WEBVTT - Bag of Snakes

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>I'm trying to buy a house.

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<v Speaker 1>Yeah, it's the nesting instinct.

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<v Speaker 2>Things in Hoboken, New Jersey. They just get wet because

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<v Speaker 2>the city is below sea level. I'm exaggerating, but only slightly.

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<v Speaker 2>And you know, mold is a problem, and remediation of

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<v Speaker 2>mold is a problem, and it's like, what are we

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<v Speaker 2>going to do? I don't know, meate that mold, I know,

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<v Speaker 2>and that's gonna cost money. And this whole thing, it's

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<v Speaker 2>gonna cost money in time. Why does anyone own a house?

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<v Speaker 1>I asked myself that question every day. Yeah, but I

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<v Speaker 1>want to on an apartment, but I don't own a house.

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<v Speaker 1>Every mediate mold check for raid On.

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<v Speaker 2>Yeah, we checked for Raidon too. There's no freight on

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<v Speaker 2>oh Neat Yeah. Yeah, that's cool.

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<v Speaker 1>The whole thing.

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<v Speaker 2>This is a place that we live in for like

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<v Speaker 2>five to seven years. Okay, in five to seven years,

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<v Speaker 2>I'm going to try to sell this bag of snakes. Yeah,

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<v Speaker 2>same way it was sold to Mate. But at least,

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<v Speaker 2>you know, I'm with my good friend Matt Levine and

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<v Speaker 2>there's microphones in front of us.

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<v Speaker 1>Yeah, I have no bags of snakes to sell you. Hello,

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<v Speaker 1>and welcome to the money Stuff Podcast. Youreicly podcast. Are

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<v Speaker 1>we talking about stuff without it? To Bunny the money?

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<v Speaker 2>Funny funny Bunny stuff.

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<v Speaker 1>Funny money, money stuff. And I write the Matt Levine column.

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<v Speaker 2>This is very silly. I'm I'm just Katie Greifeld. I'm

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<v Speaker 2>a reporter for Bloomberg News and an anchor for Bloomberg Television.

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<v Speaker 1>To the snakes. Ye Bill Ackman, founder of Pershing Square,

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<v Speaker 1>the lads fund management firm closed un fund management firm,

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<v Speaker 1>also has been talking for like two years about taking

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<v Speaker 1>a big new closed end fund public. It's called the

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<v Speaker 1>Pershing Square USA or ps US, and I feel like

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<v Speaker 1>this time too years ago, it was going to be

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<v Speaker 1>a twenty five billion dollar clothes und fund, and it

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<v Speaker 1>was going to trade it a premium, unlike most other

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<v Speaker 1>clothes und funds, including notably like Ben's other clothes then

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<v Speaker 1>fund for sure, And you really had to trade it

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<v Speaker 1>a premion to like get a twenty five billion dollar

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<v Speaker 1>IPO done, You really have to think that the thing

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<v Speaker 1>will trade up. No one did, so that IPO didn't happen,

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<v Speaker 1>And he came back last month with like, what we're

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<v Speaker 1>going to do is We're going to give you free

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<v Speaker 1>shares of the management company person to square, the Hedgelinde

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<v Speaker 1>management firm, and with those free shares, that'll be enough

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<v Speaker 1>incentive for you to buy the clothes Unfund shares and

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<v Speaker 1>then the whole thing will work. And it worked. Yeah,

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<v Speaker 1>they went public dual ipo both ps the Hedgeho management

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<v Speaker 1>company and PSUs the clothes Und Fund. They went public

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<v Speaker 1>this week. They started trading Wednesday. They raised five billion

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<v Speaker 1>dollars for the clothes Und Fund, which you can now

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<v Speaker 1>put to work investing in large cap public companies and

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<v Speaker 1>uber credit.

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<v Speaker 2>Hues Hi. I have a few questions. I guess I

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<v Speaker 2>just keep coming back to the point. I mean, you

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<v Speaker 2>think about before we get to.

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<v Speaker 1>Too many questions. Yeah, yeah, talking about So they did

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<v Speaker 1>go public PSUs so two o'clock on Thursday.

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<v Speaker 2>Yeah.

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<v Speaker 1>PSUs was trading at like forty three point fifty last

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<v Speaker 1>night checked.

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<v Speaker 2>So sounds right.

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<v Speaker 1>Not a prem to net ascid value, no meaningful discount

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<v Speaker 1>to net asset money.

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<v Speaker 2>It did close a bigger discount on once.

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<v Speaker 1>Yeah, it's up a bit today. Yeah, it closed down

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<v Speaker 1>like sort of twenty percent. Yeah, from that asset It

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<v Speaker 1>closed forty two ish and now it's at forty three

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<v Speaker 1>and change. So you know, yeah, well below that ass

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<v Speaker 1>that value.

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<v Speaker 2>I mean, it just seems extremely hard to defy the

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<v Speaker 2>physics of closed un funds.

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<v Speaker 1>Sure, I agree, I should stress that spent years being

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<v Speaker 1>like you know, in twenty twenty four, he wrote in

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<v Speaker 1>a letter, it requires a significant leap of faith and

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<v Speaker 1>ultimately careful analysis and judgment for investors to recognize that

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<v Speaker 1>this closed end company will trade at a prim master

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<v Speaker 1>the IPI, when very few in history have done so. Yeah,

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<v Speaker 1>careful analysis, not careful enough. So yeah, so that traded down.

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<v Speaker 1>You know, the management company is trading it like twenty

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<v Speaker 1>nine bucks a share, thirty bucks a share, which if

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<v Speaker 1>you bought in the IPO, you got one share of

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<v Speaker 1>piece of PSUs and one fifth of a share of

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<v Speaker 1>Pershing Square. Right, so if you do the math, you

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<v Speaker 1>got about like forty three bucks worth of the clothes

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<v Speaker 1>on fund and about six bucks worth of the management company.

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<v Speaker 1>So you lost a little bit of money as of

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<v Speaker 1>now on the IPI. Yeah, it's down from the IPI price,

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<v Speaker 1>but it's not catastrophically done. Yeah up, No, normally IPOs.

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<v Speaker 2>Go up normally, I mean ideally, Yeah, to the closed

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<v Speaker 2>end funds. He did say yesterday that there are hundreds

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<v Speaker 2>of close und funds, but they are very different animals

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<v Speaker 2>from what we are doing over time. We're going to

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<v Speaker 2>compound the book value if we do anything like we've

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<v Speaker 2>done in the past, at a high rate over time,

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<v Speaker 2>and we're going to run it like a real company.

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<v Speaker 2>I guess I just struggle to understand how this animal

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<v Speaker 2>looks different than the other animals that are out there

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<v Speaker 2>when it comes to close un funds. His eyes, Yeah, true, true.

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<v Speaker 1>His twitter, Yeah right, everyone who runs a clothes un

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<v Speaker 1>fund would like to compound it. Yeah, at a high rate.

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<v Speaker 2>I'm sure that's what he would have wanted to do

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<v Speaker 2>in Europe as well, where his clothing fund is trading

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<v Speaker 2>at a discount.

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<v Speaker 1>And compose at a high rate. But yeah, like the

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<v Speaker 1>actual investing tracker, it is good.

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<v Speaker 2>Yeah, Yeah, it just feels it feels yeah, it feels

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<v Speaker 2>disconnected from the trading dynamics of the actual structure. The

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<v Speaker 2>structure is interesting in that I really want him to

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<v Speaker 2>launch an ETF. I know he's not going to launch

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<v Speaker 2>an UTF the discount problem would be solved, but it

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<v Speaker 2>feels like that's a detail for him since he wants

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<v Speaker 2>the permanent capital.

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<v Speaker 1>It's not just that, like, yeah, like he wants it

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<v Speaker 1>to be a company, like he wants it to be

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<v Speaker 1>Berkshire halfway. Well, like if you can just be redeemed

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<v Speaker 1>at any moment, and like you're dealing with Jane Street arbitrage,

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<v Speaker 1>Like it's not the same thing. Yeah, he wants to

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<v Speaker 1>have a permanent company with permanent capital where you can

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<v Speaker 1>make permanent investments.

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<v Speaker 2>It's the Warren Buffett comparison that I also have a

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<v Speaker 2>lot of questions about, because how does the Howard Hughes

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<v Speaker 2>of it all fold into this?

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<v Speaker 1>I've never understood that. Yes, Howard Hughes is a real company,

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<v Speaker 1>but he owns a big stake in it's the offered

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<v Speaker 1>to acquire more of it, would like to control it

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<v Speaker 1>and use it as a platform to make investments. And

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<v Speaker 1>then severally there's a closing fund.

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<v Speaker 2>I don't know, So, yeah, how do those two co exist?

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<v Speaker 2>Are you going to compete with yourself? I mean probably not,

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<v Speaker 2>but it seems like you're trying to do the same

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<v Speaker 2>thing through two different Yeah.

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<v Speaker 1>I'm sure he has a plan, but I don't know

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<v Speaker 1>that it's that super well explained.

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<v Speaker 2>Yeah, Like why would I buy shares of Howard Hughes

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<v Speaker 2>and support your vision there. If you're also doing it

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<v Speaker 2>in the closed up fund.

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<v Speaker 1>It's probably a different vision, slightly different vision.

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<v Speaker 2>I want to know what it is.

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<v Speaker 1>Yeah, I don't care. I'm going to say attitude, the

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<v Speaker 1>grandiosity with which started and the sort of fizzle with

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<v Speaker 1>which is sort of when public is a little disappointing,

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<v Speaker 1>Like this is gonna be a twenty five billion dollar

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<v Speaker 1>clothes in fund, the trades at a premium. Now it's

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<v Speaker 1>a five billion dollar clothes in fund. The trades at

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<v Speaker 1>are discounts. Like, okay, thing is the normal thing happened?

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<v Speaker 1>Someone got really mad about this. This IPO sort of

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<v Speaker 1>took place in two phases. He rounded up a bunch

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<v Speaker 1>of anchor investors, institutions and family offices in highlight while

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<v Speaker 1>worth individuals who invested, who like committed their capital before

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<v Speaker 1>the IPO. They sorted like an anchor to like do

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<v Speaker 1>the IPI. They're like, we've already got like two point

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<v Speaker 1>eight million dollars of capital spoken for, so the thing,

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<v Speaker 1>will you know, have enough money? Those people got a

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<v Speaker 1>little bit extra in the IPO instead of getting one

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<v Speaker 1>fifth of a share of Pershing square for every share

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<v Speaker 1>of pieces they got, they got three tenths of a share,

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<v Speaker 1>so they got an extra like fifty percent of the

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<v Speaker 1>management company. And someone emailed me like a weeko being like,

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<v Speaker 1>it's so unfair that like the favored fat cats get

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<v Speaker 1>more than like the regular investors are buying the IPO.

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<v Speaker 1>Was like, look, like it's always true that. Yeah, venture

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<v Speaker 1>capitalists who invest in the last round before an IPO

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<v Speaker 1>get you know, a better deal than people invest in

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<v Speaker 1>the IPO. That's not that weird, but it is kind

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<v Speaker 1>of there. You're paying these people to anchor the deal

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<v Speaker 1>and make sure it happens. But it is the case

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<v Speaker 1>that like, as of like the prices right now, that

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<v Speaker 1>people who invested before the IPO have made a little

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<v Speaker 1>bit of a profit on the deal. People invested in

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<v Speaker 1>the IPO have lost a little bit of money in

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<v Speaker 1>the deal. It's a little awkward. Yeah, word that, Like

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<v Speaker 1>that's the dividing one, Like you split that perfectly where

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<v Speaker 1>the favorite investors did well and the disabored investors did poorly.

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<v Speaker 2>Yeah, I do wonder we've talked about this before. I

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<v Speaker 2>also wonder when it comes to the management company, like

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<v Speaker 2>what is the motivation to go public. There's so few

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<v Speaker 2>publicly listed hedge funds. Man Group is the one that

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<v Speaker 2>springs to mind for me. I just wonder.

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<v Speaker 1>Why, Well, I feel like the number one reason is

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<v Speaker 1>to get this close un fund one. Yeah right, Like

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<v Speaker 1>as I've written a lot, like you just can't get

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<v Speaker 1>the clothes on fund because it's well feasible.

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<v Speaker 2>But if you soon got to twenty twenty fours, like

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<v Speaker 2>they weren't connected, they were going to be to separate.

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<v Speaker 2>I know, but I feel like you're outside.

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<v Speaker 1>They were talking about doing an IPO. Yeah, yeah, no,

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<v Speaker 1>I mean I think it's the same reason anyone takes

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<v Speaker 1>any you know, financial services company public, which is if

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<v Speaker 1>you think that the public market would pay a high

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<v Speaker 1>value for your ownership and your company, Like yeah, why

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<v Speaker 1>do I take some cash up? Like you know, it's

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<v Speaker 1>like he's sort of not the main chief investment officer

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<v Speaker 1>of the company anymore. Like there's you know, there's like

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<v Speaker 1>a next generation coming up. It makes sense for him

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<v Speaker 1>to have a publicly list that's duck. So I don't know,

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<v Speaker 1>for all I know they're going to do I'm and

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<v Speaker 1>a you know, for all I know, the publicly list

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<v Speaker 1>that's luck will be a currency beyond just the getting

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<v Speaker 1>the closed end fund launched. It's also like they have

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<v Speaker 1>sort of an interesting structure where like everyone's calls him

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<v Speaker 1>a hedge fund manager, it's like sort of a hedge

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<v Speaker 1>fund firm, but it's like a closed and fund management firm.

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<v Speaker 1>I think they would argue they have more stable, recurring

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<v Speaker 1>revenue then a lot of hedge fund firms. They're not

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<v Speaker 1>making most of their money on totally at risk performance fees,

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<v Speaker 1>like they're The way it works is like the they

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<v Speaker 1>get like a senior share and the performance fees goes

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<v Speaker 1>to the shareholders, and then like the junior share goes

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<v Speaker 1>to the employees, and so they are a little bit

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<v Speaker 1>more of a like recurring revenue play. And so I

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<v Speaker 1>think they think that's something that shareholders value and they

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<v Speaker 1>can monetize.

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<v Speaker 2>Yeah, I guess maybe another way to ask that question

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<v Speaker 2>is why aren't there more public lists and hedge funds.

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<v Speaker 1>So a couple of answers. One is like, because a

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<v Speaker 1>lot of hedge funds have bad income, like they're very

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<v Speaker 1>volatile income, and so it is hard to sell that

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<v Speaker 1>to the public. Approaching Square thinks that has built a

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<v Speaker 1>better mouse trap where it has less volatile income, and

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<v Speaker 1>so you know, because it runs like locked up you

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<v Speaker 1>know in the Eastern capital with like very stable fees

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<v Speaker 1>and you know, invest in large cap aquity, it's like

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<v Speaker 1>a you know, it's a it's a fairly stable revenue stream.

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<v Speaker 1>That's one part of the answer. If you run a

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<v Speaker 1>medium sized hedge fund and you like very volatile earnings,

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<v Speaker 1>then it's harder to take that public. My theory is

0:11:03.880 --> 0:11:06.800
<v Speaker 1>that the giant hedge fund firms don't go public because

0:11:06.840 --> 0:11:10.480
<v Speaker 1>their hedge funds operate like investment banks. They offer their

0:11:10.520 --> 0:11:14.440
<v Speaker 1>investors a return on equity rather than offering them like

0:11:14.520 --> 0:11:17.199
<v Speaker 1>all of the upside and the you know, upside minus

0:11:17.240 --> 0:11:20.120
<v Speaker 1>twenty percent performance fees. Like they take whatever they want

0:11:20.400 --> 0:11:24.280
<v Speaker 1>from the investors to pay their fees, and so there's

0:11:24.320 --> 0:11:26.520
<v Speaker 1>not really like another layer of equity that you can

0:11:26.520 --> 0:11:29.360
<v Speaker 1>put on that. I think that's not a very clear answer,

0:11:29.440 --> 0:11:30.960
<v Speaker 1>but I think that's part of the answer. Like I

0:11:31.000 --> 0:11:33.080
<v Speaker 1>think of the big multi strategy hedge funds as like

0:11:33.120 --> 0:11:35.920
<v Speaker 1>this is a business, yeah, and the business has equity capital,

0:11:35.920 --> 0:11:38.680
<v Speaker 1>and the equity capital comes from the LPs in the

0:11:38.679 --> 0:11:40.760
<v Speaker 1>hedge fund. And when you think of it like that,

0:11:40.800 --> 0:11:42.840
<v Speaker 1>like you don't need another layer of equity capital for

0:11:42.880 --> 0:11:45.080
<v Speaker 1>the management company, because the management company is just a

0:11:45.120 --> 0:11:47.160
<v Speaker 1>way to pay the fees to the employees.

0:11:47.480 --> 0:11:49.240
<v Speaker 2>The good news is that we're going to be talking

0:11:49.280 --> 0:11:51.600
<v Speaker 2>about the fee structure of multistraats. Oh yeah, we are

0:11:51.760 --> 0:11:53.800
<v Speaker 2>later in this podcast. I just just want to point

0:11:53.800 --> 0:11:56.760
<v Speaker 2>out one more thing. Bill Lackman, he said on Bloeber

0:11:56.760 --> 0:11:59.319
<v Speaker 2>TV that he's been very constrained when it comes to tweeting.

0:12:00.160 --> 0:12:04.079
<v Speaker 2>He did tweet on Thursday morning was that he bought

0:12:04.120 --> 0:12:09.280
<v Speaker 2>in the open market both ps U s and p S. Yeah.

0:12:10.920 --> 0:12:12.400
<v Speaker 2>I thought that was a.

0:12:12.280 --> 0:12:15.240
<v Speaker 1>Cool little established He thinks he should traded a premium.

0:12:15.400 --> 0:12:21.560
<v Speaker 2>Yeah, you have to invest in yourself, Matt, Bill Lackman

0:12:22.440 --> 0:12:23.319
<v Speaker 2>Man not bird.

0:12:38.360 --> 0:12:39.800
<v Speaker 1>Did you talking about Bobby Jane and the fees?

0:12:39.960 --> 0:12:42.680
<v Speaker 2>Yeah, I think that we were trying to be thematic.

0:12:42.760 --> 0:12:47.320
<v Speaker 1>Yeah, sure, So elsewhere in hedge funds, behund managers, edge

0:12:47.320 --> 0:12:52.000
<v Speaker 1>trend managers who maybe you know, it's somewhat disappointing weeks.

0:12:52.320 --> 0:12:52.560
<v Speaker 2>Yeah.

0:12:52.760 --> 0:12:54.880
<v Speaker 1>Bobby Jane, the founder of.

0:12:54.920 --> 0:12:57.000
<v Speaker 2>Jane Global, which I don't think is going to go

0:12:57.040 --> 0:12:58.199
<v Speaker 2>public anytime.

0:12:57.840 --> 0:13:01.200
<v Speaker 1>Soon, multi strategy hedge fund startup from the last couple

0:13:01.200 --> 0:13:05.120
<v Speaker 1>of years. He is returning outside capital and going back

0:13:05.160 --> 0:13:08.200
<v Speaker 1>to managing money exclusively from Millennium, which is the firm

0:13:08.240 --> 0:13:08.920
<v Speaker 1>that he came from.

0:13:09.160 --> 0:13:11.400
<v Speaker 2>M He's going home, going home.

0:13:12.000 --> 0:13:12.959
<v Speaker 1>It's hard out there for.

0:13:13.000 --> 0:13:15.720
<v Speaker 2>A It really is strategy hedge on the startup. I

0:13:15.720 --> 0:13:18.880
<v Speaker 2>think a lot of people read this news and at

0:13:19.000 --> 0:13:22.040
<v Speaker 2>least my first thought was, if it's not Bobby Jane,

0:13:22.960 --> 0:13:27.520
<v Speaker 2>who can crack into this into multistrats, That's what everyone said, right.

0:13:27.600 --> 0:13:29.760
<v Speaker 1>He was like high up in investing at Millennium and

0:13:29.800 --> 0:13:31.560
<v Speaker 1>also was like sort of known as the guy who

0:13:32.000 --> 0:13:35.080
<v Speaker 1>built a lot of millenniums like architecture and processes. Like

0:13:35.120 --> 0:13:37.040
<v Speaker 1>he seemed like a guy who could run a firm

0:13:37.120 --> 0:13:39.840
<v Speaker 1>rather than just be an investor at a firm. Yeah,

0:13:39.880 --> 0:13:43.360
<v Speaker 1>and it didn't work, apparently, And I think the answer is, like,

0:13:43.840 --> 0:13:48.520
<v Speaker 1>it's just really hard. These are platforms that really require

0:13:48.559 --> 0:13:51.200
<v Speaker 1>scale and have a lot of fixed costs, and it's

0:13:51.240 --> 0:13:54.520
<v Speaker 1>just hard to get started and cover all those fixed

0:13:54.559 --> 0:13:57.240
<v Speaker 1>costs as you're like wrapping up your strategies and as

0:13:57.240 --> 0:14:01.800
<v Speaker 1>you're wrapping up your investor base. Yeah, and therefore it's

0:14:01.840 --> 0:14:04.720
<v Speaker 1>hard to get new investors because early on you're not

0:14:04.840 --> 0:14:07.840
<v Speaker 1>earning the return that they want, and so they're like, yeah,

0:14:07.880 --> 0:14:09.800
<v Speaker 1>we'll wait until you get huge, and let's stick with

0:14:09.800 --> 0:14:10.840
<v Speaker 1>the money and then till them.

0:14:10.920 --> 0:14:14.600
<v Speaker 2>Yeah, I mean it has about six billion dollars. Not enough,

0:14:14.679 --> 0:14:18.400
<v Speaker 2>it's not enough. What is enough? Jane struck out on

0:14:18.480 --> 0:14:19.680
<v Speaker 2>his own in twenty twenty four.

0:14:19.880 --> 0:14:22.080
<v Speaker 1>Yeah, so he's been independent for about two years and

0:14:22.640 --> 0:14:23.640
<v Speaker 1>it's hard to get to scale.

0:14:23.840 --> 0:14:26.640
<v Speaker 2>Yeah, let's talk a little bit about how passed through

0:14:26.680 --> 0:14:31.479
<v Speaker 2>fees factor into this, because multistraats are very expensive.

0:14:32.000 --> 0:14:34.720
<v Speaker 1>Yeah. I think that, like the intuition that people have

0:14:34.760 --> 0:14:36.760
<v Speaker 1>about hedge funds doesn't apply to all these shots. Like

0:14:36.840 --> 0:14:39.800
<v Speaker 1>Bill Ackman runs like an investment from right there. Yeah,

0:14:39.840 --> 0:14:41.800
<v Speaker 1>he like takes your money and he invested in some

0:14:41.840 --> 0:14:44.400
<v Speaker 1>stuff and he gives you the return minus his fees.

0:14:45.000 --> 0:14:48.880
<v Speaker 1>It's not what Millennium or Jane Global do. What they

0:14:48.880 --> 0:14:51.400
<v Speaker 1>do is they run some businesses. They have some desks

0:14:51.440 --> 0:14:54.400
<v Speaker 1>that do some businesses. They do index arbitrage, they do

0:14:55.400 --> 0:15:00.280
<v Speaker 1>basis trades. They do like some stuff that generates high

0:15:00.360 --> 0:15:04.160
<v Speaker 1>expected returns with like relatively low volatility, and they combine

0:15:04.200 --> 0:15:06.640
<v Speaker 1>those things into a thing that has even lower volatility

0:15:06.680 --> 0:15:08.840
<v Speaker 1>and they sell that to investors. They say, we're going

0:15:08.920 --> 0:15:11.880
<v Speaker 1>to give you alpha we're gonna give you like very stable,

0:15:12.360 --> 0:15:16.440
<v Speaker 1>medium sized returns. And when you do those businesses, there's

0:15:16.480 --> 0:15:19.160
<v Speaker 1>a certain amount of capacity in those strategies, and if

0:15:19.200 --> 0:15:21.360
<v Speaker 1>you have too much money for the capacity, then you

0:15:21.400 --> 0:15:22.960
<v Speaker 1>can't do it right. And so like these friends will

0:15:22.960 --> 0:15:25.720
<v Speaker 1>sometimes return money because they don't have enough capacity to

0:15:25.800 --> 0:15:28.360
<v Speaker 1>run the money that the investors will give them. But

0:15:28.400 --> 0:15:32.680
<v Speaker 1>if too little capacity, then you can still do the trades.

0:15:32.720 --> 0:15:35.440
<v Speaker 1>But you're paying a portfolio manager fifty million dollars a

0:15:35.480 --> 0:15:37.560
<v Speaker 1>year to do the trades, and you're only making forty

0:15:37.560 --> 0:15:39.120
<v Speaker 1>million dollars a year from the trades because you're not

0:15:39.120 --> 0:15:41.000
<v Speaker 1>putting enough money into them, right. So that's a lot

0:15:41.040 --> 0:15:43.520
<v Speaker 1>of what's happening here is like the going rate for

0:15:43.560 --> 0:15:46.480
<v Speaker 1>someone to sit in these seats and do these trades

0:15:46.560 --> 0:15:49.000
<v Speaker 1>is fifty million dollars or something, and if you're not

0:15:49.000 --> 0:15:51.240
<v Speaker 1>giving him enough capital, then he's only earning forty million

0:15:51.280 --> 0:15:53.680
<v Speaker 1>dollars and you're not earning a return for your investors.

0:15:53.840 --> 0:15:55.160
<v Speaker 1>I think that's a lot of what happened here. Like

0:15:55.160 --> 0:15:58.320
<v Speaker 1>they were earning returns running their strategies, but when you

0:15:58.360 --> 0:16:01.400
<v Speaker 1>took out the amount they were their portfolio managers, it

0:16:01.440 --> 0:16:02.600
<v Speaker 1>wasn't enough for the investors.

0:16:02.800 --> 0:16:06.280
<v Speaker 2>Yeah, it's a sad start sat right. Yeah.

0:16:07.400 --> 0:16:11.920
<v Speaker 1>The essential problem here is that hedgehund portfolio managers get

0:16:11.920 --> 0:16:14.360
<v Speaker 1>paid a lot, which is, you know, a nice problem

0:16:14.440 --> 0:16:16.280
<v Speaker 1>for them. Yeah, but it makes it hard to become

0:16:16.320 --> 0:16:18.400
<v Speaker 1>an employer of hedge on portfolio managers.

0:16:18.600 --> 0:16:22.080
<v Speaker 2>I like how you compared it to tech startups in

0:16:22.200 --> 0:16:24.880
<v Speaker 2>the newsletter that you wrote on this topic that you

0:16:24.960 --> 0:16:28.400
<v Speaker 2>think about tech startups. Employees come in and they you know,

0:16:28.480 --> 0:16:30.240
<v Speaker 2>are paid pennies, but they get a lot of stock

0:16:30.320 --> 0:16:34.000
<v Speaker 2>and investors are content to wait out for their big payday.

0:16:34.080 --> 0:16:37.560
<v Speaker 1>Yeah. Everyone has Like investors in a startup company have

0:16:38.080 --> 0:16:40.480
<v Speaker 1>a long term horizon where they're like, I know, I'm

0:16:40.520 --> 0:16:43.280
<v Speaker 1>not going to get any return on my capital in

0:16:43.400 --> 0:16:45.360
<v Speaker 1>the first year, but in ten years I'll get a lot.

0:16:45.440 --> 0:16:47.480
<v Speaker 1>I get a huge return on my capital, right, you know,

0:16:47.480 --> 0:16:49.920
<v Speaker 1>if things go well and employees are kind of taking

0:16:49.960 --> 0:16:53.440
<v Speaker 1>the same bargain at a multi strategy hedge fund, if

0:16:53.440 --> 0:16:56.120
<v Speaker 1>you're like competing for the audience that is giving money

0:16:56.160 --> 0:16:58.600
<v Speaker 1>to like Millennium and zero point seventy two and whatever,

0:17:00.200 --> 0:17:02.640
<v Speaker 1>people are not like, oh yeah in ten years, all

0:17:02.680 --> 0:17:04.639
<v Speaker 1>ten X my money. Great. Those people are like, I

0:17:04.720 --> 0:17:08.240
<v Speaker 1>want a very steady fifteen percent a year with no

0:17:08.400 --> 0:17:12.000
<v Speaker 1>correlation to the market and no drawdowns, right, Like, those

0:17:12.040 --> 0:17:15.600
<v Speaker 1>people are not the ideal investors in a startup that

0:17:15.720 --> 0:17:18.640
<v Speaker 1>is not currently earning its cost of capital. And similarly,

0:17:18.920 --> 0:17:21.760
<v Speaker 1>like the employees. I don't know, man, I'm sure there

0:17:21.800 --> 0:17:24.639
<v Speaker 1>are some, you know, portfolio managers at hedgehos who are like,

0:17:25.240 --> 0:17:27.639
<v Speaker 1>I'll work for nothing in exchange for huge equity, right,

0:17:27.680 --> 0:17:29.720
<v Speaker 1>I mean they are famous stories, right, like, yeah, Jeff

0:17:29.720 --> 0:17:33.359
<v Speaker 1>Bezos left E Shaw to Campbell on himself. But you

0:17:33.440 --> 0:17:35.359
<v Speaker 1>know a lot of them are like getting fifty million

0:17:35.359 --> 0:17:37.560
<v Speaker 1>dollars a year over here. I'd rather keep getting fifty

0:17:37.600 --> 0:17:38.320
<v Speaker 1>million dollars a year.

0:17:38.520 --> 0:17:40.960
<v Speaker 2>Yeah, I'm just I'm just doing the math, man, And

0:17:41.040 --> 0:17:42.160
<v Speaker 2>doesn't it doesn't work out?

0:17:42.560 --> 0:17:44.160
<v Speaker 1>Right? Should we move on to another Yeah?

0:17:44.160 --> 0:17:45.240
<v Speaker 2>We have a lot to cover Front of.

0:17:45.200 --> 0:17:47.200
<v Speaker 1>The show hedgehow manager had a disappointing.

0:17:46.720 --> 0:17:48.480
<v Speaker 2>Week in actual Front of the show.

0:17:50.400 --> 0:17:52.960
<v Speaker 1>Buzz once then came on the pod a few weeks

0:17:53.000 --> 0:17:55.560
<v Speaker 1>ago to talk about how he was bidding to buy

0:17:56.320 --> 0:17:58.760
<v Speaker 1>I don't know, five or ten percent of OBDC two,

0:17:58.840 --> 0:18:02.040
<v Speaker 1>the Blue Owl Private Credit Fund Audacious he got less

0:18:02.119 --> 0:18:04.760
<v Speaker 1>than one percent. I don't think he's that disappointed. I mean,

0:18:05.040 --> 0:18:07.560
<v Speaker 1>as I said on the podcast, it was not zero

0:18:07.680 --> 0:18:10.520
<v Speaker 1>percent trolling. Yeah, you got to he accomplished the trolling

0:18:10.560 --> 0:18:12.280
<v Speaker 1>whether or not he bought any shares.

0:18:12.520 --> 0:18:12.720
<v Speaker 2>Yeah.

0:18:12.840 --> 0:18:14.560
<v Speaker 1>Also, he said on the podcast, like, if he had

0:18:14.600 --> 0:18:18.679
<v Speaker 1>gotten filled, it would have been sort of scary for everyone,

0:18:18.760 --> 0:18:22.080
<v Speaker 1>including him. It would have been like, oh wow, people

0:18:22.119 --> 0:18:25.280
<v Speaker 1>are really panicking about these private credit funds. But the

0:18:25.359 --> 0:18:28.480
<v Speaker 1>fact that he didn't get that many shares suggest that, like, yeah,

0:18:28.480 --> 0:18:29.560
<v Speaker 1>everyone's fine, it's fine.

0:18:29.880 --> 0:18:33.520
<v Speaker 2>Yeah, it was an interesting experiment. He pulled it off,

0:18:33.760 --> 0:18:38.760
<v Speaker 2>and we got in interesting read on how folks are

0:18:38.800 --> 0:18:39.439
<v Speaker 2>actually feeling.

0:18:39.680 --> 0:18:42.280
<v Speaker 1>Yeah, it's very hard for me to know the psychology

0:18:42.680 --> 0:18:46.840
<v Speaker 1>of investors in private credit non traded BDCs, And I

0:18:46.960 --> 0:18:50.040
<v Speaker 1>want to emphasize that. I say that as an investor

0:18:50.160 --> 0:18:54.720
<v Speaker 1>in a non traded BDC I own, as we'll talk

0:18:54.720 --> 0:18:58.080
<v Speaker 1>about next week. I own a small amount of all

0:18:58.280 --> 0:19:02.160
<v Speaker 1>non traded bdct this one. But who are these people

0:19:02.960 --> 0:19:05.399
<v Speaker 1>like me? Some of them are people who are like,

0:19:06.320 --> 0:19:09.760
<v Speaker 1>these credits are bad. I want my money back, and

0:19:10.040 --> 0:19:12.400
<v Speaker 1>if the best I can do is bo As giving

0:19:12.440 --> 0:19:14.400
<v Speaker 1>me sixty five cents on the dollar, I'll take it. Right.

0:19:14.560 --> 0:19:16.680
<v Speaker 1>A few of those people, right, you got some take up.

0:19:17.400 --> 0:19:21.640
<v Speaker 1>A lot of them I think are like, I would

0:19:21.760 --> 0:19:25.560
<v Speaker 1>like to not be involved in this conversation. I would

0:19:25.680 --> 0:19:28.680
<v Speaker 1>like my money back at one hundred cents on the dollar,

0:19:28.760 --> 0:19:31.760
<v Speaker 1>which all these funds offer, but with caps on how

0:19:31.800 --> 0:19:33.879
<v Speaker 1>many withdraws you can and not how much they'll have

0:19:33.880 --> 0:19:37.640
<v Speaker 1>at each quarter. And they're like putting in their requests

0:19:37.760 --> 0:19:39.320
<v Speaker 1>to get back their money at one hundred cents on

0:19:39.320 --> 0:19:41.879
<v Speaker 1>the dollar. And if it's capped and they only get

0:19:42.000 --> 0:19:43.560
<v Speaker 1>a portion of their money back a one hundred cents

0:19:43.600 --> 0:19:45.920
<v Speaker 1>on the dollar, then they'll wait for next time.

0:19:46.400 --> 0:19:46.600
<v Speaker 2>Yeah.

0:19:46.680 --> 0:19:49.280
<v Speaker 1>What they won't do is sell to Boaz for sixty

0:19:49.320 --> 0:19:51.879
<v Speaker 1>five cents on the dollar, because the whole point of

0:19:51.920 --> 0:19:53.240
<v Speaker 1>this product is it doesn't go down.

0:19:53.440 --> 0:19:55.080
<v Speaker 2>Sixty five is less than one hundred.

0:19:55.280 --> 0:19:57.159
<v Speaker 1>Yeah. There are a lot of people who sell stocks

0:19:57.200 --> 0:19:59.359
<v Speaker 1>at below where they bought them because like stocks go

0:19:59.520 --> 0:20:01.840
<v Speaker 1>up and down, right, this is not supposed to go

0:20:01.960 --> 0:20:04.400
<v Speaker 1>up and down. Yeah, whatever the navy goes up and down,

0:20:04.480 --> 0:20:07.879
<v Speaker 1>put mostly up. And if the market price of this

0:20:08.040 --> 0:20:10.640
<v Speaker 1>thing is in some sense down thirty five percent from

0:20:10.680 --> 0:20:12.199
<v Speaker 1>it's that acid value, people are not going to sell

0:20:12.240 --> 0:20:14.520
<v Speaker 1>that market price. So that's a lot of what's happening

0:20:14.560 --> 0:20:17.760
<v Speaker 1>here is that these people kidding me are in these

0:20:17.920 --> 0:20:22.560
<v Speaker 1>products for like stability, and if the market has just located,

0:20:22.600 --> 0:20:24.640
<v Speaker 1>they're like, no, thank you, I don't want to play.

0:20:25.440 --> 0:20:28.480
<v Speaker 1>And then some people are like not checking their mailbox.

0:20:28.720 --> 0:20:31.840
<v Speaker 2>Right. Yeah, it feels like quite an exercise in trying

0:20:31.880 --> 0:20:33.720
<v Speaker 2>to herd cats without knowing.

0:20:33.840 --> 0:20:37.479
<v Speaker 1>I get him throw away all tender offer statements from

0:20:37.520 --> 0:20:37.920
<v Speaker 1>Blue Out.

0:20:38.240 --> 0:20:41.280
<v Speaker 2>Yeah, some of them might be interesting. Maybe you would

0:20:41.320 --> 0:20:41.800
<v Speaker 2>have liked to look.

0:20:41.800 --> 0:20:44.480
<v Speaker 1>At the time I open one, I'm like, it's relevant to.

0:20:44.520 --> 0:20:48.040
<v Speaker 2>My job, goodbye. Okay, So we don't know too much

0:20:48.040 --> 0:20:51.359
<v Speaker 2>about the psychology. If you can draw the conclusion here.

0:20:51.320 --> 0:20:53.480
<v Speaker 1>Though, that people like outright panic.

0:20:53.760 --> 0:20:56.960
<v Speaker 2>Yeah, they weren't so desperate to get out of this.

0:20:57.640 --> 0:20:59.680
<v Speaker 1>If he had bought like ten percent of the fund

0:20:59.760 --> 0:21:01.840
<v Speaker 1>it sixty five cents on the dollar, that would have

0:21:01.880 --> 0:21:04.600
<v Speaker 1>been a strong suggestion that it was worth considerably less

0:21:04.640 --> 0:21:06.240
<v Speaker 1>than sixty five cents on the dollar. Yes, and he

0:21:06.280 --> 0:21:09.560
<v Speaker 1>would be taking a bath. Yeah. But herly it's like, yeah,

0:21:09.600 --> 0:21:10.040
<v Speaker 1>that's interesting.

0:21:10.600 --> 0:21:13.200
<v Speaker 2>Well, I was to say in an interview with Bloomberg News.

0:21:13.600 --> 0:21:15.800
<v Speaker 2>To Blue Owl's credit, they went around to calm nerves.

0:21:16.240 --> 0:21:18.480
<v Speaker 2>We would have had more success if we offered for

0:21:18.560 --> 0:21:21.359
<v Speaker 2>their larger BDC, but we had the offer ready before

0:21:21.400 --> 0:21:23.680
<v Speaker 2>they offered to pay back investors, and we still wanted

0:21:23.680 --> 0:21:25.920
<v Speaker 2>to go through with it. Obviously, we hope to buy

0:21:25.960 --> 0:21:28.840
<v Speaker 2>more shares from them than we did. He's not out

0:21:28.840 --> 0:21:30.840
<v Speaker 2>of this game, right Yeah.

0:21:30.880 --> 0:21:33.000
<v Speaker 1>OBC two is a weird one because like they are

0:21:33.080 --> 0:21:34.800
<v Speaker 1>trying to wind it up at one hundred cents on

0:21:34.840 --> 0:21:37.320
<v Speaker 1>the dollar. So like one reason for him to tender

0:21:37.359 --> 0:21:39.840
<v Speaker 1>for it is it's a pretty short timeline to probably

0:21:39.880 --> 0:21:42.440
<v Speaker 1>get all of all of your money back, right the

0:21:42.520 --> 0:21:45.520
<v Speaker 1>other Blue Owl and also other firms like have a

0:21:45.600 --> 0:21:48.960
<v Speaker 1>lot of private, non traded BDCs where people have asked

0:21:48.960 --> 0:21:50.720
<v Speaker 1>for more than five percent of their money back, they've

0:21:50.760 --> 0:21:53.880
<v Speaker 1>been capped at five percent. There's a line to get out.

0:21:54.440 --> 0:21:58.760
<v Speaker 1>And how long that problem will persist, nobody quite knows.

0:21:59.240 --> 0:22:01.000
<v Speaker 1>And so he's going to tender for some other ones

0:22:01.000 --> 0:22:03.760
<v Speaker 1>where maybe the timeline is a little bit more uncertain,

0:22:03.920 --> 0:22:06.000
<v Speaker 1>maybe people will be more interested. I think he's going

0:22:06.040 --> 0:22:08.280
<v Speaker 1>to tender for the one I own, and then that'd.

0:22:08.119 --> 0:22:11.080
<v Speaker 2>Be so fun you have to sell to him. I

0:22:11.160 --> 0:22:14.679
<v Speaker 2>think it would be really good for the podcast. Make

0:22:14.760 --> 0:22:17.920
<v Speaker 2>a good ye think of the content, Matt think of

0:22:18.000 --> 0:22:34.360
<v Speaker 2>the content. If you want to talk about Avis suggests

0:22:34.400 --> 0:22:34.919
<v Speaker 2>we do it now.

0:22:34.960 --> 0:22:35.679
<v Speaker 1>That's interesting thing.

0:22:35.920 --> 0:22:38.320
<v Speaker 2>That's what we saved it for last A short squeeze,

0:22:38.680 --> 0:22:39.240
<v Speaker 2>Yeah they did.

0:22:40.359 --> 0:22:41.960
<v Speaker 1>That's been going for like a month and like it

0:22:42.040 --> 0:22:44.199
<v Speaker 1>peaked last week. This stock had gone from like one

0:22:44.280 --> 0:22:46.960
<v Speaker 1>hundred dollars like a few weeks ago to seven closed

0:22:46.960 --> 0:22:50.479
<v Speaker 1>over seven hundred dollars one day last week and then

0:22:50.560 --> 0:22:53.280
<v Speaker 1>it deflated and it's back down until the one hundredths.

0:22:53.760 --> 0:22:57.440
<v Speaker 1>And this week the company had an earnings call, which

0:22:58.440 --> 0:23:01.080
<v Speaker 1>earnings always somewhat irrelevant to the situations, and stock was

0:23:01.080 --> 0:23:02.560
<v Speaker 1>down a little. Their earnings are little disappointment.

0:23:02.560 --> 0:23:04.680
<v Speaker 2>It doesn't mean yeah, but at least the executives have

0:23:04.800 --> 0:23:07.159
<v Speaker 2>to talk about what's going on going on, and what was.

0:23:07.200 --> 0:23:09.440
<v Speaker 1>Going on was crazy, which is that the night before

0:23:09.520 --> 0:23:12.399
<v Speaker 1>the earnings announcement, so their short scureaze was like they

0:23:12.440 --> 0:23:16.160
<v Speaker 1>had two hedgehuns that owned between actual stock positions and derotos,

0:23:16.160 --> 0:23:17.760
<v Speaker 1>they owned more than one hundred percent of the stock.

0:23:18.000 --> 0:23:19.600
<v Speaker 1>So a lot of people were short, and these two

0:23:19.640 --> 0:23:22.080
<v Speaker 1>hedge funds, SRS and Pentwater were long more than one

0:23:22.119 --> 0:23:24.639
<v Speaker 1>hundred percent of the stock. Put those things together, it

0:23:24.680 --> 0:23:26.320
<v Speaker 1>just seems like there's gonna be a short squeeze, and

0:23:26.359 --> 0:23:28.640
<v Speaker 1>there seems to have been a short squaze. Those two

0:23:28.720 --> 0:23:31.119
<v Speaker 1>Edgems SRS. Is kind of like the company, like they

0:23:31.160 --> 0:23:33.119
<v Speaker 1>have a board seat, like they've been long term holders.

0:23:33.119 --> 0:23:34.399
<v Speaker 1>They're associated with.

0:23:34.400 --> 0:23:35.040
<v Speaker 2>The company, right.

0:23:35.119 --> 0:23:36.880
<v Speaker 1>They have a lockup agreement. They have an agreement where

0:23:36.880 --> 0:23:39.720
<v Speaker 1>they're like bound by the company's black eyed parents. Pentwater

0:23:39.840 --> 0:23:41.240
<v Speaker 1>is just like a hedge fund. There's bought some stock

0:23:41.240 --> 0:23:44.240
<v Speaker 1>as an investment and they got to like fifty percent

0:23:44.280 --> 0:23:47.040
<v Speaker 1>of the stock with including Derovotos, and they sold a

0:23:47.119 --> 0:23:49.400
<v Speaker 1>big chunk of stock at the peak of the short

0:23:49.440 --> 0:23:52.040
<v Speaker 1>squaze last week for something like one point seventy five

0:23:52.040 --> 0:23:58.399
<v Speaker 1>billion dollars of total proceeds and profits of possibly a billion,

0:23:58.880 --> 0:24:03.080
<v Speaker 1>huge profits. And when the short squeeze was happening, I

0:24:03.160 --> 0:24:05.919
<v Speaker 1>remember people emailing me to be like, what is Petwater

0:24:06.040 --> 0:24:08.440
<v Speaker 1>going to do about this? Because they're subject to short

0:24:08.480 --> 0:24:11.399
<v Speaker 1>swing profit rules. They own more than ten percent of

0:24:11.480 --> 0:24:15.400
<v Speaker 1>the stock, and therefore, if they sell their stock within

0:24:15.600 --> 0:24:17.919
<v Speaker 1>six months of buying it, which like they double their

0:24:17.920 --> 0:24:20.800
<v Speaker 1>stake in like February March, if they sell their stock

0:24:20.840 --> 0:24:22.600
<v Speaker 1>within six months of buying it, they have to pay

0:24:22.680 --> 0:24:25.040
<v Speaker 1>back all of the profits to the company, which is

0:24:25.080 --> 0:24:28.200
<v Speaker 1>just the weird rule of section sixteen of the US

0:24:28.320 --> 0:24:31.959
<v Speaker 1>securities laws, and so like, they can't really profit from

0:24:32.000 --> 0:24:34.960
<v Speaker 1>the short squeeze. That's what I thought, and whatever run

0:24:35.000 --> 0:24:38.280
<v Speaker 1>for that was naive. That was a little naive. So

0:24:38.320 --> 0:24:43.280
<v Speaker 1>they announced that they've sold millions of shares, and those

0:24:43.359 --> 0:24:46.720
<v Speaker 1>shares fall into two buckets. One bucket, they're like, yes,

0:24:47.440 --> 0:24:49.760
<v Speaker 1>we are subject to short swing profit rules. We bought

0:24:49.800 --> 0:24:51.680
<v Speaker 1>these shares and then we sold them within six months,

0:24:52.000 --> 0:24:53.479
<v Speaker 1>so we have to give up all of our profits

0:24:53.520 --> 0:24:55.600
<v Speaker 1>to the company. So we called the company and we're like,

0:24:55.680 --> 0:24:59.840
<v Speaker 1>here's your check. Here you go. The other bucket, they're like, no, no,

0:25:00.320 --> 0:25:04.359
<v Speaker 1>the funds like Pentwater is, you know, it manages different funds,

0:25:04.440 --> 0:25:08.359
<v Speaker 1>like theater funds, SMAs, like all sorts of like accounts, right,

0:25:08.680 --> 0:25:10.600
<v Speaker 1>and it buys stock for all the different accounts, and

0:25:10.600 --> 0:25:13.280
<v Speaker 1>the accounts are separate. And they're saying, well, you know,

0:25:13.600 --> 0:25:15.600
<v Speaker 1>most of the shares that we sold in the last

0:25:16.000 --> 0:25:19.359
<v Speaker 1>you know, last week were not sold by funds or

0:25:19.440 --> 0:25:22.480
<v Speaker 1>accounts that bought within the last six months, So there's

0:25:22.600 --> 0:25:28.720
<v Speaker 1>no Section sixteen short swing profits for that. The first bucket,

0:25:28.720 --> 0:25:30.200
<v Speaker 1>the one where they're giving up the profits is like

0:25:30.280 --> 0:25:32.560
<v Speaker 1>ninety four thousand shares, and the second buckets like millions

0:25:32.560 --> 0:25:35.080
<v Speaker 1>of shares. So they're like, we're almost all but we're

0:25:35.119 --> 0:25:37.440
<v Speaker 1>giving the company a tip, you know, you know, fifty

0:25:37.480 --> 0:25:40.280
<v Speaker 1>million bucks or whatever, maybe lass And so that's wild

0:25:40.520 --> 0:25:43.520
<v Speaker 1>on a number of levels. One, it's like, oh, you

0:25:43.600 --> 0:25:45.600
<v Speaker 1>can just get around short swing profit rolls that way.

0:25:45.720 --> 0:25:48.159
<v Speaker 1>Two like how did that happen? Like how did some

0:25:48.400 --> 0:25:51.040
<v Speaker 1>funds that they managed by the shares and other funds

0:25:51.200 --> 0:25:54.440
<v Speaker 1>sold the shares. It seems a little bit mysterious. Presumably

0:25:54.480 --> 0:25:56.360
<v Speaker 1>the funds that sold the shares were funds that had

0:25:56.440 --> 0:26:02.239
<v Speaker 1>owned them for a long time. Maybe not, Maybe they

0:26:02.240 --> 0:26:03.639
<v Speaker 1>were short selling. I don't know.

0:26:04.880 --> 0:26:06.680
<v Speaker 2>Will anyone go and try to figure that out?

0:26:06.680 --> 0:26:07.720
<v Speaker 1>O the company? Will?

0:26:07.920 --> 0:26:08.240
<v Speaker 2>Avis?

0:26:08.320 --> 0:26:10.639
<v Speaker 1>Will? Yeah? Because Avis, they said on their earnings call,

0:26:10.680 --> 0:26:12.320
<v Speaker 1>you know, we got a call from Penwater saying like

0:26:12.480 --> 0:26:15.480
<v Speaker 1>here's your you know, check for a little bit of money.

0:26:15.560 --> 0:26:18.000
<v Speaker 1>And they're like, we're gonna look into anything we can

0:26:18.040 --> 0:26:20.320
<v Speaker 1>do to recover for the shelters, because obviously they'd rather

0:26:20.400 --> 0:26:23.000
<v Speaker 1>have a billion dollars than you know, a few million dollars.

0:26:23.200 --> 0:26:24.840
<v Speaker 2>That number is bigger than the other one.

0:26:25.680 --> 0:26:27.960
<v Speaker 1>This is just like a weird exogenous event that happened

0:26:28.000 --> 0:26:30.960
<v Speaker 1>to Davis, and they're like probably a little bit unsettled

0:26:30.960 --> 0:26:33.040
<v Speaker 1>by it. And if they could have a billion dollars,

0:26:33.080 --> 0:26:34.680
<v Speaker 1>they'd that would make it better.

0:26:35.320 --> 0:26:37.040
<v Speaker 2>They have a little bit of money though, Yeah, they

0:26:37.080 --> 0:26:37.520
<v Speaker 2>have some money.

0:26:37.720 --> 0:26:39.639
<v Speaker 1>Yeah right, I read it's like a nice windfall for them.

0:26:39.720 --> 0:26:41.159
<v Speaker 1>If you'd asked me last week, and I feel like

0:26:41.240 --> 0:26:43.280
<v Speaker 1>maybe you did. I feel like we talked about this,

0:26:43.400 --> 0:26:47.200
<v Speaker 1>Like it's very hard for anyone to do anything about

0:26:47.400 --> 0:26:50.800
<v Speaker 1>the short screenze. Right, Like Penwater, I had thought, can't

0:26:50.840 --> 0:26:53.199
<v Speaker 1>sell because of Section sixteen year olds, and the company

0:26:53.240 --> 0:26:56.760
<v Speaker 1>can't sell because one they were in an earnings blackout right,

0:26:56.800 --> 0:26:58.600
<v Speaker 1>they really startings this week, so they can't like go

0:26:58.680 --> 0:27:01.879
<v Speaker 1>around selling stock the week before they release harntings. And

0:27:02.040 --> 0:27:05.080
<v Speaker 1>two if you announce a sale, you might pop the

0:27:05.119 --> 0:27:08.719
<v Speaker 1>bubble and then you won't actually sell it the high prices.

0:27:09.119 --> 0:27:12.880
<v Speaker 1>But like somehow Pintwater founder around it, where both Pentwater

0:27:12.920 --> 0:27:14.520
<v Speaker 1>got a lot of money and also the company got

0:27:14.520 --> 0:27:16.160
<v Speaker 1>a little bit of money without actually selling.

0:27:15.920 --> 0:27:17.960
<v Speaker 2>Any stock, so they found a way around it.

0:27:18.000 --> 0:27:20.760
<v Speaker 1>But TBD, well, I certainly sold stock. Who gets that

0:27:20.920 --> 0:27:25.680
<v Speaker 1>money between Pantwater and Avis is an interesting question Penwater

0:27:25.720 --> 0:27:28.080
<v Speaker 1>will be bummed if they lose all of the money.

0:27:29.000 --> 0:27:31.600
<v Speaker 1>But my impressure is they a pretty argument that they're

0:27:31.640 --> 0:27:33.919
<v Speaker 1>fine and they get to keep the money they think

0:27:33.920 --> 0:27:35.960
<v Speaker 1>they can keep. I also think there's some possibility of

0:27:36.040 --> 0:27:39.760
<v Speaker 1>just like Pentwater and Eavis beying, like, we'll give you

0:27:39.800 --> 0:27:41.680
<v Speaker 1>a little bit more than that ninety four thousand shares

0:27:41.680 --> 0:27:44.320
<v Speaker 1>and we'll call it a day. No, no, because ninety

0:27:44.359 --> 0:27:47.119
<v Speaker 1>four thousand shares. Yeah, Like the profits on these shares

0:27:47.240 --> 0:27:49.600
<v Speaker 1>sales are at least at least one hundred dollars and

0:27:49.640 --> 0:27:51.359
<v Speaker 1>as much as like six hundred dollars a share, so

0:27:51.920 --> 0:27:53.960
<v Speaker 1>you know, like it's it's millions and tens of millions

0:27:53.960 --> 0:27:55.480
<v Speaker 1>of dollars, but it's not billion dollars.

0:27:56.240 --> 0:27:58.640
<v Speaker 2>So if they had increased her safe by slightly less,

0:27:59.080 --> 0:28:00.840
<v Speaker 2>could they have just like if they had stayed at

0:28:00.840 --> 0:28:03.640
<v Speaker 2>the nine percent that they were on December thirty first,

0:28:03.720 --> 0:28:06.120
<v Speaker 2>twenty twenty five, would they.

0:28:06.040 --> 0:28:09.280
<v Speaker 1>Have a relevant number? Well, it's a fifty percent, it's

0:28:09.320 --> 0:28:11.080
<v Speaker 1>not like a little bit less. They got to fifty percent,

0:28:11.119 --> 0:28:13.439
<v Speaker 1>which would cause the short squeeze. They went from nine

0:28:13.480 --> 0:28:16.840
<v Speaker 1>percent to fifty percent. People like, oh wow, between them

0:28:17.000 --> 0:28:18.800
<v Speaker 1>Srs and Penal on more than one hundred percent of

0:28:18.800 --> 0:28:20.520
<v Speaker 1>the stock. That's going to cause a short scraze. It

0:28:20.600 --> 0:28:22.400
<v Speaker 1>causes a short squeze. The stock goes to seven hundred

0:28:22.400 --> 0:28:24.240
<v Speaker 1>and they sell right, going from nine to nine and

0:28:24.280 --> 0:28:24.720
<v Speaker 1>a half percent.

0:28:24.760 --> 0:28:27.080
<v Speaker 2>I wouldn't have done that, Yeah, But I'm just wondering

0:28:27.160 --> 0:28:30.040
<v Speaker 2>would they have then been under the threshold where they

0:28:30.119 --> 0:28:33.040
<v Speaker 2>could short sell without penalty or sell without penalty?

0:28:33.240 --> 0:28:34.000
<v Speaker 1>Sure, but who cares?

0:28:34.280 --> 0:28:36.679
<v Speaker 2>I care a little bit. You're saying the short sqeeze

0:28:36.680 --> 0:28:37.400
<v Speaker 2>would have never happen.

0:28:37.720 --> 0:28:40.680
<v Speaker 1>Selling at seven hundred dollars and then dealing with lawyers

0:28:40.680 --> 0:28:43.200
<v Speaker 1>afterwards is much much, much, much better than selling it

0:28:43.240 --> 0:28:43.960
<v Speaker 1>one hundred dollars.

0:28:44.240 --> 0:28:47.720
<v Speaker 2>Yeah. I guess that's assuming that that is what caused

0:28:47.760 --> 0:28:51.280
<v Speaker 2>the short squeeze, because there are stories like, you know,

0:28:51.360 --> 0:28:51.880
<v Speaker 2>the short.

0:28:51.720 --> 0:28:53.680
<v Speaker 1>Squeeze was definitely like two hedge funds on one hundred

0:28:53.680 --> 0:28:56.880
<v Speaker 1>and eight percent of the company. Yeah, these are things

0:28:56.920 --> 0:29:00.640
<v Speaker 1>that happened due to like attention and the best psychology

0:29:00.680 --> 0:29:02.600
<v Speaker 1>and things like that, and you know, it happens because

0:29:02.640 --> 0:29:06.120
<v Speaker 1>like they bought so much of the company. Yeah, anyway,

0:29:06.160 --> 0:29:06.840
<v Speaker 1>it's a great trade.

0:29:07.040 --> 0:29:07.280
<v Speaker 2>It is.

0:29:07.480 --> 0:29:10.960
<v Speaker 1>It's like it's baffling that I don't understand how they

0:29:11.000 --> 0:29:13.360
<v Speaker 1>could have bought so much stock in one place and

0:29:13.520 --> 0:29:15.920
<v Speaker 1>sold so much stock in another place, Like it's something

0:29:16.000 --> 0:29:17.960
<v Speaker 1>as weird but great trade.

0:29:18.200 --> 0:29:20.520
<v Speaker 2>I wish I had tuned into that earnings call because

0:29:20.520 --> 0:29:22.680
<v Speaker 2>we talk about body language all the time. I would

0:29:22.680 --> 0:29:23.040
<v Speaker 2>have loved to.

0:29:23.160 --> 0:29:25.360
<v Speaker 1>Yes, I know, I've read the transfer to letters. Just

0:29:25.480 --> 0:29:26.960
<v Speaker 1>you definitely like can imagine them like.

0:29:27.000 --> 0:29:31.520
<v Speaker 2>Tugging on their collar and dabbing at their brow. Good stuff.

0:29:38.480 --> 0:29:40.040
<v Speaker 1>And that was the Money Stuff Podcast.

0:29:40.360 --> 0:29:42.440
<v Speaker 2>I'm Matt Levine and I'm Katie Greifeld.

0:29:42.600 --> 0:29:44.760
<v Speaker 1>You can find my work by subscribing to the Money

0:29:44.760 --> 0:29:46.680
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0:29:46.600 --> 0:29:49.280
<v Speaker 2>Com, and you can find me on Bloomberg TV every

0:29:49.360 --> 0:29:52.480
<v Speaker 2>day on the Clothes between three and five pm Eastern.

0:29:53.240 --> 0:29:55.239
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0:30:00.880 --> 0:30:03.440
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0:30:07.200 --> 0:30:11.000
<v Speaker 1>The Money Stuff Podcast is produced by Anam Azarakus Moses

0:30:11.040 --> 0:30:13.680
<v Speaker 1>Onam and Alexis HoTT Our.

0:30:13.760 --> 0:30:16.160
<v Speaker 2>Theme music was composed by Blake Maples.

0:30:16.560 --> 0:30:19.960
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0:30:20.000 --> 0:30:22.440
<v Speaker 1>the Money Stuff podcast. We'll be back next week with

0:30:22.600 --> 0:30:23.200
<v Speaker 1>the More Stuff