Champagne and Caviar

Summary

Money Stuff: The Podcast

Episode Title: Champagne and Caviar

Date: June 5, 2026

Hosted by Matt Levine and Katie Greifeld

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Episode Overview

In this lively episode, Matt Levine and Katie Greifeld dive into the intersection of Wall Street, sports betting as financial hedging, a surprisingly financial New York bar, the changing landscape of equity issuance among tech giants like Google/Alphabet, and a critical look at the recent conviction of prominent short seller Andrew Left. With signature wit and technical insight, the hosts explore how financial innovation seeps into everyday life—sometimes via champagne, caviar, and basketball games.

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Key Discussion Points & Insights

1. The Jeffrey Bar: Where Hedge Funds Meet Happy Hour

(03:02–08:25)

• Bloomberg bar promotion: The Jeffrey, a well-known Bloomberg hangout (owned by a prominent activist hedge fund lawyer), ran a unique promotion: if the New York Knicks won, patrons’ bar tabs (up to $100 each) were free.

• Hedging the free drinks: To protect themselves, The Jeffrey "hedged" this risky promotion by betting on the Knicks to win via Kalshi, a legal prediction market.

  • Quote: “Kalshi put out a press release about it... But they also had a little whiteboarded explanation of the hedge that I think Kalshi probably helped with.” – Matt Levine (04:00)

• The real-world risk and financial markets overlap:

  • Matt: “Small businesses are exposed to real world risk every single day... Kalshi changes the equation. Liquid transparent markets...” (Kalshi’s pitch, paraphrased, 04:15)
  • Discussion of how the lines between sports betting, hedging, and insurance are hilariously blurry in modern finance.
  • Matt’s skepticism: “They’re hedging a sports bet... But whatever.” (06:07) – Matt Levine

• Limits and fine print: Free tabs were capped at $100 per guest, not including tax and gratuity, so some expenses (and bartender pay) still stood.

• Other wild promos: An earlier promo reduced customer bills by 1% for each point in Knicks’ victory margin—once leading to a whopping 37% discount, costing the bar $2,750 (07:28).

  • "You might have predicted that the total discount for customers in that promotion amounted to $2,750." – Katie Greifeld (07:28)

• Memorable Moment: Witty banter about how finance now essentially feels like sports gambling.

  • “I feel like financial markets are sports gambling now. And here we are.” – Matt Levine (08:25)

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2. Google’s $85 Billion Equity Move & The Changing Face of Corporate Finance

(10:46–18:48)

• Massive equity raise: Google/Alphabet is issuing up to $85 billion in equity—$35B in stock and mandatory convertible, $10B private placement with Berkshire Hathaway, and $40B via "at the market" offerings.

  • “It's actually $85 billion... The 40 billion is an aftermarket offering, so... the total might come to 40 billion or it might not.” – Matt Levine (11:06)

• Why so much equity? To fund data centers, chips, and the AI arms race, reflecting how tech giants have shifted from capital-light to capital-intensive models.

  • "I've joked for years, like Facebook is a website, you know, and it's like worth a trillion dollars... Now there's just like been a real change in how capital intensive the leading US businesses are.” – Matt Levine (12:24)

• Reversal of trends: The hosts note a shift from net negative equity issuance (buybacks dominating) to a world of major new stock offerings.

  • "Now maybe we're starting to see that trend reverse and companies are going to issue more stock." – Katie Greifeld (12:08)

• What does it mean for index investors? Discussion of how stock prices matter more directly for companies again, as money from investors increasingly flows to fund ambitious tech developments.

  • "If you are buying stock on the stock market, it's vanishingly unlikely that you are buying it from a company that will use your money to... do stuff. But now... you’re giving the company money... to build the AI future or whatever." – Matt Levine (15:02)

• Innovative compensation mechanics: Alphabet will use its ATM program to "sell to cover" employee tax obligations tied to stock rewards, reflecting how for tech giants, equity issuance and employee compensation are intertwined.

  • “Basically they're going to pay the taxes for their employees... by selling stock.” – Katie Greifeld (16:15)
  • "A lot of how companies fund themselves is by using stock to pay employees, which is economically equivalent to selling stock to the general public..." – Matt Levine (16:48)

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3. The Data Center Gold Rush

(18:53–19:47)

• *Jane Street, a major trading firm, is reportedly building a new data center—part of a growing trend where both AI labs and quant trading shops chase computational power.

  • “All the big quant firms have been AI firms forever... it's the same model. Frontier AI lab or you’re an electronic quant trading firm.” – Matt Levine (19:12)

• Memorable Moment:

  • Katie: “I just feel like I should be building a data center. Why am I sitting in this room talking about it?” (19:42)
  • Matt: “I just like living my life in a way that I do not need to build a data cent.” (19:47)

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4. Andrew Left, Short Sellers, and Market Manipulation Laws

(20:37–29:52)

• Andrew Left’s conviction: Famed activist short seller convicted of market manipulation for publishing research, then quickly closing his positions, which prosecutors allege was done with manipulative intent.

  • "He used media appearances and his company to illegally influence share prices and make quick profits known as shorting. He later walked that back a little bit to be like, shorting is not illegal, but, like, you know that he thinks it is." – Matt Levine (20:45)
  • “He closed his positions very soon after tweeting. And that is ugly.” – Matt Levine (21:46)

• Intent vs. action: The discussion emphasizes that while activist shorting is legal, intent matters. Quick covering or flippant communications ("I have a hot voice in cannabis. Let's take advantage of it.") can hurt a defendant’s case.

  • “But what Andrew Left did that upset prosecutors was... he closed his positions very soon after tweeting. And that is ugly.” – Matt Levine (21:46)
  • “The rule is like, don’t have a bad intent, but be good. Be good. Yeah.” – Matt Levine (27:49)

• Chilling effect on short sellers: The number of activist short selling funds publishing research has almost halved since 2020 (from 55 to 31).

  • "There were 31 activist short selling funds... so far this year. That compares to 55 in 2020." – Katie Greifeld (28:01)

• Legal ambiguity: Calls for the SEC to clarify rules (e.g., minimum holding periods) remain unanswered, leaving "intent" as the gray deciding factor.

  • “Andrew Left did as a sort of publicity stunt was that he sent the SEC letters saying, please publish a rule about how long I have to maintain a position.” – Matt Levine (22:52)
  • “There's no rule. Right. The rule is like, don't have a bad intent, but be good. Be good. Yeah.” – Matt Levine (27:49)

• Notable Exchange:

  • Katie: “Who among us hasn't sent a sloppy Bloomberg?” (26:29)
  • Matt: “The hardest thing in the world is not putting your criminal intent and your messages to your buddies.” (29:39)

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Notable Quotes

• “Financial markets are sports gambling now. And here we are.”
  — Matt Levine (08:25)

• "Now there's just like been a real change in how capital intensive the leading US businesses are... That just leads to a different financing universe."
  — Matt Levine (12:24)

• "He did a little late security spread, it’s fine. But like, he didn’t, he didn’t hurt anyone."
  — Matt Levine on Andrew Left's conviction (27:14)

• "There's no rule. The rule is like, don't have a bad intent, but be good. Be good. Yeah.”
  — Matt Levine (27:49)

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Timestamps for Major Segments

• The Jeffrey, Kalshi, and Sports-Betting-as-Hedging: 03:02–08:25
• Google/Alphabet’s Massive Equity Issuance & Tech Financing Shifts: 10:46–18:48
• Jane Street Data Center News / Compute Competition: 18:53–19:47
• The Andrew Left Conviction & Short Seller Uncertainty: 20:37–29:52

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Episode Tone & Style

Conversation is witty, slightly sardonic, technically deep but approachable—true to Matt Levine’s column. The banter is dry and self-aware, often breaking the fourth wall about finance’s absurdities and gray areas.

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In Summary

This episode hilariously and insightfully explores how the lines between sports betting, financial innovation, and legal gray areas are ever-blurring—from free caviar on a Knicks win to the massive capital expenditures behind the next wave of AI, and the muddy future for activist short sellers. If you want to understand modern finance’s quirks, risks, and transformations—with a side of dry Bloomberg wit—this is essential listening.

Transcript

[Katie Greifeld]

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[Katie Greifeld]

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[Matt Levine]

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[Katie Greifeld]

And I'm Karen Moscow.

[Matt Levine]

Join us each morning for curated stories

[Katie Greifeld]

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[Matt Levine]

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Bloomberg Audio Studios Podcasts Radio News

[Matt Levine]

we had a really important update. We talked last week about the enhanced games where people take drugs to be faster and the 100 meter dash was run by a guy who was not on drugs and afterwards he gloated. They gotta get on that some more. Which is just a perfect use of the English language. Incredible.

[Katie Greifeld]

You can apply it to so many different areas of your life, including the podcast.

[Matt Levine]

My arriving late at the podcast.

[Katie Greifeld]

Hey, it's okay. We have a tight.

[Matt Levine]

On drugs.

[Katie Greifeld]

We have a tight 29 minutes.

[Matt Levine]

Yeah, it's gonna be great. We're gonna be great.

[Katie Greifeld]

All right.

[Matt Levine]

No, no, no. Keep bantering.

[Katie Greifeld]

No, I gotta get on that some more. How about them Nicks?

[Matt Levine]

Well, yeah, the Knicks. Yeah, they're on some more.

[Katie Greifeld]

They certainly are. They really. This is an allegation.

[Matt Levine]

There's definitely more swearing than there's ever been on this. Yeah, the Knicks won last night. We're recording this on Thursday.

[Katie Greifeld]

Yeah. What's the next game?

[Matt Levine]

We're exhausted because we were up late watching partying. The Knicks win game one.

[Katie Greifeld]

The Jeffrey. There's so many ways to get into this first segment.

[Matt Levine]

Let me quickly say hello and welcome to the Money Stuff Podcast, your weekly podcast where we're talking about stuff related money. I'm Matt Levine. I read the moneysoft conflicting. Youg opinion.

[Katie Greifeld]

And I'm Katie Greifeld. I should do it really slow since you did it really fast. And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

[Matt Levine]

I did not watch the Knicks at all or at the Jeffrey. But the Jeffrey is like a Bloomberg bar.

[Katie Greifeld]

I know.

[Matt Levine]

So I've been to like farewell parties at the Jeffrey.

[Katie Greifeld]

That's the thing. In your newsletter you described it as a New York bar, which is so impersonal given that you and I have literally been there together.

[Matt Levine]

The Jeffrey is a Bloomberg bar. Yes, on East 6 8th Street. It's also. I learned this, I think, from a Bloomberg person. The owner of the Jeffrey is not just some bar owner. No, he is one of the nation's leading activist hedge fund lawyers. Yeah, it's just like a fun.

[Katie Greifeld]

We should have him on.

[Matt Levine]

We should have him on.

[Katie Greifeld]

He sounds really interesting.

[Matt Levine]

So, yeah, the Jeffrey, many, many people sent me this story about the Jeffrey doing a promotion where if the Knicks won on Wednesday night, if the Knicks won Wednesday night, which they did, then your bar tab at the Jeffrey was free. And so presumably the point of this promotion is that a lot of people would storm into the Jeffrey, order, you know, champagne and caviar or whatever one gets at the Jeffrey that's expensive and hope for the Knicks to win so that their bar tie would be free. And if the Knicks lost, they would be like, ah, and pay $1,000 for their night out. And the Jeffrey, you know, if the Knicks lost, would be up these giant bar tabs. But if the Knicks won, they would be out all these giant bar tabs. So the Jeffrey hedged.

[Katie Greifeld]

Yes, they did.

[Matt Levine]

By going to Vegas and betting. No, sorry, by going to Calshi, betting on the, on the Knicks to win. And so it's very like straightforward bet on the Knicks to win. But Kalshee put out a press release about it. They loved it. The bar put out a video, a little video promotion. But they also had a little whiteboarded explanation of the hedge that I think Kalshi probably helped with. It's just like this is from Kalshi. Small businesses are exposed to real world risk every single day. Weather, politics, sports, economics. With no efficient way to manage it. Traditional insurance is expensive, slow and not built for this kind of operational exposure. Kalshi changes the equation. Liquid transparent markets that let any business take an offsetting position on the risks that affect their bottom line. Also it says if the Knicks lose, the bar collects. They'll normally have revenue from the promotion having paid only A small premium for the peace of mind. No, it's a sports bet. The Knicks were underdogs. And so like I was looking like, I think historically, like the. The pre game price of the knicks was about 36 cents on the dollar. So you'd pay, you know, for like a $5,000 hedge, you'd pay like $1800.

[Katie Greifeld]

Not bad.

[Matt Levine]

So it's not that small.

[Katie Greifeld]

Yeah.

[Matt Levine]

Anyway. Yeah, so they bet on sports and now betting on sports is a hedge. And so many people sent me this, including after I wrote about it, because people don't originally end of money stuff.

[Katie Greifeld]

It's really long.

[Matt Levine]

It's long. Sorry, sorry, sorry, everyone.

[Katie Greifeld]

He's just got so many thoughts.

[Matt Levine]

So many people sent it to me. Yeah, because like my view is that when people say prediction markets, they want to be like, oh, it's for hedging a real world risk, but they're really talking about sports betting. And so this is like the overlap of the Venn diagram where it's like, it's sports betting and it's hedging a real world risk, which is not true because they're hedging a sports bet. Like, they didn't have to do this. They're hedging a sports bet. But whatever.

[Katie Greifeld]

Matt is banging the table. He is passionate about this point. A few things I do want to say that this was up to $100 per guest. So champagne and caviar, you could probably get like a little bit of both. Also, tax and gratuity were not included. So I mean, the bartenders still made money regardless, which is nice. Were you.

[Matt Levine]

This is just disappointing.

[Katie Greifeld]

Were you aware of the other promotion that they ran for their game against the the Cavs?

[Matt Levine]

No.

[Katie Greifeld]

Okay, so for game four of the Knicks versus the Cavs, the Jeffrey said that for each point in the Knicks margin of victory, the bar would reduce patrons bill by 1%.

[Matt Levine]

I'm aware of that, yes.

[Katie Greifeld]

Yeah. So it turned out to be a blow. As I understand it. I barely understand.

[Matt Levine]

You're not expecting to reduce the tab by 27% or whatever.

[Katie Greifeld]

No, it was 37%, which is nuts. So the total discount, by the way,

[Matt Levine]

by game four, the Knicks had blown out everyone for the last two series.

[Katie Greifeld]

It's amazing.

[Matt Levine]

You might have predicted that the total

[Katie Greifeld]

discount for customers in that promotion amounted to $2,750. So it'll be interesting to see what Wednesday night's game came out to.

[Matt Levine]

I wonder if they will report that. I feel like they don't have financial obligations.

[Katie Greifeld]

But the reason I know about what they did for Game four was because there was a Bloomberg News article that Reid spiked on the terminal, which is how I got to know about this. Because again, the Jeffrey is a Bloomberg bar, so obviously all your Bloomberg buddies were sending it to you, right? It's cute.

[Matt Levine]

Like if you're a bar owned by a hedge fund lawyer that is two blocks from Bloomberg, then yes, you have very important real world economic risks that you have to hedge by doing sports betting on Kalshi. By the way, you could also do sports betting on a sportsbook like it's legal now. You could, but Kelshi will do a nice whiteboard for you.

[Katie Greifeld]

I don't know, is there anything else to say? I just love it. I wish I could drink.

[Matt Levine]

I feel like financial markets are sports gambling now. And here we are.

[Katie Greifeld]

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[Matt Levine]

Let's not talk about SpaceX this week. We'll talk about SpaceX last week.

[Katie Greifeld]

We're doing really well. And then you mentioned SpaceX.

[Matt Levine]

I think what's not talking about. Yeah, Google is selling some stock.

[Katie Greifeld]

Like a lot, like a lot like $80 billion.

[Matt Levine]

Slightly more than SpaceX. I mean,

[Katie Greifeld]

redacted IPO.

[Matt Levine]

It's actually 85 billion.

[Katie Greifeld]

Oh yeah, they upsized it. That's nuts.

[Matt Levine]

So much demand for Google stock.

[Katie Greifeld]

Yeah.

[Matt Levine]

The 85 billion is like not quite right because like 40 billion of that is an at the market offering. So it's not like they just bashed

[Katie Greifeld]

out 10 billion is Berkshire Hathaway.

[Matt Levine]

10 billion is Berkshire Hathaway. I'm going to count Berkshire Hathaway. That's an anchor order that counts. But the 40 billion is like they didn't bash it all out this week. It's an aftermarket offering. So over the next, like few months or whatever, when they feel like it, they'll sell some stock and the total might come to 40 billion or it might not. They might get there. But yeah, they did about 35 billion of common stock and mandatory convertible this week. Plus 10 billion privately placed to Berkshire Hathaway to, you know, pay for data centers.

[Katie Greifeld]

Yeah.

[Matt Levine]

Pay for chips, pay for the AI. Boom.

[Katie Greifeld]

I feel like there's a few different sign of the times in here. One of them, which you highlighted in your newsletter, is that equity issuance, net equity issuance was declining for a long time and buybacks were like the thing to do.

[Matt Levine]

And look at like 60 billion in buybacks like last year.

[Katie Greifeld]

Yeah. But now maybe we're starting to see that trend reverse and companies are going to issue more stock. Also we have IPOs coming back.

[Matt Levine]

It's just like a wild shift in the markets where when you think about the big U.S. companies, you know, even five years ago you would have said stereotypically they're capital light. Right?

[Katie Greifeld]

Yeah.

[Matt Levine]

I've joked for years, like Facebook is a website, you know, and it's like worth a trillion dollars. Right. It's a website. How capital intensive could a website be? And like, you know, the answer to that question is you got to re lot of data centers to run your website.

[Katie Greifeld]

Yeah, Matt.

[Matt Levine]

And also you have to pay a lot of people a lot of money to run your website. But, you know, now there's just like been a real Change in how capital intensive the like leading US businesses are. And that just leads to a different financing universe where, you know, instead of raking in money and using it to buy back stock, you are waking up and saying, wow, we need so much money we have to sell stock.

[Katie Greifeld]

Yeah.

[Matt Levine]

I mean, Google has been, first of all raking in money, secondly, like selling debt. Right. I mean, like, you can finance a certain amount of stuff with debt, but ultimately, you know, these are very highly rated investment grade companies that have fortress balance sheets. And eventually you're like, you know what? I'd rather be more equity financed.

[Katie Greifeld]

Yeah.

[Matt Levine]

So they're doing it.

[Katie Greifeld]

I always wonder in thinking about that, that shift in markets and financing, like, what does this mean for investors who hold index funds because Google shares, Alphabet shares went down a bit. This is dilutive, et cetera. But what does it mean if you do see a sea change where there's just more equity issuance overall? I don't really know. Yeah, if you shift from stock buybacks, net negative equity issuance to a world where it's positive, I don't know what that means other than being interesting from the perspective of an investor.

[Matt Levine]

Right. One thing that's just like sort of philosophically interesting is, you know, we got a question on our last mailbag about like, what does a company's stock price matter after it goes public? Right. And like you, there are various answers to that. And it's like, oh, the market for corporate control. But like, the answer to that a few months ago was not, well, companies sell stock all the time, so they need a high stock price so they can, you know, raise money without diluting shareholders too much. Because that's not how public companies think. Until this week. And now it's like, well, you know, stock price matters because you got to build data centers. Like, you'll be thinking about your cost of financing and the higher your stock price is, the cheaper your equity financing is. So for one thing, it just changes how companies think about their stocks. But for another thing, like, I've lived my life in a financial world where the stuff that you do on the stock market is mostly not directly tied to building factories to make widgets. You know, like the stock market is not primarily a way for companies to raise money to do stuff. And if you are buying stock on the stock market, it's vanishingly unlikely that you are buying it from a company that will use your money to make a, you know, to do stuff.

[Katie Greifeld]

Right.

[Matt Levine]

It's all just like a sort of like secondary trading market where like ultimately the price of the stock sort of reflects back into the company's capital allocation decision. But it's not like you're giving the company the money. But now it's like, yeah, you're giving the company money. Like the thing that you're doing as an index fund investor really is like giving your cash to big companies to build the AI future or whatever. Yeah, unless you don't like that.

[Katie Greifeld]

Also, what does the stock price matter after a company goes public? It matters for the employees in terms of their net worth. Which leads me to an interesting nugget about this ATM program that I wanted to get your thoughts on. Because in it it was buried that the ATM program is intended primarily to facilitate, for a period of time, an administrative change in how Alphabet meets tax obligations associated with employee equity grants. This approach will mimic a sell to cover model. Upon vesting of restricted stock units, shares will still be delivered to employees, net of taxes, and the company will use corporate cash to settle taxes on behalf of employees. The company intends to issue stock for equivalent proceeds through its ATM program. So that's interesting. So basically they're going to pay the taxes for their employees.

[Matt Levine]

Yeah, which they do already, but they're going to pay them with stock now. Basically they're going to fund the payments with stock. Yeah. I wrote and we talked about like the idea that companies do not use the stock market to raise money and the net equity issuance is negative. And I got a reader pushback like in fact, these companies to in a sense issue stock to raise money, but they do it in a barter system where instead of issuing stock to raise money to pay giant salaries to employees, they just pay the giant salaries to employees in stock.

[Katie Greifeld]

Right.

[Matt Levine]

And so if you're an employee, one of these big tech companies, you get paid a lot in stock or stock options or restricted stock. And so a lot of how companies fund themselves is by using stock to pay employees, which is economically equivalent to selling stock to the general public to get cash and then using the cash to pay the employees. But has accounting and optical and tax benefits. And so people do a lot of paying in stock. But the way that that works is you still have to pay them a little in cash, which is traditionally the normal way you do this is you deliver the stock and they have some big tax obligation when you deliver the stock. And typically what you do is you deliver it net. So you them 60% of the stock, you withhold 40% for taxes, and instead of like sending the stock to the irs, you send the cash to the IRS that costs you cash. If you're Google or whatever and need to conserve cash, you might do what Google is doing here, which is still the same thing, which is you deliver the net shares to the, to the employees, you withhold the taxes, you send the cash for the taxes to the irs, except that you get that cash by selling stock. So every time they need to withhold money to pay an employee tax bill, they sell a little bit of stock under the ATM program and use that to pay the taxes. So they are issuing stock to raise cash to meet their employment comp obligations.

[Katie Greifeld]

That's interesting because I read that, I didn't know that they were already doing that and I just wondered if it fit into like the broader discussion we've been having on AI talent wars. Oh yeah, and how fiercely competitive it is.

[Matt Levine]

Right. Like the reason Google is selling $85 billion of stock is, you know, AI. Right.

[Katie Greifeld]

Yeah.

[Matt Levine]

And so some of that is like capex to build data centers and like their chip program. But some of it is just salaries and the salaries are stock and that's expensive too. And you know, there's a limit on how much you can do without raising equity for sure.

[Katie Greifeld]

Can I read you a headline without context that just crossed and you can tell me if you don't want to talk about it?

[Matt Levine]

Sure. Is it good? Yeah, I'm gonna pre register. I bet I'm not gonna wanna talk about it.

[Katie Greifeld]

Jane street is planning to build. Oh, hold on.

[Matt Levine]

Data center.

[Katie Greifeld]

Yes.

[Matt Levine]

Chip fab.

[Katie Greifeld]

Yes. The headline is Jane street plans new data center as compute power runs scarce. So Jane street also getting in.

[Matt Levine]

Sure. Yeah. But like all the big quant firms have been AI firms forever. Right. I mean they have like a big machine learning model that takes stock prices and predicts future stock prices. And so they need data centers and all the rest of it. It's the same model. Frontier AI lab or you're electronic quant trading firm. It's the same thing. That's why Deep Seq is both. It's the same model.

[Katie Greifeld]

It's turtles all the way down.

[Matt Levine]

Yeah. The data centers are bigger when you're doing a frontier AI lab, but it's the same idea.

[Katie Greifeld]

I just feel like I should be building a data center. Why am I sitting in this room talking about it?

[Matt Levine]

I just like living my life in a way that I do not need to build a data cent.

[OTC Markets / Bloomberg Sponsor Announcer]

On June 10, Bloomberg Invest is back in Hong Kong. We look at the role Hong Kong plays between China and the world as major powers compete and markets realign as Global investors rethink risk. We'll explore the forces driving Asian demand and the future of private capital. Catch exclusive interviews with top newsmakers, plus a live recording of Bloomberg's Odd lots podcast. Visit bloomberglive.com forward/investhongkong to learn more. Supporting sponsor Deutsche bank.

[Matt Levine]

Where Andrew left should have him on the pod.

[Katie Greifeld]

Yeah, I mean, he's not sentenced until August 31st. So he's out and about and, like,

[Matt Levine]

pretty vocal and, like, not wrong. Yeah, he was going to be kind of short selling this week. Did you see that? The prosecutor who prosecuted him tweeted a Los Angeles federal jury. This is quoting the prosecutor. The Los Angeles federal jury has found Andrew Left guilty of market manipulation. He used media appearances and his company to illegally influence share prices and make quick profits known as shorting. He later walked that back a little bit to be like, shorting is not illegal, but, like, you know that he thinks it is.

[Katie Greifeld]

Yeah.

[Matt Levine]

But yeah, Andrew left did some short selling. Charged with market motivation. Convicted this week. Not great for short selling.

[Katie Greifeld]

No. I'm going to steal a line from Carson Block. Muddy Waters research tweeted this right before we started recording. It's a very long tweet. It's like a Bill Ackman length tweet. But he said that the jury convicted Andrew of not actually believing the opinions he stated in his tweets, which is interesting.

[Matt Levine]

I think it is pretty clearly legal to do the following. Research a company, find out that it's a fraud shorted stock, do activist shorting. Like, announce that you're short, announced that it's a fraud, put out your research, watch the stock drop, and then have a paper profit from the stock dropping. But what Andrew Left did that upset prosecutors was two things. One is that he closed his positions very soon after tweeting. And that is ugly. Right. If you take all of your profits from the immediate reaction to your tweet rather than from, like, the stock ultimately going to zero because it's a fraud, then, like, is that because you really thought the stock was going to zero or because you were just trying to manipulate retail investors to sell the stock and you were, like, buying into their demand? And if you do it the other way, you. If you say, I love this stock, they've got a cure for cancer and people buy the stock and it goes up and you immediately sell all of your stock that really looks like a pump and dump. And by the way, like, Andrew left did some of that.

[Katie Greifeld]

Right?

[Matt Levine]

But he did for, like, Nvidia, where, like, you know, if you bought into his tweets. You did great. So it's fine. Except he was convicted of fraud for doing it. So, like, one thing that he did was close out his position very quickly, which I don't have a huge problem with. But, like, it's a ugly. And the other thing he did is that there's evidence, there's internal messages that don't say, I don't believe this opinion, but sort of sound like he was pretty sloppy and wasn't putting out reports because he had done months of deep fundamental research and was deeply convinced of his thesis. But he was putting them out because he thought, if I put out this report, the stock will drop and I'll immediately take profits. And I don't think there's like, smoking gun, slam dunk evidence of either of those things. But, yeah, like, I can see how he was convicted. It's just like, it's very troubling because there's no bright line anywhere. When he was charged, one thing that Andrew Left did as a sort of publicity stunt was that he sent the SEC letters saying, please publish a rule about how long I have to maintain a position. Like, I just want a rule. If you tell me, I'll do it. Like, if I'm not allowed to cover my shorts for 24 hours after I tweet that I'm short, then, like, fine, I will do that. But, like, I know what the rule is. There's no bright line. Tell me what the rule is. And the SEC ignored him. And I think the SEC is right to ignore him because it's clearly just a matter of intent. Right. Like, if you really, truly believe this company is a fraud and you short the stock and you say this company is a fraud and the stock falls 90% and you're like, well, as a matter of risk management, I've made 90% of the profits I was hoping to make, and I need to conserve capital and move on to the next trade I'm going to cover. And then you announce you've covered, you're honest about it. Maybe it's fine. Maybe it's fine if you have a really good, well documented process. But if you have a very sloppy process and you cover in five minutes, then it looks bad.

[Katie Greifeld]

Yeah, I was going to say it's hard to prove intent.

[Matt Levine]

It's hard to prove intent. And I think that the prosecutors were obligated to prove that Andrew Left had the bad intent, and they convinced the jury that he had the bad intent. Because, like, the way you prove intent is they have messages from him to, like, his buddies saying things like, I have a hot voice in cannabis. It's cannabis, but spelled cannabis.

[Katie Greifeld]

Delicious fish.

[Matt Levine]

I have a hot voice in cannabis. Let's take advantage of it. I don't know. Doesn't that sound like he's trying to get retail traders to dump the stock rather than. He believes that these companies are. But the thing is, it's like, it can be both, right? Yes, it's clearly both. He clearly believed these companies were bad. And also at this trial, they had people testify who were like, I put my life savings to these cannabis stocks. And then he told me they were frauds, and they went down. I lost my life savings. What a monster. It's like, no, they were frauds. They stayed down. It's not like they went down momentarily because he was lying. They stayed down. He was right. And again, like, he was convicted of pumping and dumping Nvidia.

[Katie Greifeld]

Yeah.

[Matt Levine]

In, like, 2017 or something. Like, great trade buying Nvidia.

[Katie Greifeld]

Who is influential enough that they could pump and dump Nvidia.

[Matt Levine]

Well, this is before it was like, Nvidia.

[Katie Greifeld]

That's true.

[Matt Levine]

It was a good trade if you bought Nvidia.

[Katie Greifeld]

Yeah. Well, it sounds like Andrew Left is going to appeal this. It's also interesting, really.

[Matt Levine]

Like, I could see this going either way, but I'm. I think most people in finance are kind of sympathetic to Andrew Left. Like, the messages are not all great, but, like, it's really. It's a very blurry situation where you got.

[Katie Greifeld]

Who among us hasn't sent a sloppy Bloomberg?

[Matt Levine]

I wrote that everything is securities. Right. You can't really hold a little securities. Right. Against people.

[Katie Greifeld]

But he also testified in his own defense, which is unusual.

[Matt Levine]

He thinks he's innocent. Everyone says it's unusual. It's like. I don't know.

[Katie Greifeld]

I was gonna say you're a lawyer.

[Matt Levine]

Well, I'm not a real lawyer.

[Katie Greifeld]

You're more of a lawyer than I am.

[Matt Levine]

No, I know a lot of real criminal defense lawyers, and they all, for the most part, share the view of every other criminal defense lawyer in the world, which is that you should never testify in your own defense. But me is just the guy. I'm like, I don't know if you think you're in it. They bet Andrew Left was a belligerent but credible witness. I bet he did a good job. Apparently not good enough.

[Katie Greifeld]

Well, again, sentencing on August 31st sounds like he's gonna appeal.

[Matt Levine]

I think the right outcome here is that he should be convicted and he should get zero days in prison. I think it's like, yeah, he did a little late security spread, it's fine. But like, he didn't, he didn't hurt anyone.

[Katie Greifeld]

There is the question about what effect this is going to have on short sellers.

[Matt Levine]

Bad it is back when he got charged. Carousel is another activist short seller. They put out some report on some company that had this big like, sarcastic disclaimer at the end that was like, we don't know like what we're allowed to do now, but you should just assume that we covered our short immediately.

[Katie Greifeld]

Yeah.

[Matt Levine]

Which I don't think works as a

[Katie Greifeld]

disclaimer, but we definitely discuss that on this podcast.

[Matt Levine]

Right. No one knows what the rules are. And like the rule. There's no rule. Right. The rule is like, don't have a bad intent, but be good. Be good. Yeah.

[Katie Greifeld]

There were interesting numbers in this story from the Wall Street Journal on the chilling effect that basically this case and probably other things have had on the short selling industry overall. That apparently there were 31 activist short selling funds that have published research so far this year. That compares to 55 in 2020. That is according to research firm Breakout Points.

[Matt Levine]

By the way, what else has changed between now and 2020 is the lines going up, the lines going up, and particularly the lines going vertically up at certain dubious smallish cap stocks that were heavily shorted.

[Katie Greifeld]

Right? Yes.

[Matt Levine]

The meme stock thing was not great for activist short sellers either.

[Katie Greifeld]

Fair point, fair point. There's a number of potential factors there,

[Matt Levine]

but this is bad. If you say a stock is good and the stock go and you immediately sell, that's a pump and dump. That looks bad. Right. But if you say a stock is bad and the stock goes down and you immediately cover like, that is symmetric. But it's like, it's prudent risk management. It is hard to be a short seller and you're like lightly capitalized and you're at a lot of risk. And if you do the work of identifying the problem in a company and the market reacts to your identifying the problem and you're like, okay, my work here is done. I'm going to cover this and move on. Like, I'm sympathetic to that. And. And that is now much riskier.

[Katie Greifeld]

Well, it seems like the neatest solution would be the one that you already mentioned, which is basically what Andrew Left asked the SEC to do, which is

[Matt Levine]

tell me how long it's an intent thing.

[Katie Greifeld]

How do you prove that?

[Matt Levine]

And by the way, like, you know, having to wait a day is. Makes the risk management harder. But how do you prove intent like you don't write emails saying, like, I have a hot voice in cannabis. Let's take advantage of it.

[Katie Greifeld]

Well, that's easy.

[Matt Levine]

Yeah, you say that. But, like, as someone who writes a lot about, like, securities fraud cases, like, the hardest thing in the world is not putting your criminal intent and your messages to your buddies.

[Katie Greifeld]

I guess I just don't do enough crimes, you know?

[Matt Levine]

Yeah. God, I mean, I try not to, but I don't know. Every so often, every so often I'll, like, send someone a dumb text and be like, not about crimes, but just, you know, like, texts I wouldn't want on the front page of the Wall Street Journal. And I think, have I learned nothing from my career? 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.

[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.

[Matt Levine]

The Money Stuff podcast is produced by Anna Mazarakis, Moses Andam and Alexis Haut.

[Katie Greifeld]

Our theme music was composed by Blake Maples.

[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.