Anthony Pompliano?

  That's the but.

• 7:55Speaker 02

  But there are 2.4 billion profiles in the United States. 245 million people have opted in to be in our data cloud. Now, what they were accusing us of is getting people to sign up without a value proposition on the other side. And in a hundred percent of the cases, if people opt into our data cloud, they're getting a value exchange. They're able to get a newsletter or they're able to use a technological product that we built or a company we've bought that provides them with the service.

• 8:23Anthony Pompliano?

  And this is no different than lots of companies. I'll give you maybe some-

• 8:27Speaker 02

  No, it's just like Meta. It's just like Google. I mean-

• 8:30Anthony Pompliano?

  Well, not even the big tech companies. If people have, let's say you're, you have a software company that no one's ever heard of before and you want to- Go and do customer kind of prospecting. People will create a white paper. They'll put it up on a website. There'll be some sort of registration and say, hey, if you give me your information and kind of raise your hand and say, I'm interested in the service, we'll give you the white paper. Now that company has your information, you've opted in, they can communicate.

• 8:52Speaker 02

  That would be, that would be a small example, right?

• 8:55Anthony Pompliano?

  What's a big example?

• 8:56Speaker 02

  Meta, right? So if you want to use Meta, Facebook or Instagram, you have to agree to their data terms and conditions. They then use that data, feed it into algorithms to target marketing to you. We effectively democratize the open web. 6.2 million websites use our platform today. So we're able to target people on behalf of our enterprise clients for both customer acquisition and customer retention. But if anybody ever wants to opt out of our data cloud, they can at any time. We're completely compliant with that. But the accusation was that we were running farms of signing up people where they got no value. In fact, they accused us of lying about the value, saying that job boards that we manage didn't have real jobs behind them.

• 9:48Speaker 02

  We put out a report showing that not only did we create hundreds of thousands of job applications on behalf of customers, we created tens of thousands of actual jobs. So these are real world examples of how there is a value exchange between the consumer and some product or service that they're receiving in exchange.

• 10:11Anthony Pompliano?

  So let's talk about what some of the things that you guys have booked. It's a very fascinating model, right? And I think there's a lot of people who say, hey, I didn't even know a business like this existed because you're really selling to other businesses.

• 10:22Speaker 02

  Yeah, we're pure B2B.

• 10:23Anthony Pompliano?

  So job boards, that's an interesting thing where basically if I'm looking for a job, I come in, I submit an application, there's some sort of registration. What are some other examples of things?

• 10:32Speaker 02

  We publish millions of newsletters, everything from a joke of the day to a business update. We own Discuss, DISQUS, which is the world's largest commenting platform. So millions and millions of people use that platform to make a comment on an article or share an article to their social graph.

• 10:54Speaker 02

  Have friends or family like stuff. All of that flows through the Zeta Data Cloud. But the other really interesting thing that's differentiated between us and others, we're just using that data to build algorithms on how to target people from a marketing perspective. We're not turning around, taking that data and selling it to 16 different partners who then call them and email them. We do none of that. Our platform is solely built to use the data to build an intent-based score on, do you intend to get a new credit card? Are you going to buy a new car? If so, what type and where? Are you going to churn off of a wireless platform?

• 11:37Speaker 02

  And can we build a curriculum of contact to save you? In fact, we would argue that the utilization of our data helps the consumer because we're able to help them get to products and services that they really want versus products and services that they do not want. So this was at the heart of the initial sort of report. The other accusation they made was this year, our market cap went over the point where we had to increase the type of audit we do. So we had been getting a regular audit from Deloitte and Touche. I will point out the report that published on us said that we used EY, which we- So they got the auditor wrong? Yeah, I mean, I can see how you get the auditor wrong.

• 12:22Speaker 02

  We only announce it in every single public filing we would ever do. But yeah, they got it totally- How do you really feel? Right. This is a fact, not opinion. But the truth of the matter is that we moved to what's called a PCAOB audit, which is just a much higher level of audit. In that audit type, our audit firm has to specifically point out the things they spend the most time on. So they put a note into our audit that they looked at transactions where our clients can also be a potential vendor.

• 13:00Anthony Pompliano?

  I want to point out that after they looked at all of this, they published our audit with zero material weaknesses. So our audit was totally clean. But for those that don't know kind of how audits work, basically, they could do a bunch of digging and look at a bunch of stuff and they basically say, hey, the numbers you're saying, they're correct or they're not correct.

• 13:17Speaker 02

  Yes.

• 13:17Anthony Pompliano?

  And then they say, hey, here's like areas of concern, which the material weakness is right.

• 13:22Speaker 02

  Right. But this was not an area of concern. We had no areas of concern. This was an area that they specifically said, we just spent extra time on it because it's complicated and it's good. The report said, because they mentioned it, we were doing that. Now, it is interesting. We do have some vendors who are also clients. One is the world's largest e-commerce platform. They spend millions of dollars marketing with us and we use their web hosting service. One is the world's

• 13:57Anthony Pompliano?

  I guess.

• 13:58Speaker 02

  Yeah, figure that one out. You know, it's three initials on the web hosting service. You know, the other is the world's fastest shipping company in the United States. They spend millions of dollars advertising through our job boards for drivers and, you know, using our platform. And we use them to ship packages. You know, these are just sort of nonsensical issues. It's also really interesting. If we were doing this, what's called round tripping, meaning we pay you, you pay us, it went on sort of.

• 14:34Anthony Pompliano?

  And just so people know, there are a number of companies over the years that, especially in like the dot com bubble.

• 14:40Speaker 02

  Oh, I was just gonna say that.

• 14:42Anthony Pompliano?

  They were basically investing in companies and they're like, hey, we're building out our ecosystem, but then those people are giving them the revenue right back.

• 14:48Speaker 02

  Correct.

• 14:48Anthony Pompliano?

  Nvidia, there's been people who are critics of Nvidia who are claiming this stuff. So like, it's not a specific to your industry or.

• 14:55Speaker 02

  No, this is something that companies get accused of, but it's why our auditors spend so much time on it and why they said it was clean. But. You know, it's very interesting. I do want to point out again, we grew free cash flow by 92% last quarter.

• 15:13Anthony Pompliano?

  Is that good?

• 15:14Speaker 02

  Well, if you're paying someone and they're paying you back, there's no cash flow. Like, it just doesn't exist, right? So the other thing that's very interesting is 40% of the Fortune 100 largest companies in the world use the Zeta marketing platform. Those guys are not going to do bratwurst deals with Zeta. It's just not, it was a silly and nonsensical thing.

• 15:38Anthony Pompliano?

  But it sounds scary.

• 15:39Speaker 02

  It does, correct.

• 15:41Anthony Pompliano?

  Especially in a world where, again, going back to this kind of battle in financial markets, I think one of the parts that I'm actively trying to wrap my head around, I think a lot of people are, is the more that the market moves from institutional investors to a bigger percentage of retail.

• 15:57Speaker 02

  Yep.

• 15:57Anthony Pompliano?

  It now almost becomes, it doesn't matter what's true, it matters what the narrative is.

• 16:02Speaker 02

  And what's the momentum?

• 16:03Anthony Pompliano?

  Yeah, and you see, you know, there's plenty of stocks that people would yell and scream all day long and be like, that company's overvalued, but retail, it's the sweetheart of retail.

• 16:10Speaker 02

  Yeah.

• 16:11Anthony Pompliano?

  And so you get it working in one direction. But also, if you can do this on the short side, where you can basically come out with, you know, scary sounding things, you're almost incentivized as a short seller to pick things that they don't understand versus things they do understand.

• 16:25Speaker 02

  Correct. And we have a very-

• 16:26Anthony Pompliano?

  That's kind of weird.

• 16:26Speaker 02

  We have a complex B2B, you know, software business. It's funny because, you know, ultimately, to win the battle on our side, you just have to execute. As long as we continue to do well as a business, we'll win in the end. We've been public now for 13 quarters. And for 13 quarters in a row, we have beat our guidance and raised our guidance for the next quarter and the calendar year we're in. This morning, we reaffirmed our guidance for the fourth quarter of this year, which will be our 14th consecutive quarter. But it's, it's-

• 17:07Speaker 02

  The shorts are able to create noise inside of a window. But what happens is a lot of companies stop focusing on executing and do nothing but focus on the attack. So, but what happens in that case, I'm sorry, just to finish, then they miss their numbers and then it becomes a self fulfilling prophecy.

• 17:28Anthony Pompliano?

  Of course. One of the things I've always thought would be interesting is if short sellers, fine, you're allowed to put out reports and short and do all these things, but you have to commit when you publish the report to a certain holding period.

• 17:41Speaker 02

  Oh, yeah.

• 17:42Anthony Pompliano?

  And so if you said seven days versus 12 months, that would really signal like your confidence level.

• 17:49Speaker 02

  And most of these shorts cover within 24 to 48 hours.

• 17:52Anthony Pompliano?

  Yeah, so if you put out a report and you say, hey, we are allowed to cover within 24 hours.

• 17:56Speaker 02

  They don't even say when they can cover.

• 17:58Anthony Pompliano?

  No, no, that's what I'm saying. But if there, if part of shorting was, hey, you're still allowed to short.

• 18:01Speaker 02

  Yep.

• 18:01Anthony Pompliano?

  Right, because it is healthy old stuff.

• 18:02Speaker 02

  Yep.

• 18:03Anthony Pompliano?

  But you have to tell us a minimum number of days, weeks, months, whatever, that you're going to hold the stock and you are not allowed to sell before that. Obviously, if you come out and you're like, hey, we're short, we think this company's horrible, but we're only going to hold for 24 hours.

• 18:16Speaker 02

  Right.

• 18:16Anthony Pompliano?

  People I think would read that very differently than like, we're going to hold for 12 months, you know, or short because we think that this company is, you know, not what it is claiming to be.

• 18:23Speaker 02

  Yeah, and by the way, what happens is the guys who architect all this cover their shorts quickly and they leave a lot of retail consumers holding the bag. Because what happens is, let's say we beat this quarter, raise guidance, beat next quarter, raise guidance, our stock will be right back where it was and all of the guys who didn't cover will lose a fortune to offset against the guys who, who did. So, you know, once again, I, I don't want to sound like I'm rallying against shorts. I, I don't think it's an unhealthy component of the markets.

• 19:02Speaker 02

  What I personally don't like, forget about whether it's our company or other companies, are these reports that make this stuff up. The guys disappear, they cover their shorts, they leave a bunch of retail consumers holding the bag. And, you know, quite frankly, we have an incredible business. I'll remind you, this is our fourth year in a row of organically growing greater than 20%. Our operating margins are 20% at this point. We're generating meaningful free cash flow.

• 19:37Anthony Pompliano?

  We did a lot of cash.

• 19:39Speaker 02

  Oh, yeah, we have.

• 19:39Anthony Pompliano?

  So I went and I looked at the numbers before we came in here, that cash, right?

• 19:43Speaker 02

  We have, we have a lot of cash.

• 19:44Anthony Pompliano?

  Yeah. And you are based on projections, plus what you've already done, et cetera, probably gonna do, you know, maybe nine figures of free cash flow, right? Or maybe eight figures, whatever, right?

• 19:55Speaker 02

  No, no, nine, I think nine figures of free cash flow over the next 12 months. And

• 19:59Anthony Pompliano?

  Okay.

• 19:59Speaker 02

  You know, it's, it's

• 20:01Anthony Pompliano?

  That's not a small business.

• 20:02Speaker 02

  No, I mean, we're not, we're not a small company. We'll do, at the middle of our range this year, we'll do almost a billion dollars. And

• 20:09Anthony Pompliano?

  In revenue.

• 20:10Speaker 02

  In revenue. Next year, we've already said we're comfortable with a minimum 20% growth rate.

• 20:16Anthony Pompliano?

  Okay, so short report comes out, right? And I think you said the stock was at like 37, 38.

• 20:21Speaker 02

  37.

• 20:22Anthony Pompliano?

  37, trades up to 44 in the aftermarket.

• 20:25Speaker 02

  Yep.

• 20:25Anthony Pompliano?

  Short sellers come in and I'm guessing, but I don't want to assume, short sellers don't write these reports in five minutes.

• 20:33Speaker 02

  No, they've been working on it for a while.

• 20:35Anthony Pompliano?

  Okay, so but they know your earnings are coming out. And so there's probably some lining up around that time, et cetera. They come out, stock falls.

• 20:42Speaker 02

  Yeah.

• 20:43Anthony Pompliano?

  How far does it fall?

• 20:44Speaker 02

  It went to 17.

• 20:45Anthony Pompliano?

  From 44 to 17?

• 20:46Speaker 02

  Well, the aftermarket 44, but yeah, from 37 to 17.

• 20:50Anthony Pompliano?

  37 to 17. That's a pretty good short.

• 20:52Speaker 02

  Well, they made real money. I give them credit.

• 20:55Anthony Pompliano?

  Okay, now it's traded back up.

• 20:57Speaker 02

  It's getting there.

• 20:58Anthony Pompliano?

  Right? Well, not from 17, we're back up some.

• 21:03Anthony Pompliano?

  But you guys did something that I thought was very interesting. I remember a story of Brad Jacobs. Brad Jacobs is, you know, a pretty good entrepreneur, has rolled a bunch of industries, et cetera. And he's told a story publicly where he was about to acquire a company and short report came out. Stock dropped significantly and he says, we're not acquiring that company anymore. We're going to take the cash on our balance sheet. We're going to go and buy back our stock. And if we're so, you know, if you guys say we're so stupid, thank you so much for the gift.

• 21:32Speaker 02

  Yep.

• 21:32Anthony Pompliano?

  We're going to go buy this. You announced, if I remember the number correctly, a hundred million dollar stock buyback.

• 21:36Speaker 02

  Yep.

• 21:37Anthony Pompliano?

  And the idea just being.

• 21:40Speaker 02

  Well, if he loved it at 37, at 17 is pretty cheap. I call it two for one.

• 21:44Anthony Pompliano?

  Okay.

• 21:44Speaker 02

  It's like buy one share, get one share free. So not only did we announce a hundred million dollar corporate buyback, but myself and my management team have personally bought millions of dollars worth of the stock in the open market. We see this as a very unique opportunity. Now, we own a large percentage of the company already, which, which means we're already very much in tune with shareholders and this puts us even more in tune. So, you know, we will continue to use our cash to buy back shares. And by the way, if, if we go through the hundred million and the stock still stays low, we'll do more.

• 22:28Speaker 02

  It's, uh, we, we feel like buying our stock back at these rates is the best possible use of capital. And by the way, if you want to see, does a management team believe in its business? Meaning if I'm round tripping and I'm making the data up, why would I invest millions of dollars of my own money with my management team? And why would I use a hundred million dollars of cash on my balance sheet to buy the stock back? I'd have to be insane, which I am not.

• 22:59Speaker 02

  And. Well, my kids might think I am, but, uh, you know, other than that.

• 23:02Anthony Pompliano?

  Once the short report comes out and you guys kind of fight back with the hundred million dollar corporate buyback.

• 23:07Speaker 02

  Well, we started with the truth.

• 23:09Anthony Pompliano?

  Well, yeah, it just all, it's all like you, you, here's our rebuttal. Here's our stock buyback, all the stuff. Do they go away? Are they still talking?

• 23:17Speaker 02

  Well, here's a great example. The stock started to recover and then there was an announcement that Omnicom was buying IPG and then the shorts started making up a rumor that that was horrible for us. It just so happens that Omnicom and IPG are both clients of Zaytay. So the merger of those two companies will be a net positive to our company and we believe it's very good for the industry. We're big fans of what, you know, John and Philippe are building in their firms and very big fans of those two companies being together. So it's just so the stock sells off based on that, not quite as much as it did the first time, but it's just the noise that they create.

• 24:01Anthony Pompliano?

  It just becomes a whole thing.

• 24:01Speaker 02

  Yeah, it's crazy.

• 24:02Anthony Pompliano?

  Once you're in the short hair or the crosshairs of the short sellers, what can you do?

• 24:08Speaker 02

  Execute.

• 24:08Anthony Pompliano?

  To get out?

• 24:09Speaker 02

  Execute. You just have to, you know, continue to beat your guidance, raise your guidance and generate meaningful free cash flow because the answer-

• 24:17Anthony Pompliano?

  Oh, like build a real company?

• 24:18Speaker 02

  Yeah, right. You know, it's funny because, you know, you look at it and I forget the exact number, but the vast majority of the companies that have been hit by the research firm that hit us, and I mean, like, I think over 80%, their stock is back where it was within six months. So like, they're literally driving down the stock price, shorting it, making noise in that period. But when they hit high-quality companies like our company, they're just, in the end, the stock's gonna go up. The problem is, they're gonna have already made their money.

• 24:59Anthony Pompliano?

  Yeah.

• 25:00Speaker 02

  And they're gonna leave retail investors holding the ball, the ones who stay short. The guys who stay long, they'll win because- Many of our great, long-only institutional shareholders have

• 25:14Anthony Pompliano?

  Just average, yeah.

• 25:15Speaker 02

  Yeah, they've just looked at it as a buying opportunity. It's like, I forget the exact quote, but effectively as Warren Buffett has said, right? You know, when others are scared, be greedy. And we've seen some of our large institutional clients really build their positions over the last few weeks.

• 25:32Anthony Pompliano?

  Now, as this plays out, the company lost billions of dollars of market cap when it happened.

• 25:40Speaker 02

  Yeah, yeah, very rapid.

• 25:41Anthony Pompliano?

  I don't know exactly how much of the company you own, but you own a lot.

• 25:44Speaker 02

  Yes, I do.

• 25:45Anthony Pompliano?

  On paper, you lost a lot of money.

• 25:47Speaker 02

  I did.

• 25:47Anthony Pompliano?

  During this, what's your reaction? Are you mad? Are you sad? Do you cry? Do you call up the short seller and say, fuck you? Like, what's the reaction?

• 25:56Speaker 02

  You know, you wouldn't mind the last one.

• 25:57Anthony Pompliano?

  Maybe all of them.

• 25:59Speaker 02

  No, I didn't. Listen, here's the thing. I never thought I would make as much money as I currently have. And I never thought I would make or lose as much money as I make and lose on a regular basis. This will sound a little crazy. I try not to look at the stock. Because when it goes up, I'm not that happy. And when it goes down, it really fucking pisses me off. So like, I feel like if I can focus on running a great company, the stock price will take care of itself. I got, I got an incredible call the day that this started going on.

• 26:39Speaker 02

  A very old, very dear friend of mine named Michael Milken, who of course is a financial genius legend, called me. And he, I picked up the phone, so, you know, please hold for a minute. I said, Mike, picked up, he said, hello, David? Hi, Michael, how are you? He said, how you doing? I said, well, Mike, I'm doing shitty today. How are you? And he, of course, started laughing. He said, David, I have three questions for you. Okay, Mike, what are they? He said, how much money do you have in the bank? I said, well, as of the end of last quarter, $418 million in cash. Okay. Do you generate meaningful free cash flow? Yes, Mike, we will generate over $100 million in free cash flow over the next, you know, 12, 13 months.

• 27:26Speaker 02

  How much debt do you have? Well, we have 200 million drawn, but we have an incremental $350 million available on our line of credit today. He's like, so you have 800 million approximately in liquid assets and debt available today? Like, yes. He said, then go back to work because none of this matters. This will all just be noise. Now, if you need to raise money or you're over levered, it could be a problem. But as it relates to the number of shares I have multiplied by the price that it went down, yeah, lost, lost a lot of money on paper, but.

• 28:01Anthony Pompliano?

  Did you look to know what the number is?

• 28:03Speaker 02

  Yeah, I mean, you know.

• 28:04Anthony Pompliano?

  What's the number? Come on.

• 28:05Speaker 02

  No, it's, it's, you know, close.

• 28:08Anthony Pompliano?

  It was over a billion?

• 28:09Speaker 02

  Yeah, yeah.

• 28:10Anthony Pompliano?

  Over 2 billion?

• 28:11Speaker 02

  No, no. I think at the low point, I probably lost a billion.

• 28:14Anthony Pompliano?

  A billion. You know, T. Boone's Pickens, doesn't he say the first billion is the hardest?

• 28:19Speaker 02

  He's not around anymore.

• 28:20Anthony Pompliano?

  Yeah, but the quote lives forever.

• 28:22Speaker 02

  You know, one of the, one of the great weekends of my life was spent at T. Boone's Ranch.

• 28:27Anthony Pompliano?

  No way.

• 28:27Speaker 02

  With him and his then wife years ago, but.

• 28:30Anthony Pompliano?

  Yeah, what did you guys do?

• 28:31Speaker 02

  So it was, it was around a, he was doing a health thing and, you know, they were, it was, we were talking about neural networks and brains and, you know, I'm sort of an AI guy, so I got invited to that a number of years ago. But yeah, I mean, listen, I still have plenty left. And, you know, my.

• 28:50Anthony Pompliano?

  Come on, come on, you lost a billion dollars in a single day.

• 28:52Speaker 02

  I think it was, I think it was two or three days, but.

• 28:56Anthony Pompliano?

  But it's paper, so you don't have, it's not like, you know, money leaves your bank account, but still there, that's a unique experience, a lot that no one, you know, will really go through other than somebody who's got a billion.

• 29:06Speaker 02

  Well, that's right. Good news is we had more than one, so that, that was a good thing, but.

• 29:10Anthony Pompliano?

  So like, when that happens, obviously you can't not look at the stock price because somebody on your team is like, hey, there's a short report.

• 29:18Speaker 02

  Yeah, let's be clear, it would have been irresponsible of me not to know what the stock was, but, and I, I say this in all transparency, I really didn't care about that. What I really cared about were the 2,000 employees that work for our company that go home every night and feed their families and shelter their families. They collectively lost a lot. And to them, it's really, really meaningful. And I worried about our employees and could we keep them together? Because of some of the accusations, I was worried about our customers.

• 30:00Speaker 02

  You know, if we're committing, you know, data fraud or whatever it is they accused us of, we were very nervous about losing customers. Now, we're three weeks later. This morning, when we did our investor data summit, I publicly announced that we have not lost one customer over this. In fact, our largest global client, since the publishing of this report, has now renewed for another three years with us. And we won an RFP with a Fortune 100 company that we were awarded all after the publishing of this report. In addition to that, we did dozens and dozens of calls.

• 30:44Speaker 02

  Because to me, the big question is not about the shorts and them attacking me. That's short-term news. What really matters is can we continue to run an exceptional company? And, you know, what we did was we built a plan that we now call our Emerge Stronger Plan. How do we use this crisis, right? As Winston Churchill said, "Never waste a crisis. It's the single biggest opportunity to implement change." So, we built a five-pillar plan, and number one is build a deeper and more meaningful relationship with our customers. So, we've spoken to dozens of our customers. Remember, these are Fortune 500 companies.

• 31:29Speaker 02

  And the calls have taken a very similar pattern. They start with, "What's going on here?" They're very inquisitive. By the middle of the call, they move to empathy. "God, I'm really sorry you guys are dealing with this." By the end of the call, I would tell you, Anthony, the vast majority of calls have ended with, "What more can we do together?" And out of those calls, this quarter, we've received 20 increases in business from existing clients for this quarter. 20 upsells from clients, literally, in the last three weeks. So, when you build a great company, and people say to me all the time, "How are you growing

• 32:14Speaker 02

  42%? How are you doing all these things?" Well, you build a superior product that you can sell at a lower price than your competitors. I know it sounds stupid, but you do. You also want to have a good relationship with your customers. Right? So for us, that relationship is now translating into incremental business. Because they're saying to us, we want to show support for you while you're under this attack. And once again, we are at the forefront of the artificial intelligence movement. Right now, there's a lot of noise around it, but there's not a lot of companies that are able to deliver

• 32:56Speaker 02

  real world AI products that deliver on the power of AI. Right? What does AI really do for business? It helps you run it more efficiently, meaning lower costs, and it helps you scale faster. Our platform, the XA marketing platform, is purpose built to do both. We help enterprises massively lower their cost to market while accelerating revenue growth.

• 33:25Anthony Pompliano?

  And what are like the technologies that you're using to do this? Are you just using the off the shelf models and you guys are custom customizing it? Or how does this work?

• 33:33Speaker 02

  So first of all, we have our own small and midsize language models that we've developed internally. It's funny, you'll laugh about this, Anthony. We went public in June of 2021.

• 33:45Anthony Pompliano?

  Good, good and bad time?

• 33:46Speaker 02

  Bad time, but it doesn't matter. Bottom line, we went public on the New York Stock Exchange. And just like everybody else, you put your banner on the side of the New York Stock Exchange. Right? Our banner in June of 2021 said, data plus AI equals intent. And Anthony, I'm telling you, I had people all day saying, who's Al? And why is he in charge of your data?

• 34:11Anthony Pompliano?

  Yep.

• 34:12Speaker 02

  Nobody had any idea what we were talking about. Our competitors are dealing with 10 to 15 year old technology. And they're rolling out AI and AI agents over the last seven, eight months.

• 34:26Speaker 02

  We've been programming and put AI as native to our application layer, meaning it's at the center of our software, starting seven years ago. We're already on the third version of our AI agent studios. Like, we're lapping these guys. But the reality is, that's why we're growing 42%. It's not, you just don't wake up in the morning and grow by those rates at scale. We're going to grow faster this year than we did last year. Because really what happened, it's interesting, is when OpenAI came out, who's also a partner, we use a number of the large language models, because it's cheaper to use them and do it in an enterprise way,

• 35:11Speaker 02

  where you have no data exhaust, meaning we can keep our clients' data private. We build our own small and midsize language models. But when OpenAI came out, we're going to look back 10 years from now, and that

• 35:25Anthony Pompliano?

  That was the starting line.

• 35:26Speaker 02

  The Renaissance moment.

• 35:28Anthony Pompliano?

  Yeah.

• 35:28Speaker 02

  The starting line. And it's when data went, I'm sorry, when AI went from science fiction to boardroom conversation. And every board of directors went to every CEO and said, what's our AI strategy? And every CEO went to every CIO, CTO, CMO and said, what's our AI strategy? And we were there.

• 35:50Anthony Pompliano?

  Now, when using the AI, do you guys, what is the impact on the business? Are you hiring less people, is making you more efficient? And that's what's leading to more, you know, kind of free cash flow? What else? Because I've talked to, I don't want to say what it is, but this is one of the top, maybe three executives at one of the large card businesses.

• 36:07Speaker 02

  And

• 36:07Anthony Pompliano?

  They're probably a client, but keep going. I, almost 100% positive they are. And he runs, you know, I don't know, maybe a division of 10, 15,000 people. And in his specific division, he's like, dude, we're testing all these different AI things, whatever. And he's like, I got a new problem. He's like, as we figure out the AI stuff, my new problem is what do I do with all my people? Because he's like, we don't necessarily need to fire them. We're very profitable, but they got free time now. So what else are they going to work on?

• 36:33Speaker 02

  Well, the problem is that he's probably going to need to fire those people and hire other people. Right? So let me give you a great statistic for Zeta in particular. Over the last three years, we've grown our business at approximately a 25% compounded organic growth rate.

• 36:51Speaker 02

  We've grown our global headcount by less than 4%.

• 36:56Anthony Pompliano?

  Wow.

• 36:56Speaker 02

  By using AI, and that is leverage. When we go into our clients, we're able to do multiple things. First of all, our platform can disintermediate seven different existing vendors today. So they're consolidating from seven or eight vendors down to one partner. Two, we're able to use AI to lower their marketing cost in most cases by half. So if you spend $50 to create a customer without us, we can help you do it for 25. Just by way of example, it doesn't. We, we charge on a software basis, just to be clear. We charge a software fee and then when they use our platform, a utilization fee kicks in after they hit their minimums.

• 37:42Speaker 02

  But the, the whole model is to help use our data and our AI to better target. Because if somebody's not interested in your products and they're not in market, why waste money marketing to them?

• 37:54Anthony Pompliano?

  Yeah, 100%.

• 37:55Speaker 02

  Right? So you've got the vendor consolidation, you've got the marketing targeting where you're taking the 50% out of people who are not in market and will not qualify for your products and services. And then it starts a flywheel. Because we plug into the client's customer relationship management system or CRM, we're able to see everybody who buys. And then the algorithm gets smarter. And it knows who to target of the 245 million people who are opted into our data cloud. And we do all that in an environment where we keep the consumers' data totally private. We never share the personal information of those individuals, even with the enterprise client.

• 38:40Anthony Pompliano?

  So you're basically, you're going to whatever client and you're saying, hey, in your customer database, you have clients, you know, one, two, three, all the way through, I don't know, 2 million. We think client 1,342,731, they're most likely to buy right now. Send them an email.

• 38:58Speaker 02

  Well, it's actually better than that. What we do is we take the enterprise's first party data and we put it into what's called a consumer data platform or CDP, which is like a little private data environment that we built. We then match that data. Let's say they have 2 million active customers. We match it with the data that we have on those same people. So we might add 5,000 incremental data elements, demographic data, transactional data, credit data, research data, search data, all of that. And then what the algorithm does is it starts to look at who are their most valuable customers and what did they do in the 30, 60, 90 days prior to

• 39:43Speaker 02

  buying from them? We then look at the 240 million, let's say they have 5 million customers, we have 245, there's 240 million incremental people. Who's doing those exact same things? And let's target them. It works the same way on churn management. So we have a client who's a very large global wireless company. We look at every one of their customers every moment of every day. We see that customer 45789 has begun the process of exploring, buying a new wireless phone. They searched the keywords. They've read articles on the topic. We see that they've begun research on switching carriers. We're then able to build the curriculum of

• 40:29Speaker 02

  contact and we've helped that carrier massively lower their churn by knowing exactly what the customer wants and making sure that our client can get it to them before they change. Cause once they change.

• 40:43Anthony Pompliano?

  I mean, this is the future of all communication, right? And in a weird way, I guess like the social media platforms are doing this just for showing tweets or boast or whatever. You guys are instead saying, hey, maybe you want this thing. And you said something earlier that I think is underappreciated, which is.

• 41:00Anthony Pompliano?

  People don't mind ads if they actually are valuable.

• 41:04Speaker 02

  For sure. Well, here's the thing.

• 41:06Anthony Pompliano?

  But if I get an ad for makeup?

• 41:08Speaker 02

  Right.

• 41:08Anthony Pompliano?

  I'm like, ah, this is jarring.

• 41:11Speaker 02

  It is. And in fact, it's funny because we were going through some examples this morning in our data and investor summit, which by the way is online, if anybody cares to watch it, of very jarring ads that were sent to people who it just makes no sense. What people have to understand is almost all of the content that you consume on the internet, on TV, on the radio, is created because of advertising. If you don't have marketing on that content, they cannot afford to pay those reporters. They cannot afford to keep managing that social media platform.

• 41:54Speaker 02

  So if you accept that you're going to have to see ads, you might as well see ads that are totally relevant to you and not irrelevant. And that's what our whole platform is based on, to help the consumer see stuff that is better for them while helping enterprises to lower cost of marketing and CRM. We think of ourselves as sort of helping both sides of the equation.

• 42:19Anthony Pompliano?

  I mean, it makes complete sense for me. So what's next? You guys have a stock price that's starting to come back. You got a great business, throwing off free cash flow. It's not back to where it was before. You've got this great product, have lost any customers. Where do you go from here?

• 42:35Speaker 02

  Well, we're, I mean, right now, we are laser focused on execution.

• 42:39Anthony Pompliano?

  Right.

• 42:39Speaker 02

  We are at the forefront of what we think is going to be the biggest marketing cloud replacement cycle in the history of marketing clouds, right? Because most large enterprises have worked with the same marketing partner for 10 some odd years. Those partners cannot put AI at the heart of their platforms. They can talk about AI all they want, but they have a marketing partner, platform. They can't put AI into the existing architecture and they're not throwing it out. So they have to step out to an algorithm to do a query. That algorithm then does a data dip into a data repository to go back to the algorithm,

• 43:20Speaker 02

  which creates the answer or the intelligence and then tells the marketing cloud to do something.

• 43:27Speaker 02

  Because we rolled out our completely new architecture in 2021, we completely rebuilt our platform from 2017 to 2021. And that's when we rolled it out. We put AI at the center of the platform along with data. So a great example is Forrester, which is sort of the important rating service and software. If you look at their report on marketing automation, we are the furthest to the right and the highest in the leader quadrant. I can't say we're the leader, but if you look at it, it certainly looks like we're very

• 44:02Anthony Pompliano?

  It's an attractive position to be in.

• 44:04Speaker 02

  It's a good position. Maybe you might even say it's the number one position. But the reality is they said that we solve the most complex marketing problems and we make them simple because we put AI and data as native to the application layer.

• 44:23Anthony Pompliano?

  Yeah, it makes a ton of sense. What have you learned through this process of getting attacked by the short sellers?

• 44:28Speaker 02

  I mean, listen, I've learned first and foremost that this is not a fun process. Second, you need to make sure you bring in the world's greatest people to help you, which we have. Third, be proactive. You know, this whole narrative, just sit back and this will pass. It just doesn't make sense to me. Now, listen, you don't want to be, you know, I hate to be too esoteric here, but you don't want to be jousting at windmills, right? You want to be very, very tactical. This is what they said. Here's an 8K with the Securities and Exchange Commission showing exactly why what they said is wrong.

• 45:11Speaker 02

  We then did a full webinar with William Blair and Associates going through how they were wrong. We then did a data and investor summit for three hours showing why we are a trusted partner to 40% of the Fortune 100, why we have not lost one client over this, why we're growing our business in the last quarter at 42%.

• 45:37Speaker 02

  Because we have built a superior product and we help our clients fix their biggest problems. We're going to continue to focus on that, right? We're going to roll out our next version of AI very soon. At our Zeta Live Conference in September, we rolled out our mobile intelligence product, which will now allow us to do everything we do on the internet and on connected television. We can now do in mobile.

• 46:04Anthony Pompliano?

  It's crazy. Has anything in your life changed since all this happened?

• 46:11Speaker 02

  I mean, no.

• 46:13Anthony Pompliano?

  No.

• 46:14Speaker 02

  I mean, you mean, did it affect me personally?

• 46:17Anthony Pompliano?

  Like, yeah, well, it has to affect you in some degree. It maybe sharpens your focus. It, you know, it makes you, you said, don't waste a crisis to get you really engaged with the team. Like, there's all these, you know, things that I think have to change, right?

• 46:30Speaker 02

  Here's what I would tell you. I love what I do every day, but I am as fucking energized as I have ever been.

• 46:37Anthony Pompliano?

  Yeah, of course.

• 46:38Speaker 02

  Yeah. Oh, no, we're going to win. This is not like a question.

• 46:41Anthony Pompliano?

  All right. And then I've always wanted to ask someone this, but I never had the opportunity. So you're the guy I'm going to ask.

• 46:46Speaker 02

  Not sure that's good, but keep going.

• 46:47Anthony Pompliano?

  Crisis happens.

• 46:48Speaker 02

  Yes.

• 46:49Anthony Pompliano?

  Who do you call? Like, is there like a, is there like a 911 CEO number that you call?

• 46:55Speaker 02

  You know, it's funny, there isn't, but I called Mike Milken because Mike's a 30 year friend and mentor of mine to talk through it. And he gave me some really good advice. I have a very good friend who has been through this. I called him and said, who'd you use for crisis communications? Who did you use for these different functions? And we put together a council. And the other thing that you'd figure out is this happens to more companies than you realize.

• 47:32Speaker 02

  Right, it's just, it's just almost weird to me that, that, I mean, every CEO I've spoken to over the last three weeks, and that includes one who runs a $25 billion market cap company, and another who runs a $35 billion private company, but ran a public company before this. I have not met a CEO yet who hasn't been through this, which by the way, I think is one of the reasons so many of our clients have been apathetic.

• 48:00Anthony Pompliano?

  Because they probably went through themselves.

• 48:01Speaker 02

  They've all been through it at some point, you know, not while they were a Fortune 500 company, but, but, but as they grew along the way. So, you know, big business opportunity is building a crisis communications company to help CEOs with this, and we should definitely name it CEO 911. I'm going to give you definitely credit for that. But it's, it's, it feels like it's happening for the first time when it happens to you, which, which for me it was. And, you know, you have to make sure you stay calm. And, you know, your people need to see you calm. Your people need to see you lead from the front. And, you know,

• 48:42Speaker 02

  my partner Steve Gerber, who is our president and COO, and my CFO, Chris Greiner, and my CFO, I'm sorry, my general counsel, Steve Vine, you know, I think of the four of us plus, you know, the, the rest of my ELT as partners. I don't think of them as, you know, employees. We, we really do this stuff together. And I would say that one day, they're going to look back on this and there'll be a Harvard case study on this situation. I'm not sure the whole case study will be about us, but we will be in it.

• 49:14Anthony Pompliano?

  I love it. Where can we send people to find you on the internet or find out more about the company?

• 49:19Speaker 02

  Well, zetaglobal.com. I mean, I, we have a great investor relations site. We have a lot of information online. We did this investor data summit today. It was a three hour thing. It's long, but it's online to watch it. It was, you know, all on video. We published a 15-page, you know, response that we 8K'd that is on our investor relations site. And, you know, listen, we're, I will say again,

• 49:49Speaker 02

  Excuse me. We are incredibly proud of the business we've built and the people that are with us building it. And, you know, we are going to emerge from this crisis stronger than we entered it. And that's something that at some level, this has been a bit of a gift in that it's a wake up call, and it's showing us that we have to do better at many things, which we do. We openly own that we made some mistakes on transparency and other things that if we had put information out there, they wouldn't have been able to make this stuff up. And we've begun the process of fixing that. We're going to continue to do that. But ultimately, if we beat and raise our 14th quarter,

• 50:33Speaker 02

  our 15th quarter, our 16th quarter, our 17th quarter, the stock will go back to where it should be.

• 50:40Anthony Pompliano?

  Yeah, makes a ton of sense. Well, thank you for coming to do this. I know you've got a lot of things going on, and it's probably not fun right now to be talking about this all the time. But I think people really learn a lot from it. And also, I think it's fascinating as the world kind of shifts and, you know, these financial markets become somewhat of these battlefields, to see you guys, you know, kind of in the heat of it at the moment is always great to talk. So thank you.

• 51:01Speaker 02

  It is definitely the heat of the moment, and I really appreciate you having me on, Anthony.