Perhaps a Ballroom

Summary

Money Stuff: The Podcast

Episode: "Perhaps a Ballroom"

Date: March 6, 2026
Hosts: Matt Levine (Bloomberg Opinion columnist), Katie Greifeld (Bloomberg News reporter & anchor)

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Episode Overview

In this episode, Matt Levine and Katie Greifeld return from a brief hiatus to break down several headline-making Wall Street stories. They dive deep into the high-stakes Warner Brothers acquisition drama, analyze the latest tremors in private credit and liquidity, and dissect the peculiarities of ETFs holding private assets like SpaceX. The conversation, as always, combines wit, skepticism, and sharp analysis of the latest in finance.

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Episode Breakdown

1. Return from Hiatus

Timestamps: 02:14–03:28

• The hosts explain their recent absence: vacation schedules and an accidentally unrecorded episode ("the greatest episode...never recorded").
• Matt jokes about releasing just Katie’s side of the lost audio as an avant-garde segment.
• Both prep for upcoming industry conferences (Matt: Tulane M&A in New Orleans; Katie: an ETF conference in Vegas).

Quote:

"We actually had an episode we recorded. Except when I say recorded, I mean we performed, but we accidentally did not record."
— Matt Levine (02:30)

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2. The Paramount–Warner Brothers–Netflix Merger Saga

Timestamps: 04:25–14:42

Background and Bidding Drama

• Katie recaps the state of play: "I left for vacation thinking that, okay, Netflix has kind of got this in the bag...and they did not have it in the bag."
• Matt lays out the bid sequence: Paramount bids $30/share, Warner leans towards Netflix’s more complex (but higher-valued) offer, Paramount raises to $31/share, Netflix walks.
• Paramount is set to buy Warner for $31/share; Netflix exits, collecting a breakup fee.

Merger Structure and Its Oddities

• Paramount, much smaller than Warner, is leveraging itself massively for the acquisition—up to 6x its own market cap, with help from Larry Ellison.
• A $3 billion rights offering aims to bolster the equity base and slightly reduce the resulting debt.

Key Insight:

"What doesn't make sense from a corporate finance perspective is Paramount, which is teeny, buying Warner, which is big."
— Matt Levine (06:26)

Deal Risks & Regulatory Wrangling

• Warner’s board worried about the deal’s financing—would be the largest leveraged buyout (LBO) ever, presenting risk.
• Regulatory considerations: Paramount's bid seen as faster/easier in D.C. than Netflix's.
• Alleged influence: "President Trump told Sarandos not to overpay for the company." (Katie, 11:51)

Human Element & Cynicism

• Katie empathizes with Paramount, repeatedly rebuffed: "If I was in Paramount’s shoes, I would just feel really bad all the time." (12:33)
• Matt: The board's job is simply to get the best price; ultimately, "there had to have always been some price" Paramount could pay.

Strategic Take

• Some speculate Netflix could scoop up the merged company in a few years if the debt proves crippling.

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3. Private Credit and the BCRED Situation

Timestamps: 16:33–24:24

• Katie and Matt discuss the liquidity crunch in non-traded private credit funds, specifically Blackstone’s BCRED.
• Due to high redemption requests, Blackstone executives (25+ senior leaders) personally funded some investor exits at par value—a show of confidence.

Quote:

"I don't want to... if I think they're worth a hundred cents on the dollar and everyone's panicking, I want to buy at 90 because I should get a discount."
— Matt Levine (19:41)

The Boaz Weinstein Trade

• Boaz Weinstein offers to buy interests in these illiquid vehicles at 75 cents on the dollar—capitalizing on retail investors’ desire for liquidity amid nervousness.
• The hosts debate the tactic: value of immediacy/liquidity, fundamental portfolio quality, and the impact of retail panic.

The Psychology of Retail

• Katie questions if retail confidence in private assets is permanently dented.
• Matt bets on investors’ short memories but notes right now “no one’s doing a retail private credit push.”

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4. The Perils of Private Assets in ETFs

Timestamps: 26:03–33:50

XOVR (Crossover ETF) & SpaceX Exposure

• Focus: The ERShares Private Public Crossover ETF (“XOVR”) holds SpaceX via a special purpose vehicle (SPV).
• Problem: ETF’s outflows caused illiquid SpaceX stake to exceed the SEC’s 15% cap (hitting as high as 44%).

Valuation Oddities & Expenses

• Morningstar highlights the ETF’s returns don’t match SpaceX’s valuation boom—performance is almost entirely explained by public holdings.
• Theory floated that SPV expenses/fee structures may dampen the effect.

Quote:

"This is like the opposite of private credit... Everyone's like, those marks should be much higher."
— Matt Levine (27:22)

Regulatory Gaming & Market Structure

• Portfolio managers, not the SEC, classify the liquidity of holdings—creating incentives to stretch definitions (as in the Baron First Principles ETF, “RONB”).
• Matt argues, "SpaceX is more liquid than a lot of public stocks," thanks to secondary markets.

Arbitrage & ETF Mechanics

• Some investors use ETFs to gain specific exposure (e.g., to SpaceX) by buying the ETF and shorting out the public holdings, isolating the private company’s returns.
• ETF’s marketing relies on rare private asset exposure; but if the mark-to-market doesn’t deliver, outflows occur.

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Notable Quotes & Moments

• On the lost episode:
  "We should do a Space Ghost Coast to Coast thing..."
  — Matt Levine (02:44)

• On deal making discipline:
  "Could you pay one more dollar? And you're like, no. It's amazing. It's an amazing display of discipline."
  — Matt Levine (11:10)

• On private credit optics:
  "It's a good story, it's a bad story."
  — Katie Greifeld (18:54)

• On the illiquidity trade:
  "People now want this liquidity. And if people really want liquidity, they should pay for liquidity. And Boaz will be the one to get paid."
  — Matt Levine (22:31)

• On private equity in ETFs:
  "There's a continuum of liquidity, and SpaceX is more liquid than a lot of public stocks."
  — Matt Levine (31:10)

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Key Takeaways

• Warner-Paramount Deal: A classic scenario of a smaller company taking on enormous leverage to swallow a larger target, with significant risk for the merged entity—especially when financing is supplied by a deep-pocketed backer (Ellison). Netflix’s walk-away is seen as a move of both financial and negotiating discipline.
• Private Credit Angst: Illiquidity has reared its head in popular credit funds, prompting unorthodox measures to calm rattled retail investors. Opportunists like Boaz Weinstein are trying to exploit the value of liquidity in times of stress.
• Private Assets in Public Wrappers: ETFs that add private stakes (like SpaceX in XOVR) run into both regulatory and valuation headaches—showing how market structure and fund mechanics can create wild imbalances or arbitrage opportunities.
• Market Psychology: Investor memory tends to be short—but headline scares can slow or halt whole sectors’ retail momentum, at least temporarily.

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Episode Structure & Timestamps

| Segment | Approx. Timestamp | |--------------------------------------------|----------------------| | Hiatus explanation | 02:14–03:28 | | Warner Bros–Paramount–Netflix saga | 04:25–14:42 | | Private credit & BCRED redemptions | 16:33–24:24 | | Private assets in ETFs (SpaceX, XOVR) | 26:03–33:50 |

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Tone & Style

The conversation is equal parts deadpan and incisive, mixing technical clarity with wit. The hosts are self-deprecating and skeptical of industry spin, with a clear focus on demystifying complex financial maneuvers for a broad, finance-savvy audience.

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Contact:

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This summary covers all major topics and notable moments. For full context and flavor, tune in to the episode!

Transcript

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Bloomberg Audio Studios Podcasts Radio News I

[Katie Greifeld]

feel like we should address why we were off air for three weeks. People asked me about it.

[Matt Levine]

Really? No one asked me about it. Well, no one asked me about it. Why are we off air?

[Katie Greifeld]

I got questions. Well, you had a vacation, then I had a vacation, then we actually had an episode we recorded.

[Matt Levine]

I think everyone in this room would agree the greatest episode of the Money Stuff podcast in its history. Except when I say we recorded it, I mean we performed, but we accidentally did not record.

[Katie Greifeld]

Yeah, so it'll never see the light of day.

[Matt Levine]

We do, I believe, have your side of the audio, which, like, I was joking. We should do, like, a space ghost coast to coast thing where, like, we play your audio and I just say non sequiturs. That set you up to say something weird in between your audio. But who has time for that?

[Katie Greifeld]

I was also thinking, like, Mystery Science Theater, where, like, I say something and then you offer a snippy little comment and then I say something else and you just respond.

[Matt Levine]

There were a lot of ways we could go with that audio.

[Katie Greifeld]

Who has the time?

[Matt Levine]

Yeah, who has the time?

[Katie Greifeld]

Not us. No. So we apologize, dear listeners.

[Matt Levine]

You're fine.

[Katie Greifeld]

I'm sure we all had a great couple of weeks.

[Matt Levine]

Yeah, everyone, we got a vacation from this. They got a vacation from us.

[Katie Greifeld]

It's fine.

[Matt Levine]

I'm going away on a couple of

[Katie Greifeld]

weeks, so I'm going to a conference and you're going to a conference.

[Matt Levine]

I want to say this. I'm going to the Tulane M and A conference, which is like the big M and A conference for, like, M and A bankers to some extent, but lawyers to a very large extent. So if you're there, say hi.

[Katie Greifeld]

And I've never been to this conference,

[Matt Levine]

but everyone says it's fun because it's in New Orleans.

[Katie Greifeld]

That does sound really fun. And the weather should be nice, but not horrible in March in New Orleans. I'm going to Vegas for an ETF conference. I hate Vegas, but I'll be there. So if you're there, shout out the pod.

[Matt Levine]

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

[Katie Greifeld]

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

[Matt Levine]

Where should we start, Katie?

[Katie Greifeld]

We could start with Warner Brothers. That happened last week.

[Matt Levine]

It's still happening, but.

[Katie Greifeld]

Yeah, it's still happening, but I was on vacation and I left for vacation thinking that, okay, Netflix has kind of got this in the bag. Like, they've kind of had this in the bag, and they did not have it in the bag. They ended up walking away.

[Matt Levine]

Yeah, it's fascinating, right? Paramount had bid $30 to buy Warner Brothers. Warner Brothers had said, we'd rather take this Netflix bid, which is more complicated, but whatever, it was worth more than $30. Right. To Warner, they thought. And then Paramount kept pestering them, and then they eventually raised their bid from 30 to 31. And Warner was like, well, 31 is better than Netflix's bid, although 30 was not. So they went Back to Netflix and they said, you have matching rights. Would you like to raise your bid above 31? And Netflix said, no. Thank you, see you later.

[Katie Greifeld]

Ye.

[Matt Levine]

And so Netflix just dropped out and Paramount is buying Warner for $31.

[Katie Greifeld]

I could see a world in which Paramount does go after Netflix next because this was pretty audacious.

[Matt Levine]

So you have this dynamic where Paramount thinks that it should be combined with Warner Brothers and Warner Brothers kind of thinks it should be combined with someone like Warner Brothers wants to sell itself. And so Paramount, which has a young, ambitious, arguably nepo baby CEO.

[Katie Greifeld]

I was going to say a CEO with a, well, deep pocketed father.

[Matt Levine]

A CEO with, let's say, something to prove he's like, I want to buy Warner. And Warner has a CEO who has kind of proven himself and you know, wants to sell. Right. And so it makes sense to combine these two companies. It probably makes sense. They think it makes sense. There's, there's some synergies, whatever makes sense to combine the companies. And it makes sense for Paramount's executive team to control the combined company, let's say. Right. But what doesn't make sense from a corporate finance perspective is Paramount, which is teeny, buying Warner, which is big.

[Katie Greifeld]

Yes.

[Matt Levine]

In a sort of straightforward world you'd be like, well, Warner will buy Paramount and then they'll combine them. And then. But it just didn't work out that way because of the dynamics of how Warner is trying to sell itself and bidding against Netflix. And Paramount had offered an all stock deal. It would not have worked. Right. So they offered an all cash deal,

[Katie Greifeld]

which meant borrowing more than twice their market capitalization. Actually it's pretty fantastic.

[Matt Levine]

Sort of depends on how you count their market cap. Right now Paramount's market cap is like 13, $14 billion. Their equity market cap and the debt for this deal I think including everything, is like $79 billion. So it's like six times their market cap. But that math is not quite right because their market cap today is like $13 billion. But they're getting like a 40 something billion dollars equity check from Larry Ellison.

[Katie Greifeld]

Fair.

[Matt Levine]

They're also doing a rights offering, which I love.

[Katie Greifeld]

Explain that. And why do you love it?

[Matt Levine]

Well, I love it because it doesn't make sense for like this teeny company to borrow so much money to buy this bigger company. You do it the reverse. Right. And the rights offering is a way to like very slightly move in the correct direction, which is like we should have more stock outstanding if we're going to swallow this giant company. And so they're offering to sell about $3 billion to whoever wants it, public investors on the same terms that Larry Ellison is buying. So Paramount is essentially a controlled company, like in the personal ownership of like the Ellison family, but it has public shareholders and they can put in some more money. Basically, if you're a public shareholder, you have the right to buy some stock at the 16 bucks that Zaire Ellison is paying. I mean, like, you know, it's 3 billion of stock, which it's 3 billion less of debt load than you'd otherwise need. And like, they have a lot of debt.

[Katie Greifeld]

They do have a lot of debt to the point where they were downgraded to junk by Fitch in the aftermath of this, which I guess isn't that surprising when we're talking about some of these levels.

[Matt Levine]

Not at all. I was thinking about like when they were trying to get this deal. So there's a long time where Paramount was pestering Warner to take their deal instead of Netflix, and Warner was saying no. And it was hard for them to say no because a lot of shareholders wanted the certainty and cash of the Paramount deal. And so the board had to defend their deal. And one thing the board said was the Paramount deal would be the largest leveraged buyout ever. And we have doubts that they can get it done. And like, in some sense that's like a weird thing to say because the Warner board represents the Warner shareholders. They have a fiduciary duty at this point to get the best price for the Warner shareholders. And if you say, well, the Paramount deal involves borrowing a lot of money, it would be hard to pay down all that debt. That doesn't matter. That's not your problem. Right. The shareholders are cashed out at that point. If it runs into trouble after the lbo, that's not the shareholder's problem. So it's not the board's problem. And the board is defending this as saying, well, we don't think they could even, even raise the financing to do this lbo. Which is kind of a weird thing to think because it's like Larry Ellison and Apollo. It's people who can raise the financing. But now that they've signed the Paramount deal, I'm like, oh, yeah, this is the largest LBO ever. And I can see why someone with ties to Warner Brothers would be nervous about that. There's going to be a lot of job cuts. There's going to be probably a lot of cuts in production, although there's debate about that. But to service all of this debt, it's going to Be difficult. And it's going to lead to hard business choices at Paramount, Warner. And if you sold to Netflix, which has plenty of money, you wouldn't have those pressures. You may have other pressures. Right. Like, Netflix is not necessarily a lavish, benign overload for movie companies, but, like, having that much debt makes it harder to run the business.

[Katie Greifeld]

Yeah. I mean, there were questions about theatrical releases, et cetera, when it came to the Netflix bid.

[Matt Levine]

Netflix is like, you can have your theory of mind of Netflix, but they have plenty of money.

[Katie Greifeld]

Yeah, yeah. It's funny, I mean, taking a look at our reporting, both Ted Sarandos and David Ellison had spent a lot of time in D.C. sort of pitching for this deal. And it seems like one of the factors, though, was the idea that when it came to the regulatory side of things, that it would be a quicker experience going with the Paramount bid than with Netflix. That probably would have lasted well into 2027.

[Matt Levine]

A lot of people think that, yeah, Paramount definitely pushed that narrative. Ted Sarandez was going around saying, no, no, it's fine. We have no problem. We would have got improved quickly. So I don't. I don't know the answer. But, like, yes, people were nervous about the Netflix regulatory approval process. And this is on the backdrop of everything is about Donald Trump's personal whim. But anyway, so there's a sense that Netflix is politically on the outs and Paramount is politically on the end. But Netflix very consistently said, no, no, no, it's no problem. We're fine. We're doing great. So I don't know.

[Katie Greifeld]

Yeah, I mean, Netflix, in Walking Away, said that this was solely about price, that they were confident they could get it back.

[Matt Levine]

It's fascinating that you've come this far, you've spent this much time and money on this deal, and they're like, could you pay one more dollar? And you're like, no, it's amazing. It's an amazing display of discipline. By the way, it's one more dollar. But it's also, they get a big breakup fee for walking away, which Paramount is paying. There's been a lot of talk about Paramount agreeing to pay that breakup fee. And like, I have always found that talk very perplexing because obviously, if you bid $31 per share in cash to buy a company, the incidence of. Of the breakup fee is on you. Nobody could possibly pay it other than Paramount. And it's just like sort of smoke and mirrors that Warner was like, oh, they have to pay the breakup fee. But anyway, yeah, they're paying it fine.

[Katie Greifeld]

Yeah, well, also just to the point on the D.C. relationship, apparently President Trump told Sarandos at some visit not to overpay for the company. So apparently he took his advice.

[Matt Levine]

I don't know, he was going to overpay. And then Donald Trump gave him some business advice and he's like, nevermind.

[Katie Greifeld]

If the President tells you that, I mean, kind of feels like the writing's on the wall, like this is.

[Matt Levine]

I don't think that's like if you overpay, well, we won't approve it. I think that's just. I used to be in business.

[Katie Greifeld]

Yeah, yeah, yeah.

[Matt Levine]

I don't think it's.

[Katie Greifeld]

I mean I wasn't actually in the room, so I don't know.

[Matt Levine]

I wasn't either. Yeah, we're speculating a little bit about what that conversation's like.

[Katie Greifeld]

I don't know what room it was. Was it the Oval Office? It could be any room.

[Matt Levine]

Could be any room.

[Katie Greifeld]

Yeah. Perhaps a ballroom. Just from a human level, I mean, just reading this, I feel like I was getting my feelings hurt. Like the fact that it took so many months, Paramount was rebuffed at so many turns. It feels like Warner Brothers, the board really didn't want to do this and then found themselves in a position where they sort of couldn't say no. I feel like if I was in Paramount shoes, I would just feel really bad all the time.

[Matt Levine]

But interesting. I don't know.

[Katie Greifeld]

I mean, maybe I just don't have the bullheaded confidence.

[Matt Levine]

Warner would never say we really don't want to sell the prima. Right. I mean they're a board of competent directors. They have a fiduciary duty to get the best price for their shareholders. I think that they like the Netflix deal. For whatever reason they like the Netflix deal, they'll tell you deal certainty and the value of the cable stub and whatever. But there was always some price. I mean there had to have always been some price that Paramount could pay that would be enough for them. And it turned out that price was $1 more, which is funny. The other thing that happened that is so strange is that Netflix was like, we'll pay the complicated package they would pay and this is our best and final offer. And Pearman said, We offer $30 and it is not our best and final offer. And so it would like Warner could not accept that deal. It would be just absolute malpractice to be like, we'll take your not best offer. So they had to hold out for something more Else is in the background of like, oh, we had to hold out for more. And like, I don't know if they explicitly said 31 is our best and final offer, but like 31 was enough.

[Katie Greifeld]

Yeah. Well, it'll be interesting to see how long this actually does take to get through.

[Matt Levine]

The other thing is, well, I don't think I'll take a long. I think they've already gotten some of their clearances. Although there's like European regulations, a lot can still happen. But the other interesting thing is like if your model of this is they have taken on crippling debt and won't be able to service it. Like you read some people being like Netflix's plan here is to buy the whole thing in three years when it falls apart. There you go. Which is one one way to put.

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[Matt Levine]

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[Matt Levine]

Bloomberg Surveillance Essential listening each and every business day. Private credit has been a thing.

[Katie Greifeld]

Huh? Oh my gosh.

[Matt Levine]

Oh my gosh. It is just BCRED obdc all these things.

[Katie Greifeld]

Yeah. BCRED Blackstone stepping up to meet these redemptions personally.

[Matt Levine]

Yeah, right. B cred.

[Katie Greifeld]

Yeah.

[Matt Levine]

The Blackstone non traded private credit business development company that's not its name, that's just what it is. Its name is BCRED. All these non traded BDCs, they call them semi liquid vehicles. Every quarter they offer to Redeem up to 5% of the stock tender offer. So if you are invested in this fund, you can't sell it on the stock exchange. There's no way to get liquidity except every quarter they will buy back your shares if you want, if you want out, but only up to 5%. So last quarter they got 7.9% of the fund in redemption requests, which is a record, as we reported. And so they had to scrape to do those redemptions not because they didn't have the money. They have like bank credit facilities, they can do the money, but because the way the tender offer works, they can't. It's boring. But they couldn't actually meet all those redemptions. And rather than say no, which is not quite the same thing as gating the fund in air quotes, but yeah, look like gating and people get mad and upset. So rather say no to anyone wanted out, they let everyone get out. And to do that, they paid about 7% of them out with PCRED's money and they paid the remaining 0.9% out with money from Blackstone, the firm, and from the personal accounts of some Blackstone employees who, you know, get into the fund. It's like meant to be a show of confidence. It's like we will cash you out at par and we will pay par with our own money because we really believe in these credits.

[Katie Greifeld]

Specifically, it was more than 25 seniors, senior leaders from across Blackstone, we reported. Yeah, I've heard that too. I was talking to someone about this on Bloomberg TV yesterday and they were like, I take this as a very bullish sign. It's akin to share buybacks or insider buying or something like that.

[Matt Levine]

Yeah.

[Katie Greifeld]

So that is the angle.

[Matt Levine]

That's obviously what it's meant to be.

[Katie Greifeld]

That's the optimistic angle. But the headlines keep coming.

[Matt Levine]

I mean, the angle is like some retail investors in this private fund, having read bad headlines, wanted to take their money out and there are offsetting inflows from experienced private credit professionals who work at Blackstone and know the portfolio. Right.

[Katie Greifeld]

Like, that's a good story, it's a bad story.

[Matt Levine]

Yeah. You had to like, you know, you had to like twist the arms of the employees to. Yeah. How do you say no?

[Katie Greifeld]

That's what I would love to know. Like, okay, more than 25 or about 25 said yes. Did anyone say no? Did Anyone feel like they could, I want to talk to that person.

[Matt Levine]

The other thing that bothered me about this is like, if you came to me and I was like a sharp elbowed private credit professional and you were

[Katie Greifeld]

like, I can see it.

[Matt Levine]

You're like, all of our retail investors. Not all. 7.9% of our retail investors are panicking and want out of our lovely fund, which has great credits. And we probably believe in the portfolio. Would you like in. I'd be like, sure, that sounds like a fire sale. I'd be happy to get in when these people are panicking. And then my bosses would be like, great, you're buying at 100 cents on the dollar. I'd be like, no, that's not the

[Katie Greifeld]

good news and bad news.

[Matt Levine]

I don't want to, like, if I think they're worth a hundred cents on the dollar and everyone's panicking, I want to buy a 90 because I should get a discount. You think about the professionals at the firm using their own money to buy the controversial assets. The classic story is in, I don't know, 2011 or something, sometime shortly after the financial crisis, Credit Suisse had this giant pile of what people called the toxic assets. Yeah, the mortgage derivatives. And just do your weird stuff from the crisis. And they were like, we can't sell this. It has a huge capital hit. So we're going to package it into a box and give shares of the box to our managing directors. And so they've just paid bonuses. One year in toxic assets.

[Katie Greifeld]

Love it.

[Matt Levine]

And those people all got rich. They immediately recovered and they did so well because they got these toxic assets at the marks they were at, which was a distressed mark. But here, everything's at par. There's no distress marks. You're getting a price that does not reflect necessarily the level of nervousness that your retail investors are showing when they try to redeem.

[Katie Greifeld]

Yeah, and that's the thing. I mean, we heard from Blackstone's global head of private credit strategies at Bloomberg Invest this week, saying that the noise that you're seeing doesn't match the solid credit fundamentals of the fund's assets. It almost feels like the conversation has sort of moved beyond that when it comes to the redemption requests that you're seeing. And even if it's not headlines about Blackstone specifically, there's a lot of stories. I mean, there was one on Thursday about BlackRock. What, marking a private loan they hadn't made to zero.

[Matt Levine]

There's going to be some markdowns on some loans. I don't Know that it'll be universal across all these funds. But all these people, all these senior private credit people are going around expressing confidence in their portfolios, which one might be true and two, they have to say. But then there's the separate question of if everyone is panicking and you are confident in the portfolio, yeah, you should step in and buy. But it's weird to have to buy at 100 cents on the dollar.

[Katie Greifeld]

It's upsetting.

[Matt Levine]

And this is why I love the trade that Boaz Weinstein is doing.

[Katie Greifeld]

The Boaz Weinstein of it all.

[Matt Levine]

So we're recording this on Thursday, he announced one, I think today or yesterday for the Starwood Private REIT. And two weeks ago he announced one for these Blue Owl Private BTCs where basically he's going around tendering to buy shares of these non traded semi liquid vehicles that people are nervous about. He's offering to buy them at like 75 cents on the dollar. Presumably he's more skeptical than like Blackstone is, but like less skeptical than these retail investors. Right. He thinks these credits are fine or he's hedging the credit, I don't know. But like, he's getting these credits at a discount because retail investors are, I don't want to say panicking, but they're nervous.

[Katie Greifeld]

Well, that's what I wanted to ask you was what is the trade here for Boaz?

[Matt Levine]

The trade is like, the value of liquidity in these vehicles has gone up enormously in the last month. People now want this liquidity. And if people really want liquidity, they should pay for liquidity. And Boaz will be the one to get paid. In theory.

[Katie Greifeld]

But I'm wondering, maybe no one will tender.

[Matt Levine]

This might just be trolling.

[Katie Greifeld]

Right?

[Matt Levine]

Nothing forces anyone to tender because these vehicles all have mechanisms to cash you out at 100 cents on the dollar. Yeah, not perfect. There's Gates, whatever. But because you sort of expect to get cash out at 100 cents on a dollar, you might not want to tender to Boaz at 75, but you might.

[Katie Greifeld]

Yeah, to the point. He could be trolling. I was looking at some of his tweets, including the one he announced this, and someone commented something like, you're hilarious, man. It is pretty funny.

[Matt Levine]

It's a funny trade. Yeah, it's a funny trade because, like, there's all these headlines, oh, private credit liquidity. And then like, there's all these private credit people going around on TV being like, it's fine. Our portfolios are great. And then Buzz is like, I'll pay 75 like, it's great. It's a good trade. It's a.

[Katie Greifeld]

Well, I was wondering, it's like a

[Matt Levine]

little bit pouring fuel on the fire,

[Katie Greifeld]

like how it works out for him. Like is he.

[Matt Levine]

He might get 0 shares, I don't know.

[Katie Greifeld]

But I mean it would be nice to ask the man himself. Like is this him calling the bottom and hoping like how it's being traded in the market that it will go back to 100 cents or is he just hoping that he will get cashed out at a hundred cents?

[Matt Levine]

There could be all sorts of trades. He could be short the credits. Right. But like to me like the obvious trade is like the illiquidity premium of these funds has gone way up. And he can capture that.

[Katie Greifeld]

Yeah. Well, Boaz, come on the podcast, just the point I wanted, I wanted to make when it comes to like the fundamentals almost not mattering. I just wonder about the psychological aspect of it all. The fact that over the past several years all these private asset private credit folks have been pushing so hard into the retail market. Whether this experience overall, even if the fundamentals are fine, will just dent demand going forward from retail.

[Matt Levine]

My bet is always on people having short memories. But right now, yeah, no one's like, oh, we really need to do our retail private credit push.

[Katie Greifeld]

Not this week, not this week. I don't know, there's a lot planned. There's like a lot of like interval fun type things that are supposed to push out in the next couple months. So.

[Matt Levine]

Yeah, we'll see, we'll see, we'll see.

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[Katie Greifeld]

Speaking of private assets.

[Matt Levine]

Oh, you want to talk about X over.

[Katie Greifeld]

Let's talk about what's going on in the ETF space.

[Matt Levine]

Why not immune from the semi liquid problems?

[Katie Greifeld]

Not totally while we're here. So we're talking specifically about private companies because there's this fascinating ETF. The government name is the ER, shares private public crossover ETF. It's X over crossover XOVR. It owns SpaceX not outright, but through a special purpose vehicle. And the SEC has a cap on how much of an ETF any open ended fund can have in a liquid asset. It's 15%. The problem that this ETF keeps running into is that it keeps getting outflows. So it's stake as a percentage of the portfolio keeps going up. It hit like 44% or somewhere close to it in the past couple weeks.

[Matt Levine]

Also, SpaceX's valuation has like quintupled in the last few years.

[Katie Greifeld]

Yeah. Morningstar has been very vocal on this. Specifically this man named Jeffrey Patak. I hope that's. I'm saying his last name. Right. That if you take a look at the performance of the ETF, it doesn't necessarily reflect the fact that SpaceX's valuation has quintupled, which is also a big question mark.

[Matt Levine]

Right. This is like the opposite of private credit. Private credit. Everyone's like, oh, the marks are fine. Everyone's like, but these marks. And then this one. Everyone's like, those marks should be much higher.

[Katie Greifeld]

Yeah.

[Matt Levine]

Which is weird to me that people wouldn't. Usually people mark things up.

[Katie Greifeld]

Yeah, well that's the big question there, like why you would think that this fund is absolutely crushing it. But Morningstar has made the case that if you take a look at the performance of this etf, its performance can be almost entirely explained by its public holdings rather than its SpaceX holdings, which again, it's a question mark.

[Matt Levine]

What's the question?

[Katie Greifeld]

Why is that happening?

[Matt Levine]

Sure.

[Katie Greifeld]

That's the big one.

[Matt Levine]

I don't know the answer.

[Katie Greifeld]

I don't know the answer either.

[Matt Levine]

They've looked in the SPV and the shares aren't there and they're like oops. And they close it and forget about.

[Katie Greifeld]

Well, that's one of the theories.

[Wellington Management Announcer]

Right.

[Katie Greifeld]

Is that the SPV. Well, the SPV that's like a very.

[Matt Levine]

The SV charges 100% of performance fee

[Katie Greifeld]

and so, well, it could partly be explained by SPV costs. There was a filing this week where the firm said that in the prior period the fund's like total expense ratio was 1.18% even though the management fee is only 75 basis points. And they said that they've since switched to an SPV that has no management fee and no carried interest. So this isn't going to be a problem anymore. So it's going to be interesting to see how that shakes out. But what we do know is that you take a look at this share of SpaceX that is this portfolio and it is wildly above the SEC's limit on how much you can actually hold in illiquid securities. So the point being, this is a story that's developing right now and it's going to be interesting to see how it shakes out. And it sort of puts the whole push on putting private assets, or at least private companies in an open ended vehicle kind of takes the shine off because with an ETF you can take your money out at any time. These funds, ETFs aren't gated and that can cause your portfolio to do really funky things if you have to sell your liquid assets. And it's not as easy to sell in SPV.

[Matt Levine]

I mean counterpoint, it's SpaceX.

[Katie Greifeld]

Yeah, right.

[Matt Levine]

This is not a very good counterpoint, right. Because like three months ago everyone wanted to be in credit credit and now they don't. But it is a counterpoint which is that people are like, ooh, I'm surprised having outflows because people, you want to own SpaceX and if their performance reflected their SpaceX shares, people would want that.

[Katie Greifeld]

Flows follow performance. This is probably more a conversation around SPVs, because there is an ETF that does hold SpaceX outright. The ticker is Ron B, it's the Baron First Principles ETF. But they've also classified their SpaceX holdings not as illiquid but as less liquid. Which is something that I didn't actually really appreciate until I started looking into the Ron B ETF that, that you as the portfolio manager classify the liquidity of your holdings to the SEC rather than the other way around.

[Matt Levine]

Right. And by the way, obviously there are incentives to game that. But I kind of see why someone would say, eh, SpaceX is kind of liquid. Right. It's a $2 trillion company or whatever,

[Katie Greifeld]

it's theoretically going public in the next couple of months.

[Matt Levine]

Yeah, but also there's secondary trading in that stock now and there's, there's jillions of SPCs. If you gun to your head, you have to liquidate your SpaceX shares in a week. You could do it at today's prices. You could, for hundreds of millions of dollars of size, not for tens of billions of dollars. So I don't know. I don't have that. I keep saying private markets are the new public markets. There's a continuum of liquidity, and SpaceX is more liquid than a lot of public stocks.

[Katie Greifeld]

Yeah, well, it's interesting. I mean, as far as I can tell, this ETF hasn't liquidated any of its SpaceX SPV holdings.

[Matt Levine]

Right. Also, why would it? Yeah, like as a marketing matter.

[Katie Greifeld]

Well, probably to get below the 15%.

[Wellington Management Announcer]

Yeah, sure, fair.

[Matt Levine]

But once you, once you solve that problem by saying it's liquid, then as a marketing matter, it's probably better to be like, hey, I'm an ETF that's full of SpaceX, than to be like, hey, I'm an ETF with a little bit of SpaceX and all other stuff.

[Katie Greifeld]

Baron, for example, is somewhat of a special case. People familiar with the matter have run this plan by the sec. Part of their reported logic in why they classified it this way is that they've been investing in SpaceX since 2017, and they have an established and good relationship with the company that it seems like they would have an easier time getting their hands on more SpaceX than maybe other firms and funds out there. I don't know if any issuer could go to the SEC and be like, actually this private company, we think it's less liquid. It's not illiquid.

[Matt Levine]

I don't know, I could sell SpaceX shares. It doesn't seem like a big problem. The other thing that I think is interesting with these funds is I just said you'd rather be like, hey, this is an ETF with SpaceX than cats and dogs. In SpaceX, there's obviously a demand for a publicly traded SpaceX proxy, despite how liquid SpaceX is. Right. And one thing I've heard is that people talk about these ETFs as a trade, where the trade is you buy the etf, and with xover, they have a sort of indexy, mechanistic list of their other public stocks. You buy the etf, you short the other public stocks, and what you're left with is a trade that's just long ETF, short public stocks in the ETF. So you're left with just long SpaceX. And I think that that's kind of a marketed trade of this is how you get your SpaceX exposure. You buy this ETF and you hedge out the public stocks. Which reminds me a little bit of the trades we talked about with Ark, with Cathie Wood's ARK ETFs, where those ETFs looked like they might get allocations in hot IPOs. And so people would heartbeat into the ETFs to get some brave, brave folks. But this is like a sort of way to isolate SpaceX exposure, if that's the sort of thing you're looking for, which I feel like a lot of public market investors are.

[Katie Greifeld]

Yeah, perhaps this fund did run up quite a bit. I mean, it, it grew to like $1.8 billion in assets at one point. And I have to imagine that was entirely because it was marketed as having SpaceX exposure. But it's since seen pretty significant outflows.

[Matt Levine]

Yeah. Guess if it doesn't go up a lot, SpaceX shows that it's not a very good SpaceX proxy. And that was the Money Stuff Podcast. I'm Matt Levine.

[Katie Greifeld]

And I'm Katie Greifeld.

[Matt Levine]

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

[Katie Greifeld]

do, and you can find me on Bloomberg TV every day on the close between 3 and 5pm 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 the 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 Moses Andam and Alexis Haut.

[Katie Greifeld]

Our theme music was composed by Blake Maple.

[Matt Levine]

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

[David Gura]

I'm Barry Ritholtz inviting you to join me for the Masters in Business podcast. Every week we bring you fascinating conversations with the people who shape markets, investing and business. CEOs, fund managers, billionaires, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market. Whether you own stocks, bonds, real estate, commodities, crypto. You really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Shiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors. Michael Lewis, author of the Big Short and Moneyball. Regardless of the conversation, these are the folks that move markets each week that's the Masters in Business podcast with me, Barry Ritholtz. Listen, on Apple, Spotify, or wherever you get your podcasts.