Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: It's been two weeks since they've heard.
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Speaker 2: Yeah, I sound pretty good.
Speaker 1: You do sound pretty good. Yeah, I probably sound most
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Speaker 2: Yeah, you also got a haircut. Not that that matters.
Speaker 1: No, it's an audio podcast. But no. We took last
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Speaker 2: So really it was in the listener's best interests, was
Speaker 2: it ever, Yeah, so that they didn't have to hear
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Speaker 1: I'm convincing. Hello, and welcome to the Money Stuff Podcast.
Speaker 1: You're a weekly podcast wherever you talk about stuff related
Speaker 1: to money. I'm Matt Levine and I write the Money
Speaker 1: Stuff column for Bloomberg Opinion.
Speaker 2: And I'm Katie Greifeld, a reporter for Bloomberg News and
Speaker 2: an anchor for Bloomberg Television.
Speaker 1: What is all this stuff we have to talk about today? Katie?
Speaker 2: Okay, We're coming in hot because the first ever private
Speaker 2: crediting TF has finally launched. We're going to talk about
Speaker 2: Bill Ackman's dreams of being a baby Berkshire, and then
Speaker 2: we're going to talk about info Wars and an interesting
Speaker 2: bid to try and buy it.
Speaker 1: Private CREDITYTF, the.
Speaker 2: Sp D r SSGA, Apollo IG Private Credit ETF. It
Speaker 2: launched on Thursday. Yes, and I have to say, I'm
Speaker 2: kind of shocked that this launched.
Speaker 1: You didn't he do it? And we've talked about this
Speaker 1: like more than fifteen times on the show.
Speaker 2: Yeah, And and a lot of people in the industry
Speaker 2: too are shocked that it launched. Interesting, it feels like that.
Speaker 1: I feel like, is this partly like when they filed
Speaker 1: for it, it was like there are rules and now
Speaker 1: there are no rules. Ors not related to that at all.
Speaker 2: So I was thinking about that. You know, we are
Speaker 2: in a brave new world. We have a new SEC.
Speaker 2: This was filed in September twenty twenty four. It's launching
Speaker 2: February twenty seventh, twenty twenty five. I mean they didn't
Speaker 2: make arguments. I don't think that Apollo and State Street
Speaker 2: didn't put any meaningful thought into.
Speaker 1: This, but I have no problem, Like I'm not surprised
Speaker 1: that it launched. I tell me why, because like you
Speaker 1: could do anything, Man, it's an ETF, Like why not?
Speaker 2: Like, what's what if this launched in twenty twenty four?
Speaker 2: Would you have been surprised?
Speaker 1: No? I asked about like now that we have no
Speaker 1: rules as that would make it, But like I would
Speaker 1: have thought it was fine in twenty twenty four, which
Speaker 1: is probably why they filed it.
Speaker 2: So there's a lot of question marks about and we've
Speaker 2: talked about this too, like how you put securities as
Speaker 2: a liquid as private credit into a very public wrapper,
Speaker 2: what withdrawals look like, and whether you could run into
Speaker 2: some problems there. There's rules that more than fifteen percent
Speaker 2: of an open ended fund can't be in a liquid securities.
Speaker 2: Private credit oly is considered in a liquid security. But
Speaker 2: the CTF is going to invest ten to thirty five
Speaker 2: percent of its holdings in private credit. And the argument
Speaker 2: that State Street and Apollo made was basically that you know,
Speaker 2: Apollo is going to provide that liquidity. They have this
Speaker 2: trading desk, They're going to both supply the private credit
Speaker 2: assets for this fund, and they're also going to buy
Speaker 2: them back. They're contractually obligated to buy them back. So
Speaker 2: it seems like the SEC agreed with that argument because
Speaker 2: this thing is trading.
Speaker 1: I think that argument is basically correct. Right. There's a
Speaker 1: range of stuff that is quote private credit, right, and
Speaker 1: like one thing that is private credit is business development companies,
Speaker 1: which are you know, often like middle market direct lending
Speaker 1: companies that are private credit companies in a public wrapper, right,
Speaker 1: like they provide non bank privately negotiated loans to companies,
Speaker 1: but like they're provided out of a public buol of capital.
Speaker 1: So im I understanding is there's some ability to put
Speaker 1: like BBC shares into this thing, which is liquid private credit,
Speaker 1: no problem. Some large percentage of what they're going to
Speaker 1: do is like Apollo private credit loans that like Apollo
Speaker 1: will make a market in and they will be able
Speaker 1: to trade with apollow at that market. And yeah, it's
Speaker 1: like solves the problem, right, because like the problem is,
Speaker 1: you know, you have the possibility of the fund expanding
Speaker 1: and contracting each day because like if more public buyers
Speaker 1: want to buy, then it'll have to expend. And if
Speaker 1: you have a very i liquid, hard to source, hard
Speaker 1: to sell asset, like we've talked about like private companies
Speaker 1: where it's like, you know, you can only get so
Speaker 1: many SpaceX shares. If you have that, it's hard to
Speaker 1: expand and contract. But like if you have Apollo, which
Speaker 1: has a massive supply of private credit and like you know,
Speaker 1: its own balance sheet and its ability to buy some back,
Speaker 1: then like Apollo can be the like accordion for the
Speaker 1: expanding and contracting of the ETF. And it seems fun.
Speaker 1: What's wrong with that?
Speaker 2: Well, let me read you something from morning Star analyst
Speaker 2: Brian Moriarity, and I will note that morning Star tends
Speaker 2: not to like things that are a little too crazy,
Speaker 2: like they hate what's going on.
Speaker 1: I love things that are a little too crazy. That's
Speaker 1: the problem right here.
Speaker 2: I'm like, oh yeah, they are very spiritually opposed to
Speaker 2: you know, funny business. But this is what moriogy business.
Speaker 1: Is, My whole business.
Speaker 2: Moriarity, I had to say, Apollo's liquidity facility is subject
Speaker 2: to a daily limit, and this daily limit remains undefined.
Speaker 2: It's possible the fund could have to meet way more
Speaker 2: redemptions in a day than the limit. That could force
Speaker 2: State Street to sell more liquid public securities first, potentially
Speaker 2: leaving the ETF with more liquid private credit instruments as
Speaker 2: a percentage of assets, and increasing the risks of a
Speaker 2: liquidity crunch. Okay, wait, I like this line. When this happens,
Speaker 2: the portfolio often begins to manage the advisor rather than
Speaker 2: the other way around.
Speaker 1: Okay, that's a cool line. I agree with that. I
Speaker 1: think it's like when they start with like zero dollars
Speaker 1: of assets, like it's not irrelevant consideration, right, Like, this
Speaker 1: is clearly like they're gonna see where it goes. Apollo's
Speaker 1: trading desk has some risk limit, and like that risk
Speaker 1: limit is more than adequate to deal with redemptions on
Speaker 1: the first day when it will clearly be net creating, right, Like,
Speaker 1: they're not gonna have net redemptions for.
Speaker 2: Two weeks, right, I suppose.
Speaker 1: Like if they had net redemptions in the next two weeks,
Speaker 1: they would be very small because it's all fun. But right,
Speaker 1: if this becomes a twenty billion dollar ETF, then there
Speaker 1: will be material risks of Apollo not being able to
Speaker 1: absorb all of the private credit if it goes from
Speaker 1: twenty billion to zero overnight. Yeah, my assumption is that
Speaker 1: everyone's like, Wow, that'll be a nice problem to have
Speaker 1: when we come to it, right, Yeah, but no, I
Speaker 1: think it like a modest size. It's like, yeah, this
Speaker 1: is a fun proof of concept for Apollo, and they
Speaker 1: would trade the paper. They also get to make the
Speaker 1: price in a not competitive environment, right, like in a
Speaker 1: world where Apollo thinks we're doing rate private credit loans
Speaker 1: and all of our loans are fantastic and like retail
Speaker 1: shareholders of the ETF are pulling out, then for Apollo
Speaker 1: to be like the Marcus sixty cents on the dollar,
Speaker 1: will buy as much as you want, it seems fine
Speaker 1: for them. I don't know.
Speaker 2: Yeah, well, there's skepticism that I've seen the fact that okay,
Speaker 2: Apollo is supplying the private credit and it's also contractually
Speaker 2: obligated to buy it back. I did see some people
Speaker 2: comparing this to like the fox guarding the Henhouse.
Speaker 1: One thing that I think, Yeah, I think they're creating
Speaker 1: private credit to sell to the public and they're trying
Speaker 1: to make money on it, like of course, well, also,
Speaker 1: where do you think they're.
Speaker 2: Doing In the filing, it also says to sort of
Speaker 2: I don't know, ease that worry. The ability to sell
Speaker 2: the instruments to Apollo is not exclusive. So if State
Speaker 2: Street the right find another bid, Yeah, they found a
Speaker 2: better bid somewhere else, they wouldn't have to necessarily sell.
Speaker 1: To a sure great Yeah No, I mean look, I
Speaker 1: mean like when we've talked about not only the content
Speaker 1: of the ECF, right, Like, Apollo is trying to build
Speaker 1: up a market for private credit, right, and I think
Speaker 1: they'd be thrilled to live in a world where once
Speaker 1: State Street wants to sell it's private credit, it can
Speaker 1: get bids from twenty anonymous firms on an electronic platform, right,
Speaker 1: Like that's that's a good world for a private credit
Speaker 1: originator to live in. But yeah, like they think they
Speaker 1: are smart evaluators of private credit and this is a
Speaker 1: like retail place into which to put it, Like yeah, yeah,
Speaker 1: they're hoping to make money. The thing I say is
Speaker 1: like on this liquidity worry, The thing I always write
Speaker 1: about private credit is that it's a really good funding
Speaker 1: model for loans. Right, Like you are Apollo. You raise
Speaker 1: money from like classically insurance companies are like you know,
Speaker 1: in policy case, they own ans, they are an insurance company. Right,
Speaker 1: You raise money from insurance companies and you have this
Speaker 1: very like long term locked up capital and you use
Speaker 1: it to make long term, somewhat risky loans that don't trade, right,
Speaker 1: And that's a good match of liabilities and assets, right,
Speaker 1: Like you are raising long term money to make long
Speaker 1: term loans, it's a better match of liability and assets
Speaker 1: them like classic bank lending, where the banks raise overnight
Speaker 1: money to make thirty year loans. The private credit model
Speaker 1: has always struck me as being unusually not runnable, right,
Speaker 1: Like you can't usually, I mean you sort of can.
Speaker 1: You don't really like redeem your life insurance policy, right, So,
Speaker 1: like the theene has like really long term money and
Speaker 1: if like credit gets worse, like no one is clamoring
Speaker 1: to get their money back, so Athene can kind of
Speaker 1: ride that out. The theene is Apollo is like captive,
Speaker 1: but once you do it in a like instant liquidity
Speaker 1: retail vehicle, like that changes a little bit, right, And
Speaker 1: it's like for the retail vehicle, the liquidity is like whatever,
Speaker 1: it's rodded by Apollo. But for Apollo, it's like you've
Speaker 1: shifted your funding model so that it went from being
Speaker 1: like arguably one hundred percent of your funding is from
Speaker 1: insurance company clients, where like it's like permanent funding to
Speaker 1: a small but you hope growing percentage of your funding
Speaker 1: comes from retail investors who can take their money out
Speaker 1: at any time. I think gets like a little bit
Speaker 1: more fragile. It's like, you know, I wouldn't worry so
Speaker 1: much about the fund being able to get its money
Speaker 1: back out of Apollo. I worry a little bit like Apollo,
Speaker 1: like making its funding model a little bit worse. But
Speaker 1: you can understand why they think it's worth the risk
Speaker 1: because one again, they're starting from nothing, so it's like
Speaker 1: day one, that risk is very small. Yeah, and then
Speaker 1: too if it gets really big, then it's a nice
Speaker 1: problem to have.
Speaker 2: I cannot wait to see how this is received. I
Speaker 2: mean day one is Thursday. I mean I can't wait
Speaker 2: to see what will look like on Monday, what it'll
Speaker 2: look like in two weeks, two months, et cetera, what
Speaker 2: the reception will be like.
Speaker 1: It's not that private credity. Yeah, very is like this
Speaker 1: hot asset class and subs. But it's also it's like, yeah,
Speaker 1: you get like, you know, slightly better than Bonder. Yeah.
Speaker 1: It's not like space X, right, It's not like a
Speaker 1: lottery ticket. Right, It's like, yeah, it's like a slightly
Speaker 1: higher fixed think of an investment.
Speaker 2: That's true, but still, I mean, it feels like there's
Speaker 2: been so much anticipation for this, certainly. I mean you
Speaker 2: think about the big splash that this filing made at
Speaker 2: the time. Maybe that was just a nice podcast as
Speaker 2: discussed on the Money Stuff podcast, I was not.
Speaker 1: Like hearing on the subway. People have been like, oh
Speaker 1: my gosh, did you see there's a private credit ETF coming.
Speaker 2: Well, this will be a good reality check to see
Speaker 2: whether this sort of lives up to the hype, at
Speaker 2: least in the ETF world. It's a big moment both
Speaker 2: for the ETF world but also for just the world
Speaker 2: of private assets.
Speaker 1: Oh yeah, I mean I do think and we've talked
Speaker 1: about this too. Like the idea that private credit won't
Speaker 1: trade on an electronic platform like m it was just
Speaker 1: like a weird like blip in time, Like there's no
Speaker 1: reason for that. Like in five years altho it would
Speaker 1: be like big electronic trading platforms for private credit loands
Speaker 1: like sure are why not? It's fine?
Speaker 2: Yeah. Also, if we stretch our imaginations, and this is
Speaker 2: something that I haven't really had time to do yet,
Speaker 2: But the fact that this is a partnership between you know,
Speaker 2: an ETF firm established ETF firm State Street with Apollo,
Speaker 2: which is acting as look provider. You could dream of
Speaker 2: how that model evolves. Some people, including morning Star, have
Speaker 2: pointed to we'll probably see more of these liquidity partnerships
Speaker 2: in the future.
Speaker 1: Yeah, although like that is also possibly transitional, right, And
Speaker 1: like in a world where like there is easy liquid
Speaker 1: trading of private credit, if you're an ETF provider and
Speaker 1: you're looking to start at private credit ETF, you'll pregner
Speaker 1: with like Chain Street or something. It's just like a
Speaker 1: liquidity provider, not an originator, right, but like for now
Speaker 1: the originators are they are the liquidity providers, and right
Speaker 1: every other originator is probably going to get into having
Speaker 1: an ETF.
Speaker 2: Yeah. Also, the fee seventy basis points is that high.
Speaker 2: I mean, it's not low, but considering the I don't
Speaker 2: know what the cost for a retail investor, like an
Speaker 2: average individual investor to get access to private credit now
Speaker 2: without an ETF would cost. I will say there's some
Speaker 2: like leverage single stock ETFs that cost more than one percent.
Speaker 2: So this is pretty I mean was for credib for
Speaker 2: a brand new product, a brand new category, actively managed
Speaker 2: obviously some many basis points. Is really cheap all things considered.
Speaker 1: Yeah, this is not their business, you know, Yeah, I
Speaker 1: think got a lot going on. This is a fascinating
Speaker 1: proof of concept for like, you know, Apollo is pushed
Speaker 1: to like be your one stop retirement provider, right yeah,
Speaker 1: and you know you don't need to make a lot
Speaker 1: of money on this one product in the.
Speaker 2: First week, but maybe they will. Okay, Bill Ackman, friend
Speaker 2: of the show, Bill Ackman making some interesting moves, trying
Speaker 2: to reinvent himself sort of sort.
Speaker 1: Of only sort of. It's so hard to understand what
Speaker 1: a hedgehund is. Like when I was like growing up
Speaker 1: in finance, like that dge fund managers where guys like
Speaker 1: Bill Aackman who like ran kind of concentrated equity ish
Speaker 1: activist ish you know, like got their got in the news,
Speaker 1: like got went on TV. And now like a hedge
Speaker 1: fund is more back to the classical hedged notion where
Speaker 1: it's like these much more you know, multi strategy, multi
Speaker 1: manager factor neutrol. Yeah, kind of quantity funds. But like
Speaker 1: back when like the kings of the hedgehund world were
Speaker 1: like the Bill Ackmans. It was like a lot of
Speaker 1: them kind of positioned themselves as success was to Warren Buffett,
Speaker 1: it was a hedgehund manager for a little while. Right,
Speaker 1: It's like you build an investment partnership where you make
Speaker 1: concentrated long term bets on stocks you really like, and
Speaker 1: you're smart and have a public persona and go on
Speaker 1: TV and that's your business. And like you're self consciously
Speaker 1: a like Graham and Dot value investor, and like you're
Speaker 1: sort of your your investing framework is kind of similar
Speaker 1: to Warren Buffett's. I think that one thing that Bill
Speaker 1: Ackman in particular has learned is that in addition to
Speaker 1: being good at Graham and Dodd and being folksy, Warren
Speaker 1: Buffett has a structural advantage. Like he runs a company
Speaker 1: and that's more useful to him than running a hedge fund.
Speaker 1: And in particular, it seemed to me that Bill Lackman
Speaker 1: really wants to have a thing that is his investment
Speaker 1: vehicle that trades at a premium and that people are
Speaker 1: like willing to pay up to have money managed by
Speaker 1: Bill Ackman. And it has been funny over the last
Speaker 1: year or two watching him like fail to achieve that
Speaker 1: with like his clothes end fund Ipo.
Speaker 2: Also heavily discussed on this pot I have discussed.
Speaker 1: On this podcast. And now what he wants to do,
Speaker 1: He's like, start over. We're gonna do Warren Buffet, We're
Speaker 1: gonna do Berkshire Hathway. We're going to do is we're
Speaker 1: going to buy a small, weird, random company and turn
Speaker 1: it into a gigantic investment vehicle for like Bill Ackman
Speaker 1: making some public stock investments, making some one hundred percent
Speaker 1: acquisitions of companies, just being Warren Buffett, just being an
Speaker 1: acchoir and an investor and a public figure. And I say, like,
Speaker 1: buy some random company. But it's not a random company.
Speaker 1: It's like Howard Hughes, which is a company that he
Speaker 1: has a long history of. It's like spun out of Dtart,
Speaker 1: which is one of his most successful investments. He was
Speaker 1: the chairman of the company for a while, and Pershing
Speaker 1: Square currently owns like thirty something percent of it. And
Speaker 1: what he wants to do now is one buy a
Speaker 1: little more, partly to get his take up and partly
Speaker 1: to just inject money into the company. And then too
Speaker 1: like become the head of the company and let the
Speaker 1: people who are currently running it's real estate business, be
Speaker 1: like one little segment of the company, and then let
Speaker 1: him and his investing team make investments for the company,
Speaker 1: make acquisitions for the company so that it can become
Speaker 1: a borkshare, so that in twenty years you'll think of
Speaker 1: Howard Hughes as a you know, insurance and tech and
Speaker 1: whatever company, and it's real estate will be an interesting
Speaker 1: historical side note. Well, that's also funny that, like it's
Speaker 1: called Howard Hughes like a guy's name and it's not
Speaker 1: real lacking. Yeah, that's the change in there.
Speaker 2: I was googling about it, and I kept getting the
Speaker 2: guy himself. It's not what I wanted. Yeah, it's a
Speaker 2: three point nine billion dollar arche cap company. It's heavily
Speaker 2: involved in real estate, including the seaport for our Manhattan
Speaker 2: natives here. You know what's funny is that they reported
Speaker 2: earnings today, which is Thursday when we're recording this, and
Speaker 2: I was reading through the earnings call and they did
Speaker 2: make a note that the Special Committee of our Border
Speaker 2: Directors is responsible for evaluating Pershing Square's most recent scheduled
Speaker 2: thirteen dfiling and the associated proposed transactions. Thus they will
Speaker 2: not answer any.
Speaker 1: Questions do I love it?
Speaker 2: Well, they got a question about it, obviously it did
Speaker 2: take a few questions to get there. But John Kim
Speaker 2: from BMO Capital Markets was the brave, brave analyst who
Speaker 2: spoke up and said, I was wondering if you could
Speaker 2: provide any sense at all as far as timing of
Speaker 2: when there will be an update, and I just wanted
Speaker 2: to confirm the transaction needs BORD approval and not shareholder
Speaker 2: approval to move forward. Question Mark CEO David Riley said
Speaker 2: that the Pershing Square thirteen DEEN filing is between the
Speaker 2: Special Committe in Pershing Square, and I'm going to leave
Speaker 2: any comments in timing or otherwise for them to opine on. So, yeah,
Speaker 2: scant detail.
Speaker 1: Actually, in my prior life, knowing whether that transaction buying
Speaker 1: like tennis percent of the company when you're already a
Speaker 1: thirty percent holder, Knowing whether that transaction required shareholder river
Speaker 1: was like a surprisingly large part of my prior life.
Speaker 1: But I've never forgotten. Let someone else figure that out.
Speaker 2: God, that would have been so good to bring to
Speaker 2: this pod.
Speaker 1: No, it's shockingly boring.
Speaker 2: That's what we aim for here at the Money Stuff Podcast.
Speaker 2: Shockingly boring. I have some questions. One, so it's a
Speaker 2: three point nine billion dollar company. It's a good company,
Speaker 2: he has a long history with it. Why not just
Speaker 2: take Pershing Square public?
Speaker 1: Wasn't no, No, because because you have to have a
Speaker 1: regular company. Okay, it's the real estate companies.
Speaker 2: It's like, take your hedge fund public and be this.
Speaker 1: Is what this is what he tried. He tried, I
Speaker 1: mean not the hedge fund, but he tried to take
Speaker 1: a close and fund public. Yeah, but it turns out
Speaker 1: that if you just have closed unfund, it won't trade
Speaker 1: at a premium, and then like all of the magic
Speaker 1: goes away.
Speaker 2: I thought that the closed end fund was launching as
Speaker 2: a step in taking Pershing Square itself public.
Speaker 1: Yeah, But taking Pushing Square itself public is is not
Speaker 1: quite the same thing, because when you take a hedge
Speaker 1: fund company public, you're capitalizing a fee stream. Yeah, And
Speaker 1: he doesn't want to sell a fee stream. He wants
Speaker 1: to sell a pot of investments at a premium. Right.
Speaker 1: It's now breaking my brand a little bit to think
Speaker 1: about taking a hedgehund company public and then in that
Speaker 1: hedge fund company buying assets. But it just seems it
Speaker 1: seems like a weird sort of cannibalism or something.
Speaker 2: Okay, not doesn't like it.
Speaker 1: I don't know why. But to me the question is like, Okay,
Speaker 1: you like Howard Hughes, but like there's three thousand companies
Speaker 1: out there, just by any one of them doesn't matter.
Speaker 1: Like we talked about like Brad Jacobs and QX out buying,
Speaker 1: like just like the most random software company to like, yeah,
Speaker 1: build his logistics upire out of it. It doesn't matter.
Speaker 1: They just get rid of the software company and then
Speaker 1: you have your you know, clean sheld to do logistics
Speaker 1: that far. I wrote once about GameStop in addition to
Speaker 1: being game Stop, it's like controlled by Ryan Cohen's the CEO,
Speaker 1: and like at some point they put an announcement being
Speaker 1: like he's going to be able to make equity investments
Speaker 1: with the company Treasure. It's like you can build Berkshire
Speaker 1: Hathaway out of game Stop, and you should because it
Speaker 1: will trade it at premium and people will love it. Right,
Speaker 1: But it's like that Ryan Cohen already has that one.
Speaker 1: But yeah, Bill Ackman could buy you know, all sorts
Speaker 1: of weird companies and turn them into Berkshire Hathaway.
Speaker 2: Yeah, I mean you did write in your column that
Speaker 2: someone suggested he buy Earl. Yeah, yeah, that would have
Speaker 2: been pretty good. I would love to add I mean
Speaker 2: I know that I can't that this is the matter
Speaker 2: of the Special Committee of the Board of Directors, but
Speaker 2: I would love to know how Howard Hughes feels about this.
Speaker 1: Right, it's weird because you're like here, you are trying
Speaker 1: to run your business.
Speaker 2: Yeah, trying to do your earning.
Speaker 1: School, like, no, we want to build yeah, totally unrelated
Speaker 1: hedge fund. Like if you're like running the textile mill
Speaker 1: that is Berkshire Hathaway and like Warren Buffett comes in
Speaker 1: and says, I'm going to build a business empire and
Speaker 1: like get rid of the textiles. I don't know. It's
Speaker 1: like a mixed bag. Yeah, it's like probably good for shareholders,
Speaker 1: but it's kind of weird. Yeah.
Speaker 2: I wonder if if this goes through, whether or not
Speaker 2: Bill Ackman would tweet us. But no, you thinkin maybe
Speaker 2: he'd tweets more.
Speaker 1: Oh yeah, more because you get like, like the thing
Speaker 1: you're aiming to do interested in. Yes, the thing you're
Speaker 1: aiming to do is like make investments and like be
Speaker 1: a creative to the value both of your investments and
Speaker 1: of like your vehicle. Howard huesed by, like people would
Speaker 1: be like ooh, you know, like yeah, you like Warren
Speaker 1: Buffett had the ability for a long time. It's like
Speaker 1: go to a company and be like, I will put
Speaker 1: a billion dollars into your company at like a thirty
Speaker 1: percent discount to your stock price, and the stock would double,
Speaker 1: and so it's like worth it to the company. And
Speaker 1: like Warren Buffett would make a lot of money off
Speaker 1: of it, right, Like he had like the self fulfilling
Speaker 1: prophecy ability right where he could invest money in a
Speaker 1: company and just that investment would make the company go up,
Speaker 1: and so he could like monetize that and like Blackman
Speaker 1: wants that too. And the way Blackman gets it is
Speaker 1: like one by like making good investments so that people
Speaker 1: like his track record, but then two by tweeting a lot.
Speaker 2: Right, well, let me let me refrace. Then I wonder
Speaker 2: if peopill tweet about different things. I don't know.
Speaker 1: I don't know either. I think that he thinks that
Speaker 1: this is working.
Speaker 2: Maybe it is. I will say, it's interesting to me
Speaker 2: reading this column and then preparing for this podcast. You know,
Speaker 2: I grew up just with Warren Buffett as Warren Buffett,
Speaker 2: and I haven't really thought deeply about his model before.
Speaker 2: How he did just buy a random company and start
Speaker 2: doing this.
Speaker 1: Yeah, it's like it's it's similar, like he was running
Speaker 1: a hedge fund and like they made an investment in
Speaker 1: this textile company and he got mad at them. I
Speaker 1: forget why he got mad at them. Yeah, they didn't pay.
Speaker 1: There's some like he had some fight with him and
Speaker 1: he's like, I'm just gonna buy some stock, and they
Speaker 1: bought enough stock that he controlled the company. Yeah, and
Speaker 1: then he's like, well, all right, I'm gonna take the
Speaker 1: treasury of this company and start making investments with him.
Speaker 1: And then like he became brick Sure Athora.
Speaker 2: Well, I don't know if I find it surprising or
Speaker 2: not that there haven't been more high profile successful Berkshire
Speaker 2: Hathaway types. I mean, we just talked about Brad Jacobs,
Speaker 2: for example, who's pretty well known, and I don't know,
Speaker 2: maybe Blackman will be the next Berkshire Hathaways.
Speaker 1: Yeah, I will say that, like Warren Buffett was kind
Speaker 1: of early runing hedge fund and in the nineties and
Speaker 1: certainly the two thousands and tens, and twenty twenties, if
Speaker 1: you were like good at making investment decisions, the idea
Speaker 1: that you would like take over a public company and
Speaker 1: invest that treasury and pay yourself, you know, one hundred
Speaker 1: thousand dollars a year is Buffett sort of nominally gets
Speaker 1: paid at Berkshire and like get all of your returns
Speaker 1: from the increase in the fundamental value of the company.
Speaker 1: Like people found a better model. Yeah, you can run
Speaker 1: hedge fund you charge two and twenty and like you
Speaker 1: can you know, make more exotic investments and you know,
Speaker 1: have maybe a better ties treatment and like get paid
Speaker 1: hundreds of millions of dollars a year. So the idea
Speaker 1: of people like wanting to follow exactly the Buffet path,
Speaker 1: like that kind of attenuated, and like why does ackman
Speaker 1: want to do it? Like some of it is just
Speaker 1: like he's made enough money and it's like sort of
Speaker 1: like a legacy slash, you know, experimentation kind of.
Speaker 2: Yeah, I don't know the man obviously not well, it
Speaker 2: just feels like he wants to be in control of
Speaker 2: some publicly traded entity. I don't know.
Speaker 1: I think that's right. I think that like he's had
Speaker 1: a good run as being a guy who is mainly
Speaker 1: a manager of private hedsphones and there's made a lot
Speaker 1: of money doing it, and now it's like this is
Speaker 1: somehow more of a satisfying public facing thing. Yeah.
Speaker 2: I mean it's hard to understand not being incentivized necessarily
Speaker 2: by money.
Speaker 1: But I suppose when you have you get to appoint man. Yeah,
Speaker 1: I feel like I'm sure the money.
Speaker 2: In this, like he'll be fine. Yeah, all right, Matt,
Speaker 2: we decided on this topic, Yeah, pretty much. So I'm
Speaker 2: a little bit unprepared, but I'm so excited to hear
Speaker 2: you tell me about it.
Speaker 1: Info Wars. We tied once about info Wars before we did,
Speaker 1: when the Onion was going to buy them, or rather
Speaker 1: they wanted to Global Tetra Heton was going to buy them.
Speaker 1: So Global Tetra Heaton, which is like the trade name
Speaker 1: of the Onion, was going to buy info Wars out
Speaker 1: of bankruptcy. It's like Alex Jones, the Info Wars guy,
Speaker 1: is in bankruptcy because he has spread conspiracy theories and
Speaker 1: hoaxes about the Sandy Hook Elementary School of massacre, and
Speaker 1: the families of the victims suit him and got like
Speaker 1: a billion dollars of judgments and so now he's in
Speaker 1: bankruptcy because he doesn't have a billion dollars and his
Speaker 1: main asset is info Wars has like you know, YouTube platform,
Speaker 1: and the bankruptcy court has been trying to sell that
Speaker 1: to raise money to give to these essentially Santay Hook
Speaker 1: victim families. And we talked about it because the Onion
Speaker 1: had bid to buy it, and the idea is that
Speaker 1: the Onion would like a little bit of cash for it,
Speaker 1: but mostly they would run it on behalf of the
Speaker 1: Sandiog families essentially both economically and also like to not
Speaker 1: promote right wing conspiracy theories but to instead promote gun control. Yeah,
Speaker 1: so that fell through for what I thought were kind
Speaker 1: of technical administrative reasons, but like it seems to have
Speaker 1: really fallen through. When we talked about it, I was like, yeah,
Speaker 1: the Onion can just come back and bid again, but
Speaker 1: didn't seem to work out that way. So now like
Speaker 1: the only bidders are Alex Jones himself in a fake mustache,
Speaker 1: you know. Yeah, there's a thing called Fuak that's basically
Speaker 1: like some backer of Alex Jones will give him money
Speaker 1: to buy his company back. And this thing called wow
Speaker 1: dot Ai that's like a Puerto Rican artificial intelligence. It
Speaker 1: was like some sort of thing, you know. But its
Speaker 1: bid is some cash and a meme coin. It has
Speaker 1: launched a meme coin called wars that it wants to
Speaker 1: use to pay for in four warst and the idea
Speaker 1: is that it has like this mean coin all meme coins.
Speaker 1: It's like they issue like ten percent of the meme
Speaker 1: coin and they're like, we've reserved fifty percent for some
Speaker 1: weird purpose. So this one, they preserve fifty one percent
Speaker 1: for the bankruptcy state. They're going to give it to
Speaker 1: the bankruptcy estate. It's going to be part of their bid. Yeah,
Speaker 1: so like the credit Basically, Sandy Hook families will end
Speaker 1: up owning this meme coin and they would buy the side,
Speaker 1: and then the holders of the mean coin could vote
Speaker 1: on what they would do with the side with I
Speaker 1: guess the choices be like let Alex Jones run it,
Speaker 1: or like let the onion run it. Yeah, And that's
Speaker 1: their bid and that's the plan.
Speaker 2: So you seem to write that this is pretty clever.
Speaker 1: You got to read the whole sentence. Who says you
Speaker 1: know how much I hate to say this because I
Speaker 1: hate meme couns. Yeah, And the thing that is happening
Speaker 1: here at its core is like someone thought, hey, it
Speaker 1: would be good to like pre sell stock in in forest,
Speaker 1: Like would we get to try to buy it for
Speaker 1: worse and like raise the money to do it from
Speaker 1: the public, and like that would give us the money
Speaker 1: to do it, and then the public can have a
Speaker 1: say and how we run info Wars. But you can't
Speaker 1: do that because like there are securities laws. But now
Speaker 1: there are no securities laws as long as you call
Speaker 1: it a token. And so what they have done here
Speaker 1: is they've pre sold stock in like their new info
Speaker 1: Wars company and call it a meme coin. And it
Speaker 1: has some like very clever properties. Right, you can create
Speaker 1: a dynamic where people are going to bid up the
Speaker 1: price because some people want it to be run one way,
Speaker 1: people wanted to run another way, and so there's some
Speaker 1: auction dynamic where people will pay more to get the
Speaker 1: outcome they want. And you've sold like a relatively small
Speaker 1: number of the tokens, and you've reserved a large number
Speaker 1: of the tokens, so you can say, oh, the fully
Speaker 1: diluted value of this thing is very large because like
Speaker 1: the small number of tokens trade trade it like a
Speaker 1: relatively high price, and so it's you know, it's not
Speaker 1: like trump coin, but you know, I look this morning
Speaker 1: and like the fully diluted value is like twenty three
Speaker 1: million dollars, which is like implies eleven million dollars for
Speaker 1: the Sandy Hook victims, which is more than they'd get
Speaker 1: from wuck. It's not necessarily a real value, right, because
Speaker 1: it's like it's a thinly traded meme coin there, Like
Speaker 1: the main thing about meme coins is like their value
Speaker 1: disappears over night. Let's still so like it creates like
Speaker 1: a lot of paper value, and it creates it in
Speaker 1: a somewhat clever way, and it just gets around the
Speaker 1: securities laws because everyone's decided securities laws don't apply to
Speaker 1: crypto anymore. Yeah, so it's clever, but not in a
Speaker 1: way that like I like.
Speaker 2: Yeah, yeah, like got to give it to them, But
Speaker 2: do you have to you do kind of kind of
Speaker 2: have to give it to them? A question that I
Speaker 2: have a statement, So explain this to me one more time.
Speaker 2: So the bid is for three point five million dollars
Speaker 2: in cash plus fifty one percent of the total maximum
Speaker 2: supply of the War's meme coin, So info Wars would
Speaker 2: control the meme coin, and then the remaining the mean
Speaker 2: crain is.
Speaker 1: Like I think like ten percent of the meme clign
Speaker 1: has been like just sold. Yeah, it's like issued to
Speaker 1: the public, and you can trade it, right, right, So
Speaker 1: that creates a price, right right, Like there's trading. Anyone
Speaker 1: who wants to can own it. Creates a price. They
Speaker 1: can you know, in theory, vote on whatever they if
Speaker 1: they end up buying info Wars, then the holders of
Speaker 1: the token can vote, so like ten percent or so
Speaker 1: is public, and then like some percentage of it has
Speaker 1: been reserved for like the guy doing this right wowed
Speaker 1: out AI the company, right, and then fifty one percent
Speaker 1: has been reserved for the bid. The bid would be
Speaker 1: in exchange for info Wars will give the bankruptcy a
Speaker 1: state three point five million dollars in cash and fifty
Speaker 1: one percent of this token. And then the bankruptcy state
Speaker 1: meaning the creditors meaning the Sandiak parents would get those tokens,
Speaker 1: and there's like some lock up on how one that
Speaker 1: could sell them. Okay, but the idea is like the
Speaker 1: bankruptcy state the creditors would let's say share in the
Speaker 1: economics of future info wars by owning this meme coin. Now,
Speaker 1: when I say share in the economics, I'm like rolling
Speaker 1: my eyes because.
Speaker 2: That actually said that with a completely straight faced.
Speaker 1: On the inside. Yeah, you can't see me rolling my eyes,
Speaker 1: and neither conm kiddie. But the whole thing about meme
Speaker 1: coins is that a meme coin is like it's like
Speaker 1: linked to the value of this being, but like not
Speaker 1: through any methods. Right, It's just like, yeah, maybe it is, right, Like,
Speaker 1: it's just like if people feel like it's linked to
Speaker 1: the value of the meme, then it's linked to the
Speaker 1: value of the meme, but it has no like ownership
Speaker 1: of the meme, right, And so like here that meme
Speaker 1: coin is not It does not entitle you to cash
Speaker 1: flows from intro wars. It's just like a meme coin.
Speaker 1: That's the thing. It's like a weird kind of stock
Speaker 1: that doesn't convey ownership.
Speaker 2: I was going to say, this coin or token or
Speaker 2: whatever we're calling it has clearer fundamentals than most anything else, yes.
Speaker 1: But still no fundamentals. Yeah, I agree with you, clearer
Speaker 1: fundamentals than most mime points, but still not Yeah.
Speaker 2: You would have an easier time building a case for
Speaker 2: why this has fundamentals though, then yeah.
Speaker 1: Because it gives you voting rights over a thing that
Speaker 1: you care about. Yeah right, Like, I mean, you don't
Speaker 1: have to care about it, but like the people trading
Speaker 1: it probably care about it.
Speaker 2: Right.
Speaker 1: It gives you voting rights about what will happen with
Speaker 1: this like culturally salient and controversial property. Right, So it
Speaker 1: does have fundamentals, but it doesn't have cash flows. And
Speaker 1: so they can say with a somewhat straight face, it's
Speaker 1: not stock, it's not a security. It's not an investment.
Speaker 1: By the way, if like their bid fails, it just
Speaker 1: goes away. Yeah, that's nothing happens.
Speaker 2: I was just gonna ask, So, if you care about this,
Speaker 2: you would buy this coin now in hopes of having
Speaker 2: voting rights in the future. If this doesn't work, then
Speaker 2: it doesn't work. He's well, you tried. Yeah, that's interesting.
Speaker 1: It's not like you know, you would imagine doing this
Speaker 1: like ten years ago, going to an investment bank and
Speaker 1: trying to build a structure that allowed you to like
Speaker 1: prefund your bit and where it's like yo, you put
Speaker 1: the money in escro and then like you give it
Speaker 1: back if the bid fails, like, there's not I here.
Speaker 1: It's just like a mean point. If it fails, it
Speaker 1: goes to zero. It doesn't matter.
Speaker 2: How do you think the bankruptcy judge is reading this?
Speaker 1: I assume he's rolling his eye on the inside too.
Speaker 1: I don't really know. I don't understand the process there,
Speaker 1: because he's sort of like giving up on doing an option.
Speaker 1: But uh, the mean cooin guy said to I think
Speaker 1: the Wall Street Journal. He said, like, I put in
Speaker 1: a three point five million dollar cash component to the bed,
Speaker 1: which is was what Fuak offered at one point. Is
Speaker 1: I put in that cash component so that people would like,
Speaker 1: would take me seriously? Yeah, because like I think if
Speaker 1: you just showed up bidding a meme coin, people would
Speaker 1: not take you seriously at all. And I don't think that.
Speaker 2: Would you still have written about it.
Speaker 1: I don't know that I would have taken it seriously.
Speaker 2: Wow, there you haven't.
Speaker 1: But right, I don't know how the tanks is gonna
Speaker 1: take it whatever rot on Thursday, Like this is gonna
Speaker 1: be a thing, right, Like I feel so stupid saying this,
Speaker 1: but like this is a good financing mechanism for this situation, right,
Speaker 1: for like the situation where you're like bidding in bankruptcy
Speaker 1: and you don't know if you're gonna win, and you're
Speaker 1: bidding for a relatively small, controversial online like right wing
Speaker 1: memi property using a meme coin to fund that, Like
Speaker 1: it's like it's like fit for purpose. Yeah, and so
Speaker 1: you probably are gonna see like a ton of situations
Speaker 1: where that applies. For this will be the last one.
Speaker 2: It's bread new world.
Speaker 1: You know, like the Red Lobster bankruptcy. Someone could have
Speaker 1: come in with a meme coin, like you know, like
Speaker 1: it's a thing.
Speaker 2: Not if only if they had been able to hold
Speaker 2: out for another year, shrimp shrimped to death.
Speaker 1: And that was the Money Stuff Podcast.
Speaker 2: I'm Matt Livian and I'm Katie Greifeld.
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