WEBVTT - Xs and Os: Trader U, VORB, QXO 0:00:03.120 --> 0:00:08.320 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:11.080 --> 0:00:13.960 Hello and welcome to The Money Stuff Podcast, your weekly 0:00:14.000 --> 0:00:16.320 podcast where we talk about stuff if you want it 0:00:16.400 --> 0:00:20.160 to money. I'm Matt Levian and I write the Money 0:00:20.200 --> 0:00:21.279 Stuff column for Bloomberg. 0:00:21.800 --> 0:00:24.200 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:00:24.239 --> 0:00:25.720 an anchor for Bloomberg Television. 0:00:26.640 --> 0:00:27.600 What's going on, Katie? 0:00:27.680 --> 0:00:30.720 We're going to talk about trader school and hedge funds. 0:00:30.800 --> 0:00:33.519 Then we're going to talk about fake m and A, 0:00:34.240 --> 0:00:36.000 and then we're going to talk about kind. 0:00:35.720 --> 0:00:38.120 Of M and A real weird NA. 0:00:38.479 --> 0:00:43.680 Yeah, let's get to it. Let's get into it. So 0:00:43.880 --> 0:00:48.280 Traders School, we're talking about zero point seventy two Citadel. 0:00:48.479 --> 0:00:52.080 The list goes on other giant hedge funds basically creating 0:00:52.120 --> 0:00:56.880 an in house trading school to turn their nines into 0:00:56.960 --> 0:00:57.800 perfect tens. 0:00:58.280 --> 0:01:01.920 Yes, this is a Bloomberg News Big Take article today yesterday. 0:01:02.680 --> 0:01:03.360 It does matter. 0:01:03.440 --> 0:01:06.200 Time is a construct. As we keep going over, this is. 0:01:06.120 --> 0:01:08.959 A big take article at Bloomberg about how these hedge 0:01:08.959 --> 0:01:11.479 funds are building their own in house trading schools. Here 0:01:11.520 --> 0:01:12.560 we are talking about it. 0:01:12.840 --> 0:01:16.679 Yeah, reading this, I kind of feel like, shouldn't you 0:01:16.800 --> 0:01:19.200 have an in house training program anyway. 0:01:19.520 --> 0:01:22.440 So a couple of points of that one is that no, 0:01:22.720 --> 0:01:25.480 historically all of the like buy side like used to 0:01:25.560 --> 0:01:27.920 hire from the seull side, right, Like it used to 0:01:28.000 --> 0:01:30.000 be that if you're a hedge fund, the way you 0:01:30.360 --> 0:01:33.080 acquired new talent was from the banks. And one thing 0:01:33.120 --> 0:01:35.199 that's happening here is like the banks are a less 0:01:35.200 --> 0:01:38.000 of a source of talent for these places, in part 0:01:38.040 --> 0:01:40.560 because like banks get rid of prop trading and so 0:01:40.720 --> 0:01:43.360 like the ability to source good risk takers from banks 0:01:43.400 --> 0:01:45.160 has gone down, but also a part because these places 0:01:45.160 --> 0:01:47.640 have gotten huge, and it's just like you're not looking 0:01:47.720 --> 0:01:50.200 to like identify one good trader from somewhere, you're looking 0:01:50.200 --> 0:01:52.840 to like mass produce them. And so having a training 0:01:52.880 --> 0:01:55.000 program is kind of a new need for these big firms. 0:01:55.040 --> 0:01:57.520 Right used to be a hedge funds, like one manager 0:01:57.800 --> 0:02:00.320 and when that manager got rich enough, they just the 0:02:00.360 --> 0:02:04.000 firm went away. So like, having this very institutional structure 0:02:04.120 --> 0:02:05.680 is kind of a new thing, and so you need 0:02:05.720 --> 0:02:07.840 a training program. The other thing about it, though, it's 0:02:07.840 --> 0:02:11.600 not just training you know, incoming people to be good analysts. 0:02:11.840 --> 0:02:14.480 It's taking the people who are analysts and have been 0:02:14.520 --> 0:02:17.760 there for a while and trying to find out if 0:02:17.800 --> 0:02:20.400 they will be good portfolio managers and promoting them to 0:02:20.480 --> 0:02:24.320 being portfolio managers as carefully and scientifically as you can. 0:02:24.520 --> 0:02:26.240 So instead of being like, yeah, you've been here a while, 0:02:26.240 --> 0:02:30.160 here manage a book, it's like taking the analysts and 0:02:30.520 --> 0:02:32.480 seeing if they'd be good at managing a book and 0:02:32.520 --> 0:02:33.880 teaching them how to manage a book. 0:02:34.120 --> 0:02:37.919 So two points. So we're talking about it as trader school, 0:02:37.960 --> 0:02:40.560 and the article talks about it as trader school. It's 0:02:40.600 --> 0:02:43.400 more fun to me is this sort of just be 0:02:43.480 --> 0:02:46.120 in vision where it's actually just like a factory and 0:02:46.160 --> 0:02:49.720 you're just putting this person into the machine. It does 0:02:50.000 --> 0:02:53.320 some combination of lights and sounds and things to the 0:02:53.360 --> 0:02:56.320 person that they spit out as this stock picker. 0:02:56.480 --> 0:02:58.280 Well, that is sort of how these things are supposed 0:02:58.280 --> 0:03:00.400 to work, right. The idea of these multi strategies is 0:03:00.440 --> 0:03:04.120 they're very like scientifically managed and they really like carefully 0:03:04.160 --> 0:03:06.640 monitor your trading and they make sure you're neutral to 0:03:06.680 --> 0:03:09.040 all the factors, and if your portfolio goes down by 0:03:09.040 --> 0:03:11.080 a little bit, they like pull some capital, and if 0:03:11.120 --> 0:03:12.960 it goes down by a little bit more, they fire you. 0:03:13.160 --> 0:03:15.080 It's you know it is like an alpha factory, right, 0:03:15.120 --> 0:03:19.000 it is like trying to somewhat dehumanize the management of traders. 0:03:19.040 --> 0:03:21.040 So yeah, it is a machine that flashes some lights 0:03:21.040 --> 0:03:23.360 that you But wait, I also want to take it 0:03:23.400 --> 0:03:26.240 seriously as a school because I would like to go 0:03:26.280 --> 0:03:27.040 to Trader School. 0:03:27.080 --> 0:03:28.760 I want to audit a class at Trader School. I 0:03:28.800 --> 0:03:31.280 don't think I would do very well, so I don't 0:03:31.280 --> 0:03:33.680 want to receive a grade at the end, but I 0:03:33.720 --> 0:03:35.280 would like to see what happens. 0:03:35.400 --> 0:03:38.160 Apparently they greate them out of ten, right, yeah, right, 0:03:38.720 --> 0:03:40.960 Like usually the analysts come in as ninees and they're 0:03:40.960 --> 0:03:43.640 supposed to leave as ten. Portfolio managers for that come 0:03:43.680 --> 0:03:45.040 in coming at like a two. 0:03:45.440 --> 0:03:47.880 I was gonna say, I'd be, you know, a solid one, 0:03:48.160 --> 0:03:52.680 maybe a two on a good day and maybe come out. Yeah. 0:03:54.200 --> 0:03:58.080 Two points on that one is that I hope that 0:03:58.200 --> 0:04:01.000 by saying that you want to audit a class Trader School, 0:04:01.400 --> 0:04:03.800 you have manifested that and that we will be invited 0:04:04.040 --> 0:04:06.560 to audit a class at point seventy two or someone 0:04:07.000 --> 0:04:09.800 or said it, or anyone's Trader School, any multi strategy 0:04:09.800 --> 0:04:11.480 hedge fund that wants to have us audit a class 0:04:11.480 --> 0:04:15.040 at Trader School, and maybe yeah, do some field recording. 0:04:15.080 --> 0:04:17.039 We doesn't even have to be top tier. We go 0:04:18.080 --> 0:04:19.960 we don't need to go to like the Ivy League 0:04:20.080 --> 0:04:22.279 of Trader School. I'd be willing to go, you know, 0:04:22.360 --> 0:04:25.960 in state, but yeah, I would love to do that. 0:04:25.960 --> 0:04:29.200 That would be our first like field podcast recording. 0:04:29.279 --> 0:04:30.880 I feel like we'd learn a lot at Trader School, 0:04:30.880 --> 0:04:32.919 and so at our listeners, and so would possibly the 0:04:32.920 --> 0:04:33.960 Hedge one that hosts us. 0:04:34.160 --> 0:04:36.599 I mean, point seventy two sounds like it is the 0:04:36.760 --> 0:04:40.680 place to go because the article mentions that more than 0:04:40.720 --> 0:04:44.000 half of Steve Cohen's stock pickers have come through its 0:04:44.040 --> 0:04:47.360 program rather than big expensive outside hires that they've had 0:04:47.400 --> 0:04:47.680 to make. 0:04:47.800 --> 0:04:49.599 So it does seem a lot cheaper to run a 0:04:49.600 --> 0:04:51.960 trader school than to pay someone a fifty million dollar 0:04:52.040 --> 0:04:54.160 guarantee to come be a portfolio manager. 0:04:54.360 --> 0:04:56.760 Yeah, I mean, maybe it's less good for you, that 0:04:56.880 --> 0:04:58.919 star stockpicker, because right. 0:04:58.839 --> 0:05:00.760 It's like you're like on the Rickie contract, right, Like 0:05:00.800 --> 0:05:02.839 you get paid like an employee rather than in a 0:05:02.880 --> 0:05:04.080 bidding war for your talent. 0:05:04.279 --> 0:05:04.559 Yeah. 0:05:04.680 --> 0:05:06.560 The other thing about Trader School is my dream has 0:05:06.560 --> 0:05:09.080 always been to do my job as like I write 0:05:09.080 --> 0:05:11.920 my newsletter for like and do my podcast right, thank you, 0:05:12.040 --> 0:05:14.800 six months of the year. And then I go, like, 0:05:15.320 --> 0:05:19.159 intern in a financial job somewhere for six months of 0:05:19.160 --> 0:05:20.719 the year, Like, wouldn't that be fun? 0:05:20.880 --> 0:05:23.640 I feel like this company would let you do whatever 0:05:23.680 --> 0:05:24.240 you want, I. 0:05:24.240 --> 0:05:25.640 Know, but like who would hire me for that? 0:05:25.839 --> 0:05:25.960 Who? 0:05:26.240 --> 0:05:28.920 Like hopefully some of our listeners, But who would be like, oh, yeah, come, 0:05:29.000 --> 0:05:31.719 like do a bad job at our job for six 0:05:31.760 --> 0:05:32.440 months and then. 0:05:32.320 --> 0:05:35.800 Go write about it right heavy handed section we've ever. 0:05:35.640 --> 0:05:38.479 Hed, I know, right, like please have us come into 0:05:38.520 --> 0:05:38.880 your things. 0:05:38.920 --> 0:05:39.240 Yeah. 0:05:39.279 --> 0:05:41.440 I didn't even mean it that way. It's so it's 0:05:41.440 --> 0:05:44.480 hard to know what these jobs are like unless you've 0:05:44.520 --> 0:05:46.960 done them in some way. Yeah, And I feel like 0:05:47.000 --> 0:05:49.080 I could learn a lot by like spending a few 0:05:49.120 --> 0:05:50.159 months me too. 0:05:50.360 --> 0:05:52.239 I mean, I feel like I was born and raised 0:05:52.279 --> 0:05:56.160 inside this building. I've been here since I was twenty 0:05:56.200 --> 0:05:59.800 three years old. Isn't the point of journalism to go 0:05:59.839 --> 0:06:02.560 off and have broadening experiences and really get to know 0:06:02.680 --> 0:06:04.280 the industries and the people that you cover. 0:06:04.440 --> 0:06:06.760 So and I've had some jobs in finance and that 0:06:06.800 --> 0:06:09.640 was nice, but I haven't had all the jobs in finance. Yeah, 0:06:09.880 --> 0:06:12.520 you know, you know, manage a little portfolio for for 0:06:12.640 --> 0:06:14.320 point sevenue two. I feel like that could be good. 0:06:14.720 --> 0:06:16.640 I feel like that's something you do in high school, right, 0:06:16.680 --> 0:06:18.880 you sign up and have like a paper portfolio. 0:06:19.200 --> 0:06:21.800 Well, I think that. I think the traders school is 0:06:21.800 --> 0:06:23.520 to train them to run a real portfolio. But yeah, 0:06:23.560 --> 0:06:25.680 some of these schools do have you run a paper portfolio. 0:06:25.800 --> 0:06:27.760 Yeah, I think I bought like shares of hot Topic. 0:06:28.040 --> 0:06:30.440 Okay, that sounds right. Yeah, I like this is at 0:06:30.520 --> 0:06:32.560 least the second appearance of hot Topic on this show. 0:06:32.640 --> 0:06:35.000 I spent a lot of time at Hot Topic. What 0:06:35.040 --> 0:06:37.320 else should we say about this? I mean, again, it 0:06:37.360 --> 0:06:40.440 seems like a cheaper way of doing things. There's a 0:06:40.440 --> 0:06:43.839 lot of conversation in this article about the talent war 0:06:43.960 --> 0:06:45.719 going on in hedge funds right now. 0:06:45.920 --> 0:06:47.960 I think that it's just like these funds pay so 0:06:48.080 --> 0:06:52.600 much to portfolio managers, They charge clients so much. There's 0:06:52.680 --> 0:06:54.760 so much demand for this, and I think part of 0:06:54.760 --> 0:06:57.599 it is like these are places that are pretty good 0:06:57.680 --> 0:07:01.120 at identifying alpha and being able to say, like we 0:07:01.160 --> 0:07:03.680 can strip out all the elements of luck and market 0:07:03.680 --> 0:07:07.400 exposure and just identify who is skillful at managing investments, 0:07:07.720 --> 0:07:09.640 and then we can offer you that sort of pure 0:07:09.720 --> 0:07:13.480 uncut investment skill, and the clients apparently love that because 0:07:13.560 --> 0:07:16.160 it's uncorrelated to everything else and it usually goes up, 0:07:16.600 --> 0:07:19.200 and so they're willing to pay basically whatever fees these 0:07:19.240 --> 0:07:23.440 funds charge. And given that, it's clear that there's the 0:07:23.480 --> 0:07:26.720 shortage of people who can generate alpha, and it's not 0:07:26.760 --> 0:07:28.960 clear that would be like a natural shortage, right, It's 0:07:28.960 --> 0:07:30.720 just like there's only so many people who've like come 0:07:30.720 --> 0:07:33.640 through the pipeline of becoming portfolio managers at point seventy 0:07:33.640 --> 0:07:36.360 two or whatever. So if you can train more of them, like, 0:07:36.840 --> 0:07:41.400 you're filling this like enormous unmet demand and you can 0:07:41.440 --> 0:07:42.880 make a lot of money, right if you can like 0:07:43.000 --> 0:07:45.720 bring someone in cheaply and turn them into a fifty 0:07:45.760 --> 0:07:47.680 million dollar a year portfolio manager, Like, yeah, that's a 0:07:47.680 --> 0:07:48.280 great business. 0:07:48.360 --> 0:07:50.760 I don't think I have any ideas, but wouldn't it 0:07:50.760 --> 0:07:52.880 be fun to like do a thought exercise of like 0:07:52.920 --> 0:07:55.800 what would your trading school look like? Like what are 0:07:55.840 --> 0:07:57.520 they learning in trading school classes? 0:07:57.600 --> 0:07:59.200 What are they learning in training school classes? So I 0:07:59.240 --> 0:08:01.120 think that we're sort of exaggerating by saying this is 0:08:01.120 --> 0:08:02.360 trading school, right, Like this is. 0:08:02.360 --> 0:08:04.240 Like that isn't it fun to go along this flight 0:08:04.320 --> 0:08:04.800 of fancy? 0:08:04.920 --> 0:08:06.600 Sure? So I think that this is like a lot 0:08:06.640 --> 0:08:09.040 of It is like some sort of combination of like 0:08:09.240 --> 0:08:12.720 actual classes and like mentorship and meetings and whatnot, for 0:08:12.920 --> 0:08:15.640 like existing analysts who want to move into a portfolio 0:08:15.640 --> 0:08:18.040 manager roles where they're trying to figure out if they'd 0:08:18.040 --> 0:08:20.560 actually be good at it. But I will say there 0:08:20.560 --> 0:08:23.480 are people who run trading schools, and those people are 0:08:23.760 --> 0:08:24.800 the big prop trading firms. 0:08:24.880 --> 0:08:26.080 Right. Oh, I thought you were going to say that 0:08:26.120 --> 0:08:28.480 people that keep trying to scam me you on Instagram. 0:08:28.840 --> 0:08:31.200 Oh yeah, I don't think those people even run trading schools. 0:08:31.400 --> 0:08:33.360 I think those people just run Instagram ads. But no, 0:08:33.520 --> 0:08:35.839 like Jane Street and Susquehanna and all those sort of 0:08:35.840 --> 0:08:39.600 big prop trading firms are very invested in training people 0:08:39.640 --> 0:08:42.480 how to think like traders, because you can't really hire 0:08:42.480 --> 0:08:44.560 people out of school who know how to do that 0:08:44.960 --> 0:08:47.960 if you're hiring investment bankers. It's like some combination of 0:08:47.960 --> 0:08:50.000 like can they do a DCF model and like will 0:08:50.040 --> 0:08:52.760 they work really hard? And there are ways to figure 0:08:52.800 --> 0:08:55.400 that out, but knowing if people are good at operating 0:08:55.440 --> 0:08:58.480 under uncertainty and like estimating probabilities in their head and 0:08:58.520 --> 0:09:01.640 sort of being decisive and like taking risks in the 0:09:01.720 --> 0:09:03.840 right way. It's just harder, and so a lot of 0:09:03.840 --> 0:09:06.880 what these firms do, both in their like lengthy interview 0:09:06.880 --> 0:09:09.800 process and then like in their like internship programs, is 0:09:09.880 --> 0:09:12.800 like they sit them down to like play poker every night, 0:09:13.040 --> 0:09:16.000 and they play like fake trading games where they evaluate 0:09:16.040 --> 0:09:18.640 their ability to like make these decisions. So it's a 0:09:18.679 --> 0:09:22.520 really like very organized trading school where they're trying to 0:09:22.559 --> 0:09:26.079 see who is like overconfident, who is too timid, and 0:09:26.120 --> 0:09:28.040 who has like the right ability to take risk. 0:09:28.360 --> 0:09:31.920 There were some examples in The Big Take. At Citadel, 0:09:32.040 --> 0:09:34.520 for example, trainees are taught how to back pitches from 0:09:34.559 --> 0:09:38.120 colleagues lower down the food chain. At bally Asny, they 0:09:38.120 --> 0:09:39.880 get a limited pot of cash, then they have to 0:09:39.880 --> 0:09:42.319 deliver returns that match or beat the firm's older hands. 0:09:42.360 --> 0:09:45.080 Zer point seventy two wants it's cadre to think like CEOs, 0:09:45.360 --> 0:09:47.640 meaning they'll need to create and run a book of ideas, 0:09:47.679 --> 0:09:50.760 all while getting total buy in from their teams. That 0:09:51.520 --> 0:09:55.319 doesn't quite fit my fantasy of my dream trading school, right. 0:09:55.240 --> 0:09:57.720 Because this is not really at trading school. This is 0:09:57.720 --> 0:10:00.840 a like developing like soft skills. Yeah, it's like developing 0:10:00.880 --> 0:10:03.679 like senior portfolio managers. Like that's a management job. That's 0:10:03.679 --> 0:10:06.160 an investing job, but it's also like a risk taking job, right, 0:10:06.200 --> 0:10:08.160 Whereas like if you're like a twenty two year old 0:10:08.160 --> 0:10:09.120 the Jane Street, you're. 0:10:09.000 --> 0:10:12.160 Being taught to indian options. Yeah yeah, right. 0:10:12.760 --> 0:10:15.920 There's great stories in Michael Lewis's about going infinitely No, 0:10:16.320 --> 0:10:21.320 just kidding. I've at Sam Bachminfried's training days at our 0:10:21.400 --> 0:10:24.480 internship days at Jane Street, where he like learned to 0:10:24.640 --> 0:10:27.760 like make positive expected value coin flip bets with his 0:10:27.960 --> 0:10:30.199 fellow interns. Right. Part of the goal of the trading 0:10:30.200 --> 0:10:33.040 program was to like have the interns bet against each 0:10:33.040 --> 0:10:34.960 other and sort of see who was good at betting 0:10:35.080 --> 0:10:37.600 and who is good at like finding and exploiting edges. 0:10:37.920 --> 0:10:39.760 I would not want to go to that trading school, 0:10:39.840 --> 0:10:41.600 but I like the idea of the trading school as 0:10:41.600 --> 0:10:44.520 a sort of like Darwinian fight between the interns, for like, 0:10:44.720 --> 0:10:47.040 you know, there's only so many jobs, and whatever intern 0:10:47.120 --> 0:10:49.480 can like out trade the fellow interns gets the job. 0:10:49.520 --> 0:10:49.720 You know. 0:10:49.960 --> 0:10:52.600 See again, that's something I would like to audit. Since 0:10:52.600 --> 0:10:55.160 I would do terribly in that program. But boy would 0:10:55.200 --> 0:11:12.360 it be fun to watch, right, it's stressful. I would 0:11:12.440 --> 0:11:16.360 find fake m and ice dress, It's just so good. 0:11:16.960 --> 0:11:20.680 Virgin Orbit Space company went bankrupt like last year, right, 0:11:20.880 --> 0:11:22.680 but before that, it sort of announced that it was 0:11:22.760 --> 0:11:25.520 in its last stages, like it furlowed all of its employees. 0:11:26.000 --> 0:11:29.360 And this guy named Matthew Brown sent them a LinkedIn 0:11:29.400 --> 0:11:31.520 message being like, hey, I would like to invest two 0:11:31.559 --> 0:11:34.000 hundred million dollars in your company, and they were like, hey, great, 0:11:34.040 --> 0:11:37.400 that sounds good, thank god, and they like negotiated the 0:11:37.440 --> 0:11:42.119 deal with him, and eventually the deal fell apart, probably 0:11:42.200 --> 0:11:45.640 because he didn't have the money. SEC brought a case 0:11:45.640 --> 0:11:48.360 against them this week, certainly claiming he didn't have the money, 0:11:48.360 --> 0:11:51.480 and in fact, he sent a screenshot of his bank 0:11:51.480 --> 0:11:53.560 account showing like one hundred and eighty two million dollars 0:11:53.840 --> 0:11:56.199 to Virgin Orbital, but it was a doctored screenshot and 0:11:56.240 --> 0:11:59.400 actually it had less than one dollar. Yeah, strange amount 0:11:59.400 --> 0:12:00.680 of money to having bank account. 0:12:00.760 --> 0:12:02.240 Yeah, quite a discrepancy. 0:12:02.520 --> 0:12:06.040 So deal fell apart, and the SEC sued him for fraud, 0:12:06.080 --> 0:12:08.880 saying that it was a fake takeover offer. But what 0:12:08.920 --> 0:12:10.160 I think about It is like I read a lot 0:12:10.160 --> 0:12:12.320 about fake takeover offers, and they're all the samewhich is 0:12:12.320 --> 0:12:14.959 that someone like buys stock in a company and the 0:12:15.120 --> 0:12:16.760 like puts out a press release saying, hey, I'm taking 0:12:16.760 --> 0:12:19.000 this company over, and the stock goes up and they 0:12:19.000 --> 0:12:21.280 sell the stock and then they like fizzle away. But 0:12:21.320 --> 0:12:23.400 this guy did not do that. He did not buy 0:12:23.440 --> 0:12:25.160 stock in the company. He did not put out a 0:12:25.160 --> 0:12:27.839 press release. He might have just been doing it for fun. 0:12:28.200 --> 0:12:30.480 This obsessed me because I don't understand the motivation. 0:12:30.760 --> 0:12:32.439 So he says it's real, right, I mean, like he 0:12:32.520 --> 0:12:35.480 gave a statement saying no, no, I love. 0:12:37.120 --> 0:12:38.960 Let me read it for you. The SEC's complaint is 0:12:38.960 --> 0:12:44.160 filled with egregious errors, fabrications, and biased allegations that undeniably 0:12:44.679 --> 0:12:49.000 favor the culprit and the corporate his virgin orbits management. 0:12:49.440 --> 0:12:51.920 I love that he says that they're the culprit here 0:12:51.960 --> 0:12:53.520 for doing due diligence. 0:12:53.960 --> 0:12:56.760 Yeah right, I mean I have talked to previous fake 0:12:56.800 --> 0:13:00.320 takeover guys and they're like, why won't this company take 0:13:00.360 --> 0:13:02.600 my calls. I'm offering to give them all this money 0:13:02.600 --> 0:13:04.200 as soon as I can raise it. But the company 0:13:04.240 --> 0:13:06.200 would take my calls. Virgin took his calls like they 0:13:06.200 --> 0:13:08.160 signed an NBA, They sent him a term sheet. They 0:13:08.200 --> 0:13:10.960 like sat down and negotiated a deal with him. Yeah, 0:13:11.160 --> 0:13:14.400 eventually started asking questions like do you actually have this money? 0:13:14.600 --> 0:13:16.920 Could you put it in an escrow? And he walked away. 0:13:17.200 --> 0:13:19.040 But I don't know it was a motivation, like he 0:13:19.080 --> 0:13:21.640 says it was real. I would like to think that 0:13:21.760 --> 0:13:23.480 he just wanted to be on TV, like he did 0:13:23.520 --> 0:13:27.040 this thing. Yeah, and he did eventually get on CNBC 0:13:27.240 --> 0:13:28.760 to talk about his proposed deal. 0:13:28.960 --> 0:13:31.440 He could have just started a fake AI company and 0:13:31.440 --> 0:13:32.679 gone on TV that way. 0:13:33.000 --> 0:13:35.440 But this is so fun. I don't know, right, there 0:13:35.440 --> 0:13:36.679 are a lot of ways to get on television, but 0:13:36.720 --> 0:13:38.280 this is a good one. And you grew up in 0:13:38.280 --> 0:13:39.920 this building. I grew up as an m and a lawyer, 0:13:40.040 --> 0:13:43.760 and I always thought that like drama of negotiating deals 0:13:43.800 --> 0:13:46.240 was kind of interesting and exciting. And he not only 0:13:46.240 --> 0:13:47.719 got to go on TV to talk about his deal, 0:13:47.720 --> 0:13:49.920 he got to like actually negotiate a deal, like he 0:13:50.160 --> 0:13:52.120 got a term shet. He was like doing calls with 0:13:52.200 --> 0:13:54.240 the CEO. He had a lawyer involved, but he's like, 0:13:54.320 --> 0:13:56.000 let's not bring the lawyers into this. Too much. I'll 0:13:56.040 --> 0:13:59.400 just will to negotiate this deal together, so I don't know, 0:13:59.559 --> 0:14:02.480 seems like it would be fun. I would totally roleplay 0:14:02.559 --> 0:14:04.240 negotiating and M AND ideals. This is another thing I 0:14:04.280 --> 0:14:06.600 would do, like besides go to Trader school, I would 0:14:06.679 --> 0:14:09.600 roll play negotiating M AND ideals for fun. And this 0:14:09.679 --> 0:14:10.520 guy might have done that. 0:14:10.559 --> 0:14:12.559 I would find that so enormously stressful. 0:14:12.760 --> 0:14:15.040 Not if you knew you weren't going to do the deal, 0:14:15.440 --> 0:14:18.080 that's true, you know, oh you know instead of two 0:14:18.120 --> 0:14:19.920 hundred million dollars, like two hundred and ten million dollars, 0:14:19.920 --> 0:14:21.800 you like, sure, two hundred ten million dollars. I'm not 0:14:21.840 --> 0:14:23.800 paying that money anyway. But the other thing is like 0:14:23.840 --> 0:14:26.880 the SEC claims that what he was trying to do 0:14:27.000 --> 0:14:31.200 was extract money out of Virgin. So what happened is that, 0:14:31.440 --> 0:14:32.720 you know, he was like, I'll put in two hundred 0:14:32.720 --> 0:14:34.520 million dollars and that at some point he sent them 0:14:34.520 --> 0:14:37.880 an email complaining that the deal had leaked. This is 0:14:37.880 --> 0:14:39.960 before he went on TV. Unclear why the deal leaked, 0:14:40.040 --> 0:14:42.840 but he said, I want a breakup fee. So if 0:14:42.920 --> 0:14:45.640 this deal doesn't go through for any reason, if I 0:14:45.680 --> 0:14:48.080 can't actually invest the two hundred million dollars. I want 0:14:48.120 --> 0:14:51.440 you to pay me like three percent, like six million dollars, right, 0:14:51.800 --> 0:14:55.600 which is an unusual ask, but people get breakup fees, 0:14:55.600 --> 0:14:57.640 but not for like deciding not to do the deal. 0:14:57.960 --> 0:15:00.880 But if it had worked, if Virgin Orbit had said, sure, 0:15:00.920 --> 0:15:03.240 will give you six million dollars if you can't give 0:15:03.280 --> 0:15:05.320 us the two hundred million dollars, then he might have 0:15:05.360 --> 0:15:06.720 walked away with six million dollars. 0:15:06.880 --> 0:15:08.360 But wouldn't that have been clawed back? 0:15:08.640 --> 0:15:11.120 Yeah, of course it's not a good plan because they 0:15:11.120 --> 0:15:13.240 were going into vocracy and they didn't infect going to vocracy. 0:15:13.240 --> 0:15:15.320 Like the idea that they'd pay him six million dollars 0:15:15.320 --> 0:15:18.240 for like pretending to do an equity investment not that likely. 0:15:18.640 --> 0:15:22.920 Again, this just seems totally, totally stressful. The CNBC appearance 0:15:23.000 --> 0:15:25.880 in and of itself was pretty weird. I didn't watch it. 0:15:25.920 --> 0:15:27.360 I don't think I could watch it. I find it 0:15:27.440 --> 0:15:28.440 very stressful to watch. 0:15:28.480 --> 0:15:29.640 It was stressful to watch. 0:15:29.800 --> 0:15:34.640 We fully plan on transacting with the company within the 0:15:34.680 --> 0:15:40.240 next twenty four hours. I have positions in over thirteen 0:15:41.200 --> 0:15:45.560 space companies, and I view them all as neighbors. 0:15:45.920 --> 0:15:50.360 He did not seem like an experienced investor in space investor. 0:15:50.440 --> 0:15:53.000 Yeah, I would also struggle to name thirteen space companies. 0:15:53.000 --> 0:15:54.320 But that's why I think he would have as well. 0:15:55.360 --> 0:15:56.160 That's a good joke. 0:15:57.680 --> 0:16:00.560 It felt stressful and it did not make me confident 0:16:00.600 --> 0:16:01.600 that the deal was going through. 0:16:01.760 --> 0:16:04.320 What do you do after this? He's thirty four, right, 0:16:04.440 --> 0:16:06.960 so I don't know. Maybe he was a long career 0:16:07.000 --> 0:16:08.560 of you know, fake M and I in front of him, 0:16:08.560 --> 0:16:10.040 but I feel like this kind of blew his cover. 0:16:10.520 --> 0:16:12.640 Sometimes these things are like people who actually do do 0:16:12.720 --> 0:16:15.400 a little investing and bite off more than they can chew, right, 0:16:15.600 --> 0:16:18.400 And like, maybe he can go invest money in other 0:16:18.480 --> 0:16:21.360 companies and be like the SEC got it all wrong 0:16:21.440 --> 0:16:23.960 that time. Yeah, I'm good for this one million dollar investment. 0:16:23.960 --> 0:16:27.000 I don't know, I mean at this time. But you 0:16:27.080 --> 0:16:32.240 also think about Virgin Orbits perspective during all of this, 0:16:32.440 --> 0:16:35.760 because this was sort of like a White Night Savior moment. 0:16:35.960 --> 0:16:38.280 Yeah, they did start asking him questions like do you 0:16:38.320 --> 0:16:40.840 have the money? But like they definitely like, you know, 0:16:40.960 --> 0:16:43.080 he sent them an email and they engaged right, like, yeah, 0:16:43.080 --> 0:16:44.840 he sent them like a cold LinkedIn message? 0:16:44.880 --> 0:16:47.840 Anything done over LinkedIn? I mean, come on, there's like. 0:16:47.800 --> 0:16:49.720 No record of him, right, Like he's you know, he's like, 0:16:49.760 --> 0:16:52.120 I've invested seven hundred and fifty million dollars in space 0:16:52.160 --> 0:16:55.640 companies and they're like, sure you have, right anyone? Yeah, 0:16:55.680 --> 0:16:57.440 it was good, right, Like they would take anything at 0:16:57.480 --> 0:16:59.200 that point, right, Like this is not the first, you know, 0:16:59.520 --> 0:17:01.840 the top person on their list of potential investors. But 0:17:01.840 --> 0:17:04.280 at this point they're like a week from bankruptcy. They're like, yeah, 0:17:04.280 --> 0:17:06.439 we'll take what we can get. And so they'd returned 0:17:06.480 --> 0:17:08.520 his calls, right, it is tough for them, right, Like 0:17:08.560 --> 0:17:10.760 they jumped all in on engaging with this guy who 0:17:10.840 --> 0:17:13.560 turned out to be fake. Apparently that not a lot 0:17:13.560 --> 0:17:14.440 of other good options. 0:17:14.680 --> 0:17:15.040 Yeah. 0:17:15.160 --> 0:17:18.000 I think someone from the company I read called it 0:17:18.080 --> 0:17:21.680 in unneeded distraction, but what was a very critical time? 0:17:21.720 --> 0:17:23.399 And I'm sure they yes and no? 0:17:23.520 --> 0:17:26.199 Right, I mean like, yeah, was he distracting them from 0:17:26.240 --> 0:17:27.360 other better investments? 0:17:27.480 --> 0:17:47.640 Maybe? Probably not, But maybe. 0:17:40.000 --> 0:17:41.920 Let's keep the conversation going on M and A. And 0:17:41.960 --> 0:17:44.760 let's talk about a weird M and A that's going 0:17:44.800 --> 0:17:48.280 on with Brad Jacobs and QX. 0:17:48.880 --> 0:17:52.120