Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Hello and welcome to
Speaker 1: the Money Stuff Podcast. You're a weekly podcast where we
Speaker 1: talk about stuff related to money. I'm Matt Levine and
Speaker 1: I are at the Money Stuff column for Bloomberg Opinion.
Speaker 2: I'm Katie Greifeld, a reporter for Bloomberg News and an
Speaker 2: anchor for Bloomberg Television.
Speaker 1: Hello Katie, Hey, Matt, you're very far away.
Speaker 2: I know this is the first time that we've done
Speaker 2: this podcast where we're in different locations.
Speaker 1: Yes, you're at Bloomberg. I am not at Bloomberg. I'm
Speaker 1: in a secret that I've been in my house.
Speaker 2: You're in your house, and I'm in my house because
Speaker 2: I don't actually leave this building.
Speaker 1: What are you talking about today, Katie.
Speaker 2: We're going to talk about Texas at Potential Stock Exchange
Speaker 2: coming to Dallas. We're going to talk about Bill Lackman,
Speaker 2: of course, and then we're going to talk, of course
Speaker 2: about Roaring Kitty, also known as Keith Gill.
Speaker 1: Let's give into it Equities in Dallas.
Speaker 2: Equities in Dallas, the Texas Stock Exchange. That was a
Speaker 2: big splashy report from the Wall Street Journal this week
Speaker 2: that this company would like to start a new stock
Speaker 2: exchange headquartered in Texas.
Speaker 1: It's very exciting.
Speaker 2: I guess it is. So there's so many ways that
Speaker 2: we can attack this. Let's get on it head on.
Speaker 2: In that there's been a lot of attempts to sort
Speaker 2: of launch exchanges. As you go through in many columns,
Speaker 2: the long term stock exchange, we have the members exchange,
Speaker 2: we have the investors exchange. I feel like it's kind
Speaker 2: of easy to launch an exchange and get to one
Speaker 2: to two percent share. What's interesting about this is that
Speaker 2: this is political. This is a politicized stock exchange, even
Speaker 2: if they're trying not to be. The introduction of Texas
Speaker 2: I feel like makes it political.
Speaker 1: Yeah, I mean there is like this sort of movement
Speaker 1: in American business politics to move stuff to Texas, right,
Speaker 1: I mean you see it with Elon Musk trying to
Speaker 1: move his companies to Texas from Delaware. There's the sense
Speaker 1: that like a lot of corporate rules are set from
Speaker 1: you know, New York and Delaware, and that people who
Speaker 1: don't like those rules might find a more sympathetic audience
Speaker 1: in Texas. I don't know that that's exactly relevant to
Speaker 1: this company, but yeah, they're sort of making noises about
Speaker 1: the listing standards. You know, most companies are listed on
Speaker 1: either the New York Stock Exchange or NASDAC, and there
Speaker 1: are rules about corporate governance that apply to listed companies
Speaker 1: and those stock exchanges. And I think the people starting
Speaker 1: this exchange, or at least hinting that some of those
Speaker 1: rules are either too onerous and expensive or they're too
Speaker 1: like woke and left wing, and so they will offer
Speaker 1: a different set of rules in Texas.
Speaker 2: The SEC still has to approve their listing rules, so
Speaker 2: they can't be like too crazy and out there.
Speaker 1: Yeah, I think like some of what's happening here is
Speaker 1: like there's this notion that Nicia and NASDAK accept the
Speaker 1: listing rules. I'm like, that's not exactly true. They sort
Speaker 1: of do it with pressure and input and approval from
Speaker 1: the SEC. So Nice and nas listing rules don't differ
Speaker 1: from each other all that much because it's not like
Speaker 1: Nicia and NASDAG are out there making crazy decisions. It's
Speaker 1: like kind of done in concert with the SEC. So
Speaker 1: there's only so far that the Texas Stock Exchange can differ.
Speaker 2: So I have a free idea for the Texas Stock Exchange.
Speaker 2: I was waiting for your reaction.
Speaker 1: But I'm sure they'd pay you a lot of money
Speaker 1: for that idea, Katie.
Speaker 2: But well you haven't heard, so let me let me
Speaker 2: lay it on you. So, like I said, you can
Speaker 2: get to one to two percent share. But as we've
Speaker 2: seen with some of these other upstart exchanges, it's really
Speaker 2: hard to attract listings. That is a nut that has
Speaker 2: yet to be cracked. What the Texas Stock Exchange should
Speaker 2: focus its efforts on is getting Musk to switch Tesla
Speaker 2: from Nasdaq to the Test Stock Exchange and be like
Speaker 2: the anchor big name listing.
Speaker 1: That's a really good idea. I think they should pay
Speaker 1: you for that idea. I mean, it is a really
Speaker 1: good idea. Right. It's so hard to get listings because
Speaker 1: most companies don't think that much about their listings anymore. Right, Like,
Speaker 1: if you're listed on the top tier of NASDAC or
Speaker 1: you're listed on the top tier of Nice, it's fine.
Speaker 1: Like you're not getting that many perks from switching from
Speaker 1: one to the other, and it's like an administrative hassle
Speaker 1: and it's confusing, So why would you switch? Right? Most
Speaker 1: companies think about listings only really when they're going public.
Speaker 1: I mean, you're going public. It is such a high
Speaker 1: pressure situation. It is so important to get it right.
Speaker 1: And if you list on some untested exchange and you're
Speaker 1: the first company listing on that exchange, there's that small
Speaker 1: potential for catastrophe, and you really really really don't want
Speaker 1: that when you're going public. So if you are going
Speaker 1: to compete for listings, you do have to start, probably
Speaker 1: with already public companies, and you want companies that are
Speaker 1: interesting it in doing weird stuff and not afraid of
Speaker 1: the like weird stigma of being the only company listed
Speaker 1: on a weird new exchange with lower listing standards. And
Speaker 1: that all does sound like Tesla.
Speaker 2: Yeah, and I feel like the risk of catastrophe isn't
Speaker 2: necessarily going to deter Elon musk Away.
Speaker 1: Oh yeah, I think the rest of the catastrophe is much
Speaker 1: lower for an already public company, right, Like the rest
Speaker 1: of catastrophe is mainly for an IPO. Right If you're
Speaker 1: already public, it can only go so wrong on your
Speaker 1: first day of trading, Like the worst thing that happens
Speaker 1: is like takes a little extra time to open you
Speaker 1: for trading. But yes, also I agree that even if
Speaker 1: there were a risk of catastrophe. Elon Musk would say, great,
Speaker 1: sign me up. So I think it's a good idea, Yeah,
Speaker 1: not to step on your territory. But like, I don't
Speaker 1: think that the other listings that they would want to
Speaker 1: compete for are for ETFs, right, because I assume that,
Speaker 1: you know, if you're an ETF is sure you have
Speaker 1: a lot of ETFs. It's a little bit less higher
Speaker 1: stakes each time to like pick a listing exchange and
Speaker 1: I assume they're angling for that product. I don't know.
Speaker 2: Yeah, if you take a look, I mean at their
Speaker 2: various press releases that's in there that they do plan
Speaker 2: to compete on exchange traded product listings through lower fees
Speaker 2: ETF listings. This is, you know, something that I'm actually
Speaker 2: reporting out right now. But I am curious how much
Speaker 2: of a business and how bigger of a business that
Speaker 2: might become for exchanges because you think about the current
Speaker 2: IPO market and there's very little going on relative to
Speaker 2: you know, the halcyon days of like twenty twenty one
Speaker 2: or whenever the last big rush was. But I mean
Speaker 2: there are hundreds of ETFs that launch and list every
Speaker 2: single year, and I mean those ETFs. They pay an
Speaker 2: initial listing fee and then they pay annual listing fees,
Speaker 2: so I mean that continues to hum along. It was
Speaker 2: just so fascinating to see that press release that that
Speaker 2: specifically is an area that they want to target, because
Speaker 2: right now it's NASI, it's NASDAC, it's also Cibo, and
Speaker 2: Cibo for example, has.
Speaker 1: Been taking bath Exchange is not a major listening venue
Speaker 1: for public companies, but it is for ets right. Yeah,
Speaker 1: it's the easiest space to compete in.
Speaker 2: It's the second biggest venue, so we'll see. But aside
Speaker 2: from just listing fees, which I mean, who knows. But
Speaker 2: when it comes to transaction volume, you think about black
Speaker 2: Rocks Bitcoin ETF, which is now, since it launched in January,
Speaker 2: the biggest bitcoin ETF in the world. It does a
Speaker 2: lot in trading volume, it's listed on Nasdaq. I mean,
Speaker 2: it's done much better than some of the recent IPOs
Speaker 2: from this year. So you have to imagine the ETF business,
Speaker 2: the ETP business for these exchanges. It's a nice cushion
Speaker 2: from what's going on in IPO land.
Speaker 1: Yeah, and if you're starting from scratch, it does seem
Speaker 1: like an easier thing to pursue. Now do you think
Speaker 1: that you know, as you said, it's like a lot
Speaker 1: of exchanges have started and gotten to like one to
Speaker 1: two percent of market share and then kind of plateau there.
Speaker 1: My impression is that's not the worst business, because the
Speaker 1: economics of exchanges are very weird. And one thing that
Speaker 1: sort of happens is that if you are a big
Speaker 1: broker or a big electronic market maker, you're sort of
Speaker 1: obligated to connect to every exchange because you have obligations
Speaker 1: to get your clients the best execution, and so you
Speaker 1: have to know whatever exchange is doing. So even if
Speaker 1: you sort of say, I don't think the Texas Stock
Speaker 1: Exchange is ever going to have almost ever going to
Speaker 1: have the best price on any stock, you can't be
Speaker 1: sure of that. So you have to like connect and
Speaker 1: check their prices before you trade somewhere else. And so
Speaker 1: you're paying them for like connections and for data fees,
Speaker 1: and so anyone who's like a certified official national stock
Speaker 1: exchange can get some revenue from just like charging for data.
Speaker 1: So it's this interestingly regulatorily protected business model that when
Speaker 1: you start an exchange and you go out and pitch investors,
Speaker 1: you have to like tell a story about how you
Speaker 1: know we're going to be the anti woke exchange. But
Speaker 1: like some exime, once you have the exchange, that doesn't
Speaker 1: matter what you do. You can just collect the data fees.
Speaker 2: Sounds pretty good, so.
Speaker 1: As you actually intend to like displays nice and Nasdaq
Speaker 1: as like one of the major listening venues, which I
Speaker 1: think is much much much harder to do.
Speaker 2: Yeah, I mean, I feel like I've done a good
Speaker 2: job of not exposing my bias thus far.
Speaker 1: So I wouldn't say one other thing about the Texas
Speaker 1: Stock Exchange. Two other things. When is the phrase equities
Speaker 1: in Dallas, which of course comes from liars poker, where
Speaker 1: it is used as an insult because the worst trainees
Speaker 1: in the solive and training program were sent to trade equities, And.
Speaker 2: Yeah, I missed that reference is.
Speaker 1: Oh did you?
Speaker 2: Oh? Yeah, let me tell you.
Speaker 1: I had a reader email me literally. I wrote the
Speaker 1: newsletter about the stock Exchange and the section header was
Speaker 1: equities in Dallas and someone replied saying, I can't believe
Speaker 1: the section header for the Texas Stock Exchange wasn't equities
Speaker 1: in Dallas. I was like, wait, it was just read it.
Speaker 1: People were so keen to come up with that joke
Speaker 1: on their own, that they were like emailing me that
Speaker 1: joke after I already read it. I didn't come up
Speaker 1: with my own either, but someone else told me. But anyway,
Speaker 1: Equities in Dallas like a Great Wall Street insult, which
Speaker 1: is now like the actual business model of the Texas
Speaker 1: Stock Exchange.
Speaker 2: Maybe it will soon be a compliment. Perhaps.
Speaker 1: I think Dallas has sort of self consciously reclaimed its
Speaker 1: statue as a financial center and been like, no, no,
Speaker 1: it's not Equities in Dallas anymore. Now it's good. But
Speaker 1: the other thing I want to say about this exchange
Speaker 1: is that I wrote that, you know, it's all electronic, right,
Speaker 1: No one really stands on the floor of stock exchange
Speaker 1: except like TV reporters now. But you know, I wrote
Speaker 1: that their computer for trading stocks would be in Texas,
Speaker 1: and they actually told me no, they will have a
Speaker 1: data center and somewhere in Dallas. But they also have
Speaker 1: a data center.
Speaker 2: In Secaucus, as they should.
Speaker 1: As they should because all US stock exchanges sort of
Speaker 1: have to be in northern New Jersey because it is
Speaker 1: all this interlinked web of trading venues where like everyone
Speaker 1: trades on every venue and you sometimes have to do
Speaker 1: arbitrage trades where like a stock is trading at one
Speaker 1: price on BATS and another price on NASDAIK, and so
Speaker 1: you want to do the trade between them. To do that,
Speaker 1: you have to move data. And it takes longer to
Speaker 1: move data over long distances than it does over short distances.
Speaker 1: And this business is so like competitive and so focused
Speaker 1: on speed that people locate their computers in the data
Speaker 1: center with the extan computers. And the idea of sending
Speaker 1: your data all the way to Dallas would be weird.
Speaker 1: It would be so far away, it would takes so
Speaker 1: long for your data to get there. So of course
Speaker 1: the Texas Stock Exchange will actually have computers in secaucas
Speaker 1: next to all the other stock exchanges computers.
Speaker 2: I love that that the beating heart that's a financial
Speaker 2: world is in northern New Jersey.
Speaker 1: Incas right, It's like suburban Northern New Jersey is like
Speaker 1: where everything is.
Speaker 2: I just my brain like is cooked. I can I
Speaker 2: can feel it like sizzling and frying.
Speaker 1: That's okay, because now we're going to talk about Bill Lackman.
Speaker 2: Bill Lackman, Bill Ackman, There's a lot to talk about
Speaker 2: with Bill Lackman.
Speaker 1: There usually is, but now we're talking about his closed
Speaker 1: end fund. We're among other things.
Speaker 2: That's the only thing I was referring to. I am
Speaker 2: so excited to talk about his closed down fund plans,
Speaker 2: specifically in the US. And then there's also the IPO.
Speaker 1: Yeah right, they go together, right, Yeah, he's got a
Speaker 1: lot of stuff gone up.
Speaker 2: Where do you want to start? Perhaps the IPO, I
Speaker 2: don't know.
Speaker 1: Yeah, So they're link so basically starting last week of
Speaker 1: the Welsher Journal reported and then there's been some good
Speaker 1: Plomberg flo up. There's this package of Bill Lackman news.
Speaker 1: So Bill Lackman runs Pershing Square Capital Management, which is
Speaker 1: a hedge fund firm, has been a hedgehund firm. Now
Speaker 1: most of its money is in the form of a
Speaker 1: closed end fund in Europe called Pushing Square Holdings runs
Speaker 1: like eighteen billion dollars, not all of which, most of
Speaker 1: which is in Persian car holdings. US investors they kind
Speaker 1: of can buy Pershing Square Holdings, but not really. It's
Speaker 1: like bad for taxes and they can't market it. So
Speaker 1: it's mostly European investors. But Bill Lackman is in New
Speaker 1: York and the fund mostly invests in the US. Companies,
Speaker 1: and so he wants to open a closed end fund
Speaker 1: in the US that would do the same thing. It
Speaker 1: would buy US companies, but it would be much more
Speaker 1: convenient for US investors and he could market it to
Speaker 1: US investors. But then last week the journal reported that
Speaker 1: he's also planning an IPO of the management company of
Speaker 1: Pushing Square, so the management company itself would go public,
Speaker 1: probably like at the end of next year or something.
Speaker 1: And in the lead up to that, he sold the stake.
Speaker 1: He sold like ten percent of the management company to
Speaker 1: some private investors for a billion dollars, so valuing the
Speaker 1: management company at ten billion dollars, which is really quite
Speaker 1: rich for a hedgehome firm that manages eighteen billion dollars.
Speaker 1: To value the management company at ten billion is pretty rich.
Speaker 1: But then also Bloomberg reported that he's planning to raise
Speaker 1: twenty five billion dollars for the US closed und fund,
Speaker 1: which helps explain the valuation of the management company. He's like, oh,
Speaker 1: he's going to run like a lot more money. But
Speaker 1: on the other hand, that's a sort of ambitious target
Speaker 1: to raise. So that's kind of where the news is.
Speaker 2: Yeah, I mean, starting with the ten and a half
Speaker 2: billion dollar valuation. That's something close to sixty percent of
Speaker 2: its assets. And according to the Wall Street Journal, they
Speaker 2: reported that Acman told investors to compare Pershing Square to
Speaker 2: Brookfield Asset Management, Blue Oul, et cetera. But then you
Speaker 2: take a look at how they're valued. And this is
Speaker 2: something that Aaron Brown pointed out in Bloomberg Opinion that
Speaker 2: typically they have market capitalizations that are like fifteen to
Speaker 2: eighteen percent of their assets. So I mean, comparing them
Speaker 2: to that peer group, it's still quite rich. But I
Speaker 2: guess if you are planning to quadruple assets or something,
Speaker 2: it makes a little bit more sense.
Speaker 1: I mean, like my doneb math is like you can
Speaker 1: charge some fees on your assets, right, and like what
Speaker 1: kind of fees can you charge your Blue Ol or
Speaker 1: Pushing Square or somebody like that. You can charge you
Speaker 1: do one or two percent of assets, right, you know,
Speaker 1: maybe a little more if you're making big performance fees.
Speaker 1: And so if you're charging one or two percent of assets,
Speaker 1: you capitalize that at like ten times, then the value
Speaker 1: of the managing company is ten to twenty percent of
Speaker 1: assets under management. So sixty percent is really big, right,
Speaker 1: Like if you're charging six percent of assets per year,
Speaker 1: then you can get that kind of valuation. But then
Speaker 1: you know, if you're judging six percent of who would
Speaker 1: pay you six percent of ethsets to run their money?
Speaker 1: But yeah, I mean I think that the idea is
Speaker 1: that you're comparing them to these other asset managers, but
Speaker 1: you're baking in a lot of growth in the very
Speaker 1: near future, which is ambitious, right, Blue Owl and Brookfield
Speaker 1: also want to grow assets under management, but like Pushing
Speaker 1: Square is gonna double assets under management in like six months. Okay,
Speaker 1: maybe I do think I think that's like a little
Speaker 1: bit fascinating about Pushing Square's business model, and like why
Speaker 1: they think they can get a premium valuation is it's
Speaker 1: so simple, right, Like they have one investing team, they
Speaker 1: buy like twelve stocks, they hold them for the long term.
Speaker 1: They're all like liquid public US stocks, so that there's
Speaker 1: plenty of capacity. And so like Blue Owl, you're paying
Speaker 1: a lot for a lot of people that go out
Speaker 1: on the road and like find companies and try to
Speaker 1: make direct loans to them, manage the credit risk, and
Speaker 1: like the loans are constantly like maturing. You have to
Speaker 1: find new loans. Your money is in funds that have
Speaker 1: a limited life, and so you have to like go
Speaker 1: raise new funds and all this stuff. And Bill Ackman
Speaker 1: is like, I just have like this one permanent fund
Speaker 1: or two permanent funds now, and I buy twelve stocks
Speaker 1: and like that's it. That's the whole business.
Speaker 2: So it's really I love that. I'm fascinated with this
Speaker 2: investing style just because it is so simple.
Speaker 1: Say I'm exaggerating a little bit. He has made a
Speaker 1: lot of money doing like asymmetric derivative trades, where like
Speaker 1: he'll pay like a little bit of money for CDX
Speaker 1: indexes like just before COVID hits, and like make one
Speaker 1: hundred times his money on these derivative trades. So he's
Speaker 1: like putting some of that into the product too. So
Speaker 1: it's a little hedge funny, but from day to day
Speaker 1: it kind of looks like buying twelve stocks.
Speaker 2: Yeah, I mean, I tend to think of those as
Speaker 2: just hedges and thus don't think of them very much,
Speaker 2: but maybe I should be thinking about them more.
Speaker 1: Well, they are hedges, but like you know, if you
Speaker 1: buy the S and P five hundred, you're not getting
Speaker 1: those hedges, right, This is true. What you're getting here
Speaker 1: is exposure to large cab us stocks plus some hedging
Speaker 1: for bad situations, which is like you know, which is
Speaker 1: a hedgehun product.
Speaker 2: I do really just find the simplicity, though, really appealing,
Speaker 2: and it's something that's coming a little bit back in vogue.
Speaker 2: If you think about what's really hot in the ETF
Speaker 2: world where I live, you have all these income products,
Speaker 2: these very options overlay products, and then you have just
Speaker 2: super concentrated equity ETFs that are launching with greater and
Speaker 2: greater frequency because I don't know, it feels like a
Speaker 2: while we swung into at least in the ETF world,
Speaker 2: like these basically closet indexing type active funds. Now people
Speaker 2: are just going super active because they found out that's
Speaker 2: actually a really hard way to beat the benchmark. But
Speaker 2: I mean it kind of always mixes my brain up
Speaker 2: a little bit that, like, you have a hedge fund
Speaker 2: that is going public, and I know there's a few
Speaker 2: examples of that, but if you're an equity investor in pershing,
Speaker 2: I feel like you're just buying a stock with a
Speaker 2: ton of key Man risk and that doesn't make a
Speaker 2: ton of sense to me.
Speaker 1: You definitely are. I mean, it's interesting because like you're
Speaker 1: making two baths, right, What is the business model of
Speaker 1: Pershing compared to other hedgehunt firms? Is very appealing because
Speaker 1: all their money is really locked up, you know. It's
Speaker 1: the Pershing Squareholdings closed on fund in Europe and then
Speaker 1: this anticipated fund in the US, which are permanent capital vehicles,
Speaker 1: like the money can't go away and their revenue comes
Speaker 1: mostly from management fees. Right, So, like investors are very
Speaker 1: nervous about paying for incentive fees for hedge funds because
Speaker 1: like the fund has a bad year, it doesn't earn
Speaker 1: any incentive fees, right. Like, if you're buying a management
Speaker 1: company that makes a lot of money on incentive fees,
Speaker 1: you value those at kind of a low multiple because
Speaker 1: you can't be sure they're going to be consistent from
Speaker 1: your dear Krishan Square is like you're gonna make all
Speaker 1: its money on like two percent management fees. So it's
Speaker 1: very consistent revenue on very locked up money. So on
Speaker 1: the one hand, it's like a very safe bet, right.
Speaker 1: But the other thing you're buying is like Bill Ackman
Speaker 1: as a person, right, and you're buying like his ability
Speaker 1: to go raise twenty five million dollars, which again, is
Speaker 1: like really ambitious. Right again, Like every other investment firm
Speaker 1: would love to double their assets next year, but like
Speaker 1: Bill Ackman is selling his ability to double his assets
Speaker 1: to investors, right, And I agree, it's a lot of
Speaker 1: keymand risk. It's like there's like kind of a memestock
Speaker 1: vibe to it, where like you're buying this guy who
Speaker 1: is like a financial celebrity, who's on Twitter, who's on television,
Speaker 1: his personal life is in the news, you know, like
Speaker 1: a guy who has a lot of retail appeal and
Speaker 1: who's like very explicitly marketing that as part of the
Speaker 1: business proposition. So yeah, like that's what people are investing in,
Speaker 1: is like his ability to like monetize that celebrity to
Speaker 1: raise a lot of money. But yeah, like what if
Speaker 1: he gets bored? His number two is not the same celebrity.
Speaker 1: If you're not getting like a super institutional asset manager,
Speaker 1: you're getting like kind of one guy, yeah, which again
Speaker 1: is cheap compared to like you know, you're picking twelve stocks.
Speaker 1: That sort of cost structure is fairly lean, but like
Speaker 1: you are relying a lot on him continuing to do
Speaker 1: it and his celebrity continuing to work.
Speaker 2: Let's talk a little bit more about close end funds,
Speaker 2: the close end funds specifically, you mentioned the European one.
Speaker 2: The European one is really interesting because it's actually done
Speaker 2: super well. It's returned fifty percent over the past year.
Speaker 2: But the discount, it's trading a twenty five percent discount,
Speaker 2: and I have to say, I don't super understand why.
Speaker 2: I mean, if you look at some of these UNI
Speaker 2: ceas and other ones, I sort of get it with
Speaker 2: performance like this, I don't quite understand why it's trading
Speaker 2: it's such a big discount.
Speaker 1: I don't fully understand the European tax situation. I've been
Speaker 1: told there is some tax overhang and that's part of
Speaker 1: the discount. I'm not sure if that's true. I think
Speaker 1: that the traditional explanation for closed them fund discounts is
Speaker 1: often fees. Right, Like you know again, it has like
Speaker 1: a fairly small portfolio of fairly long term holdings and
Speaker 1: fairly liquid stocks. If you look at that portfolio, you
Speaker 1: could replicate it. You just buy the twelve stocks. You
Speaker 1: would get the discount buying those twelve stocks, but you
Speaker 1: also wouldn't pay Pershing Square any fees for owning the
Speaker 1: twelve stocks, right, you just own the twelve stocks directly,
Speaker 1: So the fees eat into the value of the fund
Speaker 1: and explain part of the discount. The other thing that
Speaker 1: I think sort of explains the discount is just investors inventation. Like,
Speaker 1: as I said, it is hard to buy Pershing Square
Speaker 1: holdings if you're a US retail investor. It's got some
Speaker 1: weird tax attributes and they can't market it, and it's
Speaker 1: just like you know, you can like find on your own,
Speaker 1: but it's not a thing that a lot of US
Speaker 1: investors buy, and it's otherwise like very US centric, Right,
Speaker 1: It's like a guy who's a celebrity in the US,
Speaker 1: who tweets in the US and who invests in US companies,
Speaker 1: So like who's going to buy Pershing Square holdings in Europe?
Speaker 1: It's like open to European investors, but it's otherwise targeted
Speaker 1: very much to the US. So I think that's part
Speaker 1: of it, is like it's just not the most attractive product.
Speaker 1: And clearly pushing squares hope is that when they do,
Speaker 1: you know, kind of the same product. Pushing square US
Speaker 1: is not that different from pushing scare holdings, but when
Speaker 1: they do that product in the US, and like market
Speaker 1: it very heavily to US investors. They will get a
Speaker 1: lot of US investors, and it will not trade at a discount.
Speaker 1: If you ask them, I think they will hope that
Speaker 1: it will trade it a premium because people will be
Speaker 1: so excited to Bill Ackman manage their money that they'll
Speaker 1: pay more than the net ass and value for the fund.
Speaker 2: But we'll see, it'd be great to ask Bill Ackman that.
Speaker 2: But to that point, I do wonder once the US
Speaker 2: fund launches, who would buy the European fund other than
Speaker 2: Europeans of course. I mean, if you think about the
Speaker 2: difference in the fees. Right now, the European one charges
Speaker 2: a one point five percent management fee and a sixteen
Speaker 2: percent performance fee. You think about what the US one
Speaker 2: is going to charge, and it's just a two percent
Speaker 2: management fee. So it's free for the first year. Yeah,
Speaker 2: so it's clear what the better product is.
Speaker 1: Yeah. I mean, like, part of the reason I think
Speaker 1: that they originally did this fund in Europe is that
Speaker 1: you can't really charge performance fees on a publicly listed
Speaker 1: goes on fund in the US, and so that's why
Speaker 1: this will not charge performance fees. But also like you
Speaker 1: think about it with the IPO, like, performance fees are
Speaker 1: bad for public investors in the management company, right, Like
Speaker 1: they don't describe a lout of value to those performance
Speaker 1: fees because they fluctuate. So if you're thinking about taking
Speaker 1: your management company public, you're less excited about the performance
Speaker 1: fees and you're more willing to just sort of do
Speaker 1: it for a flat two percent because that's what investors
Speaker 1: will pay for.
Speaker 2: So if you think about the actual Pershing Square IPO,
Speaker 2: I mean that's not happening for a while, but the
Speaker 2: US closed fund could become a reality pretty soon, like
Speaker 2: in the next couple months or so.
Speaker 1: Let me ask you, as a kind of seroquas and funds,
Speaker 1: do you think they will raise twenty five billion dollars?
Speaker 2: I don't know. Actually, there was an interesting lot of money.
Speaker 2: It's a lot of money. But I mean Bloombery Intelligence
Speaker 2: had to report out this week and didn't downplay that
Speaker 2: number at all. I mean, you think about the size
Speaker 2: of some of the most retail friendly ETFs, and I
Speaker 2: think twenty five billion could be possible. Yeah, I mean
Speaker 2: think about Kathy Wood for example. She doesn't manage that
Speaker 2: much money now, but I mean she got in the
Speaker 2: forty billion dollar range. Also, for all the shade that
Speaker 2: we just threw on the European Clothes End Fund, it
Speaker 2: has fifteen point three billion dollars in Europe, so I
Speaker 2: guess twenty five billion dollars in the US. Putting it
Speaker 2: through that lens looks very realistic.
Speaker 1: Yeah, I mean I think that's right. I mean, manage
Speaker 1: a lot of money, and he has a good track record,
Speaker 1: and so yeah, why I shouldn't be able to raise
Speaker 1: twenty five billion dollars? So I want to do a
Speaker 1: weird transition here, Yeah, do it. At some point in
Speaker 1: the last few months, people started sending me Instagram ads
Speaker 1: for Bill Ackman's investing masterclass or his investing newsletter or
Speaker 1: something where you'd sign up and it's like, I'm Bill Ackman.
Speaker 1: I picked all these great stocks, and I can teach
Speaker 1: you how to pick all these great stacks. People kept
Speaker 1: sending me these being like, look at what Bill Ackman
Speaker 1: is saying. These are obviously fake, Like these are completely
Speaker 1: obviously fake, Like.
Speaker 2: His eyes were yees.
Speaker 1: No, no, they were real pictures of Bill Ackman taken
Speaker 1: from the Internet and used to market a fake Bill
Speaker 1: Ackman newsletter product. I didn't click on them, so I
Speaker 1: don't know what the product is. I don't know like
Speaker 1: what the scam is exactly. But someone is like, I'm
Speaker 1: going to like pretend that Bill Ackman is starting an
Speaker 1: investing newsletter. I'm gonna get people to send me their
Speaker 1: credit card to like sign up for this newsletter. And
Speaker 1: they bought Instagram ads, saying I always thought these were
Speaker 1: like super obvious fakes. I think I actually saw it
Speaker 1: like they were served to me on Instagram. But then
Speaker 1: people send them to me, but they're just they're fake.
Speaker 1: This week I have gotten several people sending me Instagram
Speaker 1: ads for Keith Gill oh right kiddy starting an investing
Speaker 1: masterclass or newsletter or what have you. I'm also fairly
Speaker 1: confident those are a fake. And the reason I'm confident
Speaker 1: those are fake is that anyone, almost anyone, not literally anyone,
Speaker 1: but almost anyone who's selling you an investing class or
Speaker 1: like a stock picking newsletter, you should ask the question,
Speaker 1: if they're so good at picking stocks, why aren't they
Speaker 1: just making a lot of money picking stocks? Why do
Speaker 1: they need my forty nine ninety five for this investing newsletter?
Speaker 1: And like Bill Ackman, Yeah, it's like a billionaire running
Speaker 1: a hedge funt. He doesn't need your forty nine ninety five.
Speaker 1: That's why you know that Bill Ackman investing ads are fake.
Speaker 1: But Keith gil he has like three hundred million dollars
Speaker 1: trading game stop stock. He does not need your money.
Speaker 1: He is not starting an investing newsletter. He is, however,
Speaker 1: going on YouTube to do a live stream to talk
Speaker 1: about Gamstop at noon on Friday, June seventh, which is
Speaker 1: unfortunately after we record this podcast, before we release this podcast.
Speaker 1: So for the time you hear this, Keith gill will
Speaker 1: have said something newsworthy that we haven't talked about.
Speaker 2: So here's an instance where time just really becomes a concept.
Speaker 1: You know, I know, right this podcast is meant to
Speaker 1: feel timeless and unchanging, but in fact we're recording it
Speaker 1: before Keith gill s has some stuff on YouTube and
Speaker 1: releasing it afterwards.
Speaker 2: Sorry, all we can definitively say about the.
Speaker 1: That was a transition. Now we're talking about Keith kill.
Speaker 2: That was actually I throwd at that needle quite while
Speaker 2: I was a little nervous.
Speaker 1: I think it's interesting, like there's the two that I've seen,
Speaker 1: like fake investing newsletters have been Blackman and Keith kill.
Speaker 1: Maybe there was one for Warren Buffett years ago and
Speaker 1: I just missed it. But those are the guys.
Speaker 2: Yeah, those are the guys to do it. I'm really
Speaker 2: interested to see the Keith Gill live stream at twelve pm.
Speaker 2: All we can totally say about it right now is
Speaker 2: that it will put to bed whether or not the
Speaker 2: posts that we've been getting from Roaring Kitty have actually
Speaker 2: been Keith Gill, whether it truly has been him posting, can.
Speaker 1: You think a step back? So I don't know, Keith
Speaker 1: Gill should be interested. Yeah, we've said one it before,
Speaker 1: but he's the guy who started the GameStop frenzy in
Speaker 1: like January twenty twenty one. He was like a guy
Speaker 1: who got long game stop and said I like the stock,
Speaker 1: and he would do these like four hour YouTube videos
Speaker 1: about why he thought GameStop was an undervalued business. And
Speaker 1: then when GameStop had a huge rally in January twenty
Speaker 1: twenty one, he was like the sort of patron saint
Speaker 1: of that and got a lot of media attention. And
Speaker 1: then last month he tweeted some weird stuff he treated
Speaker 1: like a cartoon, and then he treated some video clips
Speaker 1: and GameStop stock came just roaring back a huge rally.
Speaker 1: Then he like posted on Redda his trade account back
Speaker 1: in twenty twenty one. He would like periodically post his
Speaker 1: game stop positions and how much money he had made
Speaker 1: and how he was holding them. And he posted that
Speaker 1: last week, and it was hundreds of millions of dollars
Speaker 1: of game stop stocking options. And at one point Bloomberg
Speaker 1: calculated that he had a portfolio worth like three hundred
Speaker 1: million dollars of game Stop And so he's back, as
Speaker 1: you say, he's gonna do a video thing where we'll
Speaker 1: see him, and unless AI has advanced tremendously, we will
Speaker 1: know if Keith Gill has actually been on this account,
Speaker 1: which I think we already do. Like I think there
Speaker 1: were a lot of rumors when he came back, because
Speaker 1: he was just tweeting inscrutable stuff. They were rumors that
Speaker 1: like someone had like bought or hacked his account and
Speaker 1: someone else was doing this and it wasn't really him,
Speaker 1: and this was all like some sort of weird fake out.
Speaker 1: And I think that now we know that's not true.
Speaker 1: Because there was a Wall Street Journal story about e
Speaker 1: Trade getting increasingly nervous about his trading because they worry
Speaker 1: that it's market manipulation. And if he trade is worried
Speaker 1: A had his trading, they do KYC. They know who
Speaker 1: is trading it, right, And so if they know what
Speaker 1: his portfolio looks like and he's posting that portfolio, then
Speaker 1: like that means this is all real, this is actually
Speaker 1: his Twitter actually has read it, and now we'll see
Speaker 1: him tomorrow on YouTube.
Speaker 2: Can I tell you how tired I was when I
Speaker 2: saw those headlines that you Trade might kick him off.
Speaker 2: I know it's just conspiracy theory fodder. It's reasonable that
Speaker 2: people would make conspiracy theories out of that, Like didn't
Speaker 2: anyone at e Trade watch dumb money?
Speaker 1: Well, I mean to be clear, Like that's the debate
Speaker 1: they're having. They're like, on the one hand, we worried
Speaker 1: that he's committing market untilation. On the other hand, we're
Speaker 1: going to get so much flak if we kick him
Speaker 1: off for a platform. So I mean like, ordinarily, if
Speaker 1: you're like some guy, some retail trader might be committing
Speaker 1: market reutilation, but we're not sure that the charges would stick,
Speaker 1: You're like, yeah, who cares kick him off? What does
Speaker 1: it hurt you? But you don't want to skate too
Speaker 1: close to the regulatory line if you're a big broker dealer.
Speaker 1: But with Keith Gill, if you kick him off, it's
Speaker 1: going to be a real firestarman. So I think you
Speaker 1: know so far they haven't. By the way, the controversy
Speaker 1: about him being a market manipulator, I find it's a
Speaker 1: little strange.
Speaker 2: Yeah. Well, I was just going to say, I'm so
Speaker 2: drilled and grateful to be doing this podcast with you,
Speaker 2: because on Twitter after he posted some of those screenshots,
Speaker 2: I saw a few different tweets to the effect of
Speaker 2: I won't be saying how I feel about this until
Speaker 2: Matt Levin tells me how to feel. So tell us
Speaker 2: how you feel about market manipulation and whether Keith Gill
Speaker 2: is manipulating markets.
Speaker 1: I mean, I love him, like how many I said.
Speaker 2: I love it?
Speaker 1: So I wonder I want to quote a few things.
Speaker 1: There's another journal article about like the gist of it
Speaker 1: is like everyone is running around like chickens with their
Speaker 1: heads cut off because they don't know if this is
Speaker 1: market maniplation and they don't know like what the rules are.
Speaker 1: So they quote Matt Staller, who's a sort of left
Speaker 1: wing journalist and market analyst, saying this is obviously market manipulation.
Speaker 1: I can't believe we're even having this conversation. If market
Speaker 1: manipulation law doesn't handle this, then what's it for?
Speaker 2: Which is like, what is it for?
Speaker 1: I mean, like to me, like market inguilation is like
Speaker 1: if you move a stock by doing something deceptive. And
Speaker 1: the thing about Keith kill is that he's definitely moving stock.
Speaker 1: He's definitely like when he tweets, the price of game
Speaker 1: slop stock goes up, and it's definitely like not for
Speaker 1: any fundamental reason, you know, it's definitely like his fans
Speaker 1: and his followers are buying the stock because he's tweeting
Speaker 1: about it. But none of them were deceived, right, none
Speaker 1: of them are being lied to. There's no deception guy on.
Speaker 1: So I don't think it's manipulation. I think it's just
Speaker 1: this mysterious new thing. It's like coordination, right, Like people
Speaker 1: are having fun with their friends. There's like the social
Speaker 1: elements to like all buying game Stop together, and when
Speaker 1: Keith Gill tweets, that's the thing that makes everyone like
Speaker 1: go buy the game Stop together. It is strange. It
Speaker 1: is a way of moving stock prices that has nothing
Speaker 1: to do with the fundamental value of the cash flows.
Speaker 1: But marketmunification laws about using deceptive devices, and there's no
Speaker 1: deception going on here. It's weird if you're like a
Speaker 1: fundamental investor who wants to buy game Stop at a
Speaker 1: reasonable price or wants to be able to short game
Speaker 1: Stop if he gets too high and or worried about
Speaker 1: being blown up, you know, it's like bad for market efficiency.
Speaker 1: But the stock market rules are not about market efficiency.
Speaker 1: They're about honesty, and like usually those things kind of
Speaker 1: work together, and so if you're not lying about a stock,
Speaker 1: the stock will probably come to the correct price. But
Speaker 1: Keith Gill has discovered this mysterious new thing where like
Speaker 1: you cannot lie about a stock but still make the
Speaker 1: price not be correct. So I don't know. I don't
Speaker 1: think it's market mutilation, but I understand why people get
Speaker 1: mad about it.
Speaker 2: Yeah.
Speaker 1: I also from that same article, I want to quote
Speaker 1: another complaint. So Jake Clayton, who's through the chairman of
Speaker 1: the sec the Journal, says that he suggested in an
Speaker 1: interview that Gil should publicly answer questions about his trading.
Speaker 1: Such questions include is he working with anyone else? How
Speaker 1: did Gil an individual investor finance his purchases of game
Speaker 1: Stop shares? Has he hedged any of his bets on
Speaker 1: game Stop? And what are his ultimate intentions? And it's like, yeah,
Speaker 1: I understand why you want to hear all that, but
Speaker 1: he actually doesn't have any obligation to do that. There
Speaker 1: are actual disclosure rules about who has to disclose what
Speaker 1: about a stock, and he hasn't triggered any of those
Speaker 1: disclosure rules. He's not an institutional investor, he's not above
Speaker 1: five percent of the stock. He's like getting there, you know,
Speaker 1: He's just like a guy buying stock. There's no rule
Speaker 1: that says he has to answer your questions about his intentions.
Speaker 1: It's like driving people crazy because it is not covered
Speaker 1: by the rules, and everyone has this intuition that there's
Speaker 1: something wrong about it. But it's technically fun boy. Is
Speaker 1: that not legal advice?
Speaker 2: But I mean, in his own words, he just likes
Speaker 2: the stock.
Speaker 1: Well, he hasn't said maybe he'll say that on this
Speaker 1: YouTube lave Ship. Yeah he said that like two years ago,
Speaker 1: but we don't know if he likes the stock now, if.
Speaker 2: His intentions have changed. I'm curious to see how many
Speaker 2: more headlines like this week get because after he posted
Speaker 2: on Reddit that screenshot that showed his stake, Bloomberg News
Speaker 2: reported that Andrew Left, the founder of sitch On Research,
Speaker 2: pleased a new short bet against Game Stop, immediately just
Speaker 2: went back and shorted it. I have to imagine he's
Speaker 2: having a pretty lousy end to his week.
Speaker 1: Yeah, I mean, I'll tell you, if you're shorting game Stop, now,
Speaker 1: that's not like a fundamental bet, that's not like, oh,
Speaker 1: like I've looked at the you know, business model, and
Speaker 1: I think that this is overpriced, right, if you're shooting
Speaker 1: game Stop fundamentally, what you're betting on, I think is
Speaker 1: that Keith Gill will get diminishing marginal returns for his tweet, right,
Speaker 1: Like what you're betting is like oh yeah, like when
Speaker 1: he first treated that, everyone's like, oh excited he's back.
Speaker 1: When he treated his profits, everyone's like, oh he's excited.
Speaker 1: He's back. And if this YouTube video does even better
Speaker 1: than the treats, then like, yeah, Drew Left is gonna
Speaker 1: get blown up. Although I think he's said that he's
Speaker 1: scaling back his short bets on Campstop, he's going to count.
Speaker 1: But yeah, like you know, if Keith Gill continues to
Speaker 1: have this wild power to move the stock every time
Speaker 1: he does some stuff. He'll keep doing more stuff, and
Speaker 1: the stock will keep going up and the short sellers
Speaker 1: will lose a lot of money. But I think there
Speaker 1: has to be some sort of bet on fatigue here
Speaker 1: where it's like, well, you know, like eventually people will
Speaker 1: stop doing this.
Speaker 2: I don't know if that's right, but I mean so
Speaker 2: at two points there, the first one on diminishing returns,
Speaker 2: that makes a lot of sense to me. And yet
Speaker 2: I still keep getting surprised, and it still keeps popping
Speaker 2: double digits out of nowhere. And I probably would have
Speaker 2: said that in like twenty twenty one as well. And
Speaker 2: here we are in the Year of our Lord twenty
Speaker 2: twenty four. To your point, yeah, go on, no, you
Speaker 2: go no, I won't know.
Speaker 1: He's doning a great job. I don't want to use
Speaker 1: the word manipulate because I just it's not recopilation. But
Speaker 1: he's did a great job of slow rolling this out
Speaker 1: to like maximize impact. He like did that weird treat
Speaker 1: and the stock jumped, and then like he waited a
Speaker 1: while doing other weird tweets where you're like, is it
Speaker 1: is it? What is he saying, what does it mean?
Speaker 1: And then he revealed his position, which is enormous and
Speaker 1: people were very excited about that and that moveless talk,
Speaker 1: and now he's going to go on YouTube and like
Speaker 1: he was originally like more than anything else, like a
Speaker 1: YouTube guy, like he would do these long, in depth
Speaker 1: discussions of game stop and so he'd come back in
Speaker 1: other formats, and now he's finally rolling out that. You're like,
Speaker 1: if he were you know, designing this to maximize his impact,
Speaker 1: he's done a nice job of tripping it out and
Speaker 1: also like it's maximized as impact, but also like kind
Speaker 1: of maximizing pain for short sellers because I like Keith
Speaker 1: gilld tweets and the stock gaps up and you're a
Speaker 1: short seller and you're like, ah, this can't last, and
Speaker 1: you short it and then like the next day he
Speaker 1: does like another thing. He's done a nice job of
Speaker 1: making life hard for short sellers. I don't know, you
Speaker 1: want to take a step back to appreciate like he
Speaker 1: made almost three hundred million dollars basically trading one stock.
Speaker 1: You know, it's not in video, like the company hasn't
Speaker 1: done anything in the last three years, but in the
Speaker 1: last like three years, he went from kind of like zero,
Speaker 1: from like regular kind of middle class person amount of
Speaker 1: money in the stock market to three hundred million dollars
Speaker 1: on one stock through some combination of being really media
Speaker 1: savvy and being really like stock market savvy and kind
Speaker 1: of being legally savvy. And it's just amazing, No wonder,
Speaker 1: he has a fan base. Our friend Mary Child said
Speaker 1: to me that he's the first self made person in
Speaker 1: the history of the world. Like that's kind of true.
Speaker 1: Like he's really kind of gone from nothing to like
Speaker 1: immense wealth through a very odd in particular set of skills,
Speaker 1: and like, you know, no wonder people are interested in
Speaker 1: seeing what it's trading.
Speaker 2: Does you know? Again, we're recording all of this before
Speaker 2: the live stream, So I hope that he doesn't reveal
Speaker 2: himself to just be a villain and in the pocket
Speaker 2: of someone tomorrow on the live stream after you said
Speaker 2: all those nice things.
Speaker 1: Look, there's all sorts of ways this could end a dability, right,
Speaker 1: Like how could you go to this kind of the
Speaker 1: case that his three hundred million dollar wealth has been
Speaker 1: extracted from you know, his fans the stock market, like
Speaker 1: someone's on the other side of those trades and like
Speaker 1: where does this ultimately end up? Right? I mean, like
Speaker 1: the last Game Stop rally, a lot of people lost
Speaker 1: a lot of money, a lot of people made a
Speaker 1: lot of money, including Keith Kill. If you piled into
Speaker 1: Game Stop stock at the top and then lost a
Speaker 1: lot of money, Like, maybe it's not completely irrational for
Speaker 1: you to blame Keith Kill for that. Maybe, like in
Speaker 1: some people's eyes he is a villain, but like, I
Speaker 1: don't know, man, he's made a lot of money Amazon
Speaker 1: and Cleverness, I think. And that was The Money Stuff Podcast.
Speaker 2: I'm Matt Levian and I'm Katie Greifeld.
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Speaker 1: The Money Stuff Podcast is produced by Ana Maserakus and
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