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

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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