Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: I am so tickled that Bloomberg just has like loose
Speaker 2: starbursts is a snack option, at least for this week.
Speaker 1: I'm most tickled by the chocolate covered Swedish fish. Yeah,
Speaker 1: my children are occasional Swedish fish eaters. Katie's going to
Speaker 1: unwrap and chew a Star Wars.
Speaker 2: On this podcast. Amazing. We're gonna silk the mic away
Speaker 2: as I chew it.
Speaker 1: I haven't headline, and I have a bucket of Star Wars.
Speaker 2: I'm hoping you're going to talk for like at least
Speaker 2: fifteen seconds.
Speaker 1: So I can heap this fifteen seconds. I feel like
Speaker 1: a Star Wars. There's like a two minute proposition anyway.
Speaker 1: Swedish fish, chocolate covered Swedish fish. I'm killing time now
Speaker 1: with Katie cheese chocolate covered Swedish fish just loose in
Speaker 1: a big tank. My children are sort of Swedish fish eaters,
Speaker 1: and I want to bring to them the imubious pleasures
Speaker 1: of chocolate covered Swedish fish. But I can't just take a.
Speaker 2: Handful of No, you gotta wrap in a napkin or something.
Speaker 1: To figure it out. Transporting the chocolate cover.
Speaker 2: Fish to your point on time about starbursts, I eat
Speaker 2: a lot of starbursts. I keep a bag of star Wars. Yeah,
Speaker 2: pretty much in my car. So I pretty much optimized
Speaker 2: my process and I.
Speaker 1: Have not time. I'm not going to attempt the starbursts
Speaker 1: during this podcast.
Speaker 2: That's going to take you a while. You've got a
Speaker 2: lot of starburst there.
Speaker 1: So do you tell about real estate? Is it boring?
Speaker 2: No, it's been pretty cutthroat. This past week has been
Speaker 2: pretty harrowing in terms of, you know, the tight ropeer'
Speaker 2: walking when it comes to our real estate dealings. Right now,
Speaker 2: I can't care about anything. I don't know. I just
Speaker 2: like if it's not interrupting the flow of nutrients to
Speaker 2: my placenta. Like I just I can't make myself care
Speaker 2: about anything.
Speaker 1: Hello, and welcome to podcast.
Speaker 2: I think that listen, I'm here. It's amazing that I'm here.
Speaker 1: We're not going to call the episode of nutrients to Santova.
Speaker 2: It's pretty good though, right all right, Hello.
Speaker 1: And welcome to The Money's Podcast, your weekly podcasts where
Speaker 1: we're talk about stuff and Katie doesn't care about we're
Speaker 1: talking about stuff related to money. I'm Matt Levine. And
Speaker 1: I write the money Stuff column for Bloomberg Opinion.
Speaker 2: Okay, I definitely care about money. My name is Katie Greifeld.
Speaker 2: I'm a reporter for Bloomberg News and an anchor for
Speaker 2: Bloomberg Television.
Speaker 1: Should I read my favorite news story of the week,
Speaker 1: which he was really a new story of last week,
Speaker 1: but we didn't get to it because you were out.
Speaker 1: GameStop is by.
Speaker 2: Amazingly. This wasn't a huge topic of conversation at Milkin,
Speaker 2: but I would have liked it to be.
Speaker 1: It should have been Michael Milkan. He neted the highly
Speaker 1: confident letter, which in my time as a mergers and
Speaker 1: acquisitions lawyer, he did not see a lot of highly
Speaker 1: confident letters because they were replaced by commitment letters. But
Speaker 1: game Stuff is brought back the highly confident letter. But yeah,
Speaker 1: so games up, I guess last week put in a
Speaker 1: bid to buy Evey for half cash half stock. Game
Speaker 1: Stuff has neither the cash nor the stock, which is funny.
Speaker 1: People are like, well, game Stuff doesn't enough stuck because
Speaker 1: ebased so much bigger. That's not a real thing. You
Speaker 1: can issue as much stock as you want in the
Speaker 1: general case, but game Stop can't because it doesn't have
Speaker 1: enough authorized shares. No, it's trying to authorize more shares.
Speaker 1: But yeah, so it's going to pay twenty eight billion
Speaker 1: in cash for eBay, which requires borrowing twenty billion dollars
Speaker 1: from TV Bank. Yeah, gave it a highly confident letter
Speaker 1: saying that we could probably raise that money, no problem,
Speaker 1: no commitments, and then I was going to issue stock
Speaker 1: for the rest, and they lobbed in that bid. Last week,
Speaker 1: everyone scratched their heads. This week Evey said no, thank you.
Speaker 2: Yeah.
Speaker 1: The latest news is that Ryan Cohen, the CEO of
Speaker 1: game Stop, is going around giving interviews and sending letters
Speaker 1: to EVA saying no, no, no, you you should take
Speaker 1: my bid seriously.
Speaker 2: So, man, I aren't allowed to talk unless we're in
Speaker 2: this room with microphones in front of us. So it's
Speaker 2: been interesting through your columns, watching your sort of like
Speaker 2: wrestling with the idea of this a fag takeover offer. Two.
Speaker 2: Maybe this was a job application all along.
Speaker 1: Yeah. My thinking is about because obviously I know, I
Speaker 1: know and love game Stop as a meme stock, and
Speaker 1: this feels very stunty in a lot of ways, one
Speaker 1: of which is that they don't have the money. In
Speaker 1: other words, they don't have the stock, which is hard
Speaker 1: to do. You have to like work hard to not
Speaker 1: have the ability to issue stock for a takeover that
Speaker 1: you're planning to do. Another is that Ryan Cohen has
Speaker 1: did a little stunt where he listed some of his
Speaker 1: personal possessions, including his socks, on eBay as like research
Speaker 1: slash financing for the takeover.
Speaker 2: I feel like you're maybe going to bid on those socks.
Speaker 2: You've mentioned them so many times. The socks are they used?
Speaker 1: I think they are, but I'm trying not to think
Speaker 1: about that now. I'm not gonna been on the socks
Speaker 1: in any case. But so so I was like, this
Speaker 1: is like a joke, This is a fake takeover. This
Speaker 1: is poorly thought out. But the more I think about it,
Speaker 1: and this is based in part on interviews that Cohen
Speaker 1: has given. He wants to be CEO of eBay, and
Speaker 1: this is a convoluted, poorly thought out way for him
Speaker 1: to say, make me CEO of eBay. His case for
Speaker 1: being CEO of eBay is not crazy, right, He ran well, Okay,
Speaker 1: Katie's Rolling Rise and it's crazy. But but like he
Speaker 1: ran a big he like founded and ran a big
Speaker 1: e commerce company, Chewy. He I don't think that you
Speaker 1: would say that he has succeeded in his dreams of
Speaker 1: making GameStop a serious competitor to Amazon, but he's cut
Speaker 1: costed games. If you've turned around the business a little bit.
Speaker 1: He's had a good run running game Stop, and now
Speaker 1: he wants to run eBay, and this is his application
Speaker 1: to run eBay. The handy ret is, if you offer
Speaker 1: to buy a company for cash, it doesn't matter what
Speaker 1: your plans for the company. You might say them because
Speaker 1: you know it might be might appeal to someone, but ultimately,
Speaker 1: if you're like, I'm gonna pay you cash, then the
Speaker 1: shareolders are like, okay, I'll take cash, and then I'll
Speaker 1: be out of the company, and whatever you do with
Speaker 1: the company is your problem, not mine. Right. If you're
Speaker 1: like Meta and you're offering to buy a small startup
Speaker 1: for stock, it's almost the same thing. What Meta does
Speaker 1: with that startup sort of doesn't matter to the startups
Speaker 1: owners because they're just getting stock in this giant entity.
Speaker 1: But when you are game Stop offering to buy eBay
Speaker 1: for stock, and eBay is really quite a lot bigger
Speaker 1: than game Stop, Owen's math is like eBay would ownt
Speaker 1: twice as much of the company as game Stop. But
Speaker 1: it's like, really more than that. But so in that scenario,
Speaker 1: the only thing that matters to eBay shareholders is what
Speaker 1: are your plans for eBay? Would you do a better
Speaker 1: job of running eBay than eBay's current management would And
Speaker 1: you know, Coen is making that case. He's like, yeah,
Speaker 1: I've provided over a value to collide and I will
Speaker 1: do you know, jazzy memestock stuff. So that's where we are.
Speaker 1: He's making the case that he could run it better
Speaker 1: than eBay does. And all this stuff about half cash,
Speaker 1: half stock, takeovers, one hundred and twenty five dollars, takeover
Speaker 1: for sure of takeover, p has all that is kind
Speaker 1: of fake. It's really do you want him to be
Speaker 1: your CEO?
Speaker 2: Then?
Speaker 1: I don't get the sense that eBay shareholders are clamoring from.
Speaker 1: It's more of a game Stop old thing.
Speaker 2: But first of all, I have to commend you for
Speaker 2: watching the Ryan Cohen interview with the Reddit. You did
Speaker 2: you didn't watch the palm video.
Speaker 1: I didn't do that. No, well, okay, not Coen did,
Speaker 1: because it's you know, eliciting materials.
Speaker 2: I did think it's interesting in that that interview. First
Speaker 2: of all, he was appealing that he should be a
Speaker 2: CEO of eBay, that he gives a hoot. Basically, yeah,
Speaker 2: he said a bad word, but basically he put his
Speaker 2: money where his mouth is. You do on a lot
Speaker 2: of eBay shares, et cetera.
Speaker 1: This is like such standard activist playbook. Active is always
Speaker 1: five percent, not the doesn't five.
Speaker 2: Percent of Yeah, but he also said that he doesn't
Speaker 2: really want to be game stops. You that's crazy.
Speaker 1: He did say that.
Speaker 2: Yeah, I read that a few times because I'm like,
Speaker 2: that is crazy work. This is what he said. I
Speaker 2: have always long admired eBay's business, and I didn't want
Speaker 2: to be the CEO of game stops.
Speaker 1: Yeah, game stuff to take over EVA.
Speaker 2: But I looked at GameStop share price because then naively
Speaker 2: thought it was like, does anyone care that the CEO
Speaker 2: said that that they don't want to be the CEO
Speaker 2: and it seems like they don't.
Speaker 1: They enjoy being nagged.
Speaker 2: Yeah, apparently, I don't know what sort of psychological experiment
Speaker 2: is going on with game stop shareholders, but it's fascinating.
Speaker 1: Yeah, I'm sure you didn't mean it like that. I mean,
Speaker 1: I don't know how I meant it, but I.
Speaker 2: Mean, neither of us watched the video, so all we're
Speaker 2: doing is reading the naked words. But the naked words
Speaker 2: say I didn't want to be the CEO of game Stop,
Speaker 2: so it's wild I do find it.
Speaker 1: I think it was like he you know, took over,
Speaker 1: like he bought a big position in game Stop and
Speaker 1: gave them some suggestions and then ultimately was like, I
Speaker 1: need to be running this company.
Speaker 2: Yeah.
Speaker 1: It was not like he started an activist campaign to
Speaker 1: put himself in charge in the beginning. It was more
Speaker 1: like he liked, yeah, and then now I need to
Speaker 1: fix it.
Speaker 2: Yeah.
Speaker 1: Also just like he's like retired after two and then
Speaker 1: he was like, no, I need to shake the pups.
Speaker 2: Yeah, well we'll see if it works. It doesn't seem
Speaker 2: like it's going to. No.
Speaker 1: The next thing he do is run a proxy fight.
Speaker 1: But of what's happened here is this is so disorganized
Speaker 1: and not real, Like, you know, he offered to do
Speaker 1: a takeover with enough authorized shares. Their annual meeting is
Speaker 1: coming up, the deadline fornominations is long past. They can't
Speaker 1: actually do a proxy for it for months now at least,
Speaker 1: So it's it's not a real a real activist. It's
Speaker 1: more just sort of like poking around and seeing what
Speaker 1: will happen.
Speaker 2: Yeah, and just stirring it up. I do find it
Speaker 2: interesting that he's so enamored with eBay, like he just
Speaker 2: this is his white whale. He just he just wants eBay,
Speaker 2: which is mostly good.
Speaker 1: You know, start an e commerce company.
Speaker 2: Yeah.
Speaker 1: Also he now runs a I don't know what these
Speaker 1: companies are. He runs a collectibles company. Sure, eBay is
Speaker 1: like the white whale of online collectibles.
Speaker 2: That's where you go for collectibless. That's true, and.
Speaker 1: There's a huge energy where you can both go to
Speaker 1: eBay's website or walk into your local game stop and
Speaker 1: get your collectibles created and auctioned. I watch this space.
Speaker 1: I'm hoping he continues to do nonsense. This is the
Speaker 1: case where even if it just fizzles, it's still interesting
Speaker 1: because game stop owns five percent of the based stock,
Speaker 1: and if it fizzles, they're gonna have to sell that.
Speaker 1: That's going to be kind of awkward if they do it,
Speaker 1: they take over and then sell the stock. You're not
Speaker 1: really supposed to do that.
Speaker 2: Yeah, it's kind of to He gave.
Speaker 1: It interview on the NBAC that was like super super
Speaker 1: super awkward, although honestly it wasn't entirely.
Speaker 2: I had to take breaks as I was watching it.
Speaker 1: Yeah, one thing that I've written is again, like people's
Speaker 1: initial reaction to this was like, how could game Stop
Speaker 1: pay twenty eight billion dollars of stock for eBay if
Speaker 1: it only has twelve billion dollars stock? And I think
Speaker 1: that's the wrong way to look at it. Like, you
Speaker 1: can issue as much stock as you want, and twenty
Speaker 1: eight billion dollars stack for eBay would just be stock
Speaker 1: of eBay. It would just be like eBay shareolders would
Speaker 1: be given ownership interest in their own company. And the
Speaker 1: thing that would change was it would be one it
Speaker 1: would be smitshed together with game Stop, and two, more importantly,
Speaker 1: Ryan con would run the whole thing. So if you
Speaker 1: think Ryan Cohn running it is a good thing, then
Speaker 1: you'll think, oh great, twenty eight billion dollars of stock
Speaker 1: in this acquisition is valuable. It doesn't have anything to
Speaker 1: do with how much game Stop is currently worth, right,
Speaker 1: It only has to do with what you think the
Speaker 1: future combined company is worth. So my, you know, I
Speaker 1: watched that interview and I was like, why are people
Speaker 1: giving him a hard time about not having enough stock.
Speaker 1: You can issue as much stock as you want. Then
Speaker 1: I went and read their certificate of incorporation and I
Speaker 1: realized he can't actually issue an his stock and in fact,
Speaker 1: no one had thought this through at all.
Speaker 2: It was so good.
Speaker 1: It definitely made me think more that in the socks
Speaker 1: thing made me think, Ah, a fake takeover socks.
Speaker 2: Game bay E Stop Games is not bad, thank you.
Speaker 2: Speaking of Michael Milkin. Yeah, CDOs, No.
Speaker 1: They're not. Closs A slightly different thing. No, I know,
Speaker 1: there's a Bloomberg article that's like Apollo is bringing back
Speaker 1: a thing that looks like.
Speaker 2: Says, there's like CLOS but better.
Speaker 1: Yeah. But there's CLOS in the simple sense that we
Speaker 1: live in a world where there was a giant market
Speaker 1: where companies take out syndicated loans floating rate secured loans,
Speaker 1: and those loans gets packaged into a pool and the
Speaker 1: pool sells rated debt securities on them, and that thing
Speaker 1: is called the CLO right, and Apollo is like, let's
Speaker 1: do that, but instead of with probably syndicated loans, we're
Speaker 1: going to do it with private credit loans. It's a
Speaker 1: CLO yeah, I think it's a CDO in the sense
Speaker 1: that CDO collateralized. That allegation is the sort of umbrella
Speaker 1: term for all debt that you put in a pool.
Speaker 1: But like, there's a big existing market right now of
Speaker 1: things called clos, which is floating right, loan securitizations, and
Speaker 1: there's not such a big existing market of things called
Speaker 1: c doos because those went out of favor in two
Speaker 1: thousand and eight.
Speaker 2: Yeah, they led to an even scarier acronym. Or we're
Speaker 2: a starring character in the GFC.
Speaker 1: The GFC, but these are clearly clos. These are clearly like,
Speaker 1: if you're a company and you want to borrow money,
Speaker 1: you can borrow in the broadly syndicated loan market, in
Speaker 1: which case ultimately your loans will end up in a CLO.
Speaker 1: Or you can borrow from Apollo in a direct credit
Speaker 1: in a direct loan, in which case your loan will
Speaker 1: end up in.
Speaker 2: A it's called a MAPS, a Maps Apollo.
Speaker 1: Multi Asset Prime Securities. I guess once it becomes genericizeder
Speaker 1: you just call it MAPS multi Asset Prime Securities, but
Speaker 1: probably just call it a private credit CLO, which is
Speaker 1: what it is, right And if you borrow from Apollo.
Speaker 1: Your loan will end up in an am apse, which
Speaker 1: is like a CLO, and in either case there will
Speaker 1: be like a highly rated investment grade tranch that is
Speaker 1: most of the pool and that is sold to insurance companies.
Speaker 1: And in Apollow's case, the insurance company will be a Thian,
Speaker 1: which is the insurance company you knows very well. So
Speaker 1: it's just the CLO.
Speaker 2: You're not fussed about this, would anyone be? People are
Speaker 2: certainly fussed about this. There's a little bit of fuss
Speaker 2: in going on. Okay, I'm going to name the name
Speaker 2: of Michael Hislop. I hope I'm saying you're right. He's
Speaker 2: an analyst over a Cure Acid Capital Management. These are
Speaker 2: words that I like to read, not say out loud,
Speaker 2: but basically, he's saying that it's inevitable. He thinks it's
Speaker 2: a CEO saying that it's inevitable that this would make
Speaker 2: a comeback. And structured finance innovations tend to arise when
Speaker 2: there is an issue or need for them rather than
Speaker 2: just investor appetite. So basically saying this is Apollo doing
Speaker 2: this for Apollo's needs.
Speaker 1: When I think about Apollo's needs here. I think there
Speaker 1: are two things going on. One is that I have
Speaker 1: written for years that private credit is ultimately going to
Speaker 1: be it'll be quaint to talk about private credit. It's
Speaker 1: going to be a broadly syndicated, liquidly traded asset class,
Speaker 1: just like bank loans are now. Not everyone agrees with that, right.
Speaker 1: Some people are like, no, no, it's very important that
Speaker 1: it'd be a relationship driven not trading is a big
Speaker 1: part of the appeal of the product. But you see
Speaker 1: from Apollo's actions that they're like, no, no, we want
Speaker 1: to trade it right. They've set up a trading desk.
Speaker 1: They are talking about really pricing, which only really makes
Speaker 1: sense if you think there's going to be a trading market. Yes,
Speaker 1: and so you know, how does the bank syndicated load
Speaker 1: market work, How does that trading work? Well, part of
Speaker 1: it is that clo is, you know, by the stuff.
Speaker 1: So setting up a COLO product for private credit makes
Speaker 1: total sense if you are someone like Apollo who really
Speaker 1: wants the trade private credit and have it be liquid
Speaker 1: and broadly distributed and all the things that the bank
Speaker 1: line market does. The other reason I think that Apollo
Speaker 1: is interested in the sort of thing is that Apollo
Speaker 1: owns a big insurer. A lot of Apollo's private credit
Speaker 1: origination is to put stuff into the insurer. Insurers are
Speaker 1: not huge consumers of junk rating direct loans to LBO
Speaker 1: companies because they have, you know, capital requirements and ratings requirements.
Speaker 1: And so if you can smush a bunch of loans
Speaker 1: into a pool and issue a rated security is on
Speaker 1: the top eighty five percent of that pool, you can
Speaker 1: sell those to your insurance company at a good spread
Speaker 1: and in a good rating and get good capital treatment
Speaker 1: for your insurance company. This is not like a CLO
Speaker 1: manager where they want the equity for the upside and
Speaker 1: they're selling all of the highly rated tranches to outside
Speaker 1: insurance companies. This is like Apollo is an insurance company.
Speaker 1: They want the highly rated tranches because that's how they
Speaker 1: get yield with good capital treatment. So that's a CLO
Speaker 1: wow whatever I mean. CDOs were driven by investor demand
Speaker 1: for ye for yield the triple A paper, and so
Speaker 1: there is a portion of what's going on here. So sure, look,
Speaker 1: any securitization is driven by investor demand for yield the
Speaker 1: triple A paper. You can't get around that.
Speaker 2: Yeah, Well, Paul has cast this as the future of securitization.
Speaker 1: So it is the idea that private credit would just
Speaker 1: be like sleepily sit on the balance sheets of funds
Speaker 1: forever is clearly falling apart, right, I mean, yeah, sitting
Speaker 1: in the balance sheets of PDCs that are getting redemption requests.
Speaker 1: And now it's sitting on the balance sheets of securitizations
Speaker 1: that gets sold to insurance companies, and yeah, it's the
Speaker 1: future of everything. Yeah, okay, sliced uff and securitized.
Speaker 2: So not a cdo a different type of CLO. Well.
Speaker 2: Mark Rohan said that basically the idea that they have
Speaker 2: behind a MAPS is that it takes the benefits of
Speaker 2: clos and adds greater numbers of issuers, less leverage, a
Speaker 2: better structure for investors. So they prefer the CLO comparison.
Speaker 1: Yeah, I mean, I say, is it the future of
Speaker 1: private credit? Yes? I feel like people in the credit
Speaker 1: world would have some complaints about the effect of clos
Speaker 1: on the credit You know, like in the olden days,
Speaker 1: banks made loans and they the loans to maturity. Then
Speaker 1: you had a relationship with your bank and if you
Speaker 1: needed to restructure the loan, you went to the bank
Speaker 1: and talked about it and it was all very sort
Speaker 1: of sleepy. And now the thing that it's called a
Speaker 1: bank loan or broadly syndicated loan is mostly owned by
Speaker 1: clos and it trades more liquidly and you have less
Speaker 1: of a relationship, and you know, the clos are not
Speaker 1: the same sort of credit analysts as the banks and
Speaker 1: all this stuff. And private credit two years ago would
Speaker 1: be like, we're long term relationship holders, and like the
Speaker 1: people making the loan are going to hold the loan
Speaker 1: and if you need to restructure, you'll come to talk
Speaker 1: to one person, you know. And now we're going to
Speaker 1: Colo is a private credit and that market will evolve
Speaker 1: the way the bank line market does.
Speaker 2: Yeah. I mean it feels like Apollo in particular is
Speaker 2: driving a lot of this shifting conversation.
Speaker 1: I want to trade it.
Speaker 2: Yeah, daily pricing it's coming by September anti September. Yeah,
Speaker 2: according to Apollo.
Speaker 1: Yeah, you send me an article that Pimco I did.
Speaker 2: Yeah, Pimco took some umbrage with that. Basically, an analyst
Speaker 2: over there said that more frequent pricing is not more
Speaker 2: accurate pricing, so some skepticism there over. Okay, there's daily prices,
Speaker 2: but are they accurate?
Speaker 1: Okay, I don't know, but like two points. One point
Speaker 1: is if you are in the business of providing daily pricing,
Speaker 1: then you have a model. I think you have to
Speaker 1: have a model that updates daily based on something. So
Speaker 1: one possibility is that your model updates daily based on
Speaker 1: public market data, right, Like, if you know public market
Speaker 1: DOUBLEB spreads move out by five basis points, then you
Speaker 1: move your spreads out by five basis plans, right Like. Otherwise,
Speaker 1: like if you're not actually changing things day to day,
Speaker 1: then you're not providing real daily pricing. And so if
Speaker 1: you're doing that, like that's something, right, Like it's introducing
Speaker 1: some public market volatility comps to private credit and so
Speaker 1: like you're getting some possible indication because there is a
Speaker 1: link between these markets. You're getting some possible into ca
Speaker 1: of what is actually happening in your birthflete. But also
Speaker 1: I think this is all fake. And like the reason
Speaker 1: Apollo wants to do daily pricing is because they want
Speaker 1: to set up a trading desk where they'll actually trade
Speaker 1: the stuff then get real daily marks. Yeah, I think
Speaker 1: that's the future of this, right, And so I think
Speaker 1: daily pricing is a way to nudge everyone in the
Speaker 1: direction of daily trading. And if you're doing that, then
Speaker 1: the prices are, you know, more or less real.
Speaker 2: Yeah. Well, PIMCO kind of gets there in this note.
Speaker 2: And first of all, they never say Apollo by name,
Speaker 2: but you know, it came out in reaction to that news.
Speaker 2: There's an incremental fix that PIMCO proposes, which is to
Speaker 2: rely more on third party validation evaluations. The second, more
Speaker 2: ambitious way to address this is basically to have a
Speaker 2: more functional and transparent secondary market for private credit assets.
Speaker 2: Let's just yeah, so Paula would agree with that.
Speaker 1: So they're not going to provide daily marks for like
Speaker 1: ten years without ever trading it.
Speaker 2: Yeah, I'm going to trade it. Yeah the hope. So
Speaker 2: Apollo and Co. They can live in harmony here.
Speaker 1: Sure.
Speaker 2: You know what isn't harmony.
Speaker 1: The big AI companies and the people selling shares of
Speaker 1: their stock on the secondary market.
Speaker 2: Yeah. Anthropic in particular, Anthropic name names in their blog post,
Speaker 2: which I thought was cool.
Speaker 1: The actual update histories of these webages is a little
Speaker 1: bit obscure to me, but I think the point is
Speaker 1: that now both Anthropic and Open AI have websites saying Basically,
Speaker 1: our stock has transfer restructions. If someone is coming to
Speaker 1: you and saying that they'll sell you stock or that
Speaker 1: they own our stock in an SPV, or that they'll
Speaker 1: sell you a stock in a forward agreement, call the
Speaker 1: call the police, because that's all fake and void. Yeah,
Speaker 1: and that like caused a dostir because everybody on Earth
Speaker 1: owns some Anthropic stock through an SPV orly and if
Speaker 1: they're serious about those well being void, then that is
Speaker 1: going to create some drama.
Speaker 2: Yeah, it did say on an anthropics blog posts that
Speaker 2: literally get in contact with your securities regulator if someone
Speaker 2: approaches you and trying to call the sec Yeah.
Speaker 1: Right, this is a long running thing we've talked about
Speaker 1: d x y Z that yeahs tech one who caught
Speaker 1: the ire of Stripe a couple of years ago this
Speaker 1: sort of thing. Basically, like most of the big tech
Speaker 1: companies have transfer restrictions on their stock saying if you,
Speaker 1: you know, are an employee or an investor in your
Speaker 1: own stock, you can't sell it without telling the company,
Speaker 1: maybe even the company. I write a first refusal, getting
Speaker 1: permission from the company. And my guess is that all
Speaker 1: of these trans a restrictions say you also can't sell
Speaker 1: it in a forward contract, where you know forward contract
Speaker 1: is you give me money, now, I promise that when
Speaker 1: the company goes public, I'll delivery of the stock, which
Speaker 1: seems to get around the transferreratations with no company believes that.
Speaker 1: The companies will say you can't sell the stock even
Speaker 1: in a forward contract, but then people do sell it
Speaker 1: in the forward contract, thinking well, you know, when the
Speaker 1: company was public, all deliver the stock. They won't be
Speaker 1: transfer restricted them, so who's harmed at And these companies
Speaker 1: assert that if you do that, then the transfer is
Speaker 1: invalid and the company can take the stock back. And
Speaker 1: I'm not aware of high profile examples of this ever
Speaker 1: being actually fought over. Yeah, because the goal is to
Speaker 1: stop them from doing it now. But once they go public,
Speaker 1: what they're going to see it take the stock bag.
Speaker 1: But they'll say they will.
Speaker 2: Yeah. Also, I mean, we've talked a lot about like
Speaker 2: SpaceX in SPVs, but you know, there's a lot of
Speaker 2: purported exposure to open AI, et cetera in SPVs, So
Speaker 2: I mean there would be a lot of cleaning up
Speaker 2: to do, and I don't know.
Speaker 1: Right on the one hand, it is probably not like
Speaker 1: super in the best interests of open AI or Anthropic
Speaker 1: to go around suing to take backstock from shareholders once
Speaker 1: they go public, Like they'll have bigger fish to fry
Speaker 1: once they go Yeah. On the other hand, there's like
Speaker 1: tens of billions of dollars of stock that was invalidly transferred.
Speaker 1: Then it's oh, yeah, we'll take back tens of billions
Speaker 1: of dollars of you know, dilution for our shareholders by
Speaker 1: suing these dentists who bought in an SPV. Like, I
Speaker 1: don't know, I don't know.
Speaker 2: You know, I do tempted those frisky dentists. Do you
Speaker 2: think this is the end of it? That they just
Speaker 2: make scary blog posts and sort of hope that they're discouraging. Yeah,
Speaker 2: this is it. This is it, right.
Speaker 1: I don't think they're going to sue, but they might.
Speaker 1: And they're not legal advice, not investing advice.
Speaker 2: I know. Again, Anthropic did name names in their blog posts.
Speaker 1: Right, some of which are like, you know, kind of
Speaker 1: big secondary Yeah.
Speaker 2: Forge for example. Hive is also their open door. The
Speaker 2: list goes on. Yeah.
Speaker 1: So one thing they're saying is if someone writes a
Speaker 1: hard contract on Anthropic or open I shares that they
Speaker 1: own that might be invalid and we might take it
Speaker 1: back from you, and so you shouldn't buy that forward.
Speaker 1: But another thing they're saying is they might be lying.
Speaker 1: And those things do go together, right, like if you're
Speaker 1: trying to get around the transfer restrictions, like you might
Speaker 1: also be lying about owning this thought in the first place.
Speaker 1: The thing is not quite right because in fact, there
Speaker 1: seems to be a norm of kind of like trying
Speaker 1: to get around the transfer restrictions. But yeah, I mean
Speaker 1: you can see why someone willing to violate their contract
Speaker 1: might also be willing to lie about owning the shows.
Speaker 2: I could see the spiritual similarities between those two urges. Yeah,
Speaker 2: I haven't checked the price of our friend Destiny Tech.
Speaker 1: I have either continues to last trade it well above
Speaker 1: matt out the value.
Speaker 2: Do you want to tell you about human assembly lines? Yeah?
Speaker 2: I just wanted to give a shout out probably the
Speaker 2: best headline I saw this week. Goldman says banks quote
Speaker 2: human assembly lines, face automation. That was a real thing
Speaker 2: that John Waldron said. He is the president and chief
Speaker 2: operating officer over at Goldman, giving an interview on c saying,
Speaker 2: I often describe Goldman sacks as a human assembly line,
Speaker 2: which is amazing.
Speaker 1: Right, so like Henry Ford had an assembly line where
Speaker 1: cars were assembled by humans. Yeah, does John Waldrin mean
Speaker 1: M and A Deals are assembled by humans on an
Speaker 1: assembly line? Or yeah, I mean humans are assembled at Goldvin,
Speaker 1: which as a Goldman alum. Yeah, I felt a little
Speaker 1: bit like I was being assembled on an assembly.
Speaker 2: Right, they were building your personality.
Speaker 1: But mostly I think she means deals for being assembled
Speaker 1: on the assembly line, and some of the some of
Speaker 1: that assembly line will not be taken over by robots.
Speaker 2: It's pretty great. This is another interview where I didn't
Speaker 2: watch it. I just read it without any context.
Speaker 1: I don't think he meant human assembly lines in the
Speaker 1: like dystrophia and yeah.
Speaker 2: Like here's here's a leg we're going to connect it
Speaker 2: to appelvi.
Speaker 1: But that is a little bit working.
Speaker 2: But even in the more sane reading where it's humans
Speaker 2: working an assembly line, it's pretty great. Yes it is.
Speaker 2: We're going to replace all these humans with AI.
Speaker 1: No, it's going to be like a car assembly line.
Speaker 1: Those they'll be like, you know, humans with like specialized
Speaker 1: technical skills who now have a relatively physically undemanding job
Speaker 1: because the robots are welding the car together, and the
Speaker 1: humans are doing complex programming to make the robots work.
Speaker 2: They're putting the computer in the car.
Speaker 1: Yeah, you know, I mean right, it's not definitely implies
Speaker 1: that some jobs will be lost on the example. Yeah,
Speaker 1: let's be clear.
Speaker 2: Yeah, you let me read the rest of the quote. Okay.
Speaker 2: He says, if you think about what's happened in manufacturing,
Speaker 2: it's become much more robotic, it's become much more automated.
Speaker 2: The banks really haven't been on that journey to the
Speaker 2: same extent.
Speaker 1: Yeah, I do think that when you think about the
Speaker 1: activities of an investment bank, there's a lot of like
Speaker 1: kind of robotic stuff that gets done by twenty three
Speaker 1: year olds with ivy league degrees, and like having robots
Speaker 1: do some of that is probably like both efficient and
Speaker 1: a win for society and also the probably nice for
Speaker 1: those twenty three year olds who don't have to do
Speaker 1: the robotics stuff.
Speaker 2: But what are they going to make sure something want.
Speaker 1: To not be hired? Yeah, robotic stuff.
Speaker 2: Well. Waldron also did say I'm not sure dynamically how
Speaker 2: the overall headcount will change.
Speaker 1: No one's ever sure, because this is like the this
Speaker 1: is like the whole thing, right, Like a lot of
Speaker 1: technological innovations have the effect of increasing the amount of
Speaker 1: work that the firm can do, and so like you
Speaker 1: actually end up hiring more people. Yeah, that's the story
Speaker 1: of Excel and right, what would be the story of AI.
Speaker 1: I think I don't know, there's reasonably to be pessimistic.
Speaker 2: But yeah, but I don't know. They might just do.
Speaker 1: Many more deals on their robotic sized assembly line. It's
Speaker 1: the twenty three year old analysts will be like providing
Speaker 1: high powered oversight of twenty robots and it'll all be wonderful.
Speaker 2: Yeah, the robot overlord.
Speaker 1: Or the robots will be the overload.
Speaker 2: Yeah, the same. I could see it both ways. Well
Speaker 2: to that point. Thank you for all the book recommendations.
Speaker 2: We did good.
Speaker 1: Oh yeah we have the book. Yeah as a as
Speaker 1: an economist fantasy novel.
Speaker 2: Yeah.
Speaker 1: Someone so probably not what it sounds.
Speaker 2: Someone sent that over. I am going on a flight
Speaker 2: because I'm off next week. So, by the way, if
Speaker 2: you're still listening, there won't be a podcast next week.
Speaker 1: It is dark next week.
Speaker 2: Yeah great, right, I think terrific.
Speaker 1: I won't tells me anything, man, And that was the
Speaker 1: money Stuff Podcast.
Speaker 2: I'm Matt Levine and I'm Katie Greifeld.
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