Impaled on the Obelisk

Summary

Money Stuff: The Podcast

Episode: "Impaled on the Obelisk"

Date: February 6, 2026
Host: Matt Levine
Co-host: Katie Greifeld

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Overview

This episode sees Matt Levine and Katie Greifeld dive into a very “Money Stuff” week: from Elon Musk’s rapid-fire corporate maneuverings merging SpaceX with XAI, to the oddity of data centers in space, cascading effects in private markets, the state of "digital asset treasury" activism, and looming existential questions about AI's impact on the software-as-a-service (SaaS) economy. With their hallmark deadpan and irreverent banter, they explore how these headline stories intersect with market structure, corporate governance, and the occasionally bizarre motivations driving financial innovation.

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Key Discussion Points

1. Adventures On the JP Morgan Rooftop

Timestamps: 00:47–02:11

• The show opens with Matt and Katie swapping stories about recent Wall Street rooftop escapades, specifically the obelisk atop JP Morgan’s building (with much joking about King Kong, free soloing, and saluting New Jersey).
• Sets a light, playful tone and alludes to the episode’s title.

Quote:
"I wanted to, like, free solo it. Yeah, but it was so cold."
—Matt Levine (01:04)

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2. Musk's Lightning-Fast SpaceX-XAI Merger

Timestamps: 02:35–06:42

• The Deal’s Speed and Structure:
  The merger between SpaceX and XAI is characterized as astonishingly fast and idiosyncratic, made possible because Musk controls both companies—negotiating with himself and signing for himself.
• Shareholder Dynamics:
  Even though Musk is not the sole owner, his voting power enables him to bypass dissent—employees or minority shareholders have no real say.
• Regulatory & Legal Angle:
  Details about incorporation in Texas and ways the law there could facilitate muscle-flexing mergers, even if entities were public.
• Valuations:
  Numbers assigned ($1T for SpaceX, $250B for XAI) are largely arbitrary given no cash is changing hands—just allocations of ownership.

Quote:
"This is the thing. I come from the world of public company mergers, where you negotiate for weeks and then six months later it closes. Elon Musk...from a glimmer in his eye to the deal is closed is like, I don't know, what, four days?"
—Matt Levine (02:54)

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3. The Logic (and Absurdity) Behind Space Data Centers

Timestamps: 06:16–10:15

• SpaceX Funding XAI & Data Centers in Space:
  Discussion about mainstream media narratives—SpaceX’s profits not just serving rockets, but funneling into sci-fi ventures such as orbital data centers.
• Skepticism About Space Data Centers:
  Both hosts openly doubt the technological practicality ("Why do they have to go in space? Would the ocean be easier?...How did we land on space?” — Katie, 07:51), but marvel at Musk’s penchant for executing on science fiction dreams.
• Kardashev Scale:
  Matt brings up Musk’s references to harnessing ever-larger energy sources, up to wielding the sun’s energy—a tongue-in-cheek allusion to science fiction and what motivates big Silicon Valley goals.

Notable Moment:
"When you have all the energy of the sun at your disposal, you can, like, travel between galaxies or whatever. God, it sounds so stupid when I said, but Elon Musk's, like, one of his main dreams is to harness all of the energy of the sun."
—Matt Levine (08:26)

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4. SpaceX’s IPO and Index Inclusion

Timestamps: 11:00–13:07

• The hosts explore tactical efforts to alter index fund rules so SpaceX shares can be included in major benchmarks (NASDAQ, S&P) quickly after IPO, moving significant stock to public market holders sooner.
• ETF design quirks: Discussion of the Baron Capital ETF (ticker: RONB), which holds SpaceX shares, how SEC liquidity caps are navigated, and how SpaceX—while technically private—is unusually “liquid.”

Quote:
"It's a private company, but it's pretty liquid. And it makes sense that everyone's paying attention to it."
—Katie Greifeld (12:56)

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5. Closed-End Fund Activism Arrives in Crypto (“DATs”)

Timestamps: 13:56–22:03

• Closed-End Funds Refresher:
  The mechanics of closed-end fund activism, notable players (shout-out to Boaz Weinstein), and the strategy of buying discounted funds to liquidate or extract value.
• DATs (“Digital Asset Treasuries”):
  These are crypto-rich companies structurally similar to closed-end funds, now trading below the value of their holdings. Activists are circling, seeking to unlock the value gap.
• Lessons from Grayscale:
  Recalling grievances over trust discounts and the journey to ETF conversion, setting up expectations for similar activist drama among DATs.
• Implications of Bitcoin’s Volatility:
  With bitcoin’s recent plunge, DAT discounts are widening; buybacks or asset sales could further sway bitcoin’s unstable price, amplifying market volatility.

Notable Moment:
"If I pay $0.80, I can get a dollar worth of bitcoin. And the only problem is I got to crack open the pot and take out the bitcoin."
—Matt Levine (16:09)

• Potential for Activist Raids:
  Katie muses about Boaz Weinstein entering DAT activism—it’s the same trade as traditional closed-end fund activism, but “the rhetoric is different when you’re taking on a DAT CEO.” (21:39)

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6. The "Death of Software": AI’s Threat to SaaS, Private Equity, and Credit Markets

Timestamps: 22:03–28:29

• SaaS as the New Risky Asset:
  Once considered rock-solid investments, recurring revenue SaaS companies are suddenly viewed as vulnerable to rapid AI progress—especially as AI tools duplicate formerly value-add software.
• Private Equity & Credit Exposure:
  The episode details how private equity and private credit—especially business development companies (BDCs)—are heavily weighted toward SaaS, often under the impression these were conservative cash-flow businesses.
• Shifting Market Sentiment:
  This week saw a minor panic, with BDC stocks selling off and portfolio risk under fresh scrutiny. The hosts caution against overreaction but identify real longer-term credit risk if AI continues eating into SaaS revenues.
• Index Classification:
  Software companies classified by use (e.g., in healthcare) may hide the true extent of exposure in credit portfolios.

Memorable Quotes:
"Turns out that a lot of business to business software is a thing that I can either replicate, you know, individually for each company or just...do the functions of."
—Matt Levine (22:18)

"Private credit is structurally a pretty safe business...But at the end of the day, the loans either pay off or they don't, right?"
—Matt Levine (27:58)

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Notable Quotes Sourced by Timestamp

• [01:04] "I wanted to, like, free solo it. Yeah, but it was so cold." ― Matt Levine
• [02:54] "Elon Musk...from a glimmer in his eye to the deal is closed is like, I don't know, what, four days?" ― Matt Levine
• [08:26] "...one of his main dreams is to harness all of the energy of the sun." ― Matt Levine
• [16:09] "If I pay $0.80, I can get a dollar worth of bitcoin. And the only problem is I got to crack open the pot and take out the bitcoin." ― Matt Levine
• [22:18] "Turns out that a lot of business to business software is a thing that I can either replicate...or just...do the functions of." ― Matt Levine
• [27:58] "Private credit is structurally a pretty safe business...But at the end of the day, the loans either pay off or they don't, right?" ― Matt Levine

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Episode Flow & Tone

The episode is brisk, irreverent, and generous with both technical explanation and dry wit—very much in keeping with the Money Stuff newsletter’s reputation. Matt and Katie’s repartee oscillates between incredulous skepticism (especially on space data centers and Muskian schemes) and genuine technical analysis of how market structure and corporate governance flex in the face of new technology and personality-driven finance.

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Conclusion

For listeners looking to understand not just WHAT is happening in markets, but HOW and WHY those things are possible—and often, a bit ludicrous—this episode is a characteristically engaging, sarcastic, and ultimately informative romp through the state of modern finance. It succinctly traverses the evolving power structures behind tech deals, the implications of merging digital and traditional asset structures, and the existential unknowns swirling around AI, all while delivering plenty of dry laughs.

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Transcript

[A]

This message is brought to you by Apple Card. It's a great time to apply for an Apple Card. You'll love earning unlimited daily cash on every purchase. That includes 3% daily cash when you buy the latest iPhone, AirPods and Apple Watch at Apple through this special referral offer. When you get a new Apple Card, you can earn bonus daily cash. To qualify, you must apply at Apple Co getdailycash Apple Card issued by Goldman Sachs bank usa Salt Lake City. Branch offer may not be available elsewhere. Terms and limitations apply. Bloomberg Audio Studios Podcasts, radio news. It's Thursday. I'm not going to the JP Morgan pub this Thursday.

[B]

Okay. How was the last week?

[A]

I was fun.

[B]

I saw you were up on the roof.

[A]

We went to the roof. It was pretty cool. Like, the very top part is like this obelisk into the sky. So we were gazing up at it and it was all lit up. It was so cool.

[B]

It was climbing obelisk, like King Kong.

[A]

God, I wanted to, like, free solo it. Yeah, but it was so cold.

[B]

Yeah.

[A]

It was the best day to be.

[B]

On JP Morgan's rooftop.

[A]

It was so snowy and icy. It was pretty terrified. It was totally safe.

[B]

Was there a fence?

[A]

There was a fence. There was a fence.

[B]

Is there a helipad?

[A]

I'm sure there is, but I didn't.

[B]

You didn't? You were on the roof.

[A]

I was. It was like a quick. A quick lookout, you know, I waved to New Jersey, then we got back in.

[B]

Saluted New Jersey.

[A]

God, it was so cool, though.

[B]

Yeah.

[A]

We have to go. We have to go. We really have to go.

[B]

We did, after talking about this, get some email invites being like, come.

[A]

Yeah. Well, we need to take up one of them.

[B]

Yeah.

[A]

Is there anything you got?

[B]

I'm off the week after next.

[A]

Yeah. Oh, my God. Wait, what week are you off?

[B]

The 16th.

[A]

Yikes. I'm off the week after that.

[B]

Sweet. Two weeks off. It's, like, very satisfying to have the end in sight, you know?

[A]

Yeah, no, I feel that now.

[B]

Of course. I live for my work and we'll be.

[A]

Of course. Where are you going? I mean, we can talk about this later.

[B]

I'll tell you off mic. I'm going somewhere warm.

[A]

I'm going somewhere cold.

[B]

Nice.

[A]

Yeah. All right.

[B]

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.

[A]

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

[B]

We had an under the Wire last week that SpaceX and Xihi were emerging.

[A]

We were ahead of the curve.

[B]

So slightly, somewhere near the curve.

[A]

We were like on the curve.

[B]

We were on the curve.

[A]

I was going to say we're picking now.

[B]

We're kind of behind the curve.

[A]

We're a little bit. We're picking up where we left off, though.

[B]

Yes.

[A]

And that is on. It happens. SpaceX, it happened.

[B]

This is the thing. I come from the world of public company mergers, where you negotiate a deal for a few weeks and you sign a deal and then you announce the deal and then six months later it closes. Elon Musk has done that. He did the Twitter merger, which took at least 40 years off my life. But when he decides to merge Xai and SpaceX, from a glimmer in his eye to the deal is closed is like, I don't know, what, four days? Like. Yeah, it's really incredible speed.

[A]

Well, as you sort of lay out in the newsletter, he's negotiating with himself and then signing it himself.

[B]

Yeah, in a sense, it'll be interesting to learn from the eventual IPO filing. I don't know how much of these companies Elon Musk owns. Right. But he's not the sole shareholder of either one. Right. There's a lot of employees, there's outside investors, but it seems like he owns at least a majority of both companies, or at least the majority of the voting power of both companies, because he could just kind of do the merger himself. He's the controlling executive of both, he controls the board of both, and he's most importantly the controlling shareholder of both. So, like when the deal is submitted to a shareholder vote, it's submitted to him, and he says yes. And so you can just do it really fast. In addition to him being legally the controlling shareholder, also, like all of the shareholders both love him and fear him. My sense is this is true. You can imagine some SpaceX shareholders saying SpaceX is a very valuable company. It is worth more than four times as much as XAI. They say it's a $1.25 trillion valuation for the combined company, 1 trillion for SpaceX and 250 billion for XAI. Those numbers are kind of fake because no money is changing hands. So there's no actual dollar value.

[A]

Right.

[B]

Those numbers are kind of in the ballpark of what other transactions have valued them at. But this doesn't. Whatever he wants. But the proportion matters. If you say SpaceX is a trillion dollar company and XAI is a trillion dollar company, then XAI gets half the company. If you say what they should, then Xai gets 20% of the company. And you can imagine a SpaceX shelter, like say an employee or former employee saying, that's not right. SpaceX is good. I like SpaceX. I don't like Xai, which is to some extent successor of Twitter and being mad about the deal price. But there's nothing they can do, nothing they can do at all. I wrote that this is made easier by the fact that they are private companies.

[A]

Yes.

[B]

All of Elon Musk's companies either were formed in or have kind of moved to Texas. So they're incorporated in Texas. And nobody really knows what exactly would happen if these were Texas public companies, but Texas does allow you to kind of prevent small shareholders from bringing derivative lawsuits. So there's some chance that he could do this kind of stuff even with two public companies, right? There's some chance, some chance he could kind of. When he merges Tesla and Space X. Yeah, then we'll. There's some chance that like no one will be able to say anything about it. We'll see. We'll see.

[A]

I was going to say, I wish we were about to find out in this case, you know, if one of them was public. But it's a good point that eventually, when we do finally reach the convergence and SpaceX and Tesla merge, it's going.

[B]

To ruin, it's going to ruin a vacation of mine. I wonder if it's the one in two weeks. But yeah, it's going to be great.

[A]

Yeah. I also like the point made in here that the narrative has been that SpaceX is going to fund building data centers in space or it's going to fund XAI in some form. But it's pointed out that SpaceX generated around $15 billion in revenue last year. This point made by Martin Peers. It's more about the fundraising ability of space.

[B]

SpaceX is a self funding company. Right. SpaceX has done recent employee tenders where the company itself has used its free cash flow to buy stock back from employees. And so why does SpaceX need to go public? Well, maybe they have some vast new rocket program that they need to fund, but really it's to fund data centers in space. They don't necessarily need public money to shoot rockets into space, they need it to sweep xi.

[A]

This is like a little bit of stuff in space.

[B]

Like it probably makes sense from a corporate finance perspective for SpaceX as SpaceX to be public, but like it really helps to raise money for XAI or for AI type activities or data centers in space. And so this is a way for Elon Musk to take the somehow even more capital intensive business than shooting rockets into space and sweeping it into a fundraising juggernaut.

[A]

It is amazing to me how many people, and ourselves included kind of are saying data centers in space with a straight face. Orbital data centers is also a phrase that I've heard.

[B]

Yeah, a lot of people are very, very skeptical about the idea of putting a data center in space.

[A]

Well, I keep just thinking about where else can we put data centers? Why do they have to go in space? Would the ocean be easier in terms of weird frontiers where we could put data centers? Like, how did we land on space as a realistic option?

[B]

I don't know that anyone's landed on it as a realistic option, but Elon Musk really likes science fiction, for sure. And he references this, actually in the Space Xai merger announcement. There's a notion that there are some civilizations that harness energy from their planet. Genius looks so tired.

[A]

No, I'm here, I'm here.

[B]

There are some civilizations that can harness some large proportion of the energy on their planet, but then there are the better civilizations that can harness most of the energy of the star they orbit. And then there are even better the sun. Yeah, and then there are even better civilizations that can harness, like, whole galaxies of energy. And so if you have all of the energy of the sun at your disposal, you can, like, travel between galaxies or whatever. And so, God, it sounds so stupid when I said, but Elon Musk's, like, one of his main dreams is to harness all of the energy of the sun. And to do that, you put. I'm sorry, you put a shell of satellites around the sun that take all of the energy from the sun so that they run the data centers so a little beam of light gets through so that we can live on Earth. And the rest of the sun's energy goes to the data center. So Elon Musk can be like, the data centers are harnessing the power of the sun.

[A]

This is, honest to God, the first time I've ever heard of this.

[B]

Yeah, I learned of it from the announcement that references the Russian scientists who came up with these tiers of civ. And then I read a portion of his Wikipedia page, and now I'm telling you and you're weeping.

[A]

Well, the thing is, I'm feeling really sick. I'm, like, brewing something right now. I'm also reading this really trippy garbage magic science fiction book right now. And I'm at the point I'm 81% of the way through it. So I'm going to finish it. But it's basically just garbage like you just threw at me right now.

[B]

And it's like you read this magic sci fi garbage and then you come into work and it's more of it.

[A]

I feel like I'm dissociating. Am I on the path?

[B]

We all feel like that. We all feel like that.

[A]

But anyway, that's why, Anyway, thank you for walking me through that. If I had just realized we're trying to harness the energy of the sun.

[B]

So they get a grand sci fi level. That's the intention. In terms of like, will the data centers work? Like, yeah, no one knows. Whatever, you know who I want to spend a minute talking about who? Twitter's bondholders.

[A]

Yeah.

[B]

Do you remember when people, when people like me were like, man, what a bad deal to agree to fund Elon's Twitter buyout with debt that like now trades that back then traded like, you know, 40 cents on the dollar.

[A]

What a short sighted thing to say.

[B]

Now if Twitter needs to pay back like $13 billion of debt, like no sweat, like that's like, you know, one minute of fundraising for Twitter, which is now called SpaceX.

[A]

So quaint.

[B]

Anyway, everyone always wins.

[A]

Everyone always wins.

[B]

Yeah, I written about this a little bit this week too. The SpaceX IPO team are working on changing the rules for index eligibility so that SpaceX can be put into at least some big stock indexes earlier than like normally for like the NASDAQ 100 or the S&P.

[A]

It's like three months.

[B]

Yeah, it's like some, some period of months. And they want it to be fast. They're going to be in the business in the next year of moving an enormous amount of stock from like early SpaceX investors to index funds. Yeah, they want to move that stock efficiently.

[A]

It makes a lot of sense.

[B]

It does. They can't really fault it.

[A]

I will say it's interesting that like SpaceX in terms of private companies is kind of in a league of its own.

[B]

Like sort of like it's becoming more of a thing. Right. I mean, one reason that it seems like they're having traction with like the index companies, there's backlog behind them of other multi hundred billion dollar companies that everyone wants to own. And it's like, yeah, this should be in the index as soon as I can.

[A]

Well, part of the reason I say this relates back to ETFs. Don't worry.

[B]

Sure, sure.

[A]

Baron Capital, which is a firm founded by Ron Baron, who is like a Longtime Elon Musk investor. He loves Elon Musk companies. They recently launched an etf. The ticker is Ron B. Which I love. And they own a pretty sizable chunk of SpaceX. In the ETF. The number of shares that they hold stays static, but as the asset levels of the funds go around, some days It'll be like 22% of the fund. Some days it'll be 11% of the fund. Which is interesting because the SEC has a 15% cap on a liquid assets for ETFs, but the company confirmed that they classify it as less liquid. There's four liquidity tiers, highly liquid, moderately less liquid, and then illiquid. But SpaceX for their purposes, by their definition is less liquid.

[B]

I bet they can move SpaceX pretty quick.

[A]

Yeah, that's the thing. That's kind of what I mean. It's in like a league of its own. It's a private company, but it's pretty liquid. And it makes sense that everyone's paying attention to it.

[B]

And it's like everyone knows this IPO is coming.

[A]

Yeah. Foreign. This message is brought to you by Apple Card. It's a great time to apply for an Apple Card. You'll love earning unlimited daily cash on every Purchase. That includes 3% daily cash when you buy the latest iPhone, AirPods and Apple. Watch at Apple through this special referral offer. When you get a new Apple Card, you can earn bonus daily cash. To qualify, you must apply at Apple Co getdailycash Apple Card issued by Goldman Sachs Bank USA Salt Lake City. Branch offer may not be available elsewhere. Terms and limitations apply.

[B]

Should we talk about dads?

[A]

Yeah, I was wondering when we were gonna talk about closed end fund activism again. It's been a while.

[B]

Have we talked about closed end fund.

[A]

Activism on this podcast? Think about the dawn of this podcast.

[B]

Oh yeah. Okay.

[A]

I don't know if we just talked about it a lot in pretend podcasts, but I'm pretty sure we talked about it on real podcasts.

[B]

You and I have talked about microphones, about closed end funds and closed end fund activism. Closed end fund activism is when I guess we've talked about the Bill Ackman closed end fund that ever was.

[A]

Oh, come on. We've definitely talked about Boaz Weinstein on this episode.

[B]

Talked about Boaz Weinstein, friend of the pod, a leading closed end fund activist. Er, closed end fund activism is like you have a closed end fund, which is a company that buys investments and also lists its own shares on the public stock market. And sometimes a closed end Fund. The fund's own shares will trade at a discount to the net asset value. And then some activists will buy up some shares and run a proxy fight and try to kick out the management of the fund so that they can liquidate the fund, sell all the underlying stuff at net asset value and return money to the shareholders and, and capture that discount. This is a thing, you know, it's like controversial Boaz gets yelled at by BlackRock or whoever. Sometimes activists win, sometimes they lose. Sometimes the underlying fund managers make the case that there's actually some long term value and that it is shortsighted to liquidate the fund and capture the discount. Sometimes that case doesn't work anyway. DATS digital asset treasury companies were all the rage last year, led by strategy, formerly microstrategy, which is, you know, a.

[A]

Huge pot of bitcoins which reports earnings.

[B]

I know we got to talk about strategy too, but let's talk about activism first. All these companies were formed that would buy crypto, like bitcoin or, you know, different companies specialize in different things and they would make it have a big pot of crypto and it would trade at like a huge premium to the net asset value. And so everyone did this trade like in summer of last year, and then it collapsed. Like the prices came down, but also the premiums collapsed. So now a lot of these doubts are trading at discounts to net asset value. And so now you're starting to see glimmers of activism against stats where someone will be like, I can buy stock in this pot of bitcoin and the stock trades at like 80% of net asset value. So if I pay $0.80, I can get a dollar worth of bitcoin. And the only problem is I got to crack open the pot and take out the bitcoin. And so you do things like pressure the management to do buybacks or maybe launch a proxy fight. We haven't seen proxy fights yet, but like, we've seen activist filings and the proxy fights will be so good because if you run a digital asset treasury company, like, yeah, you're kind of, you know, a colorful character. And if you're taking a run at them as an activist, you're probably kind of a colorful character too. And so there'll be some good proxy fights.

[A]

I have two things, maybe three. I think this is really fun, like the concept of bringing the closed end fund activism playbook to crypto, because I feel like crypto market structure and equity market structure, they blend together in some ways or at least parallel each other. And this is just another other way.

[B]

Well, but this is to be clear, just equity. These are companies with stocks. And in fact, the controversy is that a lot of digital asset treasury companies will say, no, no, no, we're not a close end fund, we're an operating business. We're creating a lot of value. For you to just take our crypto and liquidate it to capture the discount is totally destructive of long term value. And then other people are like, no, you're a product. Bitcoins, come on. So we'll see, we'll see who.

[A]

Well, for index classification purposes, they have to be operating businesses.

[B]

Yeah. They argue that they're operating businesses and so far they have more or less run with the index classifiers. But I.

[A]

You with the might of the pen.

[B]

Yeah, exactly.

[A]

A swipe of the keyboard. The other thing is this brought back just a myriad of memories of the grayscale bitcoin trust.

[B]

Yeah, sure.

[A]

Because that did operate as a close in fund and they were so eager to convert it to an ETF so they could get rid of their discount.

[B]

Yeah. And they had weirder governance and so you couldn't like just do a proxy fight. But like, like people were mad at them for not closing the discount earlier. And then they did in fact want to convert to an etf and then they did. I know that your next sentence will be these DATs should convert to ETFs, but I disagree and they disagree. So I'm very excited for a wave of this in part because one thing that is happening is the price of bitcoin is collapsing.

[A]

Oh my God.

[B]

The premiums of these DATs are collapsing. And today, Thursday, February 5th, strategy was at least at some point trading below net asset value.

[A]

I mean, I think their break even or whatever you want to call it is $76,000 per bitcoin or about there.

[B]

Well, there's two things. There's like their cost basis.

[A]

Yes.

[B]

Which like if they trade below their cost basis, then arguably their bitcoin buying has been money losing. Right.

[A]

Yeah. And they've been here before.

[B]

Yeah. And like they're a proxy for bitcoin. So that's fine. Like if bitcoin goes down, like they'll go down. But the other thing that's happening is their stock at least briefly traded below net asset value. The whole point of strategy was like you're paying a premium to own strategy because they were doing something that made their pot of bitcoins more valuable than just the pot of bitcoins. And now the market has completely moved away from that. And now they trade at roughly or even a little below the value of their bitcoins.

[A]

I'm actually scared to check where bitcoin is right now. When we stepped into this recording, it was down like 10% on the day, I think to.

[B]

It was like, at $65,000. Yeah, yeah. Which is down like. Yeah, it's. It's been a bloodbath. And, like, part of what's happening, there's reporting of, you know, forced deleveraging or whatever. Like. But, like, one thing that's happening is like, a big chunk of bitcoin is held by strategy, particularly, and DATs in general. And you do wonder what will happen with those, right?

[A]

I mean, I do wonder. Can you tell me?

[B]

Well, so, like, for instance, the DAT that I wrote about this week that faced an activist is a bitcoin one called Empery. And it has announced that it will either take, you know, borrow money or sell bitcoin, but it might sell bitcoin to buy back stock. I think selling bitcoin to buy back stock, if you're a DAT that trades at a discount is just like a straightforwardly good trade. And then, like, you have strategy, which is enormous and has huge cash obligations, you know, to pay preferred dividends and stuff, because it's taken out all this debt. And preferred stock to buy bitcoin, how will they fund that? Well, if their stock trades at a premium to its underlying asset value, then they should sell stock to fund that stuff, which is embarrassing. But fine. If the stock trades at a discount, I mean, they've sometimes said they might sell bitcoin and sometimes said they won't. But if your stock is trading at a discount and you need cash to pay your debt, maybe you sell some bitcoin. And then is every dat that probably provided a lot of buying pressure on the way up? Are they providing selling pressure on the way down?

[A]

Well, that's the thing. I feel like if a DAT such as strategy came out and sold even like a really insignificant amount of bitcoin, what that would mean for sentiment.

[B]

Yeah, it's not good. It's potentially a lot of actual volume. But, yeah, as a sentiment letter, it's. It's great.

[A]

Yeah. I would love if Boaz Weinstein started dabbling in a little bit of DAT activism. Doesn't it make sense for Balas to do.

[B]

It's the same trade? Yeah, it's because it's activism. It's the same trade.

[A]

I'm going to send him this podcast.

[B]

All right. I think that one thing that Boaz Weinstein has done is he's tilted at funds run by companies like BlackRock, where BlackRock for a long time has talked a lot about good governance. And Boaz has kind of used those words against them and said like, you're not doing good governance, you're like stifling shareholders in your closed end funds. I think you're like moral and political playbook would be different with the debt because they don't care about shareholder governance. Something else. Right.

[A]

Some AI generated, it's some other him on an orange bull.

[B]

Your rhetoric is different when you're taking on a dat CEO, but like he.

[A]

Should still be, but the trade is.

[B]

The economics of the trade are the same. Speaking of bad for sentiment, should talk about the.

[A]

Oh my God. Yeah, I mean, software's dead. I didn't know that until this week. Apparently this is the week.

[B]

This is the week that software died.

[A]

I know, I mean, I guess it was theoretically started by anthropic. I believe it was coming out with some tool for lawyers.

[B]

There's like some catalyst moment, but it's just been like a drumbeat of like AI doing stuff that used to be sort of hard specialized. It's like the thing people used to say about like Google and Apple that like you thought you'd built a business but actually you built like a button, you know, like it turns out that a lot of like business to business software is a thing that I can either replicate, you know, individually for each company or just like, you know, do the functions of. And so there's a lot of worry about a lot of software as a service companies that they might not be competitive in a world of AI.

[A]

Yeah. Which I get.

[B]

Yeah.

[A]

You know, like that's a real fear. Can you talk to me about the private equity angle? Because that's been the other thing. BDCs have been absolutely in the toilet amidst this SaaS apocalypse.

[B]

Yeah. Because like for a while SaaS seemed like a really good business where you sell software to companies, you charge them a recurring license. And so you had this really good stable cash flow. And when you have a business with really good stable cash flow, what happens is private equity wants to buy it and they want to lever it up because stable cash flows are good for servicing debt and becoming good private equity businesses. And then you have this problem where private equity and private credit, which like provides the leverage, are overweight sort of SaaS companies because they're the safe companies. And then it turns out they're not safe, like foolish. All of this stuff that Is, you know, was meant to be like sort of safe, stable recurring revenue, like conservative investments, now turns out to be kind of risky. Right. The Bloomberg story about this is that software is the largest sector exposer for BDC. So like private credit, business development companies, it's around 20% of portfolios.

[A]

Right.

[B]

You're like a private credit lender. Like, you're underwriting weird companies. Like, you're underwriting bias. And you're like, oh, this company, like, you know, can show me their contracts where they have like all this like very stable recurring revenue. And so you're happy to underwrite that and have it in your portfolio. And now it maybe is not that stable.

[A]

Well, on that 20% figure, I think that came from Barclays. The story also points out that it's possible, slash, maybe probable that it's higher than that. Because you think about, and this is a quote from an analyst at Raymond James, if your software businesses in healthcare, the fund classifies it as a healthcare exposure, the software exposure is meaningfully higher than it looks.

[B]

Yeah.

[A]

So.

[B]

Right. Because like every business is a software.

[A]

Yeah. It's kind of been where we've, where the tide has been going over the past however many decades.

[B]

Right. It's not software. Right. It's like how much of like all of business will be eaten by AI, Right. How many businesses will become irrelevant? Right. I mean, we've talked about like consulting and investment banking.

[A]

Right?

[B]

Yeah. And certainly journalism. Right. Certainly all these things. Right. And so like a lot of businesses these days are more, less software businesses. And to the extent they're put out of business by AI, then that'll be bad for their shareholders and lenders, right?

[A]

Yeah.

[B]

I don't know. This is kind of like the AI thing that people are worrying about, right?

[A]

Yeah, the existential. Oh, my God. I have to say it's interesting. I mean, the story on the terminal, which is great. Private equity's giant software bet has been upended by AI. It points out that some firms have hired consultants to check their portfolios for businesses that could be vulnerable.

[B]

They don't know, man.

[A]

But also they could just ask, like.

[B]

Me, it's me, I'm vulnerable.

[A]

They could ask ChatGPT to do that analysis for them. Also they've been, I mean, private credit in particular has been, you know, funding the AI build edge, like hedging their bets. AI is one of these things will work out, but it's not a new concept to them. It's just weird that it seems like the way that the market is now positing that, you know, none of these alternative asset managers have questions whether or not their holdings are maybe vulnerable.

[B]

I think that like people have differing views on the timeframe of like AI disrupting every industry.

[A]

Right. Yeah.

[B]

The thing that happened this week is like particular cloud products are introduced that look like they're further ahead than people thought and that they could replace stuff faster than people thought. I think people had a mindset of like we are financing this huge data center build out so that in X years AI will eat the world. Right. And like for the next few years nothing will be eaten. Right. And it's like, oh, things might get.

[A]

Eaten faster, sooner than you think Also.

[B]

By the way, if your conclusion from this week is AI has actually already completely eaten all of the software sector, then like maybe you could slow the data center build out because you've accomplished a lot with the data centers. We have.

[A]

Yeah. Maybe we are overbuilding.

[B]

That could be a takeaway. I don't think that's the main takeaway here.

[A]

Everyone's too busy selling software. Yeah. So Aries and Blue Owl and also a whole host of these other BDC that are just getting crushed did report earnings and Ares CEO made the point that only about 9% of Ares loan assets were to software firms. So everyone's coming out and trying to say that their actual risk here is pretty low. Is interesting that this just feels like a very much. Let's just throw out the whole bathtub, all the babies, put them in it and let's throw it out the window.

[B]

Yeah. I mean, you know, one thing we've talked about and I've written about a lot is private credit is structurally a pretty safe business. Right? Like structurally pretty safe. Right.

[A]

Go on.

[B]

Nothing's perfect. Right. But they have equity funding, they have long term funding. They don't, they, they don't have maybe quite the mark to market discipline that some other investment firms might have. And so it is true that like if there is a three week panic about software and then everyone's like, actually we overreacted, the private credit firms can really ride that out quite easily.

[A]

Right? Yeah.

[B]

Like the BDC stock price goes down, comes back up, there's no like run on banks. Right. There's no like loss of funding probably. So this is just like try to manage perception and tough it out. Right now that could change. Right. But like for now it's a fairly safe funding model. But at the end of the day the loans either pay off or they don't, right? Yeah, like it's a safe funding model. And it seems like SaaS companies should be a fairly safe credit to invest in. But if that turns out to be wrong, it's bad.

[A]

Well, there's a whole bunch of them on sale right now, so go nuts. Definitely won't.

[B]

And that was the Money Stuff Podcast. I'm Matt Levine.

[A]

And I'm Katie Greifeld.

[B]

You can find my work by subscribing to the Money stuff newsletter on bloomberg.com.

[A]

And you can find me on Bloomberg TV every day on the close between 3 and 5pm Eastern.

[B]

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 the air.

[A]

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.

[B]

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

[A]

Our theme music was composed by Blake Maples.

[B]

Amy Kean is our executive producer. Thanks for listening to the Money Stuff podcast. We'll be back next week with more stuff.