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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to

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Speaker 1: The Money Stuff Podcast, your weekly podcast where we talk

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Speaker 1: about stuff related to money. I'm Matt levian Ton I

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Speaker 1: write the Money Stuff column for.

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Speaker 2: Bloomberg Opinion, and I'm Katie Greifeld, a reporter for Bloomberg

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Speaker 2: News and an anchor for Bloomberg Television. Welcome back, Katie,

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Speaker 2: Welcome back, Matt. You didn't go anywhere, but in my mind,

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Speaker 2: I took a vacation from me. Yeah, it's been a minute.

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Speaker 1: For the listener's service has continued uninterrupted, but for us,

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Speaker 1: it's been two weeks.

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Speaker 2: I know, I know. I had to remember how to

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Speaker 2: anchor television this morning. I'm currently trying to remember how

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Speaker 2: to record a podcast. Yeah.

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Speaker 1: No, I also forgot in the in our week off,

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Speaker 1: it was yeah. Yeah.

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Speaker 2: The way this usually goes, though, is we have three topics.

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Speaker 1: Sure, yeah, what are those three topics today? Katy?

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Speaker 2: So we're gonna talk about endeavor. You're on a three

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Speaker 2: day streak of writing about the steal an endeavor. We're

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Speaker 2: going to talk about the Baby Berkshire boom because that

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Speaker 2: is underway, and then we're going to talk about public

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Speaker 2: private prices, Endeavor. I think when we first spoke about

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Speaker 2: this steal, we ended with something close to watch this

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Speaker 2: space because it was going to close on March twenty fourth,

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Speaker 2: and it did.

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Speaker 1: Right. It's funny like I sometimes will write an m

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Speaker 1: and a deal will have a lot of drama, and

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Speaker 1: so I'll write about it successively for days or weeks.

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Speaker 1: Nothing's really happened in this deal, like Monday, Like, nothing's

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Speaker 1: happened since like, this company doesn't need this right. So

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Speaker 1: Endeavor is a company. It went private. There was like

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Speaker 1: a long lead up to it going private, Like they

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Speaker 1: signed their deal about a year ago, silver like the

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Speaker 1: biggest shareholder agreed to take it private at twenty seven

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Speaker 1: dollars and fifty cents per share, and they announced a

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Speaker 1: few weeks ago that it was going to close this

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Speaker 1: month day, March twenty fourth, and then this Monday, March

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Speaker 1: twenty fourth, it closed at twenty seven to fifty per share,

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Speaker 1: exactly on schedule. So not really a lot of news there.

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Speaker 1: But what was weird is that the previous week it

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Speaker 1: traded well above twenty seven fifty per share, and in fact,

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Speaker 1: the last day before the closing on Friday, it closed

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Speaker 1: at twenty nine dollars and twenty five cents a share,

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Speaker 1: so like a buck seventy five over the merger price,

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Speaker 1: and like a lot of shares traded, and you know,

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Speaker 1: if you know you're going to get cash that at

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Speaker 1: twenty seven to fifty on Monday, it's a little weird

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Speaker 1: to buy this stock at twenty nine to twenty five

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Speaker 1: on Friday. And you know the reason for that seems

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Speaker 1: to be that everyone expects there to be a class

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Speaker 1: action lawsuit saying that the deal was underpriced and they're

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Speaker 1: looking forward to getting in on that class action.

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Speaker 2: Yeah, you had three possibilities.

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Speaker 1: Yeah, So when we talked about it this last time,

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Speaker 1: there's a lot of noise about appraisal, which is one

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Speaker 1: way you can basically sue for a better price. But

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Speaker 1: to do that you have to like demand appraisal, and

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Speaker 1: there are reasons that can be advantageous to you, but

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Speaker 1: like one problem with it is you need to have

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Speaker 1: owned the stock continuously since like early February. The other

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Speaker 1: way to sue to get a better price is just

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Speaker 1: a class action lawsuit saying that the board that approved

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Speaker 1: the deal was like failing in its footy share I

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Speaker 1: duties to shareholders, and here that's like a pretty tempting

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Speaker 1: lawsuit because you know, as you talked about last time,

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Speaker 1: the deal price turned out to look really low. You know,

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Speaker 1: Endeavour's main asset is shares of another publicly traded company, right,

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Speaker 1: that company traded up a lot, So by now the

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Speaker 1: deal price for Endeavor looks really low, and you know

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Speaker 1: it's being bought by its controlling shareholder, so there's always

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Speaker 1: a conflict of interest there. There wasn't a vote of

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Speaker 1: the independent shareholders, like no, like independent person really ratified

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Speaker 1: the price, right, like the board did, but like the

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Speaker 1: shareholders didn't. So you know, there's a lot of a

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Speaker 1: lot of stuff for a lawsuit, and people seem to

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Speaker 1: be valuing that lawsuit at about a buck seventy five

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Speaker 1: a share.

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Speaker 2: We'll clear this up for me because I was a

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Speaker 2: little bit confused. So there's a possibility of a class

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Speaker 2: action lawsuit, but that is different than the appraisal.

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Speaker 1: Yeah, the appraisal is like this price should have been higher, right,

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Speaker 1: it doesn't require any like allegations of wrongdoing. The class

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Speaker 1: action lawsuit is like the board didn't do its fiduciary

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Speaker 1: duty for shareholders, but in this sort of conflicted situation,

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Speaker 1: like they almost get to the same place, and it's

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Speaker 1: a little bit easier to do the class action because

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Speaker 1: you don't have to have held the shares continuously.

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Speaker 2: So your third explanation was people might have thought.

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Speaker 1: That Silverlake would recut the deal to give people a

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Speaker 1: better price. But I don't know why they would have

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Speaker 1: thought that, because silver like did say they wouldn't do it,

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Speaker 1: and then they didn't do it.

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Speaker 2: So it looks like the possibility that your readers seem

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Speaker 2: to agree with was that maybe you bought the stock

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Speaker 2: getting on this lawsuit happening.

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Speaker 1: You bought the stock thinking a lawsuit would happen, that

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Speaker 1: you wanted to be in that lawsuit because you thought

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Speaker 1: that lawsuit was worth more than a buck seventy five

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Speaker 1: a share.

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Speaker 2: Maybe that's what carl Icon did.

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Speaker 1: I would be surprised if there was any other reason

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Speaker 1: for it. But yeah, Carlaikon bought about eight percent of Endeavor.

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Speaker 1: It's not exactly clear when because the disclosure doesn't have

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Speaker 1: like the trading records, but it kind of seems like

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Speaker 1: he bought it all on Friday.

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Speaker 2: As of Friday, he had eight point four percent.

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Speaker 1: Yeah. Yeah, and there's a lot of shares traded on Friday,

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Speaker 1: Like he might have bought all of his shares on Friday,

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Speaker 1: might have been why the stock spiked, but any caayse Yeah,

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Speaker 1: he seems to have bought the stock fairly recently. And

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Speaker 1: he's carl iik On like he doesn't mind a lawsuit. No,

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Speaker 1: he doesn't mind getting his hands a little dirty. And

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Speaker 1: you know I wrote on Thursday, like, if you're a

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Speaker 1: shareholder who was hoping to get it in on a lawsuit,

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Speaker 1: like you gotta feel good about this, right, He's gonna

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Speaker 1: have some fun with that lawsuit. Yeah, carlaike On on

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Speaker 1: your side complaining about the deal price. I don't know.

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Speaker 1: It sounds like an encouraging fact.

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Speaker 2: Makes for good TV, makes for podcasting. So perhaps carl

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Speaker 2: Icon wanted in on this lawsuit specifically, But there's also

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Speaker 2: the possibility that maybe short sellers wanted out question Mark.

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Speaker 1: I really don't know. There's a weird, fascinating history of this,

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Speaker 1: so like this is not the first deal that's kind

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Speaker 1: of gone like this, where there's been a going private transaction.

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Speaker 1: It looks kind of conflicted. Shareholders are disgruntled. The stock

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Speaker 1: trades above the deal price right until the last minute,

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Speaker 1: and then the deal closes, and the shareholders sue, and

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Speaker 1: like years later down the line, they win their lawsuit

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Speaker 1: and they get some money. In that case, if you

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Speaker 1: see a stock trading at twenty nine dollars a share

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Speaker 1: and you know that it's going to be cashed out

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Speaker 1: at twenty seven to fifty on Monday, you might be

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Speaker 1: tempted to sell that stock short. Because you sell it

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Speaker 1: for twenty nine dollars, you pay back the twenty seven

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Speaker 1: to fifty on Monday, you make an easy buck fifty.

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Speaker 1: So in a lot of these deals, they end up

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Speaker 1: the deal closes and there's some number of shorts, and

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Speaker 1: the shorts make a quick profit because the deal closes

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Speaker 1: it below the last trade price, and so like if

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Speaker 1: they short aed it above the deal price, they make

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Speaker 1: it quick profit and then they go about their business.

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Speaker 1: And years later the class action lawsuit gets decided in

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Speaker 1: favor of the shareolders, and someone like they're broker comes

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Speaker 1: to them and says, remember that deal that closed the

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Speaker 1: twenty seven to fifty, and you paid twenty seven to

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Speaker 1: fifty because you were short. Actually the real deal price

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Speaker 1: is thirty two dollars, so you owe us another four

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Speaker 1: p fifty there's a lot of like lower on this,

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Speaker 1: and it's not clear like what the actual rules are.

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Speaker 1: My understanding is there are people who have done this

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Speaker 1: trade and like years later the brokers have come to

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Speaker 1: them and said you owe us more money and they said, no,

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Speaker 1: we don't. We close that are short. What are you

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Speaker 1: even talking about? This is not a corporate action that

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Speaker 1: we owe money on. And there are some like finra

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Speaker 1: arbitrations where the customers and the brokers have gone to arbitration,

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Speaker 1: and it's kind of I think, gone both ways. There

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Speaker 1: are some where the customers have lost, but some I

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Speaker 1: think where they've won. So there's like an interesting trade

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Speaker 1: here where you can like make a free, risk free

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Speaker 1: profit on your short and years later try to steff

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Speaker 1: your brokers so you can keep the profit. But it's

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Speaker 1: you know, a little dicey.

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Speaker 2: Yeah, but I don't know, for a good two to

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Speaker 2: three years you did make a profit on that, and

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Speaker 2: that has to feel somewhat good.

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Speaker 1: Yeah. I get a lot of emails from people to

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Speaker 1: be like what if I did this? What if I

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Speaker 1: moved out of state? You know, there's a lot of

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Speaker 1: you know, it's easy to imagine how you enjoyed your

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Speaker 1: broker's phone call in three years, right, Yeah, I think

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Speaker 1: people are very interested in that trade.

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Speaker 2: Okay, So where does this go for here? Like you said,

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Speaker 2: usually I keep.

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Speaker 1: Looking for the lawsuit.

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Speaker 2: I haven't seen, like the lost class action loss.

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Speaker 1: Yeah, usually like you know, lawyers or nut pressure.

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Speaker 2: So why is that more likely, just judging from the

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Speaker 2: tone of this conversation than appraisal.

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Speaker 1: Oh, just because like so many shares have traded hands

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Speaker 1: after the appraisal deadline. So like, if you're buying shares

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Speaker 1: at twenty nine dollars last week, yeah, you couldn't be

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Speaker 1: doing it for appraisal because you wouldn't get appraisal. You

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Speaker 1: could have to be buying into the loss of the

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Speaker 1: class action.

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Speaker 2: Could there be both?

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Speaker 1: Yeah, there could be. Okay, the big case that I

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Speaker 1: read about was Dole, and there were both appraisal. They're

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Speaker 1: not the same thing. You could imagine an appraisal court

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Speaker 1: saying oh, the actual value of the company was this,

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Speaker 1: and the class action court saying, oh, like the fiduciary

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Speaker 1: duties you know were violated and that's where this you know,

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Speaker 1: like they're not the same thing at all, but like

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Speaker 1: you know, they're kind of roughly the same idea, which is,

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Speaker 1: you underpaid for this company, give us more money.

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Speaker 2: So it seems like this continues to be a watch

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Speaker 2: this Space situation. There's the promise of drama. It just

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Speaker 2: hasn't necessarily happened.

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Speaker 1: Weird if nothing happened, because people for drama, right.

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Speaker 2: May be kind of beautiful though, if truly nothing, If

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Speaker 2: everyone was like.

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Speaker 1: I think this is a dollar seventy five a shared lawsuit,

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Speaker 1: looking forward to that lawsuit, I actually remember STI follow

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Speaker 1: the lawsuit and it just goes away.

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Speaker 2: I kind of was just like, I don't know, I

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Speaker 2: feel possessed to buy eight point four percent of the

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Speaker 2: shares on Friday.

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Speaker 1: I was hoping someone else will bring a lawsuit.

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Speaker 2: I'm feeling shy now.

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Speaker 1: I told you that I went to the Blue experience.

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Speaker 2: That we've almost certainly talked about this. Did I remember that?

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Speaker 1: No?

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Speaker 2: But tell me about it.

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Speaker 1: They like build Blue's house in a building near Union Square.

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Speaker 2: That sounds kind of fun.

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Speaker 1: I really like that.

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Speaker 2: Yeah. Yeah, I can have my own children to watch Blue.

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Speaker 1: I say, it's very much like a show for parents. Yeah,

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Speaker 1: it's it's very mature. You know what else is uh

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Speaker 1: very mature? The business model?

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Speaker 2: Yeah?

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Speaker 1: Oh, yeah, oh, here we go.

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Speaker 2: What do you got?

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Speaker 1: What do I got? KKRL?

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Speaker 2: Yeah, not just regular holdings, but strategic holdings, holdings that

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Speaker 2: they will hold for a while, is the plan. Yeah,

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Speaker 2: I've got about eighteen of them.

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Speaker 1: Eighteen right. So KKR is like historically a leverage biot

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Speaker 1: firm where they manage funds, They raise funds from limited partners,

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Speaker 1: They take those funds and they equity checks to do

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Speaker 1: leverage biots. They borrow money to buy companies. They take

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Speaker 1: over the companies, they lever them up, they improve their operations,

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Speaker 1: they strip off the stuff they don't want, They incentivize managers,

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Speaker 1: they get everything all nice, and three to five years

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Speaker 1: later they take them public again or sell them and

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Speaker 1: get a big check that they return to their limited

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Speaker 1: partners and you know, take twenty percent for themselves. Like

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Speaker 1: that's the traditional LBO business model. And you know all

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Speaker 1: these like LBO pioneers of the eighties and nineties like

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Speaker 1: are now giant public companies like KKAR, and they run

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Speaker 1: funds for investors. Like now the term is alternative asset

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Speaker 1: managers because they do a lot besides classic leverage biotes.

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Speaker 1: But they still basically do that kind of model where

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Speaker 1: they run funds and take twenty percent, and KKR is shifting,

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Speaker 1: let's say, or like introducing more of a model where

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Speaker 1: what they do is they just on their own balance

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Speaker 1: as a company, buy stakes and companies or infrastructure projects

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Speaker 1: or whatever, and just own them forever and they're just

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Speaker 1: part of the company. They're like a big industrial conglomerate.

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Speaker 1: That's an interesting shift.

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Speaker 2: Yeah, the logic here, I mean, looking at Alison mcneely's story,

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Speaker 2: KKR has this plan to quadruple its earnings for sure

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Speaker 2: over the next decade. Strategic holdings would be a strategic

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Speaker 2: part of that. They also want to build a portfolio

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Speaker 2: that kicks off more than a billion dollars a year

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Speaker 2: in dividends. So it's different from the fee model, of course.

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Speaker 1: It's you know, one thing I write is that the

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Speaker 1: ultimate success for a hedge fund is to get rid

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Speaker 1: of all of your outside investors and convert to a

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Speaker 1: family office because you've just made so much money for

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Speaker 1: yourself that you'd rather earn one hundred percent of the

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Speaker 1: returns on your investments than.

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Speaker 2: They get it.

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Speaker 1: It's like a little bit like that, right. The fee

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Speaker 1: model is good enough that ky Care has made a

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Speaker 1: lot of money and where they do that money. Well, well,

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Speaker 1: one thing you do is you transition from being a

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Speaker 1: service writer who collects twenty percent to being just an

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Speaker 1: asset owner and a capitalist, right and you just own

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Speaker 1: the companies instead of owning the twenty percent promote on them.

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Speaker 1: It's like, one way to analyze what they're doing here

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Speaker 1: is like it has been a good enough business for

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Speaker 1: long enough that now instead of KKR being like, we're

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Speaker 1: going to manage funds to buy companies, they'll be like,

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Speaker 1: we'll just buy the companies. But it's different for being

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Speaker 1: a family office because like most hedge funds are, like

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Speaker 1: the hedge fund management company is privately owned, and transitioning

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Speaker 1: to a family office means like the guy who owned

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Speaker 1: the hedge fund now owns all the investments here. KKR

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Speaker 1: is not like a guy or even the three you know, Colbert, Cravis,

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Speaker 1: and Roberts. It's a public company. So the public company

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Speaker 1: is sort of becoming its own family office. And like

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Speaker 1: the public company is going to own all these investments

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Speaker 1: directly rather than taking fees to run a fund.

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Speaker 2: In a way, it's beautiful, just the natural evolution of things.

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Speaker 2: Don't we all aspire to something similar.

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Speaker 1: In some ways, it's like the whole private equity business

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Speaker 1: has done this right. Like private equity was like a small,

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Speaker 1: scrappy business taking over like poorly managed companies and like

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Speaker 1: making them more efficient, and that was like so wildly

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Speaker 1: lucrative for so long. And now it's like, we have

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Speaker 1: all this money, we could just own the companies ourselves.

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Speaker 1: We don't need to run funds anymore. Like that's not

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Speaker 1: you know, it's an exaggeration because most of them, including KKR,

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Speaker 1: mostly run funds. But like there's this shift to like

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Speaker 1: we can own stuff on our balance sheet.

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Speaker 2: Yeah, in a way, I feel really drawn to this.

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Speaker 2: I think I've talked before on this podcast how I

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Speaker 2: really like and admire the old school strategy of just

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Speaker 2: stock picking. This is a little bit different, but you're right,

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Speaker 2: it's sort of the same basis.

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Speaker 1: Like old school private equity is like people and I

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Speaker 1: would disagree with this, but it's a financial engineering story, right,

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Speaker 1: and so like we can put more leverage on this

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Speaker 1: company than the public markets can, right, But this is like, yeah,

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Speaker 1: we like that business, let's own it forever.

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Speaker 2: Yeah, think about it. It's gonna compound over time and

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Speaker 2: become better and you just got to be patient and

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Speaker 2: we're gonna hold this for a few decades.

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Speaker 1: Now. I'm with you. I also admire the business to

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Speaker 1: my mind, like what better job could you possibly have

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Speaker 1: than like waking up and being like, here are twelve

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Speaker 1: stocks I want to own, I will buy them, and

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Speaker 1: my job is over the rest of my life.

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Speaker 2: The answer is right in front of you being a podcaster, obviously,

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Speaker 2: but I take your point. I find it really compelling.

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Speaker 2: And of course this comes as KKRS freeze this. The

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Speaker 2: co CEO said at Bloomberg invest earlier in March that

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Speaker 2: basically it's in some ways to become a mini Berkshire Hathaway. Sure,

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Speaker 2: everyone wants to bearned about it, including friend of the

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Speaker 2: show Bill Ackman. I think it is interesting that you

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Speaker 2: do have at least a size of two folks saying

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Speaker 2: that we are basically wanting to model ourselves after Berkshire Hathaway.

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Speaker 1: You're so young. I feel like, well, you know, people

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Speaker 1: wanting to be more in Buffett. It's like a lung

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Speaker 1: steady but in the past, like Joe Bay and like

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Speaker 1: Bill grew up in a world where like the pinnacle

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Speaker 1: of investing was Warren Buffett right, I do wonder.

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Speaker 2: I mean, I kind of grew.

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Speaker 1: I want to be Warren Buffett, but I don't know.

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Speaker 2: There was that time during the pandemic where Buffett was

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Speaker 2: getting dunked on a lot by like the Dave portnoise

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Speaker 2: of the world. But I feel like he's back in vogue.

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Speaker 1: But he's certainlygue among friend of.

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Speaker 2: The shop Bill Lackman, like that crowd.

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Speaker 1: Yeah, why wouldn't you want to be Berkshire Hathway.

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Speaker 2: I want to talk about their current lineup of investments. So,

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Speaker 2: as I mentioned, eighteen includes lens retailer one eight hundred Contacts,

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Speaker 2: which actually texted me today to tell me that it's

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Speaker 2: time to order eight hundred dollars worth of contacts again,

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Speaker 2: cybersecurity company Barracuda Networks, also Australian stack food manufacturer, our

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Speaker 2: Nose Group, our Knots Group. But anyway, again it's just

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Speaker 2: I mean one eight hundred Contacts. That's a household name.

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Speaker 2: But it's cool because it's not like flashy like AI

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Speaker 2: sort of stuff, at least from what I can tell

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Speaker 2: from Alison mcneely's article. Yeah, I could keep going.

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Speaker 1: Those are sort of like you know, those are like

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Speaker 1: classic private acuity kind of investments, right, Like, yeah, I'm glamorous,

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Speaker 1: like nice cash flow kount of companies. But you know

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Speaker 1: now they just done them directly.

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Speaker 2: Yeah for me an absolute consumer stable just check about

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Speaker 2: hundred contacts, you.

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Speaker 1: Are a reliable source of cash flow for kake cars.

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Speaker 2: Strategic holdings just a little more color there. They own

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Speaker 2: an average twenty percent stake in these eighteen firms. That

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Speaker 2: is about three point seven billion dollars of revenue nine

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Speaker 2: hundred million dollars of adjusted earnings, which is a small

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Speaker 2: share overall of their operating earnings right now. But they're

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Speaker 2: predicting those strategic holdings will generate one point one billion

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Speaker 2: by twenty thirty.

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Speaker 1: The main way I think about this bet is like

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Speaker 1: when you generated enough money during a like high fee,

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Speaker 1: high return financial services business, like you can just use

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Speaker 1: that money to own things yourself. But there's also like

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Speaker 1: you do wonder if there's like pressure on those fees

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Speaker 1: or those returns, right, Like private equity in the eighties,

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Speaker 1: there's a lot of low fruit. Later vintages of funds

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Speaker 1: have not always returned as well, And like you know,

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Speaker 1: people talk about how there's pressure on private equity exits

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Speaker 1: now and you don't hear a ton about fee pressure

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Speaker 1: and private equity, but you hear that something every now

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Speaker 1: and then, Like you might be one of these alternative

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Speaker 1: asset matters looking around and saying, like, you know, the

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Speaker 1: long term trend of like financial services fees are like

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Speaker 1: you know, Kitty Greyfeld keeps telling me that you can

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Speaker 1: get an ETF for one basis point. It's common if

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Speaker 1: you think, like, you know, in twenty years, what will

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Speaker 1: our earnings makes look like you might say, like we

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Speaker 1: might earn lesson fees, but we'll own all these companies

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Speaker 1: that like sell contacts to Katy Greifeld, so we can

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Speaker 1: we can we can get our money that way, right,

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Speaker 1: Like if you think that fees over time will come down,

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Speaker 1: like owning businesses is the way to avoid that so that.

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Speaker 2: They're future proofing in all. Yeah, Man, if I could

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Speaker 2: go back to the eighties, anything.

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Speaker 1: Like private equity like feels really institutional that. But if

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Speaker 1: you run like I always think, like if you run

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Speaker 1: like a crypto exchange, like you got to like take

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Speaker 1: all that money and put it into like laundromats or like.

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Speaker 2: Like real businesses machines.

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Speaker 1: Yeah, because you can't rely on like that like lottery

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Speaker 1: winnings to keep continuing, but that you can put the

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Speaker 1: money into a real business like Land. I don't know.

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Speaker 2: Oh my god, yeah, everyone should buy Land. I would

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Speaker 2: love to be land rich. Okay, So we have been

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Speaker 2: talking for months, really the entire existence of this podcast

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Speaker 2: about how private markets are becoming public. Private markets are

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Speaker 2: the new public market, and now we have some prices

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Speaker 2: to put to that.

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Speaker 1: I really feel like it's a big step in private

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Speaker 1: markets becoming more public when finance starts putting up like

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Speaker 1: daily or you know, like real time, real time ish

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Speaker 1: stock sharts of SpaceX and open a stripe Stripe and

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Speaker 1: ninety seven or so other private companies that don't trade

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Speaker 1: on the stock exchange but that are tracked by enough

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Speaker 1: like private company tracking kind of things that they can

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Speaker 1: be like, oh, here's a stock price chart, and yeah,

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Speaker 1: you can go look at a stock price chart of

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Speaker 1: all these companies. And that feels like, you know, you

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Speaker 1: could read news articles that were like secondary trading suggests,

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Speaker 1: stripes values, blah blah blah, but like now you can

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Speaker 1: just go look at a chart on your finance. Seems

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Speaker 1: like a big difference, seems like a real step toward

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Speaker 1: making them look public.

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Speaker 2: I appreciate the effort. It's like an opening volley. I

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Speaker 2: don't think these prices are perfect.

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Speaker 1: No, they're fascinating the imperfect, right, So, like, these are

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Speaker 1: these prices, Yeah, he gets them from two marketplaces, right,

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Speaker 1: two companies that provide a marketplace for you know, like

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Speaker 1: sort of employees ex employees of these companies to sell

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Speaker 1: their stock.

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Speaker 2: To like Forge and Equities in yeah.

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Speaker 1: Forge and Equities. Basically, it's like on the selling side

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Speaker 1: you have like employees and ex employees of these companies

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Speaker 1: who want an exit, and the buying side you have dentists. Right,

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Speaker 1: Like that's roughly the model. And I was like, those

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Speaker 1: trades have to be like a liquid and small and

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Speaker 1: you know, driven by weird dynamics and not really reflective

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Speaker 1: evaluation of these companies. But if you look at how

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Speaker 1: these prices are, they're not really derived necessarily from those trades.

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Speaker 1: Like these prices are sort of like algorithmically determined from

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Speaker 1: things like funding rounds and tender offers and also like

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Speaker 1: bids and trades on these platforms. But it's unclear like

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Speaker 1: how the prices are determined. And you look at some

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Speaker 1: of these companies and the prices like don't change very much,

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Speaker 1: and it's just very clear that they're sort of essentially

437
00:21:41,760 --> 00:21:44,840
Speaker 1: pulling in like prices from funding rounds and tender offers.

438
00:21:44,880 --> 00:21:46,600
Speaker 1: And it's not a real time stock chart. It's like

439
00:21:46,640 --> 00:21:48,800
Speaker 1: crunch base and chart form, you know, it's like prices

440
00:21:48,800 --> 00:21:51,320
Speaker 1: of funding rounds. It's not like real time secondary market

441
00:21:51,320 --> 00:21:52,560
Speaker 1: trading prices, which.

442
00:21:52,400 --> 00:21:54,920
Speaker 2: Again I appreciate. But then you take a look at

443
00:21:55,000 --> 00:21:58,959
Speaker 2: open AI's chart for example, as you mentioned, it is

444
00:21:59,480 --> 00:22:03,680
Speaker 2: pretty Yeah, it's pretty flat, which is funny and probably

445
00:22:03,880 --> 00:22:07,520
Speaker 2: again not reflective of real time pricing. When you consider

446
00:22:07,520 --> 00:22:10,920
Speaker 2: the news this week that they're close to finalizing a fork, but.

447
00:22:10,880 --> 00:22:13,920
Speaker 1: There isn't real time. Yeah, the open Eyes stock does

448
00:22:13,960 --> 00:22:18,719
Speaker 1: not like really trade among like on these secondary trading platforms.

449
00:22:19,000 --> 00:22:22,240
Speaker 2: Yeah, I know what I'm saying. It's an example of

450
00:22:22,240 --> 00:22:24,919
Speaker 2: how time not real time. This is they're close to

451
00:22:25,000 --> 00:22:28,920
Speaker 2: finalizing they're forty billion dollar funding around at least according

452
00:22:28,960 --> 00:22:31,080
Speaker 2: to Bloomberg reporting, that would value the company at three

453
00:22:31,119 --> 00:22:34,280
Speaker 2: hundred billion dollars. If this was close to real time,

454
00:22:34,280 --> 00:22:36,560
Speaker 2: I would imagine you would see the line wiggle a little,

455
00:22:36,640 --> 00:22:37,680
Speaker 2: but it hasn't.

456
00:22:37,920 --> 00:22:41,000
Speaker 1: Right, It's like psychologically interesting to have like what looks

457
00:22:41,040 --> 00:22:42,600
Speaker 1: like a real time price chart, even if it's not

458
00:22:42,640 --> 00:22:45,600
Speaker 1: a real time price chart, because it just makes you think, ooh,

459
00:22:45,920 --> 00:22:48,480
Speaker 1: that's a company who's stock I can buy. And by

460
00:22:48,480 --> 00:22:50,640
Speaker 1: the way, you can't necessarily right like.

461
00:22:50,560 --> 00:22:51,960
Speaker 2: The other thing, you can try hard.

462
00:22:52,440 --> 00:22:54,600
Speaker 1: These tide fims are like places that will let you

463
00:22:54,640 --> 00:22:57,239
Speaker 1: buy many of these stocks, but it doesn't mean they

464
00:22:57,280 --> 00:22:59,480
Speaker 1: have stock to sell you, right, Like you know, these

465
00:22:59,560 --> 00:23:04,000
Speaker 1: companies often try to restrict their you know, employees and investors'

466
00:23:04,040 --> 00:23:07,200
Speaker 1: ability to resell stock. The news this week is both

467
00:23:07,240 --> 00:23:10,560
Speaker 1: the Yahoo Finance is taking prices from equity Zen and

468
00:23:10,560 --> 00:23:13,320
Speaker 1: Forged to like show these stock shots, but also that

469
00:23:13,560 --> 00:23:16,800
Speaker 1: equity Zen and Forger lowering their investment minimums. So now

470
00:23:16,880 --> 00:23:19,720
Speaker 1: you can, if you're an incredit and investor, you can

471
00:23:20,160 --> 00:23:22,720
Speaker 1: buy stock in these companies with as little as five

472
00:23:22,760 --> 00:23:25,560
Speaker 1: thousand dollars. But again, like that's just that's just like

473
00:23:25,600 --> 00:23:28,199
Speaker 1: their rules. It doesn't mean that someone's going to sell

474
00:23:28,240 --> 00:23:30,639
Speaker 1: you five thousand dollars basic stock. And in fact, I

475
00:23:30,640 --> 00:23:32,800
Speaker 1: think it's kind of hard to source a lot of

476
00:23:32,800 --> 00:23:35,560
Speaker 1: the really hot private companies on these platforms.

477
00:23:35,400 --> 00:23:38,600
Speaker 2: So I'm comparing. I hate to talk about ETFs. I

478
00:23:38,640 --> 00:23:42,320
Speaker 2: just hate them. Att, I'm gon do it right now.

479
00:23:42,560 --> 00:23:44,399
Speaker 2: I know that there's a you know, a subset of

480
00:23:44,440 --> 00:23:47,040
Speaker 2: listeners who absolutely hate when I bring up ETFs. But

481
00:23:47,320 --> 00:23:49,000
Speaker 2: I just came back from an ETF conference and we

482
00:23:49,040 --> 00:23:51,920
Speaker 2: have a lot of fans there. So shout out to

483
00:23:51,920 --> 00:23:55,199
Speaker 2: the friendly to the friendly couple that stopped me in

484
00:23:55,280 --> 00:23:58,119
Speaker 2: Las Vegas, in the casino, in the Virgin Hotel. In

485
00:23:58,160 --> 00:24:02,240
Speaker 2: any case, there is this ETF called the er Shares

486
00:24:02,640 --> 00:24:08,000
Speaker 2: Private Public Crossover ETF. The ticker is x OvR Crossover.

487
00:24:08,080 --> 00:24:12,080
Speaker 2: It actually ten percent of its portfolio is SpaceX. This

488
00:24:12,400 --> 00:24:14,919
Speaker 2: is pretty much meaningless, but you take a look at

489
00:24:14,960 --> 00:24:19,560
Speaker 2: the performance of this ETF. It's down about seven percent

490
00:24:19,600 --> 00:24:23,480
Speaker 2: on a total return basis year to date, and SpaceX,

491
00:24:23,480 --> 00:24:28,040
Speaker 2: at least according to Yahoo Finance, is at least up slightly.

492
00:24:28,240 --> 00:24:32,400
Speaker 2: According to Yahoo Finance, it went from to eleven per

493
00:24:32,480 --> 00:24:36,879
Speaker 2: share to just under two fifteen per share. Again, this

494
00:24:37,040 --> 00:24:41,120
Speaker 2: is very close to a meaningless comparison, but there is

495
00:24:41,680 --> 00:24:44,919
Speaker 2: some way I guess you could back into what SpaceX

496
00:24:45,000 --> 00:24:49,760
Speaker 2: is doing. Not really, but I do think it's a

497
00:24:49,800 --> 00:24:53,360
Speaker 2: little bit interesting. You do have this ETF with real

498
00:24:53,359 --> 00:24:55,560
Speaker 2: time pricing. We know that ten percent of it is SpaceX.

499
00:24:55,680 --> 00:24:57,800
Speaker 1: Yeah, but that doesn't give us real time SpaceX price. Now,

500
00:24:58,000 --> 00:25:01,000
Speaker 1: Like I don't know how like do the ARB, but

501
00:25:01,080 --> 00:25:03,040
Speaker 1: like I assume that, like Jane Street is not like

502
00:25:03,080 --> 00:25:05,439
Speaker 1: delivering a basket of a little SpaceX doc to like

503
00:25:05,520 --> 00:25:08,919
Speaker 1: get shares of X over right, Like in some ways,

504
00:25:09,000 --> 00:25:12,280
Speaker 1: like this stuff where like yeah, who's putting up price

505
00:25:12,400 --> 00:25:16,439
Speaker 1: charts and like you can theoretically get into these private

506
00:25:16,480 --> 00:25:18,719
Speaker 1: markets with as little as five thousand dollars, Like in

507
00:25:18,800 --> 00:25:22,840
Speaker 1: some ways that is like psychological signaling rather than like

508
00:25:22,880 --> 00:25:24,600
Speaker 1: a real thing. And it's not like you can go

509
00:25:24,640 --> 00:25:26,720
Speaker 1: buy five thousand dollars worth of SpaceX and like there's

510
00:25:26,720 --> 00:25:29,520
Speaker 1: a real time chart on Yahoo. But in some ways

511
00:25:29,520 --> 00:25:31,920
Speaker 1: it like is pushing it towards being a little bit

512
00:25:31,920 --> 00:25:36,520
Speaker 1: more real. So like private markets theoretically are open only

513
00:25:36,560 --> 00:25:39,040
Speaker 1: to accredited and investors in the US, whereas like public

514
00:25:39,040 --> 00:25:41,320
Speaker 1: markets are open to everyone. But if you look at

515
00:25:41,320 --> 00:25:43,919
Speaker 1: like the number of people who are accredited, because like

516
00:25:44,200 --> 00:25:46,960
Speaker 1: the accredited standards have not gone up since like the eighties,

517
00:25:47,000 --> 00:25:50,359
Speaker 1: Like to be accredited, you need to have two hundred

518
00:25:50,400 --> 00:25:52,840
Speaker 1: thousand dollars a year of income or three hundred thousands

519
00:25:52,840 --> 00:25:55,480
Speaker 1: of a couple, or like a million dollars in assets,

520
00:25:56,160 --> 00:25:59,159
Speaker 1: and that works out to something like twenty percent of

521
00:25:59,240 --> 00:26:01,960
Speaker 1: the population, which is like roughly the percent of the

522
00:26:01,960 --> 00:26:06,040
Speaker 1: population that like own individual stocks and brokerage accounts. So

523
00:26:06,400 --> 00:26:08,879
Speaker 1: the investor class that like buys public stocks and the

524
00:26:08,880 --> 00:26:11,200
Speaker 1: investor class that can legally buy private stocks is like

525
00:26:11,280 --> 00:26:14,000
Speaker 1: kind of the same class. Kind of, Yeah, you do

526
00:26:14,119 --> 00:26:16,440
Speaker 1: wonder a little like what is the need for a

527
00:26:16,480 --> 00:26:18,920
Speaker 1: company to go public? And then conversely, like what is

528
00:26:18,960 --> 00:26:20,600
Speaker 1: the need for it to stay private? Right, because like

529
00:26:21,520 --> 00:26:24,359
Speaker 1: one thing that CEO sometimes says they don't like the

530
00:26:24,400 --> 00:26:26,879
Speaker 1: distraction of having a public stock price, and like they

531
00:26:26,880 --> 00:26:28,680
Speaker 1: don't like managing to the stock price, and they don't

532
00:26:28,680 --> 00:26:30,880
Speaker 1: like the short termsm of like the stock price reacting

533
00:26:30,880 --> 00:26:33,480
Speaker 1: to news. Yeah, like now you have the stock shot

534
00:26:33,520 --> 00:26:35,520
Speaker 1: on your finance that doesn't move very much, but like

535
00:26:35,960 --> 00:26:37,800
Speaker 1: you know, in the future, if it moves a lot,

536
00:26:38,040 --> 00:26:39,320
Speaker 1: you might be like, ah, I might as well just

537
00:26:39,400 --> 00:26:41,919
Speaker 1: go public because my stock price is public anyway. You know.

538
00:26:42,280 --> 00:26:44,360
Speaker 2: Another counter with that would be though, that they don't

539
00:26:44,359 --> 00:26:46,560
Speaker 2: have to report earnings four times a year.

540
00:26:47,240 --> 00:26:50,439
Speaker 1: It's wild to me that like basically retail investors can

541
00:26:50,440 --> 00:26:53,919
Speaker 1: put five thousand dollars into a stock and there is

542
00:26:54,000 --> 00:26:58,320
Speaker 1: no expectation nobody cares at all that they will ever

543
00:26:58,359 --> 00:27:01,600
Speaker 1: see financial statements for the company. Yeah, and like, of course,

544
00:27:01,680 --> 00:27:05,400
Speaker 1: of course no one stocks at brokers accounts looks at

545
00:27:05,480 --> 00:27:07,919
Speaker 1: financial statements for the companies. The hast not get right,

546
00:27:08,119 --> 00:27:09,719
Speaker 1: So like, of course it makes sense that no one

547
00:27:09,760 --> 00:27:12,359
Speaker 1: cares about saying financial statements. But it's weird that, like

548
00:27:12,440 --> 00:27:14,680
Speaker 1: we have like one hundred years of securities law that's

549
00:27:14,680 --> 00:27:17,280
Speaker 1: based around, like we need full disclosure about a company.

550
00:27:17,280 --> 00:27:20,199
Speaker 1: We need like audited financial statements to allow people to

551
00:27:20,200 --> 00:27:22,879
Speaker 1: make informed the investing decisions, and everyone's like, no, we

552
00:27:22,880 --> 00:27:25,119
Speaker 1: don't care about that stuff. Full buy SpaceX doesn't matter.

553
00:27:25,680 --> 00:27:28,680
Speaker 2: But you couldn't directly say that you know, they need

554
00:27:28,720 --> 00:27:30,960
Speaker 2: them and care about them because they form the basis

555
00:27:31,000 --> 00:27:34,800
Speaker 2: of a lot of great articles written by financial journalists

556
00:27:35,080 --> 00:27:37,720
Speaker 2: who do read the financial statements, et cetera and do

557
00:27:37,760 --> 00:27:38,120
Speaker 2: the work.

558
00:27:38,200 --> 00:27:41,160
Speaker 1: That's definitely the theory of like public markets is that,

559
00:27:41,240 --> 00:27:43,879
Speaker 1: like there is a lot of work done, you know,

560
00:27:43,960 --> 00:27:47,680
Speaker 1: including based on like regulated public financial disclosure. There's a

561
00:27:47,680 --> 00:27:49,479
Speaker 1: lot of work done to make prices efficient. So when

562
00:27:49,520 --> 00:27:52,240
Speaker 1: you buy stocking your broker's account, you are probably getting

563
00:27:52,880 --> 00:27:55,679
Speaker 1: an efficient price, right, Like you're paying sort of roughly

564
00:27:55,720 --> 00:27:58,440
Speaker 1: the you know, market expected fair value of the company

565
00:27:59,560 --> 00:28:04,040
Speaker 1: with private companies, Like you could probably make similar arguments, right, Like, not, really,

566
00:28:04,200 --> 00:28:07,280
Speaker 1: the financials are not public institutions are not necessarily like

567
00:28:07,320 --> 00:28:09,560
Speaker 1: trading in the secondary market in large size, Like you're

568
00:28:09,600 --> 00:28:14,800
Speaker 1: sort of drafting on like venture capitalists valuing the company

569
00:28:15,040 --> 00:28:17,639
Speaker 1: in funding rounds, and like the incentives that are not

570
00:28:17,760 --> 00:28:20,080
Speaker 1: quite like it's not quite the same thing as in

571
00:28:20,119 --> 00:28:23,639
Speaker 1: public markets, where there's like, you know, informed people on

572
00:28:23,680 --> 00:28:24,880
Speaker 1: both sides of the trade.

573
00:28:25,640 --> 00:28:29,240
Speaker 2: Yeah, funding rounds obviously are the basis of these Yahoo

574
00:28:29,440 --> 00:28:31,600
Speaker 2: Finance price charts, all of them.

575
00:28:31,880 --> 00:28:35,240
Speaker 1: Suppose I don't secondary market trading, but yeah.

576
00:28:35,080 --> 00:28:37,560
Speaker 2: Open Ai, I mean, so much has happened in the

577
00:28:37,600 --> 00:28:40,760
Speaker 2: AI landscape. There's no pricing of what happened with deep

578
00:28:40,800 --> 00:28:41,680
Speaker 2: seek et cetera.

579
00:28:42,520 --> 00:28:44,960
Speaker 1: Right, right, it would be really funny. It would be

580
00:28:45,000 --> 00:28:47,840
Speaker 1: really fun like if when the deep seek news had dropped,

581
00:28:47,960 --> 00:28:51,120
Speaker 1: if you could go to your browser and look at

582
00:28:51,160 --> 00:28:53,480
Speaker 1: a real time stock price for open Ai. Yeah, it

583
00:28:53,520 --> 00:28:55,120
Speaker 1: would be really really funny. If like it's just a

584
00:28:55,160 --> 00:28:57,200
Speaker 1: flat lab You're like, wait, where's the reaction?

585
00:28:57,360 --> 00:28:59,920
Speaker 2: We are actually person in all information that we have

586
00:29:00,080 --> 00:29:00,920
Speaker 2: available to us.

587
00:29:01,400 --> 00:29:03,560
Speaker 1: I will tell you the other big open Ai like

588
00:29:04,000 --> 00:29:08,400
Speaker 1: the stock price thing. The thing that happened a real

589
00:29:08,440 --> 00:29:11,520
Speaker 1: time price was when they fired sam Altan for a

590
00:29:11,560 --> 00:29:15,280
Speaker 1: weeknd I wrote about it. At the time they had

591
00:29:15,360 --> 00:29:19,400
Speaker 1: just done I think they finalized like an employee tender.

592
00:29:19,400 --> 00:29:21,520
Speaker 1: I think at like an eighty four billion dollar valuation,

593
00:29:21,640 --> 00:29:23,840
Speaker 1: I think, and it almost like they were almost done,

594
00:29:23,920 --> 00:29:26,640
Speaker 1: and then like they fired their CEO and then you know,

595
00:29:26,640 --> 00:29:29,680
Speaker 1: two days later the hard back, and then like they

596
00:29:29,720 --> 00:29:32,480
Speaker 1: continued doing the tender and then like they finalized it

597
00:29:32,520 --> 00:29:34,600
Speaker 1: and I think it was still at eighty four billion dollars,

598
00:29:34,800 --> 00:29:38,800
Speaker 1: and I wrote about, like, what a weird fact that

599
00:29:39,000 --> 00:29:42,640
Speaker 1: this news didn't change, like in either direction, didn't change

600
00:29:42,640 --> 00:29:43,600
Speaker 1: the valuation of open.

601
00:29:43,560 --> 00:29:44,640
Speaker 2: It was perfectly priced.

602
00:29:44,640 --> 00:29:47,800
Speaker 1: It's just like all of it was as expected. Everything

603
00:29:47,880 --> 00:29:49,560
Speaker 1: is totally normal. This is not really true. And then

604
00:29:49,600 --> 00:29:51,320
Speaker 1: like you know they have they like very quickly went

605
00:29:51,360 --> 00:29:54,120
Speaker 1: on to raise it much heart raluations. Actually, this is

606
00:29:54,120 --> 00:29:56,320
Speaker 1: my way of saying, if you looked at a real

607
00:29:56,320 --> 00:29:59,080
Speaker 1: time stockhart of open Ai during deep seek and it

608
00:29:59,120 --> 00:30:02,440
Speaker 1: didn't move, you might be like, oh, that's right, that's

609
00:30:02,440 --> 00:30:04,920
Speaker 1: how like your cat. Let's think about opening eye.

610
00:30:05,200 --> 00:30:07,680
Speaker 2: Just a flat line, you know, and it's still flat

611
00:30:07,720 --> 00:30:11,239
Speaker 2: this week even with studio ghibli. You can do that

612
00:30:11,440 --> 00:30:15,040
Speaker 2: on chat ebt right now. Cool, Well, it's all over

613
00:30:15,080 --> 00:30:17,680
Speaker 2: my Twitter feed, my X feed right now. I feel

614
00:30:17,680 --> 00:30:21,760
Speaker 2: like you don't really you're not an excer, I'm an

615
00:30:21,920 --> 00:30:24,920
Speaker 2: X excerpt. Well that's what you can expect if you

616
00:30:24,960 --> 00:30:27,520
Speaker 2: go there right now. But maybe that would have pushed

617
00:30:27,520 --> 00:30:29,920
Speaker 2: the stock price higher if these were real.

618
00:30:30,960 --> 00:30:36,800
Speaker 1: Isn't it nice like you're saying like it's all over

619
00:30:36,840 --> 00:30:39,440
Speaker 1: my X feed? Makes me think, like I understand why

620
00:30:39,560 --> 00:30:43,080
Speaker 1: CEOs don't like to have a real time stock price.

621
00:30:43,280 --> 00:30:46,280
Speaker 1: It's like this distraction has moved around our stock price.

622
00:30:46,320 --> 00:30:47,680
Speaker 1: It's just not that.

623
00:30:47,800 --> 00:30:49,320
Speaker 2: So I talked to a lot of CEOs in my

624
00:30:49,440 --> 00:30:52,480
Speaker 2: other job, which is being a television anchor, and you

625
00:30:52,520 --> 00:30:54,800
Speaker 2: ask them on air, do you know, do you care

626
00:30:54,840 --> 00:30:56,760
Speaker 2: about the stock price or you did you notice this

627
00:30:56,800 --> 00:30:58,760
Speaker 2: in the stock price? And they always say no, I

628
00:30:58,760 --> 00:31:01,080
Speaker 2: don't really look at the stock price, blah blah blah.

629
00:31:01,120 --> 00:31:04,040
Speaker 2: And then you get lunch with them, you get coffee,

630
00:31:04,080 --> 00:31:06,680
Speaker 2: you ask them in the commercial break and I often

631
00:31:06,680 --> 00:31:09,320
Speaker 2: get from them, yeah, I'm constantly watching it, and of

632
00:31:09,320 --> 00:31:11,959
Speaker 2: course you are if I had a real time measure

633
00:31:12,280 --> 00:31:15,920
Speaker 2: of my performance, I would never not be looking at it,

634
00:31:16,040 --> 00:31:17,280
Speaker 2: which I guess is distracting.

635
00:31:17,600 --> 00:31:19,840
Speaker 1: This is like the fastness is theory about private equity,

636
00:31:19,840 --> 00:31:23,880
Speaker 1: which is that, like it is not less volatile than

637
00:31:23,920 --> 00:31:27,680
Speaker 1: public stocks, but it reports less frequently and so it

638
00:31:27,720 --> 00:31:31,160
Speaker 1: feels less volatile and everyone knows that. But his point is,

639
00:31:31,200 --> 00:31:33,480
Speaker 1: like that is actually valuable to a lot of investors,

640
00:31:33,480 --> 00:31:35,320
Speaker 1: and that's why they're willing to pay a premium for

641
00:31:35,360 --> 00:31:39,000
Speaker 1: private equity, because like, not knowing what the stock price

642
00:31:39,120 --> 00:31:40,720
Speaker 1: is is like really good for you.

643
00:31:41,280 --> 00:31:45,520
Speaker 2: I mean probably, But I'm an intercheck. I read every

644
00:31:45,560 --> 00:31:49,000
Speaker 2: YouTube comment, I read every Spotify comment, I look at

645
00:31:49,040 --> 00:31:52,240
Speaker 2: every tweet tweeted at me. I just am desperate for feedback.

646
00:31:55,360 --> 00:31:56,800
Speaker 1: And that was the Money Stuff Podcast.

647
00:31:56,960 --> 00:31:59,160
Speaker 2: I'm Matt Levian and I'm Katie Greifeld.

648
00:31:59,320 --> 00:32:01,400
Speaker 1: You can find my work by subscribing to the Money

649
00:32:01,400 --> 00:32:03,720
Speaker 1: Stuff newsletter on Bloomberg dot com.

650
00:32:03,440 --> 00:32:05,920
Speaker 2: And you can find me on Bloomberg TV every day

651
00:32:05,960 --> 00:32:09,040
Speaker 2: on Open Interest between nine to eleven am Eastern.

652
00:32:09,400 --> 00:32:11,120
Speaker 1: We'd love to hear from you. You can send an

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00:32:11,160 --> 00:32:14,320
Speaker 1: email to money Pod at Bloomberg dot net, ask us

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Speaker 1: a question and we might answer it on air.

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Speaker 2: You can also subscribe to our show wherever you're listening

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Speaker 2: right now and leave us a review. It helps more

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Speaker 2: people find the show.

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Speaker 1: The Money Stuff podcast that is produced by Anna Maserakus

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Speaker 1: and Moses ONAM and special thanks this week to Cal Brooks.

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Speaker 2: Our theme music was composed by Blake Naples, Brandon, Francis

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Speaker 2: nudimass our executive producer, and Stage Bauman is Bloomberg's head

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Speaker 2: of podcasts.

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Speaker 1: Thanks for listening to The Money Stuff Podcast. We'll be

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Speaker 1: back next week with more stuff