WEBVTT - Equities in Secaucus: TXSE, PSUS, GME 0:00:03.120 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio News. Hello and welcome to 0:00:10.760 --> 0:00:13.560 the Money Stuff Podcast. You're a weekly podcast where we 0:00:13.640 --> 0:00:17.560 talk about stuff related to money. I'm Matt Levine and 0:00:17.600 --> 0:00:19.799 I are at the Money Stuff column for Bloomberg Opinion. 0:00:20.120 --> 0:00:22.680 I'm Katie Greifeld, a reporter for Bloomberg News and an 0:00:22.720 --> 0:00:24.320 anchor for Bloomberg Television. 0:00:24.880 --> 0:00:27.520 Hello Katie, Hey, Matt, you're very far away. 0:00:27.720 --> 0:00:30.280 I know this is the first time that we've done 0:00:30.280 --> 0:00:32.640 this podcast where we're in different locations. 0:00:33.000 --> 0:00:37.040 Yes, you're at Bloomberg. I am not at Bloomberg. I'm 0:00:37.080 --> 0:00:38.440 in a secret that I've been in my house. 0:00:38.920 --> 0:00:40.760 You're in your house, and I'm in my house because 0:00:40.760 --> 0:00:42.040 I don't actually leave this building. 0:00:44.080 --> 0:00:45.640 What are you talking about today, Katie. 0:00:45.680 --> 0:00:48.400 We're going to talk about Texas at Potential Stock Exchange 0:00:48.440 --> 0:00:51.000 coming to Dallas. We're going to talk about Bill Lackman, 0:00:51.280 --> 0:00:53.840 of course, and then we're going to talk, of course 0:00:54.040 --> 0:00:56.720 about Roaring Kitty, also known as Keith Gill. 0:01:00.040 --> 0:01:01.840 Let's give into it Equities in Dallas. 0:01:02.600 --> 0:01:05.880 Equities in Dallas, the Texas Stock Exchange. That was a 0:01:05.880 --> 0:01:08.440 big splashy report from the Wall Street Journal this week 0:01:08.480 --> 0:01:10.920 that this company would like to start a new stock 0:01:10.920 --> 0:01:12.720 exchange headquartered in Texas. 0:01:13.080 --> 0:01:14.039 It's very exciting. 0:01:14.760 --> 0:01:18.880 I guess it is. So there's so many ways that 0:01:18.920 --> 0:01:21.560 we can attack this. Let's get on it head on. 0:01:21.800 --> 0:01:26.479 In that there's been a lot of attempts to sort 0:01:26.520 --> 0:01:30.760 of launch exchanges. As you go through in many columns, 0:01:30.920 --> 0:01:33.200 the long term stock exchange, we have the members exchange, 0:01:33.200 --> 0:01:37.360 we have the investors exchange. I feel like it's kind 0:01:37.400 --> 0:01:39.800 of easy to launch an exchange and get to one 0:01:39.840 --> 0:01:43.479 to two percent share. What's interesting about this is that 0:01:44.200 --> 0:01:47.840 this is political. This is a politicized stock exchange, even 0:01:47.880 --> 0:01:52.120 if they're trying not to be. The introduction of Texas 0:01:52.680 --> 0:01:54.040 I feel like makes it political. 0:01:54.560 --> 0:01:57.200 Yeah, I mean there is like this sort of movement 0:01:57.480 --> 0:02:02.640 in American business politics to move stuff to Texas, right, 0:02:02.640 --> 0:02:04.320 I mean you see it with Elon Musk trying to 0:02:04.320 --> 0:02:07.520 move his companies to Texas from Delaware. There's the sense 0:02:07.560 --> 0:02:11.560 that like a lot of corporate rules are set from 0:02:11.919 --> 0:02:14.680 you know, New York and Delaware, and that people who 0:02:14.720 --> 0:02:17.760 don't like those rules might find a more sympathetic audience 0:02:17.840 --> 0:02:21.840 in Texas. I don't know that that's exactly relevant to 0:02:21.960 --> 0:02:25.160 this company, but yeah, they're sort of making noises about 0:02:25.160 --> 0:02:28.400 the listing standards. You know, most companies are listed on 0:02:28.440 --> 0:02:31.440 either the New York Stock Exchange or NASDAC, and there 0:02:31.440 --> 0:02:34.680 are rules about corporate governance that apply to listed companies 0:02:34.680 --> 0:02:38.720 and those stock exchanges. And I think the people starting 0:02:38.760 --> 0:02:40.760 this exchange, or at least hinting that some of those 0:02:40.840 --> 0:02:44.239 rules are either too onerous and expensive or they're too 0:02:44.320 --> 0:02:48.560 like woke and left wing, and so they will offer 0:02:48.720 --> 0:02:50.760 a different set of rules in Texas. 0:02:51.160 --> 0:02:54.200 The SEC still has to approve their listing rules, so 0:02:54.200 --> 0:02:56.600 they can't be like too crazy and out there. 0:02:56.720 --> 0:02:58.880 Yeah, I think like some of what's happening here is 0:02:58.919 --> 0:03:01.320 like there's this notion that Nicia and NASDAK accept the 0:03:01.320 --> 0:03:03.799 listing rules. I'm like, that's not exactly true. They sort 0:03:03.800 --> 0:03:07.120 of do it with pressure and input and approval from 0:03:07.160 --> 0:03:10.720 the SEC. So Nice and nas listing rules don't differ 0:03:10.760 --> 0:03:13.040 from each other all that much because it's not like 0:03:13.560 --> 0:03:16.160 Nicia and NASDAG are out there making crazy decisions. It's 0:03:16.160 --> 0:03:19.000 like kind of done in concert with the SEC. So 0:03:19.040 --> 0:03:22.640 there's only so far that the Texas Stock Exchange can differ. 0:03:23.120 --> 0:03:25.760 So I have a free idea for the Texas Stock Exchange. 0:03:28.720 --> 0:03:31.480 I was waiting for your reaction. 0:03:31.800 --> 0:03:34.440 But I'm sure they'd pay you a lot of money 0:03:34.480 --> 0:03:35.360 for that idea, Katie. 0:03:35.440 --> 0:03:38.800 But well you haven't heard, so let me let me 0:03:38.880 --> 0:03:41.920 lay it on you. So, like I said, you can 0:03:41.960 --> 0:03:44.480 get to one to two percent share. But as we've 0:03:44.520 --> 0:03:47.640 seen with some of these other upstart exchanges, it's really 0:03:47.680 --> 0:03:50.800 hard to attract listings. That is a nut that has 0:03:50.880 --> 0:03:53.960 yet to be cracked. What the Texas Stock Exchange should 0:03:53.960 --> 0:03:57.840 focus its efforts on is getting Musk to switch Tesla 0:03:57.880 --> 0:04:01.080 from Nasdaq to the Test Stock Exchange and be like 0:04:01.440 --> 0:04:03.880 the anchor big name listing. 0:04:04.880 --> 0:04:06.640 That's a really good idea. I think they should pay 0:04:06.680 --> 0:04:07.760 you for that idea. I mean, it is a really 0:04:07.760 --> 0:04:10.400 good idea. Right. It's so hard to get listings because 0:04:10.560 --> 0:04:15.520 most companies don't think that much about their listings anymore. Right, Like, 0:04:15.520 --> 0:04:18.000 if you're listed on the top tier of NASDAC or 0:04:18.000 --> 0:04:20.960 you're listed on the top tier of Nice, it's fine. 0:04:21.279 --> 0:04:23.640 Like you're not getting that many perks from switching from 0:04:23.640 --> 0:04:26.480 one to the other, and it's like an administrative hassle 0:04:26.480 --> 0:04:29.159 and it's confusing, So why would you switch? Right? Most 0:04:29.200 --> 0:04:33.120 companies think about listings only really when they're going public. 0:04:33.480 --> 0:04:35.760 I mean, you're going public. It is such a high 0:04:35.760 --> 0:04:38.480 pressure situation. It is so important to get it right. 0:04:38.800 --> 0:04:41.600 And if you list on some untested exchange and you're 0:04:41.640 --> 0:04:44.680 the first company listing on that exchange, there's that small 0:04:45.080 --> 0:04:48.240 potential for catastrophe, and you really really really don't want 0:04:48.279 --> 0:04:51.320 that when you're going public. So if you are going 0:04:51.320 --> 0:04:54.400 to compete for listings, you do have to start, probably 0:04:54.800 --> 0:04:59.120 with already public companies, and you want companies that are 0:04:59.600 --> 0:05:03.320 interesting it in doing weird stuff and not afraid of 0:05:03.360 --> 0:05:06.279 the like weird stigma of being the only company listed 0:05:06.320 --> 0:05:08.760 on a weird new exchange with lower listing standards. And 0:05:08.800 --> 0:05:10.360 that all does sound like Tesla. 0:05:10.600 --> 0:05:13.239 Yeah, and I feel like the risk of catastrophe isn't 0:05:13.279 --> 0:05:15.599 necessarily going to deter Elon musk Away. 0:05:15.839 --> 0:05:17.920 Oh yeah, I think the rest of the catastrophe is much 0:05:17.920 --> 0:05:20.320 lower for an already public company, right, Like the rest 0:05:20.400 --> 0:05:22.920 of catastrophe is mainly for an IPO. Right If you're 0:05:22.920 --> 0:05:25.840 already public, it can only go so wrong on your 0:05:25.839 --> 0:05:27.719 first day of trading, Like the worst thing that happens 0:05:27.720 --> 0:05:29.200 is like takes a little extra time to open you 0:05:29.200 --> 0:05:31.520 for trading. But yes, also I agree that even if 0:05:31.560 --> 0:05:34.560 there were a risk of catastrophe. Elon Musk would say, great, 0:05:34.640 --> 0:05:37.560 sign me up. So I think it's a good idea, Yeah, 0:05:37.640 --> 0:05:39.920 not to step on your territory. But like, I don't 0:05:39.920 --> 0:05:43.560 think that the other listings that they would want to 0:05:43.600 --> 0:05:47.680 compete for are for ETFs, right, because I assume that, 0:05:47.800 --> 0:05:49.560 you know, if you're an ETF is sure you have 0:05:49.560 --> 0:05:51.920 a lot of ETFs. It's a little bit less higher 0:05:51.960 --> 0:05:54.800 stakes each time to like pick a listing exchange and 0:05:55.120 --> 0:05:58.600 I assume they're angling for that product. I don't know. 0:05:58.960 --> 0:06:00.760 Yeah, if you take a look, I mean at their 0:06:01.120 --> 0:06:03.880 various press releases that's in there that they do plan 0:06:03.960 --> 0:06:08.160 to compete on exchange traded product listings through lower fees 0:06:08.720 --> 0:06:11.880 ETF listings. This is, you know, something that I'm actually 0:06:11.960 --> 0:06:16.839 reporting out right now. But I am curious how much 0:06:17.520 --> 0:06:20.000 of a business and how bigger of a business that 0:06:20.120 --> 0:06:22.760 might become for exchanges because you think about the current 0:06:23.200 --> 0:06:27.279 IPO market and there's very little going on relative to 0:06:27.360 --> 0:06:30.800 you know, the halcyon days of like twenty twenty one 0:06:31.040 --> 0:06:33.600 or whenever the last big rush was. But I mean 0:06:33.600 --> 0:06:36.600 there are hundreds of ETFs that launch and list every 0:06:36.640 --> 0:06:40.200 single year, and I mean those ETFs. They pay an 0:06:40.200 --> 0:06:43.040 initial listing fee and then they pay annual listing fees, 0:06:43.600 --> 0:06:47.000 so I mean that continues to hum along. It was 0:06:47.400 --> 0:06:49.640 just so fascinating to see that press release that that 0:06:49.800 --> 0:06:52.280 specifically is an area that they want to target, because 0:06:52.360 --> 0:06:55.680 right now it's NASI, it's NASDAC, it's also Cibo, and 0:06:55.960 --> 0:06:57.839 Cibo for example, has. 0:06:57.680 --> 0:07:01.200 Been taking bath Exchange is not a major listening venue 0:07:01.240 --> 0:07:03.760 for public companies, but it is for ets right. Yeah, 0:07:03.800 --> 0:07:05.440 it's the easiest space to compete in. 0:07:05.760 --> 0:07:10.120 It's the second biggest venue, so we'll see. But aside 0:07:10.120 --> 0:07:12.600 from just listing fees, which I mean, who knows. But 0:07:12.760 --> 0:07:15.880 when it comes to transaction volume, you think about black 0:07:15.960 --> 0:07:20.440 Rocks Bitcoin ETF, which is now, since it launched in January, 0:07:20.880 --> 0:07:23.640 the biggest bitcoin ETF in the world. It does a 0:07:23.680 --> 0:07:27.080 lot in trading volume, it's listed on Nasdaq. I mean, 0:07:27.080 --> 0:07:30.120 it's done much better than some of the recent IPOs 0:07:30.160 --> 0:07:33.680 from this year. So you have to imagine the ETF business, 0:07:33.760 --> 0:07:37.239 the ETP business for these exchanges. It's a nice cushion 0:07:37.280 --> 0:07:38.840 from what's going on in IPO land. 0:07:39.920 --> 0:07:42.440 Yeah, and if you're starting from scratch, it does seem 0:07:42.440 --> 0:07:44.560 like an easier thing to pursue. Now do you think 0:07:44.600 --> 0:07:47.320 that you know, as you said, it's like a lot 0:07:47.360 --> 0:07:49.320 of exchanges have started and gotten to like one to 0:07:49.320 --> 0:07:51.840 two percent of market share and then kind of plateau there. 0:07:53.360 --> 0:07:55.960 My impression is that's not the worst business, because the 0:07:55.960 --> 0:08:00.600 economics of exchanges are very weird. And one thing that 0:08:00.680 --> 0:08:03.240 sort of happens is that if you are a big 0:08:03.280 --> 0:08:06.480 broker or a big electronic market maker, you're sort of 0:08:06.520 --> 0:08:09.840 obligated to connect to every exchange because you have obligations 0:08:09.880 --> 0:08:12.600 to get your clients the best execution, and so you 0:08:12.680 --> 0:08:15.160 have to know whatever exchange is doing. So even if 0:08:15.200 --> 0:08:18.400 you sort of say, I don't think the Texas Stock 0:08:18.440 --> 0:08:20.600 Exchange is ever going to have almost ever going to 0:08:20.600 --> 0:08:22.520 have the best price on any stock, you can't be 0:08:22.520 --> 0:08:24.760 sure of that. So you have to like connect and 0:08:24.880 --> 0:08:28.160 check their prices before you trade somewhere else. And so 0:08:28.280 --> 0:08:31.040 you're paying them for like connections and for data fees, 0:08:31.520 --> 0:08:34.880 and so anyone who's like a certified official national stock 0:08:34.960 --> 0:08:37.880 exchange can get some revenue from just like charging for data. 0:08:38.360 --> 0:08:43.160 So it's this interestingly regulatorily protected business model that when 0:08:43.200 --> 0:08:45.280 you start an exchange and you go out and pitch investors, 0:08:45.280 --> 0:08:47.080 you have to like tell a story about how you 0:08:47.120 --> 0:08:48.920 know we're going to be the anti woke exchange. But 0:08:48.960 --> 0:08:50.880 like some exime, once you have the exchange, that doesn't 0:08:50.880 --> 0:08:52.600 matter what you do. You can just collect the data fees. 0:08:52.840 --> 0:08:53.560 Sounds pretty good, so. 0:08:53.600 --> 0:08:56.600 As you actually intend to like displays nice and Nasdaq 0:08:56.640 --> 0:08:58.199 as like one of the major listening venues, which I 0:08:58.200 --> 0:09:00.200 think is much much much harder to do. 0:09:00.679 --> 0:09:04.080 Yeah, I mean, I feel like I've done a good 0:09:04.160 --> 0:09:06.439 job of not exposing my bias thus far. 0:09:06.520 --> 0:09:11.120 So I wouldn't say one other thing about the Texas 0:09:11.120 --> 0:09:13.400 Stock Exchange. Two other things. When is the phrase equities 0:09:13.400 --> 0:09:15.840 in Dallas, which of course comes from liars poker, where 0:09:15.840 --> 0:09:18.520 it is used as an insult because the worst trainees 0:09:18.559 --> 0:09:21.400 in the solive and training program were sent to trade equities, And. 0:09:21.520 --> 0:09:23.480 Yeah, I missed that reference is. 0:09:23.360 --> 0:09:23.920 Oh did you? 0:09:24.120 --> 0:09:25.280 Oh? Yeah, let me tell you. 0:09:25.280 --> 0:09:27.640 I had a reader email me literally. I wrote the 0:09:27.640 --> 0:09:30.600 newsletter about the stock Exchange and the section header was 0:09:30.880 --> 0:09:34.960 equities in Dallas and someone replied saying, I can't believe 0:09:35.240 --> 0:09:38.160 the section header for the Texas Stock Exchange wasn't equities 0:09:38.160 --> 0:09:40.600 in Dallas. I was like, wait, it was just read it. 0:09:40.920 --> 0:09:43.480 People were so keen to come up with that joke 0:09:43.520 --> 0:09:45.400 on their own, that they were like emailing me that 0:09:45.480 --> 0:09:47.320 joke after I already read it. I didn't come up 0:09:47.320 --> 0:09:49.680 with my own either, but someone else told me. But anyway, 0:09:49.760 --> 0:09:52.640 Equities in Dallas like a Great Wall Street insult, which 0:09:52.679 --> 0:09:55.679 is now like the actual business model of the Texas 0:09:55.679 --> 0:09:56.360 Stock Exchange. 0:09:56.400 --> 0:09:58.400 Maybe it will soon be a compliment. Perhaps. 0:09:58.720 --> 0:10:01.199 I think Dallas has sort of self consciously reclaimed its 0:10:01.200 --> 0:10:03.319 statue as a financial center and been like, no, no, 0:10:03.520 --> 0:10:05.880 it's not Equities in Dallas anymore. Now it's good. But 0:10:05.920 --> 0:10:07.480 the other thing I want to say about this exchange 0:10:07.520 --> 0:10:09.840 is that I wrote that, you know, it's all electronic, right, 0:10:10.080 --> 0:10:11.920 No one really stands on the floor of stock exchange 0:10:11.960 --> 0:10:14.920 except like TV reporters now. But you know, I wrote 0:10:14.960 --> 0:10:17.079 that their computer for trading stocks would be in Texas, 0:10:17.320 --> 0:10:18.720 and they actually told me no, they will have a 0:10:18.760 --> 0:10:21.040 data center and somewhere in Dallas. But they also have 0:10:21.040 --> 0:10:21.880 a data center. 0:10:21.679 --> 0:10:23.120 In Secaucus, as they should. 0:10:23.280 --> 0:10:27.320 As they should because all US stock exchanges sort of 0:10:27.400 --> 0:10:31.080 have to be in northern New Jersey because it is 0:10:31.160 --> 0:10:35.480 all this interlinked web of trading venues where like everyone 0:10:35.600 --> 0:10:38.440 trades on every venue and you sometimes have to do 0:10:38.559 --> 0:10:42.079 arbitrage trades where like a stock is trading at one 0:10:42.080 --> 0:10:44.520 price on BATS and another price on NASDAIK, and so 0:10:44.600 --> 0:10:46.800 you want to do the trade between them. To do that, 0:10:46.840 --> 0:10:49.719 you have to move data. And it takes longer to 0:10:49.760 --> 0:10:52.440 move data over long distances than it does over short distances. 0:10:52.559 --> 0:10:56.040 And this business is so like competitive and so focused 0:10:56.120 --> 0:10:59.240 on speed that people locate their computers in the data 0:10:59.240 --> 0:11:01.720 center with the extan computers. And the idea of sending 0:11:01.720 --> 0:11:03.480 your data all the way to Dallas would be weird. 0:11:03.480 --> 0:11:05.040 It would be so far away, it would takes so 0:11:05.080 --> 0:11:06.800 long for your data to get there. So of course 0:11:06.800 --> 0:11:10.200 the Texas Stock Exchange will actually have computers in secaucas 0:11:10.320 --> 0:11:12.640 next to all the other stock exchanges computers. 0:11:13.360 --> 0:11:17.000 I love that that the beating heart that's a financial 0:11:17.000 --> 0:11:18.600 world is in northern New Jersey. 0:11:18.720 --> 0:11:21.079 Incas right, It's like suburban Northern New Jersey is like 0:11:21.120 --> 0:11:37.679 where everything is. 0:11:38.920 --> 0:11:42.719 I just my brain like is cooked. I can I 0:11:42.760 --> 0:11:44.760 can feel it like sizzling and frying. 0:11:45.280 --> 0:11:50.200 That's okay, because now we're going to talk about Bill Lackman. 0:11:50.880 --> 0:11:54.240 Bill Lackman, Bill Ackman, There's a lot to talk about 0:11:54.240 --> 0:11:54.840 with Bill Lackman. 0:11:55.360 --> 0:11:58.640 There usually is, but now we're talking about his closed 0:11:58.760 --> 0:12:01.440 end fund. We're among other things. 0:12:01.800 --> 0:12:04.240 That's the only thing I was referring to. I am 0:12:04.280 --> 0:12:06.920 so excited to talk about his closed down fund plans, 0:12:07.080 --> 0:12:09.520 specifically in the US. And then there's also the IPO. 0:12:10.040 --> 0:12:13.559 Yeah right, they go together, right, Yeah, he's got a 0:12:13.600 --> 0:12:14.480 lot of stuff gone up. 0:12:14.679 --> 0:12:17.840 Where do you want to start? Perhaps the IPO, I 0:12:17.840 --> 0:12:18.200 don't know. 0:12:18.320 --> 0:12:20.960 Yeah, So they're link so basically starting last week of 0:12:21.000 --> 0:12:23.040 the Welsher Journal reported and then there's been some good 0:12:23.040 --> 0:12:26.080 Plomberg flo up. There's this package of Bill Lackman news. 0:12:26.120 --> 0:12:29.079 So Bill Lackman runs Pershing Square Capital Management, which is 0:12:29.120 --> 0:12:32.120 a hedge fund firm, has been a hedgehund firm. Now 0:12:32.160 --> 0:12:33.720 most of its money is in the form of a 0:12:33.800 --> 0:12:37.240 closed end fund in Europe called Pushing Square Holdings runs 0:12:37.240 --> 0:12:39.120 like eighteen billion dollars, not all of which, most of 0:12:39.160 --> 0:12:42.480 which is in Persian car holdings. US investors they kind 0:12:42.520 --> 0:12:44.760 of can buy Pershing Square Holdings, but not really. It's 0:12:44.760 --> 0:12:46.720 like bad for taxes and they can't market it. So 0:12:47.000 --> 0:12:50.160 it's mostly European investors. But Bill Lackman is in New 0:12:50.200 --> 0:12:52.680 York and the fund mostly invests in the US. Companies, 0:12:53.120 --> 0:12:57.720 and so he wants to open a closed end fund 0:12:57.840 --> 0:13:00.439 in the US that would do the same thing. It 0:13:00.480 --> 0:13:03.560 would buy US companies, but it would be much more 0:13:03.559 --> 0:13:05.760 convenient for US investors and he could market it to 0:13:05.840 --> 0:13:08.839 US investors. But then last week the journal reported that 0:13:09.600 --> 0:13:12.600 he's also planning an IPO of the management company of 0:13:12.600 --> 0:13:16.400 Pushing Square, so the management company itself would go public, 0:13:16.640 --> 0:13:18.280 probably like at the end of next year or something. 0:13:18.600 --> 0:13:20.720 And in the lead up to that, he sold the stake. 0:13:21.080 --> 0:13:23.080 He sold like ten percent of the management company to 0:13:23.800 --> 0:13:27.079 some private investors for a billion dollars, so valuing the 0:13:27.160 --> 0:13:30.040 management company at ten billion dollars, which is really quite 0:13:30.160 --> 0:13:33.920 rich for a hedgehome firm that manages eighteen billion dollars. 0:13:33.920 --> 0:13:36.400 To value the management company at ten billion is pretty rich. 0:13:36.480 --> 0:13:39.360 But then also Bloomberg reported that he's planning to raise 0:13:39.800 --> 0:13:43.120 twenty five billion dollars for the US closed und fund, 0:13:43.320 --> 0:13:45.800 which helps explain the valuation of the management company. He's like, oh, 0:13:45.840 --> 0:13:47.760 he's going to run like a lot more money. But 0:13:47.880 --> 0:13:50.000 on the other hand, that's a sort of ambitious target 0:13:50.040 --> 0:13:52.400 to raise. So that's kind of where the news is. 0:13:52.720 --> 0:13:54.520 Yeah, I mean, starting with the ten and a half 0:13:54.559 --> 0:13:58.800 billion dollar valuation. That's something close to sixty percent of 0:13:58.800 --> 0:14:02.199 its assets. And according to the Wall Street Journal, they 0:14:02.240 --> 0:14:06.400 reported that Acman told investors to compare Pershing Square to 0:14:07.000 --> 0:14:10.520 Brookfield Asset Management, Blue Oul, et cetera. But then you 0:14:10.559 --> 0:14:13.760 take a look at how they're valued. And this is 0:14:13.760 --> 0:14:16.920 something that Aaron Brown pointed out in Bloomberg Opinion that 0:14:17.559 --> 0:14:21.560 typically they have market capitalizations that are like fifteen to 0:14:21.640 --> 0:14:24.920 eighteen percent of their assets. So I mean, comparing them 0:14:24.960 --> 0:14:27.680 to that peer group, it's still quite rich. But I 0:14:27.680 --> 0:14:30.960 guess if you are planning to quadruple assets or something, 0:14:31.480 --> 0:14:32.640 it makes a little bit more sense. 0:14:32.760 --> 0:14:35.200 I mean, like my doneb math is like you can 0:14:35.240 --> 0:14:37.880 charge some fees on your assets, right, and like what 0:14:37.960 --> 0:14:39.800 kind of fees can you charge your Blue Ol or 0:14:39.880 --> 0:14:42.920 Pushing Square or somebody like that. You can charge you 0:14:43.000 --> 0:14:45.320 do one or two percent of assets, right, you know, 0:14:45.360 --> 0:14:47.320 maybe a little more if you're making big performance fees. 0:14:47.440 --> 0:14:49.560 And so if you're charging one or two percent of assets, 0:14:49.720 --> 0:14:52.240 you capitalize that at like ten times, then the value 0:14:52.240 --> 0:14:53.920 of the managing company is ten to twenty percent of 0:14:53.960 --> 0:14:57.040 assets under management. So sixty percent is really big, right, 0:14:57.040 --> 0:14:59.760 Like if you're charging six percent of assets per year, 0:15:00.160 --> 0:15:02.920 then you can get that kind of valuation. But then 0:15:03.040 --> 0:15:05.480 you know, if you're judging six percent of who would 0:15:05.480 --> 0:15:07.520 pay you six percent of ethsets to run their money? 0:15:07.760 --> 0:15:09.320 But yeah, I mean I think that the idea is 0:15:09.360 --> 0:15:12.880 that you're comparing them to these other asset managers, but 0:15:13.480 --> 0:15:15.760 you're baking in a lot of growth in the very 0:15:15.800 --> 0:15:19.400 near future, which is ambitious, right, Blue Owl and Brookfield 0:15:19.400 --> 0:15:22.680 also want to grow assets under management, but like Pushing 0:15:22.720 --> 0:15:26.080 Square is gonna double assets under management in like six months. Okay, 0:15:26.280 --> 0:15:28.160 maybe I do think I think that's like a little 0:15:28.200 --> 0:15:31.400 bit fascinating about Pushing Square's business model, and like why 0:15:31.480 --> 0:15:33.920 they think they can get a premium valuation is it's 0:15:33.960 --> 0:15:37.880 so simple, right, Like they have one investing team, they 0:15:37.880 --> 0:15:40.480 buy like twelve stocks, they hold them for the long term. 0:15:40.520 --> 0:15:43.160 They're all like liquid public US stocks, so that there's 0:15:43.200 --> 0:15:46.560 plenty of capacity. And so like Blue Owl, you're paying 0:15:46.560 --> 0:15:47.920 a lot for a lot of people that go out 0:15:47.920 --> 0:15:49.840 on the road and like find companies and try to 0:15:49.880 --> 0:15:52.480 make direct loans to them, manage the credit risk, and 0:15:52.560 --> 0:15:55.200 like the loans are constantly like maturing. You have to 0:15:55.200 --> 0:15:57.720 find new loans. Your money is in funds that have 0:15:57.760 --> 0:15:59.000 a limited life, and so you have to like go 0:15:59.080 --> 0:16:01.440 raise new funds and all this stuff. And Bill Ackman 0:16:01.520 --> 0:16:03.080 is like, I just have like this one permanent fund 0:16:03.200 --> 0:16:06.560 or two permanent funds now, and I buy twelve stocks 0:16:06.560 --> 0:16:08.160 and like that's it. That's the whole business. 0:16:08.240 --> 0:16:10.920 So it's really I love that. I'm fascinated with this 0:16:11.040 --> 0:16:13.360 investing style just because it is so simple. 0:16:13.520 --> 0:16:16.160 Say I'm exaggerating a little bit. He has made a 0:16:16.160 --> 0:16:19.240 lot of money doing like asymmetric derivative trades, where like 0:16:19.240 --> 0:16:21.920 he'll pay like a little bit of money for CDX 0:16:22.040 --> 0:16:25.560 indexes like just before COVID hits, and like make one 0:16:25.640 --> 0:16:28.160 hundred times his money on these derivative trades. So he's 0:16:28.200 --> 0:16:30.040 like putting some of that into the product too. So 0:16:30.080 --> 0:16:31.800 it's a little hedge funny, but from day to day 0:16:31.840 --> 0:16:33.400 it kind of looks like buying twelve stocks. 0:16:33.720 --> 0:16:36.440 Yeah, I mean, I tend to think of those as 0:16:36.480 --> 0:16:38.800 just hedges and thus don't think of them very much, 0:16:38.840 --> 0:16:41.320 but maybe I should be thinking about them more. 0:16:41.520 --> 0:16:43.160 Well, they are hedges, but like you know, if you 0:16:43.240 --> 0:16:45.640 buy the S and P five hundred, you're not getting 0:16:45.640 --> 0:16:48.000 those hedges, right, This is true. What you're getting here 0:16:48.080 --> 0:16:51.960 is exposure to large cab us stocks plus some hedging 0:16:52.000 --> 0:16:53.960 for bad situations, which is like you know, which is 0:16:53.960 --> 0:16:54.800 a hedgehun product. 0:16:55.200 --> 0:16:58.960 I do really just find the simplicity, though, really appealing, 0:16:58.960 --> 0:17:01.680 and it's something that's coming a little bit back in vogue. 0:17:02.000 --> 0:17:04.040 If you think about what's really hot in the ETF 0:17:04.080 --> 0:17:06.560 world where I live, you have all these income products, 0:17:06.640 --> 0:17:10.040 these very options overlay products, and then you have just 0:17:10.880 --> 0:17:15.040 super concentrated equity ETFs that are launching with greater and 0:17:15.080 --> 0:17:17.720 greater frequency because I don't know, it feels like a 0:17:17.720 --> 0:17:20.320 while we swung into at least in the ETF world, 0:17:20.520 --> 0:17:24.840 like these basically closet indexing type active funds. Now people 0:17:24.840 --> 0:17:27.720 are just going super active because they found out that's 0:17:27.720 --> 0:17:30.520 actually a really hard way to beat the benchmark. But 0:17:30.800 --> 0:17:34.119 I mean it kind of always mixes my brain up 0:17:34.160 --> 0:17:36.120 a little bit that, like, you have a hedge fund 0:17:36.600 --> 0:17:39.320 that is going public, and I know there's a few 0:17:39.359 --> 0:17:45.000 examples of that, but if you're an equity investor in pershing, 0:17:45.320 --> 0:17:48.479 I feel like you're just buying a stock with a 0:17:48.560 --> 0:17:51.199 ton of key Man risk and that doesn't make a 0:17:51.200 --> 0:17:52.000 ton of sense to me. 0:17:52.600 --> 0:17:54.760 You definitely are. I mean, it's interesting because like you're 0:17:54.760 --> 0:17:57.080 making two baths, right, What is the business model of 0:17:57.080 --> 0:18:00.000 Pershing compared to other hedgehunt firms? Is very appealing because 0:18:00.560 --> 0:18:02.280 all their money is really locked up, you know. It's 0:18:02.280 --> 0:18:04.560 the Pershing Squareholdings closed on fund in Europe and then 0:18:04.600 --> 0:18:08.840 this anticipated fund in the US, which are permanent capital vehicles, 0:18:08.960 --> 0:18:12.000 like the money can't go away and their revenue comes 0:18:12.040 --> 0:18:15.080 mostly from management fees. Right, So, like investors are very 0:18:15.119 --> 0:18:17.760 nervous about paying for incentive fees for hedge funds because 0:18:17.800 --> 0:18:19.840 like the fund has a bad year, it doesn't earn 0:18:19.840 --> 0:18:21.879 any incentive fees, right. Like, if you're buying a management 0:18:21.880 --> 0:18:23.680 company that makes a lot of money on incentive fees, 0:18:23.880 --> 0:18:26.000 you value those at kind of a low multiple because 0:18:26.160 --> 0:18:27.960 you can't be sure they're going to be consistent from 0:18:28.000 --> 0:18:30.080 your dear Krishan Square is like you're gonna make all 0:18:30.080 --> 0:18:32.200 its money on like two percent management fees. So it's 0:18:32.320 --> 0:18:35.159 very consistent revenue on very locked up money. So on 0:18:35.200 --> 0:18:36.880 the one hand, it's like a very safe bet, right. 0:18:37.200 --> 0:18:39.080 But the other thing you're buying is like Bill Ackman 0:18:39.119 --> 0:18:41.680 as a person, right, and you're buying like his ability 0:18:41.720 --> 0:18:43.800 to go raise twenty five million dollars, which again, is 0:18:43.840 --> 0:18:46.800 like really ambitious. Right again, Like every other investment firm 0:18:46.800 --> 0:18:48.760 would love to double their assets next year, but like 0:18:49.240 --> 0:18:52.040 Bill Ackman is selling his ability to double his assets 0:18:52.200 --> 0:18:54.399 to investors, right, And I agree, it's a lot of 0:18:54.480 --> 0:18:57.280 keymand risk. It's like there's like kind of a memestock 0:18:57.400 --> 0:18:59.680 vibe to it, where like you're buying this guy who 0:18:59.760 --> 0:19:03.640 is like a financial celebrity, who's on Twitter, who's on television, 0:19:03.960 --> 0:19:06.240 his personal life is in the news, you know, like 0:19:06.280 --> 0:19:08.359 a guy who has a lot of retail appeal and 0:19:08.400 --> 0:19:10.720 who's like very explicitly marketing that as part of the 0:19:10.720 --> 0:19:13.760 business proposition. So yeah, like that's what people are investing in, 0:19:13.840 --> 0:19:15.920 is like his ability to like monetize that celebrity to 0:19:16.000 --> 0:19:18.080 raise a lot of money. But yeah, like what if 0:19:18.080 --> 0:19:21.280