Bat Tat: Labubu, OBDC, Frank

Summary

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Money Stuff: The Podcast

Episode: Bat Tat: Labubu, OBDC, Frank
Date: November 21, 2025
Hosts: Matt Levine (Bloomberg Opinion, "Money Stuff"), Katie Greifeld (Bloomberg News & TV)

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Episode Overview

This week on Money Stuff: The Podcast, Matt Levine and Katie Greifeld spin through a range of topics at the quirky edges of finance, from the personal (Katie’s new "bat tat") to the deeply technical (derivatives on collectible toys), and on to a saga of corporate fraud (the Frank-J.P. Morgan debacle). True to form, Matt brings technical clarity peppered with dry wit, while Katie keeps things lively, skeptical, and relatable.

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1. The "Bat Tat": Katie’s Neck Tattoo & Corporate TV Reactions

[01:26–03:38]

• Katie reveals she got a Batman-themed neck tattoo in memory of her late pony named Batman, her first tattoo ever, and an unusually bold choice for someone on financial television.
  • “Yeah, it’s a bat tat on my neck. It’s my first tattoo. A little intense to get it on the neck.” – Katie (01:44)
• Matt’s reaction: Surprised it’s her first and commends the commitment.
• Katie shares the emotional backstory: “I got the tattoo for my late pony, Batman. I’d had him since I was 11. He passed away in May, the day before my birthday.” (01:55)
• Workplace angle: Her conservative TV producers were surprisingly enthusiastic, even orchestrating an on-air reveal.
• The duo riff on tattoo timing and adulthood:
  • Matt: “Weird for me to get a tattoo now. I’m an old man.” (03:01)
  • Katie: “But I feel like if you want a tattoo, you probably get it in your teens or twenties.” (03:12)
  • Matt: “No, I feel like a lot of people enter a new phase of life in their 30s and become tattoo people.” (03:15)

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2. Labubu Derivatives: Prediction Markets Go Full Meme

[04:04–13:29]

• Labubu?
  The hosts discuss the rise of “labubus”—oddball collectible toys which, much to their bemusement/disgust, are now subject to financial derivatives via prediction markets like Kalshi in partnership with StockX.

  • “They’re like furry creatures... They’re freaky. They’re freaky little things. Now you can trade derivatives of them, kind of.” – Katie (04:31)
  • “You can trade binary options on the boo boos. It’s so good.” – Matt (04:35)

• Matt explains the event contract mechanism:
  It’s not about owning the collectible but about betting on price outcomes—for example, “a yes/no contract that pays off a dollar if the price of some box of labubus is over $120 and it pays off $0 if the price ... is less than $120.” (05:38)

• Meta discussion:
  These are convoluted financial products—event contracts about sneakers, trading cards, and meme toys—representing a larger trend toward making markets out of anything and everything.

  • “If you get money for trading, then you want to turn everything in the world into a yes/no event...what products can we trade? And it’s like well, sneakers. Well, sneakers are not really yes/no events, but if you have to, you can make them...” – Matt (06:12)
  • “It’s a strange, strange mechanism. Maybe this is just like a publicity stunt. But... there is a belief... that this is like the path to be an everything exchange...” – Matt (07:13)

• Risk and collateral:
  Event contracts (binary options) present less risk than continuous contracts; they’re easier to collateralize and harder to blow up than, say, crypto derivatives.

• Manipulation concerns:
  Katie wonders about how easy these things are to rig; Matt describes the (at first) limited potential given tiny market sizes, but acknowledges that as they (possibly) scale, manipulation issues will grow:

  • “If the event contract gets big enough... you’ll buy some of the underlying thing to push it up above the threshold and you make a lot of money on the contract. It’s very easy to manipulate in concept, it’s probably very hard to manipulate right now in reality.” – Matt (10:17)

• Regulatory angle:
  If everything becomes a prediction market, regulatory bodies like the CFTC will increasingly have to deal with market manipulation in everything (from wheat to sneakers).

  • “If you put everything onto prediction markets then everything becomes a commodity and the CFTC has to think about were you buying those sneakers to push up the price of sneaker futures.” – Matt (11:04)

• The two futures for prediction markets:
  Matt: “One is ... it somehow becomes a market for everything... [or] it’s like a giant legalized sportsbook, right? And that’s kind of where my money is.” (11:48)

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3. OBDC and Blue Owl: The Private Credit Discount Drama

[15:49–23:35]

• From Labubus to Owls:
  The story pivots from collectibles to Katie’s “second love” after horses—ETFs, and specifically Business Development Companies (BDCs), with Blue Owl’s OBDC in focus.
• What’s a BDC?
  Matt: “The BDC is just a private credit fund. It’s just a pot into which a manager like Blue Owl puts private credit investments.” (16:35)
• Difference between ETFs and BDCs:
  The crucial distinction – BDCs don’t allow traditional redemption mechanisms so their share prices can (and do) detach from net asset value (NAV).
  • “With BDCs... There’s no mechanism to make sure that the price of the shares is in line with NAV...And it’s therefore not factually the case.” – Matt (17:32)
• The merger mess:
  Blue Owl tried to merge its public (OBDC) and private (OBDC2) BDCs to address redemption pressure, but failed because:
  • The public OBDC trades at a 20% discount to NAV, so merging would force private holders to realize losses to access liquidity.
  • “No one wanted that. So they ultimately called off the merger.” – Matt (19:14)
• Why the persistent discount?
  • Some is standard (future fees), but in late 2025, Matt notes persistent skepticism about the true value of private credit assets:
    • “There are some people who believe that some private credit loans aren’t worth as much as private credit managers think they are.” (20:43)
    • “The price of OBDC shares tells you what people think about what the current loans are currently worth... The price of the business development company possibly suggests cockroaches.” – Matt (22:24)
• Potential for liquidation:
  The vehicle may end up being liquidated, in which case shareholders would (in theory) receive 100 cents on the dollar—assuming the assets are truly worth that.
  • “Liquidating is not a terrible outcome...because it’s like then you get 100 cents on the dollar...Better than 80 for sure.” – Matt (23:17)

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4. Frank, J.P. Morgan, and the Legendary Legal Bill

[26:44–34:16]

• Recap of the Frank saga:
  • Charlie Javice, founder of Frank (student aid fintech), sells company to J.P. Morgan for $170 million, largely on the basis of a claimed customer base that proved mostly (literally) fake.
    • “The allegations are that she sold it to them on the basis of, like, having millions of devoted customers. And then it turned out that all of the customer email addresses in her database were fake.” – Matt (26:51)
  • JP Morgan promotes her internally before discovering the fraud via failed marketing emails.
• Prison, indemnity, and bonkers legal bills:
  • Despite being accused (and later convicted) of fraud against J.P. Morgan, the bank is contractually obliged to pay her legal bills, already totaling over $142 million (and climbing).
    • “The legal bills are now nine digits.” – Matt (28:50)
  • Katie on WSJ’s reporting: “According to the Wall Street Journal, between her and her co-executive’s legal defense, it’s already cost more than $142 million. Incredible.” (29:00)
• Egregious billing & "cellulite butter":
  • The legal teams’ expense reports include luxury hotels and “cellulite butter.”
    • “I never heard of it. Okay, I’m interested.” – Katie (30:14)
  • Matt theorizes that this is routine big-firm lawyering—clients pay for everything, even personal services or surprises: “There’s a lot of stuff like that where if you’re a client... [law firms will] just do it for you. But then they’ll put it on your bill.” (31:37)
• Can JP Morgan stop the bleeding?
  • Ongoing litigation to halt payments; but even if they succeed, the saga exposes the perverse logic of corporate indemnity and legal billing excess.
• Notable reflection on modern corporate risk:
  • How big does a bank’s mistake have to be to make analysts ask about it on an earnings call? “The $175 million acquisition of Frank definitely got raised on some calls...But now we’re getting to that level...we’ve doubled that price tag.” – Matt (33:13)
• A sobering coda:
  • Katie: “Charlie Javis is exactly my age. She was born in March of 1993. She’s done so much. What have I done?” – Katie (33:47)

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Notable Quotes & Memorable Moments

• On the rise of event contracts/trading anything:
  • “If you put everything onto prediction markets then everything becomes a commodity and the CFTC has to think about were you buying those sneakers to push up the price of sneaker futures.” – Matt (11:04)
• On BDC discounts:
  • “There are some people who believe that some private credit loans aren’t worth as much as private credit managers think they are.” – Matt (21:05)
• On the size of the Frank legal defense:
  • “The legal bills are now nine digits.” – Matt (28:50)
  • Katie: “According to the Wall Street Journal, between her and her co-executive’s legal defense, it’s already cost more than $142 million. Incredible. So they’re pretty incredible. Yeah. Queen. Just kidding.” (29:00)
• On billable hour excess:
  • “Lawyers were billing for 20 hours of work in a single day.” – Katie (31:49)
  • Matt: “That’s individual lawyers...24 hours. I’ve worked at a law firm.” (32:02)
• On career/life (with deadpan):
  • Katie: “Charlie Javis is exactly my age. She was born in March of 1993. She’s done so much. What have I done?” (33:47)
  • Matt: “And by the time she gets out of prison, when she eventually goes, I mean, she’ll still be a relatively young woman. Yeah, early 40s. Lot to live for. She could still get a tattoo.” (34:00)

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Key Timestamps

• 01:26 – Katie’s bat neck tattoo, story and on-air reveal
• 04:04 – The rise of labubu (Labubu) collectibles and their market derivatives
• 06:55 – How binary prediction markets work and their expansion to collectibles
• 11:04 – Regulatory implications if everything becomes a prediction market
• 15:51 – Shifting to BDCs and the Blue Owl OBDC drama
• 19:14 – The failed OBDC/OBDC2 merger and public/private fund dynamics
• 21:24 – Why BDCs (and private credit) might trade at persistent discounts
• 26:44 – Enter the Frank-JP Morgan deep dive
• 28:50 – $142 million (and growing) legal bill for Charlie Javis’ defense
• 30:14 – Mystery of the “cellulite butter” and law firm expense culture
• 33:13 – How financial fiascos hit public-company earnings scrutiny

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Episode Tone & Style

• Deadpan, witty, lightly skeptical storytelling with explanations—Matt’s signatures abound, especially as he explains convoluted market structures or pokes at legal absurdities.
• Conversational, personal, and a bit irreverent—Katie’s tattoo and reactions to financial oddities keep the show grounded and relatable.
• Theme: The wildly expanding boundaries of what’s monetized and tradable in finance, along with stark illustrations of perverse incentives and bubble dynamics.

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For Listeners: Why Should You Listen?

This episode is a whirlwind tour through modern finance’s weirdest fringes, giving you technical clarity on prediction markets, real talk on private credit’s hidden risks, and a front-row seat to one of the most expensive examples of corporate schadenfreude in recent years. All delivered with a blend of dry humor, fresh skepticism, and surprisingly warm personal moments.

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Transcript

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[Matt Levine]

Bloomberg.

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Audio Studios Podcasts Radio News I got a haircut.

[Katie Greifeld]

That was actually that's the first thing I said to you after I told you that I didn't like want you to watch me eat yogurt.

[Matt Levine]

But in other news, you got a neck tattoo.

[Katie Greifeld]

I did.

[FedEx Advertiser]

Yeah.

[Katie Greifeld]

I got a neck tattoo last Friday.

[Matt Levine]

It's a Batman bat.

[Katie Greifeld]

Yeah, it's the bat signal.

[Matt Levine]

The bat signal, yes.

[Katie Greifeld]

Yeah, it's a bat tat on my neck. It's my first tattoo. A little intense to get it on the neck.

[Matt Levine]

You can't see it is your last tattoo. Like having only one tattoo and having it be a neck tattoo is pretty good.

[Katie Greifeld]

The tattoo artist asked me that as well. The thing is, I got the tattoo for my late pony, Batman. I'd had him since I was 11. He passed away in May, the day before my birthday. Also intense. I knew I was gonna get this tattoo when he did leave us. So my answer to that question is when my cat dies, I'll probably get another tattoo. I wasn't expecting my TV producers to be as into it as they were. Okay, we have this thing called Really.

[Matt Levine]

I feel like a Nick tattoo is news.

[Katie Greifeld]

I know, but I thought that, you know, we are a buttoned up financial news network. I thought that they wouldn't be thrilled about it, but they really wanted to do an on air reveal. So we did. We had a man with A Steadicam, which is just a handheld camera, essentially come in and zoom in on it at one point during Monday show. Thankfully, it wasn't scabbing yet, so it still looked kind of good.

[Matt Levine]

It's in, like a little bit in the show. Notes that are scabbing.

[Katie Greifeld]

Yeah, Yeah. I think it's healing nicely. It was really painful. Are you going to get a tattoo?

[Matt Levine]

No, no, no. I've missed that.

[Katie Greifeld]

I don't.

[Matt Levine]

Weird for me to get a tattoo now I'm an old man.

[Katie Greifeld]

I was kind of thinking about that, that my first Tattoo was at 32 years old.

[Matt Levine]

32 is fine.

[Katie Greifeld]

It's still.

[Matt Levine]

I don't know. I feel like I redact my age, but I'm too old for a tattoo.

[Katie Greifeld]

But I feel like if you want a tattoo, you probably get it in your teens or twenties.

[Matt Levine]

No, I feel like a lot of people enter a new phase of life in their 30s and become tattoo people.

[Katie Greifeld]

Yeah, maybe.

[Matt Levine]

Yes. I saw it on Instagram on Friday and I said to my wife, oh, Katie got a neck tattoo. My wife was like, what? I'm like, Katie is not just a financial news anchor. She's also an emo girl.

[Katie Greifeld]

Yeah. At heart, I'm just trying to get back to my roots, you know?

[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.

[Katie Greifeld]

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

[Matt Levine]

Do you know what a lububu is?

[Katie Greifeld]

I do. They're impossible to escape. Did you know what a lububu was prior to this week?

[Matt Levine]

I'm definitely aware of lububus as an important cultural force.

[Katie Greifeld]

Yeah.

[Matt Levine]

Do I know what they are? Even now, I couldn't pick them out of a lineup.

[Katie Greifeld]

I really hate them.

[Matt Levine]

Sure, they seem bad.

[Katie Greifeld]

There's a printout of Olububu between us on the table right now, and I.

[Matt Levine]

They're like furry creatures that.

[Katie Greifeld]

They're freaky. They're freaky little things. Now you can trade derivatives of them, kind of.

[Matt Levine]

Derivatives of them. Yes, absolutely. You can trade binary options on the boo boos. It's so good.

[Katie Greifeld]

Yeah. Through calcium.

[Matt Levine]

I hear the enthusiasm of fights.

[Katie Greifeld]

I really. I don't get it. This is one of the first cultural phenomenons where I just feel like I can't get into the headspace to predict.

[Matt Levine]

Okay. Wow. Yeah. This is like the 400th for me.

[Katie Greifeld]

Really?

[Matt Levine]

Yeah. I'm an old man.

[Katie Greifeld]

Yeah. That's true. See, I'm still getting neck tattoos.

[Matt Levine]

Yes.

[Katie Greifeld]

This is my limit though. So Kalshe and StockX are partner up so that there's going to be event contracts tied to many things.

[Matt Levine]

Yeah, sneakers, collectibles, let's say sneakers, the Boo Boos, a third category of things. Yeah, sneakers and the Boo Boos and.

[Katie Greifeld]

Also some trading cards.

[Matt Levine]

Trading cards? Yes.

[Katie Greifeld]

I don't understand this because I have my mind wrapped around what StockX does. And there's other alternative asset marketplaces where you can buy shares of collectible items. I don't know how you turn that into an events contract, right?

[Matt Levine]

This is what I've been writing about. It's a weird mechanism. What you can do is you can buy a yes no contract that pays off a dollar if the price of some box of labubus is over $120 and it pays off $0 if the price of that box of booze is less than 120. Or you know, like you can turn any continuous variable into a binary, right? You can say if the price of Tesla is above $400 then you get a dollar and if it's below $400 you don't get a dollar. Right. But it's not the most natural no product.

[Katie Greifeld]

It seems not fun, but that's a different.

[Matt Levine]

It seems not fun, but I don't know, it's like kind of interesting, right? Like I, I don't know the reason for this, but I've speculated on some reasons, the simplest of which is like Kalshi is an event contract marketplace, right? I think that's what it does. It lets you bet on whether or not some event will happen. And if that's your lens, then you could turn anything in the world into a yes no event. Right? And if you get money for trading, then you want to turn everything in the world into a yes no event. And so you sort of look around and say what products can we trade? And it's like well, sneakers. I was like, well, sneakers are not really yes no events, but if you have to, you can make them into yes no events and then you can trade them.

[Katie Greifeld]

Convolute the question in such a way that it becomes yeah.

[Matt Levine]

And it's not like a crazy convolution, but it's like a little crazy. Yeah, it's a little crazy. Like I was looking at their charts, you know, and like they have like price of some sneaker and like there's a chart and the chart is like four different lines for the probabilities of different like Price levels. It's like you want the chart to be just like the price, right?

[Katie Greifeld]

Yes.

[Matt Levine]

It's an intuitive chart of a sneaker price and they don't show that intuitive chart. So it's a strange, strange mechanism. Maybe this is just like a publicity stunt. But I've enjoyed writing about it because like, one thing that is going on here is that there is a belief, possibly a money motivated belief among people who work in prediction markets and who work at big exchanges and who are partnering with prediction markets that this is like the path to be an everything exchange, which is like the term that Coinbase has used. This is the way that you can sort of suck everything in the world into financial markets. And one point I've been making this week is in kind of a rickety way, why does it have to be a prediction market like this? But it is something that people are pretty enthusiastic about because at the end of the day, if you're running a financial market, one big category of what you're doing is offering people more opportunities to bet, let's say, on more things. And this is the most general purpose way that people have found to let people bet on things.

[Katie Greifeld]

Yeah, I get the betting argument. People like to bet.

[Matt Levine]

I don't know why they would want to bet on the yes day.

[CBOE Announcer]

Whatever.

[Katie Greifeld]

That's the thing, it has to be fun, right? And it doesn't seem as fun. Versus is like I'm going to buy shares of a meme stock and hope it goes to the moon versus I'm going to hope the price of the box of the Labubus goes above this certain threshold.

[Matt Levine]

Yeah, I do wonder if this is like a baby step on the way to some more moon worthy financial market. One thing I've written is that the essential thing here is that these are contracts with someone on either side of them. Right? Like you're betting against someone else. And if you have a contract that can go to a million dollars, then the person on the other side of that has to put up collateral and could have to put up a million dollars of coll collateral. So you have a really complicated and risky margining system if you're having bets that can go continuously as far as you want in either direction. Whereas traditional prediction markets, the bets are like you get a dollar or you don't get a dollar. And so the collateral and the margining is a lot easier and the risk is a lot lower. So these are not super risky exchanges. The exchange itself not a particularly risky proposition as compared to, oh, say certain crypto exchanges. We've talked about. And so going from that system to a system where the price can be whatever the price is is like a risky and complicated set of decisions but possibly something that is in the future if you want to be an everything exchange.

[Katie Greifeld]

Yeah, I do wonder how this can be manipulated. This. Oh right, I mean events contracts on.

[Matt Levine]

Boo boos, you know the answer I think is very clearly that it can't be because.

[Katie Greifeld]

Go on, who is trading this? You and me are.

[Matt Levine]

The way to manipulate this is like there's a contract on like the average price of some sneake and I go and buy a bunch of the sneaker to push out the average price and then I win on my prediction market contract. But I assume that however big the market for the sneaker is, it's probably not that big. It's not like treasury bonds. But however big the market for the sneaker is, presumably the prediction market is orders of magnitude smaller because some people buy sneakers because they want to wear the sneakers.

[Katie Greifeld]

Weirdos.

[Matt Levine]

But how many people are going to want to buy the contract? That's like sneaker price will be above 140 doll think that it's going to be very hard to manipulate because it is at this point two days in or whatever a very small derivative on top of a moderately larger market. But in the long run, sure you have an event contract that is a binary. It pays 0 or 1 and it's on some underlying thing. And if the event contract gets big enough and it's like trading a penny below the threshold, you'll buy some of the underlying thing to push it up above the threshold and you make a lot of money on the contract. It's very easy to manipulate in concep, it's probably very hard to manipulate right now in reality. But give it time, get more things.

[Katie Greifeld]

Let it get its sea legs first.

[Matt Levine]

And the other thing is I think about this all the time. The cftc, the US Commodities Futures Trading Commission regulates commodities futures. It doesn't really regulate the market for wheat but it does regulate. You can't manipulate the wheat market if it's going to affect commodity futures. The CFTC has some anti manipulation powers but if you put everything onto prediction markets then everything becomes a commodity and the CFTC has to think about were you buying those sneakers to push up the price of sneaker futures. And then it's like it's going to.

[Katie Greifeld]

Be interesting to see how just the prediction market space matures because this I think is firmly silly season and I think we can put it in that Bucket.

[Matt Levine]

Yeah. I think there are two paths for it maturing. One is what everyone says, which is it somehow becomes a market for everything. And it becomes the way that companies and real people think about hedging risk and predicting the future and understanding the probabilities and potentialities for the future. And then the other way is it's like a giant legalized sports book, right?

[Katie Greifeld]

Yeah.

[Matt Levine]

And that's kind of where my money is. But who knows? Who knows?

[Katie Greifeld]

Well, I was speaking to the CEO of CBO last week.

[Matt Levine]

Probably not in the legalized sportsbook.

[Tide Advertiser]

No.

[Katie Greifeld]

No. So CBO doesn't have their own prediction markets outfit yet, but they're going to.

[Matt Levine]

Roll something 45 minutes.

[Katie Greifeld]

Well, they're going to roll it out in the next few months, which is interesting because there's kind of a land grab going on right now. I have to imagine that the exchanges think about this all the time, or they should.

[Matt Levine]

Doing commodity futures for years, and now it's like, ooh, it turns out they were running a sports book and they didn't know it. Right. We got to do sports.

[Katie Greifeld]

SIBO specifically is not going to go into sports. At least that's. That's what the CEO said.

[Matt Levine]

That's probably right.

[Katie Greifeld]

But mid November 2025, so we have the receipts.

[Matt Levine]

But, like, and like, that makes sense because, like, if you're like Calcium or polymarket and you're like a little hobbyist prediction site, and then like, sports is this, like, enormous gusher of money, then you go into sports. Right. If you're cbo, if you have, like, Treasury.

[FedEx Advertiser]

Yeah.

[Matt Levine]

Like, you know, there's, like, more money in sports books than there is in, like, traditional prediction markets. There's more money in real financial markets than there's in sports books.

[Katie Greifeld]

Yeah. Exact. Focusing on economic and financial prediction markets for the next 45 minutes.

[Matt Levine]

Right. Synergies there with interest rates and whatnot.

[Katie Greifeld]

Yeah, for sure.

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[Katie Greifeld]

From Labubus to Owls.

[Matt Levine]

Owls.

[Katie Greifeld]

Yeah, the blue kind. What an interesting week.

[Matt Levine]

We've cited this before, but like you.

[Katie Greifeld]

Yes.

[Matt Levine]

Your first love besides your horse is ETFs.

[Katie Greifeld]

Yeah.

[Matt Levine]

You love an ETF.

[Katie Greifeld]

I do.

[Matt Levine]

And so we've talked about private credit. We've talked a lot about retail private credit. And like ETFs for private credit, which is like a category that kind of sort of exists.

[Katie Greifeld]

They're trying to make it a thing.

[Matt Levine]

Trying to make it a thing. And whenever we talk about that, I always say there is a retail exchange traded fund category for private credit and it is called a BDC or a business development company, which is a terrible name.

[Katie Greifeld]

Yeah.

[Matt Levine]

Because it makes it sound like it's a business development company and that is not what it is. I don't know what a business development company would be, but it sounds like a company that develops businesses, right?

[Katie Greifeld]

Yeah, for sure.

[Matt Levine]

But in fact the BDC is just a private credit fund. It's just a pot into which a manager like Blue Owl puts private credit investments.

[Katie Greifeld]

And it's publicly traded.

[Matt Levine]

It's publicly traded. And so investors can buy shares. A traded bdc. Not all. Some are like private, like not traded. And we'll talk about that.

[Katie Greifeld]

Which we'll get into.

[Matt Levine]

Yes, but like Listed BDC is just a stock on the stock market. You can buy shares, anyone can buy shares, you can sell shares on the market. It's a little bit like an etf.

[Katie Greifeld]

Yeah.

[Matt Levine]

With one really important distinction.

[Katie Greifeld]

Go on.

[Matt Levine]

You can't redeem, like, you can sell your shares in the market. And so what that means is that the price of the shares is the price of the shares. There's no mechanism to make sure that the price of the shares is in line with nav. Whereas, like, with an etf, like, you know, if, like, the shares are trading below nav, then, like, you buy some shares and you pop them out of the. You know, pop the assets out of the fund and you get stuff at nav.

[Katie Greifeld]

An authorized participant does.

[Matt Levine]

Yeah, yeah, yeah, whatever, whatever. With BDCs, that's not necessarily the case.

[Katie Greifeld]

No.

[Matt Levine]

And it's therefore not factually the case.

[Katie Greifeld]

Yeah.

[Matt Levine]

For whatever reason.

[Katie Greifeld]

And I feel like we got another lesson in that this week with Blue Owl having to call off the merger between one of its publicly listed BDCs and then a private fund.

[Matt Levine]

Yeah. So it has a thing called OBDC, which is like the Blue Owl Business Development Company, which is a publicly traded BDC, and it has a thing called OBDC 2, which is a private BDC. So a private BDC is like, they sell it to investors. It doesn't trade on the market. And so if you're an investor in OBDC2, the private one, you can't get your money back by just selling on the stock market. And so the way it works is that they have a redemption mechanism where, like, every quarter they'll buy up to a certain amount of the shares back, if you want to. Right. So they'll offer to buy shares back and you can tender or not. And in recent months, there's been a little tension. Yes, they have bought back anyone's shares who's wanted to sell, but there's, like, been a little bit more redemptions than they'd like. There's a widespread sense that if it continued at that pace, they would eventually get redemptions, which they're allowed to do. They can buy back as much as they want to get out. Ahead of that, they announced that they were going to merge these two funds. If you had shares of OBDC 2, the private company, you'd get shares of OBDC, the public company, and then you could sell those whenever you wanted, no problem. You don't have to redeem anymore. And that caused some unhappiness because OBDC1, the publicly traded one, happens to trade at about a 20% discount to net asset value. And so instead of being able to get back 100 cents on the dollar, you can get back 80 cents on the dollar if you sell your public shares. No one wanted that. So they ultimately called off the merger.

[Katie Greifeld]

Yeah, specifically when it comes to redemptions. In the third quarter, they approved about $60 million worth that was already exceeding their preset. That limit here, the discount, they've been trying to address that. They've been doing a bunch of share repurchases. They have a $200 million program. But I could see how that would cause some indigestion.

[Matt Levine]

Yeah, yeah, right.

[Katie Greifeld]

Yeah. So now they're evaluating how to go forward.

[Matt Levine]

Yeah. It's hard because the publicly traded product seems kind of like a better product for the manager. And getting people out of the private product into the public product. The public product for the manager's perspective is permanent capital. They never have to redeem any of it. They can if they want to. And they have been. They've been doing buybacks, which you can think of a buyback as a way to address the discount and make shareholders happy. Or you can think of it as just an opportunistic trade where they can buy 100 cents worth of stuff at 80 cents on the dollar. But with a private company, it's like people complaining when they don't get liquidity. You have them asking for liquidity. So you have to pay out money when you don't necessarily want to. It's a less good product. But it is hard to get people out when the public product trades at a discount.

[Katie Greifeld]

Yeah.

[Matt Levine]

The other question that one might ask is, why does the public product trade at a discount? And some of the answer for that is like, everything trades at a discount. Like close end funds trade at a discount. And the traditional reason for that is you capitalize future fees in the discount. And so like, you know, you'd rather own 100 cents worth of loans than 100 cents of worth of loans. Plus, like the fees you have to pay Blue Owl for the rest of time. But in November of 2025. The other reason that there might be a discount is that there are some people who believe. You may not believe this. There are some people who believe that some private credit loans aren't worth as much as private credit managers think they are.

[Katie Greifeld]

Yeah, that seems to be a more and more pervasive view.

[Matt Levine]

It's a view.

[Katie Greifeld]

It's a view.

[Matt Levine]

Yeah. Jamie Dimon said some words about cockroaches, et cetera, et cetera, and so Jeffrey Gundlach. Everyone. Not everyone. I shouldn't say that.

[Katie Greifeld]

Mark Lipscholson.

[Matt Levine]

Yeah. This is not like necessarily correct, but it is a view that people have. And so one reason that a publicly traded pot of private credit loans might trade at $0.80 on the dollar is that some of the people trading it don't really believe that the pot of loans is worth a dollar. And so if that's the case, then like one, this merger is awkward. But two, the awkwardness around this merger calls awkward attention to people's worries about valuation.

[Katie Greifeld]

Yeah. I mean you can also see this just in shares of Blue Owl proper, which are down like 40 something percent this year. They're at their lowest since 2023. A lot of that decline happened before we got into any drama with the fund merger.

[Matt Levine]

Yeah, that's like a little, you know, Blue Owl is a management company. Right. Like it's, you don't get a pure sense of like the valuation of the portfolio.

[Katie Greifeld]

No, but people view it as a proxy.

[Matt Levine]

No, no, I understand. Right. The price of Blue Owl shares tells you something about what people think about the future cash flows of the private credit business. The price of OBDC shares tells you what people think about what the current loans are currently worth. Right. And they're slightly different questions.

[Katie Greifeld]

Slightly different.

[Matt Levine]

The price of the Blue Owl shares going down suggests that people think that the private credit party is over coming to an end. Not as good as it used to be, certainly. Right, yeah. The price of the business development company possibly suggests cockroaches.

[Katie Greifeld]

Yeah, possibly. Well, it's going to be interesting to see what happens here. According to Bloomberg News, they have until April to find a solution or will consider liquidating or dissolving the vehicle according to filings. Typically there's some wiggle room around those deadlines.

[Matt Levine]

I will say liquidating is not a terrible outcome for the shareholders because it's like then you get 100 cents on the dollar assuming which is better than loans at 100 cents on the dollar.

[Katie Greifeld]

Better than 80 for sure.

[Matt Levine]

Yeah, probably.

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[Matt Levine]

There's an incredible controversy, let's say, about Charlie Javis.

[Katie Greifeld]

Another one.

[Matt Levine]

So she was the founder and CEO of a company called Frank that like Helped students fill out financial aid forms, basically. And she sold it to J.P. morgan for $170 million. And the allegations are that she sold it to them on the basis of, like, having millions of devoted customers. And then it turned out that all of the customer email addresses in her database were fake. And they sent out. JP Morgan is not really in the business of providing financial aid advice. JP Morgan bought Frank to get access to this devoted young customer base. And then they sent out an email to all of Frank's customers being like, hey, sign up for a JP Morgan credit card or whatever. And all of the emails bounced in there, like, wait a minute. And so they sued her for fraud, and then ultimately it got referred to prosecutors and she was arrested and charged with fraud and tried and convicted and sentenced to seven years in prison. And she's now at Unbound.

[Katie Greifeld]

I'm trying to find the title that JP Morgan gave her because it was pretty good. But anyway, go on.

[Matt Levine]

She was like, yeah, they bought Frank and she was made a managing director and head of Frank or whatever. Right?

[Katie Greifeld]

It was like head of student something.

[Matt Levine]

Yeah. And then they sent out this email and it all bounced and they were like, wait a minute. And they put her on leave and fired her and so forth. But because she was a JP Morgan employee and because she had a merger agreement or she sold Frank, they had agreed to indemnify her for legal expenses, pay her defense costs in certain legal cases, including, it turns out, and they litigated this, but they lost. They were on the hook to pay for her criminal defense, which is like. Seems a little weird that, like, she defrauded them allegedly and now convictedly, and they had to pay for her legal defense. But it's not that weird. Like, that's actually like, a thing that happens somewhat regularly is that, you know, you agree to indemnify your employees even against charges that they stole from you. But what has also happened is that she has racked up astonishing, amazing, incredible legal bills to the point that people keep saying the legal bills might approach the amount the $175 million that she defrauded from JP Morgan. The legal bills are now nine digits.

[Katie Greifeld]

According to the Wall Street Journal, between her and her co executive's legal defense, it's already cost more than $142 million. Incredible. So they're pretty incredible. Yeah. Queen. Just kidding.

[Matt Levine]

If the government is trying to send you to prison and someone else will pay for your lawyers, you might as well hire all of the best lawyers and leave no stone unturned in Your defense, which I think is what happened, she hired really fancy lawyers, and they put in a lot of hours, and they reviewed a lot of documents. And from where I sit, that doesn't seem all that useful because they share a lot of emails being like, let's do fraud. Right? That's not true. There is more of a defense of her actions than I'm. Whatever. I mean, pretty bad fraud. But if it's not your money, you might as well spend as much as you can to take any shot of that kind of prison. But the other thing is that. And this is like, at the Times Ron Lieber wrote about this last week, JP Morgan is trying to claw back some of his money and stop paying for it. And one thing they're accusing her is, like, you know, enormous, wasteful, unconscionable spending on legal bills. But the other thing is, they're like, she spent money on cellulite butter.

[Katie Greifeld]

Yeah. I never heard of it. Okay, I'm interested.

[Matt Levine]

And I don't exactly know why JP Morgan, in paying her legal bills, would have paid her cellulite butter bills. But I have a guess, which I wrote about, which is that law firms will serve you lunch.

[Katie Greifeld]

Yeah.

[Matt Levine]

Like, seems good. I used to work at a law firm, and, like, so I once worked on a deal where, like, we had a client and, like, they were negotiating a merger with some other client, and the other client had another law firm, and we were meeting at that other law firm's offices, and our client was like, let's go to Wachtel's offices. They have better food. And so we went to our offices and we had better food, and it's much nicer to be at our offices. Like, you have, like, a sort of negotiating advantage when it's at your office.

[Katie Greifeld]

Right.

[Matt Levine]

And I was like, oh, that's so nice. We got a real advantage by having better food. And we didn't cook the food, you know, like, we ordered in, but, like, we ordered in nice food. I was like, on the one hand, it's nice that we're doing this nice thing for the client, but we're billing it to the client. Like, the client pays for all of this eventually. And so there's a lot of stuff like that where if you're a client and you're at the law firm and you're paying the law firm an enormous bill, and you ask the law firm to do anything at all for you, like, buy you a change of clothes because you've been there overnight, really, anything, they'll just do it for You. But then they'll put it on your bill, right?

[Katie Greifeld]

Yeah.

[Matt Levine]

I think that one thing that might be happening here is that JP Morgan is not only paying the law firm's bills, they're paying the law firm's expenses. And the law firm's expenses could be some stuff for Charlie Javice.

[Katie Greifeld]

Yeah, well. Well, according to the Wall Street Journal, lawyers were billing for 20 hours of work in a single day.

[Matt Levine]

Sure.

[Katie Greifeld]

So maybe there were day shift and night shift lawyers working around the clock.

[Matt Levine]

No, that's individual lawyers.

[Katie Greifeld]

That's the same guy.

[Matt Levine]

24 hours I've worked at a law firm.

[Katie Greifeld]

That's awesome. Luxury hotel upgrades. Fine. The cellulite butter again. I'm very interested in that. But we should probably say that a spokesperson for Charlie Javis says that Charlie says she has nothing to do with that. And it's a ridiculous allegation, by the way.

[Matt Levine]

It's not obvious that, like, they could have bought the cellulite better for themselves.

[Katie Greifeld]

That's true.

[Matt Levine]

You're on a work trip, you're like, yeah, it's very. You got it. Like, you bill enough hours, you work enough hours, you're like, I'm gonna expense everything on this work trip.

[Katie Greifeld]

It is very heteronormative that we assumed it was for Charlie.

[Matt Levine]

Well, right, because, like, JP Morgan is sort of accusing her of wasting their money.

[Katie Greifeld]

Yeah, but it could have been the law.

[Matt Levine]

It could have been the lawyers. Right. The lawyers bracket up whatever expenses they rack up.

[Katie Greifeld]

They're no angels.

[Matt Levine]

There are no angels.

[Katie Greifeld]

Yeah. This is amazing. And I didn't fully appreciate that. I would have just thought, she's very expensive. Lawyers. But I'm glad that so many different news outlets have tackled this. Do you think that JP Morgan is going to be able to stop paying for her legal defense?

[Matt Levine]

Maybe. I don't know.

[Katie Greifeld]

When does it start to impact their earnings? When do we see analysts ask questions.

[Matt Levine]

About this billion dollar appeal?

[Katie Greifeld]

Someone asked Jamie Dimon, next earnings call.

[Matt Levine]

Yeah, it's true. It's true. True. It's true. I think sometimes about the level of mistake that you have to make at a bank to be asked about on the earnings call. And to be fair, the $175 million acquisition of Frank definitely got raised on some calls. Right. Jamie Dimon has addressed this, I think, more than once with analysts and reporters, people being like, how could you do such bad due diligence and spend $175 million in this company that just had fake email addresses? But now we're getting to that level. We're getting to that level.

[Katie Greifeld]

Yeah, we've doubled that price tag. Charlie Javis is exactly my age. She was born in March of 1993. She's done so much. What have I done? God, what a whirlwind that must have been.

[Matt Levine]

Yeah.

[Katie Greifeld]

And by the time she gets out of prison, when she eventually goes, I mean, she'll still be a relatively young woman. Yeah, early 40s. Lot to live for. She could still get a tattoo.

[Matt Levine]

And that was the Money Stuff Podcast. I'm Matt Levine.

[Katie Greifeld]

And I'm Katie Greifeld.

[Matt Levine]

You can find my work by subscribing to the Money stuff newsletter on bloomberg.com.

[Katie Greifeld]

And you can find me on Bloomberg TV every day on the close between 3 and 5pm Eastern.

[Matt Levine]

We'd love to hear from you. You can send an email to moneypodloomberg.net Ask us a question and we might answer it on the air.

[Katie Greifeld]

You can also subscribe to our show wherever you're listening right now and leave us a review.

[Matt Levine]

Review.

[Katie Greifeld]

It helps more people find the show.

[Matt Levine]

The Money Stuff podcast is produced by Anna Mazarakis and Moses Ondahm.

[Katie Greifeld]

Our theme music was composed by Blake Maples.

[Matt Levine]

Amy Keen is our executive producer and.

[Katie Greifeld]

Sage Bauman is Bloomberg's head of podcasts.

[Matt Levine]

Thanks for listening to the Money Stuff podcast. We'll be back next week with more stuff.

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