Speaker 1: Bloomberg Audio Studios, podcasts, radio news. We had a really
Speaker 1: important update. We talked last week about the enhanced games
Speaker 1: where people take drugs to be faster, and the one
Speaker 1: hundred meters dash was run by a guy who is
Speaker 1: not on drugs and afterwards he gloaded. They got to
Speaker 1: get on that some more, which is just a perfect
Speaker 1: use of the English language.
Speaker 2: I mean it really you can apply it to so
Speaker 2: many different areas of your life, including the podcast.
Speaker 1: Arriving later at the podcast.
Speaker 2: Hey it's okay, we have a tight on drugs. We
Speaker 2: have a tight twenty nine minutes.
Speaker 1: It's all right, no, no, no, keep banering, no more.
Speaker 2: How about them Nicks?
Speaker 1: Well yeah, the next Yeah, they're on more.
Speaker 2: They certainly are they really?
Speaker 1: This is a swearing then there's ever been on this podcast. Yeah,
Speaker 1: the next one. Last night, we're recruiting the on Thursday.
Speaker 2: Yeah, what's the next game?
Speaker 1: You're exhausted because you're.
Speaker 2: Watching partying at.
Speaker 1: Expend game one the Jeffrey.
Speaker 2: There's so many ways to get into this. For a second,
Speaker 2: very quickly.
Speaker 1: Say hello podcast, your weekly podcast, were talking about sepilated,
Speaker 1: money and met Levine. Are the many fim your opinion and.
Speaker 2: I'm Katie Greifeld. I should do it really slow since
Speaker 2: you did it really fast. And I'm Katie Greifeld, a
Speaker 2: reporter for Bloomberg News and an anchor for Bloomberg Television.
Speaker 1: I did not watch the Knicks at all or at
Speaker 1: the Jeffrey. But the Jeffrey is like a Bloomberg bar.
Speaker 1: I know it's been to like farewell parties of the Jeffrey.
Speaker 2: That's the thing. In your newsletter you described it as
Speaker 2: a New York bar, which is so impersonal given that
Speaker 2: you and I have literally been there together.
Speaker 1: The Jeffrey is a Bloomberg bar h on the East
Speaker 1: six eighth Street. It's also I learned this, I think
Speaker 1: from a bloomber of person. The owner of the Jeffrey
Speaker 1: is not just some bar owner. No, he is one
Speaker 1: of the nations leading activist hedge fundlers. It's just like
Speaker 1: a fun.
Speaker 2: We should have lunch, we should he sounds really interesting.
Speaker 1: So, yeah, the Jeffrey. Many many people send me this
Speaker 1: story about the Jeffrey doing a promotion where if the
Speaker 1: Knicks won on Wednesday night, if the next one Wednesday night,
Speaker 1: which they did, then your bar tab at the Jeffrey
Speaker 1: was free and so presumably the point of this promotion
Speaker 1: is that a lot of people would storm into the
Speaker 1: Jeffrey order you know, champagne and caviar or whatever one
Speaker 1: gets to the Jeffrey that's expensive, and hope for the
Speaker 1: Knicks to win so that their part tab would be free.
Speaker 1: And if the Knicks lost, they would be like ah
Speaker 1: and pay a thousand dollars for their night out and
Speaker 1: the Jeffrey, you know, if the next lost would be
Speaker 1: up these giant partabs. If the nixt won, there would
Speaker 1: be out all these give artabs to the differy hedge.
Speaker 2: Yes they did by going.
Speaker 1: To Vegas and no, sorry, we're going to Calshi betting
Speaker 1: on the next to it. And so this is very
Speaker 1: like straightforward beat on the Knicks to win. But Kalchi
Speaker 1: put out a pressless about it.
Speaker 2: Calsh was excited, they loved it.
Speaker 1: The bar like put out a video, you know, a
Speaker 1: little video you know, promotion. But they also had like
Speaker 1: a little like white boarded explanation of the hedge that
Speaker 1: I think Calshi probably helped with. It's just like this
Speaker 1: is from Calsh. Small businesses are exposed to real world
Speaker 1: risk every single day, whether politics, sports, economics, with no
Speaker 1: efficient way to manage it. Traditional insurance is expensive, slow,
Speaker 1: and not built for this kind of operational exposure. Calshi
Speaker 1: changes the equation liquid transparent markets that let any business
Speaker 1: take an upsetting position on the risks that affect their
Speaker 1: bottom line. Also says, if the Knicks lease the bark likes,
Speaker 1: I normally have revenue from the promotion, having paid only
Speaker 1: a small premium for the peace of mind. No, it's
Speaker 1: a sports bet, the Knicks for underdogs, and so like
Speaker 1: I was looking, like I think historic, Like the pre
Speaker 1: game price of the Knicks was about thirty six per
Speaker 1: cents on the dollar, so you'd pay, you know, for
Speaker 1: like a five thousand dollars head, you'd pay like eighteen
Speaker 1: hundred dollars. Not bad, So it's not that small. Yeah anyway, Yeah,
Speaker 1: so they bet on sports, and now betting on sports
Speaker 1: is a hedge. And so many people send me this,
Speaker 1: including after I write about because people don't originally unt
Speaker 1: of money stuff.
Speaker 2: It's really long.
Speaker 1: It's sorry, sorry, sorry, he's.
Speaker 2: Just got so many thoughts I summarize it.
Speaker 1: So many people said to me, Yeah, because like my
Speaker 1: view is that when people say prediction markets, they want
Speaker 1: to be like Oh, it's we're hedging a real world risks.
Speaker 1: But they're really talking about sports betting, and so this
Speaker 1: is like the overlap of the vent diagram, where it's
Speaker 1: like it's sports betting and it's hedging a real world risk,
Speaker 1: which is not true because they are hedging a sports
Speaker 1: bet like they didn't have to do this. They're hedging
Speaker 1: on sports.
Speaker 2: But whatever, Matt is banging the table, he is passionate
Speaker 2: about this point. A few things. I do want to
Speaker 2: say that this was up to one hundred dollars per guest,
Speaker 2: so champagne and cavia are you could probably get like
Speaker 2: a little bit of both. Also, tax and gratuity were
Speaker 2: not included, so I mean the bartenders still made money regardless,
Speaker 2: which is nice. Were you Were you aware of the
Speaker 2: other promotion that they ran for their game against the Calves? Okay,
Speaker 2: so for Game four of the Knicks versus the Calves,
Speaker 2: the Jeffrey said that for each point in the Knicks
Speaker 2: margin of victory, the bar would reduce patrons bill by
Speaker 2: one percent. Yes, yeah, so it turned out to be
Speaker 2: a blowout. As I understand, I barely understand.
Speaker 1: You're not expecting to reduce the tab by twenty seven
Speaker 1: percent or whatever.
Speaker 2: No, it was thirty seven percent, which is nuts. So
Speaker 2: the total tal.
Speaker 1: By the way, like by game four, like the Knicks
Speaker 1: had blown out everyone for the last like two series.
Speaker 2: It's amazing. You might have predicted the total discount for
Speaker 2: customers in that promotion amounted to twenty seven hundred and
Speaker 2: fifty dollars. So it'll be interesting to see what Wednesday
Speaker 2: night's game came out to.
Speaker 1: I wonder if they will report that. I feel like
Speaker 1: they don't have will obligations.
Speaker 2: But the reason I know about what they did for
Speaker 2: Game four was because there was a Bloomberg News article
Speaker 2: that reads piked on the terminal, which is how I
Speaker 2: got to know about this because again, the Jeffrey is
Speaker 2: a Bloomberg bar, so obviously all your Bloomberg buddies were
Speaker 2: sending it to you. Right, It's ry like if you're.
Speaker 1: A bar owned by a hedge fund lawyer that has
Speaker 1: two blogs from Bloomberg, then yes, you have very important
Speaker 1: real world economic risks that you have to hedge by
Speaker 1: doing sports betting on CALSHI. But by the way, you
Speaker 1: can also do sports betting on a sports book like
Speaker 1: it's legal now, like you could Kelshi will do a
Speaker 1: nice whiteboard for you.
Speaker 2: I don't know, is there anything else to say? I
Speaker 2: just love it. I wish I could drink.
Speaker 1: I feel like some markets are sports gambling now and
Speaker 1: here we are. Let's not tell you about SpaceX this week.
Speaker 1: We'll tell you about SpaceX last week. Week.
Speaker 2: We're doing really well. And then you mentioned SpaceX. Uh,
Speaker 2: I think it's not.
Speaker 1: Google selling some stock like.
Speaker 2: A lot, like a lot, like eighty billion.
Speaker 1: Dollars more than spacexan.
Speaker 2: Were adapted IPO.
Speaker 1: It's actually eighty five billion AiZ.
Speaker 2: It's nice, so.
Speaker 1: Much demand for Google stock. Yeah, the eighty five billion
Speaker 1: is like not quite right, because like forty billion of
Speaker 1: that is an at the market offering. So it's not
Speaker 1: like they just bashed out.
Speaker 2: Ten billion is Berkshire Hathaway.
Speaker 1: Ten billion is Berksu Hay. I'm going to count Berkshire Hasway.
Speaker 1: That's the anchor order that counts. But the forty billion
Speaker 1: is like they didn't bash it all out this week.
Speaker 1: It's an out the market offering. So the next like
Speaker 1: few months or whatever, when they feel like it, they'll
Speaker 1: sell some stock and the total might come to forty billion,
Speaker 1: or it might not. We don't get there. But yeah,
Speaker 1: they did about thirty five billion of common stock and
Speaker 1: mandatory convertible this week plus ten billion properately place the
Speaker 1: Berkshire Hathaway to you know, pay for data centers, Yeah,
Speaker 1: pay for pay for chips, pay for the boom.
Speaker 2: I feel like there's a few different sign of the
Speaker 2: times in here. One of them, which you highlighted in
Speaker 2: your newsletter is that equity issuance net equity issuance was
Speaker 2: declining for a long time, yea, and buybacks for like
Speaker 2: the thing to do.
Speaker 1: Yeah, and did like sixty billion in buybacks like last year.
Speaker 2: Yeah. But now maybe we're starting to see that trend
Speaker 2: reverse and companies are going to issue more stock. Also,
Speaker 2: we have IPOs coming back.
Speaker 1: It's just like a wild chips in the markets where
Speaker 1: when you think about the big US companies, you know,
Speaker 1: even five years ago, you would have said stotypically they're
Speaker 1: capital light, right, Yeah, I joked for years like Facebook
Speaker 1: is a website, you know, and it's like worth a
Speaker 1: trillion dollars, right, it's a website. How capital intensive could
Speaker 1: a website be? And like, you know the answer to
Speaker 1: that question is right, I have a lot of data
Speaker 1: centers to run your.
Speaker 2: Website, yeah, Matt.
Speaker 1: And also you have to pay a lot of people
Speaker 1: a lot of money to run your website. But you know,
Speaker 1: now there's just like beind a real change and how
Speaker 1: capital intensive the like leading US businesses are, and that
Speaker 1: just leads to a different financing universe where you know,
Speaker 1: instead of raking in money and using it to buy
Speaker 1: back stock, you're waking up and saying, wow, we need
Speaker 1: so much money we have to sell stock.
Speaker 2: Yeah.
Speaker 1: I mean Google has been first of all, raking in money.
Speaker 1: Secondly like selling debt, right, I mean, like you can
Speaker 1: finance a certain amount of stuff with that. But ultimately,
Speaker 1: you know, these are very highly rated, investment in grade
Speaker 1: companies that have portress balance sheets, and eventually you're like,
Speaker 1: you know what, I'd rather be more equity financed.
Speaker 2: Yeah, so they're doing it. I always wonder in thinking
Speaker 2: about that that shift in markets and you know, financing,
Speaker 2: like what does this mean for investors who like hold
Speaker 2: index ones because like Google shares, the alphabet shares went
Speaker 2: down a bit, this is diluted, et cetera. But like,
Speaker 2: what does it mean if you do see a c
Speaker 2: change where there's just more equity issuance overall, I don't
Speaker 2: really know. Yeah, like if you shift from from stock
Speaker 2: buybacks net negative equity issuance to a world where it's positive,
Speaker 2: I don't know what that means other than being interested
Speaker 2: from the perspective of an investor.
Speaker 1: Right. One thing that's just like sort of philosophically interesting is,
Speaker 1: you know, we got a question on our last mailbag, right,
Speaker 1: like what does the company stock price matter after it
Speaker 1: goes public? Right? And like you they are great answers
Speaker 1: to that, and I was like, oh, the market for
Speaker 1: corporate control. Oh, but like the answer to that a
Speaker 1: few months ago was not, Well, companies sell stock all
Speaker 1: the time, so they need a high stock price so
Speaker 1: they can you know, raise money without diluting share elders
Speaker 1: too much. Because that is not how public companies think
Speaker 1: until this week. And now it's like, well, you know,
Speaker 1: stock price matter is because you got to build data centers,
Speaker 1: like you'll be thinking about your cost of financing, and
Speaker 1: the higher your stock prices, the cheaper your equity financing is.
Speaker 1: So for one thing, it just changes how companies think
Speaker 1: about their stocks. But for anything, like, I've lived my
Speaker 1: life in a financial world where the stuff that you
Speaker 1: do on the stock market is mostly not directly tied
Speaker 1: to building factories to make widgets, you know, Like the
Speaker 1: stock market is not primarily a way for companies to
Speaker 1: raise money to do stuff. And if you are buying
Speaker 1: stock on the stock market, it's vanishingly unlikely that you
Speaker 1: are buying it from a company that will use your
Speaker 1: money to make a you know, to do stuff. Right,
Speaker 1: It's all just like a sort of like secondary trading
Speaker 1: market where like ultimately the price of the stock sort
Speaker 1: of reflects back into the company's capital allocation decision. But
Speaker 1: it's not like you're giving the company to money. But
Speaker 1: now it's like, yeah, you're giving the company money. Like
Speaker 1: the thing that you're doing as an index one investor
Speaker 1: really is like giving your cash to big companies to
Speaker 1: build the AI future or whatever. Yeah, unless you don't
Speaker 1: like that.
Speaker 2: Also, what does the stock price matter after company goes public?
Speaker 2: It matters for the employees in terms of their net worth,
Speaker 2: Which leads me to an interesting nugget about this ATM
Speaker 2: program that I want to get your thoughts on, because
Speaker 2: in it it was buried that the ATM program is
Speaker 2: intended primarily to facilitate, for a period of time, an
Speaker 2: administrative change in how alphabet makes tax obligations associated with
Speaker 2: employee equity grants. This approach will mimic a cell to
Speaker 2: cover model. Upon vesting of restricted stock units, shares will
Speaker 2: still be delivered to employees net of taxes, and the
Speaker 2: company will use corporate cash to settle taxes on behalf
Speaker 2: of employees. The company intends to issue stock for equivalent
Speaker 2: proceeds through its ATM program. So that's interesting. So basically
Speaker 2: they're going to pay the taxes for their employees.
Speaker 1: Yeah, which they do already, but they're going to pay
Speaker 1: them with stock now basically, Yeah, I wrote and we
Speaker 1: talked about like the idea that companies do not use
Speaker 1: the stock market to raise money and the net equitations,
Speaker 1: and I got pushfact like, in fact, these companies too,
Speaker 1: in a sense issue stock to raise money, but they
Speaker 1: do it in a barter system where instead of issuing
Speaker 1: stock to raise money to pay giant salaries to employees,
Speaker 1: they just pay the giant salaries to employees in stock. Right,
Speaker 1: And so if you're an employee and these big tech companies,
Speaker 1: you get paid a lot in stock where stock options
Speaker 1: are restricted stock. And so a lot of how companies
Speaker 1: fund themselves is by using stock to pay employees, which is,
Speaker 1: you know, economically equivalent to selling stock to the general
Speaker 1: public to get cash and then using the cash to
Speaker 1: pay the employees. Right, but has you know, like accounting
Speaker 1: and optical and tax benefits and so people you know,
Speaker 1: do a lot of pay in stock. But the way
Speaker 1: that that works is you still have to pay them
Speaker 1: a little in cash, which is traditionally the normal way
Speaker 1: you do this. You deliver the stock, and they have
Speaker 1: some big tax obligation when you deliver the stock, and
Speaker 1: typically what you do is you deliver net so like
Speaker 1: you know, you deliver them sixty percent of the stock,
Speaker 1: you withhold forty percent for taxes, and instead of like
Speaker 1: sending the stock to the irs, you send the cash
Speaker 1: to the irs. It's it costs you cash. If you're
Speaker 1: Google or whatever and need to conserve cash, you might
Speaker 1: do what Google is doing here, which is still the
Speaker 1: same thing, which is you deliver the net shares to
Speaker 1: the to the employees, you withhold the taxes. You send
Speaker 1: the cash for the taxes to the IRS, except that
Speaker 1: you get that cash by selling stock. So every time
Speaker 1: they need to withhold money to pay employee tax bill,
Speaker 1: they sell a little bit of stock under the ATM
Speaker 1: program and use that to pay the taxes. So they
Speaker 1: are issuing stock toories cash to meet their employment comp publications.
Speaker 2: That's interesting because I read that. I didn't know that
Speaker 2: they were already doing that, and I just wondered if
Speaker 2: it fit into like the broader discussion we've been having
Speaker 2: on AI talent wars and how fiercely competitive it is.
Speaker 1: Like the reason Google is selling eighty five billion dollars
Speaker 1: are stuck is you know AI, right, And so some
Speaker 1: of that is like Capex to build you know, data
Speaker 1: centers and like their chip program, But some of it
Speaker 1: is just salaries, and the salaries are stuck and that's
Speaker 1: expensive too, and you know there's a there's a limit
Speaker 1: on that much you can do without raising equity.
Speaker 2: For sure, can I read you a headline without contacts
Speaker 2: that just crossed and you can tell me if you
Speaker 2: don't want to talk about it?
Speaker 1: Sure? Is it good? Free register? I bet I'm not
Speaker 1: going to want to talk about it.
Speaker 2: Jane Street is planning to build data center. Yes, yes,
Speaker 2: the headline is Jane Street plants new data center as
Speaker 2: compute power runs scarce. So Jane Street also getting in.
Speaker 1: Sure, like All the big quant firms have been AI
Speaker 1: firms forever, right. I mean they have like a big
Speaker 1: machine learning model that takes stock prices and predicts future
Speaker 1: stock prices, and so you know, they need data centers
Speaker 1: and all the rest of it. It's the same model
Speaker 1: frontier AI lab or you're a you know, electronic quantrating
Speaker 1: for him, it's the same thing. That's why deep seek
Speaker 1: is both it's it's the.
Speaker 2: Same models, turtles all the way down.
Speaker 1: Yeah. Yeah, the data centers are bigger when you're doing
Speaker 1: like a frontier AI lab, but it's the same idea.
Speaker 2: I just feel like I should be building a data center.
Speaker 2: Why am I sitting in this room talking about it.
Speaker 1: I just like living my lip in a way that
Speaker 1: I do not need to build a data center. We're
Speaker 1: shoot him on the pod.
Speaker 2: Yeah, I mean he's not sentenced until August thirty first,
Speaker 2: so he's out and.
Speaker 1: About and like pretty vocal and like not wrong. Yeah,
Speaker 1: he was going to be kind of short selling this week,
Speaker 1: did you see. Yeah, the prosecutor who prosecuted him tweeted
Speaker 1: Los Angeles Federal Jury. This is quoting the presetar. Los
Speaker 1: Angeles Federal Jury has found Andrew Left guilty of market manipulation.
Speaker 1: He used media appearances and his company to illegally influence
Speaker 1: share prices and make quick profits, known as shortingh He
Speaker 1: later walked I back a little bit to like shorting
Speaker 1: is not illegal, but like you know that he thinks
Speaker 1: it is. Yeah, but yeah, Andrew Left did some short
Speaker 1: selling charge with market medization convicted this week. Not great
Speaker 1: for short selling.
Speaker 2: No, I'm going to steal a line from Carson Block.
Speaker 2: Muddy Waters Research tweeted this rate before we started recording.
Speaker 2: It's a very long tweet. It's like a Bill Ackman
Speaker 2: length tweet. But he said that the jury convicted Andrew
Speaker 2: of not actually believing the opinions he stated in his tweets,
Speaker 2: which is interesting.
Speaker 1: I think it is pretty clearly legal to do the
Speaker 1: following research a company find out that it's a fraud,
Speaker 1: short at stock, do active as shorting. I announce it
Speaker 1: your short announced that it's a fraud, put out your research,
Speaker 1: wat's the stock up, and then have a paper profit
Speaker 1: from the stock dropping. But what Andrew Left did that
Speaker 1: upset prosecutors was two things. One is that he closed
Speaker 1: his positions very soon after tweeting, and that is ugly right,
Speaker 1: if you take all of your profits from the immediate
Speaker 1: reaction to your tweet rather than from like the stock
Speaker 1: ultimately going to zero because it's a fraud, then like
Speaker 1: is that because you really thought the stock was going
Speaker 1: to zero or because you were just trying to manipulate
Speaker 1: retail investors to sell the stock and you were like
Speaker 1: buying into their demand. And if you do it the
Speaker 1: other way, if you say I love the stock that
Speaker 1: you've got a cure for cancer, and people buy the
Speaker 1: stock and it goes up and you immediately sell all
Speaker 1: of your stock, that really looks like a pump and dump.
Speaker 1: And by the way, like Andrew Left did some of
Speaker 1: that right, but he didn't for like Nvidia, where like
Speaker 1: you know, if you bought into his tweets, you did great,
Speaker 1: So it's fine, except that he was convicted of frauder day.
Speaker 1: So like one thing that he did was to close
Speaker 1: out his position very quickly, which I don't have a
Speaker 1: huge problem with, but like it's ugly. And the other
Speaker 1: thing he did is that there's like evidence there's like
Speaker 1: internal messages that don't say like I don't believe this opinion,
Speaker 1: but sort of sound like he was pretty sloppy and
Speaker 1: wasn't putting out reports because he had done months of
Speaker 1: deep fundamental research and was deeply convinced of his thesis.
Speaker 1: But he was putting them at because he thought, if
Speaker 1: I put out this report, the stock will drop and
Speaker 1: I'll immediately take profits. And I don't think there's like
Speaker 1: smoking gun, slammed on evidence over there, those things. But yeah,
Speaker 1: like I can see how he was convicted. It's just
Speaker 1: like it's very troubling because like there's no bright line anywhere,
Speaker 1: you know, when he was charged. One thing that Andrew
Speaker 1: Left did as a sort of publicity stunt was that
Speaker 1: he like sent the SEC letters saying, please, like publish
Speaker 1: a rule about how long I have to maintain a position,
Speaker 1: Like I just want to Well, if you tell me,
Speaker 1: I'll do it. Like if I'm not allowed to cover
Speaker 1: my shorts for twenty four hours after I tweet them
Speaker 1: I'm short, then like fine, I will do that. But
Speaker 1: like I don't know what the rule is. There's no
Speaker 1: bright line. Tell me what the rule is. And the
Speaker 1: SEC ignored him, And I think the SEC is right
Speaker 1: to ignore him because it's clearly just a matter of intent, right,
Speaker 1: Like if you really truly believe this company is a
Speaker 1: fraud and you short the stock and you say this
Speaker 1: company is a fraud and the stock falls ninety percent,
Speaker 1: and you're like, well, there's a matter of risk management.
Speaker 1: I've you know, made ninety percent of the profits I
Speaker 1: was hoping to make, and like, I need to conserve
Speaker 1: capital and move on to the next trade. I'm going
Speaker 1: to cover. And then like you announce your cover, you're
Speaker 1: honest about like maybe it's fine. Maybe it's fine if
Speaker 1: you have like a really good, well documented process. But
Speaker 1: if you have a very sloppy process and you cover
Speaker 1: in five minutes, then that looks bad.
Speaker 2: Yeah, I was gonna say, it's hard to prove intent.
Speaker 1: It's hard to prove intense. And I think that the
Speaker 1: prosecutors were obligated to prove that Andrew Left had the
Speaker 1: bad and they convinced the jury that he had the
Speaker 1: bad intent because like the way you prove intent is
Speaker 1: they have messages from him to like his buddies, saying
Speaker 1: things like, I have a hot voice in cannabis. It's
Speaker 1: it's cannabis but spelled.
Speaker 2: Cannabass, delicious fish.
Speaker 1: I have a hot voice in cannabis. Let's take advantage
Speaker 1: of it. I don't know. Doesn't that sound like he's
Speaker 1: trying to get retail traders to dump the stock rather
Speaker 1: than he believes that these companies are front But the things,
Speaker 1: it's like it can be both, right, Like it's clearly both,
Speaker 1: like he clearly believed these companies were bad. And also
Speaker 1: like at this trial they had people testify who are
Speaker 1: like I put my life savings to these cannabis stocks
Speaker 1: and then he told me they were frauds and they
Speaker 1: went down. I lost my life savings. What a monster.
Speaker 1: It's like, no, they were frauds, like they stayed down. Yeah,
Speaker 1: it's not like it's only they went down momentarily because
Speaker 1: he was lying, Like they stayed down, like he was right.
Speaker 1: And again like he was convicted of pumping and dumping
Speaker 1: in Vidia. Yeah, in Vidia in like two thousand seventeen
Speaker 1: ors on that great trade buying in video.
Speaker 2: Who is influential enough that they could pump and dump in.
Speaker 1: Before it was like in video It's still it was
Speaker 1: a good trade if you bought in video.
Speaker 2: Yeah. Well, it sounds like Andrew Left is going to
Speaker 2: appeal this.
Speaker 1: It's awesome really, like I could see this going anither way,
Speaker 1: But I'm I think most people in finance are kind
Speaker 1: of sympathetic to Andrew Left here, Like the messages are
Speaker 1: not all great, but like it's really it's a very
Speaker 1: blurry situation where you.
Speaker 2: Got who among us US hasn't sent a sloppy.
Speaker 1: Everything is security is right. You can't really hold a
Speaker 1: little securities right against people.
Speaker 2: But he also testified in his own defense, which is unusual.
Speaker 1: I think he's gonna say everyone says it's unusual.
Speaker 2: I'm going to say, you're a lawyer.
Speaker 1: I'm not a real lawyer.
Speaker 2: You're more of a lawyer than I am.
Speaker 1: No. I know a lot of real criminal defense layers,
Speaker 1: and they all, for the most part share the view
Speaker 1: of every other criminal defenseiler in the world is that
Speaker 1: you should never testify on your own defense. But me,
Speaker 1: it's just the guy. I'm like, I don't know if
Speaker 1: you think you're in It's like they bet Andrew left
Speaker 1: was a belligerent but credible witness, Like I bet he
Speaker 1: did a good job. Apparently not good enough, but well again.
Speaker 2: Sentencing on August thirty first sounds like he's going to appeal.
Speaker 1: I think the right outcome here is that he should
Speaker 1: be convicted, and he should get zero days in prison.
Speaker 1: I think it's like, yeah, he did a little light
Speaker 1: security sprout, it's fine, but like he didn't hurt anyone.
Speaker 2: There is the question about what effect this is going
Speaker 2: to have on short cellars.
Speaker 1: Yea, it is back when he got charged. Kristol is
Speaker 1: another like active at short seller. They put out some
Speaker 1: report on some company that had this big, like sarcastic
Speaker 1: disclaimer at the end that was like, we don't know
Speaker 1: like what we're allowed to do now, but you should
Speaker 1: just assume that we covered our short immediately. Yeah, which
Speaker 1: I don't think works as a disclaimer, but.
Speaker 2: We definitely discussed that on this podcast.
Speaker 1: Right, no one knows what the rules are, and like
Speaker 1: the rule, there's a rule, right, the rule is like
Speaker 1: don't have a bad intent.
Speaker 2: But be good, be good.
Speaker 1: Yeah.
Speaker 2: There were interesting numbers in this story from the Wall
Speaker 2: Street Journal on the chilling effect that basically this case
Speaker 2: and probably other things have had on the short selling
Speaker 2: industry overall. That apparently there were thirty one activist short
Speaker 2: selling funds that have published research so far this year.
Speaker 2: That compares to fifty five in twenty twenty. That is,
Speaker 2: according to research firm breakout points by the way, Like.
Speaker 1: What else has changed between now and twenty twenty is.
Speaker 2: The lines going up.
Speaker 1: The line's going up, and particularly the line's going vertically
Speaker 1: up at certain dubious smallish cap stocks that were heavily shorted. Right, Yes,
Speaker 1: the memestock thing was not great for activist short sellers either.
Speaker 2: Fair point, fair point, there's a number of potential factors there.
Speaker 1: This is bad. Like if you say a stock is
Speaker 1: good and the stock goes up and you immediately sell,
Speaker 1: that's a pump it dump. That looks bad, right, But
Speaker 1: if you say a stock is bad and the stock
Speaker 1: goes down and you immediately cover, like that is symmetric,
Speaker 1: but it's it's like it's prudent risk management. Yeah, hard
Speaker 1: to be a short seller and you're like lightly capitalized
Speaker 1: and you're at a lot of risk. And if you
Speaker 1: do the work of identifying the problem in a company
Speaker 1: and the market reacts to your identifying the problem and
Speaker 1: you're like, Okay, my work here is done. I'm going
Speaker 1: to cover this and move on. Like I am sympathetic
Speaker 1: to that, and that is now much riskier.
Speaker 2: Well, it seems like the neatest solution would be the
Speaker 2: one that you already mentioned, which is basically what Andrew
Speaker 2: left ask the sec to do, which is tell.
Speaker 1: Me how old it's an intent thing?
Speaker 2: How do you prove that?
Speaker 1: And by the way, like you know, having to wait
Speaker 1: a day is makes the responishment harder. But how do
Speaker 1: you prove intent? Like you don't write emails saying like
Speaker 1: I have a hot voice and cannabis, let's take advantage
Speaker 1: of it.
Speaker 2: Well that's easy, yeah, you say.
Speaker 1: That, But like, as someone who writes a lot about
Speaker 1: like securities, fraad Case has, like the hardest thing in
Speaker 1: the world is not putting your criminal intent and your
Speaker 1: messages to your buddies.
Speaker 2: I guess I just don't do enough crimes, you know, God, I.
Speaker 1: Mean I try to every so often. I fedotic sense.
Speaker 1: I want a dumb text and be like, not o crimes,
Speaker 1: but just you know, like the texts I would move
Speaker 1: on on the front page of the Wall Street Journal,
Speaker 1: and I think, have I learned nothing from my career?
Speaker 1: And that was the Money Stuff podcast.
Speaker 2: I'm Matt Levine and I'm Katie Greifeld.
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