WEBVTT - Money Failed!: Death bets, Paramount and Archegos 0:00:03.120 --> 0:00:08.320 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:11.480 --> 0:00:13.720 Hello and welcome to The Money Stuff Podcast, your weekly 0:00:13.760 --> 0:00:17.960 podcast where we talk about stuff related to money. I'm 0:00:17.960 --> 0:00:20.520 Matt Levin, all right, the Money Stuff Colm for Bloomberg. 0:00:20.160 --> 0:00:23.319 Opinion, And I'm Katie Greifeld, a reporter for Bloomberg News 0:00:23.320 --> 0:00:24.960 and an anchor for Bloomberg Television. 0:00:25.960 --> 0:00:27.040 What are you at today, Katie? 0:00:27.360 --> 0:00:28.800 Death bets, death bets. 0:00:28.840 --> 0:00:31.560 We're going to talk about Apollo, and we're going to 0:00:31.640 --> 0:00:35.040 talk about a really interesting asset class. 0:00:35.400 --> 0:00:37.720 Death death, the final asset class. 0:00:37.840 --> 0:00:41.040 We're also going to talk about a messy merger. We're 0:00:41.040 --> 0:00:44.599 talking about Paramount and Sherry Redstone and what is going 0:00:44.680 --> 0:00:45.280 to happen there. 0:00:45.560 --> 0:00:48.880 And we're going to talk about Bill Wang and Archagis 0:00:49.000 --> 0:00:49.920 and how money. 0:00:49.640 --> 0:00:51.120 Failed him Money failed. 0:00:51.920 --> 0:00:55.160 And we might talk about reader mail. 0:00:55.320 --> 0:00:56.160 We have a lot of it. 0:00:56.720 --> 0:00:58.080 We have a certain amount of reader mail. 0:01:01.200 --> 0:01:01.880 Death bets. 0:01:01.960 --> 0:01:04.920 Specifically, you said that Apollo had some death bets, really 0:01:04.920 --> 0:01:08.240 interesting case. I'm going to need you to just give 0:01:08.360 --> 0:01:10.039 us a quick summary here. 0:01:10.080 --> 0:01:13.400 Okay, So you can buy life insurance. If you buy 0:01:13.440 --> 0:01:16.920 life insurance, you can sell that life insurance if you 0:01:17.000 --> 0:01:19.080 have like a twenty year life insurance policy, and after 0:01:19.120 --> 0:01:20.720 five years you're like, I don't need this life insurance 0:01:20.720 --> 0:01:23.600 policy anymore. They're investors who will buy it from you. 0:01:24.000 --> 0:01:27.040 One of the biggest investors that owns these policies is Apollo, 0:01:27.240 --> 0:01:31.640 or it's funds run by Apollo, and when you do this, 0:01:31.840 --> 0:01:34.400 then they take over the policy and then if you die, 0:01:34.720 --> 0:01:38.120 they get the money, but the estate the sun. I 0:01:38.160 --> 0:01:41.640 think of a woman who died well Apollo owned her 0:01:41.680 --> 0:01:45.759 life insurance policy, sued Apollo saying you shouldn't get that money, 0:01:45.800 --> 0:01:48.560 and he actually won, and now he's suing Apollo some more. 0:01:48.880 --> 0:01:51.160 Which is crazy. We're going to get into the specifics, 0:01:51.520 --> 0:01:53.240 all the bits of it occurred that case. 0:01:53.480 --> 0:01:55.600 I have to say before you even wrote about this, 0:01:55.720 --> 0:01:58.280 because I think the original story was from April twenty six, 0:01:59.000 --> 0:02:01.960 and there were a imediately so many memes on Twitter 0:02:02.240 --> 0:02:04.960 about like how this is the perfect money stuff story. 0:02:05.360 --> 0:02:08.240 There is a meme of Matt Levine reading this headline 0:02:08.280 --> 0:02:11.440 and it was like this cartoon guy like being reanimated. 0:02:12.240 --> 0:02:14.760 I really enjoyed it, and then you did write about it. 0:02:15.440 --> 0:02:17.400 I did write about it. There is a sense in 0:02:17.400 --> 0:02:20.359 which it is not news. This is a trade that 0:02:21.120 --> 0:02:24.160 happened in two thousand and six. The women died several 0:02:24.280 --> 0:02:27.280 years ago. The lawsuit they won against the polo last year, 0:02:27.360 --> 0:02:29.680 but it burbled up into consciousness this week when they 0:02:29.680 --> 0:02:32.720 filed this other lawsuit. And although it is not very newsy, 0:02:32.760 --> 0:02:33.720 it is very money stuff. 0:02:33.919 --> 0:02:35.760 It is very money stuff. And I'm going to need 0:02:35.800 --> 0:02:39.600 you to just explain to me what they're alleging that 0:02:39.800 --> 0:02:42.320 Apollo did wrong here, because, as you lay out in 0:02:42.360 --> 0:02:45.600 your column, you can sell your life insurance policy. If 0:02:45.639 --> 0:02:48.160 you have one, you can sell it. And it seems 0:02:48.240 --> 0:02:49.639 like that is somewhat common. 0:02:50.120 --> 0:02:53.000 Somewhat common, it's common. It's a very small fraction of 0:02:53.000 --> 0:02:54.799 the life insurance market, but it does happen a lot. 0:02:55.040 --> 0:02:58.040 So they're actually not saying Apolo did anything wrong. Weirdly, 0:02:58.120 --> 0:03:01.200 I mean they are because like they're trying to be inflammatory. 0:03:01.400 --> 0:03:04.079 But what happened here is that for a long time 0:03:04.120 --> 0:03:06.600 you could sell your life insurance policies, and at some 0:03:06.680 --> 0:03:08.760 point in the early two thousands, people realize, hey, this 0:03:08.800 --> 0:03:11.080 could be a big business, so they started funds so 0:03:11.080 --> 0:03:13.080 they'd raise money from investors saying we're going to go 0:03:13.120 --> 0:03:16.160 buy all these life insurance policies from people, and they 0:03:16.280 --> 0:03:18.280 raise all this money and then they're like, oh, we 0:03:18.320 --> 0:03:20.280 got to go find all this life insurance. It's actually 0:03:20.320 --> 0:03:22.799 not that easy. All these people have life insurance and 0:03:22.800 --> 0:03:24.639 they don't want to keep paying the premiums. It's hard 0:03:24.680 --> 0:03:26.800 to find them. Like they don't know that there's a 0:03:26.840 --> 0:03:29.560 secondary market where they can sell their life insurance. And 0:03:29.639 --> 0:03:31.959 so what happened in the early to mid two thousands 0:03:32.480 --> 0:03:35.400 is that there is a boom in insurance brokers saying, 0:03:35.440 --> 0:03:37.480 wait a minute, there's all these investors looking to buy 0:03:37.480 --> 0:03:40.480 life insurance policies. I'm trying to sell life insurance policies 0:03:40.800 --> 0:03:44.200 to people. There's a trade here where I sell a 0:03:44.200 --> 0:03:47.080 five million dollar life insurance policy to like an older person. 0:03:47.480 --> 0:03:50.400 I get my commission for selling the life insurance policy. 0:03:50.600 --> 0:03:53.920 She turns around and immediately sells the policy to an investor, 0:03:54.440 --> 0:03:58.000 and she gets cash for selling the policy. I get 0:03:58.040 --> 0:04:02.280 cash for originating the policy, and the investors get life 0:04:02.320 --> 0:04:04.640 insurance policies that they want to invest in. So this 0:04:04.720 --> 0:04:07.840 became a big business in the early mid two thousands. 0:04:08.200 --> 0:04:12.160 And it's called stolely, which is stranger originated life insurance. 0:04:12.320 --> 0:04:14.840 And so this policy came into being, like an insurance 0:04:14.920 --> 0:04:17.240 agent went to this woman and said, hey, I've got 0:04:17.279 --> 0:04:18.760 a trade for you. You can get paid one hundred 0:04:18.760 --> 0:04:22.400 and fifty thousand dollars to sign your name to some papers, 0:04:22.520 --> 0:04:25.599 and then I'll sell the life insurance to investors. The 0:04:25.640 --> 0:04:29.360 investors were not Apollo. Yeah, Apollo like several years later 0:04:29.480 --> 0:04:32.040 bought this policy in a big pool of policies from 0:04:32.200 --> 0:04:35.719 other investors. So Pollow didn't have anything to do with 0:04:35.760 --> 0:04:39.719 the apparently illegal origination of this policy. Because it turns 0:04:39.760 --> 0:04:42.080 out that if you're a person and you take out 0:04:42.120 --> 0:04:45.479 life insurance and you then change your mind years later 0:04:45.560 --> 0:04:47.120 and decide to sell it, you can do that. There's 0:04:47.160 --> 0:04:50.880 a secondary market. It's sometimes controversial, but basically it works 0:04:50.880 --> 0:04:53.200 and it's legal. But if you do this, if you 0:04:53.240 --> 0:04:55.640 do the thing where you just take out a policy, 0:04:56.480 --> 0:04:58.920 planning from day one to sell it to investors, and 0:04:58.960 --> 0:05:01.960 you're not paying the premium, the investors are sponsoring the 0:05:01.960 --> 0:05:06.320 premium from day one, then that doesn't work. 0:05:06.880 --> 0:05:07.240 Why not? 0:05:07.720 --> 0:05:11.520 Is it just because the insurance company doesn't like that? 0:05:11.640 --> 0:05:14.040 Because insurance companies don't like it, and so like states 0:05:14.080 --> 0:05:17.479 regulate it. I don't have a good answer to why not. Yeah, 0:05:17.800 --> 0:05:24.240 But the rough answer is that insurance is supposed to 0:05:24.279 --> 0:05:26.279 be insurance. You're supposed to be buying it for what 0:05:26.320 --> 0:05:28.800 they call insurance purposes, which is this kind of vague term, 0:05:28.800 --> 0:05:30.880 but it means like, you're trying to protect your family 0:05:30.880 --> 0:05:33.040 if you die, you're trying to do some estate planning, 0:05:33.040 --> 0:05:35.760 you have some sort of personal reason for buying the insurance. 0:05:36.080 --> 0:05:38.640 If you're just doing it as a bet on your mortality, 0:05:39.080 --> 0:05:44.520 then it's frowned upon. And this trade where it's just 0:05:44.560 --> 0:05:46.839 an investor buying life insurance for you is just a 0:05:46.839 --> 0:05:49.040 pure bet on your mortality, and so they don't like it. 0:05:49.040 --> 0:05:50.600 It's kind of illegal, by which I mean not that 0:05:50.680 --> 0:05:53.320 you go to jail necessarily. But the result here is 0:05:53.360 --> 0:05:57.560 that the investors bought this policy for this one. They 0:05:57.600 --> 0:05:59.480 gave her money, They paid her like one hundred and 0:05:59.480 --> 0:06:02.200 fifty to sign the papers and do this thing. They 0:06:02.240 --> 0:06:05.000 paid all the premiums on the policy for her entire life, 0:06:05.440 --> 0:06:07.680 and then she died and the policy paid out five 0:06:07.720 --> 0:06:09.599 million dollars and the investors were like, Okay, that's the 0:06:09.600 --> 0:06:12.279 insurance we paid for, and her estate was like, no, no, 0:06:12.600 --> 0:06:14.760 we get that money because you weren't allowed to do 0:06:14.800 --> 0:06:17.279 this in the first place. And turns out the estate 0:06:17.360 --> 0:06:19.279 is right, and so the estate gets the money she 0:06:19.360 --> 0:06:20.960 got paid to take out the insurance, and then she 0:06:20.960 --> 0:06:22.960 got the proceeds of the insurance. It seems kind of unfair. 0:06:23.000 --> 0:06:25.160 I have two points to make here, the first being 0:06:25.160 --> 0:06:28.760 on like why insurance companies don't like this. I mean, 0:06:28.760 --> 0:06:31.240 you make the point that this is an insurance product, 0:06:31.279 --> 0:06:34.719 it's not necessarily supposed to be financialized in the way 0:06:34.760 --> 0:06:36.520 that it has been. But I was talking to someone 0:06:36.560 --> 0:06:39.880 in the insurance industry and they also said that these 0:06:39.920 --> 0:06:43.040 insurance companies count on there's going to be a certain 0:06:43.160 --> 0:06:47.680 percentage of people who let their life insurance laughs, like 0:06:47.760 --> 0:06:50.320 they're not going to pay the premiums, they can't keep 0:06:50.400 --> 0:06:53.080 up with it, and then obviously they don't have to 0:06:53.080 --> 0:06:56.279 pay it out the insurance company, and this whole model 0:06:56.279 --> 0:06:57.560 that we're talking about removes that. 0:06:57.880 --> 0:06:59.680 Yeah, that's exactly right. That's sort of what it means 0:06:59.680 --> 0:07:03.400 to say, shouldn't be financialized. Like the insurance companies sell 0:07:03.440 --> 0:07:06.920 you the insurance understanding that you're a person, and like 0:07:08.320 --> 0:07:11.520 your circumstances can change. You might forget to pay the premiums, 0:07:11.560 --> 0:07:13.400 you might not be able to afford to pay the premiums. 0:07:13.480 --> 0:07:15.320 You might decide, actually, I don't need this life insurance 0:07:15.320 --> 0:07:19.280 anymore because my kids grew up or whatever. And if 0:07:19.320 --> 0:07:24.360 you do that, you will stop paying the premiums, and 0:07:24.480 --> 0:07:27.400 so they can price that and the insurance is cheaper 0:07:27.440 --> 0:07:29.280 because they know some people won't pay the premiums and 0:07:29.320 --> 0:07:31.520 will then die and won't get the death benefit. But 0:07:31.960 --> 0:07:34.080 if you sell your insurance to a financial investor, the 0:07:34.120 --> 0:07:36.440 financial investor is just going to make a rational calculation 0:07:36.520 --> 0:07:39.160 about what the expected value of the policy is and 0:07:39.160 --> 0:07:40.880 they're going to keep paying the premiums as long as 0:07:40.880 --> 0:07:43.680 it has positive expected value. And so the insurance company 0:07:43.720 --> 0:07:46.440 is underpricing its insurance. Like that's why this trade worked, 0:07:46.720 --> 0:07:49.040 because you could go to all these people and buy 0:07:49.160 --> 0:07:52.960 underpriced insurance because the insurance companies were pricing it expecting 0:07:52.960 --> 0:07:55.320 the policies with lapse. But they didn't know or they 0:07:55.960 --> 0:07:57.640 didn't think about the fact that they're selling it to 0:07:57.680 --> 0:07:58.600 financial investors. 0:07:58.720 --> 0:08:01.200 I have to say, from the investors, you seems like 0:08:01.240 --> 0:08:04.320 a great trade. I mean you thinking about uncorrelated returns, 0:08:04.480 --> 0:08:06.280 how much more uncorrelated can you get? 0:08:06.440 --> 0:08:08.680 That's how this worked. People were like realized that this 0:08:08.840 --> 0:08:11.160 was a asset class that first of all, there's tons 0:08:11.200 --> 0:08:13.680 of life insurance out there, and sandly it's uncorrelated, and 0:08:13.760 --> 0:08:16.240 so it's a great product to pitch to investors. I 0:08:16.240 --> 0:08:18.520 would say that my understanding is that the size of 0:08:18.520 --> 0:08:20.200 the market is limited by the fact that a lot 0:08:20.200 --> 0:08:22.880 of investors in a lot of investors everywhere, but particularly 0:08:22.880 --> 0:08:26.400 the United States, find this cross like, yeah, I don't 0:08:26.400 --> 0:08:27.720 want to buy life. I don't want to if you 0:08:27.720 --> 0:08:28.520 can grow up. 0:08:28.720 --> 0:08:28.960 Yeah. 0:08:29.000 --> 0:08:31.040 Well. The reason I use the word death bets is 0:08:31.080 --> 0:08:33.640 because like it's funny. Well, yeah, because it's funny, but 0:08:33.679 --> 0:08:37.560 also because the estate suing Apollo in their complaint they 0:08:37.559 --> 0:08:40.760 had a lot of rhetoric about how Apollo is secretly 0:08:40.840 --> 0:08:43.720 betting on people's deaths and people don't know who has 0:08:43.760 --> 0:08:46.360 an incentive to have them dead, and it's like, this 0:08:46.480 --> 0:08:48.679 is true. The reason for a lot of these like 0:08:49.000 --> 0:08:52.160 rules is it's called the insurable interest treament. It's like, 0:08:52.160 --> 0:08:55.000 you can only take out insurance on someone who you 0:08:55.080 --> 0:08:57.400 have some connection to, you have some incentive, you have 0:08:57.440 --> 0:08:58.960 some reason to want them to stay a lot. Right, 0:08:59.000 --> 0:09:00.920 So you're gonna have insurance on your parents because like 0:09:00.920 --> 0:09:02.679 hopefully you're not going to kill your parents, right, you 0:09:02.760 --> 0:09:05.559 get have insurance on your employee because like, you care 0:09:05.559 --> 0:09:07.920 about your employee's production, right, and if your employee dies, 0:09:07.960 --> 0:09:10.320 you'll be sad and the insurance will compensate you for that. 0:09:10.640 --> 0:09:12.640 But you can have insurance on a stranger because if 0:09:12.679 --> 0:09:15.000 you go and try to take out insurance on a stranger, 0:09:15.240 --> 0:09:16.920 why are you doing that? Is it because you're trying 0:09:16.920 --> 0:09:19.360 to kill them? The insurance law is really based in 0:09:19.400 --> 0:09:22.200 part in like not creating incentives to murder people. And 0:09:22.280 --> 0:09:25.080 as when Investor pointed out, there are no cases o 0:09:25.080 --> 0:09:29.079 case we know financial investors killing the insurance on their 0:09:29.120 --> 0:09:34.400 contracts to get the payout. There are many cases of husbands, wives, 0:09:34.640 --> 0:09:38.160 children killing their loved ones to get insurance parents, So like, 0:09:38.320 --> 0:09:40.200 really this is not that gross at all, Right, yeah, 0:09:40.200 --> 0:09:42.520 really this is like sure they're betting on depths, but 0:09:42.559 --> 0:09:44.719 they're like more more morell than the sort of tail 0:09:44.800 --> 0:09:46.360 end of the spouse distribution. 0:09:46.679 --> 0:09:48.920 I was wondering how quickly we would get to the 0:09:48.960 --> 0:09:52.000 fact that this does create incentive for murder. 0:09:52.120 --> 0:09:53.520 I mean, when I wrote about it, I think I 0:09:53.559 --> 0:09:55.719 got to it immediately. It's the most sense to talk 0:09:55.760 --> 0:09:57.079 about it insurance. 0:09:57.320 --> 0:09:59.640 I mean, I have the entire column in front of 0:09:59.640 --> 0:10:03.240 me and yeah, you're right, murder did get brought up 0:10:03.320 --> 0:10:03.920 pretty quickly. 0:10:04.760 --> 0:10:06.440 Did you not think about murder when you think about 0:10:06.440 --> 0:10:06.960 life insurance. 0:10:07.040 --> 0:10:10.080 Let's talk a little bit though, about this actual case. 0:10:10.320 --> 0:10:10.800 Her name. 0:10:10.920 --> 0:10:12.920 I feel like we've referenced her a few different times, 0:10:13.040 --> 0:10:16.800 Martha Barotes. I'm saying it correctly. She died in twenty eighteen. 0:10:17.120 --> 0:10:19.319 Like you said, the estate wants. 0:10:19.040 --> 0:10:19.880 The payout back. 0:10:19.960 --> 0:10:23.360 They got it, and I don't know is that entirely 0:10:23.600 --> 0:10:25.800 fair because Martha knew what she was doing. 0:10:26.320 --> 0:10:28.640 Martha knew what she was doing. Yeah, she never paid 0:10:28.640 --> 0:10:30.840 a penny for this insurance. She got paid to fill 0:10:30.880 --> 0:10:34.280 out the forums, and then when she died, her children 0:10:34.320 --> 0:10:36.400 were like, hey, we'd like the money. I would think 0:10:36.440 --> 0:10:39.240 that if you decide that this policy is invalid because 0:10:39.240 --> 0:10:41.400 it was like a bad evil betting on lives, it 0:10:41.440 --> 0:10:43.440 didn't have an insurable interest whatever, I would think that 0:10:43.559 --> 0:10:46.120 you would say, well, then the insurance company doesn't have 0:10:46.160 --> 0:10:48.400 to pay. But in fact, the law seems to be 0:10:48.440 --> 0:10:51.120 that if the insurance company pays, the estate can get 0:10:51.160 --> 0:10:53.679 it back rather than giving it to the investors because 0:10:53.679 --> 0:10:56.040 they want Basically, the law wants to punish the investors 0:10:56.040 --> 0:10:57.240 so that the investors don't. 0:10:57.040 --> 0:10:59.920 Do this one more point on investing, what do this do? 0:11:00.080 --> 0:11:03.079 The thoughts I had while reading this and thinking about 0:11:03.120 --> 0:11:06.560 this was to the point that this has become an 0:11:06.600 --> 0:11:10.160 asset class. I feel like just the evolution of markets 0:11:10.240 --> 0:11:14.320 is that somehow this is gonna be an investable asset class. 0:11:14.320 --> 0:11:17.120 On robin Hood, retail will be involved in It'll trade 0:11:17.160 --> 0:11:17.920 twenty four to seven. 0:11:18.640 --> 0:11:24.400 So there I would worry more about murder. 0:11:24.480 --> 0:11:25.720 Murder, oh my god. 0:11:26.160 --> 0:11:29.679 Because it's like there's a limited number of investors in 0:11:29.720 --> 0:11:33.560 this asset class. They're all institutional, they have careers, they 0:11:33.559 --> 0:11:35.440 don't want to go to jail, they care about the 0:11:35.480 --> 0:11:38.600 reputation of the asset class, and they're doing it in scale, 0:11:38.880 --> 0:11:41.240 so that like murdering one person wouldn't change the returns 0:11:41.240 --> 0:11:41.640 that much. 0:11:42.120 --> 0:11:45.400 It I don't know, man, it have to be totally blind. 0:11:45.600 --> 0:11:47.600 If you invested in a big pool, then you wouldn't 0:11:47.600 --> 0:11:48.520 have much incentive together. 0:11:48.559 --> 0:11:50.760 Well, you'd want to diversify, obviously, but. 0:11:50.960 --> 0:11:52.800 Unless you're planning to do murder, than you wouldn't want 0:11:52.800 --> 0:11:53.520 a diverse Well. 0:11:53.520 --> 0:11:55.360 I feel like then it'd be easy to track, like 0:11:55.400 --> 0:11:59.120 who just has some really concentrated part of the playoffs 0:11:59.200 --> 0:11:59.560 a lot. 0:11:59.480 --> 0:12:01.560 Of insider trading is pretty easier to track, and people 0:12:01.600 --> 0:12:04.080 do it anyway, So if you had a lot of this, 0:12:04.200 --> 0:12:06.160 you'd have at least one murder, I think. 0:12:06.280 --> 0:12:09.199 I think it'd be a really interesting psychological and market 0:12:09.240 --> 0:12:10.240 structure experiment. 0:12:10.360 --> 0:12:23.360 So maybe someone will do it. 0:12:25.320 --> 0:12:30.160 Let's talk about a messy merger, potentially tricky, messy. I 0:12:30.200 --> 0:12:31.600 don't know what word do you want to use. 0:12:32.760 --> 0:12:34.360 It's a classic boardroom battle. 0:12:36.040 --> 0:12:36.880 That's a good one. 0:12:37.120 --> 0:12:37.760 Why don't you tell that? 0:12:37.840 --> 0:12:42.040 What we're talking about Paramount and the fact that it's 0:12:42.080 --> 0:12:46.679 in exclusive conversations with sky Dance, which is owned by 0:12:46.760 --> 0:12:50.800 David Ellison, but there's a lot of investors who would 0:12:50.800 --> 0:12:54.360 like them to consider also a deal coming from Apollo 0:12:54.480 --> 0:12:57.680 and Sony as well. So that's one tricky element. Then 0:12:57.720 --> 0:13:00.120 the other tricky element is, of course Sherry Redstone, who 0:13:00.120 --> 0:13:04.079 owns seventy seven percent of the Class A shares, which 0:13:04.120 --> 0:13:07.320 is what Skydance is after. And then you have the 0:13:07.640 --> 0:13:11.120 vast majority of outstanding shares or Class B shares that 0:13:11.320 --> 0:13:12.319 have no voting power. 0:13:12.559 --> 0:13:15.640 Yeah, so it's like this weird situation where Paramount is 0:13:15.760 --> 0:13:18.360 a big company with a lot of shares outstanding, most 0:13:18.360 --> 0:13:23.080 of which don't vote, and so basically Sharry Redstone controls 0:13:23.120 --> 0:13:25.720 about five percent of the stock, but that five percent 0:13:25.720 --> 0:13:28.000 of the stock has seventy seven percent of the voting power, 0:13:28.240 --> 0:13:30.520 which means that if you buy her five percent stake, 0:13:30.800 --> 0:13:33.360 you control the company, which creates a lot of incentives 0:13:33.400 --> 0:13:35.840 for mischief. The other weird thing is that share Redson 0:13:35.880 --> 0:13:38.320 doesn't actually own that stock, which she owns is a 0:13:38.360 --> 0:13:42.720 company called National Amusements. National Amusements is a chain of 0:13:42.760 --> 0:13:45.839 movie theaters that also owns this five percent one. 0:13:45.840 --> 0:13:47.160 Hundred and twenty four theaters on. 0:13:47.480 --> 0:13:49.920 Four theaters, but they also own this chunk of class 0:13:49.960 --> 0:13:53.000 A voting stock in Paramount. That company controls Paramount, and 0:13:53.000 --> 0:13:55.640 shire redsn controls that company. And so if you want 0:13:55.679 --> 0:13:57.640 to buy Paramount. One thing you could do is you 0:13:57.640 --> 0:13:59.520 can go to the board of directors and say we'll 0:13:59.559 --> 0:14:01.800 pay twelve dollars a share in cash for all the 0:14:01.800 --> 0:14:04.160 shares of Paramounts in a merger. And that's kind of 0:14:04.160 --> 0:14:06.160 more or less what Apolo seems to have offered. Another 0:14:06.160 --> 0:14:07.320 thing you can do is you get a share red 0:14:07.360 --> 0:14:09.800 Zone and say, hey, we'll take National Amusements off your 0:14:09.800 --> 0:14:12.880 hands for like two billion dollars, which is like a 0:14:12.960 --> 0:14:15.560 fraction of the price of Paramount. Paramount is equity value 0:14:15.600 --> 0:14:17.720 something like twelve billion dollars. This is what people seem 0:14:17.720 --> 0:14:19.760 to be talking about. If you could pay two billion 0:14:19.800 --> 0:14:21.960 dollars for National Amusements and then you control Paramount and 0:14:21.960 --> 0:14:23.600 then you can do what you want, and I don't 0:14:23.600 --> 0:14:26.600 know what they want, but the deal structure is very complicated. Basically, 0:14:26.600 --> 0:14:29.560 skid Ends wants to buy National Amusements and then have 0:14:29.720 --> 0:14:32.440 Paramount buy Skuidens for stock and then put their own 0:14:32.440 --> 0:14:34.480 people in charge of Paramount, and they're like, this is 0:14:34.480 --> 0:14:36.520 going to make Paramount be worth thirty dollars a share. 0:14:36.760 --> 0:14:39.080 But it's like a complicated merger structure. But step one 0:14:39.080 --> 0:14:41.320 of the structures, we're going to buy National Amusements and 0:14:41.360 --> 0:14:42.440 then we'll control Paramount. 0:14:42.640 --> 0:14:45.240 So that was a gorgeous explanation. I don't know why 0:14:45.240 --> 0:14:48.640 I had to try. So that's very tricky. And I 0:14:48.680 --> 0:14:52.280 have to say the disparity, the discrepancy in pricing between 0:14:52.280 --> 0:14:54.720 the Class A and the Class B is interesting. 0:14:54.760 --> 0:14:56.280 I mean, there's just a wide gap there. 0:14:56.440 --> 0:14:58.360 There's lots of companies that have dual class shares, but 0:14:58.440 --> 0:15:01.520 it's often like a founder compan where like Mark Zuckerberg 0:15:01.560 --> 0:15:04.280 isn't going to sell Facebook, right, Like here, you really 0:15:04.320 --> 0:15:07.960 can buy control of a twelve million dollar company by 0:15:07.960 --> 0:15:09.960 buying five percent of the stock. And it's like just 0:15:09.960 --> 0:15:12.360 an unusually sharp case of the difference in the value 0:15:12.360 --> 0:15:13.400 of the two types of shares. 0:15:14.000 --> 0:15:16.680 So that's tricky. That's one of the messy things. The 0:15:16.680 --> 0:15:19.880 other messy thing they fired the CEO. Now it's a 0:15:20.040 --> 0:15:22.000 CEO committee run. 0:15:21.960 --> 0:15:26.120 Office of COO. Right, it's like three guys. Yeah, yeah, 0:15:26.200 --> 0:15:28.320 I was looking at the announcement. They say the Office 0:15:28.320 --> 0:15:30.200 of the CEO is working with the board to develop 0:15:30.240 --> 0:15:33.480 a comprehensive long range plan to accelerate growth and develop 0:15:33.520 --> 0:15:36.160 popular content. But you know they don't mean that, right. 0:15:36.440 --> 0:15:39.760 You don't install three guys as your office of CEO 0:15:40.000 --> 0:15:43.040 if you're planning to like have them run the company 0:15:43.080 --> 0:15:46.200 for ten years and develop new content. Right. That's like, 0:15:46.280 --> 0:15:48.200 we are selling this company in the next two weeks. 0:15:48.360 --> 0:15:50.080 We don't really care he's running it for like two. 0:15:49.960 --> 0:15:51.080 Weeks, right, yeah. 0:15:51.320 --> 0:15:54.240 Yeah. As Blueberg Intelligence put it, the replacement of Bob 0:15:54.280 --> 0:15:57.440 Backish puts Paramount a step closer to a deal with 0:15:57.480 --> 0:16:01.960 Skydance Media. Backish obviously the acquisition it feels like, there's 0:16:02.000 --> 0:16:04.720 a lot of people who vocally oppose this. 0:16:05.160 --> 0:16:09.400 Yeah, well so shareholders, Yes, some shareholders oppose it. Backers 0:16:09.400 --> 0:16:12.720 seems to opposed that. Several directors step down last month 0:16:12.800 --> 0:16:15.600 because they seem to be not super comfortable with the deal. 0:16:15.920 --> 0:16:18.520 One person who really opposes it is h Marrigabelly, who 0:16:18.560 --> 0:16:22.920 runs GAM who's the biggest holder of Class A shares 0:16:23.320 --> 0:16:26.640 other than National Amusements. He's in this weird position where like, 0:16:26.880 --> 0:16:29.280 he has these shares that are like theoretically worth more 0:16:29.520 --> 0:16:33.000 than the Class B shares, except that like Skydence doesn't 0:16:33.000 --> 0:16:34.680 have to go buy up all the Class A shares, 0:16:34.680 --> 0:16:36.120 They don't have to pay a premium for the Class 0:16:36.160 --> 0:16:37.800 A shares. All they have to do is buy National 0:16:37.800 --> 0:16:40.240 Amusements and then they get a majority of the vote 0:16:40.320 --> 0:16:42.000 and they're done. So they don't have to pay him 0:16:42.200 --> 0:16:44.280 any premium. Right, they don't have to pay the other 0:16:44.280 --> 0:16:46.000 Class A holders of premium. They just have to pay 0:16:46.000 --> 0:16:48.560 Shary Redstone for National Amusements. So he's in this weird 0:16:48.600 --> 0:16:50.560 position where he's like, I think I have these super 0:16:50.640 --> 0:16:53.280 voting valuable shares, but actually they turn out not to 0:16:53.280 --> 0:16:54.760 be that valuable because they're a minority. 0:16:55.000 --> 0:16:56.480 I mean, where does this go from here? Is this 0:16:56.560 --> 0:16:57.320 like a done deal? 0:16:57.520 --> 0:17:00.200 Is there any way that some of these vocal people 0:17:00.240 --> 0:17:02.280 who don't like this deal could actually stop it? 0:17:02.720 --> 0:17:08.879 Oh? Yeah, I mean you can't literally buy the seventy 0:17:08.920 --> 0:17:14.120 seven percent voting stock, fire the board and say okay, 0:17:14.400 --> 0:17:16.239 we're like taking over this company and we're not going 0:17:16.280 --> 0:17:19.879 to give the public shareholders anything. There's a special committee 0:17:19.880 --> 0:17:23.400 of Paramount directors who have to approve any transaction. Now 0:17:23.400 --> 0:17:27.200 it's tricky because they don't have to approve any National 0:17:27.240 --> 0:17:30.720 Amusements transaction. Yeah, they don't run National Amusements. The Class 0:17:30.760 --> 0:17:33.600 A shares don't have to change hands, right Like National Amusements, 0:17:33.640 --> 0:17:35.879 which is its own company, could just be acquired and 0:17:35.920 --> 0:17:38.399 then National Amusements can come into the board meaning and say, okay, 0:17:38.400 --> 0:17:40.920 we're still we still have our seventy seven percent control. 0:17:41.240 --> 0:17:44.720 Nothing has changed except who owns National Amusements. It's also 0:17:44.760 --> 0:17:47.239 tricky because the Special Committee and thinking about paramount will 0:17:47.240 --> 0:17:50.680 think about how much value did share Redstone get for 0:17:50.720 --> 0:17:52.840 her Class A shares? How much value are the other 0:17:52.880 --> 0:17:55.800 shareholders getting for their Class P shares? But they don't 0:17:55.800 --> 0:17:57.720 know how much value she's getting for her Class A 0:17:57.800 --> 0:18:00.919 shares because Skydance will presumably right her a check for 0:18:01.000 --> 0:18:03.679 National amusements. And you know, her Class A shares have 0:18:03.680 --> 0:18:05.960 a market value seven hundred million dollars, and the check 0:18:06.000 --> 0:18:08.879 for National amusemance is like supposedly the reporting is going 0:18:08.960 --> 0:18:11.320 to be around two billion dollars. So that's a big premium. 0:18:11.359 --> 0:18:13.280 But there's all those movie theaters. We don't know how 0:18:13.320 --> 0:18:14.120 much they're worth. 0:18:14.000 --> 0:18:15.760 Right, all one hundred and twenty four of them. 0:18:15.800 --> 0:18:19.200