1 00:00:02,759 --> 00:00:07,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,600 --> 00:00:09,760 Speaker 2: I'm trying to buy a house. 3 00:00:10,320 --> 00:00:11,760 Speaker 1: Yeah, it's the nesting instinct. 4 00:00:11,920 --> 00:00:14,680 Speaker 2: Things in Hoboken, New Jersey. They just get wet because 5 00:00:16,079 --> 00:00:20,239 Speaker 2: the city is below sea level. I'm exaggerating, but only slightly. 6 00:00:20,960 --> 00:00:24,680 Speaker 2: And you know, mold is a problem, and remediation of 7 00:00:24,760 --> 00:00:27,560 Speaker 2: mold is a problem, and it's like, what are we 8 00:00:27,600 --> 00:00:30,880 Speaker 2: going to do? I don't know, meate that mold, I know, 9 00:00:31,040 --> 00:00:35,040 Speaker 2: and that's gonna cost money. And this whole thing, it's 10 00:00:35,080 --> 00:00:38,519 Speaker 2: gonna cost money in time. Why does anyone own a house? 11 00:00:39,120 --> 00:00:41,920 Speaker 1: I asked myself that question every day. Yeah, but I 12 00:00:41,960 --> 00:00:44,960 Speaker 1: want to on an apartment, but I don't own a house. 13 00:00:45,440 --> 00:00:49,400 Speaker 1: Every mediate mold check for raid On. 14 00:00:50,080 --> 00:00:53,720 Speaker 2: Yeah, we checked for Raidon too. There's no freight on 15 00:00:53,840 --> 00:00:55,640 Speaker 2: oh Neat Yeah. Yeah, that's cool. 16 00:00:55,840 --> 00:00:56,319 Speaker 1: The whole thing. 17 00:00:56,680 --> 00:00:58,760 Speaker 2: This is a place that we live in for like 18 00:00:58,840 --> 00:01:02,240 Speaker 2: five to seven years. Okay, in five to seven years, 19 00:01:02,920 --> 00:01:05,520 Speaker 2: I'm going to try to sell this bag of snakes. Yeah, 20 00:01:05,640 --> 00:01:08,200 Speaker 2: same way it was sold to Mate. But at least, 21 00:01:08,240 --> 00:01:10,679 Speaker 2: you know, I'm with my good friend Matt Levine and 22 00:01:10,800 --> 00:01:12,560 Speaker 2: there's microphones in front of us. 23 00:01:12,680 --> 00:01:16,160 Speaker 1: Yeah, I have no bags of snakes to sell you. Hello, 24 00:01:16,280 --> 00:01:19,400 Speaker 1: and welcome to the money Stuff Podcast. Youreicly podcast. Are 25 00:01:19,400 --> 00:01:23,920 Speaker 1: we talking about stuff without it? To Bunny the money? 26 00:01:24,600 --> 00:01:27,080 Speaker 2: Funny funny Bunny stuff. 27 00:01:27,319 --> 00:01:30,800 Speaker 1: Funny money, money stuff. And I write the Matt Levine column. 28 00:01:33,880 --> 00:01:37,440 Speaker 2: This is very silly. I'm I'm just Katie Greifeld. I'm 29 00:01:37,480 --> 00:01:40,440 Speaker 2: a reporter for Bloomberg News and an anchor for Bloomberg Television. 30 00:01:40,600 --> 00:01:45,119 Speaker 1: To the snakes. Ye Bill Ackman, founder of Pershing Square, 31 00:01:45,560 --> 00:01:48,440 Speaker 1: the lads fund management firm closed un fund management firm, 32 00:01:48,440 --> 00:01:51,160 Speaker 1: also has been talking for like two years about taking 33 00:01:51,200 --> 00:01:54,440 Speaker 1: a big new closed end fund public. It's called the 34 00:01:54,440 --> 00:01:58,640 Speaker 1: Pershing Square USA or ps US, and I feel like 35 00:01:59,320 --> 00:02:00,840 Speaker 1: this time too years ago, it was going to be 36 00:02:00,880 --> 00:02:03,520 Speaker 1: a twenty five billion dollar clothes und fund, and it 37 00:02:03,560 --> 00:02:05,840 Speaker 1: was going to trade it a premium, unlike most other 38 00:02:05,880 --> 00:02:09,320 Speaker 1: clothes und funds, including notably like Ben's other clothes then 39 00:02:09,400 --> 00:02:11,920 Speaker 1: fund for sure, And you really had to trade it 40 00:02:11,960 --> 00:02:14,000 Speaker 1: a premion to like get a twenty five billion dollar 41 00:02:14,000 --> 00:02:16,280 Speaker 1: IPO done, You really have to think that the thing 42 00:02:16,280 --> 00:02:19,600 Speaker 1: will trade up. No one did, so that IPO didn't happen, 43 00:02:20,120 --> 00:02:22,560 Speaker 1: And he came back last month with like, what we're 44 00:02:22,560 --> 00:02:24,280 Speaker 1: going to do is We're going to give you free 45 00:02:24,320 --> 00:02:26,920 Speaker 1: shares of the management company person to square, the Hedgelinde 46 00:02:26,919 --> 00:02:30,760 Speaker 1: management firm, and with those free shares, that'll be enough 47 00:02:30,800 --> 00:02:34,880 Speaker 1: incentive for you to buy the clothes Unfund shares and 48 00:02:34,919 --> 00:02:37,000 Speaker 1: then the whole thing will work. And it worked. Yeah, 49 00:02:37,200 --> 00:02:41,400 Speaker 1: they went public dual ipo both ps the Hedgeho management 50 00:02:41,440 --> 00:02:44,880 Speaker 1: company and PSUs the clothes Und Fund. They went public 51 00:02:45,000 --> 00:02:50,960 Speaker 1: this week. They started trading Wednesday. They raised five billion 52 00:02:51,000 --> 00:02:53,480 Speaker 1: dollars for the clothes Und Fund, which you can now 53 00:02:53,520 --> 00:02:56,760 Speaker 1: put to work investing in large cap public companies and 54 00:02:57,680 --> 00:02:58,440 Speaker 1: uber credit. 55 00:02:58,480 --> 00:03:02,359 Speaker 2: Hues Hi. I have a few questions. I guess I 56 00:03:02,520 --> 00:03:04,120 Speaker 2: just keep coming back to the point. I mean, you 57 00:03:04,160 --> 00:03:06,160 Speaker 2: think about before we get to. 58 00:03:05,960 --> 00:03:09,280 Speaker 1: Too many questions. Yeah, yeah, talking about So they did 59 00:03:09,320 --> 00:03:12,360 Speaker 1: go public PSUs so two o'clock on Thursday. 60 00:03:12,840 --> 00:03:13,120 Speaker 2: Yeah. 61 00:03:13,520 --> 00:03:17,760 Speaker 1: PSUs was trading at like forty three point fifty last 62 00:03:17,800 --> 00:03:18,280 Speaker 1: night checked. 63 00:03:18,440 --> 00:03:19,720 Speaker 2: So sounds right. 64 00:03:19,600 --> 00:03:24,480 Speaker 1: Not a prem to net ascid value, no meaningful discount 65 00:03:24,480 --> 00:03:25,400 Speaker 1: to net asset money. 66 00:03:25,440 --> 00:03:27,639 Speaker 2: It did close a bigger discount on once. 67 00:03:27,760 --> 00:03:30,160 Speaker 1: Yeah, it's up a bit today. Yeah, it closed down 68 00:03:30,200 --> 00:03:33,160 Speaker 1: like sort of twenty percent. Yeah, from that asset It 69 00:03:33,240 --> 00:03:35,600 Speaker 1: closed forty two ish and now it's at forty three 70 00:03:35,640 --> 00:03:38,400 Speaker 1: and change. So you know, yeah, well below that ass 71 00:03:38,440 --> 00:03:38,880 Speaker 1: that value. 72 00:03:39,080 --> 00:03:42,400 Speaker 2: I mean, it just seems extremely hard to defy the 73 00:03:42,440 --> 00:03:44,040 Speaker 2: physics of closed un funds. 74 00:03:44,320 --> 00:03:48,680 Speaker 1: Sure, I agree, I should stress that spent years being 75 00:03:48,720 --> 00:03:51,360 Speaker 1: like you know, in twenty twenty four, he wrote in 76 00:03:51,400 --> 00:03:54,040 Speaker 1: a letter, it requires a significant leap of faith and 77 00:03:54,160 --> 00:03:57,520 Speaker 1: ultimately careful analysis and judgment for investors to recognize that 78 00:03:57,560 --> 00:04:00,240 Speaker 1: this closed end company will trade at a prim master 79 00:04:00,320 --> 00:04:02,760 Speaker 1: the IPI, when very few in history have done so. Yeah, 80 00:04:03,000 --> 00:04:06,200 Speaker 1: careful analysis, not careful enough. So yeah, so that traded down. 81 00:04:06,320 --> 00:04:09,000 Speaker 1: You know, the management company is trading it like twenty 82 00:04:09,120 --> 00:04:11,000 Speaker 1: nine bucks a share, thirty bucks a share, which if 83 00:04:11,040 --> 00:04:13,840 Speaker 1: you bought in the IPO, you got one share of 84 00:04:14,160 --> 00:04:18,000 Speaker 1: piece of PSUs and one fifth of a share of 85 00:04:18,120 --> 00:04:21,240 Speaker 1: Pershing Square. Right, so if you do the math, you 86 00:04:21,320 --> 00:04:23,719 Speaker 1: got about like forty three bucks worth of the clothes 87 00:04:23,760 --> 00:04:26,320 Speaker 1: on fund and about six bucks worth of the management company. 88 00:04:26,400 --> 00:04:29,120 Speaker 1: So you lost a little bit of money as of 89 00:04:29,160 --> 00:04:31,960 Speaker 1: now on the IPI. Yeah, it's down from the IPI price, 90 00:04:32,000 --> 00:04:36,600 Speaker 1: but it's not catastrophically done. Yeah up, No, normally IPOs. 91 00:04:36,240 --> 00:04:40,719 Speaker 2: Go up normally, I mean ideally, Yeah, to the closed 92 00:04:40,800 --> 00:04:44,760 Speaker 2: end funds. He did say yesterday that there are hundreds 93 00:04:44,760 --> 00:04:46,799 Speaker 2: of close und funds, but they are very different animals 94 00:04:46,800 --> 00:04:49,279 Speaker 2: from what we are doing over time. We're going to 95 00:04:49,279 --> 00:04:52,120 Speaker 2: compound the book value if we do anything like we've 96 00:04:52,120 --> 00:04:53,880 Speaker 2: done in the past, at a high rate over time, 97 00:04:53,920 --> 00:04:55,640 Speaker 2: and we're going to run it like a real company. 98 00:04:56,160 --> 00:04:58,680 Speaker 2: I guess I just struggle to understand how this animal 99 00:04:58,720 --> 00:05:00,800 Speaker 2: looks different than the other animals that are out there 100 00:05:01,200 --> 00:05:05,440 Speaker 2: when it comes to close un funds. His eyes, Yeah, true, true. 101 00:05:06,480 --> 00:05:09,359 Speaker 1: His twitter, Yeah right, everyone who runs a clothes un 102 00:05:09,400 --> 00:05:12,039 Speaker 1: fund would like to compound it. Yeah, at a high rate. 103 00:05:13,160 --> 00:05:15,480 Speaker 2: I'm sure that's what he would have wanted to do 104 00:05:15,520 --> 00:05:18,120 Speaker 2: in Europe as well, where his clothing fund is trading 105 00:05:18,120 --> 00:05:19,159 Speaker 2: at a discount. 106 00:05:18,720 --> 00:05:21,760 Speaker 1: And compose at a high rate. But yeah, like the 107 00:05:21,800 --> 00:05:23,280 Speaker 1: actual investing tracker, it is good. 108 00:05:23,360 --> 00:05:27,360 Speaker 2: Yeah, Yeah, it just feels it feels yeah, it feels 109 00:05:27,360 --> 00:05:31,200 Speaker 2: disconnected from the trading dynamics of the actual structure. The 110 00:05:31,279 --> 00:05:35,320 Speaker 2: structure is interesting in that I really want him to 111 00:05:35,520 --> 00:05:37,880 Speaker 2: launch an ETF. I know he's not going to launch 112 00:05:37,920 --> 00:05:40,640 Speaker 2: an UTF the discount problem would be solved, but it 113 00:05:40,640 --> 00:05:42,600 Speaker 2: feels like that's a detail for him since he wants 114 00:05:42,640 --> 00:05:43,520 Speaker 2: the permanent capital. 115 00:05:43,800 --> 00:05:46,000 Speaker 1: It's not just that, like, yeah, like he wants it 116 00:05:46,040 --> 00:05:47,560 Speaker 1: to be a company, like he wants it to be 117 00:05:47,880 --> 00:05:50,560 Speaker 1: Berkshire halfway. Well, like if you can just be redeemed 118 00:05:50,560 --> 00:05:53,560 Speaker 1: at any moment, and like you're dealing with Jane Street arbitrage, 119 00:05:53,760 --> 00:05:55,880 Speaker 1: Like it's not the same thing. Yeah, he wants to 120 00:05:55,920 --> 00:05:58,480 Speaker 1: have a permanent company with permanent capital where you can 121 00:05:58,520 --> 00:06:00,400 Speaker 1: make permanent investments. 122 00:06:00,880 --> 00:06:05,320 Speaker 2: It's the Warren Buffett comparison that I also have a 123 00:06:05,360 --> 00:06:08,320 Speaker 2: lot of questions about, because how does the Howard Hughes 124 00:06:08,360 --> 00:06:09,320 Speaker 2: of it all fold into this? 125 00:06:09,480 --> 00:06:12,760 Speaker 1: I've never understood that. Yes, Howard Hughes is a real company, 126 00:06:12,960 --> 00:06:14,920 Speaker 1: but he owns a big stake in it's the offered 127 00:06:14,920 --> 00:06:17,560 Speaker 1: to acquire more of it, would like to control it 128 00:06:17,600 --> 00:06:19,839 Speaker 1: and use it as a platform to make investments. And 129 00:06:19,839 --> 00:06:21,039 Speaker 1: then severally there's a closing fund. 130 00:06:21,080 --> 00:06:25,360 Speaker 2: I don't know, So, yeah, how do those two co exist? 131 00:06:26,400 --> 00:06:28,719 Speaker 2: Are you going to compete with yourself? I mean probably not, 132 00:06:28,880 --> 00:06:30,320 Speaker 2: but it seems like you're trying to do the same 133 00:06:30,360 --> 00:06:31,640 Speaker 2: thing through two different Yeah. 134 00:06:31,680 --> 00:06:33,680 Speaker 1: I'm sure he has a plan, but I don't know 135 00:06:33,760 --> 00:06:36,080 Speaker 1: that it's that super well explained. 136 00:06:36,560 --> 00:06:40,720 Speaker 2: Yeah, Like why would I buy shares of Howard Hughes 137 00:06:40,760 --> 00:06:42,599 Speaker 2: and support your vision there. If you're also doing it 138 00:06:42,640 --> 00:06:43,680 Speaker 2: in the closed up fund. 139 00:06:43,680 --> 00:06:46,760 Speaker 1: It's probably a different vision, slightly different vision. 140 00:06:46,839 --> 00:06:47,880 Speaker 2: I want to know what it is. 141 00:06:48,040 --> 00:06:55,880 Speaker 1: Yeah, I don't care. I'm going to say attitude, the 142 00:06:55,960 --> 00:06:58,880 Speaker 1: grandiosity with which started and the sort of fizzle with 143 00:06:58,920 --> 00:07:03,200 Speaker 1: which is sort of when public is a little disappointing, 144 00:07:03,480 --> 00:07:05,280 Speaker 1: Like this is gonna be a twenty five billion dollar 145 00:07:05,320 --> 00:07:07,560 Speaker 1: clothes in fund, the trades at a premium. Now it's 146 00:07:07,600 --> 00:07:09,880 Speaker 1: a five billion dollar clothes in fund. The trades at 147 00:07:09,880 --> 00:07:14,000 Speaker 1: are discounts. Like, okay, thing is the normal thing happened? 148 00:07:14,360 --> 00:07:17,120 Speaker 1: Someone got really mad about this. This IPO sort of 149 00:07:17,160 --> 00:07:19,320 Speaker 1: took place in two phases. He rounded up a bunch 150 00:07:19,320 --> 00:07:22,680 Speaker 1: of anchor investors, institutions and family offices in highlight while 151 00:07:22,760 --> 00:07:26,960 Speaker 1: worth individuals who invested, who like committed their capital before 152 00:07:27,000 --> 00:07:29,200 Speaker 1: the IPO. They sorted like an anchor to like do 153 00:07:29,280 --> 00:07:31,000 Speaker 1: the IPI. They're like, we've already got like two point 154 00:07:31,000 --> 00:07:34,400 Speaker 1: eight million dollars of capital spoken for, so the thing, 155 00:07:34,440 --> 00:07:37,960 Speaker 1: will you know, have enough money? Those people got a 156 00:07:37,960 --> 00:07:41,320 Speaker 1: little bit extra in the IPO instead of getting one 157 00:07:41,400 --> 00:07:45,120 Speaker 1: fifth of a share of Pershing square for every share 158 00:07:45,160 --> 00:07:47,920 Speaker 1: of pieces they got, they got three tenths of a share, 159 00:07:47,960 --> 00:07:50,680 Speaker 1: so they got an extra like fifty percent of the 160 00:07:50,720 --> 00:07:54,800 Speaker 1: management company. And someone emailed me like a weeko being like, 161 00:07:55,200 --> 00:07:58,640 Speaker 1: it's so unfair that like the favored fat cats get 162 00:07:58,760 --> 00:08:01,200 Speaker 1: more than like the regular investors are buying the IPO. 163 00:08:01,320 --> 00:08:04,520 Speaker 1: Was like, look, like it's always true that. Yeah, venture 164 00:08:04,520 --> 00:08:06,640 Speaker 1: capitalists who invest in the last round before an IPO 165 00:08:06,720 --> 00:08:08,840 Speaker 1: get you know, a better deal than people invest in 166 00:08:08,880 --> 00:08:12,120 Speaker 1: the IPO. That's not that weird, but it is kind 167 00:08:12,120 --> 00:08:15,040 Speaker 1: of there. You're paying these people to anchor the deal 168 00:08:15,080 --> 00:08:17,080 Speaker 1: and make sure it happens. But it is the case 169 00:08:17,120 --> 00:08:19,640 Speaker 1: that like, as of like the prices right now, that 170 00:08:19,720 --> 00:08:22,120 Speaker 1: people who invested before the IPO have made a little 171 00:08:22,120 --> 00:08:24,280 Speaker 1: bit of a profit on the deal. People invested in 172 00:08:24,320 --> 00:08:26,000 Speaker 1: the IPO have lost a little bit of money in 173 00:08:26,040 --> 00:08:28,120 Speaker 1: the deal. It's a little awkward. Yeah, word that, Like 174 00:08:28,960 --> 00:08:31,480 Speaker 1: that's the dividing one, Like you split that perfectly where 175 00:08:32,120 --> 00:08:35,000 Speaker 1: the favorite investors did well and the disabored investors did poorly. 176 00:08:35,240 --> 00:08:38,280 Speaker 2: Yeah, I do wonder we've talked about this before. I 177 00:08:38,320 --> 00:08:41,000 Speaker 2: also wonder when it comes to the management company, like 178 00:08:41,080 --> 00:08:44,360 Speaker 2: what is the motivation to go public. There's so few 179 00:08:45,000 --> 00:08:48,440 Speaker 2: publicly listed hedge funds. Man Group is the one that 180 00:08:48,520 --> 00:08:51,120 Speaker 2: springs to mind for me. I just wonder. 181 00:08:51,920 --> 00:08:56,160 Speaker 1: Why, Well, I feel like the number one reason is 182 00:08:56,200 --> 00:08:59,000 Speaker 1: to get this close un fund one. Yeah right, Like 183 00:09:00,040 --> 00:09:01,760 Speaker 1: as I've written a lot, like you just can't get 184 00:09:01,760 --> 00:09:04,880 Speaker 1: the clothes on fund because it's well feasible. 185 00:09:04,960 --> 00:09:06,840 Speaker 2: But if you soon got to twenty twenty fours, like 186 00:09:06,880 --> 00:09:09,240 Speaker 2: they weren't connected, they were going to be to separate. 187 00:09:09,760 --> 00:09:11,959 Speaker 2: I know, but I feel like you're outside. 188 00:09:12,320 --> 00:09:15,080 Speaker 1: They were talking about doing an IPO. Yeah, yeah, no, 189 00:09:15,200 --> 00:09:17,760 Speaker 1: I mean I think it's the same reason anyone takes 190 00:09:17,800 --> 00:09:22,280 Speaker 1: any you know, financial services company public, which is if 191 00:09:22,320 --> 00:09:24,439 Speaker 1: you think that the public market would pay a high 192 00:09:24,520 --> 00:09:27,480 Speaker 1: value for your ownership and your company, Like yeah, why 193 00:09:27,480 --> 00:09:29,560 Speaker 1: do I take some cash up? Like you know, it's 194 00:09:29,559 --> 00:09:32,480 Speaker 1: like he's sort of not the main chief investment officer 195 00:09:32,559 --> 00:09:34,760 Speaker 1: of the company anymore. Like there's you know, there's like 196 00:09:34,800 --> 00:09:36,760 Speaker 1: a next generation coming up. It makes sense for him 197 00:09:36,800 --> 00:09:40,120 Speaker 1: to have a publicly list that's duck. So I don't know, 198 00:09:40,320 --> 00:09:41,480 Speaker 1: for all I know they're going to do I'm and 199 00:09:41,520 --> 00:09:43,360 Speaker 1: a you know, for all I know, the publicly list 200 00:09:43,400 --> 00:09:45,800 Speaker 1: that's luck will be a currency beyond just the getting 201 00:09:45,800 --> 00:09:49,800 Speaker 1: the closed end fund launched. It's also like they have 202 00:09:49,880 --> 00:09:52,240 Speaker 1: sort of an interesting structure where like everyone's calls him 203 00:09:52,240 --> 00:09:54,320 Speaker 1: a hedge fund manager, it's like sort of a hedge 204 00:09:54,320 --> 00:09:57,680 Speaker 1: fund firm, but it's like a closed and fund management firm. 205 00:09:57,960 --> 00:10:02,160 Speaker 1: I think they would argue they have more stable, recurring 206 00:10:02,160 --> 00:10:04,640 Speaker 1: revenue then a lot of hedge fund firms. They're not 207 00:10:04,679 --> 00:10:08,720 Speaker 1: making most of their money on totally at risk performance fees, 208 00:10:08,760 --> 00:10:12,000 Speaker 1: like they're The way it works is like the they 209 00:10:12,080 --> 00:10:14,600 Speaker 1: get like a senior share and the performance fees goes 210 00:10:14,600 --> 00:10:16,439 Speaker 1: to the shareholders, and then like the junior share goes 211 00:10:16,440 --> 00:10:20,439 Speaker 1: to the employees, and so they are a little bit 212 00:10:20,440 --> 00:10:22,600 Speaker 1: more of a like recurring revenue play. And so I 213 00:10:22,600 --> 00:10:25,320 Speaker 1: think they think that's something that shareholders value and they 214 00:10:25,320 --> 00:10:26,040 Speaker 1: can monetize. 215 00:10:26,280 --> 00:10:29,040 Speaker 2: Yeah, I guess maybe another way to ask that question 216 00:10:29,080 --> 00:10:31,160 Speaker 2: is why aren't there more public lists and hedge funds. 217 00:10:31,320 --> 00:10:33,520 Speaker 1: So a couple of answers. One is like, because a 218 00:10:33,559 --> 00:10:37,880 Speaker 1: lot of hedge funds have bad income, like they're very 219 00:10:38,320 --> 00:10:41,839 Speaker 1: volatile income, and so it is hard to sell that 220 00:10:41,960 --> 00:10:44,120 Speaker 1: to the public. Approaching Square thinks that has built a 221 00:10:44,120 --> 00:10:46,199 Speaker 1: better mouse trap where it has less volatile income, and 222 00:10:46,240 --> 00:10:49,640 Speaker 1: so you know, because it runs like locked up you 223 00:10:49,640 --> 00:10:51,920 Speaker 1: know in the Eastern capital with like very stable fees 224 00:10:51,960 --> 00:10:54,280 Speaker 1: and you know, invest in large cap aquity, it's like 225 00:10:54,320 --> 00:10:57,000 Speaker 1: a you know, it's a it's a fairly stable revenue stream. 226 00:10:57,160 --> 00:10:58,560 Speaker 1: That's one part of the answer. If you run a 227 00:10:58,559 --> 00:11:01,240 Speaker 1: medium sized hedge fund and you like very volatile earnings, 228 00:11:01,280 --> 00:11:03,880 Speaker 1: then it's harder to take that public. My theory is 229 00:11:03,880 --> 00:11:06,800 Speaker 1: that the giant hedge fund firms don't go public because 230 00:11:06,840 --> 00:11:10,480 Speaker 1: their hedge funds operate like investment banks. They offer their 231 00:11:10,520 --> 00:11:14,440 Speaker 1: investors a return on equity rather than offering them like 232 00:11:14,520 --> 00:11:17,199 Speaker 1: all of the upside and the you know, upside minus 233 00:11:17,240 --> 00:11:20,120 Speaker 1: twenty percent performance fees. Like they take whatever they want 234 00:11:20,400 --> 00:11:24,280 Speaker 1: from the investors to pay their fees, and so there's 235 00:11:24,320 --> 00:11:26,520 Speaker 1: not really like another layer of equity that you can 236 00:11:26,520 --> 00:11:29,360 Speaker 1: put on that. I think that's not a very clear answer, 237 00:11:29,440 --> 00:11:30,960 Speaker 1: but I think that's part of the answer. Like I 238 00:11:31,000 --> 00:11:33,080 Speaker 1: think of the big multi strategy hedge funds as like 239 00:11:33,120 --> 00:11:35,920 Speaker 1: this is a business, yeah, and the business has equity capital, 240 00:11:35,920 --> 00:11:38,680 Speaker 1: and the equity capital comes from the LPs in the 241 00:11:38,679 --> 00:11:40,760 Speaker 1: hedge fund. And when you think of it like that, 242 00:11:40,800 --> 00:11:42,840 Speaker 1: like you don't need another layer of equity capital for 243 00:11:42,880 --> 00:11:45,080 Speaker 1: the management company, because the management company is just a 244 00:11:45,120 --> 00:11:47,160 Speaker 1: way to pay the fees to the employees. 245 00:11:47,480 --> 00:11:49,240 Speaker 2: The good news is that we're going to be talking 246 00:11:49,280 --> 00:11:51,600 Speaker 2: about the fee structure of multistraats. Oh yeah, we are 247 00:11:51,760 --> 00:11:53,800 Speaker 2: later in this podcast. I just just want to point 248 00:11:53,800 --> 00:11:56,760 Speaker 2: out one more thing. Bill Lackman, he said on Bloeber 249 00:11:56,760 --> 00:11:59,319 Speaker 2: TV that he's been very constrained when it comes to tweeting. 250 00:12:00,160 --> 00:12:04,079 Speaker 2: He did tweet on Thursday morning was that he bought 251 00:12:04,120 --> 00:12:09,280 Speaker 2: in the open market both ps U s and p S. Yeah. 252 00:12:10,920 --> 00:12:12,400 Speaker 2: I thought that was a. 253 00:12:12,280 --> 00:12:15,240 Speaker 1: Cool little established He thinks he should traded a premium. 254 00:12:15,400 --> 00:12:21,560 Speaker 2: Yeah, you have to invest in yourself, Matt, Bill Lackman 255 00:12:22,440 --> 00:12:23,319 Speaker 2: Man not bird. 256 00:12:38,360 --> 00:12:39,800 Speaker 1: Did you talking about Bobby Jane and the fees? 257 00:12:39,960 --> 00:12:42,680 Speaker 2: Yeah, I think that we were trying to be thematic. 258 00:12:42,760 --> 00:12:47,320 Speaker 1: Yeah, sure, So elsewhere in hedge funds, behund managers, edge 259 00:12:47,320 --> 00:12:52,000 Speaker 1: trend managers who maybe you know, it's somewhat disappointing weeks. 260 00:12:52,320 --> 00:12:52,560 Speaker 2: Yeah. 261 00:12:52,760 --> 00:12:54,880 Speaker 1: Bobby Jane, the founder of. 262 00:12:54,920 --> 00:12:57,000 Speaker 2: Jane Global, which I don't think is going to go 263 00:12:57,040 --> 00:12:58,199 Speaker 2: public anytime. 264 00:12:57,840 --> 00:13:01,200 Speaker 1: Soon, multi strategy hedge fund startup from the last couple 265 00:13:01,200 --> 00:13:05,120 Speaker 1: of years. He is returning outside capital and going back 266 00:13:05,160 --> 00:13:08,200 Speaker 1: to managing money exclusively from Millennium, which is the firm 267 00:13:08,240 --> 00:13:08,920 Speaker 1: that he came from. 268 00:13:09,160 --> 00:13:11,400 Speaker 2: M He's going home, going home. 269 00:13:12,000 --> 00:13:12,959 Speaker 1: It's hard out there for. 270 00:13:13,000 --> 00:13:15,720 Speaker 2: A It really is strategy hedge on the startup. I 271 00:13:15,720 --> 00:13:18,880 Speaker 2: think a lot of people read this news and at 272 00:13:19,000 --> 00:13:22,040 Speaker 2: least my first thought was, if it's not Bobby Jane, 273 00:13:22,960 --> 00:13:27,520 Speaker 2: who can crack into this into multistrats, That's what everyone said, right. 274 00:13:27,600 --> 00:13:29,760 Speaker 1: He was like high up in investing at Millennium and 275 00:13:29,800 --> 00:13:31,560 Speaker 1: also was like sort of known as the guy who 276 00:13:32,000 --> 00:13:35,080 Speaker 1: built a lot of millenniums like architecture and processes. Like 277 00:13:35,120 --> 00:13:37,040 Speaker 1: he seemed like a guy who could run a firm 278 00:13:37,120 --> 00:13:39,840 Speaker 1: rather than just be an investor at a firm. Yeah, 279 00:13:39,880 --> 00:13:43,360 Speaker 1: and it didn't work, apparently, And I think the answer is, like, 280 00:13:43,840 --> 00:13:48,520 Speaker 1: it's just really hard. These are platforms that really require 281 00:13:48,559 --> 00:13:51,200 Speaker 1: scale and have a lot of fixed costs, and it's 282 00:13:51,240 --> 00:13:54,520 Speaker 1: just hard to get started and cover all those fixed 283 00:13:54,559 --> 00:13:57,240 Speaker 1: costs as you're like wrapping up your strategies and as 284 00:13:57,240 --> 00:14:01,800 Speaker 1: you're wrapping up your investor base. Yeah, and therefore it's 285 00:14:01,840 --> 00:14:04,720 Speaker 1: hard to get new investors because early on you're not 286 00:14:04,840 --> 00:14:07,840 Speaker 1: earning the return that they want, and so they're like, yeah, 287 00:14:07,880 --> 00:14:09,800 Speaker 1: we'll wait until you get huge, and let's stick with 288 00:14:09,800 --> 00:14:10,840 Speaker 1: the money and then till them. 289 00:14:10,920 --> 00:14:14,600 Speaker 2: Yeah, I mean it has about six billion dollars. Not enough, 290 00:14:14,679 --> 00:14:18,400 Speaker 2: it's not enough. What is enough? Jane struck out on 291 00:14:18,480 --> 00:14:19,680 Speaker 2: his own in twenty twenty four. 292 00:14:19,880 --> 00:14:22,080 Speaker 1: Yeah, so he's been independent for about two years and 293 00:14:22,640 --> 00:14:23,640 Speaker 1: it's hard to get to scale. 294 00:14:23,840 --> 00:14:26,640 Speaker 2: Yeah, let's talk a little bit about how passed through 295 00:14:26,680 --> 00:14:31,479 Speaker 2: fees factor into this, because multistraats are very expensive. 296 00:14:32,000 --> 00:14:34,720 Speaker 1: Yeah. I think that, like the intuition that people have 297 00:14:34,760 --> 00:14:36,760 Speaker 1: about hedge funds doesn't apply to all these shots. Like 298 00:14:36,840 --> 00:14:39,800 Speaker 1: Bill Ackman runs like an investment from right there. Yeah, 299 00:14:39,840 --> 00:14:41,800 Speaker 1: he like takes your money and he invested in some 300 00:14:41,840 --> 00:14:44,400 Speaker 1: stuff and he gives you the return minus his fees. 301 00:14:45,000 --> 00:14:48,880 Speaker 1: It's not what Millennium or Jane Global do. What they 302 00:14:48,880 --> 00:14:51,400 Speaker 1: do is they run some businesses. They have some desks 303 00:14:51,440 --> 00:14:54,400 Speaker 1: that do some businesses. They do index arbitrage, they do 304 00:14:55,400 --> 00:15:00,280 Speaker 1: basis trades. They do like some stuff that generates high 305 00:15:00,360 --> 00:15:04,160 Speaker 1: expected returns with like relatively low volatility, and they combine 306 00:15:04,200 --> 00:15:06,640 Speaker 1: those things into a thing that has even lower volatility 307 00:15:06,680 --> 00:15:08,840 Speaker 1: and they sell that to investors. They say, we're going 308 00:15:08,920 --> 00:15:11,880 Speaker 1: to give you alpha we're gonna give you like very stable, 309 00:15:12,360 --> 00:15:16,440 Speaker 1: medium sized returns. And when you do those businesses, there's 310 00:15:16,480 --> 00:15:19,160 Speaker 1: a certain amount of capacity in those strategies, and if 311 00:15:19,200 --> 00:15:21,360 Speaker 1: you have too much money for the capacity, then you 312 00:15:21,400 --> 00:15:22,960 Speaker 1: can't do it right. And so like these friends will 313 00:15:22,960 --> 00:15:25,720 Speaker 1: sometimes return money because they don't have enough capacity to 314 00:15:25,800 --> 00:15:28,360 Speaker 1: run the money that the investors will give them. But 315 00:15:28,400 --> 00:15:32,680 Speaker 1: if too little capacity, then you can still do the trades. 316 00:15:32,720 --> 00:15:35,440 Speaker 1: But you're paying a portfolio manager fifty million dollars a 317 00:15:35,480 --> 00:15:37,560 Speaker 1: year to do the trades, and you're only making forty 318 00:15:37,560 --> 00:15:39,120 Speaker 1: million dollars a year from the trades because you're not 319 00:15:39,120 --> 00:15:41,000 Speaker 1: putting enough money into them, right. So that's a lot 320 00:15:41,040 --> 00:15:43,520 Speaker 1: of what's happening here is like the going rate for 321 00:15:43,560 --> 00:15:46,480 Speaker 1: someone to sit in these seats and do these trades 322 00:15:46,560 --> 00:15:49,000 Speaker 1: is fifty million dollars or something, and if you're not 323 00:15:49,000 --> 00:15:51,240 Speaker 1: giving him enough capital, then he's only earning forty million 324 00:15:51,280 --> 00:15:53,680 Speaker 1: dollars and you're not earning a return for your investors. 325 00:15:53,840 --> 00:15:55,160 Speaker 1: I think that's a lot of what happened here. Like 326 00:15:55,160 --> 00:15:58,320 Speaker 1: they were earning returns running their strategies, but when you 327 00:15:58,360 --> 00:16:01,400 Speaker 1: took out the amount they were their portfolio managers, it 328 00:16:01,440 --> 00:16:02,600 Speaker 1: wasn't enough for the investors. 329 00:16:02,800 --> 00:16:06,280 Speaker 2: Yeah, it's a sad start sat right. Yeah. 330 00:16:07,400 --> 00:16:11,920 Speaker 1: The essential problem here is that hedgehund portfolio managers get 331 00:16:11,920 --> 00:16:14,360 Speaker 1: paid a lot, which is, you know, a nice problem 332 00:16:14,440 --> 00:16:16,280 Speaker 1: for them. Yeah, but it makes it hard to become 333 00:16:16,320 --> 00:16:18,400 Speaker 1: an employer of hedge on portfolio managers. 334 00:16:18,600 --> 00:16:22,080 Speaker 2: I like how you compared it to tech startups in 335 00:16:22,200 --> 00:16:24,880 Speaker 2: the newsletter that you wrote on this topic that you 336 00:16:24,960 --> 00:16:28,400 Speaker 2: think about tech startups. Employees come in and they you know, 337 00:16:28,480 --> 00:16:30,240 Speaker 2: are paid pennies, but they get a lot of stock 338 00:16:30,320 --> 00:16:34,000 Speaker 2: and investors are content to wait out for their big payday. 339 00:16:34,080 --> 00:16:37,560 Speaker 1: Yeah. Everyone has Like investors in a startup company have 340 00:16:38,080 --> 00:16:40,480 Speaker 1: a long term horizon where they're like, I know, I'm 341 00:16:40,520 --> 00:16:43,280 Speaker 1: not going to get any return on my capital in 342 00:16:43,400 --> 00:16:45,360 Speaker 1: the first year, but in ten years I'll get a lot. 343 00:16:45,440 --> 00:16:47,480 Speaker 1: I get a huge return on my capital, right, you know, 344 00:16:47,480 --> 00:16:49,920 Speaker 1: if things go well and employees are kind of taking 345 00:16:49,960 --> 00:16:53,440 Speaker 1: the same bargain at a multi strategy hedge fund, if 346 00:16:53,440 --> 00:16:56,120 Speaker 1: you're like competing for the audience that is giving money 347 00:16:56,160 --> 00:16:58,600 Speaker 1: to like Millennium and zero point seventy two and whatever, 348 00:17:00,200 --> 00:17:02,640 Speaker 1: people are not like, oh yeah in ten years, all 349 00:17:02,680 --> 00:17:04,639 Speaker 1: ten X my money. Great. Those people are like, I 350 00:17:04,720 --> 00:17:08,240 Speaker 1: want a very steady fifteen percent a year with no 351 00:17:08,400 --> 00:17:12,000 Speaker 1: correlation to the market and no drawdowns, right, Like, those 352 00:17:12,040 --> 00:17:15,600 Speaker 1: people are not the ideal investors in a startup that 353 00:17:15,720 --> 00:17:18,640 Speaker 1: is not currently earning its cost of capital. And similarly, 354 00:17:18,920 --> 00:17:21,760 Speaker 1: like the employees. I don't know, man, I'm sure there 355 00:17:21,800 --> 00:17:24,639 Speaker 1: are some, you know, portfolio managers at hedgehos who are like, 356 00:17:25,240 --> 00:17:27,639 Speaker 1: I'll work for nothing in exchange for huge equity, right, 357 00:17:27,680 --> 00:17:29,720 Speaker 1: I mean they are famous stories, right, like, yeah, Jeff 358 00:17:29,720 --> 00:17:33,359 Speaker 1: Bezos left E Shaw to Campbell on himself. But you 359 00:17:33,440 --> 00:17:35,359 Speaker 1: know a lot of them are like getting fifty million 360 00:17:35,359 --> 00:17:37,560 Speaker 1: dollars a year over here. I'd rather keep getting fifty 361 00:17:37,600 --> 00:17:38,320 Speaker 1: million dollars a year. 362 00:17:38,520 --> 00:17:40,960 Speaker 2: Yeah, I'm just I'm just doing the math, man, And 363 00:17:41,040 --> 00:17:42,160 Speaker 2: doesn't it doesn't work out? 364 00:17:42,560 --> 00:17:44,160 Speaker 1: Right? Should we move on to another Yeah? 365 00:17:44,160 --> 00:17:45,240 Speaker 2: We have a lot to cover Front of. 366 00:17:45,200 --> 00:17:47,200 Speaker 1: The show hedgehow manager had a disappointing. 367 00:17:46,720 --> 00:17:48,480 Speaker 2: Week in actual Front of the show. 368 00:17:50,400 --> 00:17:52,960 Speaker 1: Buzz once then came on the pod a few weeks 369 00:17:53,000 --> 00:17:55,560 Speaker 1: ago to talk about how he was bidding to buy 370 00:17:56,320 --> 00:17:58,760 Speaker 1: I don't know, five or ten percent of OBDC two, 371 00:17:58,840 --> 00:18:02,040 Speaker 1: the Blue Owl Private Credit Fund Audacious he got less 372 00:18:02,119 --> 00:18:04,760 Speaker 1: than one percent. I don't think he's that disappointed. I mean, 373 00:18:05,040 --> 00:18:07,560 Speaker 1: as I said on the podcast, it was not zero 374 00:18:07,680 --> 00:18:10,520 Speaker 1: percent trolling. Yeah, you got to he accomplished the trolling 375 00:18:10,560 --> 00:18:12,280 Speaker 1: whether or not he bought any shares. 376 00:18:12,520 --> 00:18:12,720 Speaker 2: Yeah. 377 00:18:12,840 --> 00:18:14,560 Speaker 1: Also, he said on the podcast, like, if he had 378 00:18:14,600 --> 00:18:18,679 Speaker 1: gotten filled, it would have been sort of scary for everyone, 379 00:18:18,760 --> 00:18:22,080 Speaker 1: including him. It would have been like, oh wow, people 380 00:18:22,119 --> 00:18:25,280 Speaker 1: are really panicking about these private credit funds. But the 381 00:18:25,359 --> 00:18:28,480 Speaker 1: fact that he didn't get that many shares suggest that, like, yeah, 382 00:18:28,480 --> 00:18:29,560 Speaker 1: everyone's fine, it's fine. 383 00:18:29,880 --> 00:18:33,520 Speaker 2: Yeah, it was an interesting experiment. He pulled it off, 384 00:18:33,760 --> 00:18:38,760 Speaker 2: and we got in interesting read on how folks are 385 00:18:38,800 --> 00:18:39,439 Speaker 2: actually feeling. 386 00:18:39,680 --> 00:18:42,280 Speaker 1: Yeah, it's very hard for me to know the psychology 387 00:18:42,680 --> 00:18:46,840 Speaker 1: of investors in private credit non traded BDCs, And I 388 00:18:46,960 --> 00:18:50,040 Speaker 1: want to emphasize that. I say that as an investor 389 00:18:50,160 --> 00:18:54,720 Speaker 1: in a non traded BDC I own, as we'll talk 390 00:18:54,720 --> 00:18:58,080 Speaker 1: about next week. I own a small amount of all 391 00:18:58,280 --> 00:19:02,160 Speaker 1: non traded bdct this one. But who are these people 392 00:19:02,960 --> 00:19:05,399 Speaker 1: like me? Some of them are people who are like, 393 00:19:06,320 --> 00:19:09,760 Speaker 1: these credits are bad. I want my money back, and 394 00:19:10,040 --> 00:19:12,400 Speaker 1: if the best I can do is bo As giving 395 00:19:12,440 --> 00:19:14,400 Speaker 1: me sixty five cents on the dollar, I'll take it. Right. 396 00:19:14,560 --> 00:19:16,680 Speaker 1: A few of those people, right, you got some take up. 397 00:19:17,400 --> 00:19:21,640 Speaker 1: A lot of them I think are like, I would 398 00:19:21,760 --> 00:19:25,560 Speaker 1: like to not be involved in this conversation. I would 399 00:19:25,680 --> 00:19:28,680 Speaker 1: like my money back at one hundred cents on the dollar, 400 00:19:28,760 --> 00:19:31,760 Speaker 1: which all these funds offer, but with caps on how 401 00:19:31,800 --> 00:19:33,879 Speaker 1: many withdraws you can and not how much they'll have 402 00:19:33,880 --> 00:19:37,640 Speaker 1: at each quarter. And they're like putting in their requests 403 00:19:37,760 --> 00:19:39,320 Speaker 1: to get back their money at one hundred cents on 404 00:19:39,320 --> 00:19:41,879 Speaker 1: the dollar. And if it's capped and they only get 405 00:19:42,000 --> 00:19:43,560 Speaker 1: a portion of their money back a one hundred cents 406 00:19:43,600 --> 00:19:45,920 Speaker 1: on the dollar, then they'll wait for next time. 407 00:19:46,400 --> 00:19:46,600 Speaker 2: Yeah. 408 00:19:46,680 --> 00:19:49,280 Speaker 1: What they won't do is sell to Boaz for sixty 409 00:19:49,320 --> 00:19:51,879 Speaker 1: five cents on the dollar, because the whole point of 410 00:19:51,920 --> 00:19:53,240 Speaker 1: this product is it doesn't go down. 411 00:19:53,440 --> 00:19:55,080 Speaker 2: Sixty five is less than one hundred. 412 00:19:55,280 --> 00:19:57,159 Speaker 1: Yeah. There are a lot of people who sell stocks 413 00:19:57,200 --> 00:19:59,359 Speaker 1: at below where they bought them because like stocks go 414 00:19:59,520 --> 00:20:01,840 Speaker 1: up and down, right, this is not supposed to go 415 00:20:01,960 --> 00:20:04,400 Speaker 1: up and down. Yeah, whatever the navy goes up and down, 416 00:20:04,480 --> 00:20:07,879 Speaker 1: put mostly up. And if the market price of this 417 00:20:08,040 --> 00:20:10,640 Speaker 1: thing is in some sense down thirty five percent from 418 00:20:10,680 --> 00:20:12,199 Speaker 1: it's that acid value, people are not going to sell 419 00:20:12,240 --> 00:20:14,520 Speaker 1: that market price. So that's a lot of what's happening 420 00:20:14,560 --> 00:20:17,760 Speaker 1: here is that these people kidding me are in these 421 00:20:17,920 --> 00:20:22,560 Speaker 1: products for like stability, and if the market has just located, 422 00:20:22,600 --> 00:20:24,640 Speaker 1: they're like, no, thank you, I don't want to play. 423 00:20:25,440 --> 00:20:28,480 Speaker 1: And then some people are like not checking their mailbox. 424 00:20:28,720 --> 00:20:31,840 Speaker 2: Right. Yeah, it feels like quite an exercise in trying 425 00:20:31,880 --> 00:20:33,720 Speaker 2: to herd cats without knowing. 426 00:20:33,840 --> 00:20:37,479 Speaker 1: I get him throw away all tender offer statements from 427 00:20:37,520 --> 00:20:37,920 Speaker 1: Blue Out. 428 00:20:38,240 --> 00:20:41,280 Speaker 2: Yeah, some of them might be interesting. Maybe you would 429 00:20:41,320 --> 00:20:41,800 Speaker 2: have liked to look. 430 00:20:41,800 --> 00:20:44,480 Speaker 1: At the time I open one, I'm like, it's relevant to. 431 00:20:44,520 --> 00:20:48,040 Speaker 2: My job, goodbye. Okay, So we don't know too much 432 00:20:48,040 --> 00:20:51,359 Speaker 2: about the psychology. If you can draw the conclusion here. 433 00:20:51,320 --> 00:20:53,480 Speaker 1: Though, that people like outright panic. 434 00:20:53,760 --> 00:20:56,960 Speaker 2: Yeah, they weren't so desperate to get out of this. 435 00:20:57,640 --> 00:20:59,680 Speaker 1: If he had bought like ten percent of the fund 436 00:20:59,760 --> 00:21:01,840 Speaker 1: it sixty five cents on the dollar, that would have 437 00:21:01,880 --> 00:21:04,600 Speaker 1: been a strong suggestion that it was worth considerably less 438 00:21:04,640 --> 00:21:06,240 Speaker 1: than sixty five cents on the dollar. Yes, and he 439 00:21:06,280 --> 00:21:09,560 Speaker 1: would be taking a bath. Yeah. But herly it's like, yeah, 440 00:21:09,600 --> 00:21:10,040 Speaker 1: that's interesting. 441 00:21:10,600 --> 00:21:13,200 Speaker 2: Well, I was to say in an interview with Bloomberg News. 442 00:21:13,600 --> 00:21:15,800 Speaker 2: To Blue Owl's credit, they went around to calm nerves. 443 00:21:16,240 --> 00:21:18,480 Speaker 2: We would have had more success if we offered for 444 00:21:18,560 --> 00:21:21,359 Speaker 2: their larger BDC, but we had the offer ready before 445 00:21:21,400 --> 00:21:23,680 Speaker 2: they offered to pay back investors, and we still wanted 446 00:21:23,680 --> 00:21:25,920 Speaker 2: to go through with it. Obviously, we hope to buy 447 00:21:25,960 --> 00:21:28,840 Speaker 2: more shares from them than we did. He's not out 448 00:21:28,840 --> 00:21:30,840 Speaker 2: of this game, right Yeah. 449 00:21:30,880 --> 00:21:33,000 Speaker 1: OBC two is a weird one because like they are 450 00:21:33,080 --> 00:21:34,800 Speaker 1: trying to wind it up at one hundred cents on 451 00:21:34,840 --> 00:21:37,320 Speaker 1: the dollar. So like one reason for him to tender 452 00:21:37,359 --> 00:21:39,840 Speaker 1: for it is it's a pretty short timeline to probably 453 00:21:39,880 --> 00:21:42,440 Speaker 1: get all of all of your money back, right the 454 00:21:42,520 --> 00:21:45,520 Speaker 1: other Blue Owl and also other firms like have a 455 00:21:45,600 --> 00:21:48,960 Speaker 1: lot of private, non traded BDCs where people have asked 456 00:21:48,960 --> 00:21:50,720 Speaker 1: for more than five percent of their money back, they've 457 00:21:50,760 --> 00:21:53,880 Speaker 1: been capped at five percent. There's a line to get out. 458 00:21:54,440 --> 00:21:58,760 Speaker 1: And how long that problem will persist, nobody quite knows. 459 00:21:59,240 --> 00:22:01,000 Speaker 1: And so he's going to tender for some other ones 460 00:22:01,000 --> 00:22:03,760 Speaker 1: where maybe the timeline is a little bit more uncertain, 461 00:22:03,920 --> 00:22:06,000 Speaker 1: maybe people will be more interested. I think he's going 462 00:22:06,040 --> 00:22:08,280 Speaker 1: to tender for the one I own, and then that'd. 463 00:22:08,119 --> 00:22:11,080 Speaker 2: Be so fun you have to sell to him. I 464 00:22:11,160 --> 00:22:14,679 Speaker 2: think it would be really good for the podcast. Make 465 00:22:14,760 --> 00:22:17,920 Speaker 2: a good ye think of the content, Matt think of 466 00:22:18,000 --> 00:22:34,360 Speaker 2: the content. If you want to talk about Avis suggests 467 00:22:34,400 --> 00:22:34,919 Speaker 2: we do it now. 468 00:22:34,960 --> 00:22:35,679 Speaker 1: That's interesting thing. 469 00:22:35,920 --> 00:22:38,320 Speaker 2: That's what we saved it for last A short squeeze, 470 00:22:38,680 --> 00:22:39,240 Speaker 2: Yeah they did. 471 00:22:40,359 --> 00:22:41,960 Speaker 1: That's been going for like a month and like it 472 00:22:42,040 --> 00:22:44,199 Speaker 1: peaked last week. This stock had gone from like one 473 00:22:44,280 --> 00:22:46,960 Speaker 1: hundred dollars like a few weeks ago to seven closed 474 00:22:46,960 --> 00:22:50,479 Speaker 1: over seven hundred dollars one day last week and then 475 00:22:50,560 --> 00:22:53,280 Speaker 1: it deflated and it's back down until the one hundredths. 476 00:22:53,760 --> 00:22:57,440 Speaker 1: And this week the company had an earnings call, which 477 00:22:58,440 --> 00:23:01,080 Speaker 1: earnings always somewhat irrelevant to the situations, and stock was 478 00:23:01,080 --> 00:23:02,560 Speaker 1: down a little. Their earnings are little disappointment. 479 00:23:02,560 --> 00:23:04,680 Speaker 2: It doesn't mean yeah, but at least the executives have 480 00:23:04,800 --> 00:23:07,159 Speaker 2: to talk about what's going on going on, and what was. 481 00:23:07,200 --> 00:23:09,440 Speaker 1: Going on was crazy, which is that the night before 482 00:23:09,520 --> 00:23:12,399 Speaker 1: the earnings announcement, so their short scureaze was like they 483 00:23:12,440 --> 00:23:16,160 Speaker 1: had two hedgehuns that owned between actual stock positions and derotos, 484 00:23:16,160 --> 00:23:17,760 Speaker 1: they owned more than one hundred percent of the stock. 485 00:23:18,000 --> 00:23:19,600 Speaker 1: So a lot of people were short, and these two 486 00:23:19,640 --> 00:23:22,080 Speaker 1: hedge funds, SRS and Pentwater were long more than one 487 00:23:22,119 --> 00:23:24,639 Speaker 1: hundred percent of the stock. Put those things together, it 488 00:23:24,680 --> 00:23:26,320 Speaker 1: just seems like there's gonna be a short squeeze, and 489 00:23:26,359 --> 00:23:28,640 Speaker 1: there seems to have been a short squaze. Those two 490 00:23:28,720 --> 00:23:31,119 Speaker 1: Edgems SRS. Is kind of like the company, like they 491 00:23:31,160 --> 00:23:33,119 Speaker 1: have a board seat, like they've been long term holders. 492 00:23:33,119 --> 00:23:34,399 Speaker 1: They're associated with. 493 00:23:34,400 --> 00:23:35,040 Speaker 2: The company, right. 494 00:23:35,119 --> 00:23:36,880 Speaker 1: They have a lockup agreement. They have an agreement where 495 00:23:36,880 --> 00:23:39,720 Speaker 1: they're like bound by the company's black eyed parents. Pentwater 496 00:23:39,840 --> 00:23:41,240 Speaker 1: is just like a hedge fund. There's bought some stock 497 00:23:41,240 --> 00:23:44,240 Speaker 1: as an investment and they got to like fifty percent 498 00:23:44,280 --> 00:23:47,040 Speaker 1: of the stock with including Derovotos, and they sold a 499 00:23:47,119 --> 00:23:49,400 Speaker 1: big chunk of stock at the peak of the short 500 00:23:49,440 --> 00:23:52,040 Speaker 1: squaze last week for something like one point seventy five 501 00:23:52,040 --> 00:23:58,399 Speaker 1: billion dollars of total proceeds and profits of possibly a billion, 502 00:23:58,880 --> 00:24:03,080 Speaker 1: huge profits. And when the short squeeze was happening, I 503 00:24:03,160 --> 00:24:05,919 Speaker 1: remember people emailing me to be like, what is Petwater 504 00:24:06,040 --> 00:24:08,440 Speaker 1: going to do about this? Because they're subject to short 505 00:24:08,480 --> 00:24:11,399 Speaker 1: swing profit rules. They own more than ten percent of 506 00:24:11,480 --> 00:24:15,400 Speaker 1: the stock, and therefore, if they sell their stock within 507 00:24:15,600 --> 00:24:17,919 Speaker 1: six months of buying it, which like they double their 508 00:24:17,920 --> 00:24:20,800 Speaker 1: stake in like February March, if they sell their stock 509 00:24:20,840 --> 00:24:22,600 Speaker 1: within six months of buying it, they have to pay 510 00:24:22,680 --> 00:24:25,040 Speaker 1: back all of the profits to the company, which is 511 00:24:25,080 --> 00:24:28,200 Speaker 1: just the weird rule of section sixteen of the US 512 00:24:28,320 --> 00:24:31,959 Speaker 1: securities laws, and so like, they can't really profit from 513 00:24:32,000 --> 00:24:34,960 Speaker 1: the short squeeze. That's what I thought, and whatever run 514 00:24:35,000 --> 00:24:38,280 Speaker 1: for that was naive. That was a little naive. So 515 00:24:38,320 --> 00:24:43,280 Speaker 1: they announced that they've sold millions of shares, and those 516 00:24:43,359 --> 00:24:46,720 Speaker 1: shares fall into two buckets. One bucket, they're like, yes, 517 00:24:47,440 --> 00:24:49,760 Speaker 1: we are subject to short swing profit rules. We bought 518 00:24:49,800 --> 00:24:51,680 Speaker 1: these shares and then we sold them within six months, 519 00:24:52,000 --> 00:24:53,479 Speaker 1: so we have to give up all of our profits 520 00:24:53,520 --> 00:24:55,600 Speaker 1: to the company. So we called the company and we're like, 521 00:24:55,680 --> 00:24:59,840 Speaker 1: here's your check. Here you go. The other bucket, they're like, no, no, 522 00:25:00,320 --> 00:25:04,359 Speaker 1: the funds like Pentwater is, you know, it manages different funds, 523 00:25:04,440 --> 00:25:08,359 Speaker 1: like theater funds, SMAs, like all sorts of like accounts, right, 524 00:25:08,680 --> 00:25:10,600 Speaker 1: and it buys stock for all the different accounts, and 525 00:25:10,600 --> 00:25:13,280 Speaker 1: the accounts are separate. And they're saying, well, you know, 526 00:25:13,600 --> 00:25:15,600 Speaker 1: most of the shares that we sold in the last 527 00:25:16,000 --> 00:25:19,359 Speaker 1: you know, last week were not sold by funds or 528 00:25:19,440 --> 00:25:22,480 Speaker 1: accounts that bought within the last six months, So there's 529 00:25:22,600 --> 00:25:28,720 Speaker 1: no Section sixteen short swing profits for that. The first bucket, 530 00:25:28,720 --> 00:25:30,200 Speaker 1: the one where they're giving up the profits is like 531 00:25:30,280 --> 00:25:32,560 Speaker 1: ninety four thousand shares, and the second buckets like millions 532 00:25:32,560 --> 00:25:35,080 Speaker 1: of shares. So they're like, we're almost all but we're 533 00:25:35,119 --> 00:25:37,440 Speaker 1: giving the company a tip, you know, you know, fifty 534 00:25:37,480 --> 00:25:40,280 Speaker 1: million bucks or whatever, maybe lass And so that's wild 535 00:25:40,520 --> 00:25:43,520 Speaker 1: on a number of levels. One, it's like, oh, you 536 00:25:43,600 --> 00:25:45,600 Speaker 1: can just get around short swing profit rolls that way. 537 00:25:45,720 --> 00:25:48,159 Speaker 1: Two like how did that happen? Like how did some 538 00:25:48,400 --> 00:25:51,040 Speaker 1: funds that they managed by the shares and other funds 539 00:25:51,200 --> 00:25:54,440 Speaker 1: sold the shares. It seems a little bit mysterious. Presumably 540 00:25:54,480 --> 00:25:56,360 Speaker 1: the funds that sold the shares were funds that had 541 00:25:56,440 --> 00:26:02,239 Speaker 1: owned them for a long time. Maybe not, Maybe they 542 00:26:02,240 --> 00:26:03,639 Speaker 1: were short selling. I don't know. 543 00:26:04,880 --> 00:26:06,680 Speaker 2: Will anyone go and try to figure that out? 544 00:26:06,680 --> 00:26:07,720 Speaker 1: O the company? Will? 545 00:26:07,920 --> 00:26:08,240 Speaker 2: Avis? 546 00:26:08,320 --> 00:26:10,639 Speaker 1: Will? Yeah? Because Avis, they said on their earnings call, 547 00:26:10,680 --> 00:26:12,320 Speaker 1: you know, we got a call from Penwater saying like 548 00:26:12,480 --> 00:26:15,480 Speaker 1: here's your you know, check for a little bit of money. 549 00:26:15,560 --> 00:26:18,000 Speaker 1: And they're like, we're gonna look into anything we can 550 00:26:18,040 --> 00:26:20,320 Speaker 1: do to recover for the shelters, because obviously they'd rather 551 00:26:20,400 --> 00:26:23,000 Speaker 1: have a billion dollars than you know, a few million dollars. 552 00:26:23,200 --> 00:26:24,840 Speaker 2: That number is bigger than the other one. 553 00:26:25,680 --> 00:26:27,960 Speaker 1: This is just like a weird exogenous event that happened 554 00:26:28,000 --> 00:26:30,960 Speaker 1: to Davis, and they're like probably a little bit unsettled 555 00:26:30,960 --> 00:26:33,040 Speaker 1: by it. And if they could have a billion dollars, 556 00:26:33,080 --> 00:26:34,680 Speaker 1: they'd that would make it better. 557 00:26:35,320 --> 00:26:37,040 Speaker 2: They have a little bit of money though, Yeah, they 558 00:26:37,080 --> 00:26:37,520 Speaker 2: have some money. 559 00:26:37,720 --> 00:26:39,639 Speaker 1: Yeah right, I read it's like a nice windfall for them. 560 00:26:39,720 --> 00:26:41,159 Speaker 1: If you'd asked me last week, and I feel like 561 00:26:41,240 --> 00:26:43,280 Speaker 1: maybe you did. I feel like we talked about this, 562 00:26:43,400 --> 00:26:47,200 Speaker 1: Like it's very hard for anyone to do anything about 563 00:26:47,400 --> 00:26:50,800 Speaker 1: the short screenze. Right, Like Penwater, I had thought, can't 564 00:26:50,840 --> 00:26:53,199 Speaker 1: sell because of Section sixteen year olds, and the company 565 00:26:53,240 --> 00:26:56,760 Speaker 1: can't sell because one they were in an earnings blackout right, 566 00:26:56,800 --> 00:26:58,600 Speaker 1: they really startings this week, so they can't like go 567 00:26:58,680 --> 00:27:01,879 Speaker 1: around selling stock the week before they release harntings. And 568 00:27:02,040 --> 00:27:05,080 Speaker 1: two if you announce a sale, you might pop the 569 00:27:05,119 --> 00:27:08,719 Speaker 1: bubble and then you won't actually sell it the high prices. 570 00:27:09,119 --> 00:27:12,880 Speaker 1: But like somehow Pintwater founder around it, where both Pentwater 571 00:27:12,920 --> 00:27:14,520 Speaker 1: got a lot of money and also the company got 572 00:27:14,520 --> 00:27:16,160 Speaker 1: a little bit of money without actually selling. 573 00:27:15,920 --> 00:27:17,960 Speaker 2: Any stock, so they found a way around it. 574 00:27:18,000 --> 00:27:20,760 Speaker 1: But TBD, well, I certainly sold stock. Who gets that 575 00:27:20,920 --> 00:27:25,680 Speaker 1: money between Pantwater and Avis is an interesting question Penwater 576 00:27:25,720 --> 00:27:28,080 Speaker 1: will be bummed if they lose all of the money. 577 00:27:29,000 --> 00:27:31,600 Speaker 1: But my impressure is they a pretty argument that they're 578 00:27:31,640 --> 00:27:33,919 Speaker 1: fine and they get to keep the money they think 579 00:27:33,920 --> 00:27:35,960 Speaker 1: they can keep. I also think there's some possibility of 580 00:27:36,040 --> 00:27:39,760 Speaker 1: just like Pentwater and Eavis beying, like, we'll give you 581 00:27:39,800 --> 00:27:41,680 Speaker 1: a little bit more than that ninety four thousand shares 582 00:27:41,680 --> 00:27:44,320 Speaker 1: and we'll call it a day. No, no, because ninety 583 00:27:44,359 --> 00:27:47,119 Speaker 1: four thousand shares. Yeah, Like the profits on these shares 584 00:27:47,240 --> 00:27:49,600 Speaker 1: sales are at least at least one hundred dollars and 585 00:27:49,640 --> 00:27:51,359 Speaker 1: as much as like six hundred dollars a share, so 586 00:27:51,920 --> 00:27:53,960 Speaker 1: you know, like it's it's millions and tens of millions 587 00:27:53,960 --> 00:27:55,480 Speaker 1: of dollars, but it's not billion dollars. 588 00:27:56,240 --> 00:27:58,640 Speaker 2: So if they had increased her safe by slightly less, 589 00:27:59,080 --> 00:28:00,840 Speaker 2: could they have just like if they had stayed at 590 00:28:00,840 --> 00:28:03,640 Speaker 2: the nine percent that they were on December thirty first, 591 00:28:03,720 --> 00:28:06,120 Speaker 2: twenty twenty five, would they. 592 00:28:06,040 --> 00:28:09,280 Speaker 1: Have a relevant number? Well, it's a fifty percent, it's 593 00:28:09,320 --> 00:28:11,080 Speaker 1: not like a little bit less. They got to fifty percent, 594 00:28:11,119 --> 00:28:13,439 Speaker 1: which would cause the short squeeze. They went from nine 595 00:28:13,480 --> 00:28:16,840 Speaker 1: percent to fifty percent. People like, oh wow, between them 596 00:28:17,000 --> 00:28:18,800 Speaker 1: Srs and Penal on more than one hundred percent of 597 00:28:18,800 --> 00:28:20,520 Speaker 1: the stock. That's going to cause a short scraze. It 598 00:28:20,600 --> 00:28:22,400 Speaker 1: causes a short squeze. The stock goes to seven hundred 599 00:28:22,400 --> 00:28:24,240 Speaker 1: and they sell right, going from nine to nine and 600 00:28:24,280 --> 00:28:24,720 Speaker 1: a half percent. 601 00:28:24,760 --> 00:28:27,080 Speaker 2: I wouldn't have done that, Yeah, But I'm just wondering 602 00:28:27,160 --> 00:28:30,040 Speaker 2: would they have then been under the threshold where they 603 00:28:30,119 --> 00:28:33,040 Speaker 2: could short sell without penalty or sell without penalty? 604 00:28:33,240 --> 00:28:34,000 Speaker 1: Sure, but who cares? 605 00:28:34,280 --> 00:28:36,679 Speaker 2: I care a little bit. You're saying the short sqeeze 606 00:28:36,680 --> 00:28:37,400 Speaker 2: would have never happen. 607 00:28:37,720 --> 00:28:40,680 Speaker 1: Selling at seven hundred dollars and then dealing with lawyers 608 00:28:40,680 --> 00:28:43,200 Speaker 1: afterwards is much much, much, much better than selling it 609 00:28:43,240 --> 00:28:43,960 Speaker 1: one hundred dollars. 610 00:28:44,240 --> 00:28:47,720 Speaker 2: Yeah. I guess that's assuming that that is what caused 611 00:28:47,760 --> 00:28:51,280 Speaker 2: the short squeeze, because there are stories like, you know, 612 00:28:51,360 --> 00:28:51,880 Speaker 2: the short. 613 00:28:51,720 --> 00:28:53,680 Speaker 1: Squeeze was definitely like two hedge funds on one hundred 614 00:28:53,680 --> 00:28:56,880 Speaker 1: and eight percent of the company. Yeah, these are things 615 00:28:56,920 --> 00:29:00,640 Speaker 1: that happened due to like attention and the best psychology 616 00:29:00,680 --> 00:29:02,600 Speaker 1: and things like that, and you know, it happens because 617 00:29:02,640 --> 00:29:06,120 Speaker 1: like they bought so much of the company. Yeah, anyway, 618 00:29:06,160 --> 00:29:06,840 Speaker 1: it's a great trade. 619 00:29:07,040 --> 00:29:07,280 Speaker 2: It is. 620 00:29:07,480 --> 00:29:10,960 Speaker 1: It's like it's baffling that I don't understand how they 621 00:29:11,000 --> 00:29:13,360 Speaker 1: could have bought so much stock in one place and 622 00:29:13,520 --> 00:29:15,920 Speaker 1: sold so much stock in another place, Like it's something 623 00:29:16,000 --> 00:29:17,960 Speaker 1: as weird but great trade. 624 00:29:18,200 --> 00:29:20,520 Speaker 2: I wish I had tuned into that earnings call because 625 00:29:20,520 --> 00:29:22,680 Speaker 2: we talk about body language all the time. I would 626 00:29:22,680 --> 00:29:23,040 Speaker 2: have loved to. 627 00:29:23,160 --> 00:29:25,360 Speaker 1: Yes, I know, I've read the transfer to letters. Just 628 00:29:25,480 --> 00:29:26,960 Speaker 1: you definitely like can imagine them like. 629 00:29:27,000 --> 00:29:31,520 Speaker 2: Tugging on their collar and dabbing at their brow. Good stuff. 630 00:29:38,480 --> 00:29:40,040 Speaker 1: And that was the Money Stuff Podcast. 631 00:29:40,360 --> 00:29:42,440 Speaker 2: I'm Matt Levine and I'm Katie Greifeld. 632 00:29:42,600 --> 00:29:44,760 Speaker 1: You can find my work by subscribing to the Money 633 00:29:44,760 --> 00:29:46,680 Speaker 1: Stuff newsletter on Bloomberg dot. 634 00:29:46,600 --> 00:29:49,280 Speaker 2: Com, and you can find me on Bloomberg TV every 635 00:29:49,360 --> 00:29:52,480 Speaker 2: day on the Clothes between three and five pm Eastern. 636 00:29:53,240 --> 00:29:55,239 Speaker 1: We'd love to hear from you. You can send an 637 00:29:55,280 --> 00:29:58,479 Speaker 1: email to money Pod at Bloomberg dot net, ask us 638 00:29:58,560 --> 00:30:00,480 Speaker 1: a question and we might answer it on the air. 639 00:30:00,880 --> 00:30:03,440 Speaker 2: You can also subscribe to our show wherever you're listening 640 00:30:03,520 --> 00:30:05,360 Speaker 2: right now and leave us a review. It helps more 641 00:30:05,400 --> 00:30:06,200 Speaker 2: people find the show. 642 00:30:07,200 --> 00:30:11,000 Speaker 1: The Money Stuff Podcast is produced by Anam Azarakus Moses 643 00:30:11,040 --> 00:30:13,680 Speaker 1: Onam and Alexis HoTT Our. 644 00:30:13,760 --> 00:30:16,160 Speaker 2: Theme music was composed by Blake Maples. 645 00:30:16,560 --> 00:30:19,960 Speaker 1: Amy keen Is our executive producer. Thanks for listening to 646 00:30:20,000 --> 00:30:22,440 Speaker 1: the Money Stuff podcast. We'll be back next week with 647 00:30:22,600 --> 00:30:23,200 Speaker 1: the More Stuff