Cool and Fun for Capital Markets Nerds: Tayvis, MSTR, IPO

Summary

Money Stuff: The Podcast

Episode: Cool and Fun for Capital Markets Nerds: Tayvis, MSTR, IPO
Date: August 29, 2025
Hosts: Matt Levine (Bloomberg Opinion columnist) & Katie Greifeld (Bloomberg News reporter and TV anchor)

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Episode Overview

Matt Levine and Katie Greifeld return after a hiatus for a lively discussion about the quirks of capital markets through the lens of recent market stories. This week, they jump into three big themes:

1. The Tayvis (Taylor Swift and Travis Kelce) engagement prediction market oddity
2. The evolving fate of MicroStrategy’s Bitcoin-fueled “premium” stock play
3. A new academic paper (and timely debate) on why IPOs “pop” so dramatically

The conversation is packed with market nerd banter, ground-level explanations, and signature dry wit.

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Key Discussion Points & Insights

1. Prediction Markets and the “Tayvis” Engagement (01:29 – 14:02)

The Story

• Polymarket—a crypto prediction market—saw a notable spike in the “Taylor Swift gets engaged” contract just before the news broke.
• A user called “Romantic Paul” made ~$3,000 from a well-timed bet, sparking chatter about possible insider trading.

Why It Matters

• Prediction Markets are blurring lines with financial markets, raising questions about regulation, insider trading, and the fusion of entertainment/sports wagering with commodity-style speculation.
• Discussion pivots into recent history: platforms like Kalshi enabling sports betting as regulated commodities, Robinhood seeking a gambling license, and the fundamental difference between gambling and financial hedging.

Notable Quotes & Moments

• On Market Reaction and Absurdity:
  “Taylor Swift got engaged and you’re bearish. It’s just a risk on moment.” – Matt Levine (03:52)
• On Insider Trading in Prediction Markets:
  “The contours of insider trading around prediction markets are very strange.” – Matt Levine (07:02)
• On Convergence of Betting & Markets:
  “There’s just a lot of convergence between gambling and financial markets.” – Matt Levine (11:08)

Timestamps

• 01:29 – Banter on podcast return, “Taylor Swift engaged” prediction trade
• 02:58 – Odds discussion: Was 25% too low?
• 03:54 – Are there macro ripples in big cultural events?
• 04:53 – Can you lever trades like this? Prediction market liquidity limits
• 06:30 – Was there “insider info” from Swift-Kelce podcast?
• 07:15 – Matt explains the legal oddities of prediction markets, CFTC & Kalshi
• 10:03 – Network effects: If sports betting moves to commodity exchanges
• 11:08 – FanDuel/Flutter experimenting with stock market betting products
• 11:43 – Legal treatment of insider knowledge: Who “owns” the bet?
• 12:44 – How commodity insider trading rules transfer (awkwardly) to these markets

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2. MicroStrategy’s Bitcoin Bet: The Dissolving Premium (16:11 – 25:22)

The Story

• Michael Saylor’s MicroStrategy (MSTR) became infamous for issuing stock at a premium to buy more bitcoin, creating a "money-printing machine" effect as long as stock traded above net asset value (NAV).
• That premium is now rapidly collapsing (from 2x to ~1.4x), raising existential questions for both MicroStrategy and the broader wave of “crypto treasury” companies.

The Underlying Dynamics

• The “premium-to-NAV” trade works well as long as there’s confidence and limited alternatives; it falters when competitors and copycats spring up or when investor skepticism rises.
• MicroStrategy’s multipronged financing has included both stock sales and creative preferred share instruments—some with floating rates based on their own credit risk.

Notable Quotes & Moments

• On Peak Absurdity:
  “You have to sort of put a lot of science around things like this because strategies, businesses, they violate a bitcoin…” – Matt Levine (16:47)
• Capital Markets Weirdness:
  “For me, I love it… their most recent thing is… a floating rate preferred that the rate floats with just, like, their feelings—the rate floats with whatever makes it trade at par, which is a truly insane instrument that no one has ever done before.” – Matt Levine (20:33)
• On the Future for Crypto Treasury Companies:
  “Are we just going to have like a watery graveyard of companies that are discount…” – Katie Greifeld (24:00)

Timestamps

• 16:11 – The inexorable collapse of the MSTR premium
• 17:41 – Why sell stock below prior “policy” levels? Matt breaks down logic and gamesmanship
• 18:30 – Investor confidence and “telling people what they want to hear”
• 19:35 – The wild world of preferred stock as “perpetual Bitcoin leverage”
• 21:08 – Matt’s “cool and fun, but don’t buy it” disclosure
• 21:34 – Why is the premium collapsing? More competitors, more “crypto treasury” firms
• 22:39 – Market saturation means less unique appeal for MSTR’s strategy
• 23:20 – The coming “graveyard” of failed crypto treasury experiments

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3. IPO “Pops,” Scarcity, and Supply/Demand Weirdness (28:11 – 36:51)

The Story

• Academic paper (Henry & O’Brien) formalizes a common intuition: IPOs “pop” because only a small fraction of stock is available on Day One, but demand (especially from retail) is high.
• Recent 2025 IPOs (Figma, CoreWeave, Circle) have posted triple-digit first-day or first-week returns.
• The paper finds average first-day “pop” is 19% over the offer price, though recent moves are even more extreme.

Key Concepts

• Companies sell only 10–20% of shares in the IPO, and typically, just 1–2% is available for trading at open; this artificially boosts price in the face of surging demand.
• There’s a “deal” with long-term investors/bankers: don’t flip on Day 1.
• Classic lament: Are companies “leaving money on the table”? It depends which supply/demand curve you look at.

Notable Quotes & Moments

• On Day One Supply Scarcity:
  “…the amount of stock that’s available to buy on the first day is on the order of 1% of the shares outstanding. Meanwhile, there’s all these retail investors who want to buy stock.” – Matt Levine (29:45)
• On Recurrence of the Phenomenon:
  “I think that this dynamic here where very little of the shares are available and retail wants them and so the stock pops is exactly the same dynamic that you see in the private company stuff…” – Matt Levine (34:43)
• Supply & Demand is everything:
  “It does seem somewhat parallel to what we’re talking about with MicroStrategy and the Premium. And it’s just coming down to supply and demand.” – Katie Greifeld (36:09)

Timestamps

• 28:11 – Matt’s bias: Being cited in finance academia
• 29:45 – Mechanics of IPO lockups, the 1% “float,” and bursting demand
• 32:10 – 19% is the average “pop,” but recent IPOs much higher
• 34:43 – Parallels between IPO scarcity and private company secondary markets (e.g., OpenAI, SpaceX proxies)
• 36:09 – Katie ties supply/demand to MicroStrategy premium discussion

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Additional Memorable Moments

• Meta-Media Humor:
  “If you quote me at the beginning of your paper, it probably does increase your chances.” – Matt Levine (29:28)
• Matt’s Classic Disclaimer:
  “When I say something is cool and fun, that means I would not buy it.” – Matt Levine (21:08)

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The Money Stuff Tone

Friendly, slightly self-mocking, often deadpan, always explanatory—with a taste for pointing out the absurdities where finance, speculation, and culture intersect.

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TL;DR

• Prediction Markets are growing, but remain small-scale and legally weird. The “Tayvis” bet is a case study in their quirks and regulatory evolution.
• MicroStrategy’s Bitcoin Flywheel is breaking down as more “crypto treasury” imitators dilute the premium.
• IPO “Pops” are less about bank errors and more about limited supply and insatiable retail demand—parallels abound with private markets and meme stocks.
• Everything in capital markets, it seems, is becoming a form of betting—a “convergence of gambling and financial markets.” (11:08)

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Suggested Listen Points

• [01:29] – Show proper begins; host banter and intro to Tayvis/Polymarket
• [07:02] – In-depth legal/financial breakdown of prediction markets and insider trading
• [16:11] – MicroStrategy’s unraveling; premium collapse explained
• [28:11] – IPO “pop” mechanics and Matt’s take on scarcity, demand, and price

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(End of Summary)

Transcript

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[Commercial Announcer]

Bloomberg Audio Studios Podcasts Radio News so here we are.

[Katie Greifeld]

I guess we're on the clock. It's been approximately six months since we've recorded a podcast together.

[Matt Levine]

Right? It's good to see you.

[Katie Greifeld]

It's nice to see you. You look rested, you got a haircut, you're clean shaven, you have a tan.

[Matt Levine]

Yeah, yeah, it was nice. I missed the podcast of course, but it was nice being on vacation.

[Katie Greifeld]

You're so full of it.

[Matt Levine]

Yeah. Yeah, we're both like being incredibly insincere. Yeah, here we are.

[Katie Greifeld]

Yeah. I will say it was nice to roll into Thursday the and been like oh my God. And then have been like oh wait, no, everything's fine. I don't have to record anything right now.

[Matt Levine]

I share that feeling. And also this Thursday was not like that.

[Katie Greifeld]

Yeah, we should set up a Patreon.

[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 Tele.

[Matt Levine]

Yeah, Taylor Swift's got Engaged?

[Katie Greifeld]

Yeah. Biggest financial market news of the week. Pretty surprising. But not to at least one person named Romantic Paul.

[Matt Levine]

You know, several people sent me this thing, so. Right, so like a guy made a well timed trade.

[Katie Greifeld]

You assume it's a man.

[Matt Levine]

Yeah. A user with the account name Romantic Paul made a well timed trade on Polymarket on Taylor Swift getting engaged. Basically, like that contract was trading at like 25% and then it spiked up to like 40ish percent like the day before she got engaged. Yeah, and several people sent that to me and you know, people were interested in that stuff. But like that was a contract with a couple of hundred thousand dollars of bets outstanding and Romantic Paul seems to have made on the order of $3,000 on this well time trade. So was it the biggest financial market news of the week?

[Katie Greifeld]

Oh, no, I'm just talking about the magnitude of Taylor Swift getting engaged.

[Matt Levine]

Right, right, right, right.

[Katie Greifeld]

Sending ripples across all financial.

[Matt Levine]

Okay, you're saying like Treasuries sold off?

[Katie Greifeld]

Yeah, yeah. You didn't need a Haven asset in that scenario. America's back.

[Matt Levine]

I saw your tweet. Like, you're bearish and Taylor Swift got engaged and you're bearish.

[Katie Greifeld]

You're bearish. Taylor Swift got engaged and you're bearish.

[Matt Levine]

It's just a risk on moment.

[Katie Greifeld]

Yeah, absolutely.

[Matt Levine]

Okay, I'm sorry, I take it back. I was just talking about the narrow.

[Katie Greifeld]

No, that so many things.

[Matt Levine]

It's like prediction markets. Like you specifically bet on or hedge a specific thing, but then those things often have broader financial market implications. And so you can structure your Taylor Swift trade by, I don't know, buying the S and P. I have to.

[Katie Greifeld]

Say I am surprised that it was only about 25% odds. I wish I had known that it was trading that cheap.

[Matt Levine]

Yeah, it was like she gets engaged by the end of this year.

[Katie Greifeld]

Yeah, I agree.

[Matt Levine]

That seems cheap.

[Katie Greifeld]

It does seem. I mean, especially right now when she's engaged after the trial.

[Matt Levine]

Hindsight for sure. I knew that all along.

[Katie Greifeld]

You raised the point that she got engaged two weeks ago. So theoretically someone probably knew. So maybe there was an element of insider trading here.

[Matt Levine]

Yeah. Although again, the amount of money that you could make insider trading on the Taylor Swift engagement news is in the single digit thousands of dollars.

[Katie Greifeld]

Single digit thousands, yeah. Can you lever these bets?

[Matt Levine]

The problem is finding people to bet against you. It's a prediction market. And to bet on. Yes. You have to find people who are willing to bet on the number of people who want to put millions of dollars into betting that Taylor Swift Won't get engaged against a highly motivated buyer.

[Katie Greifeld]

That's true. I guess if you knew for sure, you'd probably just sell it to a tabloid, but.

[Matt Levine]

Right, right, right.

[Katie Greifeld]

Or, like, you can make a lot.

[Matt Levine]

More money or just, like, be friends with Taylor Swift. Just seems like a lucrative.

[Katie Greifeld]

Yeah, there's a few things that point to this being not insider trading. Or a person who didn't know for sure. We were just joking. In hindsight, of course, it seems obvious. But also, they got engaged theoretically, right after they recorded a podcast together with the Kelsey brothers. Funny how that happens. Maybe I'll go re propose to my husband after this. But anyway, Taylor Swift. Sorry, this is for the Swifties out there. She hasn't done an interview like that with a previous romantic partner of that scale. I mean, this is so.

[Matt Levine]

I don't think she's ever dated a podcaster before. Maybe I'm wrong. I'm probably wrong.

[Katie Greifeld]

I know, but she's dated other famous people where theoretically they could have done a joint appearance like that.

[Matt Levine]

Yeah, but they didn't have a podcast.

[Katie Greifeld]

I know, but they could have found a podcast to go on is what I'm saying. Like, she hasn't, like, sat in an interview or done anything like that with previous partners. So you could watch the New Heights episode, which millions of people did be like, oh, wow, these two people clearly like each other. And the bet was that they would like.

[Matt Levine]

You're like, no, you had to know they were getting engaged because they podcasted together.

[Katie Greifeld]

Well, no, it was also a video podcast.

[Matt Levine]

Which video podcast, by the way, we.

[Katie Greifeld]

Should probably do more of anyway. You could really read their body language. But probably, maybe if you want to give Romantic Paul the benefit of the doubt, he saw that podcast was like, oh, shoot. These are two people who genuinely like each other. And the bet was that they'd get engaged sometime this year. It's only August. Yeah, yeah. And they're 35 years old.

[Matt Levine]

Yeah. You make good points.

[Katie Greifeld]

Thank you.

[Matt Levine]

I don't mean to suggest that Romantic Paul was insider trading to make $3,000.

[Katie Greifeld]

On Taylor Swiss 3500.

[Matt Levine]

Prediction markets are so weird and interesting and so, like, growing in importance in strange ways. And I think, you know, the contours of insider trading around prediction markets are very strange.

[Katie Greifeld]

Yeah.

[Matt Levine]

I think of it mostly in connection with sports betting. Right. Because. And this is not a sports bet. It's sports adjacent. Travis Kelsey is a sports figure. But I have written a lot about. And we've talked about how prediction markets are an interestingly important way to make sports bets because it seems like right now CFTC regulated commodities futures markets like Kalshi are a way to make sports bets that are not subject to state regulation. So you can like, you know, ignore state gambling laws and get better tax treatment than actual gambling. Because right now gambling losses are not fully deductible on your taxes, but commodity trading losses are probably fully deductible. So the prediction markets, particularly Kalshi, are having a real moment for becoming the sports gambling platform. And this week I wrote about Robinhood is suing Nevada regulators so that they can be allowed to offer sports gambling. Robinhood wouldn't say this, but I would say so they can be allowed to offer sports gambling on their stock trading app, which is kind of amazing, but just where things are heading. And prediction markets are beloved by economists and libertarian weirdos because in theory, if you had a prediction market on everything, then you could predict everything and the world would be better informed because markets would push prices to the correct place. And there's a lot of skepticism about that because in fact people don't want to bet on all sorts of nonsense. And the big problem with prediction markets has always been outside of the US Presidential election, it is hard to find a lot of people who are really into betting on prediction markets because it doesn't sort of serve any savings purpose and it's not a natural home for gamblers. And so the volumes on prediction markets are kind of small and you can have your doubts about how predictive the prices are. You know, again, outside of like the US Presidential election. And when prediction markets get into the sports gambling game, that changes that dynamic entirely. Right. It means that like if you look at Kalshi and you think this is the future of sports betting because it has a better regulatory and tax treatment than the sports books that are doing billions of dollars of bets, then you're thinking Kalshi is going to offer people gambles that they want and that they come back to every day. Right. Because sports are constantly happening. And so then all of the ancillary stuff, all of the stuff like betting on Taylor Swift's baby is just more appealing because more people have Kalshi accounts and more people are betting there anyway. So they'll bet on when the wedding will happen.

[Katie Greifeld]

The network effects will kick in.

[Matt Levine]

Yeah. So people will be betting on everything and then you'll have a CFTC regulated licensed US commodities exchange for sports betting. And then what happens when people start know make an insider bets on sports or on Taylor Swift's engagement?

[Katie Greifeld]

I should know this but have DraftKings and FanDuel, like have they tried to offer stock betting on their platforms?

[Matt Levine]

Yeah, a little bit. That's funny Flutter, which is like the parent company.

[Katie Greifeld]

A FanDuel. Right?

[Matt Levine]

A FanDuel. Yeah. They're working on some sort of partnership with CME to offer essentially sportsbook bets on financial outcome. You know, like will the S and P be up or down today? Because yeah, for one thing, if you're a gambling platform, offering people more bets is just more appealing. Right. Just give them more touch points. And then for another thing, if you're a gambling platform and you look at what Kalsha is doing, you have to think maybe we should be in the futures trading business rather than the sportsbook business because it's the same business and it gets better tax and regulatory treatment.

[Katie Greifeld]

Man, that's pretty wild.

[Matt Levine]

Yeah. There's just a lot of convergence between gambling and financial markets.

[Katie Greifeld]

Parallels here to private markets becoming the public market.

[Matt Levine]

Yeah. The betting markets are becoming the financial markets. Yeah.

[Katie Greifeld]

All of the Venn diagrams are just turning into circles.

[Matt Levine]

All just bets.

[Katie Greifeld]

Before we leave this topic talking about whether or not this is insider trading or if it could be insider trading, you wrote that if Romantic Paul is Travis Kelce. That's fine. Is that fine?

[Matt Levine]

This is not legal advice.

[Katie Greifeld]

Go on.

[Matt Levine]

This is going to depend a little bit on the specific terms of service of the platform. Right. I mean polymarket has kind of vague terms of service. But if you think about, and this is not a CFTC regulated exchange, but if you think about the future that we'll live in, where all betting takes place on commodities future, I look forward to that future. Then the way commodities insider trading rules work is if you misappropriate information from someone else, then that's illegal. It's illegal insider trading. But if you own the information, it's harder to say that you're insider trading. So if you're an oil company and you drill a lot of oil and your well is a bust and you think, oh, that's going to push up oil prices, you're allowed to buy oil futures because the point of oil futures is to allow actual oil producers and consumers to sort of hedge their actual production and demand. And so of course you're trading an insider permission about your own behavior.

[Katie Greifeld]

Right.

[Matt Levine]

If you're like a trader at an oil company and you're front running your company by buying futures for your own account, that's illegal insider trading. And there are cases, right? There are cases of people who are front running who are misappropriating information get in trouble for commodities insider trading, but just the owners of the commodity, the commodity producers, they're allowed to trade on their own information. So I don't know where that leaves you when your commodity is like, will Taylor Swift and Travis Kelsey get will.

[Katie Greifeld]

I engage or will I propose to Taylor Swift?

[Matt Levine]

Right. But I think it kind of leaves you like, yeah, go ahead and trade on that. Again, there's like no money here. Right.

[Katie Greifeld]

There also is a risk. I was going to say, because he didn't know that she was going to say, yes, of course there's a risk.

[Matt Levine]

Right. But insider trading, whatever.

[Katie Greifeld]

Yeah.

[Matt Levine]

Trading is rarely 100% risk free.

[Katie Greifeld]

Also, she had already said yes by the time these were made. But I was thinking more of the example of he's the CEO of a company and he knew that earnings were going to be good, but they hadn't.

[Matt Levine]

That's not the CEO's information, that's the company's information. And by the way, companies can't really insider trade their stock. Like in stocks, the rules are kind of different. Like in stocks, companies have fiduciary data to shareholders and they can't really insider trade their stocks. But in commodities, it's a little bit.

[Katie Greifeld]

We're talking about commodities, not stocks, not equities.

[Matt Levine]

Like Taylor Swift's engagement.

[Katie Greifeld]

Congratulations, Taylor Swift. From your friends at the Money Stuff podcast.

[Matt Levine]

Come on the pod.

[Katie Greifeld]

Yeah, come on. It worked out really well. Your last podcast appearance.

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[Katie Greifeld]

Do you want to talk about Michael Saylor? Yeah. This is a guy that we talk about sometimes and his company strategy, not microstrategy strategy. Yeah. Its premium is collapsing before our eyes.

[Matt Levine]

I know, I feel a little bad about that somehow. I don't know why.

[Katie Greifeld]

Does it cause that?

[Matt Levine]

No, but like, I've like made fun of this premium for years and years and now it's collapsing before our eyes and I'm like, you know, I don't wish ill on anyone. I want them to keep running this ridiculous strategy for as long as they can.

[Katie Greifeld]

Strategy, strategy, strategy. I mean, it's been kind of depressed for a while.

[Matt Levine]

Yeah.

[Katie Greifeld]

The premium. The mnav.

[Matt Levine]

The mnav, yeah. You have to sort of put a lot of science around things like this because strategies, businesses, they violate a bitcoin, their stock trades at like twice their net asset value. They sell more stock to buy more Bitcoin, the net asset value goes up, the stock goes up by two times as much and it's a perpetual flywheel. But now instead of 2 times it's like 1.5 ish times it's 1.4 last I checked. Yeah. So it's like this trade is a magical money printing machine when you can sell stock at a big premium to your net asset value. And it's like a terrible disaster if you can sell stock at a discount to your net asset value. As you come down, it's less and less fun. I think they put out guidance that they would not sell stock at less than 2.5 times net asset value. Then when the premium went below two times, they were like, well, never mind. We'll just keep selling stock at, you know, whatever we can get.

[Katie Greifeld]

Yeah. So I have to say I don't really understand why they did that. Because.

[Matt Levine]

At 1.1 times it's a good trade.

[Katie Greifeld]

I know, but. No, no, no.

[Matt Levine]

You can like sell, you know, at a premium. You should sell at a premium.

[Katie Greifeld]

I know, but okay, they pledged to.

[Matt Levine]

And they said they wouldn't. But like, you know, that was when things looked.

[Katie Greifeld]

But they were already below two and half when they said that.

[Matt Levine]

Okay, but like the other reason. Okay, so sorry.

[Katie Greifeld]

And there is a two week span there.

[Matt Levine]

Yeah.

[Katie Greifeld]

So they said they wouldn't do this. Two weeks later they did and they were already below two and a half times.

[Matt Levine]

Yeah. Okay, so there's two questions, right? One is why would you sell stock at below 2.5 times net asset value? And the answer is, because if you can sell stock at any premium to net asset value, it's a good trade. It's accretive to your shareholders to sell stock for more than it's worth. And then the other question is, why did they say they wouldn't sell?

[Katie Greifeld]

That's what I don't understand.

[Matt Levine]

Okay, so there's two answers to that. One is the whole game here is investor confidence. If you can say, oh, it's always going to be at a premium, then investors will like your stock and the stock will go up and it'll be at a bigger premium. One thing is you just have to tell people what they want to hear because you're in the business of selling them stock at a premium for sure. But then the other reason is that they're not exclusively in the business of selling stock. They have gotten really into doing weird capital markets trades that I love as a former weird capital markets banker. And so they've found all sorts of straight preferred stock deals to do, which is like tech companies don't do big straight preferred stock deals. That's not a thing. Straight preferred stock is not a real instrument outside of financials and a few other weird places. And they were like, we're going to sell billions of dollars of preferred stock because essentially it's like borrowing money perpetually at call it 9%, 10% interest to buy Bitcoin. And if you think Bitcoin will always go up by 50% a year, then borrowing a 10% to buy Bitcoin that yields 50% is a great deal.

[Katie Greifeld]

Yeah.

[Matt Levine]

And so they've been doing a lot of preferred stock deals. And I think when they said we're not going to sell stock below 2.5x, they thought we'll just do fixed income financing to keep buying More bitcoins. And then the market for that softened. Yeah, it's such a weird market. Like people don't need billions of dollars of preferred stock of a tech company that buys Bitcoin. And so when that market collapsed, they're like, we still need to buy more bitcoin. So they're selling stock again.

[Katie Greifeld]

Yeah. It's funny. Who would be the typical buyer of preferreds?

[Matt Levine]

I have never really known that. I mean, it's like income oriented. You know, if you're a retiree and you can get 9% yield, that's great, you know.

[Katie Greifeld]

Yeah. Well, apparently there's not enough of those people because their recent billions of dollars.

[Matt Levine]

With that credit profile, that's a weird trend.

[Katie Greifeld]

Their most recent sale raised just about $47 million.

[Matt Levine]

And the stuff they're doing is. I mean, for me, I love it. Their most recent thing is they're.

[Katie Greifeld]

You're not buying enough of it.

[Matt Levine]

I haven't bought any of it. But it's a floating rate preferred that the rate floats with. Just like their feelings the rate floats with. They want to keep it to trading at par. And so the rate will float at whatever makes it trade at par, which is like essentially floating with their own credit, which is a truly insane instrument that no one has ever done before. Like Michael Saylor is like, I'm going to do this. And so I shouldn't say no one's ever done it before. It's kind of auction rate preferred. But it's very strange and very cool and fun for capital markets nerds. But like they don't buy billions of dollars of preferred stock.

[Katie Greifeld]

Yeah, yeah.

[Matt Levine]

And also, by the way, when I say something is cool and fun, that means I would not buy it.

[Katie Greifeld]

Yes. Okay. That's a necessary disclosure. There's also the question of why the premium is collapsing. I mean, taking a look at Bloomberg news coverage, it would. One of the reasons pointed to, but go ahead. Is that there's just so many crypto treasury companies. How much is that truly diluting demand for strategy?

[Matt Levine]

So one thing that's interesting is like, you know, people thought that the premium would collapse when spot Bitcoin ETFs became a big thing. And it didn't really.

[Katie Greifeld]

Yeah.

[Matt Levine]

And I think the reason for that is like they really are two different trades. Right. A spot bitcoin ETF is like you can buy Bitcoin and you want exposure to Bitcoin, so you buy Bitcoin. Microstrategy trade is you can buy stock at a premium so that they can sell more stock at a premium so they can accumulate more bitcoin. Like, you're really just betting on, this is a company that can sell stock at a premium to buy assets. Right. I think that's the bet. And that bet is very circular and strange, but it was hard to find. Right. It's not replicated with a Bitcoin etf. Right. That's just a bet on bitcoin. The strategy is a bet on selling stock at a premium.

[Katie Greifeld]

That's great exposure.

[Matt Levine]

But now you can find that bet anywhere. There's hundreds of companies that are like, oh, we've got a way to sell stock at a premium. And some of the people who are gambling on the generic concept of ability to sell stock at a premium to buy crypto are doing it with other crypto companies that have higher premiums or lower premiums. There are more flavors of that bet, and there are only so many people who want that bet.

[Katie Greifeld]

That's true.

[Matt Levine]

So I think that's part of why the premium is not doing as well. But also just like, I really think that this is the sort of thing where if you think about it for a minute, you'll be like, yeah, don't do that. And so you look at, like, you know, Jim Chanos betting against this. It's just like some of the people who look at this who have my or Jim Chanos cast of mind are like, this is crazy.

[Katie Greifeld]

Yeah.

[Matt Levine]

And, you know, enough of those people say that, then maybe people stop buying it at 2.5x.

[Katie Greifeld]

It is fun to think about. Okay, let's say that the strategy premium does erode even further. What this means for this ocean of crypto treasury companies that now exist. Are you just kind of.

[Matt Levine]

They're all the numbers that people have announced for their plans. It's the tens of billions of dollars of crypto treasury plans. That's not going to happen.

[Katie Greifeld]

We'll see.

[Matt Levine]

They're not going to raise that kind of money. I think some of it is people have converted their stashes of crypto into crypto treasury companies because, like, it's trading at a higher value. And if that arose and it ends up at a zero premium, and they'll, you know, they'll own a stash of crypto in somewhat inconvenient form, and it's like, kind of fine. But the people who are like, we're going to go sell $20 billion of stock at the market to buy dogecoin.

[Katie Greifeld]

Yeah, you are.

[Matt Levine]

They're not.

[Katie Greifeld]

So what does that mean? We're just going to have, like, A watery graveyard of companies that are discount.

[Matt Levine]

Strategies is a different story because it's a real. With eccentric management. But a lot of crypto treasury companies are sort of more or less defunct. Like biotech companies that have like a $1 million market cap and then got acquired so that someone could pump a billion dollars of crypto into them. Right. Before there were biotech companies, they were gold miners. Right. There's like a long history of water graveyards of public company tickers being passed around. And let's go back to that. Right. The fad this year was crypto treasury companies. The fad two years ago. Yeah. It's like fine.

[Katie Greifeld]

Yeah, okay. I feel better.

[Matt Levine]

Yeah. Crypto treasury companies are quite harmless.

[Katie Greifeld]

They're not like negatively impacting the economy.

[Matt Levine]

No, I mean, in some broad sense, yes. But it's not like a crisis could occur in crypto treasury companies if the strategy trade stops working. The worst case is kind of IT trades to 80% of net asset value. That's still many tens of billions of dollars company. Right. They've really pumped a lot of. I don't know that I want to say real value, but in quotes, real value into this small software company.

[Katie Greifeld]

Got a lot of bitcoin.

[Matt Levine]

They've got a lot of bitcoin at.

[Katie Greifeld]

The end of the day.

[Matt Levine]

Wherever we are in the day.

[Katie Greifeld]

Okay, well, on the long list of things to worry about, I will put that at the bottom.

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[Katie Greifeld]

IPOS IPOS Matt, you wrote about a paper it came out of Joseph J. Henry of Northeastern University and Terrence M. O' Brien from the University of Maryland. I realize that you're biased here because they quote you right off the bat.

[Matt Levine]

That's true. I probably should have disclosed that in my column.

[Katie Greifeld]

No, I think that's awesome.

[Matt Levine]

I am biased here.

[Katie Greifeld]

It's like an Easter egg if you actually go to look at the paper that you're referencing.

[Matt Levine]

I think sometimes that there are a lot of finance and law papers on ssrn that have 12 downloads. This one has more than that sometimes, right? I don't mean to talk about this one specifically. Sometimes I come across these papers in various ways, often because the writers send them to me and then I write about them in Money Stuff and then they have more than 12 downloads. And I think. I don't know how directly useful Money Stuff mentions are for like academic tenure, but like there's some.

[Katie Greifeld]

There's going to be a Paper, Marginal benefit.

[Matt Levine]

Yeah. Oh, there should be.

[Katie Greifeld]

I really want SSRN in a couple weeks.

[Matt Levine]

I really want to see that. Like, am I getting academics? Tenure? But anyway, if you quote me at the beginning of your paper, it probably does increase your chances.

[Katie Greifeld]

Yeah, definitely.

[Matt Levine]

Sure.

[Katie Greifeld]

Fire away.

[Matt Levine]

So, something to think about anyway. Yeah. So they wrote this paper about IPO pops, which we talked about on the mailbag episode of our podcast that was aired most recently.

[Katie Greifeld]

You have to sing it. No, the mailbag episode we did.

[Matt Levine]

And this paper sort of formalizes an intuition that I've long thought about, which is that when you do an IPO, you're a company and you sell in the IPO something like 10 to 20% of your stock. The rest of your stock stays locked up. It's owned by the CEO, it's owned by the early investors, it's owned by the employees, and it's locked up in the IPO. So they can't sell for like six months after the IPO, something like 10 or 20% of the shares come loose in the IPO. But most of the shares, most of the time are being sold to like long term investors who have had conversations with management and who management wants to be the shareholders. And so there's this sort of deal where the management and the bankers and the long term investors are trying to send the stock to people who hold it for the long term. And what that means is that when the stock opens for trading the day after the ipo, there's not a lot of stock to buy because the company has sold 10 ish percent of its stock. And then 90 ish percent of that stock goes to people who don't sell it on the first day. The amount of stock that's available to buy on the first day is on the order of 1% of the shares outstanding. Meanwhile, there's all these retail investors who want to buy stock. And so when there's a hot IPO that a lot of retail investors want to buy, there's just not a lot of supply for them. And so the stock trades to a price that equilibriates supply and demand for that 1% of the shares that the retail investors want to buy. But that doesn't tell you what the company is worth, necessarily. And it also doesn't tell you what the right IPO price was, because the IPO price was the clearing price for 10, 15, 20% of the stock. But then 1 or 2% of the stock trades on the exchange. So the clearing price on the exchange is going to be a lot higher than the clearing price for the ipo if there's a lot of demand on the exchange. But if all 10% of the stock came loose on the day after the ipo, it would probably trade less of a population. And so they write about, there's this question of how much money are companies leaving on the table that we talked about where people get really mad that when a stock doubles on its first day after the ipo, they say, oh, the banker should have set the price higher so that it wouldn't trade up that high and the company left all this money on the table. But that's not necessarily true because most of the stock doesn't trade on the first day. They couldn't necessarily have sold 10 or 20% of their stock at the price that it rose to on the first day.

[Katie Greifeld]

Yeah, this paper, I mean, it's a really good time for this paper because I feel like this topic has taken on new life because we're getting IPOs again and we're seeing, I was going.

[Matt Levine]

To say, like, this is an evergreen topic. I've been thinking about this for like 15 years. But you're right, like for a while it went pretty dormant because there are no IPOs.

[Katie Greifeld]

Yeah, absolutely. And then 2025, I feel like you've seen really dramatic pops even in the last couple months. You think about Figma Core Weave, Circle, we were talking triple digit, multiple hundred percent pops.

[Matt Levine]

Right. And you think about you're an institutional stock investor, you do some valuation work, you meet with this company, you think, this is what I'd pay for this company because it's comparable to other companies in my portfolio. Maybe you own other private companies because a lot of institutions do. And then the stock opens for trading. And retail investors haven't had fun new IPOs to buy for years. And so there's a ton of demand for very limited supply. And so the stocks go up a lot, but that's not necessarily reflective of where institutions would price them.

[Katie Greifeld]

Yeah, I will say though, we're not talking about like one day pops. I mean, in the case of those three companies, Figma, Core Weave and Circle, these are like multi week, mostly sustained moves.

[Matt Levine]

Yeah, I want to be clear, like this explanation is like an interesting and important technical explanation for some of the what happens in IPO pass. It's not the only explanation. There is a desire to underprice IPOs so that people who invest in the IPO make a profit because that's good for them and for the banks and also arguably for the company because it creates Investor goodwill. But this explanation is not the only reason that IPOs pop.

[Katie Greifeld]

Yeah. It is interesting to look that they find that the average IPO share price pop is like 19% higher than the actual offer price on the first day of trading. 19%. I mean, relative to some of the IPOs I just mentioned, seems tame at this point. I don't think that would turn heads in quite the same way that whatever happened to Fitbar.

[Matt Levine]

Long sample. Right. And like.

[Katie Greifeld]

Yeah, 30 years.

[Matt Levine]

Yeah. And like I do think that the scarcity of supply means there's more kind of dispersion now.

[Katie Greifeld]

Yeah.

[Matt Levine]

When there's two IPOs a week, they're not all going to pop 100%.

[Katie Greifeld]

That's true. It feels like we're a ways away from that. Like, I know that the IPO market is normalizing.

[Matt Levine]

Right. I said two IPOs a week. That's a low number. I feel like there used to be a lot more than two IPOs a week.

[Katie Greifeld]

Two IPOs that people are excited about.

[Matt Levine]

A week though we're now pretty low.

[Katie Greifeld]

Yeah, yeah. It's been grim for a while and now it's great.

[Matt Levine]

I think that this dynamic here where like very little of the shares are available and retail wants them and so the stock pops is exactly the same dynamic that you see in the private company stuff that we talk about all the time, like retail and retail. Ish. And like, you know, accredited retail investors really want to own shares.

[Katie Greifeld]

They're dentists.

[Matt Levine]

Yeah, Dentists really want to own shares of OpenAI and SpaceX. It is hard for a retail investor to buy OpenAI and SpaceX, but it's not impossible. There's like little bits of OpenAI and SpaceX and little. There's secondary funds, there's little closed end funds that own a little bit of it. And because there is a limited but not zero supply available to retail, retail really bids them up. And so the prices of, you know, OpenAI shares or proxies or SpaceX shares or proxies on the retail market, the price is much higher than what you see those companies raising money at.

[Katie Greifeld]

Right.

[Matt Levine]

And it's the same story. Right. Like institutions will buy tens of billions of dollars of OpenAI stock at some price and then retail investors will buy tens of millions of dollars of that stock at some much higher price. That doesn't mean that OpenAI's valuation is in the trillions of dollars. It means that the supply available to retail is really low. It's the same thing with IPOs. The supply the first day available to retail is much lower than what institutions have access to. And so the price is higher.

[Katie Greifeld]

I feel like I'm too tired to neatly make this point, but it does seem somewhat parallel to what we're talking about with MicroStrategy and the Premium. And it's just coming down to supply and demand.

[Matt Levine]

Yeah, I mean, I guess it's true in the sense that MicroStrategy, unlike OpenAI or these IPO or Figma, MicroStrategy is pretty much willing to supply whatever is demanded. And that is bad for the premium.

[Katie Greifeld]

Exactly. And also to tie it to the first thing that we talked about, those retail investors don't need to try to own OpenAI. They just need to make a prediction market around it somehow to reflect the movement of these.

[Matt Levine]

Oh, I write about that all the time. Yeah, well, but there's legal complications there too. Yeah, because like that's not a commodity, that's a security based swap. Completely different problem. Let's leave it there. On that very boring note. Yeah.

[Katie Greifeld]

Well, that was awesome. I think that was really titillating.

[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 Open Interest between 9 to 11am Eastern.

[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 air.

[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 and Moses Andam.

[Katie Greifeld]

Our theme music was composed by Blake Maples and Sage Bauman is Bloomberg's head of podcast.

[Matt Levine]

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

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