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- [00:00]
Katie Greifeld
Money Stuff is brought to you by OTC Markets Group. OTC Markets overnight platform for Exchange listed Securities Moon ATS provides access to Global securities in US dollars from 8pm to 4am Eastern Sunday through Thursday. Learn more at OTCMarkets.com Moon Moon ATS is operated by OTC Link, LLC, a FINRA registered broker dealer and is available only through participating broker dealers.
- [00:27]
Matt Levine
The thing about AI for business, it may not automatically fit the way your business works. At IBM we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slash repetitive tasks and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Lets create smarter business.
- [00:56]
Commercial Announcer
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- [01:46]
Katie Greifeld
Radio News Happy Birthday America. Matt, what are you doing for America? 250
- [01:57]
Matt Levine
like people have asked me that and I'm confused.
- [02:00]
Katie Greifeld
What do you mean?
- [02:01]
Matt Levine
I'm like, I'm like going to the pool.
- [02:04]
Katie Greifeld
Yeah.
- [02:04]
Matt Levine
I might go to like the riverfront fireworks, I might not.
- [02:07]
Katie Greifeld
Yeah. I'm also past my bedtime I guess. There's the heat dome is descending.
- [02:13]
Matt Levine
The heat dome. The lateness of the fireworks. I'm gonna go to the pool and stay in the air conditioning and watch the World Cup. Patriotic endeavor.
- [02:21]
Katie Greifeld
Yeah, I think I'm gonna watch my first match of the World cup tonight which is Wednesday versus Bosnia. Yeah, I didn't know that was happening. And then my dad informed me of such since I'm on my way to my parents house after I do this podcast and anchor two hours of television.
- [02:36]
Matt Levine
Your dad was like, just so you know we're watching World cup tonight. Yeah, don't come here with big ideas.
- [02:43]
Katie Greifeld
He's like it starts at 8pm so you should get here before that.
- [02:46]
Matt Levine
I sympathize I really enjoy watching the
- [02:49]
Katie Greifeld
World cup with my children, so I'm psyched. I mean, it's great. I just, I like sports.
- [02:54]
Matt Levine
I can't believe that you like, like sports and have not watched any of the, I don't know, 50 World cup matches so far, which is so good.
- [03:01]
Katie Greifeld
I'm not a casual consumer. I have like two niche sports that I really care about and then I'll watch anything you put in front of me, pretty much. I'm excited to make this lobster cake. For some reason, the trend on TikTok right now is to cut up strawberries and arrange them on cake in the shape of a lobster. The algorithm has decided that this is the only thing that I need to see. So, like every other video is women making lobster cakes. So I'm going to try that.
- [03:29]
Matt Levine
It's interesting. I don't know you that well. I wouldn't have thought of you as a person who, like, your number one interest is going to be cake decorating. But I guess the algorithm knows you're better than I do.
- [03:39]
Katie Greifeld
I don't have a lot going on right now. A lot of my, my normal activities I can't do, which is like drinking alcohol and like running a lot or like horseback riding. You know, those are kind of holy trinity. That's the kind of stuff I like to do. So can't really do that. So I'm gonna bake instead.
- [03:57]
Matt Levine
It's like drunk horseback riding.
- [03:59]
Katie Greifeld
Like, don't drink and ride.
- [04:02]
Matt Levine
Hello and welcome to the Money Stuff podcast, your weekly podcast where we talk about stuff related to money. I'm Matt Levine and I write the Money Stuff column for Bloomberg Opinion.
- [04:13]
Katie Greifeld
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
- [04:26]
Matt Levine
Jeff Yass, the founder of Susquehanna Investment Group, the big options trading market making quant firm.
- [04:34]
Katie Greifeld
I've heard of them.
- [04:35]
Matt Levine
Yeah. Back in 1992, he did an interview in Jack Schrager's book New Market Wizards. Great, great series of books, the Market Wizards books. It's like just these great, like super informative interviews with, with hedge fund managers and traders. And in that interview they talked about Susquehanna being an options market maker. And they spent a long time talking about Susquehanna getting picked off by insider traders. Susquehanna would get a call being like, would you make a price? And hundreds of call options on some company? And they're like, sure, here's your price. Because they're a market maker and that's what. And they don't want to say no. And they'd make a price and they'd sell a bunch of options and then 10 minutes later the company would be taken over and they'd lose a bucket of money on the options. And he discusses this, he gives an example and he's like, well, in that case we got our money back because the SEC found the guy who did it and he immediately gave back the money and we got all our money back. And he talks about in the options market, the more you can trust the SEC to crack down on insider trading and stop insider traders, the better the pricing of options will be, the tighter the spreads will be because people like Jeff Yass, people like Susquehanna won't get picked off by insider traders. And so they can quote tight prices because they're not going to lose a lot of money getting insider traded against. So that was 34 years ago. Yeah, he's still doing it. So this week Susquehanna sued 100 anonymous people for insider trading against them on like Chinese brokerage options. Yeah, it's so cool.
- [06:07]
Katie Greifeld
Susquehanna saying that this would be one of the largest insider trading schemes in recent memory.
- [06:14]
Matt Levine
Sure. If it were insider trading.
- [06:17]
Katie Greifeld
Yeah.
- [06:17]
Matt Levine
Insider trading.
- [06:18]
Katie Greifeld
100 people is a lot to organize.
- [06:20]
Matt Levine
Right, right, right, right. China announced, everyone calls it a crackdown on cross border trading. So obviously Chinese brokerage firms that did cross border trading, their share prices plummeted on them like May 22nd, I think.
- [06:34]
Katie Greifeld
Yeah.
- [06:35]
Matt Levine
And this, you know, more or less came as a surprise to the market. Like the stocks were high and then they were low. And some people bought short, dated out of the money, put options on these Chinese brokerages and a lot of them bought them from Susquehanna. And Susquehanna was like all those people, one had inside information and two were part of a coordinated scheme to pick us off by uncertain trading. And so Susquehanna was like, please give us the money back. And they went to court and they sued these people, but they don't know who these people are. So they just put like John Doe 1 through 100 and they sued these people. But the real sort of immediate object of their lawsuit was to get the court to order their brokerages to freeze their accounts and give up information about them to Susquehanna. And so then after that, you know, Susquehanna can like go look and see who these people are. And if they're like employees of Chinese regulators or brokerage firms, that can be like, aha, you hadn't sent information.
- [07:30]
Katie Greifeld
Yeah.
- [07:31]
Matt Levine
But also once the money is frozen, Task keeps pursuing this lawsuit, the people don't necessarily show up because one, probably most of them are in China and two, maybe some of them are insider trading. Maybe all of them are inside. Maybe it was a coordinated conspiracy. And if they don't show up, then maybe Salkhohana just gets to keep the money. So that seems to be the trade.
- [07:54]
Katie Greifeld
Yeah. So in suing 100, John does, give or take, is the idea that, okay, maybe half of them were actually insider trading.
- [08:03]
Matt Levine
Susquehanna's complaint suggests that there is evidence that it was all part of the same scheme, but not really. Yeah, well, they were all in a few brokerages and they all bought short dated out of the money puts. And so, yeah, it's all probably insider trading. But realistically, Susquehanna is an options market maker. They know what they're doing. It's a probable probabilistic bet. Right. Probably half these people are insider trading. The other half can show up and ask for their money back and we'll give it to them.
- [08:31]
Katie Greifeld
By lumping them all together, they did get to cite an impressive number, $70 million.
- [08:37]
Matt Levine
They're like the Raja Rata, like insider trading cases even smaller than this. It's like, well, that was one guy who actually did the trades. This is like 100 people who are unified only by having bought some put options.
- [08:47]
Katie Greifeld
Yeah, Yeah. I do think it's interesting that, okay, Interactive Brokers, that's where a lot of the accounts were, where the trades were made, but also Futu holdings and Tiger Brokers. So these were firms that were targeted in the crackdown. And these are also platforms where these trades were made as well.
- [09:06]
Matt Levine
If you asked me who is likely to buy put options on Chinese brokerages, I'd be like, Chinese retail investors who are customers of those brokerages.
- [09:12]
Katie Greifeld
Right.
- [09:12]
Matt Levine
They bought out of the money puts. It's a good. Like, one thing I wrote about it is that I know this is rude and you're not supposed to say this, but, like, in a world in which Susquehanna is actually making markets in sports bets, they have to kind of think of Susquehanna as, like, not literally a bookie, but, you know, analogous to running a casino or a sports book or whatever and options market making with retail. Kind of like running a casino. Right? Like, you're sort of offering people bets and you expect that some of them will win and some of them will lose. And on balance, they will mostly lose, particularly after the spread. And so you'll make a lot of money. And that's been a great business in the last few years because there's been a real rush of degenerate gamblers to the options market. And it seems to be nice for Susquehanna and other big options market makers. And the risk of that business is that you'll encounter sharp bettors, people who win more than they lose. And if you actually run a sports book or a casino, like a lot of your business is about getting rid of sharp betters, right? It's tracking who's a good bettor. And if they win a lot, then you limit their size or you don't let them bet. And you can't do that traditionally in the stock market or the options market. One thing you can do is one kind of sharp betting, which is maybe the main kind of sharp betting and short dated options is like insider trading, right? And if you can get rid of those people, then like most of the customers lose. And the customers who win, you're like, nope, not paying you. You cheated. And they don't have to prove that they cheated. I mean, maybe eventually they have to prove that they cheated, but they haven't proved it, managed to keep the money.
- [10:49]
Katie Greifeld
So far, I hadn't been, you know, reading the tea leaves enough going into May 22nd. I mean, you could make the case that this wasn't insider trading, that if you, you know, looked at the body language of Chinese regulators, you knew this crackdown was coming.
- [11:03]
Matt Levine
There's two things. One is like, yes, you might have just made a educated bet based only on public information that this crackdown was coming. The other thing is, let's say there was some insider trading, right? Let's say that you're just like a person, just a regular retail trader. You have no inside information and you're like looking at a screen and you see that a lot of people have been buying put options on Chinese brokerages. And you're like, I wonder if that means a crackdown is coming. And then you buy put options. As far as Susquehanna's complaint is concerned, you're part of the conspiracy.
- [11:32]
Katie Greifeld
Now, are you part of the John Doe?
- [11:33]
Matt Levine
Like, in a sense, if you're trading based on, like public indicia of the conspiracy, maybe you are, but like, you're not really. You're not insider trading.
- [11:40]
Katie Greifeld
You're just like, you know, you're following the crowd.
- [11:42]
Matt Levine
Following the crowd, yeah. So it seems unlikely to me that all 100. By the way, 100 is a fake number. It's just like to say John does 1 through 100. But it seems blossoming me that all 100 of these people are all part of an insider trading conspiracy.
- [11:57]
Katie Greifeld
But wouldn't it be exciting if they were?
- [11:59]
Matt Levine
It would be really cool. But if half of them are and the other half are innocent, it's like, how do you show up in court in a foreign country and be like, oh, I'm innocent. I don't know. It's a strange case.
- [12:08]
Katie Greifeld
Something that was delightful about this story was a quote from Thomas Peterfy of Interactive Brokers at the bottom of this article. He was recently on Odd Lots. I missed the nugget where he was like, actually there shouldn't be any rules at all against insider trading. We should just live and let live. It would get information to market faster.
- [12:29]
Matt Levine
So this is like a classic thing. I mean, people have been saying this for decades and like if you just made that the rule tomorrow, Susquehanna would adapt.
- [12:37]
Katie Greifeld
Yeah, it would be fine.
- [12:38]
Matt Levine
Like they'd charge wider spreads, right? And they'd like do more to try to prevent getting picked up. But like, you know, there's a price. But as Jeff Yass said 34 years ago, the cost of insider trading is paid by the retail investors. Because in a world where insider trading was legal then Susquehanna would still sell you short dated out of the money call options, but they would charge a much wider bid ask spread. So every other retail investor would lose more money trading options to subsidize the profits of the insider traders. Which by the way is fine because it's just gambling, but whatever. All right,
- [13:21]
Katie Greifeld
Money Stuff is brought to you by OTC Markets Group Thinking about joining the exploding overnight market space but unsure where to start. Designed to meet the needs of a growing international investor base, OTC Markets overnight platform for Exchange Listed Securities Moon ATS provides access to Global securities in US dollars from 8:00pm to 4:00am Eastern Sunday through Thursday. Extend your trading day and trade global securities in US Dollars through a FINRA licensed broker dealer. In April, over US$4.5 billion traded on
- [13:52]
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- [14:49]
Matt Levine
Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, LLC. SEC registered advisor complete disclosures available@public.com disclosures
- [15:03]
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- [16:17]
Katie Greifeld
Do you want to talk about ETFs now?
- [16:19]
Matt Levine
Yeah, let's do it.
- [16:20]
Katie Greifeld
Okay, good. You don't want to save. It's so good that you don't want to save it for the end of the podcast because usually the ETF stuff
- [16:25]
Matt Levine
we sort of oh no, this is great ETF stuff.
- [16:28]
Katie Greifeld
This is pretty good ETF stuff.
- [16:30]
Matt Levine
Okay, so no it's not. ETF stuff is boring. But sports gambling ETFs are my white whale. I have been writing since March 2025. I think it's March 18th maybe that within two years there will be sports gambling ETFs in the US. Okay, I've written about there's this guy named Mike Wall who In the early 2010s ran a sports gambling fund because he like wrote a paper when he was like a student at Wharton about like if you bet Moneyline bets on huge favorites in college football, like teams that are favored to win by 30 points. If you just bet on them to win, they win 94% of the time. And you get some money from these winning bets. You don't double your money, but you get some money. And if you do that on every huge favorite, you pretty reliably make a low double digit ish sort of return. And so it's like a bond fund that is uncorrelated to the rest of the market because your returns come from football favorites winning.
- [17:30]
Katie Greifeld
Right.
- [17:31]
Matt Levine
And so he ran a fund for a while doing this and like he did. Okay, but like you can't. This was in the dark ages when like you had to go to a bookie at like in like Las Vegas.
- [17:40]
Katie Greifeld
Can you imagine your sports bets?
- [17:42]
Matt Levine
But now, now you can make sports bets on a regulated U.S. commodities futures exchange. And so like of course people want to Launch Sports Gambling ETFs. Like one thing you can do is actively manage sports gambling ETF where you hire a really good gambler and he makes really good bets. But another thing you do is just bet the huge favorites and achieve a bond like return with no correlation to the market and be like, haha, what a great product I have. And sell that to institutions and retail. People definitely want to do it and I definitely want them to do it because one, I've put a marker down that I've predicted it and two, it's just funny, it's just good comedy.
- [18:20]
Katie Greifeld
Well, you've got one big hurdle.
- [18:22]
Matt Levine
We have one medium sized hurdle.
- [18:24]
Katie Greifeld
It's the sec. Yeah, I mean it's a sizable hurdle.
- [18:27]
Matt Levine
Yeah, the SEC did say whoa there, slow down. We have like however many dozens of. I say sports gambling, they have applications for prediction market etfs.
- [18:40]
Katie Greifeld
Yes, thank you. I don't think, I mean I don't think it's all sports gambling.
- [18:43]
Matt Levine
No, I'm not sure any of it is sports gambling. Some of it's sports gambling. But will the Republicans take the House etf? Who cares? Who cares? Not interesting.
- [18:52]
Katie Greifeld
Not you split scandal ETFs.
- [18:54]
Matt Levine
Interesting. But yes, they have applications for prediction market ETFs and they have been like whoa there, slow down. And so this week they put out a request for comments on just sort of like weird ETFs. Generally.
- [19:07]
Katie Greifeld
Yeah, there's a lot of them.
- [19:08]
Matt Levine
Yeah. It's like they have this process for approving fee ETFs and they don't like it.
- [19:13]
Katie Greifeld
That's the thing, it's not necessarily a process for approving. The way that the SEC handles ETF applications is that rather than formally approving or reject, basically you're just, you go effective.
- [19:27]
Matt Levine
Yeah.
- [19:27]
Katie Greifeld
And if the SEC doesn't want you to go effective and like bring this to market, they'll probably back channel that to you and you'll politely withdraw your application. But it doesn't outright reject ETFs.
- [19:42]
Matt Levine
But it can suspend trading those ETFs. Right.
- [19:45]
Katie Greifeld
Yeah, yeah.
- [19:45]
Matt Levine
Which is rejecting them.
- [19:46]
Katie Greifeld
But the ETF was created.
- [19:48]
Matt Levine
Yeah.
- [19:49]
Katie Greifeld
They can't get an application and be like, this is a hunk of junk. You can't launch this.
- [19:54]
Matt Levine
Yeah. Right. So they want to, like, fine tune their process for. They want to, like, be able to approve. They want to be able to.
- [20:00]
Katie Greifeld
Well, that's.
- [20:01]
Matt Levine
They have some views about their process.
- [20:02]
Katie Greifeld
That's up for some debate. I mean, there's. This is a great story coming from Bloomberg News. Basically, they're thinking about how they oversee the ETF industry in general. One of the things they're asking is whether there should be additional circumstances under which they could suspend the effectiveness of an ETF so long launching. The way that ETF filings work right now is that once you file something, once you file an application, everyone can see it. It's open to the public. It's not dramatic. But when you have all these new categories being dreamed up, when one person files for a new etf, prediction markets etf, you see this, like, dog piling among issuers with copycat filings.
- [20:45]
Matt Levine
Right.
- [20:45]
Katie Greifeld
And now they're asking, maybe this should be a confidential process.
- [20:48]
Matt Levine
Right. Because, like, when someone other than me.
- [20:52]
Katie Greifeld
Yeah.
- [20:52]
Matt Levine
Dreams up the mousetrap of like, let's bet on sports favorites, you want that to yourself. You don't want everyone to copy you before you launch.
- [20:59]
Katie Greifeld
Yeah. I mean, it's like some of these. It's like this copy and paste mentality of, you know, we just. We need to get our filing in too, so that we can maybe capture a first mover advantage.
- [21:10]
Matt Levine
Leverage Bitcoin etf.
- [21:12]
Katie Greifeld
Exactly.
- [21:12]
Matt Levine
Yeah.
- [21:13]
Katie Greifeld
Wouldn't it be sweet if you had the second or the first instead of the seventh?
- [21:17]
Matt Levine
No. This is not my problem. Right. I get to just type in a box. Like, there should be a sports gambling etf. Leave it to someone else to be the first mover in the sports gambling etf.
- [21:26]
Katie Greifeld
Well, you say that and then there's a bloodbath to get your filing to the sec.
- [21:31]
Matt Levine
I don't care about that. That's their problem.
- [21:32]
Katie Greifeld
Well, that's what the SEC is a little bit concerned about here.
- [21:36]
Matt Levine
Yeah. The proposal is not just about the process. It's also one weird thing is these things are investment companies under the regulation of investment companies. And I think investment companies, traditionally, the core of them is they invest in securities. And none of this stuff is securities. I mean, like leverage single stock ETFs, or like Bitcoin gold sports bets, other prediction market bets, all not securities. And so the SEC is like, are these even ETFs?
- [22:03]
Katie Greifeld
Yeah.
- [22:04]
Matt Levine
I don't know. That doesn't trouble me that much. I feel like they'll.
- [22:07]
Katie Greifeld
I'm glad they're. I'm glad they're thinking about it.
- [22:10]
Matt Levine
I have to say, like, is this at all legal?
- [22:12]
Katie Greifeld
It's like a worthy topic for an. A regulator to engage with philosophically.
- [22:17]
Matt Levine
I know. But like guess what? Yeah, great. Sure.
- [22:20]
Katie Greifeld
Sure.
- [22:21]
Matt Levine
I don't know. I mean like the fact that they did pause the prediction marketing test.
- [22:26]
Katie Greifeld
Thank you. Thank you.
- [22:27]
Matt Levine
There's some chance that they in their secret SEC heart of hearts are like, actually this sports gambling stuff has gone too far. But like, I don't know, man. There's no other indication of that. Like everything else is like full speed ahead on sports gambling.
- [22:39]
Katie Greifeld
Yeah. I mean, I don't know. The fun design of these ETFs seems a little bit tricky.
- [22:46]
Matt Levine
Of course that's what's fun.
- [22:49]
Katie Greifeld
Who cares about.
- [22:51]
Matt Levine
Not their problem that the fund design is tricky. That's the ETF issuer's problem.
- [22:55]
Katie Greifeld
Aren't they in the business problem? Yeah, that's the thing. Aren't they in the business of protecting those investors? They should be.
- [23:01]
Matt Levine
They've approved all these double, triple levered singles like ETFs. Are they?
- [23:07]
Katie Greifeld
Yeah.
- [23:07]
Matt Levine
This is not investing advice. I would rather invest in, I think bet on all the favorites college football ETF than a double levered MicroStrategy ETF.
- [23:18]
Katie Greifeld
Brave. That's brave, right?
- [23:20]
Matt Levine
It's just an arbitrary dividing line between what's a quasi legal investment company and what's.
- [23:26]
Katie Greifeld
Yeah.
- [23:27]
Matt Levine
Did you imagine 10 years ago that financial markets would be like sports gambling ETFs? I just love it so much.
- [23:32]
Katie Greifeld
I didn't have the thought was not close to my mind. I have to say I am excited to leave here for six months and see what happens.
- [23:41]
Matt Levine
I know, right? It's going to like.
- [23:43]
Katie Greifeld
I feel like the world's going to
- [23:44]
Matt Levine
change like a steaming wasteland.
- [23:47]
Katie Greifeld
I'm not going to recognize the ETF industry.
- [23:50]
Matt Levine
You're going to have a beard down to my knees like Matt Tattered shirt.
- [23:54]
Katie Greifeld
What the heck happened to you?
- [23:56]
Matt Levine
The sports gambling
- [24:06]
Public.com Advertiser
support for this show comes from public.com. if you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge on public. You can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like if the Vix hits 25, buy a put option. On the S&P 500 or if my cash balance goes above $20,000, move the excess into my Direct Index. You approve the workflow and your agent handles the risk, monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com market and fund your account in five minutes or less. That's public.com market paid for by Public
- [25:02]
Matt Levine
Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors LLC. SEC registered advisor complete disclosures available@public.com disclosures
- [25:15]
Commercial Announcer
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- [26:21]
Matt Levine
Never bet against American Grit or American Energy through innovation, Venture Global is not only building some of the largest energy facilities in the world right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
- [27:00]
Katie Greifeld
You mentioned MicroStrategy.
- [27:01]
Matt Levine
Oh yeah, I mentioned MicroStrategy. How are they doing?
- [27:04]
Katie Greifeld
Not great. Fives aren't great, man. The main problem as I've identified it, is that bitcoin.
- [27:11]
Matt Levine
Too much bitcoin.
- [27:12]
Katie Greifeld
Bitcoin continues to fall and they have a lot.
- [27:14]
Matt Levine
It's not the only problem.
- [27:15]
Katie Greifeld
They have a lot of it though. Okay, but like it's a big problem.
- [27:18]
Matt Levine
Okay, but like simply owning a lot of bitcoin that has Gone down is not a problem. The way that it becomes a problem for a company or for anyone is when you have leverage. And it becomes a particular problem if you have borrowed money for two reasons. One is that you have to pay interest on the money you've borrowed.
- [27:36]
Katie Greifeld
For sure.
- [27:37]
Matt Levine
The MicroStrategy borrowed so much money to buy Bitcoin and now it has to pay so much interest on that money. It has a software business that generates
- [27:47]
Katie Greifeld
some money, which I love to think about.
- [27:49]
Matt Levine
Yeah, sure they don't, but it doesn't naturally generate tons and tons and tons of cash flow to, for instance, pay interest on its billions and billions of dollars of preferred stock. So that's one problem. The other problem is that it did a lot of this borrowing. I say borrowing, it's all preferred stock, but it's like it's essentially borrowing. They call it a credit instrument. They think of it as borrowing. Did a lot of this borrowing through this thing called a stretch, which is absolutely magical. It has been widely reported that Michael Saylor, he's not the CEO, he's the eminence behind MicroStrategy, he's the chairman, he's the guy.
- [28:25]
Katie Greifeld
Is he the founder?
- [28:27]
Matt Levine
Sure, let's say. I don't know. He's the guy. It has been widely reported that he asked ChatGPT to design the security for him. And ChatGPT did a bang up job. It's a preferred slide that its dividend rate resets every month and they reset it at their own discretion. But they said when they issued it 11 and a half months ago. They issued this in July of 2025. They said when they issued it that our current intention, which is subject to change in our sole and absolute discretion, is to adjust the regular dividend rate in such a manner as we believe will maintain stretch stock's trading price at or close to its stated amount of $100 per share. So basically the dividend floats every month to make it trade at par.
- [29:08]
Katie Greifeld
Yes.
- [29:08]
Matt Levine
Which makes it basically a monthly debt instrument that rolls over every month. Automatically rolls over. But if your borrowing costs go up the stretch.
- [29:17]
Katie Greifeld
Right.
- [29:18]
Matt Levine
And that is like a bank deposit. They like use bank deposits to buy bitcoin, which is crazy on so many levels. Olga Karif at Bloomberg reported in May that they were the majority of corporate and ETF Bitcoin buying. Yeah, for the year. They were buying like all the bitcoin. And they're doing it funny with stretch, like issuing like short dated par liabilities to buy all the bitcoin, you could sell them crazy thing to do and then everything went bad. And now their market clearing interest rate on stretch is 15% on billions and billions of dollars which means that like hundreds of millions of cash cost that they have to pay from somewhere. So this week they announced the series of measures to fix that, one of which was, never mind, we are not going to keep Stretch at par. They raised the dividend, it was at 11.5%. They raised it to 12% which is not market clear. It doesn't trade at par. It's trading the 80s now. They're no longer trying to keep it at par. They had said when they issued it less than a year ago.
- [30:20]
Katie Greifeld
Right.
- [30:20]
Matt Levine
Our intention is to keep it at par with no guarantees. And now they've already been like, yeah, sorry, never mind. They've also like announced that they're going to sell some bitcoin.
- [30:29]
Katie Greifeld
They did.
- [30:29]
Matt Levine
To raise some cash to pay these dividends. Yeah, they're going to like increase their cash reserves. They're trading at like around mnev. I think on Friday they were below enough. So like they were. The value of the company is less than the value of the bitcoin.
- [30:43]
Katie Greifeld
They did break the buck at one point. It's a sad story.
- [30:48]
Matt Levine
It's a sad story. We've talked about and I've written about a bunch of DATs. Digital asset treasury companies have also broken the buck and have various problems and various solutions including selling crypto to buy back your stock. Or activists have been trying to get them to do that. But that's all the minor leagues strategy. The original dat, the biggest dat, the one that was like we'll never sell bitcoin traded above net asset value for much longer than the other ones and certainly did really looked like they might be able to weather the storm, but now it is not great. Not great.
- [31:25]
Katie Greifeld
I mean the natural question is how does this story end if bitcoin rips from here, let's say it goes back to all time highs. Does that solve a bunch of these problems?
- [31:36]
Matt Levine
One, yeah, not necessarily all of them. Right. One thing that happened is bitcoin went down. Another thing that happened is the whole DAT story of where is he going to have. They called it accretive dilution. We'll always issue stock to buy more bitcoin which will be accretive because we're issuing stock at a premium. That story doesn't work anymore because you're no longer issuing stock at a premium. So even if bitcoin rips, people might be like, well I'll buy bitcoin instead of Buying strategy. But for the most part, bitcoin ripping doesn't hurt. Probably helps, but that's not necessarily exogenous. Like, strategy is buying all the bitcoin, right?
- [32:11]
Katie Greifeld
Yeah.
- [32:11]
Matt Levine
One reason bitcoin is down is because strategy is not buying all the bitcoin anymore. People have conspiracy theories about how big an influence strategy is buying is, but it's not none.
- [32:22]
Katie Greifeld
I mean, especially from a sentiment perspective as well.
- [32:24]
Matt Levine
Right. Michael Saylor's out here being like, yeah, we're selling bitcoin. It's bad.
- [32:28]
Katie Greifeld
I haven't checked his X in a while. I don't know if he's still posting those AI generated photos of like, him as a bear with like a big B across his chest.
- [32:38]
Matt Levine
There's so much like.
- [32:40]
Katie Greifeld
Or no, he's slapping a bear.
- [32:42]
Matt Levine
Yeah, right.
- [32:43]
Katie Greifeld
With a bitcoin.
- [32:44]
Matt Levine
Right.
- [32:45]
Katie Greifeld
Well, another sad part of the story is that, I mean, they bought all the way up, like just every. And now they're selling all the way down.
- [32:55]
Matt Levine
That's life, man. But that's not as life as a leveraged investor.
- [32:58]
Katie Greifeld
That's not what you're supposed to do, man.
- [33:00]
Matt Levine
It's not what you're supposed to do to do. But, like, there's a reason markets have cycles and it's because everyone does that.
- [33:06]
Katie Greifeld
So how does this potentially end? Assuming that bitcoin doesn't rip, we don't break $100,000 in short order.
- [33:13]
Matt Levine
Strategy used to say, and I used to agree with them, that they had really good leverage because it's all long dated. Most of it's perpetual, you know. Now most of their leverage is perpetual preferred, which means they never have to pay it back and they never have to pay interest. They can just be like, we're skipping the dividend this month on Stretch. And they just do that. No contractual obligation to ever pay out any cash. So one thing they could do is hibernate and just be like, we're going to keep this bitcoin until it rips up again. And then when it does, we'll turn the dividends back on and sell more stock and it's going to be great. That's not a preferred outcome for anyone.
- [33:45]
Katie Greifeld
No, I can't imagine.
- [33:46]
Matt Levine
Because in theory, if you do that, you can really never sell preferred stock again. In theory, memories are short. And maybe if some new part of the story comes in, maybe there's something there. But that's not what they're doing. What they're doing is they're buying back stretch to try to. But the answer to how does this End is it's just the inverse of what they did on the way up. It's like selling bitcoin, buying stock, paying down preferred, just reversing all the trades that they did. And there's a huge frictional cost in reversing all those trades because you buy on the way up and you sell on the way down, you lose a lot of money for shareholders. And then the question is, how long does that continue until something better happens?
- [34:26]
Katie Greifeld
I'm looking up right now how many employees Strategy actually has. It's over a thousand. We've talked about this before. I want to know what they each. I want to know what they all do.
- [34:35]
Matt Levine
Yeah. Like if you're the enterprise software.
- [34:37]
Katie Greifeld
Yeah. But if you're, if you're the average employee at Strategy, and I don't know what that looks like. How do you feel right now?
- [34:45]
Matt Levine
Entertained?
- [34:46]
Katie Greifeld
Scared? I don't know.
- [34:47]
Matt Levine
I don't know. But like, this has been going on for a while in some form, right?
- [34:51]
Katie Greifeld
Yeah.
- [34:52]
Matt Levine
You have to have made your peace with, like, this is a weird bitcoin company now. And like you have to wear orange to work and stuff. It's like a whole lot.
- [35:00]
Katie Greifeld
Is that for real?
- [35:01]
Matt Levine
I don't think so, but like a little bit, maybe.
- [35:05]
Katie Greifeld
I feel like you could make that piece and enjoy it while the times were good and the line was going up.
- [35:10]
Matt Levine
Yeah. All right, all right, all right.
- [35:12]
Katie Greifeld
Maybe you don't fix now.
- [35:13]
Matt Levine
You're like, ah, no one told me that the line could go down.
- [35:19]
Katie Greifeld
You just believe.
- [35:20]
Matt Levine
You just feel like it's amusing on the way up. It's amusing on the way down.
- [35:22]
Katie Greifeld
Yeah.
- [35:23]
Matt Levine
Probably less so if you own a lot of stock options.
- [35:26]
Katie Greifeld
Yeah. Well, it'll be fun to see how this all happens again six months from now. Who knows what Strategy will look like.
- [35:33]
Matt Levine
Yeah. For a while they're really shooting out weird capital markets instruments. I wonder if they're.
- [35:39]
Katie Greifeld
And you were living for it. I know.
- [35:41]
Matt Levine
And now, as I said, the thing that's going to happen is they're going to reverse that and buy back all these crazy instruments. But maybe they'll find something else. This is like I used to be a corporate equity derivative structure. So this is near and dear to my heart. You know, there are people at banks who are getting calls from the people who cover Michael Saylor being like, could we find some kind of new preferred stock for them to issue now when they're trading below MNAV and their stock is going down? Is there something that could. We could work with here?
- [36:09]
Katie Greifeld
Like just wrestle something together.
- [36:11]
Matt Levine
So I hope that the corporate equity derivatives bankers are burning the moonlight oil to think up weird trades for Michael Saylor to do. And I hope they find one.
- [36:21]
Katie Greifeld
I hope they're having fun.
- [36:22]
Matt Levine
I can't think of one.
- [36:23]
Katie Greifeld
It doesn't.
- [36:23]
Matt Levine
Not a lot makes sense here. But like, you know, maybe I'll think of something.
- [36:26]
Katie Greifeld
Maybe something to noodle on over the long weekends.
- [36:29]
Matt Levine
Yeah. America 250 what a real way to celebrate America's birthday is to find a new preferred stock for Michael Sailor Edition. And that was the Money Stuff podcast. I'm Matt Levine.
- [36:49]
Katie Greifeld
And I'm Katie Greifeld.
- [36:50]
Matt Levine
You can find my work by subscribing to the Money stuff newsletter on bloomberg.com
- [36:55]
Katie Greifeld
and you can find me on Bloomberg TV every day on the close between 3 and 5pm Eastern.
- [37:01]
Matt Levine
We'd love to hear from you. You can send an email to moneypodlumberg.net Ask us a question and we might answer it on the air.
- [37:09]
Katie Greifeld
You can also subscribe to our show wherever you're listening right now and leave us a review. It helps more people find the show.
- [37:15]
Matt Levine
The Money Stuff podcast is produced by Anna Mazarakis, Moses Andam and Alexis Haut.
- [37:21]
Katie Greifeld
Our theme music was composed by Blake Maples.
- [37:24]
Matt Levine
Amy Keen is our executive producer. Thanks for listening to the Money Stuff podcast. We'll be back next week with more stuff.
- [37:38]
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- [38:10]
Matt Levine
about what can be done, not what's usually done through innovation. Venture Global is not only building some of the largest energy facilities in the world, right here in the United States, but delivering American energy at a fraction of the cost in a fraction of the time. So while others are busy talking, we're busy building. That's Venture Global. That's unstoppable energy.
- [38:38]
Katie Greifeld
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