Finders Keepers: IPO, XAI, Subs

Summary

Money Stuff: The Podcast – Episode: Finders Keepers: IPO, XAI, Subs Release Date: April 4, 2025
Hosts: Matt Levine & Katie Greifeld

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1. Newsmax IPO: A Conservative-Led Media Company Goes Public

Timestamp: [02:31] – [08:53]

In this segment, Matt Levine and Katie Greifeld delve into the recent Initial Public Offering (IPO) of Newsmax, a conservative-leaning news network. They explore the factors contributing to its high valuation and the dynamics surrounding its stock performance.

• Valuation Concerns:
  Matt expresses skepticism about Newsmax's lofty valuation, stating, “I think that it does not warrant this high price” ([03:54]). He compares Newsmax to the Trump Media and Technology Group, highlighting the challenges these right-wing media companies face in balancing high valuations with relatively low revenues and significant net losses.

• Ownership and Stock Dynamics:
  Katie reveals that Thomas Petterfi, a billionaire Republican donor and trader, holds the second-largest stake in Newsmax, once valued at approximately $5.4 billion ([03:54]). Matt further explains that Petterfi is likely locked up from selling his shares immediately post-IPO, which is a common practice among significant shareholders to stabilize the stock price.

• Investment Banking Insights:
  The hosts discuss the role of Digital Offering LLC, a boutique investment bank based in Laguna Beach, California, which managed Newsmax's IPO. Katie highlights that the firm typically advises companies valued under $1 billion, making Newsmax's IPO a notable success for them ([06:43]). Matt speculates that the high stock price may stem from treating Newsmax as a "meme stock," where retail investor enthusiasm drives secondary market valuations rather than the company's fundamentals.

• Market Implications:
  Matt emphasizes the distinction between primary and secondary market activities, noting, “Newsmax is not selling any stock. This is just secondary trading” ([04:48]). He underscores the volatility and speculative nature of meme stocks, which can lead to inflated valuations detached from a company's actual financial health.

2. Circle’s IPO and the Business of Stablecoins

Timestamp: [09:05] – [15:14]

The conversation shifts to the stablecoin sector, focusing on Circle, a prominent player in the cryptocurrency market, which has recently filed for an IPO.

• Financial Performance:
  Katie shares key financial metrics from Circle's IPO filings, including a net income of $156 million on revenues of $1.68 billion in 2024 ([09:16]). Matt analyzes how Circle generates revenue by managing customer deposits through investments in BlackRock money market funds, primarily in Treasury bills ([10:17]).

• Business Model and Margins:
  Matt elaborates on Circle's business model, explaining that they make money by taking large deposits and investing them to earn interest while paying little to no interest to their customers. “They say they make a discount to SOFR, but they kind of make T bill rates and then they pay as a first cut, 0% interest to their customers” ([10:17]).

• Regulatory Landscape:
  The hosts discuss the potential regulatory implications of interest-bearing stablecoins. Matt mentions that paying interest on stablecoins could reclassify them under securities law, aligning them more closely with money market funds ([11:31]). This regulatory shift could lead to the emergence of new financial products that combine traditional money market instruments with blockchain technology.

• Market Position and Future Prospects:
  Katie speculates on the future acceptance and integration of stablecoins into mainstream financial infrastructure, suggesting that companies like Circle aim to establish themselves as foundational elements in the financial ecosystem. Matt envisions a future where stablecoins become a primary medium of exchange in digital transactions, driven by their liquidity and integration with major platforms like Coinbase and Binance ([14:02]).

3. Elon Musk’s Merger: XAI Acquires Twitter

Timestamp: [18:12] – [28:20]

Matt and Katie transition to discussing the significant merger between XAI, an AI company, and Twitter, now rebranded as X, under Elon Musk's leadership.

• Merger Mechanics and Valuations:
  Matt breaks down the valuation mechanics of the merger, highlighting that XAI assumed Twitter's debt and exchanged stock based on their respective valuations. “What does $33 billion worth of stock mean?...you give Twitter 33/8 of that” ([20:48]). He clarifies that the valuations are relative and rooted in the negotiated merger ratio rather than absolute company values.

• Synergies and Business Integration:
  The hosts explore the strategic reasons behind the merger, noting the potential synergies between XAI's AI capabilities and Twitter's vast data resources. Matt suggests that integrating AI models with Twitter's user data could enhance both platforms' offerings, creating a unified ecosystem for data-driven services ([23:43]).

• Antitrust and Regulatory Concerns:
  Katie raises the question of antitrust issues, to which Matt responds that since both companies are under Musk's ownership, traditional antitrust concerns are negligible ([22:04]). The merger is seen more as an internal restructuring rather than a competitive consolidation.

• Comparison to Other Musk Ventures:
  Matt draws parallels between this merger and previous acquisitions by Elon Musk, such as Tesla's acquisition of SolarCity. He discusses how Musk's centralized control over multiple ventures allows for flexible restructuring without the typical hurdles faced in public company mergers ([25:14]).

• Future Implications:
  The discussion touches on the broader impact of such mergers on the industry, with Matt speculating that this could signal a trend where data-centric companies leverage AI to enhance their platforms. He envisions a scenario where stable infrastructure companies like Circle could emerge from similar strategic mergers, integrating traditional financial services with cutting-edge technology ([24:25]).

4. Administrative Error: Substitute Teacher Receives $7 Million

Timestamp: [32:04] – [38:02]

Shifting gears, Matt and Katie discuss a startling incident involving a substitute teacher mistakenly paid $7 million due to an administrative error in Prince George's County, Maryland.

• Incident Details:
  Matt describes how a substitute teacher was erroneously paid $7 million for just three days of work after an administrative mistake placed the teacher's ID number in the hours worked field ([32:06]). The error was detected 50 days later, and although the teacher returned the money, Matt humorously imagines the scenario: “I keep saying this person... imagine what this person did” ([32:24]).

• Potential Reactions and Legal Considerations:
  The hosts debate what the teacher could have done with the money during the 50-day period. Matt suggests that while some might invest the funds or engage in significant purchases, Katie emphasizes the ethical dilemma and the likely steps to rectify the mistake without immediate excess spending ([34:18]).

• Legal Framework and Statute of Limitations:
  Matt recounts an email from a listener who, after being mistakenly overpaid, consulted a lawyer and learned about the statute of limitations for such errors. “He learned about the time period for latches... it's like a statute of limitations for stuff like this” ([36:20]). The listener waited out the six-year period before claiming the money had lapsed, effectively retaining the funds ([36:49]).

• Ethical Implications:
  Katie and Matt reflect on the moral responsibilities of individuals who receive unintended payments. While some may view it as an opportunity, others advocate for returning the funds promptly, especially when the sums involved are life-altering, as in the case of the substitute teacher ([35:59]).

Conclusion

Throughout this episode, Matt Levine and Katie Greifeld provide insightful analyses of recent developments in the financial and corporate landscape. From the speculative frenzy surrounding Newsmax's IPO to the evolving stablecoin market and high-profile mergers orchestrated by Elon Musk, the hosts navigate complex topics with clarity and wit. Additionally, the lighthearted yet thought-provoking discussion on administrative errors in payroll systems adds a unique human interest angle to the episode.

Notable Quotes:

• Matt Levine ([03:54]): “I think that it does not warrant this high price.”
• Matt Levine ([04:48]): “Newsmax is not selling any stock. This is just secondary trading.”
• Matt Levine ([10:17]): “They say they make a discount to SOFR, but they kind of make T bill rates and then they pay as a first cut, 0% interest to their customers.”
• Matt Levine ([22:04]): “There's really no antitrust concerns in many respects.”
• Katie Greifeld ([36:50]): “Wow.”
• Matt Levine ([36:49]): “And he's like, at the end, I threw a claim has lapsed party.”

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For more insights and discussions on financial topics, subscribe to the Money Stuff podcast on your preferred platform and visit Bloomberg Opinion’s Money Stuff column for additional content.

Transcript

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[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 Opin.

[Katie Greifeld]

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

[Matt Levine]

And today is an all tariffs episode of the Money's Help. No, it's not.

[Katie Greifeld]

Can you imagine? I actually would be the most prepared out of any episode that we've ever done.

[Matt Levine]

I know you've been talking about tariffs nonstop for 48 hours.

[Katie Greifeld]

I was actually at my grandmom's apartment last night, or I guess in the afternoon talking about tariffs. Well, I was with my dad and my dad and I both were like, can we turn on the tv? My grandma was like, sure, yeah. So we watched it with no. Yeah, the Rose Garden.

[Matt Levine]

No.

[Katie Greifeld]

Anyway, yeah, we're not talking about tariffs. We are talking about a conservative leaning news network that went public.

[Matt Levine]

Conservative leading. Yeah, yeah.

[Katie Greifeld]

I don't know what Newsmax does. I probably should.

[Matt Levine]

They're a television channel that I know.

[Katie Greifeld]

I've never watched them.

[Matt Levine]

They stake out the vast territory to the far right of Fox News is.

[Katie Greifeld]

My understanding of it and their ipo. At one point they had a market value of over $30 billion, which had them more valuable than Fox for a brief moment of time. The stock has since started to come back to earth.

[Matt Levine]

I don't pretend to understand this anymore. The meme thing, the meme IPO thing. I think of this in comparison to Trump Media and Technology Group, the other, let's say right wing media network maybe that also has a very high valuation relative to fairly low revenue and net loss. And Trump Media is owned by people who are like, yeah, great, But Newsmax is partly owned by Thomas Petterfi, who in addition to being a billionaire Republican donor, is also a trader. He's the founder of a director of brokers. The FT got him on the phone and he said he was stunned by the price. I think Newsmax is a great company and it's going to have a very bright future. But I think that it does not warrant this high price, which is like he knows in addition to being a real billionaire, he has like a billion dollars worth of Newsmax stock.

[Katie Greifeld]

Yeah, he owns the second largest stake. It was at one point worth at least $5.4 billion. I wonder if he sold.

[Matt Levine]

I think he's locked up.

[Katie Greifeld]

Really?

[Matt Levine]

And I think like they asked him like, are you going to sell? And he said, you know, I can change before the lock. Most big shareholders are locked up in IPOs like that. And it's funny, like for the same reason that the stock price is high. Some of the commentary that you'll read from enthusiasts is not always well informed. And I read someone being like, what will Newsmax do with all of this capital? Will they use it the next big immediate? They're not getting any capital. It's just like the stock is trading in the secondary market. There's a real move among meme stocks that if your stock is memeing, you should get off at the market stock offerings so you can raise money from the people who are buying your stock in the secondary market and pushing out the price. But you can't do that a week after your IPO or three days after your ipo. Newsmax is not selling any stock. I mean, they sold stock at $10 before the run in the stock, but they're not making any money from this. This is just secondary trading.

[Katie Greifeld]

They're not making money in General. They lost $72 million.

[Matt Levine]

These are separate things. If you're a Meme stock, you don't make money on your business, but you make money selling stock. But they're not even doing that.

[Katie Greifeld]

I'm old fashioned, Matt. I like to go back to the fundamentals. That's true. I guess it's hard to predict what will become a meme stock. I would not have guessed that Newsmax was a candidate. No, not really.

[Matt Levine]

Oh, really?

[Katie Greifeld]

Apparently Chris Ruddy, though, the CEO, was going on like cable news and pitching the ipo, which I didn't know. Had I known that, maybe I would.

[Matt Levine]

Have a TV channel.

[Katie Greifeld]

Yeah, that's true. But he was going on other channels, not Bloomberg News, to the best of my knowledge.

[Matt Levine]

I'm on the podcast.

[Katie Greifeld]

That's true. Chris Rotti, if you're listening, I want to talk a little bit about the mechanics of this ipo. I was chatting with Bailey Lipschultz of Bloomberg News about this. He's my go to guy.

[Matt Levine]

He's our Mims Tucker Burger.

[Katie Greifeld]

Yeah. On Funky Things. He also covers IPOs, which is a really poetic intersection. So this was a regulation A plus. It's a mini ipo.

[Matt Levine]

Okay. A mini ipo.

[Katie Greifeld]

Yeah. I didn't know that. And the reason I found out is because I have another Matt in my professional life. His name is Matt Miller. And he was like, wow, the bank must have really mispriced this. And Billy made the good point that because it's a reg. A IPO, they can only raise up to $75 million. So it's not like this was mispriced or anything.

[Matt Levine]

I mean, you can sell fewer shares to raise the 75 million, but who are the banks?

[Katie Greifeld]

I'm so excited you ask. Digital Offering llc. Oh, yeah, yeah. Business Insider. I don't think you've seen this yet. Business Insider, just as we're talking about this on a Thursday, published a story titled meet the tiny investment bank behind Newsmax's rip roaring stock debut. Laguna Beach, California based Digital Offering LLC was the bank behind this. Can I tell you more facts about them?

[Matt Levine]

I want to hear all of the facts about them.

[Katie Greifeld]

I'll tell you at least three. They have 10 full time registered banker, three of whom act as principal investment bankers. They typically advise companies valued at a billion dollars or less. Those are actually all the facts I have. But I have a quote from Mark Alenowitz. I hope I'm saying his name correctly. He's a managing director there. He said that Newsmax, as you might predict, has been huge for them. The small cap community knows who we are, but the rest of Wal street didn't. But now they're on the map.

[Matt Levine]

So I'm still hung up on the idea that the bank's mispriced it. Because I used to be an equity capital markets banker. I think of the way you do an IPO is you go out to institutional accounts and you build a book of institutional accounts. You put some stuff with retail. But if you go to an institution and you're like, well, we lost $70 million on 170 million of revenue, there's some cap to the valuation you're going to get. And if you trade on the secondary market to retail, there is not that cap or any cap. You can be a $30 billion company for briefly, if you have those kind of numbers. And so if you go to institutional investors and say, this is going to be a meme stock so we're pricing it at $200, they will laugh at you. By the way, I don't want to say Bill Ackman tried that, but a little bit.

[Katie Greifeld]

A little bit friend of the show.

[Matt Levine]

Friend of the show, Bill did it. But I don't think that's the case here because a reggae offering done by a small bank might have been. It was for the small cap community. It's not like they're selling this to Fidelity necessarily. Maybe they did misprice it as a meme matter. I don't know.

[Katie Greifeld]

I don't know. Well, it'll be interesting to see their follow up to the Newsmax debut digital offering llc.

[Matt Levine]

It does feel like a real golden age for a certain sort of banker who is happy to work with meme stock companies. There's a lot of stuff going on. Stuff going on that not necessarily everybody wants to be doing.

[Katie Greifeld]

I don't know. I feel like the golden age might have been 2021.

[Matt Levine]

Like the deep spacs kind of thing.

[Katie Greifeld]

Yeah. Obviously you're still having some meme stock IPOs, but there's just not a lot of IPOs, and I don't know.

[Matt Levine]

That's right.

[Katie Greifeld]

Looking at Thursday, like a relative golden.

[Matt Levine]

Age for the meme stock bankers compared to the large cap tech bankers everyone.

[Katie Greifeld]

Else could talk about. Circle.

[Matt Levine]

You know what?

[Katie Greifeld]

Also in Ito, also in Ito news, this one hasn't happened yet, but it's going to, theoretically. Circle of stablecoin fame has filed for an ipo.

[Matt Levine]

Yeah, they filed a long time ago, but their filing became public this year. They filed under another special IPO rule, which is you can file confidentially, but now they're unconfidential. So you can read their filings.

[Katie Greifeld]

Got some numbers. $156 million. That's their net income. That's on revenue of $1.68 billion in 2024. My only simple question for you is how does a stablecoin make money? Is that just because they're backed by.

[Matt Levine]

Yeah, yeah, that's it. So. Oh, yeah, yeah. It's the best business in the world. And it's actually like, it was surprising to me that their margins are so low. And it's a little interesting why their margins aren't 100%. Yeah, but no, they make money by like they take tens of billions of dollars of deposits from customers. You know, I wrote about this. They don't directly put it in T bills because I think my explanation would be like, that is too much of like a banking function or a financial services function. And they are like a fintech. So what they do is they take all the money and they put it in a BlackRock money market fund that puts it in T bills.

[Katie Greifeld]

That's amazing.

[Matt Levine]

Effectively, they put it in T bills and they pay BlackRock to be a sort of like adult custodian of their T bills. Yeah, they put some of it in bank accounts, but it's like 85% T bills. They say they make a discount to SOFR, but they kind of make T bill rates and then they pay as a first cut, 0% interest to their customers. That's not quite right. It's basically right. So they're making 4% or so on tens of billions of dollars. And that might be a slight exaggeration, but it's like they're making a lot of money and then where does it go? I mean, some of it is like they have expenses because they are a tech company. They're building technological infrastructure to transfer stablecoins on the blockchain, et cetera, et cetera, et cetera. Another big part of it is everyone knows this is a good business model. It's not quite a winner take all business model, but it's a little bit like you want to be the most liquid stablecoin. And so they are paying platforms to be a preferred stablecoin. So they're the stablecoin of Coinbase and there's a partnership with Coinbase and if their coins are held on Coinbase, they're paying Coinbase a lot of the interest. They're paying fees to Binance to be on Binance. So there's some amount of like, this is a good business. And so the customer acquisition cost is kind of. You're paying something for it, but it.

[Katie Greifeld]

Feels like it's only a good business when rates are high.

[Matt Levine]

So right it's such an interesting business because it stumbled into being a good business. It started, the stablecoin business started when rates were low and everyone was like, well, it's fine if we don't get paid interest, because interest. We don't get interest on our savings accounts, don't get interested in our money market account. So it's fine. And now the rates are high and you do get interest on your money market account. And the stablecoin issuers are raking in money. And there are reasons that you can't just easily natively get that interest on your stablecoin. One reason is that's historically not how it developed. And the biggest stablecoin issuers have a liquidity advantage and they don't want to pay interest. But another reason is there's securities law problems with doing it. If you were paying interest on a stablecoin, it's not in the crypto gray area where it's probably fine. It's a money market fund and it's security. This is at least the SEC theory as of four months ago. And one thing that I have written about for a long time is that clearly people are going to just start issuing interest bearing stablecoins that are registered money market funds that trade on a blockchain. And if you look at the Circle IPO documents, they talk about that. They have a issuer that does that, that has a small money market fund. And they are doing essentially an interest bearing stablecoin that you can convert into their regular coin. And they kind of hint and I'm sure that there will be more of that and ultimately some of this free money will be returned to customers.

[Katie Greifeld]

Why am I thinking of BlackRock and securitized? Don't they have something?

[Matt Levine]

Everyone has it. Yeah. BlackRock has a tokenized new market fund. Circle, I think, owns a company that does it in addition to having their stablecoin money out of BlackRock fund. But yeah, everyone's doing it. Franklin Templeton did it in 2019. They launched their tokenized flow.

[Katie Greifeld]

I remember that.

[Matt Levine]

Yeah. And I was like, why is it not called the Benjamin? And no one had a good answer.

[Katie Greifeld]

I am excited to see how this is received when it eventually does become public. Because I know you think about all the other crypto equities. I imagine this is going to trade similarly to the price of bitcoin, even though maybe it shouldn't. I mean, it's really just a money market fund with a lot of layers.

[Matt Levine]

It is what it is, a first cut. Their business is kind of like what is the market cap of their coins outstanding and the market cap of stablecoins outstanding does have a lot to do with like demand for crypto.

[Katie Greifeld]

Yeah, that's true. It's not as direct though as like it's pretty direct. No MicroStrategy owns a ton of bitcoin.

[Matt Levine]

That's right.

[Katie Greifeld]

So it's not exactly a proxy.

[Matt Levine]

It's obviously it's not a proxy for bitcoin. I always think about like Goldman used to say that like their business is a bet on global GDP and like the stablecoin business is a bet on like crypto gdp. Right. Like if, if crypto is booming, like there will be more demand for stablecoins now they're separately like a competitive dynamic in stablecoins where they might lose out to other stablecoins and there's the business model of we get interest and don't pay interest might be compressed and they might have to pay more interest. But broadly speaking, the more crypto there is, the more people want their stablecoin.

[Katie Greifeld]

I wonder what the pitch to buy Circle shares is, especially if rates.

[Matt Levine]

We have billions of dollars. We get paid interest and we don't pay interest.

[Katie Greifeld]

But if rates go down, what's the point?

[Matt Levine]

The pitch is like we are building the future of financial infrastructure. The real upside case is in five years the way that you normally pay for stuff will be with a regulated US Stablecoin instead of Venmo or credit cards or checks or whatever, you will boop some Circle coins to someone. That's the upside case.

[Katie Greifeld]

It's kind of quaint to think we'll still be here in five years.

[Matt Levine]

That's the downside case.

[Katie Greifeld]

Yeah, right. Foreign.

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[Katie Greifeld]

Man, you know we were talking about right leaning social media networks.

[Matt Levine]

Oh gosh, we were. What a transition.

[Katie Greifeld]

Oh boy. X X Twitter X X Now part of XAI Holdings. Yes man. So I obviously immediately thought of you on.

[Matt Levine]

I'm like the chronicler of Elon Musk's mergers. And this technically is an Elon Musk merger.

[Katie Greifeld]

I thought about texting you, but I was. I was done.

[Matt Levine]

You spared me.

[Katie Greifeld]

Yeah, right.

[Matt Levine]

I remember seeing that news and being.

[Katie Greifeld]

Like, well, it seems like this is my life now. This though isn't like that huge of a deal like this didn't rock your world as much as some might have expected it to.

[Matt Levine]

It's the biggest M and A deal this year.

[Katie Greifeld]

Yeah.

[Matt Levine]

And the second biggest, actually maybe the first biggest is Elon Musk's. By biggest I mean from the Bloomberg table which counts announced deals, including announced hostel deals. The biggest deal this year is Elon's deal to buy OpenAI, which is not a deal, it's just a bid. It's not really a bid. It's a piece of performance art. But the second biggest is this deal, which is a, let's say, $45 billion acquisition or $125 billion total enterprise value of all stock merger. I don't know. It's a pretty big deal, except it's like it's two companies he owns or now one company that he owns.

[Katie Greifeld]

I want to talk about valuations a little bit.

[Matt Levine]

Sure.

[Katie Greifeld]

Because it kind of feels like the XAI valuation. You could poke a lot of holes in it.

[Matt Levine]

So a couple of things. So Xai, the AI company, bought X the Twitter company, in an all stock deal. So XAI assumed, let's say, $12 billion of Twitter debt, and it paid, let's say, $33 billion of stock for X. What does $33 billion worth of stock mean? Well, it means if you value Xai at $80 billion, then you give Twitter 33/8 of that, and that's $33 billion worth of stock. You don't have to believe either valuation. What actually happened was that they merged at a ratio. The people who owned Xai got 80, 113 of the company, and the people who owned Twitter got 30, 313 of the company. And that was the ratio that happened. They could have been worth $80 and $33, or they could have been worth $80 billion and $33 billion or any other number in that ratio. So you don't have to believe the valuations. And it's interesting, like the last round where XAI raised cash, it was like, I think at a 51 billion.

[Katie Greifeld]

It was 51 billion in December. You did point out that in mid February, Bloomberg reported that XAI was canvassing potential investors for a $10 billion funding round that would value it at $75 billion. But I think that happens.

[Matt Levine]

Meanwhile, X raised money recently at a. You know, I've been saying 33 and 45, $33 billion equity valuation, $45 billion enterprise value. Like that was a weird round. And one thing about it is Elon Musk put in some money and in hindsight, you could sort of be like, well, they were doing that to print a trade at that price so they could justify doing the merger at that price because there was talk of x being down 50% from where he bought it. And I think it's nice for him to close it out at the price that he paid for it. But you don't have to believe any of those valuations because in a rough sense, what happened here was that Elon Musk owns two companies and he's mushed them into one company. It doesn't matter what the valuation was. Now, that's not quite true because there are minority shareholders in both companies, but they're along for the ride. They don't get us say they're not going to complain about the valuations of any of these things.

[Katie Greifeld]

I mean, are there any antitrust concerns here at all?

[Matt Levine]

Could we see anything I mentioned, usually you have some delay between signing and closing because you have to fill out antitrust forms, but someone pointed out they're both owned by the same guy anyway, so there's really no antitrust concerns in many respects. The thing to say about this deal is those companies were already the same company. So it doesn't really matter for antitrust or for fiduciary duties or for valuation or for anything else that they're merging. Right. It's just, yeah, sure, it's like he's reshuffling the paperwork for his own companies.

[Katie Greifeld]

Yeah.

[Matt Levine]

The only thing I'll say is, like, why did he merge them? One possible answer is that these are kind of the same business. And so one reason that I think Elon Musk has a bunch of separate companies for all of his different ideas is you want to have the companies have some focus and have the employees of these companies have shares or options in their one company. So they're really motivated to do a good job for that one company. So Tesla and SpaceX are doing different things, so it'll move people between them, but you want to pay the Tesla people in Tesla options and the SpaceX people in SpaceX options. And I think that there was a reason to separate X and X and AI, because AI was really hot and he wanted to raise money and get employees and press for doing AI. But increasingly I think that they're the same business, which is that you collect a lot of data, like natural language data and information from the Twitter user corpus and then you feed that into models that are built by AI engineers who work at xai. And then you produce a large language model that you distribute through Twitter. Their model is a pretty.

[Katie Greifeld]

The only reason I know what GROK is is because of Twitter, obviously, but that's not weird.

[Matt Levine]

Every AI company, they're different, trying to figure out business models. But a lot of stuff is like there's a consumer distribution where OpenAI, among other products, sells access to. You could subscribe and have ChatGPT and you pay a fee every month to have the consum version of ChatGPT and Grok is like that and their distribution is through X and so it's increasing. It's like this is the same business. It's like the inputs and the outputs are through X and the model in the middle is done through xai. So everyone should be working for the same goals and motivated the same way. So we should merge it so that the employees are getting incentivized to help the whole system.

[Katie Greifeld]

Well, it's a nice reminder that nothing truly matters. And I guess that my experience on X as a user won't change. So I'm not particularly fussed about this. I do want to go to the second element in your people were like.

[Matt Levine]

You know, like I wrote about this. I got a lot of people being like, but now they're going to like steal all your data.

[Katie Greifeld]

They already are.

[Matt Levine]

It's like they already were like, they all like the commercial relationship, like already existed. XAI was already paying X for like data and distribution and like it was already stealing all your data and sort of using all of your data for sure. So there's no, there's no real change. I don't think.

[Katie Greifeld]

I do want to go to the second element in the Musk Mars conglomerate that you penned. You write nothing is permanent and if one of the companies succeeds while another one has some temporary struggles, the winner can subsidize or buy the loser. Talking about Musk's portfolio of different companies.

[Matt Levine]

This is like Tesla acquired SolarCity years ago in a deal that people sued over and they kind of looked like a bailout of SolarCity.

[Katie Greifeld]

Yeah, well you could see the reverse logic in Tesla buying XAI in a distant reality because Tesla is really in the hurt locker. But I don't think XAI could buy Tesla. It still has a market cap of something insane.

[Matt Levine]

It would be buying, it would be a merger, it would be an all stock merger. And I think it would be hard for a number of reasons. One of which is like I just made the case that X and XAR are the same business. Yes, Tesla's a different business.

[Katie Greifeld]

Yes, that's true.

[Matt Levine]

There's overlap. You're doing AI stuff to make the self driving cars, but it's a pretty different business.

[Katie Greifeld]

Hasn't he said that he wants Tesla to be an AI company?

[Matt Levine]

Well, it is an AI. It's a self driving car company. It's an AI company, but they're different. But either way there's some overlap, but it's not the same business model or distribution. But then also like this deal is so easy because they're private companies, there are shareholders other than him and both of these companies, but they're there because they love him. They're not going to complain. Tesla's a different situation. Every shareholder in XAI or X is there because they trust Elon Musk and they want him to do stuff right. And they will give him a lot of leeway to do the stuff he thinks is good. But many vocal retail investors, vocal institutional investors too, and Tesla are like that, but not all of them. The one thing that exists in Tesla is there are people who really don't like Elon Musk who will buy Tesla stock in order to be able to complain about Elon Musk. I wrote this week about the comptroller of the City of New York. New York pension funds own a lot of Tesla stock. This is not because they're huge Elon Musk fans. Some of it is because they're sort of indexy. But also you could just do it to be like, I'll keep an eye on that Elon Musk character. I'll own some of his stock. And so the comptroller sent a letter to the legal department of the pension fund saying we should sue Elon Musk because he is distracted by his role in the government and he is advocating policies that are bad for Tesla. And you say Tesla's in the herd locker. It's because there's been boycotts and, and stuff because people don't like Elon.

[Katie Greifeld]

That's one part of it.

[Matt Levine]

But yeah, yeah, sure, right, right.

[Katie Greifeld]

They had some pretty ugly delivery numbers.

[Matt Levine]

Which I think some people, including the comptrollerist City of New York, would say is in part due to slackening demand because people are mad at Elon Musk's politics. Right.

[Katie Greifeld]

I'm also anti EV and I think that, I don't know, they've reached their addressable market on the side.

[Matt Levine]

But like, if you think about the people who are like, in the addressable market, like, people are like, I love an ev and the people who are like, I also love far right politics. There's some disjunction there anyway, though. So the New York might sue for securities fraud for doge, which is a real Everything is securities fraud. But anyway, my point is only that Tesla, if it were to merge with xai, there would be all sorts of lawsuits that you don't have when it's all private companies.

[Katie Greifeld]

That's true. Well, I guess it would make more sense with SpaceX since they both make things that go fast, but that's a gross oversimplification.

[Matt Levine]

There was that time, I think about it all the time, that Elon Musk tweeted that the next Tesla model would have rocket boosters and be able to fly. And there were articles that were like, how feasible is this? It's just like CEO of a public company saying this stuff. And you know, this is like seven years ago.

[Katie Greifeld]

Did he mean it back when things mattered back then?

[Matt Levine]

Well, no. No.

[Katie Greifeld]

A little bit. Seven years ago. What? 29?

[Matt Levine]

I actually don't know.

[Katie Greifeld]

2018?

[Matt Levine]

It might have been any number of years ago.

[Katie Greifeld]

It's more than 3 and less than 15 pre pandemic.

[Matt Levine]

Yeah, that seems right.

[Katie Greifeld]

That's how I think about things.

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[Intuit Representative]

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[Matt Levine]

Should we talk about substitute teachers?

[Katie Greifeld]

We absolutely should. Have you seen lately what substitute teachers in Maryland are making $7 million? $7 million. Geez Louise. What are we doing?

[Matt Levine]

Yeah, so there's this story about a Maryland state audit of the Prince George's county school system that found various administrative errors, sloppiness. And the one that I was drawn to is that a substitute teacher taught for like three days. And they entered this teacher's information into the system to send them a check for their three days of work. And they put the teacher's ID number into the hours worked field and the ID number had more digits than you want in the hours worked field. And so they sent the person a check for $7 million. And they noticed that 50 days later and asked for it back. And the teacher gave it back. And I just liked to imagine what this person did. I keep saying this person. I don't know the gender of the teacher. I imagine what the, what the teacher did in those 50 days. And so did my readers. A lot of emails about this. Most of were to the effect of, you take that money, you put it in a money market fund. 50 days later when they ask for the money back, you give it back and you keep the 30 to $50,000, depending on exactly how you count the tens of thousands of dollars of interest is yours to keep. You're briefly the owner of $7 million, but you can collect interest on $7 million and it's a meaningful amount of money.

[Katie Greifeld]

Absolutely.

[Matt Levine]

That's the most reasonable thing that you can do with it. The other thing that someone sent me was like, you should go to a trading firm. This is someone who works at a trading firm. He's like, you should go to an insurance company or trading firm and buy insurance on this. You should be like, I will give you, this person said $3.5 million. I'll give you $3.5 million. And if they come to me for the money back, you give them $7 million. And if they don't, you keep the $3.5 million. So you're paying an insurance premium for. Are they going to ask you for the money back? Now? I don't think any trading firm would do that at 50% odds, but you could give them, like $6.8 million, and someone might take that trade, and then you keep the 200,000. You know, there's trades you can do, maybe.

[Katie Greifeld]

I would love to know what this person actually did, though. I don't think that we can get this person on the podcast it in.

[Matt Levine]

Their checking account for.

[Katie Greifeld]

Are you sure?

[Matt Levine]

No, I'm not sure.

[Katie Greifeld]

I mean, this is the whole point of what we're reading. But you are magic $7 million. You're just an ordinary person. You just leave it in your checking account.

[Matt Levine]

You weren't magicked it, you were mistakenly paid it.

[Katie Greifeld]

Yeah.

[Matt Levine]

Now, there's a range of things you can do. You can call the school system and be like, you mistakenly paid me $7 million. Teachers seems not to have done that. There is a number where I would do that. You know, if I was accidentally paid, you know, an extra $200, I would probably call.

[Katie Greifeld]

Really?

[Matt Levine]

I don't know. I mean, it depends.

[Katie Greifeld]

But yeah, I don't think I would.

[Matt Levine]

Have noticed if I accidentally paid an amount that I noticed. But that would not materially change my life. Not like really materially changed my life. I'd probably call and be like, hey, I'm a nice person. Let's sort this error out. But at $7 million, you're like, let's see where this goes. Right.

[Katie Greifeld]

See, I'm the exact opposite of you. If it was. It's hard to do this without talking about numbers. If it was $7 million, I would probably call, because that is so egregiously in error. There's like, no way I'm going to be able to keep this if it was far less than that. Not enough to change my life, but enough that I could.

[Matt Levine]

You might just buy a horse. They're fine.

[Katie Greifeld]

If it was enough to buy one horse worth of horses, a young greenbrok horse, I would probably not call about it.

[Matt Levine]

But like that.

[Katie Greifeld]

Would you spend it on the horse? No.

[Matt Levine]

No. But you would, like, the next day go out and buy a horse?

[Katie Greifeld]

Well, I'd have to find the horse first, you know, probably do a few test rides.

[Matt Levine]

But while you're test riding, there's a good chance that they'll ask for the money back.

[Katie Greifeld]

That's true. That's true. I wouldn't spend it immediately, but I would start the process.

[Matt Levine]

The choice Is not like you call and say, hey, there's an error here, or you keep the money forever. There's the vast middle ground of you don't call and you worry, which is what this person did. Right.

[Katie Greifeld]

That's true.

[Matt Levine]

You're not keeping that money.

[Katie Greifeld]

I probably would not spend it immediately in any situation, but I'm not really an impulse buyer.

[Matt Levine]

My favorite reader email about this.

[Katie Greifeld]

Yeah.

[Matt Levine]

Came from someone who worked at a bank and got overpaid. He was mistakenly paid a bonus or something. And it was not $7 million, but it was. I think he was a young person. I don't know. It was tens of thousands of dollars. He consulted an employment lawyer and learned about the time period for latches, which is a legal concept of basically how long do you have to wait before you don't have to worry about it anymore. It's like a statute of limitations for stuff like this. And the lawyer told him it was six years.

[Katie Greifeld]

Wow.

[Matt Levine]

And he waited out the six years.

[Katie Greifeld]

Wow.

[Matt Levine]

And he's like. And at the end, I threw a claim has lapsed party.

[Katie Greifeld]

That's awesome.

[Matt Levine]

Because they didn't ask for the money back.

[Katie Greifeld]

Man, that is a great email.

[Matt Levine]

But I just imagine the mindset of this money has been mistakenly deposited in my account. Let me ask a lawyer. I wrote once about the Citigroup error.

[Katie Greifeld]

Which one?

[Matt Levine]

Yeah, I know, right? When they sent the $900 million to hedge fund that were mad at them and the hedge funds kept it. I wrote about the hedge funds consulting finders keepers lawyers because they did actually bring a claim being like, no, we're allowed to keep the money, but there are finders keepers lawyers out there in the world and you can consult one and be like, you have six years. If you get through six years, you can keep the money. And he did.

[Katie Greifeld]

I would love to have gone to that party. That sounds like a blast.

[Matt Levine]

It's a good party.

[Katie Greifeld]

Yeah. It's a good theme. I love a theme. That's a good one. It's a good theme, man.

[Matt Levine]

It's not, I got a mistaken bonus. It's six years later. They haven't asked for my mistaken bonus back. It's so good.

[Katie Greifeld]

I wonder if he told the bank.

[Matt Levine]

This is not. That's a good point. Probably not. But now they know. I should say, this is not legal advice. I have no idea. What was this?

[Katie Greifeld]

Citigroup City Group.

[Matt Levine]

I know. That'd be too perfect. Citigroup check. 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 Money Stuff podcast is produced by Anna Mazarakis and Moses Andam.

[Katie Greifeld]

Our theme music was composed by Blake.

[Matt Levine]

Maples, Brendan Francis Newnham is our Executive.

[Katie Greifeld]

Producer and 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.

[Thrivent Representative]

Thrivent can help you plan your finances for the people, causes and community you love. What makes Thrivent different financial services and generosity programs are combined to help you build a financial roadmap for the future while also creating opportunities to give back along the way. Visit thrivent.com to learn more. Where Money Means More this episode is.

[Intuit Representative]

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