Land Rich: EDR, KKR, SPAX.PVT

Summary

Money Stuff: The Podcast – Episode Summary: "Land Rich: EDR, KKR, SPAX.PVT"

Release Date: March 28, 2025
Host/Author: Matt Levine, Bloomberg
Co-host: Katie Greifeld, Bloomberg News

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1. Endeavor's Going-Private Deal and Legal Implications

In this episode, Matt Levine and Katie Greifeld delve into the recent developments surrounding Endeavor's transition from a public to a private entity. The deal, orchestrated by Silver Lake—the company's largest shareholder—was announced about a year prior, with Silver Lake agreeing to acquire Endeavor shares at $27.50 each. The closure of the deal on March 24th saw Endeavor shares finalize at $2,750 per share, strictly adhering to the scheduled price.

Notable Tensions and Market Reactions:
Despite the deal’s closure, anomalies emerged in Endeavor’s stock performance leading up to the finalization. Notably, on the Friday before the closure, the stock price surged to $29.25—$1.75 above the merger price. This spike puzzled market observers, as investors seemingly bet on potential legal actions claiming the deal was undervalued.

Potential Legal Challenges:
Levine explains, “'It's being bought by its controlling shareholder. So there's always a conflict of interest,'” highlighting the contentious nature of the buyout. The elevated stock price suggested market participants anticipated class action lawsuits, either through appraisal claims or allegations that Endeavor's board neglected fiduciary duties.

Carl Icahn's Involvement:
Adding intrigue, activist investor Carl Icahn acquired approximately 8.4% of Endeavor’s shares on the critical Friday, potentially signaling his support for challenging the deal. Levine remarks, “'Carl Icahn was just like, I don't know. I feel possessed to buy 8.4% of these shares on Friday.'” Icahn’s move hints at possible strategic maneuvers to influence the outcome of ensuing legal battles.

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2. KKR's Strategic Holdings: A Shift from Traditional Private Equity

The conversation transitions to KKR's innovative shift from its conventional leveraged buyout (LBO) model to establishing Strategic Holdings. Historically, KKR has been synonymous with managing funds, executing leveraged buyouts, enhancing operational efficiencies, and exiting investments within a typical 3-5 year window to realize substantial returns.

Transition to Long-Term Ownership:
Katie Greifeld highlights KKR's ambition to pivot towards owning companies indefinitely, akin to Berkshire Hathaway’s model. Matt Levine adds, “'It's like, we can put more leverage on this company than the public markets can. Right. But this is like, yeah, we like that business. Let's own it forever.'” This strategic realignment aims to generate consistent revenue streams through dividends, projecting $1.1 billion by 2030.

Comparison to Family Offices:
While KKR remains a public company unlike typical family offices, Levine draws parallels: “'And you just own the companies instead of owning the 20% promote on them.'” This move signifies a broader industry trend where established private equity firms leverage their amassed capital to transition from fee-based operations to asset ownership, ensuring sustained growth and revenue beyond traditional management fees.

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3. Private Markets Enter the Public Eye: Yahoo Finance's New Listings

Levine and Greifeld explore the evolving landscape where private companies gain visibility akin to publicly traded firms. Yahoo Finance’s recent initiative to display stock-like charts for private entities such as SpaceX, OpenAI, and Stripe marks a significant step towards bridging private and public market dynamics.

Mechanics of Private Market Pricing:
Levine explains the complexity behind these charts: “'These prices […] are not really derived necessarily from those trades. These prices are sort of algorithmically determined from things like funding rounds and tender offers.'” Unlike real-time public market data, these valuations stem from less frequent and less transparent transactions, making them “'fascinatingly imperfect.'”

Psychological Impact and Market Perception:
Despite their inaccuracies, these pseudo-stock prices influence investor perceptions. Greifeld notes, “'It just makes you think, ooh, that's a company whose stock I can buy, by the way.'” This visibility may pressure private companies to consider public listings to align with investor expectations and market dynamics.

ETF Example – ER Shares Private Public Crossover ETF (XOVR):
An illustrative example discussed is the XOVR ETF, which allocates 10% of its portfolio to SpaceX. However, the ETF's performance, being down 7% year-to-date compared to SpaceX’s minor uptick, underscores the challenges in accurately reflecting private company valuations within public investment vehicles.

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4. Reflections on Public vs. Private Market Transparency

The hosts reflect on the inherent differences in transparency and regulatory requirements between public and private markets. Matt Levine critiques the lack of rigorous financial disclosures in private markets: “'It's weird that we have 100 years of securities law that is based around we need full disclosure about a company, we need audited financial statements to allow people to make informed investing decisions.'” This absence of stringent reporting standards in private investments contrasts sharply with the public market's emphasis on transparency and regulated disclosures.

Implications for Investors and CEOs:
Greifeld shares insights from her interactions with CEOs, revealing a disconnect between public statements and private concerns about stock performance: “'You ask them on air, do you care about the stock price … and then you get lunch with them, you … ask them in the commercial break … and they say, yeah, I'm constantly watching it.'” This dichotomy highlights the challenges private companies face in managing investor relations and internal expectations without the constant scrutiny of public market trading.

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Conclusion

In "Land Rich: EDR, KKR, SPAX.PVT," Matt Levine and Katie Greifeld provide a deep dive into the nuances of private equity maneuvers, legal intricacies of going-private transactions, and the emerging intersection between private and public market dynamics. Through their insightful discussion, listeners gain a comprehensive understanding of the strategic shifts within major financial entities and the evolving landscape of investment transparency.

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Notable Quotes:

• Matt Levine [04:37]: “Endeavor's main asset is shares of another publicly traded company. That company traded up a lot. So by now, the deal price for Endeavor looks really low.”

• Katie Greifeld [16:12]: “KKR has this plan to quadruple its earnings per share over the next decade. Strategic holdings would be a strategic part of that.”

• Matt Levine [17:55]: “The fee model is good enough that KKR has made a lot of money. And where they do that money, well, one thing you do is you transition from being a service provider who collects 20% to being just an asset owner and a capitalist.”

• Katie Greifeld [25:57]: “We have been talking for months really the entire existence of this podcast about how private markets are becoming public. Private markets are the new public market and now we have some prices to put to that.”

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For more insights and detailed analyses, subscribe to the Money Stuff podcast available on all major platforms.

Transcript

[Amazon Business]

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[Matt Levine]

Please hold. Estimated wait time is 25 minutes.

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[Amazon Business]

Bloomberg Audio Studios Podcasts Radio News hello and welcome to the.

[Matt Levine]

Money Stuff podcast, your weekly podcast where we talk about stuff related to money. I'm Matt Levine and I write the Money Stuff column for Bloomberg Opinion.

[Katie Greifeld]

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

[Matt Levine]

Welcome back, Katie.

[Katie Greifeld]

Welcome back, Matt, you didn't go anywhere. But in my mind, I took a vacation from. Yeah, it's been a minute.

[Matt Levine]

For the listeners, service has continued uninterrupted, but for us it's been two weeks.

[Katie Greifeld]

I know, I know. I had to remember how to anchor television this morning. I'm currently trying to remember how to record a podcast.

[Matt Levine]

Yeah, no, I also forgot in our week off.

[Katie Greifeld]

It was honestly nice. Yeah. The way this usually goes though, is we have three topics.

[Matt Levine]

Sure, yeah. What are those three topics today, Katie?

[Katie Greifeld]

So we're gonna talk about Endeavor. You're on a three day streak of writing about this deal.

[Matt Levine]

It's quite an endeavor.

[Katie Greifeld]

We're gonna talk about the baby Berkshire boom. Cause that is underway. And then we're gonna talk about public private prices. Endeavor.

[Matt Levine]

Endeavor.

[Katie Greifeld]

I think when we first spoke about this deal, we. We ended with something close to watch this space because it was going to close on March 24th and it did.

[Matt Levine]

Right. It's funny, I sometimes will write an M and a deal will have a lot of drama. And so I'll write about it successively for days or weeks. Nothing's really happened in this deal. Just the intestines on Monday. Nothing's happened since. This company doesn't exist. So Endeavor is a company. It went private. There was a long lead up to it going private. They signed their deal about a year ago. Silverlake, the biggest shareholder, agreed to take it private at $27.50 per share. They announced a few weeks ago that it was going to close this Monday, March 24th. Then this Monday, March 24th, it closed at $2,750 per share, exactly on schedule. Not really a lot of news there. But what was weird is that the previous week it traded well above 2,750 per share. In fact, the last day before the closing on Friday, it closed at $29.25 a share. So like $1.75 over the merger price. And a lot of shares traded. If you know you're going to get cashed out at $27.50 on Monday, it's a little weird to buy the stock at $29.25 on Friday. The reason for that seems to be that everyone expects there to be a class action lawsuit saying that the deal was underpriced. And they getting in on that last action.

[Katie Greifeld]

Yeah. You had three possibilities.

[Matt Levine]

Yeah. So when we talked about this last time, there was a lot of noise about appraisal, which is one way you can basically sue for a better price. But to do that, you have to demand appraisal. And there are reasons that can be advantageous to you. But one problem with it is you need to have owned the stock continuously since early February. The other way to sue to get a better price is just a class action lawsuit saying that the board that approved the deal was failing in its fiduciary duties to shareholders. And here that's a pretty tempting lawsuit because as we talked about last time, the deal price turned out to look really low. Endeavor's main asset is shares of another publicly traded company. That company traded up a lot. So by now, the deal price for Endeavor looks really low, and it's being bought by its controlling shareholder. So there's always a conflict of interest. There's. There wasn't a vote of the independent shareholders. No independent person really ratified the price like the board did, but the shareholders didn't. There's a lot of stuff for a lawsuit, and people seem to be valuing that lawsuit at about $1.75 a share.

[Katie Greifeld]

Well, clear this up for me, because I was a little bit confused. There's a possibility of a class action lawsuit, but that is different than appraisal.

[Matt Levine]

Different from appraisal? Yeah. Appraisal is. This price should have been higher. It doesn't require any allegations of wrongdoing. The class action lawsuit is like the board didn't do its fiduciary duty for shareholders. But in this sort of conflicted situation, they almost get to the same place, and it's a little bit easier to do the class action because you don't have to have held the shares continuously.

[Katie Greifeld]

So your third explanation was people might.

[Matt Levine]

Have thought that Silver Lake would recut the deal to give people a better price, but I don't know why they would have thought that, because silverlake did say they wouldn't do it, and then they didn't do it.

[Katie Greifeld]

So it looks like the possibility that your readers seem to agree with was that maybe you bought the stock betting on this lawsuit happening.

[Matt Levine]

You bought the stock thinking a lawsuit would happen, and you wanted to be in that lawsuit because you thought that lawsuit was worth more than $1.75 a share.

[Katie Greifeld]

Maybe that's what Carl Icahn did.

[Matt Levine]

I would be surprised if there was any other reason for it. But, yeah, Carl ICAHN bought about 8% of Endeavor. It's not exactly clear when the disclosure doesn't have the trading records, but it kind of seems like he bought it all on Friday.

[Katie Greifeld]

As of Friday, he had 8.4%.

[Matt Levine]

Yeah, there was a lot of shares traded on Friday. He might have bought all of his shares on Friday. Might have been why the stock spiked. But in any case, yeah, he seems to have bought the stock fairly recently. And he's. Carl Icahn. He doesn't mind a lawsuit. No, he doesn't mind getting his hands a little dirty. And I wrote on Thursday, if you're a shareholder who was hoping to get in on a lawsuit, you got to feel good about this, right? He's going to have some fun with that lawsuit. You want Carl Icahn on your side complaining about the deal price? I don't know. Sounds like an encouraging fact.

[Katie Greifeld]

Makes for good tv. Makes for good tv.

[Matt Levine]

Makes for good tv.

[Katie Greifeld]

Podcasting. So perhaps Carl Icahn wanted in on this lawsuit specifically, but there's also the possibility that maybe short sellers wanted out.

[Matt Levine]

I really don't know. There's a weird, fascinating history of this. So this is not the first deal that has kind of gone like this where there's been a going private transaction. It looks kind of conflicted. Shareholders are disgruntled. The stock trades above the deal price right until the last minute. And then the deal closes and the shareholders sue and like years later down the line, they win their lawsuit and they get some money. In that case, if you see a stock trading at $29 a share and you know that it's going to be cashed out at 27.50 on Monday, you might be tempted to sell that stock short. Because you sell it for $29, you pay back the 2750 on Monday, you make an easy buck 50. So in a lot of these deals, they end up, the deal closes and there's some number of shorts and the shorts make a quick profit because the deal closes at below the last trade price. And so like if they shorted it above the deal price, they make a quick profit and then they go about their business. And years later, the class action lawsuit gets decided in favor of the shareholders and someone like their broker comes to them and says, remember that deal that closed at $2,750 and you paid $27.50 because you were short? Actually the real deal price is $32, so you owe us another 450. Uh oh, there's a lot of lore on this and it's not clear what the actual rules are. My understanding is there are people who have done this trade and years later the brokers have come to them and said, you owe us more money. And they've said, no, we don't. We closed out our short. What are you even talking about? This is not a corporate action that we owe money on. And there are some FINRA arbitrations where the customers and the brokers have gone to arbitration and it's I think, gone both ways. There are some where the customers have lost, but some, I think, where they've won. So there's an interesting trade here where you can make a free, risk free profit on your short and then years later try to stiff your broker so you can keep the profit, but it's a little dicey.

[Katie Greifeld]

But I don't know, for a good two to three years, you did make a profit on that, and that has to feel somewhat good.

[Matt Levine]

Yeah. I get a lot of emails from people being like, what if I did this? What if I moved out of state? There's a lot of ways it's easy to imagine how you would avoid your broker's phone call in three years. I think people are interested in that trade.

[Katie Greifeld]

Okay, so where does this go for here?

[Matt Levine]

Like you said, usually I keep looking for the lawsuit. I haven't seen the lawsuit.

[Katie Greifeld]

Class action lawsuit.

[Matt Levine]

Yeah. Usually lawyers are putting out press releases.

[Katie Greifeld]

So why is that more likely, just judging from the tone of this conversation, than appraisal?

[Matt Levine]

Oh, just because so many shares have traded hands after the appraisal deadline. So if you're buying shares of $29 last week, you couldn't be doing it for appraisal because you wouldn't get appraisal. You have to be buying into the class action.

[Katie Greifeld]

Could there be both?

[Matt Levine]

Yeah, there could be both.

[Katie Greifeld]

Okay.

[Matt Levine]

The big case that I wrote about was Dole, and there were both appraisal. They're not the same thing. You could imagine an appraisal court saying, oh, the actual value of the company was this. And the class action court saying, oh, the fiduciary duties were violated. And it's worth this. They're not the same thing at all, but they're kind of roughly the same idea, which is you underpaid for this company. Give us more money.

[Katie Greifeld]

So it seems like this continues to be a watch this space situation. There's the promise of drama. It just hasn't necessarily.

[Matt Levine]

It would be weird if nothing happened because people are fighting for drama. Right.

[Katie Greifeld]

That'd be kind of beautiful, though, if truly nothing happened.

[Matt Levine]

If everyone was like, I think this is a $75 a share lawsuit, looking forward to that lawsuit, and actually remembers to file the lawsuit and just goes away.

[Katie Greifeld]

Icahn was just like, I don't know. I feel possessed to buy 8.4% of these shares on Friday.

[Matt Levine]

I was like, I was hoping someone else would bring a lawsuit, but I don't know. It's not worth it to me.

[Katie Greifeld]

I'm feeling shy now.

[Microsoft Security]

What are some ways that Microsoft Security is helping customers stay ahead of 600 million attacks without slowing down business? For sports organizations, it means letting fans share in the action without sharing sensitive information. For automakers, it means driving change and securely innovating their development process. And for digital banks, it means staying ahead and keeping up with evolving cyber attacks. Microsoft Security equips you with deeper insights to help you pinpoint vulnerabilities, see around corners and innovate confidently. They scan trillions of signals daily, giving you the guidance, expertise and tools to protect your business without sacrificing speed for safety. Security is your job, and it's also theirs. With Microsoft Security, you have a partner that looks deeper, keeps you ahead, and helps your business move forward securely. To Learn more, visit Microsoft.com CISO that's.

[Stifel]

Microsoft.com CISO deep domain expertise, strong relationships, broad capabilities. It's what makes Stifel one of the industry's leading providers of M and A and capital raising services in the middle market. But don't just take anyone's word for it. IFR has named Stifel US Mid Market Equity House of the Year five times in the last 10 years. When it comes to investment banking, Stifel is the name you should know. To learn more about how Stifel can help you address your most complex investment banking needs, visit stifelinstitutional.com Stifel Nicholas & Co. Inc. Member SIPC and New York Stock Exchange.

[Amazon Business]

How can you grow your business from idea to industry leader? Bring your vision to life with smart business buying tools and technology from Amazon Business. From fast free shipping to in depth buying insights and automated purchase approvals, they deliver everything you need to achieve your goals. It's not easy to stand out from the crowd. Simplify how you stock up to get ahead. Go to amazonbusiness.com for support.

[Matt Levine]

I told you that I went to the Bluey Experience at.

[Katie Greifeld]

We've almost certainly talked about this. Did I remember that? No, but tell me about it.

[Matt Levine]

They built Bluey's house in a building near Union Square.

[Katie Greifeld]

That sounds kind of fun.

[Matt Levine]

I really like Bluey.

[Katie Greifeld]

It's good show. Yeah. I can't wait to have my own children to watch Bluey.

[Matt Levine]

Bluey is very much like a show for parents. Yeah, it's very mature.

[Katie Greifeld]

You know what else is very mature?

[Matt Levine]

The private equity business model.

[Katie Greifeld]

Yeah.

[Matt Levine]

Oh, yeah.

[Katie Greifeld]

Oh, here we go. What do you got?

[Matt Levine]

What do I got? Kkr.

[Katie Greifeld]

KKR Strategic Holdings. Yeah.

[Matt Levine]

Not just regular holdings, but strategic holdings.

[Katie Greifeld]

Holdings that they will hold for a while. Is the plan.

[Matt Levine]

Decades.

[Katie Greifeld]

Yeah. They've got about 18 of them.

[Matt Levine]

18?

[Katie Greifeld]

Yeah.

[Matt Levine]

Right. So KKR is like historically a leveraged buyout firm where they manage funds, they raise funds from limited partners, they take those funds and they write equity checks to do leveraged buyouts. They borrow money to buy companies. They Take over the companies, they lever them up, they improve their operations, they strip off the stuff they don't want. They incentivize managers. They get everything all nice and three to five years later they take them public again or sell them, get a big check that they return to their limited partners and take 20% for themselves. That's the traditional LBO business model. All these LBO pioneers of the 80s and 90s are now giant public companies like KKR and they run funds for investors. Now, the term is alternative asset managers because they do a lot besides classic leveraged buyouts, but they still basically do that kind of model where they run funds and take 20%. KKR is shifting, let's say, or introducing more of a model where what they do is they just, on their own balance sheet as a company, buy stakes in companies or infrastructure projects or whatever and just own them forever. And they're just part of the company. They're like a big industrial conglomerate. It's an interesting shift.

[Katie Greifeld]

Yeah. The logic here, looking at Alison McNeely's story, KKR has this plan to quadruple its earnings per share over the next decade. Strategic holdings would be a strategic part of that. They also want to build a portfolio that kicks off more than a billion dollars a year in dividends. So it's different from the fee model. Of course.

[Matt Levine]

One thing I write is that the ultimate success for a hedge fund is to get rid of all of your outside investors and convert to a family office because you've just made so much money for yourself that you'd rather earn 100% of the returns on your investments than ear 20%. Right. This is a little bit like that. The fee model is good enough that KKR has made a lot of money. And where they do that money, well, one thing you do is you transition from being a service provider who collects 20% to being just an asset owner and a capitalist. And you just own the companies instead of owning the 20% promote on them. That's one way to analyze what they're doing here. It has been a good enough business for long enough that now instead of KKR being like, we're going to manage funds to buy companies, they'll be like, we'll just buy the companies. But it's different from being a family office because most hedge funds are like, the hedge fund management company is privately owned, and transitioning to a family office means the guy who owned the hedge fund now owns all the investments here. KKR is not like a guy, or even the three Kohlberg Kravos and Roberts. It's a public company, so the public company is becoming its own family office. And the public company is going to own all these investments directly rather than taking fees to run a fund.

[Katie Greifeld]

In a way, it's beautiful. Just the natural evolution of things. Don't we all aspire to something similar?

[Matt Levine]

In some ways, it's like the whole private equity business has done this. Private equity was a small, scrappy business, taking over poorly managed companies and making them more efficient. And that was so wildly lucrative for so long that now it's like, we have all this money. We could just own the companies ourselves. We don't need to run funds anymore. It's an exaggeration because most of them, including kkr, mostly run funds. But there's this shift to we can own stuff on our balance sheet.

[Katie Greifeld]

Yeah, in a way, I feel really drawn to this. I think I've talked before on this podcast how I really like and admire the old school strategy of just stock picking. This is a little bit different. Yeah, but you're right. It's sort of the same basis.

[Matt Levine]

Old school private equity is like people in it would disagree with this, but it's a financial engineering story. It's like we can put more leverage on this company than the public markets can. Right. But this is like, yeah, we like that business. Let's own it forever. Let's never think about it again.

[Katie Greifeld]

It's going to compound over time and become better. And you just got to be patient. And we're going to hold this for a few decades.

[Matt Levine]

No, I'm with you. I also admire the business. To my mind, what better job could you possibly have than waking up and being like, here are 12 stocks I want to own. I will buy them and my job is over for the rest of my life.

[Katie Greifeld]

The answer is right in front of you. Being a podcaster, obviously, but I take your point. I find it really compelling. And of course this comes as KKR has phrased this. The co CEO said at Bloomberg Invest earlier in March that basically it's in some ways to become a mini Berkshire Hathaway.

[Matt Levine]

Sure, mini Berkshire Hathaway.

[Katie Greifeld]

Everyone wants to be Warren Buffett, including friend of the show, Bill Ackman. I think it is interesting that you do have at least a size of two folks saying that we are basically wanting to model ourselves after Berkshire Hathaway.

[Matt Levine]

You're so young.

[Katie Greifeld]

I feel like, well, you know, people.

[Matt Levine]

Wanting to be Warren Buffett is like a long standing. I was thinking about that, but in the past, Joe Bay and Bill Ackman grew up in a world where like the pinnacle of investing was Warren Buffett. Right. I do wonder.

[Katie Greifeld]

I mean, I kind of agree want.

[Matt Levine]

To be Warren Buffett, but I don't know.

[Katie Greifeld]

There was that time during the pandemic where Buffett was getting dunked on a lot by like the Dave Portnoy's of the world. But I feel like he's back in vogue.

[Matt Levine]

But he's certainly in vogue. Among friend of the show Bill Ackman, that crowd. Why wouldn't you want to be Berkshire Hathaway?

[Katie Greifeld]

I want to talk about their current lineup of investments. As I mentioned, 18 includes Lens Retailer 1, 800 contacts, which actually texted me today to tell me that it's time to order $800 worth of contacts again, cybersecurity company Barracuda Networks, also Australian Stack food manufacturer Australia, our Nose group, our Knots Group. But anyway, again it's just, I mean 1, 800 context, that's a household name. But it's cool because it's not like flashy AI sort of stuff. At least from what I can tell from Alison McNeely's article.

[Matt Levine]

Yeah, that could keep going. Those are sort of like, those are like classic private equity kind of investments, right? Like unglamorous, nice cash flow kind of companies. But now they just own them directly.

[Katie Greifeld]

Yeah, for me, an absolute consumer staple. Just talk about 1, 800 contacts.

[Matt Levine]

You are a reliable source of cash flow for KKR's strategic holdings.

[Katie Greifeld]

Just a little more color there. They own an average 20% stake in these 18 firms. That is about $3.7 billion of revenue, $900 million of adjusted earnings, which is a small share overall of their operating earnings right now. But they're predicting that Strategic holdings will generate 1.1 billion by 2030.

[Matt Levine]

The main way I think about this bet is when you generated enough money doing a high fee, high return financial services business, you can just use that money to own things yourself. But there's also, you do wonder if there's pressure on those fees or those returns. Private equity in the 80s, there's a lot of low hanging fruit. Later vintages of funds have not always returned as well. People talk about how there's pressure on private equity. It's now you don't hear a ton about fee pressure in private equity, but you hear that every now and then you might be one of these alternative asset managers looking around and saying the long term trend of financial services fees are. Katie Greifeld keeps telling me that you can get an ETF for one basis point.

[Katie Greifeld]

It's coming.

[Matt Levine]

If you think in 20 years, what will our earnings mix look like? You might say we might earn less in fees, but we'll own all these companies that sell contacts to Katie Greifeld so we can, we can get our money that way. If you think that fees over time will come down, owning businesses is the way to avoid that.

[Katie Greifeld]

So they're future proofing in a way. Man, if I could go back to.

[Matt Levine]

The 80s, it's like anything private equity feels really institutional now. But if you run, I always think if you run a crypto exchange, you got to take all that money and put it into laundromats or real businesses, vending machines. Yeah, because you can't rely on like that, like lottery winnings to keep continuing. But you can put the money into a real business. You buy like land. I don't know.

[Katie Greifeld]

Oh my God. Yeah, yeah, they're buying land.

[Amazon Business]

They should buy land.

[Katie Greifeld]

Everyone should buy land. I would love to be land rich.

[Microsoft Security]

What are some ways that Microsoft Security is helping customers stay ahead of 600 million attacks without slowing down business? For sports organizations, it means letting fans share in the action without sharing sensitive information. For automakers, it means driving change and securely innovating their development process. And for digital banks, it means staying ahead and keeping up with evolving cyber attacks. Microsoft Security equips you with deeper insights to help you pinpoint vulnerabilities, see around corners and innovate confidently. They scan trillions of signals daily, giving you the guidance, expertise and tools to protect your business without sacrificing speed for safety. Security is your job, and it's also theirs. With Microsoft Security, you have a partner that looks deeper, keeps you ahead, and helps your business move forward securely. To Learn more, visit Microsoft.com CISO that's.

[Stifel]

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[Katie Greifeld]

Okay, so we have been talking for months really the entire existence of this podcast about how private markets are becoming public. Private markets are the new public market and now we have some prices to put to that.

[Matt Levine]

I really feel like it's a big step in private markets becoming more public when Yahoo Finance starts putting up like daily or real time, real time ish stock charts of SpaceX and OpenAI, Stripe, Stripe and 97 or so other private companies that don't trade on the stock exchange but that are tracked by enough private company tracking kind of things that they can be like, oh, here's a stock price chart. And so you can go look at a stock price chart of all these companies and that feels like you could read news articles that were like secondary trading suggests stripe's value is blah blah blah. But now you can just go look at a chart on your Yahoo Finance. Seems like a big difference. Seems like a real step toward making them look public.

[Katie Greifeld]

I appreciate the effort. It's like in opening volley. I don't think these prices are perfect.

[Matt Levine]

No, they're fascinatingly imperfect. So these prices, Yahoo gets them from two marketplaces, two companies that provide a marketplace for sort of employees, ex employees of these companies to sell their stock to.

[Katie Greifeld]

Forge and Equity Zen.

[Matt Levine]

Yeah, Forge and Equity Zen. Basically it's like on the selling side you have employees and ex employees of these companies who want to exit. And on the buying side you have dentists. That's roughly the model. And I was like, those trades have to be illiquid and small and driven by weird dynamics and not really reflective of valuation of these companies. But if you look at how these prices are derived, they're not really derived necessarily from those trades. These prices are sort of algorithmically determined from things like funding rounds and tender offers and also bids and trades on these platforms. But it's unclear how the prices are determined. And you look at some of these companies and the prices don't change very much. And it's just very clear that they're sort of essentially pulling in prices from funding rounds and tender offers. And it's not a real time stock chart. It's like Crunchbase in chart form. It's like prices of funding rounds. It's not like Real time secondary market.

[Katie Greifeld]

Trading prices, which again I appreciate. But then you take a look at OpenAI's chart, for example, as you mentioned. It is pretty flat. It's pretty flat, which is funny and probably again not reflective of real time pricing when you consider the news this week that they're close to finalizing a full year.

[Matt Levine]

But there isn't real time. The OpenAI stock does not like really trade among like on these secondary trading platforms. Right?

[Katie Greifeld]

Yeah, I know, but I'm saying an example of how pretend real time, not real time this is they're close to finalizing their $40 billion funding round, at least according to Bloomberg reporting, that would value the company at $300 billion. If this was close to real time, I would imagine you would see the line wiggle a little, but it hasn't, right?

[Matt Levine]

It's like psychologically interesting to have like what looks like a real time price chart, even if it's not a real time price chart because it just makes you think, ooh, that's a company whose stock I can buy, by the way. You can't necessarily.

[Katie Greifeld]

The other thing is you can try hard.

[Matt Levine]

These platforms are places that will let you buy many of these stocks, but it doesn't mean they have stock to sell you. These companies often try to restrict their employees and investors ability to resell stock. The news this week is both that Yahoo Finance is taking prices from Equity Zen and Forge to show these stock charts, but also that Equity Zen and Forger are lowering their investment minimums so that now you can, if you're an accredited investor, you can buy stock in these companies with as little as $5,000. But again, that's just like their rules. It doesn't mean that someone's going to sell you $5,000 of SpaceX stock. And in fact, I think it's kind of hard to source a lot of the really hot private companies on these platforms.

[Katie Greifeld]

So I'm comparing. I hate to talk about ETFs, I just hate it, Matt, but I'm going to do it right now. I know that there a, you know, a subset of listeners who absolutely hate when I bring up ETFs, but I just came back from an ETF conference and we have a lot of fans there. So shout out to the friendly to the friendly couple that stopped me in Las Vegas in the casino, in the Virgin Hotel. In any case, there is this ETF called the ER Shares Private Public Crossover ETF. The ticker is X O VR Crossover. It actually 10% of its portfolio is SpaceX. This is pretty much meaningless. But you take a look at the performance of this ETF, it's down about 7% on a total return basis year to date. And SpaceX at least according to Yahoo Finance, is at least up slightly. According to Yahoo Finance, it went from 211 per share to just under 215 per share. Again, this is very close to a meaningless comparison, but there is some way, I guess you could back into what SpaceX is doing. Not really, but I do think it's a little bit interesting. You do have this ETF with real time pricing. We know that 10% of it is SpaceX.

[Matt Levine]

Yeah, but that doesn't give us real time SpaceX pricing. I don't know how people do the arb, but I assume that Jane street is not delivering a basket of a little SpaceX stock to get shares of X over. In some ways this stuff where Yahoo is putting up price charts and you can theoretically get into these private markets with as little as $5,000. In some ways that is psychological signaling rather than a real thing. And it's not like you can go buy $5,000 worth of SpaceX and there's a real time chart on Yahoo, but in some ways it is pushing it towards being a little bit more real. So private markets theoretically are open only to accredited investors in the US whereas public markets are open to everyone. But if you look at the number of people who are accredited, because the accredited standards have not gone up since the 80s, to be accredited you need to have I think $200,000 a year of income or $300,000 as a couple, or a million dollars in assets. And that works out to something like 20% of the population, which is roughly the percent of the population that own individual stocks and brokerage accounts. The investor class that buys public stocks and the investor class that can legally buy private stocks is kind of the same class, kind of. You do wonder a little what is the need for a company to go public. And then conversely, what is the need for it to stay private? Because One thing that CEOs sometimes say is they don't like the distraction of having a public stock price and they don't like managing to the stock price and they don't like the short termism of the stock price. Reacting to news. Now you have this stock chart on Yahoo Finance that doesn't move very much. But in the future, if it moves a lot, you might be like, yeah, I might as well just go public because my stock price is public anyway.

[Katie Greifeld]

Another counter that would be though that they don't have to report earnings four times a year.

[Matt Levine]

It's wild to me that basically retail investors can put $5,000 into a stock and there is no expectation, nobody cares at all that they will ever see financial statements for the company. Of course, of course, no one who buys stocks in a brokerage account looks at financial statements for the companies they buy stock at. Right? Of course it makes sense that no one cares about seeing financial statements. But it's weird that we have 100 years of securities law that's based around we need full disclosure about a company, we need audited financial statements to allow people to make informed investing decisions. Everyone's like, no, we don't care about that stuff. We'll buy SpaceX, it doesn't matter.

[Katie Greifeld]

But you couldn't directly say that they need them and care about them because they form the basis of a lot of great articles written by financial journalists who do read the financial statements, et cetera, and do the work.

[Matt Levine]

That's definitely the theory of public markets is that there is a lot of work done, including based on regulated public financial disclosure, there's a lot of work done to make prices efficient. So when you buy stock in your brokerage account, you are probably getting an efficient price price. You're paying roughly the market expected fair value of the company. With private companies, you could probably make similar arguments, but not really. The financials are not public institutions are not necessarily trading in the secondary market in large size. You're drafting on venture capitalists valuing the company in funding rounds and the incentives there are not quite. It's not quite the same thing as in public markets where there's, you know, inform people on both sides of the trade.

[Katie Greifeld]

Yeah. Funding rounds obviously are the basis of these Yahoo Finance price charts.

[Matt Levine]

Not all of them, supposedly. I don't know, it's like secondary market trading.

[Katie Greifeld]

But yeah, looking at OpenAI, I mean, so much has happened in the AI landscape. There's no pricing of what happened with Deepseek, et cetera.

[Matt Levine]

Right. It would be really funny. It would be really fun. Like if, when the deep seek news had dropped, if you could go to your browser and look at a real time stock price for OpenAI, that would be really, really funny if it was just a flat line and you're like, wait, where's the reaction?

[Katie Greifeld]

We are actually pricing in all information that we have available to us at this time.

[Matt Levine]

I will tell you the other big OpenAI stock price thing. The other thing that you would expect.

[Katie Greifeld]

If there had been a real time.

[Matt Levine]

Stock price was when they fired Sam Altman for a weekend that would have been fun. I wrote about it at the time. They had just done, I think they finalized an employee tender, I think, at an $84 billion valuation, I think, and they were almost done. And then they fired their CEO. And then two days later they hired them back. And then they continued doing the tender and then they finalized it and I think it was still at $84 billion. I wrote about what a weird fact that this news didn't change in either direction. Didn't change the valuation of Opioid.

[Katie Greifeld]

It was perfectly priced in.

[Matt Levine]

It was just like all of as expected. Everything's totally normal. This is not really true. And then they very quickly went on to raise at much higher valuations. Actually, this is my way of saying, if you looked at a real time stock chart of OpenAI during deepseek and it didn't move, you might be like, oh, that's right. That's how venture capitalists think about OpenAI. Just a flat line.

[Katie Greifeld]

And it's still flat this week, even with Studio Ghibli. You can do that on ChatGPT right now.

[Matt Levine]

That's pretty cool.

[Katie Greifeld]

Well, it's all over my Twitter feed, my X feed right now. I feel like you don't really.

[Matt Levine]

I'm not an X.

[Katie Greifeld]

You're not an Xer?

[Matt Levine]

Yeah, I'm an X Xer.

[Katie Greifeld]

Well, that's what you can expect if you go there right now. But maybe that would have pushed the stock price higher if these were real.

[Matt Levine]

Isn't it nice?

[Katie Greifeld]

Go on.

[Matt Levine]

You saying it's all over my X feed makes me think I understand why CEOs don't like to have a real time stock price. It's like this distraction has moved around our stock price. Let's just not have that.

[Katie Greifeld]

So I talk to a lot of CEOs in my other job, which is being a television anchor, and you ask them on air, do you care about the stock price or did you notice this in the stock price? And they always say, no, I don't really look at the stock price, blah, blah, blah. And then you get lunch with them, you get coffee, you ask them in the commercial break. And I often get from them, yeah, I'm constantly watching it. And of course you are. If I had a real time measure of my performance, I would never not be looking at it, which I guess is distracting.

[Matt Levine]

This is like Cliff as theory about private equity, which is that, like, it is not less volatile than public stocks, but it reports less frequently and so it feels less volatile. And everyone knows that. But his point is like, that is actually valuable to a lot of investors and that's why they're willing to pay a premium for private equity. Because like not knowing what the stock price is is like really good for you.

[Katie Greifeld]

I mean, probably, but I would never do it. It's very intuitive. I read every YouTube comment, I read every Spotify comment, I look at every tweet tweeted at me. I just am desperate for feedback.

[Matt Levine]

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

[Katie Greifeld]

And I'm Katie Greifeld.

[Matt Levine]

You can find my work by subscribing to the Money Stuff newsletter on and.

[Katie Greifeld]

You can find me on Bloomberg TV every day on open interest between 9 to 11am Eastern.

[Matt Levine]

We'd love to hear from you. You can send an email to moneypodlumberg.net Ask us a question and we might answer it on air.

[Katie Greifeld]

You can also subscribe to our show wherever you're listening right now and leave us a review. It helps more people find the show.

[Matt Levine]

The Money Stuff podcast is produced by Anna Mazarakis and Moses Ando, and special thanks this week to Cal Brooks.

[Katie Greifeld]

Our theme music was composed by Blake.

[Matt Levine]

Maples, Brendan Francis Newnham is our executive.

[Katie Greifeld]

Producer and Sage Bauman is Bloomberg's Head of Podcasts.

[Matt Levine]

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

[Microsoft Security]

How is Microsoft Security helping customers stay ahead of 600 million attacks without slowing down business? From automakers to sports organizations and digital banks, Microsoft Security delivers deeper insights, scanning trillions of signals daily to help you see around corners and protect your business. Security is your job, and it's theirs too. With Microsoft Security, you have a partner that helps your business move forward confidently. To Learn more, visit Microsoft.com CISO that's Microsoft.com CISO how can you free your.

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