WEBVTT - Just Keep Bidding: MMTLP, PE, ETFs 0:00:03.120 --> 0:00:08.280 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:11.320 --> 0:00:14.000 Hello and welcome to The Money Stuff Podcast, your weekly 0:00:14.040 --> 0:00:18.439 podcast where we talk about stuff related to money. I'm 0:00:18.440 --> 0:00:21.360 Matt Levine and I write The Money Stuff Colin for Bloomberg. 0:00:20.960 --> 0:00:23.880 Opinion, and I'm Katie Greifeld, a reporter for Bloomberg News 0:00:23.880 --> 0:00:25.520 and an anchor for Bloomberg Television. 0:00:26.239 --> 0:00:26.800 Got Katie. 0:00:26.960 --> 0:00:29.040 We're going to talk about a merger. 0:00:29.760 --> 0:00:31.520 I don't think it's a merger. I think we're talking 0:00:31.520 --> 0:00:32.360 about short squeeze. 0:00:32.560 --> 0:00:34.680 We're going to talk about a short squeeze. That's not 0:00:34.800 --> 0:00:38.760 a merger. There is fraud involved. We're going to talk 0:00:38.880 --> 0:00:42.760 about on cycle private equity recruiting. It wasn't a world 0:00:42.800 --> 0:00:43.919 that I was familiar with. 0:00:44.240 --> 0:00:45.200 That's an important world. 0:00:45.320 --> 0:00:48.000 And then we're going to talk about bloom Er Candy Delicious. 0:00:48.320 --> 0:00:55.200 I'm gonna say that. Okay, so this is a merger, 0:00:55.320 --> 0:00:56.000 but maybe it's not. 0:00:56.200 --> 0:00:57.600 We're telling you about MMTLP. 0:00:58.160 --> 0:00:59.480 Yeah, there's some more here. 0:01:00.000 --> 0:01:02.440 Thing that people on social media really care about it. 0:01:02.520 --> 0:01:04.160 Oh yeah, a lot, a lot. 0:01:04.319 --> 0:01:06.200 I've been getting emails about it for years. 0:01:06.520 --> 0:01:09.440 Yeah, I mean I was reading some Reddit posts from 0:01:09.680 --> 0:01:12.640 three years ago this morning. Gosh, how to begin how 0:01:12.640 --> 0:01:13.600 to begin begin. 0:01:14.319 --> 0:01:17.840 So there's an oil company called Torchlight. It had some 0:01:18.400 --> 0:01:20.800 leases that were not producing a lot of oil, but 0:01:20.840 --> 0:01:23.280 I like drill the releases. But it was a publicly 0:01:23.319 --> 0:01:25.920 listed company and it did a reverse merger with a 0:01:25.959 --> 0:01:29.679 like material science company, and they decided to get rid 0:01:29.680 --> 0:01:31.840 of the oil assets, and like they could do it bad, 0:01:31.840 --> 0:01:33.720 like spinning it out to shareholders. But like at some 0:01:33.880 --> 0:01:38.000 point they had conceived this notion that short sellers were 0:01:38.120 --> 0:01:40.360 bad and that like short sellers were the problem with 0:01:40.360 --> 0:01:41.560 the company, and they were like, we want to find 0:01:41.560 --> 0:01:43.960 a way to punish the short sellers. And the way 0:01:44.000 --> 0:01:46.200 you do that, it turns out there's like a technology 0:01:46.200 --> 0:01:48.800 to punish short sellers, which is that instead of spinning 0:01:48.800 --> 0:01:52.280 out Torchlight or like the oil assets as a new 0:01:52.320 --> 0:01:54.680 company where people could buy and sell the stock, you 0:01:54.720 --> 0:01:57.120 spin it out as a company where they can't buy 0:01:57.160 --> 0:01:59.160 and solve the stock. And the reason you do that 0:01:59.240 --> 0:02:00.600 is like, if you were a short seller who is 0:02:00.600 --> 0:02:03.080 short Torchlight, you've borrowed the stock and you have to 0:02:03.080 --> 0:02:06.080 return what you borrowed. So if Torchlight splits up into 0:02:06.080 --> 0:02:08.680 two companies, one of which is like the new Meta Materials, 0:02:09.160 --> 0:02:11.359 that like has a public traded stock and one of 0:02:11.400 --> 0:02:14.200 them is like this new not traded stock, then you 0:02:14.240 --> 0:02:16.760 have to return both of those things to your stock lender. 0:02:16.919 --> 0:02:18.680 Public get traded stock is easy, you just go buy 0:02:18.720 --> 0:02:21.000 it on the stock market, but the not traded stock 0:02:21.280 --> 0:02:23.000 you can't buy in the stock market, so you can't 0:02:23.000 --> 0:02:26.200 return it to your stock lender. And so what Torchlight 0:02:26.240 --> 0:02:28.520 figured out is if we do this merger and like 0:02:28.639 --> 0:02:30.840 we have like this new meta material stock that's the 0:02:31.080 --> 0:02:33.960 new public company, and we also have this other non 0:02:34.000 --> 0:02:38.440 traded stock, then like the short sellers will see that, 0:02:38.760 --> 0:02:41.200 and before the merger closes, they will know they have 0:02:41.280 --> 0:02:45.080 to buy back their Torchlight short positions because after the 0:02:45.080 --> 0:02:47.679 merger closes, they'll be host there'll be no way to 0:02:47.720 --> 0:02:49.720 close out there short they'll be in big trouble. This 0:02:49.800 --> 0:02:52.120 is the idea, and so they do that. They created 0:02:52.120 --> 0:02:54.400 this non traded stock or this thing that wasn't supposed 0:02:54.400 --> 0:02:57.360 to be traded called MMTLP. It's like a weird preferred 0:02:57.360 --> 0:03:01.280 stock of the new public company that wasn't supposed to 0:03:01.280 --> 0:03:03.520 be traded on a public stock exchange, and like sort 0:03:03.560 --> 0:03:06.079 of represented a claim on the oil and gas assets. 0:03:06.600 --> 0:03:10.000 And they like announced this merger, and they went out 0:03:10.080 --> 0:03:13.840 and sort of marketed quietly to the right people. They 0:03:13.919 --> 0:03:16.280 marketed the idea that there would be a short squeeze, 0:03:16.400 --> 0:03:18.280 and so they didn't put it in their public filings. 0:03:18.280 --> 0:03:19.560 They weren't like, oh, we're doing this to do a 0:03:19.560 --> 0:03:22.400 short squeeze, but like privately amongst themselves, they were like, 0:03:22.400 --> 0:03:24.280 we're doing this to do a short squeeze, and like 0:03:24.360 --> 0:03:27.520 they sort of like tried to convince short sellers that 0:03:27.560 --> 0:03:29.840 they would get squeezed. And they also like tried to 0:03:29.840 --> 0:03:32.560 convince some number of Torchlight shareholders that there would be 0:03:32.560 --> 0:03:34.480 the short squeeze. And the point of all this is 0:03:34.600 --> 0:03:37.160 just before the merger, there's a short squeeze, all the 0:03:37.160 --> 0:03:39.240 short sellers have to buy back the stock. The stock 0:03:39.280 --> 0:03:40.960 goes way up, and what they do is just before 0:03:40.960 --> 0:03:42.720 the merger they sell a bunch of stock. They doing 0:03:42.760 --> 0:03:45.120 at the market offering a stock like right before the 0:03:45.120 --> 0:03:47.600 merger closes in order to take advantage of the short 0:03:47.600 --> 0:03:50.600 squeeze and raise like one hundred million dollars to use 0:03:50.640 --> 0:03:52.600 to like keep drilling Torchlights oil leases. 0:03:52.720 --> 0:03:54.560 That feels like meme stock economics. 0:03:54.800 --> 0:03:57.960 It's very meme stock economics. The difference between this and 0:03:58.080 --> 0:04:02.240 like game Stop is one, the company is explicitly like saying, hey, 0:04:02.280 --> 0:04:03.800 there's gonna be a short scueze, usually in like a 0:04:03.880 --> 0:04:05.800 meme stock. It's like people on Reddit are saying, hey, 0:04:05.840 --> 0:04:07.800 there's gonna be a short scuzz here. It's the company doing. 0:04:07.960 --> 0:04:10.040 But then two, the other thing that's like really important 0:04:10.120 --> 0:04:13.120 is they engineered the short squeeze by like giving out 0:04:13.120 --> 0:04:15.800 this non traded stock in game Stop or whatever. The 0:04:15.920 --> 0:04:18.680 short squeeze is not like a real short squeeze. It's 0:04:18.680 --> 0:04:21.000 just like the price goes up and so short sellers 0:04:21.080 --> 0:04:23.640 like lose money and so they feel like they need 0:04:23.640 --> 0:04:26.359 to cover their short positions. But this is a specific 0:04:26.440 --> 0:04:30.560 designed structure to make it impossible to keep a short 0:04:30.600 --> 0:04:33.039 position on. So even if the stock went down, the 0:04:33.040 --> 0:04:35.160 shorts would still be in trouble because they wouldn't be 0:04:35.160 --> 0:04:37.920 able to buy back this weird non traded stock that 0:04:37.960 --> 0:04:40.279 the company was giving out. So that was the idea. 0:04:40.360 --> 0:04:42.560 Now I don't know if it worked. And the reason 0:04:42.640 --> 0:04:45.000 we're talking about it is the SEC brought a fraud 0:04:45.120 --> 0:04:49.119 case against Meta Materials, the company, and like the SEEO 0:04:49.120 --> 0:04:51.760 of Torchlight and the former CEO of Meta materials who 0:04:51.760 --> 0:04:54.840 were sort of allegedly in on this plan. And the 0:04:54.880 --> 0:04:56.680 SEC says what you were doing was fraud, but they 0:04:56.680 --> 0:04:59.040 don't know why it was fraud. They say, either it 0:04:59.080 --> 0:05:01.920 was fraud because you did this short squeeze and that's 0:05:01.960 --> 0:05:04.400 market manipulation. You're not allowed to do this thing that 0:05:04.480 --> 0:05:06.719 causes the short squeeze, or it was fraud because you 0:05:06.760 --> 0:05:09.400 didn't actually succeeded during the short scuers. No short sellers 0:05:09.440 --> 0:05:12.040 bought back their stock. There was fine, but you convinced 0:05:12.120 --> 0:05:14.960 enough retail shareholders that there would be a short squeeze 0:05:15.040 --> 0:05:16.440 that they all bought the stock and then you were 0:05:16.440 --> 0:05:18.000 able to sell because the stock did go up a lot, 0:05:18.200 --> 0:05:19.240 because just nobody knows why the. 0:05:19.240 --> 0:05:21.159 Stock But either way, what you did is fraud. 0:05:21.360 --> 0:05:22.560 That's what the SEC says. 0:05:22.960 --> 0:05:26.839 So what does this mean for the actual shareholders because 0:05:26.880 --> 0:05:30.120 there were actual shareholders in this company while this was 0:05:30.120 --> 0:05:30.640 all happening. 0:05:30.720 --> 0:05:33.640 Oh yeah, if you bought stock, there's a good chance 0:05:33.640 --> 0:05:35.360 you lost money. Right, Like the company sold you all 0:05:35.400 --> 0:05:37.840 the stock at basically the peak, right, like they did 0:05:37.839 --> 0:05:39.760 this short squeeze or whatever it was, like the stock 0:05:39.800 --> 0:05:42.000 went way up and they did an out the market offering, 0:05:42.040 --> 0:05:43.839 like right at the peak because they timed it to 0:05:44.000 --> 0:05:46.120 when they were planning to have the short squeeze, and 0:05:46.160 --> 0:05:48.479 so they sold one hundred million dollars worth of stock 0:05:48.800 --> 0:05:52.480 to people, maybe some short sellers, but a lot of 0:05:52.480 --> 0:05:55.400 like regular investors at prices that you know, like then 0:05:55.440 --> 0:05:57.600 the stock fell by like, you know, eighty percent, so 0:05:57.920 --> 0:06:00.200 a lot of people lost money. The other thing it means, though, 0:06:00.279 --> 0:06:02.719 is like if you bought the stock sort of leading 0:06:02.720 --> 0:06:06.160 into the short squeeze, you got shares of Meta Materials, 0:06:06.160 --> 0:06:08.280 which is the public company, but you also got these 0:06:08.360 --> 0:06:11.839 MMTLP shares. And the MMTLP shares were supposed to be 0:06:11.920 --> 0:06:14.120 not traded, right, so like instead of having like a 0:06:14.120 --> 0:06:16.200 public company, like you own torch Light, which is a 0:06:16.200 --> 0:06:18.400 public company, and now you have like this not traded company. 0:06:18.480 --> 0:06:20.800 Now it turns out they were traded. The company was like, 0:06:20.800 --> 0:06:22.360 we're going to make them not traded. We're going to 0:06:22.440 --> 0:06:24.120 like not list them on a stock exchange. But that 0:06:24.160 --> 0:06:26.640 doesn't matter. They can still trade over the counter. It's 0:06:26.640 --> 0:06:30.159 still a public company. And so in fact, MMCLP shares 0:06:30.200 --> 0:06:33.200 did trade, not a lot, but they traded. You know, 0:06:33.200 --> 0:06:35.760 the sec cases about stuff that happened only twenty twenty one. 0:06:36.400 --> 0:06:39.279 Since then, yeah, MMCLP has become even more of a 0:06:39.360 --> 0:06:42.279 meme because what happened is at some point the company 0:06:42.320 --> 0:06:45.760 was like, you know what, the stock is not non 0:06:45.839 --> 0:06:49.200 traded enough for us. There are still short sellers. 0:06:49.520 --> 0:06:52.280 We're still mad at short to exterminate them. 0:06:52.279 --> 0:06:54.880 So we're going to do this again, but like more so. 0:06:55.080 --> 0:06:57.040 And so they did is they took MMTLP, which was 0:06:57.040 --> 0:06:59.520 sort of like a tracking stock on the oil assets, 0:06:59.839 --> 0:07:02.200 and they replaced it with they spun out the oil 0:07:02.200 --> 0:07:06.280 assets into a new company called next Bridge, and the 0:07:06.320 --> 0:07:09.160 stock of that company is like super duper not traded. 0:07:09.760 --> 0:07:14.320 It's not registered with DTC, the like repository of all stock. 0:07:14.600 --> 0:07:17.000 And so what that means is your broker can't hold 0:07:17.360 --> 0:07:19.680 or transfer your shares for you, so it's just you 0:07:19.760 --> 0:07:21.640 really can't trade it at all. And the idea was 0:07:21.680 --> 0:07:24.000 like that would really drive out the short sellers. You 0:07:24.040 --> 0:07:26.400 definitely couldn't buy that stock to close out your short 0:07:26.560 --> 0:07:28.280 So I don't really know how many short sellers were 0:07:28.320 --> 0:07:31.520 left at MMTLP because it was hard to trade it. 0:07:31.640 --> 0:07:33.320 The plan wasn't twenty twenty one they were gonna get 0:07:33.360 --> 0:07:36.640 rid of all the short sellers, but they replaced MMTLP 0:07:36.720 --> 0:07:38.840 with Next Bridge. They published a perspective for it that 0:07:38.920 --> 0:07:41.320 like explicitly said there's going to be a short squeeze, 0:07:41.640 --> 0:07:45.400 and there was, in fact, again a rally, and MMTLP 0:07:45.520 --> 0:07:47.840 stock is like either because there was a short squeeze 0:07:47.960 --> 0:07:49.720 or because people were like, oh, there's gonna be a 0:07:49.720 --> 0:07:52.920 short squez, it's great. And then Finra, the financial regulator, 0:07:53.600 --> 0:07:55.800 halted trading in the stock like two days before it 0:07:55.840 --> 0:07:58.280 poofed into Next Bridge, And so all these people who 0:07:58.280 --> 0:08:01.000 had bought the stock expecting one there'd be a short 0:08:01.000 --> 0:08:03.160 squeeze and two they would then sell at the peak, 0:08:03.400 --> 0:08:06.280 they got stuck in it. They had stuck holding mm 0:08:06.280 --> 0:08:09.040 TOP for like the last two days, and then it 0:08:09.240 --> 0:08:11.440 poofed into a Next Bridge, which they can't sell at all. 0:08:11.520 --> 0:08:14.400 So now I just own the stock in this oil 0:08:14.400 --> 0:08:16.240 company that doesn't make any money, and like you know, 0:08:16.280 --> 0:08:18.320 as in oil properties, it may one day make money, 0:08:18.440 --> 0:08:20.480 but they can't trade it because it's really super duper 0:08:20.600 --> 0:08:23.160 not tradable, and so it's like these decisions that the 0:08:23.160 --> 0:08:26.720 company made were really bad for shareholders. Yeah, they made 0:08:26.720 --> 0:08:29.800 life much worse for actual shareholders in the pursuit of 0:08:29.840 --> 0:08:31.120 making life worse for short. 0:08:30.880 --> 0:08:33.880 Sellers in a way, I find that sort of just 0:08:34.160 --> 0:08:37.200 do whatever it takes kind of just amazing. 0:08:37.480 --> 0:08:39.720 Yeah, it's like such a sort of well known obvious 0:08:39.800 --> 0:08:43.199 fact that if a company is going around doing stuff 0:08:43.320 --> 0:08:45.480 for the purpose of hoording short sellers, one that's gonna 0:08:45.480 --> 0:08:47.840 be bad for shareholders, but two, like that company is 0:08:47.880 --> 0:08:50.880 focused on the wrong thing, right, Yeah, if you're thinking 0:08:50.880 --> 0:08:53.320 about short sellers like twenty percent of the time, like 0:08:53.400 --> 0:08:55.160 you are not spending enough time on your business, and 0:08:55.200 --> 0:08:57.400 these guys are thinking about short sellers like ninety percent, I. 0:08:57.400 --> 0:08:59.440 Was gonna say that's one hundred percent. Well, there's a 0:08:59.440 --> 0:09:01.360 few questions that I'm hoping you can help me out with. 0:09:01.440 --> 0:09:07.760 So before this combination, it was Torchlight that was heavily shorted, right, 0:09:08.120 --> 0:09:10.920 and it was the old version of Meta Materials that 0:09:11.160 --> 0:09:13.080 wanted to do the merger so that they would get 0:09:13.120 --> 0:09:13.520 the list in. 0:09:13.600 --> 0:09:16.240 Yeah. Meta material is like a small Canadian company and 0:09:16.280 --> 0:09:18.160 they were like listed on a I think on one 0:09:18.200 --> 0:09:20.720 of the secondary Canadian stock exchanges, and they wanted a 0:09:20.800 --> 0:09:23.520 US listing, and so yeah, torch Light had a Nasdaq listing, 0:09:23.559 --> 0:09:27.559 and so they did a reverse merger where basically Meta 0:09:27.559 --> 0:09:32.480 Materials would get Torchlights listing, and torch Light's assets would 0:09:32.480 --> 0:09:35.360 be spun out into this like MMTLP whatever kind of thing. 0:09:35.640 --> 0:09:39.559 What I don't quite understand is both CEOs linking arms 0:09:39.600 --> 0:09:42.280 in this cause to just like kill all the shorts. 0:09:42.520 --> 0:09:47.079 Why did this become the cause of the Meta Materials, Like, 0:09:47.120 --> 0:09:48.240 I don't know. It just feels like there was a 0:09:48.240 --> 0:09:49.120 cleaner way to do this. 0:09:49.200 --> 0:09:52.560 Okay, yes, but the SEC would say the goal here 0:09:52.600 --> 0:09:55.360 was not just to kill the shorts. There was another goal, 0:09:55.559 --> 0:09:57.800 which the pump the stock up, right, and like so 0:09:57.840 --> 0:09:59.680 they did pump the stock up. They raised like one 0:09:59.720 --> 0:10:02.080 hundred million, a hundred plus million dollars selling stock into 0:10:02.080 --> 0:10:05.080 this whatever it was rally, and then most of that 0:10:05.120 --> 0:10:08.160 money went to Meta Materials M. The Canadian company got 0:10:08.200 --> 0:10:10.520 not only the publicly thing, but like this money from 0:10:10.520 --> 0:10:12.920 this pumped up stock price. Now, the deal was they'd 0:10:12.960 --> 0:10:14.760 give some of that money to like Torchlight, to like 0:10:14.840 --> 0:10:17.240 keep drilling the assets. But the SEC would say they 0:10:17.280 --> 0:10:19.720 went around looking for companies that wanted a reverse merger 0:10:19.720 --> 0:10:21.800 and then they're like, hey, by the way, we have 0:10:21.880 --> 0:10:23.760 this great plan to pump up the stock price and 0:10:23.800 --> 0:10:25.280 like raise a lot of money, and then you know, 0:10:25.360 --> 0:10:27.360 some number of CEOs would say like, oh great, yeah, 0:10:27.440 --> 0:10:29.079 I want a pumped up stock price and I want 0:10:29.080 --> 0:10:30.040 a lot of money a good deal. 0:10:30.160 --> 0:10:30.600 There you go. 0:10:30.760 --> 0:10:33.800 So they did it. Now, why did Meta Materials do 0:10:33.920 --> 0:10:37.680 the extra super duper not tradable thing? Why afterwards? I 0:10:37.720 --> 0:10:39.480 don't know. I think some of it might be they 0:10:39.480 --> 0:10:40.959 were really mad at short sellers. Some of it was 0:10:41.000 --> 0:10:42.800 like they had to get rid of this MMTLP things. 0:10:42.840 --> 0:10:45.280 Somehow they did have this retail investor base that has 0:10:45.360 --> 0:10:48.280 spent years having conspiracy theories about short sellers. 0:10:48.760 --> 0:10:52.120 So you wrote in your Money Steff column that they 0:10:52.160 --> 0:10:56.160 took a page from the Overstock CEO's book from that 0:10:56.280 --> 0:10:59.600 experience who did something similar. Then they did this, which 0:10:59.679 --> 0:11:02.000 was a lightly better version. That's what you called it. 0:11:02.080 --> 0:11:03.640 I wonder where this now evolves to. 0:11:04.240 --> 0:11:06.199 Well, we're like really in the middle of the story 0:11:06.240 --> 0:11:08.959 because the SEC brought these charges saying that the thing 0:11:09.000 --> 0:11:10.760 they did in the merger in twenty twenty one was 0:11:10.760 --> 0:11:14.760 a fraud. But there's still the like MMTLP into next Bridge, 0:11:14.960 --> 0:11:18.400 the trading halt that's hotly controversial. They've been writing letters 0:11:18.440 --> 0:11:21.880 to Congress, They've been sending threatening emails to journalists. They've 0:11:21.880 --> 0:11:23.840 been sending very polite emails to me, honest, they sort 0:11:23.840 --> 0:11:26.360 of arguing about this, like, I, you know, all my 0:11:26.679 --> 0:11:29.640 interactions with the MMTLP people have been fine, but there's 0:11:29.640 --> 0:11:31.679 a lot of them, like they're really passionate about it. 0:11:32.080 --> 0:11:35.600 And the conspiracy theory at this point involves Finra. The 0:11:35.760 --> 0:11:39.640 MMTLP community believes that the trading halt in that stock 0:11:40.320 --> 0:11:43.800 was Finna trying to bail out short sellers, and like 0:11:44.280 --> 0:11:46.680 Finra is conspiring with short sellers. By the way, this 0:11:46.760 --> 0:11:49.000 is not true. The halt came after the X date 0:11:49.080 --> 0:11:50.880 for short sellers to have to close out their positions, 0:11:50.920 --> 0:11:52.560 like this is not true. But they you know, they're 0:11:52.600 --> 0:11:55.040 calling for hearings and whatnot. And so meanwhile, the sec 0:11:55.120 --> 0:11:58.080 like explicitly said in this case, we are still continuing 0:11:58.120 --> 0:12:01.400 our investigation of the subsequent events MMTLP, so there will 0:12:01.400 --> 0:12:04.080 probably be another case about the MMTLP. 0:12:04.360 --> 0:12:05.880 So are you rooting for chaos here? 0:12:06.120 --> 0:12:08.040 No? Okay, I kind of like. 0:12:08.800 --> 0:12:11.560 Do you want there to be hearings because that's something 0:12:11.600 --> 0:12:12.120 a little. 0:12:11.880 --> 0:12:13.800 Bit fun like to me, Like, I feel really bad 0:12:13.800 --> 0:12:15.880 for the regulators here, who, like I think, are just 0:12:16.840 --> 0:12:21.520 doing very straightforward market regulation, and you clearly think you 0:12:21.520 --> 0:12:24.080 know the SEC's position here, which is what I've been saying, 0:12:24.120 --> 0:12:25.680 you know, since I started writing about this, is like 0:12:26.240 --> 0:12:29.880 this company was doing a fraud by trying to arrange 0:12:29.920 --> 0:12:33.640 the short squeeze, and all of the investors think the opposite. 0:12:33.679 --> 0:12:35.520 They think the short sellers were doing some sort of 0:12:35.559 --> 0:12:37.800 fraud and the company was just helping out shareholders by 0:12:37.800 --> 0:12:39.880 taking revenge on the shorts, which is again not true 0:12:39.920 --> 0:12:42.440 because the shareholders are stuck in this non treaded stock 0:12:42.440 --> 0:12:44.120 and have lost a lot of money. So I just 0:12:44.120 --> 0:12:47.559 think that the regulators are sort of very straightforwardly doing 0:12:47.600 --> 0:12:50.400 the right thing and trying to prevent weird market manipulations, 0:12:50.679 --> 0:12:53.559 and like somehow there's this populist view that that's all 0:12:53.600 --> 0:12:57.440 wrong and the regulators should be punishing the short sellers 0:12:57.480 --> 0:13:00.280 and like this sort of short squeeze is good. So no, 0:13:00.360 --> 0:13:02.240 I'm not reading for I often read for Cass, but 0:13:02.280 --> 0:13:04.520 here I'm like, these hard working regulators are just trying 0:13:04.559 --> 0:13:06.440 to keep orderly markets and we should. 0:13:06.280 --> 0:13:07.480 Let them God bless them. 0:13:07.559 --> 0:13:10.480 Yeah, I'm going to talk about my favorite financial story. Ever. 0:13:10.800 --> 0:13:14.000 I think it's interesting that the SEC believes that like 0:13:14.760 --> 0:13:18.200 engineering a short squeeze is illegal. It's not like super 0:13:18.240 --> 0:13:20.520 clear to me that that's right, but you know, it's 0:13:20.559 --> 0:13:23.880 probably right. I mean it's market manipation, right. It's like 0:13:23.960 --> 0:13:26.839 causing the price of a security not to reflect the 0:13:26.880 --> 0:13:29.880 fundamentals of supply, and that's kind of market manipulation. So 0:13:29.920 --> 0:13:32.240 I understand the case. It's probably right, but it's a 0:13:32.240 --> 0:13:36.120 little odd. And every so often not companies, just market 0:13:36.160 --> 0:13:39.079 participants engineer a short squeeze. And my favorite of them 0:13:39.520 --> 0:13:43.160 is in twenty twelve, the SEC brought acase against Phil Falcone, 0:13:43.200 --> 0:13:46.960 who ran Arbager, the hedge fund he like owned some 0:13:47.000 --> 0:13:50.120 bonds which are delightfully called the max zips. I don't 0:13:50.160 --> 0:13:52.560 know what Max is. I don't know his bonds, right, 0:13:53.000 --> 0:13:55.560 And he like owned these boonds. He liked these bonds, 0:13:55.840 --> 0:14:00.280 and he heard that some bank was shorting them, also 0:14:00.360 --> 0:14:02.480 encouraging its clients to short them, and he got mad 0:14:02.480 --> 0:14:04.480 at short slash. And so what he did was like, 0:14:04.520 --> 0:14:06.320 He's like, okay, you're shorting the bonds. So he would 0:14:06.320 --> 0:14:08.320 buy them. Like people would short the bonds, he'd buy them, 0:14:08.640 --> 0:14:11.120 and he would also lend out his bonds. If you 0:14:11.120 --> 0:14:13.440 want a short bonds, you have to borrow them from someone, 0:14:13.679 --> 0:14:16.400 and so you know, Phil Falcone would tell his prime broker, 0:14:16.400 --> 0:14:18.719 you can let out my bonds, and his bonds got 0:14:18.760 --> 0:14:20.600 loaned up, and like he would keep landing at bonds. 0:14:20.640 --> 0:14:23.240 People would borrow them, they'd sell them, he'd buy them, 0:14:23.280 --> 0:14:25.680 he'd lend them out again, and ultimately he ended up 0:14:25.680 --> 0:14:29.080 owning more than all of the bonds. The company issued 0:14:29.080 --> 0:14:30.600 like two hundred million dollars of bonds and he had 0:14:30.720 --> 0:14:32.720 own two hundred and twenty million because he had like 0:14:32.960 --> 0:14:34.360 bought all of them and loan them out and then 0:14:34.400 --> 0:14:36.440 bought them again. And so once he owned more than 0:14:36.480 --> 0:14:39.880 all of the bonds, he stopped lending them out. He 0:14:39.960 --> 0:14:42.280 called in the stock bar, He called all the brokerage 0:14:42.320 --> 0:14:45.600 firms and said I want my bonds back, and they 0:14:45.600 --> 0:14:48.440 had to go buy them to return them to Phil Falcon, 0:14:49.000 --> 0:14:51.160 and they couldn't buy them because he owned all of 0:14:51.200 --> 0:14:54.600 them and he wasn't selling. Yeah, and so the sec 0:14:54.960 --> 0:14:58.000 has this incredible passage of like this unnamed at banker 0:14:58.040 --> 0:15:01.000 brokerage called Phil Falcon. It was like, you know, we 0:15:01.080 --> 0:15:03.480 understand you want your bonds back, but we can't find 0:15:03.520 --> 0:15:06.200 them to buy them. And he said they should quote 0:15:06.360 --> 0:15:07.360 just keep it bidding. 0:15:07.760 --> 0:15:09.040 Oh my goodness. 0:15:09.160 --> 0:15:11.920 And he said, sometimes you are just on the wrong 0:15:12.040 --> 0:15:13.000 side of the trade. 0:15:13.840 --> 0:15:14.160 Wow. 0:15:14.600 --> 0:15:18.800 And so you know, the bank was like, I don't understand. Apparently, 0:15:18.800 --> 0:15:21.720 Falcone said that he knew that there was a long 0:15:21.760 --> 0:15:24.560 position in the bonds and excess of like the size 0:15:24.560 --> 0:15:26.960 of the total bonds, and and the bank said, how 0:15:26.960 --> 0:15:28.920 could you know this. Phial Cones said that he was 0:15:28.960 --> 0:15:31.880 working the position himself and that he had acquired approximately 0:15:31.920 --> 0:15:34.840 one hundred and ninety million bonds, meaning more than all 0:15:34.880 --> 0:15:37.720 of the bonds. Yeah, And the SEC says the senior 0:15:37.760 --> 0:15:41.160 officer and the other Wall Street firm personnel were stunned. Still, 0:15:41.160 --> 0:15:42.920 I just like picture this conversation. 0:15:43.000 --> 0:15:45.240 It's like he must have been having so much, just like. 0:15:45.240 --> 0:15:48.080 The greatest feeling in the world to be like, oh, yeah, just. 0:15:48.440 --> 0:15:50.920 Keep bidding, but he's gonna I mean, I would be 0:15:51.000 --> 0:15:52.680 chasing that high for the rest of my life. 0:15:52.800 --> 0:15:55.520 I mean yeah, I tell you. The SEC determined that 0:15:55.560 --> 0:15:58.440 this was market manipulation. Come on, they sued him, they settled. 0:15:58.440 --> 0:16:00.840 I don't think he admitted wrongdoing. It my suspicions that 0:16:00.880 --> 0:16:02.800 he thinks and also kind of I think this was 0:16:02.840 --> 0:16:05.440 just extremely cool that you shouldn't have gotten in trouble 0:16:05.440 --> 0:16:06.880 for it, but he did get in trouble for it. 0:16:06.920 --> 0:16:11.560 The SEC believes that engineering a short squeeze is market manipulation, 0:16:11.960 --> 0:16:13.800 so they got meta materials too. 0:16:13.920 --> 0:16:17.080 I just feel like short selling just breaks everyone's brain 0:16:17.280 --> 0:16:19.520 on every single side of it. 0:16:19.520 --> 0:16:22.480 It really does. People get mad at short sellers in 0:16:22.480 --> 0:16:24.880 a way that has just exceeds like what they're actually doing. 0:16:24.960 --> 0:16:26.880 People would say they're manipulating the market. 0:16:27.040 --> 0:16:29.080 Yeah, but like even if you think that, like to 0:16:29.280 --> 0:16:32.000 arrange your entire public company around punishing short sellers is 0:16:32.160 --> 0:16:34.120 just like an overreaction, even if they're. 0:16:34.000 --> 0:16:47.760 Doing something ill, that man can hold a grudge. Should 0:16:47.840 --> 0:16:52.040 we talk about on cycle pe recruiting? I guess I 0:16:52.240 --> 0:16:56.600 s Business Insider of course out with reporting this week 0:16:56.640 --> 0:17:01.160 that apparently his cycle is starting much than usual, or 0:17:01.160 --> 0:17:04.040 at least a month earlier then it started last year, 0:17:04.080 --> 0:17:04.920 which was also starting. 0:17:05.080 --> 0:17:06.480 Yeah, but it's a key month. R So, like the 0:17:06.480 --> 0:17:10.320 way it works is like you go to college, maybe 0:17:10.359 --> 0:17:13.720 like one summer you intern at an investment bank. Sure, 0:17:13.800 --> 0:17:15.879 you graduate from college. I mean, if you're looking to 0:17:16.040 --> 0:17:18.800 work in sort of like the standard financial path, and 0:17:18.880 --> 0:17:21.200 you graduate from college and you go work at an 0:17:21.200 --> 0:17:23.960 investment bank for to your analyst program, and at the 0:17:24.000 --> 0:17:27.359 end of your two year analyst program, you often want 0:17:27.440 --> 0:17:30.280 to work in private equity, and so you get a 0:17:30.359 --> 0:17:34.280 job offer from you know, a big private equity fund KKR, Apollo, 0:17:34.640 --> 0:17:39.439 Blackstone or whatever to start there after your two years 0:17:39.480 --> 0:17:43.240 as an analyst's end. And at some point in the 0:17:43.280 --> 0:17:47.480 distant past, twenty months into your analyst program, after doing 0:17:47.520 --> 0:17:49.840 a bunch of deals and learning how you know, to 0:17:50.000 --> 0:17:53.119 build financial models and generally, you know, getting some experience 0:17:53.160 --> 0:17:55.760 in investment banking, you would go interview at the big 0:17:55.800 --> 0:17:57.760 private equity funds and they'd ask you about your work 0:17:57.800 --> 0:18:01.040 experience and they would hire you, and then you would 0:18:01.440 --> 0:18:03.400