← Money Stuff: The Podcast
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- [00:00]
Sierra AI Representative
Your customers are important to you, but they won't feel that way if they're messaging a clunky chatbot or waiting on hold.
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Matt Levine
Please hold. Estimated wait time is 25 minutes.
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Sierra AI Representative
Now you can deploy a Sierra AI agent to delight customers and solve tough problems in real time. Always friendly, always helpful, always ready. Visit Sierra AI to learn more. That's Sierra AI. This show is sponsored by Better Help.
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Matt Levine
BetterHelp has been revolutionary in connecting people to mental health services.
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Katie Greifeld
Using Better Help can be as easy.
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Sierra AI Representative
As opening your laptop or your phone.
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Katie Greifeld
And clicking a button and the session begins.
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Matt Levine
Clients are able to choose in what way they would like to communicate with me. Whether video or on the phone or.
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Intuit Representative
Chat texting, BetterHelp is there when you.
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Sierra AI Representative
Need it, and that's what makes all the difference. Visit betterhelp.com to get 10% off your first month. Therapists were compensated Growing your business can.
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Intuit Representative
Come with its challenges, but with the all new Intuit Enterprise suite, you can bring all your tools and data together in one place, making it easier to keep growing without the growing pains. Learn more@intuit.com Enterprise.
- [01:23]
Matt Levine
Bloomberg Audio Studios Podcasts.
- [01:26]
Katie Greifeld
Radio News it's been two weeks since they've heard our scratchy voices. Yeah, I sound pretty good.
- [01:35]
Matt Levine
You do sound pretty good. Yeah, I probably sound mostly like myself, but I have been sick.
- [01:39]
Katie Greifeld
Yeah, you also got a haircut. Not that that matters.
- [01:41]
Matt Levine
No, it's an audio podcast. But no, we took last week off because I was taking my children to a water park. But also I got extremely sick and so I couldn't have recorded anyway. I lost my voice. I was like standing at the water park very quietly saying don't go in there.
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Katie Greifeld
So really it was in the listeners best interests.
- [02:02]
Matt Levine
Was it ever?
- [02:03]
Katie Greifeld
Yeah, so that they didn't have to hear that voice. But we're back now and boy, we have some stuff to talk about.
- [02:13]
Matt Levine
Unconvincing. 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.
- [02:25]
Katie Greifeld
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
- [02:30]
Matt Levine
What is all this stuff we have to talk about today? Katie?
- [02:33]
Katie Greifeld
Okay, we're coming in hot because the first ever private credit ETF has finally launched. We're gonna talk about Bill Ackman's dreams of being a baby Berkshire and then we're going to talk about Infowars and an interesting bid to try and buy it. Private Credit ETF the SPDR SSGA Apollo IG Private Credit ETF. It launched on Thursday.
- [02:58]
Matt Levine
PRIV is the ticker.
- [02:59]
Katie Greifeld
Yes. And I have to say I'm kind of shocked that this launched.
- [03:04]
Matt Levine
You didn't think it would. We've talked about this like more than 15 times on the show, right?
- [03:09]
Katie Greifeld
Yeah. And a lot of people in the industry too are shocked that it launched.
- [03:13]
Matt Levine
Okay, interesting.
- [03:14]
Katie Greifeld
It feels like the.
- [03:15]
Matt Levine
I feel like. Is this partly like when they filed for it, it was like there were a rul and now there are no rules or is it not related to that at all?
- [03:21]
Katie Greifeld
So I was thinking about that. You know, we are in a brave new world. We have a new SEC. This was filed in September 2024. It's launching February 27, 2025. I mean, they didn't make arguments. I don't think that Apollo and State street didn't put any meaningful thought into this.
- [03:39]
Matt Levine
I have no problem. Like I'm not surprised that it launched.
- [03:41]
Katie Greifeld
Tell me why.
- [03:42]
Matt Levine
Because like you could do anything, man. It's an etf. Like why not? Like what's like, why not?
- [03:47]
Katie Greifeld
If this launched in 2024, would you have been surprised?
- [03:51]
Matt Levine
No. I asked about like now that we have no rules, is that what made it. But like I would have thought it was fine in 2024, which is probably why they filed it.
- [03:58]
Katie Greifeld
So there's a lot of question marks about. And we've talked about this too, like how you put securities as a liquid, as private credit into a very public wrapper, what withdrawals look like and whether you could run into some problems there. There's rules that more than 15% of an open ended fund can't be in a liquid securities. Private credit obviously is considered in a liquid security. But this ETF is going to invest 10 to 35% of its holdings in private credit. And the argument that State street and Apollo made was basically that Apollo is going to provide that liquidity. They have this trading desk. They're going to both supply the private credit assets for this fund and they're also going to buy them back. They're contractually obligated to buy them back. So it seems like the SEC agreed with that argument because this thing is trading.
- [04:56]
Matt Levine
I think that argument is basically correct. Right. There's a range of stuff that is, quote, private credit. Right. And one thing that is private credit is business development companies, which are often like middle market direct lending companies that are private credit companies in a public wrapper. Right. Like they provide non bank privately negotiated loans to companies, but they're provided out of a public pool. Of capital. So my understanding is there's some ability to put like, BDC shares into this thing, which is liquid private credit. No problem. Some large percentage of what they're going to do is like Apollo private credit loans that Apollo will make a market in and they will be able to trade with Apollo at that market. And yeah, it solves the problem, right? Because the problem is, you know, you have the possibility of the fund expanding and contracting each day because, like, if more public buyers want to buy, then it'll have to expand. And if you have a very illiquid, hard to source, hard to sell asset, like we've talked about, like private companies where it's like, you know, you can only get so many SpaceX shares if you have that it's hard to expand and contract. But like, if you have Apollo, which has a massive supply of private credit and like, you know, its own balance sheet and its ability to buy some back, then, like, Apollo can be the, like, accordion for the expanding and contracting of the etf. And it seems fine. What's wrong with that?
- [06:19]
Katie Greifeld
Well, let me read you something from Morningstar analyst Brian Moriarty, and I will note that Morningstar tends not to like things that are a little too crazy. Like, they hate what's going on.
- [06:29]
Matt Levine
I love things that are a little too crazy. That's the problem right here. I'm like, yeah, yeah, they are very.
- [06:33]
Katie Greifeld
Spiritually opposed to, you know, funny business. But this is what Moriarty business is, my whole business. Moriarty had to say, Apollo's liquidity facility is subject to a daily limit. And this daily limit remains undefined. It's possible the fund could have to meet way more redemptions in a day than the limit that could force State street to sell more liquid public securities first, potentially leaving the ETF with more liquid private credit instruments as a percentage of assets and increasing the risks of a liquidity crunch. Okay, so I wait, I like this line. When this happens, the portfolio often begins to manage the advisor rather than the other way around.
- [07:12]
Matt Levine
Okay, that's a cool line. I agree with that. I think it's like when they start with like $0 of assets, like it's not a relevant consideration. Right. Like, this is clearly like they're going to see where it goes. Apollo's trading desk has some risk limit. And like, that risk limit is more than adequate to deal with redemptions on the first day when it will clearly be net creating. Right. Like they're not going to have net redemptions for two weeks. Right.
- [07:37]
Katie Greifeld
I suppose.
- [07:38]
Matt Levine
Like if they had net redemptions in the next two weeks, they would be very small because it would be a small fund. But. Right. If this becomes a $20 billion ETF, then there will be material risks of Apollo not being able to absorb all of the private credit if it goes from 20 billion to zero overnight.
- [07:59]
Katie Greifeld
Yeah.
- [08:00]
Matt Levine
My assumption is that everyone's like, wow, that'll be a nice problem to have when we come to it. Right?
- [08:04]
Katie Greifeld
Yeah.
- [08:04]
Matt Levine
But no, I think at modest size, it's like, yeah, this is a fun proof of concept for Apollo and they would trade the paper. They also get to make the price in a not competitive environment. Right. In a world where Apollo thinks we are doing great private credit loans and all of our loans are fantastic and like retail shareholders of the ETF are pulling out, then for Apollo to be like, the mark is 60 cents on the dollar, will buy as much as you want seems fine for them. I don't know.
- [08:37]
Katie Greifeld
Yeah, well, there's skepticism that I've seen the fact that, okay, Apollo is supplying the private credit and it's also contractually obligated to buy it back. I did see some people comparing this to like the fox guarding the hen house. One thing that I think, yeah, but.
- [08:53]
Matt Levine
They'Re creating private credit to sell to the public and they're trying to make money on it. Yeah, it's like, of course. Well, also, what do you think they're.
- [08:59]
Katie Greifeld
Doing in the filing? It also says to sort of, I don't know, ease that worry. The ability to sell the instruments to Apollo is not exclusive. So if State street theoretically found another bid. Yeah. If they found a better bid somewhere else, they wouldn't have to necessarily sell to Apollo.
- [09:14]
Matt Levine
Sure. Great.
- [09:15]
Katie Greifeld
Yeah.
- [09:16]
Matt Levine
No, I mean, look, I mean, like one we've talked about not only in the context of the etf. Right. Like, Apollo is trying to build up a market for private credit. Right. And I think they'd be thrilled to live in a world where when State street wants to sell its private credit, it can get bids from 20 anonymous firms on an electronic platform. Right. Like that's, that's a good world for a private credit originator to live in. But yeah, like, they think they are smart evaluators of private credit and this is a, like, retail place into which to put it. Like, yeah, they're hoping to make money. The other thing I'll say is, like, on this liquidity worry, the thing I always write about private credit is that it's a really good funding model for loans. Right. Like, you are Apollo, you raise money from like, classically insurance companies. Or like, you know, Apollo's case, they own an, they are an insurance company. Right. You raise money from insurance companies and you have this very like long term locked up capital and you use it to make long term, somewhat risky loans that don't trade. Right. And that's a good match of liabilities and assets. Right. Like you are raising long term money to make long term loans. It's a better match of liabilities and assets than like classic bank lending where the banks raise overnight money to make 30 year loans. The private credit model has always struck me as being unusually not runnable. Right. Like you can't usually, I mean you sort of can, but you don't really like redeem your life insurance policy. Right. So like like a theme has like really long term and if like credit gets worse, like no one is clamoring to get their money back. So Athene can kind of ride that out. Athene is Apollo's like captivating. But once you do it in a like instant liquidity retail vehicle, like that changes a little bit. Right? And it's like for the retail vehicle the liquidity is like whatever it's provided by Apollo. But for Apollo it's like you've shifted your funding model so that it went from being like arguably 100% of your funding is from insurance company clients where like it's like permanent funding to a small, but you hope growing percentage of your funding comes from retail investors who can take their money out at any time. And it gets like a little bit more fragile. A little bit more fragile. It's like, you know, I wouldn't worry so much about the fund being able to get its money back out of Apollo. I'd worry a little bit like Apollo like making its funding model a little bit worse. But you can understand why they think it's worth the risk. Because one again, they're starting from nothing. So it's like day one, that risk is very small.
- [11:39]
Katie Greifeld
Yeah.
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Matt Levine
And then two, if it gets really big, then say that's a nice problem to have.
- [11:43]
Katie Greifeld
I cannot wait to see how this is received. I mean day one is Thursday. I mean I can't wait to see what it'll look like on Monday, what it'll look like in two weeks, two months, et cetera, what the reception will be like.
- [11:55]
Matt Levine
It's not that private credit.
- [11:57]
Katie Greifeld
Yeah, it sounds like private credit.
- [11:59]
Matt Levine
Private credit is like this hot asset class in some sense. But it's also, it's like, yeah, you get like, you know, slightly better than bond or you know like. Yeah, it's not like SpaceX. Right. It's not like a lottery ticket. Right. It's a. Yeah. It's like a slightly higher fixed income investment.
- [12:13]
Katie Greifeld
That's true. But still, I mean, it feels like there's been so much anticipation for this. Certainly. I mean, you think about the big splash that this filing made at the time. Maybe that was just talked about on this podcast. We talked about it.
- [12:23]
Matt Levine
I was going to say that was.
- [12:24]
Katie Greifeld
Mostly in your world, as discussed on the Money Stuff podcast.
- [12:28]
Matt Levine
I was not like, hearing on the subway, people being like, oh, my gosh, did you see there's a private credit ETF coming?
- [12:34]
Katie Greifeld
Well, this will be a good reality check to see whether this sort of lives up to the hype, at least in the ETF world. It's a big moment both for the ETF world, but also for just the world of private assets.
- [12:47]
Matt Levine
Oh, yeah. I mean, I do think, and we've talked about this too, like, the idea that private credit won't trade an electronic platform, like, it's just like a weird, like, blip in time. Like, there's no reason for that. Like, in five years, will there be, like, big electronic trading platforms for private credit loans? Like, sure, why not? It's fine.
- [13:06]
Katie Greifeld
Yeah. Also, if we stretch our imaginations, and this is something that I haven't really had time to do yet, but the fact that this is a partnership between, you know, an ETF firm, established ETF firm, State street with Apollo, which is acting as liquidity provider, you could dream up how that model evolves. Some people, including Morningstar, have pointed to we'll probably see more of these liquidity partnerships in the future.
- [13:31]
Matt Levine
Yeah. Although, like, that is also possibly transitional. Right. And like, in a world where, like, there is easy liquid trading of private credit, if you're an ETF provider and you're looking to start a private credit etf, you'll partner with like Jane street or something, which is like a liquidity provider, not an originator. Right. But like, for now, the originators are the, are the liquidity providers and. Right. Every other originator is probably going to get into having an ETF.
- [13:58]
Katie Greifeld
Yeah. Also, the fee, 70 basis points, is.
- [14:02]
Matt Levine
That high or low?
- [14:03]
Katie Greifeld
I mean, it's not low, but considering the. I don't know what the cost for a retail investor, like an average individual investor to get access to private credit now without an ETF would cost. I will say there's some, like, leverage single stock ETFs that cost more than 1%.
- [14:21]
Matt Levine
Sure.
- [14:21]
Katie Greifeld
So this is pretty, I mean, 70.
- [14:23]
Matt Levine
Basis points for A credit investment seems.
- [14:24]
Katie Greifeld
Fine for a brand new product. A brand new category, actively managed. Obviously 70 basis points is fairly cheap, all things considered.
- [14:33]
Matt Levine
Yeah, this is not their business, you know. Yeah, they got a lot going on. This is a fascinating proof of concept for like, you know, Apollo's push to like be your one stop retirement provider. Right?
- [14:43]
Katie Greifeld
Yeah.
- [14:44]
Matt Levine
And you know, you don't need to make a lot of money on this.
- [14:47]
Katie Greifeld
One product in the first week, but maybe they will.
- [14:55]
Sierra AI Representative
Your customers are important to you, but they won't feel that way if they're stuck messaging a clunky chatbot or waiting on hold for a representative.
- [15:06]
Matt Levine
Estimated wait time is 25 minutes.
- [15:13]
Sierra AI Representative
With Sierra, your company can deploy a branded AI agent that engages and delights customers anytime, anywhere. Sierra agents pick up every phone call and personalize every interaction. No more menus, no more hold times. And if you have an issue, Sierra's AI agents solve tough problems, whether they're helping your customer pick out the perfect mattress, update a subscription plan, or even troubleshoot a new device. Always friendly, always helpful, always ready, always visit Sierra AI to learn more. That's Sierra AI.
- [15:55]
Intuit Representative
This episode is brought to you by Intuit Enterprise Suite. Helping your business grow to the next level. To all the CFOs and business leaders listening right now. Does it ever feel like the bigger your company gets, the bigger the headaches become due to disconnected tools? Growth is exciting, but it often means more scattered data, limited tools and endless manual tasks that pull you and your team away from what really matters driving the business forward. Meet the all new Intuit Enterprise Suite. An AI powered solution that brings all your business tools and data together. Which means less manual work to run the business and faster real time and actionable insights in one place. It's one smart system that takes care of your financials, payroll, marketing and payments processing all in one solution. Learn more@intuit.com Enterprise that's intuit.com Enterprise Money Movement Services by Intuit Payments, Inc.
- [16:53]
Microsoft Representative
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- [18:03]
Katie Greifeld
Okay. Bill Ackman, friend of the show Bill Ackman making some interesting moves, trying to reinvent himself. Sort of. Sort of.
- [18:13]
Matt Levine
Only sort of. It's so hard to understand what a hedge fund is like. When I was like growing up in finance, like the hedge fund managers were guys like Bill Ackman who like ran kind of concentrated equity ish, activist ish, got on the news, went on tv and now a hedge fund is more back to the classical hedged notion where it's like these much more multi strategy, multi manager factor neutral kind of quantity funds. But back when the kings of the hedge fund world were like the Bill Ackmans, it was like a lot of them kind of position themselves as successors to Warren Buffett, who was a hedge fund manager for a little while. It's like you build an investment partnership where you make concentrated long term bets on stocks you really like and you're smart and have a public Persona and go on TV and that's your business. And you are self consciously a Graham and Dot value investor. And your investing framework is kind of similar to Warren Buffett's. I think that one thing that Bill Ackman in particular has learned is that in addition to being good at Graham and Dodd and being folksy, Warren Buffett has a structural advantage like he runs a company and that's more useful to him than running a hedge fund. And in particular it has seemed to me that Bill Ackman really wants to have a thing that is his investment vehicle that trades at a premium and that people are like willing to pay up to have money managed by Bill Ackman. And it has been funny over the last year or two watching him like fail to achieve that with like his closed end fund ipo.
- [19:52]
Katie Greifeld
Also heavily discussed on this podcast.
- [19:53]
Matt Levine
Heavily discussed on this podcast. And now what he wants to do, he's like, start over. We're going to do Warren Buffett, we're going to do Berkshire Hathaway. What we're going to do is we're going to buy a small, weird, random company and turn it into a gigantic investment vehicle for like Bill Ackman, making some public Stock investments, making some 100% acquisitions of companies, just being Warren Buffett, just being an acquirer and an investor and a public figure. And I say like buy some random company, but it's not a random company. It's like Howard Hughes, which is a company that he has a long history of. It's like spun out of dtr, which is one of his most successful investments. He was the chairman of the company for a while and Pershing Square currently owns like 30 something percent of it. And what he wants to do now is one, buy a little more, partly to get his stake up and partly to just inject money into the company. And then two, like become the head of the company and let the people who are currently running its real estate business be like one little segment of the company. And then let him and his investing team make investments for the company, make acquisitions for the company so that it can become a Berkshire, so that in 20 years you'll think of Howard Hughes as a, you know, insurance and tech and whatever company. And its real estate will be a interesting historical side note. Although it's also funny that like it's called Howard Hughes, which is like a guy's name and it's not Bill Hackman's name.
- [21:15]
Katie Greifeld
Yeah, I was, I was googling about it and I kept getting the guy himself. It's not what I wanted. Yeah, it's a $3.9 billion market cap company. It's heavily involved in real estate, including the seaport for our Manhattan natives here. You know what's funny is that they reported earnings today, which is Thursday when we're recording this. And I was reading through the earnings call and they did make a note that the special committee of our board of directors is responsible for evaluating Pershing Square's most recent scheduled 13D filing and the associated proposed transactions. Thus they will not answer any questions.
- [21:51]
Matt Levine
Being really cagey about it. I like, I love it.
- [21:53]
Katie Greifeld
Well, they got a question about it. Obviously it did take a few questions to get there, but John Kim from BMO Capital Markets was the brave, brave analyst who spoke up and said, I was wondering if you could provide any sense at all as far as timing of when there will be an update. And I just wanted to confirm the transaction needs board approval and not shareholder approval to move forward. CEO David Riley said that the Pershing Square 13 dean filing is between the special committee and Pershing Square. And I'm going to leave any comments on timing or otherwise for them to opine on. So, yes, scant detail, actually.
- [22:27]
Matt Levine
In my prior life, knowing Whether that transaction buying like 10ish percent of the company when you're already a 30ish percent holder. Knowing whether that transaction required shareholder approval was like a surprisingly large part of my prior life, but I've never gotten. I'll let someone else figure that out.
- [22:43]
Katie Greifeld
God, that would have been so good to bring to this podcast.
- [22:46]
Matt Levine
No, it's a shockingly boring subject.
- [22:49]
Katie Greifeld
That's what we aim for here at the Money Stuff podcast. Shockingly boring. I have some questions. 1. So it's a $3.9 billion company. It's a good company. He has a long history with it. Why not just take Pershing Square public? Wasn't.
- [23:06]
Matt Levine
No, no, because. Because you have to have a regular company.
- [23:09]
Katie Greifeld
Okay.
- [23:10]
Matt Levine
It's a real estate company, so it's like not really a regular.
- [23:11]
Katie Greifeld
Can you just take your hedge fund public and be.
- [23:14]
Matt Levine
This is what. This is what he tried. He tried. I mean, not the hedge fund. He tried to take a closed end fund public.
- [23:18]
Katie Greifeld
Yeah.
- [23:18]
Matt Levine
But it turns out that if you just have a closed end fund, it won't trade at a premium and then like all of the magic goes away.
- [23:23]
Katie Greifeld
I thought that the closed end fund was launching as a step in taking Pershing Square itself public.
- [23:30]
Matt Levine
Yeah, but Pershing Square itself public is not quite the same thing. Because when you take a hedge fund company public, you're capitalizing a fee stream. And he doesn't want to sell a fee stream. He wants to sell the pot of investments at a premium. It's now breaking my brain a little bit to think about taking a hedge fund company public and then in that hedge fund company buying assets. But it just seems like a weird sort of cannibalism or something.
- [23:56]
Katie Greifeld
Yeah, okay. Matt doesn't like it.
- [23:58]
Matt Levine
I don't like it. I don't know why, but to me the question is like, okay, you like Howard hughes, but there's 3,000 companies out there. Just buy any one of them. It doesn't matter. We've talked about Brad Jacobs and QXO buying just the most random software company to build his logistics empire out of it. It doesn't matter. Just get rid of the software company and then you have your clean shell to do a logistics empire. I wrote once about GameStop. In addition to being GameStop, it's like controlled by Ryan Cohen, who's the CEO, and at some point they put in an announcement being like he's going to be able to make equity investments with the company Treasury. It's like you can build Berkshire Hathaway out of GameStop and you should, because it will trade at a premium and people will love it. Right. But it's like that. Ryan Cohen already has that one. But like, Bill Ackman could buy, you know, all sorts of weird companies and turn them into Berkshire Hathaway.
- [24:48]
Katie Greifeld
Yeah. I mean, you did write in your column that someone suggested he buy Herbalife.
- [24:52]
Matt Levine
Yeah.
- [24:53]
Katie Greifeld
That would have been pretty good. I would love to. I mean, I know that I can't. That this is the matter of the special committee of the board of directors. But I would love to know how Howard Hughes feels about this.
- [25:06]
Matt Levine
Right. It's weird because you're like, here you are trying to run your business.
- [25:09]
Katie Greifeld
Yeah. Trying to do your earnings call.
- [25:11]
Matt Levine
It's like, no, we want to build.
- [25:13]
Katie Greifeld
Yeah.
- [25:14]
Matt Levine
Totally unrelated hedge fund. Like, if you're like running the textile mill that is Berkshire Hathaway, and like Warren Buffett comes in and says, I'm going to build a business empire and like, get rid of the textiles. I don't know. It's like a mixed bag.
- [25:27]
Katie Greifeld
Yeah.
- [25:28]
Matt Levine
It's like, probably good for shareholders, but it's kind of weird.
- [25:30]
Katie Greifeld
Yeah. I wonder if this goes through, whether or not Bill Ackman would tweet less, but.
- [25:34]
Matt Levine
No.
- [25:35]
Katie Greifeld
You think so? You think he'd. Maybe he'd tweet more.
- [25:38]
Matt Levine
Oh, yeah. More.
- [25:39]
Katie Greifeld
Wow. He's.
- [25:40]
Matt Levine
Because you get like. Well, he's got the thing you're aiming to do.
- [25:44]
Katie Greifeld
Interested in it.
- [25:44]
Matt Levine
I suppose the thing you're aiming to do is like, make investments and like, be accretive to the value both of your investments and of like your vehicle, Howard Hughes. By like, people being like, ooh. You know, like, you, like, Warren Buffett had the ability for a long time to like, go to a company and be like, I will put a billion dollars into your company at like a 30% discount to your stock price. And the stock would double. And so it was like worth it to the company. And like, Warren Buffett would make a lot of money off of it. Right. Like, he had like the self fulfilling prophecy ability. Right. Where he could invest money in a company and just that investment would make the company go up. And so he could like monetize that. And like, Bill Ackman wants that too. And the way Bill Ackman gets it is like one, by, like making good investments so that people like his track record. But then two, by tweeting a lot. Right.
- [26:29]
Katie Greifeld
Well, let me. Let me rephrase that. I wonder if he will tweet about different things. I don't know.
- [26:34]
Matt Levine
I don't know either. I think that he thinks that this is working.
- [26:38]
Katie Greifeld
Maybe it is. I will say, it's interesting to me reading this column and then preparing for this podcast. You know, I grew up just with Warren Buffett as Warren Buffett, and I haven't really thought deeply about his model before, how he did just buy a random company and start doing this.
- [26:55]
Matt Levine
Yeah, it's similar. Like he was running a hedge fund and like, they made an investment in this textile company and he got mad at them. I forget why he got mad at them. Yeah, they didn't pay. There's some. Like he had some fight with them and he's like, I'm just going to buy some stock. And they bought enough stock that he controlled the company.
- [27:11]
Katie Greifeld
Yeah.
- [27:12]
Matt Levine
And then he's like, well, all right, I'm going to take the treasury of this company and start making investments with it. And then, like, he became Berkshire Hathaway.
- [27:19]
Katie Greifeld
Well, I don't know if I find it surprising or not that there haven't been more high profile, successful Berkshire Hathaway types. I mean, we just talked about Brad Jacobs, for example, who's pretty well known. And I don't know, maybe Bill Ackman will be the next Berkshire Hathaway.
- [27:33]
Matt Levine
But I will say that, like, Warren Buffett was kind of early to running a hedge fund. And in the 90s, and certainly the 2000s and 2010s and 2000s, if you were, like, good at making investment decisions, the idea that you would, like, take over a public company and invest its treasury and pay yourself, you know, $100,000 a year as Buffett sort of nominally gets paid at Berkshire, and, like, get all of your returns from the increase in the fundamental value of the company. Like, people found a better model.
- [28:02]
Katie Greifeld
Yeah.
- [28:03]
Matt Levine
You can run a hedge fund, you can charge 2 and 20, and you can make more exotic investments and have maybe better tax treatment and get paid hundreds of millions of dollars a year. So the idea of people wanting to follow exactly the Buffett path, that kind of attenuated. And why does Ackman want to do it? Some of it is just like. Like he's made enough money and it's like sort of like a legacy slash experimentation kind of thing.
- [28:32]
Katie Greifeld
Yeah. I don't know. The man, obviously not Will. It just feels like he wants to be in control of some publicly traded entity. I don't know.
- [28:40]
Matt Levine
I think that's right. I think that he's had a good run as being a guy who's mainly a manager of private hedge funds and has made a lot of money doing it. And now it's like this is somehow more of a satisfying public facing thing.
- [28:53]
Katie Greifeld
Yeah. I mean, it's hard to understand not being incentivized necessarily by money, but I suppose when you have, you get to a point, man. Yeah.
- [29:02]
Matt Levine
Also like, I'm sure the money in.
- [29:03]
Katie Greifeld
This, like, he'll be fine.
- [29:05]
Matt Levine
Yeah. Okay.
- [29:13]
Sierra AI Representative
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- [29:23]
Matt Levine
Estimated wait time is 25 minutes.
- [29:31]
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- [30:13]
Intuit Representative
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- [31:11]
Microsoft Representative
Licensed by NYDFS the world is built on code. From the apps we use every day to the systems powering industries. Developers like you are the architects of tomorrow. But let's be real. The road to innovation can get a little tricky. You need the right tools to move fast, but you also need a community to help you go further. That's where Microsoft comes in. Microsoft has the tools to help you move at lightning speed, like GitHub, Copilot VS Code and a ton of AI resources to keep you on the cutting edge. But here's the best part. You can build with confidence, knowing that Microsoft security and compliance are already taken care of. No more worrying about vulnerabilities or threats while you focus on Your craft. And with Azure AI Foundry, you can build your way. The future is yours to build, no strings attached. From ready to code tools to full flexibility, it's all in one place. The future's in your hands. So learn more@developer.Microsoft.com AI all right, Matt.
- [32:23]
Katie Greifeld
We decided on this topic 10 minutes ago. Yeah, pretty much. So I'm a little bit unprepared, but I'm so excited to hear you. Tell me about it.
- [32:32]
Matt Levine
Infowars. We talked once about Infowars before we did, when the Onion was going to buy them, or rather they wanted to. Global Tetrahedron was going to buy them. So Global Tetrahedon, which is like the trade name of the Onion, was going to buy Infowars out of bankruptcy. It's like Alex Jones, the Infowars guy, is in bankruptcy because he spread conspiracy theories and hoaxes about the Sandy Hook Elementary School massacre. And the families of the victims sued him and got like a billion dollars of judgments. And so now he's in bankruptcy because he doesn't have a billion dollars. And his main asset is Infowars, his like, you know, YouTube platform. And the bankruptcy court has been trying to sell that to raise money to give to these essentially Sandy Hook victim families. And we talked about it because the Onion had bid to buy it. And the idea was that the Onion would pay like a little bit of cash for it, but mostly they would run it on behalf of the Sandy Hook families, essentially both economically and also like to not promote right wing conspiracy theories, but to instead promote gun control. Yeah, so that fell through for what I thought were kind of technical administrative reasons, but like, it seems to have really fallen through. And when we talked about it, I was like, yeah, the Onion can just come back and bid again. But didn't seem to work out that way. So now like the only bidders are Alex Jones himself in a fake mustache, you know.
- [33:53]
Katie Greifeld
Fuwak.
- [33:54]
Matt Levine
Yeah, there's a thing called Fu act that's basically like some backer of Alex Jones will give him money to buy his company back. And this thing called wow. AI that's like a Puerto Rican artificial intelligence, like some sort of thing, you know. But its bid is some cash and a meme coin. It has launched a meme coin called wars that it wants to use to pay for Infowars. And the idea is that it has like this meme coin. All meme coins. It's like they issue like 10% of the meme coin and they're like, we've reserved 50% for some weird purpose. So this one, they reserve 51% for the bankruptcy state. They're going to give it to the bankruptcy estate. It's going to be part of their bid.
- [34:34]
Katie Greifeld
Yeah.
- [34:35]
Matt Levine
So like the creditors, basically, the Sandy Hook families will end up owning this meme coin and they would buy the site and then the holders of the meme coin could vote on what they would do with the site with I guess the choices be like, let Alex Jones run it or like, let the Onion run it.
- [34:48]
Katie Greifeld
Yeah.
- [34:48]
Matt Levine
And that's their bid and that's the plan.
- [34:52]
Katie Greifeld
So you seem to write that this is pretty clever.
- [34:56]
Matt Levine
You got to read the whole sentence which says, you know how much I hate to say this because, like, I hate meme coins.
- [35:01]
Katie Greifeld
Yeah.
- [35:02]
Matt Levine
And the thing that is happening here at its core is like someone thought, hey, it would be good to like pre sell stock in infowars. Like, it would be good to try to buy infowars and like raise the money to do it from the public. And like, that would give us the money to do it. And then the public could have a say in how we run Infowars. But you can't do that because, like, there are securities laws, but now there are no securities laws as long as you call it a token. And so what they have done here is they've pre sold stock in like their new infowars company and called it a meme coin. And it has some like, very clever properties. Right. You can create a dynamic where people are going to bid up the price because some people want it to be run one way, some people want it to rerun another way. And so there's some auction dynamic where people will pay more to get the outcome they want. And you've sold like a relatively small number of the tokens and you've reserved a large number of the tokens. So you can say, oh, the fully diluted value of this thing is very large because, like the small number of tokens trade. Trade at like a relatively high price. And so it's, you know, it's not like Trump coin, but, you know, I looked this morning and like the fully diluted value is like $23 million, which is like implies $11 million for the Sandy Hook victims, which is more than they'd get from Fuak. It's not necessarily a real value. Right. Because it's like it's a thinly traded meme coin. They're like, the mean thing about meme coins is like, their value disappears overnight, but still. So like, it creates like a lot of paper value and it Creates it in a somewhat clever way and it just gets around the securities laws because everyone's decided securities laws don't apply to crypto anymore.
- [36:32]
Katie Greifeld
Yeah, so.
- [36:33]
Matt Levine
So it's clever, but not in a way that like, I like.
- [36:35]
Katie Greifeld
Yeah, yeah. Like gotta give it to him. But do you have to?
- [36:39]
Matt Levine
You do kind of.
- [36:40]
Katie Greifeld
But yeah, kind of have to give it to him. A question that I have a statement. So explain this to me one more time. So the bid is for $3.5 million in cash plus 51% of the total maximum supply of the War's Meme coin. So Infowars would control the Meme coin and then the remaining.
- [37:00]
Matt Levine
No, the Meme coin. The Meme Coin is like, I think like 10% of the meme Coin has been like, just sold.
- [37:05]
Katie Greifeld
Yeah.
- [37:05]
Matt Levine
It's like issued to the public and you can trade it. Right. So that creates a price. Right. Like there's trading. Anyone who wants to can own it. Creates a price. They can, you know, in theory vote on whatever they. If they end up buying Infowars, then the holders of the token can vote. So like 10% or so is public and then like some percentage of it has been reserved for like the guy doing this. Right. Wow. AI. The company. Right. And then 51% has been reserved for the bid. The bid would be in exchange for Infowars, we will give the bankruptcy estate $3.5 million in cash and 51% of this token. And then the bankruptcy estate, meaning the creditors, meaning the Sandia parents would get those tokens and there's like some lockup at when they could sell them. But the idea is the bankruptcy state, the creditors would, let's say, share in the economics of future Infowars by owning this Meme Coin. Now when I say share in the economics, I'm like rolling my eyes because.
- [38:04]
Katie Greifeld
Matt actually said that with a completely straight face. I did not even.
- [38:07]
Matt Levine
I was rolling my eyes on the inside. Yeah, you can't see me rolling my eyes and neither can Katie. But the whole thing about Meme coins is that a Meme coin is like, eh, it's like linked to the value of this meme, but like not through any mechanism. Right. It's just like. Yeah, maybe it is. Right? Like, it's just like if people feel like it's linked to the value of the meme, then it's linked to the value of the meme, but it has no like, ownership of the meme. Right. And so like here the Meme Coin does not entitle you to cash flows from Infowars. It's just like a meme coin connected to the thing. It's like a weird kind of stock that doesn't convey ownership.
- [38:40]
Katie Greifeld
I was going to say this coin or token or whatever we're calling it has clearer fundamentals than most anything else.
- [38:48]
Matt Levine
Yes. But still no fundamentals. Yeah, I agree with you. Clearer fundamentals than most meme coins, but still none.
- [38:53]
Katie Greifeld
Yeah. You would have an easier time building a case for why this has fundamentals though, than.
- [38:57]
Matt Levine
Yeah, because it gives you voting rights over a thing that you care about. Right. Like, I mean, you don't have to care about it, but like the people trading it probably care about it.
- [39:04]
Katie Greifeld
Right.
- [39:05]
Matt Levine
It gives you voting rights about what will happen with this, like, culturally salient and controversial property.
- [39:11]
Katie Greifeld
Right.
- [39:11]
Matt Levine
So it does have fundamentals, but it doesn't have cash flows. And so they can say with a somewhat straight face, it's not stock, it's not a security, it's not an investment. And by the way, if their bid fails, it just goes away.
- [39:24]
Katie Greifeld
Yeah, that's what I mean.
- [39:25]
Matt Levine
Nothing happens.
- [39:25]
Katie Greifeld
I was going to ask. So if you care about this, you would buy this coin now in hopes of having voting rights in the future?
- [39:32]
Matt Levine
Sure.
- [39:32]
Katie Greifeld
If this doesn't work, then it doesn't work. All right, well, you tried. Yeah. That's interesting.
- [39:37]
Matt Levine
It's not like you would imagine doing this 10 years ago, going to an investment bank and trying to build a structure that allowed you to pre fund your bid and where it's like, oh, you put the money in escrow and then you give it back if the bid fails. There's none of that here. It's just like a meme point. If it fails, it goes to zero. It doesn't matter.
- [39:55]
Katie Greifeld
How do you think the bankruptcy judge is reading this?
- [39:58]
Matt Levine
I assume he's rolling his eyes on the inside too. I don't really know. I don't understand the process there because he's sort of given up on doing an auction. But the meme coin guy said to, I think the Wall Street Journal, he said, I put in a $3.5 million cash component to the bid, which was what Fuak offered at one point is I put in that cash component so that people wouldn't like take me seriously. Because I think if you just showed up bidding a meme coin, people would not take you seriously at all. And I don't think that.
- [40:28]
Katie Greifeld
Would you still have written about it?
- [40:29]
Matt Levine
I don't know that I would have taken it seriously.
- [40:31]
Katie Greifeld
Wow.
- [40:32]
Matt Levine
Yeah.
- [40:32]
Katie Greifeld
Yeah, there you have it.
- [40:34]
Matt Levine
But. Right. I don't know how the tank strategy is going to take it. What I wrote on Thursday, like this is gonna be a thing. Right. Like, I feel so stupid saying this, but like this is a good financing mechanism for this situation. Right. For like the situation where you're like bidding in bankruptcy and you don't know if you're gonna win and you're bidding for a relatively small, controversial online like right wing meme property using a meme coin to fund that, like kind of. It's like, it's like fit for purpose.
- [41:02]
Katie Greifeld
Yeah.
- [41:02]
Matt Levine
And so you probably aren't gonna see like a ton of situations where that applies. But this won't be the last one. It's Brave new world, you know, like the Red Lobster bankruptcy. Someone could have come in with a meme coin. Like, you know, like it's a thing.
- [41:15]
Katie Greifeld
God, if only they had been able to hold out for another year.
- [41:21]
Matt Levine
Shrimp coin.
- [41:23]
Katie Greifeld
Shrimped to death.
- [41:27]
Matt Levine
And that was the Money Stuff Podcast. I'm Matt Levine.
- [41:30]
Katie Greifeld
And I'm Katie Greifeld.
- [41:31]
Matt Levine
You can find my work by subscribing to the Money stuff newsletter on Bloomberg.com.
- [41:36]
Katie Greifeld
And you can find me on Bloomberg TV every day on Open Interest between 9 to 11am Eastern.
- [41:41]
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.
- [41:48]
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.
- [41:54]
Matt Levine
The Money Stuff Podcast is produced by Anna Mazarakis and Moses Onbound.
- [41:58]
Katie Greifeld
Our theme music was composed by Blake.
- [42:00]
Matt Levine
Brendan Francis Newnham is our executive producer.
- [42:03]
Katie Greifeld
And Sage Bauman is Bloomberg's head of podcasts.
- [42:06]
Matt Levine
Thanks for listening to the Money Stuff Podcast. We'll be back next week with more stuff.