WEBVTT - Finders Keepers: IPO, XAI, Subs 0:00:02.720 --> 0:00:10.840 Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to 0:00:10.840 --> 0:00:13.720 The Money Stuff Podcast. You're a weekly podcast where we 0:00:13.760 --> 0:00:17.360 talk about stuff related to money. I'm Matt Levian and 0:00:17.440 --> 0:00:19.480 I write the Money Stuff column for Bloomberg Opinion. 0:00:19.720 --> 0:00:22.200 And I'm Katie Greifeld, a reporter for Bloomberg News and 0:00:22.239 --> 0:00:23.759 an anchor for Bloomberg Television. 0:00:25.480 --> 0:00:27.680 That's Today. It was an all tariffs episode of The 0:00:27.680 --> 0:00:28.400 Money suff. 0:00:30.640 --> 0:00:33.800 I actually would be the most prepared out in any 0:00:33.840 --> 0:00:35.040 episode that we've ever done. 0:00:36.479 --> 0:00:39.280 We're talking about tariffs, non fought for forty eight hours. 0:00:39.320 --> 0:00:42.680 I was actually at my Grandmam's apartment last night, or 0:00:42.720 --> 0:00:44.200 I guess in the afternoon. 0:00:43.760 --> 0:00:44.560 Talking about taffs. 0:00:44.640 --> 0:00:46.159 Well, I was with my dad, and my dad and 0:00:46.159 --> 0:00:47.800 I both were like, can we turn on the TV? 0:00:48.479 --> 0:00:51.120 My grandma was like sure, yeah, so we watched it 0:00:51.159 --> 0:01:02.080 with her. No, yeah, the Rose Garden. Anyway, we're not 0:01:02.120 --> 0:01:06.639 talking about tariffs. We are talking about a conservative leaning 0:01:06.720 --> 0:01:07.720 news network. 0:01:07.360 --> 0:01:09.479 That in public conservative leading. Yeah. 0:01:09.560 --> 0:01:12.040 Yeah, I don't know what news Max does. I probably should. 0:01:12.360 --> 0:01:14.000 They're a television channel that I know. 0:01:14.120 --> 0:01:14.840 I've never watched them. 0:01:14.880 --> 0:01:18.319 They've take out the vast territory to the far right 0:01:18.360 --> 0:01:19.640 of Fox News is. 0:01:19.600 --> 0:01:22.080 My understanding of it, them, you know, and their IPO. 0:01:22.280 --> 0:01:25.400 At one point they had a market value of over 0:01:25.520 --> 0:01:29.640 thirty billion dollars, which had them more valuable than Fox 0:01:30.200 --> 0:01:32.040 for a brief moments of time. The stock has since 0:01:32.080 --> 0:01:33.240 started to come back to earth. 0:01:33.640 --> 0:01:36.479 I don't pretend to understand this anymore. Yeah, the meme thing, 0:01:36.640 --> 0:01:38.960 like the meme ipo thing. I think of this in 0:01:39.000 --> 0:01:41.960 comparison to Trumpet Media and technology grew up the other 0:01:42.640 --> 0:01:47.000 let's say, right wing media network. Maybe that also has 0:01:47.040 --> 0:01:50.560 a very high valuation relative to its fairly low revenue 0:01:51.160 --> 0:01:55.240 and net loss, and trump Media is owned by people 0:01:55.280 --> 0:01:59.000 who are like, yeah, great, but like News is probably 0:01:59.040 --> 0:02:02.680 owned by Thomas Pettif, who, in addition to being a 0:02:02.720 --> 0:02:05.520 billionaire Republican downer, is also like a trader, you know, 0:02:05.720 --> 0:02:09.160 Like he's the founder of Attractor Breakers, So like the ft. 0:02:09.240 --> 0:02:10.480 You got him on the phone and he was like, 0:02:10.720 --> 0:02:13.000 he said, he was stunned by the price. I think 0:02:13.040 --> 0:02:14.800 newsbacks is a great company, and it's going to have 0:02:14.800 --> 0:02:16.320 a very bread feature, but I think that it does 0:02:16.360 --> 0:02:19.000 not warrant this high price. It was just like, you know, 0:02:19.600 --> 0:02:21.360 in addition to being a real billionaire, he's like a 0:02:21.440 --> 0:02:23.080 billion dollars worth of Newsmax stock. 0:02:23.200 --> 0:02:25.760 Yeah, he owns the second largest steak. It was at 0:02:25.760 --> 0:02:29.079 one point worth at least five point four billion dollars. 0:02:29.120 --> 0:02:30.040 I wonder if he's sold. 0:02:30.120 --> 0:02:32.040 I think he's locked up. Really, I think like to 0:02:32.080 --> 0:02:33.560 ask him, like, are you going to sell? And you 0:02:33.600 --> 0:02:36.560 know I can change before the long most big sharelders 0:02:36.560 --> 0:02:39.560 are locked up in IPOs like that. And it's funny, 0:02:39.600 --> 0:02:41.680 like for the same reason that the thigh prices, some 0:02:41.720 --> 0:02:44.360 of the commentary that you'll read from enthusiasts is not 0:02:44.400 --> 0:02:46.920 always well informed. And I read someone being like, what 0:02:47.000 --> 0:02:49.080 will Newsmacks do with all of this capital while they 0:02:49.200 --> 0:02:51.359 use it to become the next big media, Like they're 0:02:51.400 --> 0:02:53.200 not getting any capital. It's just like the stock is 0:02:53.200 --> 0:02:55.440 trading in the secondary market. You know, there's like a 0:02:55.480 --> 0:02:59.200 real move among meme stocks that if your stock is meaning, 0:02:59.520 --> 0:03:01.920 you should get off at the market stock offering so 0:03:01.919 --> 0:03:03.640 you can raise money from the people who are buying 0:03:03.639 --> 0:03:06.200 your stock in the secondary market and pushing out the price. 0:03:06.320 --> 0:03:08.000 But you can't do that a week after your IPO 0:03:08.160 --> 0:03:10.480 R three days after your ip Newsmax is not selling 0:03:10.480 --> 0:03:12.560 any stock. I mean they sold stock at ten dollars 0:03:12.600 --> 0:03:15.120 before the run in the stock. But they're not making 0:03:15.160 --> 0:03:17.320 any money from this. This is just secondary training. 0:03:17.360 --> 0:03:20.520 They're not making money in general. They lost seventy two 0:03:20.639 --> 0:03:21.480 million dollars. 0:03:21.520 --> 0:03:23.400 These are separate things. If you're a meme stock, you 0:03:23.400 --> 0:03:25.079 don't make money in your business. Do you make money 0:03:25.120 --> 0:03:26.480 selling stock? But they're not even doing that. 0:03:26.520 --> 0:03:28.760 I'm old fashioned, mad, I like to go back to 0:03:28.800 --> 0:03:33.320 the That's true. I guess it's hard to predict what 0:03:33.639 --> 0:03:36.320 will become a meme stock. I would not have guessed 0:03:36.320 --> 0:03:38.000 that Newsmax was a candidate. 0:03:38.120 --> 0:03:40.360 No, not really really. 0:03:40.600 --> 0:03:44.480 Apparently, Chris Ruddy, though the CEO, was going on like 0:03:44.560 --> 0:03:48.320 cable news and pitching the IPO, which I didn't know. 0:03:48.400 --> 0:03:49.400 Had I known that, maybe I. 0:03:49.360 --> 0:03:50.520 Would to a TV channel. 0:03:50.760 --> 0:03:54.040 Yeah, that's true, but he was going on others, not 0:03:54.080 --> 0:03:58.480 Bloomberg News. To the best of my knowledge. On the podcast, 0:03:58.800 --> 0:04:02.480 I that's true, Chris Heiretti, if you're listening, I want 0:04:02.520 --> 0:04:04.840 to talk a little bit about the mechanics of this IPO. 0:04:05.000 --> 0:04:07.440 I was chatting with Bailey Lipschultz Bloomberg News about this. 0:04:07.520 --> 0:04:11.440 He's my go to guy. Yeah, on funky things. He 0:04:11.440 --> 0:04:15.440 also covers IPOs, which is a really poetic intersection. So 0:04:15.520 --> 0:04:20.039 this was a regulation A plus it's a mini ipo. 0:04:20.080 --> 0:04:21.040 Okay, mini ipo? 0:04:21.200 --> 0:04:23.960 Yeah yeah, I didn't know that. And the reason I 0:04:23.960 --> 0:04:26.760 found out is because I have another Matt in my 0:04:26.839 --> 0:04:29.080 professional life. His name is Matt Miller, and he was like, wow, 0:04:29.160 --> 0:04:32.720 the bank must have really mispriced this. And Billy made 0:04:32.720 --> 0:04:36.239 the good point that because it's a reggae plus ipo, 0:04:36.400 --> 0:04:38.240 they can only raise up to seventy five million, So 0:04:38.240 --> 0:04:40.679 it's not like this was mispriced or anything. 0:04:41.480 --> 0:04:46.800 I mean, you can solve your shares. Who are the banks? 0:04:47.520 --> 0:04:52.080 Oh, I'm so excited. Do you ask Digital Offering LLC? Oh? Yeah, yeah, 0:04:52.320 --> 0:04:55.400 Business Insider. I don't think you've seen this yet. Business Insider, 0:04:55.600 --> 0:04:58.360 just as we're talking about this on a Thursday, published 0:04:58.360 --> 0:05:02.880 a story titled Meet the tiny investment bank behind Newsmax's 0:05:03.080 --> 0:05:07.920 rip roaring stock debut. Laguna Beach, California based Digital Offering 0:05:08.080 --> 0:05:11.120 LLC was the bank behind this. Can I tell you 0:05:11.160 --> 0:05:12.039 more facts about them? 0:05:12.520 --> 0:05:14.640 I want to hear all of the facts about them. 0:05:14.720 --> 0:05:17.960 I'll tell you at least three. They have ten full 0:05:18.000 --> 0:05:22.880 time registered banker, three of whom act as principal investment bankers. 0:05:23.360 --> 0:05:27.000 They typically advise companies valued at a billion dollars or less. 0:05:27.200 --> 0:05:29.440 Those are actually all the facts I have. But I 0:05:29.480 --> 0:05:33.719 have a quote from Mark Alenowitz. I hope I'm saying 0:05:33.720 --> 0:05:36.880 his name correctly. He's a managing director there. He said, 0:05:36.880 --> 0:05:40.360 the Newsmax, as you might predict, has been huge for them. 0:05:40.880 --> 0:05:43.320 The small cap community knows who we are, but the 0:05:43.320 --> 0:05:46.400 rest of Wall Street didn't. But now they're on the map. 0:05:47.040 --> 0:05:49.400 So I'm still highly open the idea that the bank's 0:05:49.400 --> 0:05:51.200 miss priced today because like I used to be an 0:05:51.200 --> 0:05:53.520 equity capital markets banker, I think of like, well you 0:05:53.560 --> 0:05:55.680 do an IPO is you go out to institutional accounts 0:05:55.680 --> 0:05:57.800 and you build a book of institutional accounts and you 0:05:57.839 --> 0:06:00.320 put some stuff with retail. But you go to an 0:06:00.320 --> 0:06:02.520 institution and you're like, well we lost seventy million dollars 0:06:02.520 --> 0:06:04.760 one hundred seventy million over revenue. There's some cap to 0:06:04.800 --> 0:06:07.919 the valuation you're going to get, right, And if you 0:06:08.160 --> 0:06:10.839 trade on the secondary market to retail, there is not 0:06:11.000 --> 0:06:12.880 that cap or any cap right, Like you can be 0:06:12.920 --> 0:06:15.640 a thirty billion dollar company for briefly if you have 0:06:15.760 --> 0:06:20.200 those kind of numbers. And so if you go to 0:06:20.800 --> 0:06:23.359 institutional investors and say this is going to be a 0:06:23.400 --> 0:06:25.239 memes talks that are prising it at two hundred dollars, 0:06:25.600 --> 0:06:27.839 they will laugh at you. By the way, I don't 0:06:27.839 --> 0:06:29.320 want to say black Ben tried that, but like. 0:06:29.440 --> 0:06:31.840 A little bit, a little bit friend of the show. 0:06:31.720 --> 0:06:35.480 Front of the show, Black they did it. But I 0:06:35.480 --> 0:06:37.120 don't think that's the case here because the Reggae plus 0:06:37.200 --> 0:06:39.000 offering done by a small bank might have been you know, 0:06:39.120 --> 0:06:40.840 it was for the small cap community. It's not like 0:06:40.880 --> 0:06:44.240 they're selling this to fidelity necessarily. Yeah, so maybe they 0:06:44.240 --> 0:06:46.640 did misprice it as a meme matter. I don't know. 0:06:47.000 --> 0:06:49.520 I don't know. Well, it'll be interesting to see their 0:06:49.560 --> 0:06:53.440 follow up to the newsmac's debut digital offering LLC. 0:06:53.960 --> 0:06:57.560 It does feel like a real golden age for like 0:06:57.600 --> 0:06:59.960 a certain sort of like banker who is happy to 0:07:00.040 --> 0:07:03.920 work with memestock companies. Right, stuff going on? Does it 0:07:04.279 --> 0:07:07.119 going on that, like, you know, not necessarily everything wants 0:07:07.160 --> 0:07:07.840 to be doing. 0:07:08.000 --> 0:07:09.720 I don't know, I feel like the golden age might 0:07:09.760 --> 0:07:13.240 have been twenty twenty one, like these are like the 0:07:13.960 --> 0:07:17.120 kind of thing or yeah, obviously you're still having some 0:07:17.200 --> 0:07:20.080 memes stock IPOs, but there's just not a lot of 0:07:20.120 --> 0:07:21.720 IPOs and I don't know. 0:07:21.760 --> 0:07:24.960 A lot of that's right, looking at a relative golden 0:07:25.000 --> 0:07:27.800 age for the yeah memes stock bankers compared to the 0:07:27.880 --> 0:07:30.960 you know, large cap it's true tech bankers. 0:07:31.080 --> 0:07:35.400 Everyone else could talk about circle you know what to 0:07:36.160 --> 0:07:40.480 also in IPOs, this one hasn't happened yet, but it's 0:07:40.520 --> 0:07:44.440 going to theoretically circle of stable coin fame has filed 0:07:44.440 --> 0:07:45.000 for an IPO. 0:07:45.080 --> 0:07:46.880 Yeah, they filed like a long time ago, but their 0:07:47.120 --> 0:07:50.000 filing became public this day. They filed like under yeah, 0:07:50.040 --> 0:07:53.360 another special IPO rule, which is you can file confidentially, 0:07:53.400 --> 0:07:56.120 but now they're unconfidential, so you can read their filings. 0:07:56.560 --> 0:07:59.000 Got some numbers. One hundred and fifty six million dollars, 0:07:59.200 --> 0:08:01.520 that's their net in. That's on revenue of one point 0:08:01.640 --> 0:08:05.160 six eight billion dollars in twenty twenty four. My only 0:08:05.600 --> 0:08:08.920 simple question for you is how does the stable coin 0:08:09.000 --> 0:08:11.360 make money? Is that just because they're backed. 0:08:11.000 --> 0:08:15.720 By how they're making Yeah, that's it. So oh yeah, 0:08:15.720 --> 0:08:17.440 it's the best business in the world. And it's actually like, 0:08:17.600 --> 0:08:19.400 it was surprising to me that their margins are so low, 0:08:19.440 --> 0:08:22.200 and it's it's a little interesting why their margins aren't 0:08:22.200 --> 0:08:24.520 one hundred percent. Yeah, but no they make money by 0:08:24.560 --> 0:08:27.200 like they take tens of billions of dollars of deposits 0:08:27.200 --> 0:08:30.120 from customers. You know, I read about this. They don't 0:08:30.160 --> 0:08:34.560 directly put it in T bills because I think my 0:08:34.679 --> 0:08:36.920 explanation would be like that is too much of like 0:08:36.960 --> 0:08:40.560 a banking function or a financial services function, and they're 0:08:40.600 --> 0:08:42.640 like a fintech. So what they do is they take 0:08:42.640 --> 0:08:43.800 all the money and they put it in a black 0:08:43.840 --> 0:08:46.160 Rock money market fund that puts it in T bills. 0:08:46.280 --> 0:08:46.880 That's amazing. 0:08:46.920 --> 0:08:48.520 Effectively, they put it in T bills and they pay 0:08:48.559 --> 0:08:51.080 black Rock to be a sort of like adults custodian 0:08:51.120 --> 0:08:53.240 in their T bills. Yeah, they put someone in bank accounts, 0:08:53.240 --> 0:08:55.040 but it's like eighty five percent T bills. They say 0:08:55.080 --> 0:08:56.920 they make a discount to sover, but they kind of 0:08:56.920 --> 0:09:02.439 make T bill rits and then they pay as a 0:09:02.480 --> 0:09:06.480 first cut zero percent interest to their customers. Now it's 0:09:06.480 --> 0:09:09.559 like quite right, it's basically right. So they're making you know, 0:09:10.640 --> 0:09:13.480 four percent or so on tens of billions of dollars, 0:09:13.600 --> 0:09:15.520 and that might be a slight exaggeration, but it's like, 0:09:15.559 --> 0:09:18.120 you know, they're making a lot of money, and then 0:09:18.679 --> 0:09:20.080 where does it go? I mean some of it is 0:09:20.080 --> 0:09:22.079 like they have expenses because they are a tech company. 0:09:22.120 --> 0:09:25.760 They're building for sure, technological infrastructure to transfer stable coins 0:09:25.840 --> 0:09:29.280 on the blockchain, et cetera, outside et cetera. Another big 0:09:29.320 --> 0:09:31.640 part of it is like everyone knows this is a 0:09:31.679 --> 0:09:35.000 good business model. It's not quite it's quite a business 0:09:35.000 --> 0:09:36.680 a winner take all business model, but it's a little 0:09:36.679 --> 0:09:38.679 bit like you want to be the most liquid stable coin, 0:09:39.000 --> 0:09:42.160 and so they are paying platforms to be like a 0:09:42.200 --> 0:09:44.680 preferred stable coin, so like they're the stable coin of coinbase, 0:09:45.080 --> 0:09:48.240 and like there's a partnership with coinbase, and if their 0:09:48.600 --> 0:09:50.679 coins are held on coin Base, like they're paying Coinbase 0:09:50.679 --> 0:09:52.480 a lot of the interest. Right, They're paying fees to 0:09:52.520 --> 0:09:55.360 buyance to be on binance, So there's some amount of like, 0:09:55.920 --> 0:09:57.520 you know, this is a good business, and so the 0:09:57.559 --> 0:09:59.920 customer acquisition cost is kind of they're paying something. 0:10:00.440 --> 0:10:02.079 But it feels like it's only a good business when 0:10:02.160 --> 0:10:02.720 rates are high. 0:10:03.280 --> 0:10:07.400 So, right, it's such an interesting business because it's stumbled 0:10:07.400 --> 0:10:10.040 into being a good business. It started. The stable coin 0:10:10.080 --> 0:10:13.120 business started when rates were low, and everyone was like, well, 0:10:13.280 --> 0:10:15.240 it's fine if we don't get paid interest, because it 0:10:15.360 --> 0:10:16.880 was interested. You know, you don't get interest on our 0:10:16.880 --> 0:10:20.120 savings accounts, on our money market account. So it's fine. Yeah, 0:10:20.200 --> 0:10:21.640 And now the rates are high and you do get 0:10:21.679 --> 0:10:25.200 interest on your money market account, and the stablegin issuers 0:10:25.240 --> 0:10:30.079 are raking in money, and there are reasons that you 0:10:30.160 --> 0:10:33.920 can't just easily natively get that interest on your stable coin. Yeah. 0:10:33.960 --> 0:10:37.720 Think one reason is, like you know, that's like historically 0:10:37.800 --> 0:10:39.680 not how it developed, and like you know, the biggest 0:10:39.720 --> 0:10:42.760 stablekind issuers have ever liquidity advantage and they don't want 0:10:42.760 --> 0:10:45.560 to pay interest. But another reason is, like there's securities, 0:10:45.559 --> 0:10:47.480 a lot problems with doing it. If you were paying 0:10:47.520 --> 0:10:49.040 interest on a stable clin it's not in like the 0:10:49.200 --> 0:10:51.400 sort of crypto e gray area where it's probably fine. 0:10:51.440 --> 0:10:53.880 It's a money market fund and it's security. And I 0:10:53.960 --> 0:10:56.000 mean this is at least the sec theory as of 0:10:56.480 --> 0:10:59.920 four months ago. And one thing that I have written 0:11:00.160 --> 0:11:02.600 for a long time is that clearly people are going 0:11:02.760 --> 0:11:06.800 to just start issuing interest sparing stable coins that are 0:11:06.880 --> 0:11:09.440 you know, registered money market funds that trade on a blockchain. 0:11:09.920 --> 0:11:11.880 And if you look at the Circle IPO documents, like 0:11:11.960 --> 0:11:14.199 they talk about that, like they have an issuer that 0:11:14.320 --> 0:11:16.720 does that that has like a small money market fund 0:11:17.040 --> 0:11:20.559 and they are doing essentially an intersparing stable coin that 0:11:20.600 --> 0:11:24.000 you can convert into like their regular coin. And they 0:11:24.120 --> 0:11:25.959 kind of hint and I'm sure that there will be 0:11:26.040 --> 0:11:28.000 more of that and like ultimately some of this, like 0:11:28.600 --> 0:11:31.079 free money, will be returned to customers. 0:11:31.640 --> 0:11:33.880 Why am I thinking of black Rock and Securitized don't 0:11:33.920 --> 0:11:35.040 they have something everyone has? 0:11:35.240 --> 0:11:38.920 Yeah, has a tokenized market fund circle I think owns 0:11:39.440 --> 0:11:41.960 a company that does it in addition to like having 0:11:42.200 --> 0:11:45.080 their stablegoin money out of black Rock fund. Yeah, everyone's 0:11:45.080 --> 0:11:48.280 doing it. Franklin Templeton did it, like in twenty nineteen. 0:11:48.360 --> 0:11:50.839 I watched their Recognize one remember that, Yeah, And I 0:11:50.960 --> 0:11:53.319 was like, why is it not called the Benjamin And 0:11:53.440 --> 0:11:54.280 no one had a good answer. 0:11:55.080 --> 0:11:58.200 I am excited to see how this is received when 0:11:58.360 --> 0:12:02.640 it eventually does become public, because I know, you know, 0:12:02.679 --> 0:12:06.400 you think about all the other like crypto equities. I 0:12:06.559 --> 0:12:08.880 imagine this is going to trade similarly to the price 0:12:08.920 --> 0:12:11.240 of bitcoin, even though maybe it shouldn't if it's I mean, 0:12:11.280 --> 0:12:13.800 it's really just a money market fund with a lot 0:12:13.840 --> 0:12:16.160 of I mean, like you know, as a first cut. 0:12:16.200 --> 0:12:17.760 Their business is kind of like what is the market 0:12:17.840 --> 0:12:20.600 cap of like their coins outstanding and like the market 0:12:20.640 --> 0:12:22.760 cap of stable coins outstanding does have a lot to 0:12:22.840 --> 0:12:24.440 do with like demand for crypto. 0:12:24.679 --> 0:12:26.959 Yeah, that's true. It's not as direct though, as like 0:12:28.400 --> 0:12:32.120 no micro strategy owns a ton of points, so it's 0:12:32.160 --> 0:12:34.080 not exactly a proxy. It's obviously not. 0:12:34.160 --> 0:12:36.360 A pricy for bitcoin. I always think about like Golden 0:12:36.440 --> 0:12:38.480 used to say that, like their business is at on 0:12:38.600 --> 0:12:41.160 global GDP, and like the stable grend business is a 0:12:41.240 --> 0:12:44.000 bet on like crypto GDP. Right, like if if crypto 0:12:44.120 --> 0:12:46.040 is booming, like there will be more demand for stable 0:12:46.120 --> 0:12:49.520 clins Now they're separately like a competitive dynamic and table 0:12:49.559 --> 0:12:51.600 coins where like they might lose out to other stable coins. 0:12:51.840 --> 0:12:55.280 And there's like the business model of like we get 0:12:55.400 --> 0:12:58.440 interest and don't pay. Interest might be compressed and they 0:12:58.520 --> 0:13:00.880 might have to pay more interest, like you know probably 0:13:00.920 --> 0:13:03.560 speaking like the more crypto there is, the more people 0:13:03.600 --> 0:13:04.560 will want their stable colin. 0:13:04.720 --> 0:13:07.160 I wonder like what the pitch to buy circle shares is, 0:13:07.520 --> 0:13:09.320 especially if we have billions. 0:13:09.000 --> 0:13:10.719 Of dollars we get paid interest. 0:13:10.440 --> 0:13:12.880 That we don't pay, interest rates go down, Like what's 0:13:12.920 --> 0:13:13.520 the point. 0:13:13.800 --> 0:13:16.599 The pitch is? Like we are building the future of 0:13:17.120 --> 0:13:20.000 financial infrastructure, Like there's like the real upside case is 0:13:20.080 --> 0:13:23.920 like five years, the way that you normally pay for 0:13:24.040 --> 0:13:28.840 stuff will be with a regulated US stable clin instead 0:13:28.880 --> 0:13:32.160 of venmo or credit cards or checks or whatever. You 0:13:32.240 --> 0:13:36.319 will boop some circle coins to someone, right, Like, that's 0:13:36.320 --> 0:13:37.080 the upside case. 0:13:37.160 --> 0:13:39.000 It's kind of coin to think we'll still be here 0:13:39.040 --> 0:13:57.600 in five years. Yeah, right, man. You know we were 0:13:57.640 --> 0:14:06.040 talking about right leaning like social media networks boy x X, 0:14:06.240 --> 0:14:11.240 Twitter x X now part of x a I holdings. Yes, man, 0:14:11.520 --> 0:14:13.840 so I obviously immediately thought of you on. 0:14:15.480 --> 0:14:19.040 The chronic layer of Elon Musk's mergers and this technically. 0:14:19.320 --> 0:14:24.000 Yeah, I thought about texting you, but I was it 0:14:24.120 --> 0:14:24.480 was done. 0:14:24.880 --> 0:14:29.560 You spared me, right. I remember saying that it seems like. 0:14:30.720 --> 0:14:32.840 This though, isn't like that huge of a deal, Like 0:14:32.960 --> 0:14:35.520 this didn't rock your world as much as some might 0:14:35.600 --> 0:14:36.360 have expected it to. 0:14:36.640 --> 0:14:38.720 It's the biggest mn A deal this year. Yeah, and 0:14:38.800 --> 0:14:43.320 the second biggest, actually maybe the first biggest is Elon 0:14:43.400 --> 0:14:46.920 Musk's very biggest I mean like from like the Bloomberg table, 0:14:47.120 --> 0:14:51.600 which counts announced deals including announced hostile deals. And the 0:14:51.680 --> 0:14:54.880 biggest deal this year is Elon's deal to BioPen Ai, 0:14:55.120 --> 0:14:56.880 which is not a deal. It's just a bid, and 0:14:56.960 --> 0:14:59.640 it's not it's not really a bit, it's a piece 0:14:59.680 --> 0:15:02.120 of warm. It's hard. But the second biggest is this deal, 0:15:02.160 --> 0:15:05.480 which is a let's say forty five billion dollar acquisition 0:15:05.680 --> 0:15:08.520 or like a you know, one hundred and twenty five 0:15:08.600 --> 0:15:11.840 billion dollar total enterprise value of the all stock merger. 0:15:12.360 --> 0:15:15.240 It's pretty big deal, except it's like, you know, it's 0:15:15.240 --> 0:15:17.760 two companies he owns, or now one company that owns. 0:15:18.480 --> 0:15:20.560 I want to talk about valuations a little bit sure, 0:15:20.760 --> 0:15:23.680 because it kind of feels like the Xai valuation. You 0:15:23.720 --> 0:15:24.920 could poke a lot of holes in it. 0:15:25.360 --> 0:15:29.640 So a couple of things. So XAI, the Ai company, 0:15:30.520 --> 0:15:34.240 bought x the Twitter company, in an all stock deal. 0:15:35.080 --> 0:15:37.360 So xa I assumed let's say twelve million dollars of 0:15:37.520 --> 0:15:41.320 Twitter debt, and it paid let's say thirty three billion 0:15:41.360 --> 0:15:46.560 dollars of stock for x What is thirty three billion 0:15:46.600 --> 0:15:47.520 dollars worth of stock? 0:15:47.600 --> 0:15:47.720 Mean? 0:15:47.840 --> 0:15:51.160 Well, it means if you value Xai at eighty billion dollars, 0:15:51.720 --> 0:15:54.480 then you give Twitter, you know, thirty three eightieths of that, 0:15:55.120 --> 0:15:58.960 and that's thirty three billion dollars worth of stock. You 0:15:59.040 --> 0:16:02.320 don't have to believe eitheraluation. What actually happened was that, like, 0:16:02.640 --> 0:16:05.960 they merged at a ratio, right, the people who owned 0:16:06.240 --> 0:16:09.760 Xai got eighty one hundred and thirteen so of the company, 0:16:09.800 --> 0:16:11.960 and the people who owned Twitter got thirty three hundred 0:16:11.960 --> 0:16:15.160 and thirteens of the company. And that was the ratio 0:16:15.240 --> 0:16:17.400 that happened. They could have been worth eighty dollars and 0:16:17.560 --> 0:16:19.240 thirty three dollars right, or they could have been worth 0:16:19.720 --> 0:16:22.120 eighty billion dollars and thirty three billion dollars or any 0:16:22.160 --> 0:16:24.560 other number in that ratio. So you don't have to 0:16:24.640 --> 0:16:28.480 believe the valuations. And it's interesting, like the last round 0:16:28.480 --> 0:16:30.880 where Xai raised cash, it was like, I think at 0:16:30.880 --> 0:16:32.520 a fifty one billion. 0:16:32.280 --> 0:16:35.520 It was fifty one billion in December. You did point 0:16:35.520 --> 0:16:38.440 out that in mid February, Bloomberg reported that Xai was 0:16:38.680 --> 0:16:41.760 canvassing potential investors for a ten billion dollar funding round 0:16:41.800 --> 0:16:45.120 that would value it at seventy five billion dollars. But 0:16:45.560 --> 0:16:46.480 I think that happened. 0:16:47.360 --> 0:16:51.480 X raised money recently at a you know, I've been 0:16:51.520 --> 0:16:53.360 saying thirty three and forty five thirty three million dollar 0:16:53.400 --> 0:16:56.880 equity evaluation, forty five billion dollars enterprise eye, Like that 0:16:57.040 --> 0:17:00.520 was a weird round. And one thing about it is 0:17:00.520 --> 0:17:04.840 like Elon Musk put in some money, and in hindsight, 0:17:05.480 --> 0:17:07.080 you could sort of be like, well, they were doing 0:17:07.160 --> 0:17:09.440 that to like print a trade at that price, so 0:17:09.520 --> 0:17:13.240 they could justify doing the merger at that price, because 0:17:13.280 --> 0:17:15.240 like you know, there was like talk of like X 0:17:15.320 --> 0:17:17.399 being down fifty percent from where he bought it, and 0:17:17.440 --> 0:17:19.200 I think it's nice for him to close it out 0:17:19.680 --> 0:17:22.119 at the price that he paid for it. Yeah, but 0:17:22.280 --> 0:17:23.960 like you know, you don't have to believe any of 0:17:23.960 --> 0:17:27.639 those valuations because in a rough sense, like what happened 0:17:27.680 --> 0:17:30.680 here was that Elon Musk owns two companies and he's 0:17:30.720 --> 0:17:33.159 mushed them into one company. It doesn't matter what the 0:17:33.240 --> 0:17:36.000 valuation was. Now that's not quite true because there are 0:17:36.680 --> 0:17:39.720 minority shareolders in both companies, but like they're like along 0:17:39.800 --> 0:17:41.600 for the ride. They don't they don't get us say 0:17:41.640 --> 0:17:43.399 that they're not going to complain about the valuations of 0:17:43.440 --> 0:17:44.000 any of these things. 0:17:44.160 --> 0:17:46.880 So I mean, are there any anti trust concerns here 0:17:47.000 --> 0:17:47.320 at all? 0:17:47.440 --> 0:17:50.960 Like ABC anything I mentioned, Like you know, usually you 0:17:51.400 --> 0:17:53.720 have some delay between signing and closing because you have 0:17:53.800 --> 0:17:57.280 to like fill out anti trust forms. But someone pointed 0:17:57.320 --> 0:17:59.159 out they're both owned by the same guy. Anyway, So 0:17:59.200 --> 0:18:02.280 there's really no antigie concerns in many respects. The thing 0:18:02.359 --> 0:18:04.600 to say I had this deal is those companies were 0:18:04.640 --> 0:18:09.320 already the same company, So it doesn't really matter for antitrust, 0:18:09.400 --> 0:18:12.840 or for fiduciary duties, or for valuation or for anything 0:18:12.880 --> 0:18:14.880 else that they're emerging, Right, It's just like, yeah, sure, 0:18:14.920 --> 0:18:17.920 it's like he's reshuffling the paperwork for his own companies. Yeah. 0:18:18.200 --> 0:18:19.520 The one thing I'll say is, like why did he 0:18:19.760 --> 0:18:22.879 merge them? One possible answer is that these are kind 0:18:22.920 --> 0:18:25.520 of the same business and so like one reason that 0:18:25.880 --> 0:18:28.600 I think Elon Musk has a bunch of separate companies 0:18:28.680 --> 0:18:30.920 for all of the different ideas is like you want 0:18:30.960 --> 0:18:33.000 to have like the companies have some focus and have 0:18:34.040 --> 0:18:37.280 the employees of these companies have shares or options in 0:18:37.359 --> 0:18:39.399 like their one companies. They're really motivated to do a 0:18:39.440 --> 0:18:41.560 good job for that one company. And so like Tesla 0:18:41.640 --> 0:18:44.320 and SpaceX are doing different things, so like move people 0:18:44.359 --> 0:18:46.480 between them, but like you want to pay the Tesla 0:18:46.520 --> 0:18:49.240 people in Tesla options and the SpaceX people and SpaceX options. 0:18:50.359 --> 0:18:52.520 And I think that like there was a reason to 0:18:52.640 --> 0:18:55.600 separate x and XAI because like AI was really hot 0:18:56.080 --> 0:18:58.280 and he wanted to like raise money and like get 0:18:58.880 --> 0:19:02.880 employees and pressed doing AI. But like increasingly I think 0:19:02.960 --> 0:19:06.800 that they're the same business, which is that you collect 0:19:06.800 --> 0:19:09.600 a lot of data like natural language of data and 0:19:09.840 --> 0:19:15.720 information from the Twitter user corpus, right, and then you 0:19:15.880 --> 0:19:20.120 feed that into models that are built by AI engineers 0:19:20.160 --> 0:19:23.640