Tellers in Dallas: TSLA, FD, PE

Summary

Money Stuff: The Podcast – Episode Summary
Title: Tellers in Dallas: TSLA, FD, PE
Release Date: August 8, 2025
Hosts: Matt Levine and Katie Greifeld

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Introduction: A Brief Respite [01:33 - 02:44]

The episode kicks off with Matt Levine and Katie Greifeld sharing light-hearted banter about Katie's upcoming two-week vacation. Matt expresses envy over Katie's time off, saying, “I'm really jealous that you're taking two weeks off” (01:38). Katie responds with playful remarks about her sunburn and relaxation plans, setting a casual and personable tone for the episode.

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Elon Musk and Tesla’s Interim Stock Options Award [04:06 - 15:18]

Background and Recent Developments

The primary focus of this segment is Tesla CEO Elon Musk's latest interim award of $28 billion in restricted stock units (RSUs). Katie delves into the complexities behind this significant compensation package, explaining that these options were initially granted in 2018 contingent upon Musk transforming Tesla into a "giant company." Despite fulfilling this condition, a Delaware court invalidated the original options, leading Tesla into a complex legal and financial maneuver to regain those funds.

“Tesla's in this weird bind. They're appealing the decision and stuff. They're trying to get him back that money.” – Katie Greifeld (05:50)

Implications and Contingencies

Katie discusses the strategic reasoning behind the $28 billion award instead of the original $87 billion, highlighting that Tesla views this as a "good faith down payment" while navigating legal challenges. She notes two main contingencies:

1. Tenure Requirement: Musk must remain with Tesla for an additional two years.
2. Legal Outcome: The award is nullified if Tesla successfully appeals the Delaware court decision.

“It's like a $14 billion a year payback.” – Matt Levine (07:41)

Financial and Corporate Governance Considerations

The hosts analyze the financial impact on both Musk and Tesla, emphasizing that the arrangement is designed to align with shareholder interests and future company performance. Katie remarks on the board’s delicate balance between rewarding Musk and ensuring Tesla's continued growth, particularly in the burgeoning AI sector.

“We have to be like, we need him to focus on building AI and attracting talent to this company because we're in an arms race for AI.” – Katie Greifeld (10:38)

Regulatory and Accounting Nuances

Katie touches upon the accounting treatment of these RSUs, explaining that Tesla’s accountants likely deemed the options “worthless” under current conditions, hence no immediate expense is recorded. This reflects Tesla's cautious approach amidst legal uncertainties.

“They say there's less than like a 25% chance of both of those conditions being met.” – Katie Greifeld (12:28)

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Corporate Access: The Intricacies of Investor Relations [17:49 - 28:36]

Understanding Corporate Access

Matt and Katie delve into the concept of corporate access, where institutional investors such as hedge funds and mutual funds meet directly with company CEOs. Katie references Bradley Sachs’ piece highlighting the paradoxical nature of these interactions.

“Corporate access is like investors… they will sit down with the CEO and be like, so how's business? And they learn things in these meetings.” – Katie Greifeld (18:27)

Regulation FD and Information Asymmetry

The discussion addresses Regulation FD (Fair Disclosure), which mandates that companies cannot selectively disclose material non-public information. Despite this, Matt and Katie argue that these meetings likely provide nuanced insights beyond regulatory constraints.

“These meetings have some value… it's unclear if tone and body language convey additional information.” – Katie Greifeld (19:36)

Efficacy and Skepticism

Both hosts express skepticism about the purported benefits of corporate access, questioning whether executives’ body language genuinely provides actionable intelligence. Katie suggests that while some value exists, the scope is limited and often overshadowed by scripted responses.

“I come at it from a skeptical lens as a journalist who talks to a lot of CEOs.” – Matt Levine (20:40)

Empirical Insights and Retail Investors

Katie references academic studies indicating that investors engaging in corporate access meetings make more informed trading decisions. However, she challenges the notion that body language is a significant factor, proposing instead that the value lies in the structured information exchange.

“Investors again are competing to add extremely granular information to the information set.” – Katie Greifeld (23:55)

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On-Cycle Recruiting in Investment Banking [31:29 - 38:58]

Bank of America’s Recruitment Policies

The conversation shifts to on-cycle recruiting within investment banking, highlighting recent measures taken by Bank of America to deter junior bankers from accepting private equity (PE) job offers prematurely. Katie explains that analysts who pursue PE opportunities may face reassignment to less desirable roles, such as tellers.

“Bank of America said accept an offer elsewhere, you'll be reassigned… Bank of America has tellers.” – Katie Greifeld (32:03)

Industry-Wide Impact and Competitive Pressures

Matt and Katie discuss how JPMorgan's leadership in enforcing these policies has influenced other banks to adopt similar stances. This coordinated effort creates a tough environment for junior bankers seeking to transition to PE roles early in their careers.

“Jamie Dimon has a lot of moral leadership… everyone knows he's right.” – Katie Greifeld (35:42)

Implications for Junior Bankers

The hosts empathize with junior bankers facing these restrictions, noting the lack of job satisfaction and the harsh consequences of attempting to transition to PE early. They highlight the potential punitive nature of these reassignment policies and the broader uncertainty in the job market influenced by AI developments and fluctuating PE demands.

“They can spend 100% of his time elsewhere for two years and still be the CEO of Tesla.” – Katie Greifeld (09:22)
“The deal flow situation is there's less need for associates right now than people might have predicted two years ago.” – Katie Greifeld (37:37)

Future Outlook

Katie speculates on the sustainability of this recruiting freeze, suggesting that unless competitive pressures or market demand shift, the current restrictive equilibrium might persist. However, she remains cautious, acknowledging that industry dynamics could lead to eventual policy relaxations.

“They break down because of competitive pressures. Right? And if there are no competitive pressures for them to break down, they won't break down.” – Katie Greifeld (38:55)

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Conclusion: Looking Forward [38:58 - 39:38]

The episode wraps up with Matt and Katie summarizing the key discussions, reinforcing the intricate balance between corporate governance, investor relations, and industry recruitment practices. They invite listeners to engage through the Money Stuff newsletter and on Bloomberg TV, ensuring continuity and community engagement.

“We're going to really try hard to make this one good.” – Matt Levine (02:36)
“Choose Express Employment Professionals is the move to make this year with more than 870 locations.” – Ad skipped

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Notable Quotes

• Katie Greifeld on Musk's Stock Options: “Tesla's in this weird bind. They're appealing the decision and stuff. They're trying to get him back that money.” (05:50)

• Matt Levine on Tenure Requirement: “It's like a $14 billion a year payback.” (07:41)

• Katie Greifeld on Corporate Access Meetings: “Corporate access is like investors… they will sit down with the CEO and be like, so how's business? And they learn things in these meetings.” (18:27)

• Katie Greifeld on Recruiting Policies: “Bank of America said accept an offer elsewhere, you'll be reassigned… Bank of America has tellers.” (32:03)

• Katie Greifeld on the Future of Recruiting: “They break down because of competitive pressures. Right? And if there are no competitive pressures for them to break down, they won't break down.” (38:55)

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Key Takeaways

1. Elon Musk’s Compensation: Tesla’s complex legal and financial strategies to handle Elon Musk’s stock options reflect the challenges of aligning executive incentives with shareholder interests amidst regulatory setbacks.

2. Corporate Access Dynamics: While corporate access meetings between CEOs and institutional investors aim to enhance information flow, their actual efficacy and compliance with regulations remain contentious and subject to scrutiny.

3. Investment Banking Recruitment Freeze: Major banks, led by Bank of America and JPMorgan, are tightening their recruiting practices to control the flow of junior bankers to private equity firms, significantly impacting career trajectories in the finance sector.

4. Industry-Wide Impacts: The interplay between corporate governance, investor relations, and recruitment policies underscores the intricate balance companies must maintain to foster growth, compliance, and talent retention in a rapidly evolving financial landscape.

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Transcript

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[Matt Levine]

I'm really jealous that you're taking two weeks off.

[Katie Greifeld]

Yeah, I'm pretty checked out, ma'.

[Matt Levine]

Am. I was gonna say that, but I was gonna say you're already pretty tan. Yeah, I feel like. So I'm excited to see you. After two weeks in the sun, I'm.

[Katie Greifeld]

Gonna work very rigorously on my towns.

[Matt Levine]

Good. I mean, wear spf, please.

[Katie Greifeld]

Yeah, yeah.

[Matt Levine]

Do it responsibly.

[Katie Greifeld]

I'll come back. I'm gonna be like the color of this table.

[Matt Levine]

Whoa.

[Katie Greifeld]

For those can't see the table.

[Matt Levine]

Listening at home. It's a handsome mahogany. Oh, I don't know either.

[Katie Greifeld]

It's plastic.

[Matt Levine]

It's not real wood.

[Katie Greifeld]

It's not real wood. Maybe it is. I don't know. What do I know? But yeah. So I'm out for the next two weeks.

[Matt Levine]

Mm. I'll be here. Yeah.

[Katie Greifeld]

Enjoy it. Keep me up to date on the gossip.

[Matt Levine]

Yeah. Plenty of tea. I'll keep the tea. Flowing.

[Katie Greifeld]

Yeah. Yeah. So this episode is coming out this Friday. We will have a mailbag.

[Matt Levine]

Mailbag.

[Katie Greifeld]

I'm gonna say we're gonna have a mailbag the following week.

[Matt Levine]

We're recording it directly after this episode. So it's actually still up in the air.

[Katie Greifeld]

Sure.

[Matt Levine]

We have to see if we.

[Katie Greifeld]

Right.

[Matt Levine]

We'll cut this out. Enjoy it.

[Katie Greifeld]

But, like, probably we're gonna have this episode out on August 8th and the mailbag out on August 15th, and then on August 22nd, you'll be alone with your thoughts.

[Matt Levine]

Money stuff will go dark, but it'll be okay. I think we all need that reset.

[Katie Greifeld]

It'll be August 22nd.

[Matt Levine]

Yeah. You know, actually, no one will want. I won't even be on air that day because it'll be our Jackson Hole Financial market special. Our Jackson Hole special. So let's all just enjoy Jackson Hole together, you know, take a look at some central bankers in front of mountaintops. And we don't need to listen to a podcast that day, but you do.

[Katie Greifeld]

Need to listen to a podcast today.

[Matt Levine]

And we're gonna really try hard to make this one good.

[Katie Greifeld]

You might. 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.

[Matt Levine]

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

[Katie Greifeld]

Katie, I feel like I follow Elon Musk's pay more than he does. More than. I don't think that's true, by the way. I follow Elon Musk's pay. It is rumored that he follows my vacation schedule and schedules his most insane activities for when I'm supposed to be on vacation so that I have to write about them. I don't think this is true. I don't think he consciously. We're going to find out, but we're going to find out.

[Matt Levine]

We're going to test this.

[Katie Greifeld]

Here I am talking on a podcast about taking two weeks off. So if Elon does something really egregious in the next two weeks, you'll know why.

[Matt Levine]

Well, he should be happy. Er, right now. He got a.

[Katie Greifeld]

What, you think $30 billion makes him happy? Fine.

[Matt Levine]

It's, you know, I have to imagine maybe he's not completely happy, but he's a degree happier than he was, perhaps.

[Katie Greifeld]

So the news is that Tesla's board announced that it's going to give Elon Musk an interim award of $28 billion worth of. I was going to say stock options. It's like restricted stock units with a strike price, but it's stock options, whatever. They ended up giving him that as basically a good faith payment, because as we've talked about on this pod a lot, he was awarded a bunch of options in 2018. They were all contingent on him making Tesla a giant company. He made Tesla a giant company. He got the options. They're worth something like $87 billion today. And then last year, Delaware court said, no, those weren't valid. They go away now. Tesla's in this weird bind. They're appealing the decision and stuff. They're trying to get him back that money. But there are various governance and tax and accounting and legal complications around getting him back that money. And they're still kind of figuring out how to do it. But as a good faith down payment on their desire to give him back those options, they gave him back $28 billion of them this week. So you asked if that made him happy. One thing I wonder is, was it a surprise? Because, like, the previous set of options, like, he sort of negotiated with the board, you know, in 2018, and, like, there was obviously, like, you know, this is an incentive package that, you know, we're giving you these targets that are super ambitious, but, you know, you think you can meet them. So that was like a employment deal that he struck with the board.

[Matt Levine]

Right.

[Katie Greifeld]

This is like. This could have just been like, surprise, here's some of your money back. It's possible the board did it without him, which would be kind of funny if he just woke up one day and, like, you know, at a $28 billion transfer in his bank account, that'd be pretty cool.

[Matt Levine]

Why 28 billion? Why not just make it 87 billion?

[Katie Greifeld]

Part of it is like, they're still figuring out what's happening, right? So this is like a down payment on figuring out the whole answer to this question. Right. If they win the appeal, this award goes away. And it's probably easier to have given him less while they're on appeal. I think it's possible that part of the answer is that. Funny that this is to say that Tesla's board of directors and the special committee that gave him this award are independent and are thinking about their fiduciary duty to Tesla's minority shareholders or outside shareholders, and are thinking not only what would be nice for Elon, but also how do we motivate him to maximize the value of the company? And it's possible that giving him all the options right now is not the answer to that question. It's Possible that the ultimate structure they'll come to is something like you get $30 billion of this stuff and a new award with new targets that requires you to do new stuff. But for now, they gave him this award and it has essentially two contingencies. One is that he has to stay there for two years, which, who knows. And the other one is that it goes away if they win the appeal. So if he gets all the previous options back, he doesn't get these options.

[Matt Levine]

The 2018 options.

[Katie Greifeld]

Yeah. So if he gets that, like 90. That 87 billion DOL. This is not additive to that.

[Matt Levine]

So no double dipping.

[Katie Greifeld]

No double dipping, as they say. Yeah.

[Matt Levine]

You talk about this a little bit in your column that, okay, it has these strings attached. It's contingent on him staying there for two years.

[Katie Greifeld]

There are very few strings. Well, sure, he has to stay there for two years, but it's like a $14 billion a year payback.

[Matt Levine]

But isn't, I don't know, isn't it a little weird that, okay, you have to stay here another two years, but also this is making good on our promise for things you already.

[Katie Greifeld]

Yes, I agree with you. It's a little weird. If their mentality is truly like, we owe you this and we're giving it to you no matter what, then you're right, he shouldn't have to stay for two years. But I don't think they can really do that. I think they really have to be like, in a posture of like, we are maximizing value for the shareholders and we have to get something going forward from it. And if we're just giving Elon Musk $28 billion on his way out the door, then that is not a good use of shareholder resources, even if it's in some sense fair.

[Matt Levine]

True.

[Katie Greifeld]

Also, it doesn't seem like that big.

[Matt Levine]

An ask to stay there for two years.

[Katie Greifeld]

It's like his main source of wealth, more or less. And also, it's not that big an ask in the sense that you and I, if we got a great job opportunity, we'd have to sadly quit this job to pursue that great job opportunity. I would never. That is not a problem for Elon Musk. He can have as many jobs as he wants. Require him to only work at Tesla for two years just to have it have his name on the door for two more years.

[Matt Levine]

Continuously. Right.

[Katie Greifeld]

Intermittently on alternate Tuesdays. I think it's fine. It's not a big ask. He can spend 100% of his time elsewhere for two years and still be the CEO of Tesla.

[Matt Levine]

Yeah. Which is kind of worse. Some would argue that's what's been happening already.

[Katie Greifeld]

Many would argue.

[Matt Levine]

So just keep it status quo.

[Katie Greifeld]

I think, again, the board, they're doing two things. They're trying to be fair to Elon, which I think is a legitimate concern. I think the board thinks and Elon thinks, I think they have a real point that he earned this $87 billion of options, and so he should get them and just retroactively, he should get them for his prior work. They're trying to be a fair to him, but they're also trying to do good things for the company and situate the company well going forward. And so their announcement is not just literally. He has to have his name there for two more years. It's like we need him to focus on building AI and attracting talent to this company because we're in an arms race for AI and Tesla is an AI company. Kitty's rolling her eyes. It's reasonable because Elon Musk does have an AI company. That's not Tesla, but Tesla is.

[Matt Levine]

It's valued like an AI company.

[Katie Greifeld]

Right. It's not valued like a car company that sells as many cars as it sells. Right. It's valued like the future of life, robotics, AI, something, something, something. And so to live up to that valuation, they need to keep him around to be their futurist in residence.

[Matt Levine]

Yeah, I anchor a television show with Matt Miller.

[Katie Greifeld]

Really?

[Matt Levine]

Yeah. How about that? He's a car guy, so talking about Tesla makes smoke come out of his ears. When we talk about the fact that it's a trillion dollar company, you add up the market caps of the big three, Stellantis, Ford and GM, and it comes out to less than $150 billion, which shocked me, actually. I didn't realize it was that low. So a trillion dollars. I wanted to talk a little bit more about the fact that. Okay, if we're talking about this options package, the $30 billion one. So Tesla would take an enormous tax hit if this happens?

[Katie Greifeld]

Well, Elon Musk would take a tax hit.

[Matt Levine]

I think Elon Musk would take a tax hit. Tesla would take a hit to their earnings. Correct?

[Katie Greifeld]

Yeah. Basically, the way it works is that when they granted the options in 2018, they were, for accounting purposes, kind of worthless because they were at the money. So they were not like a gift of stock that day. And because they had these really aggressive conditions where as like a $60 billion company, you would have to grow it into a $650 billion company to get all of the options. And so you can go to your accountants and say that's not very likely to happen. So the value of this grant day one is not very much when they do it retroactively. Now, the value of the grant day one is kind of $28 billion. But they apparently, this is in the disclosure and it's a little unclear why, although I have my assumptions. They apparently went to their accountants and said it's very unlikely that he'll get these options. And so they're worth nothing. And the accountants agreed. And so they say right now that they plan to not incur any expense for these options because it's unlikely that the performance conditions of the options will be met. But there are no performance conditions. So we talked about the two conditions, which are, one, he has to stay there for two years and two, these go away if he gets back the previous tranche. Like, basically, if they win on appeal.

[Matt Levine]

In that court case, if the Delaware decision is overturned, is overturned.

[Katie Greifeld]

Yeah. And so what I think they're saying is that there is a less than like 25% chance of both of those conditions being met. That is, either they're very confident that the Delaware decision will be overturned, or they're very confident that Elon's going to quit in the next two years, or they believe the joint probability of neither of those things happening is very low. They think if the decision is not overturned, he'll quit. Something like that. So this is a funny little. I don't know what those conversations with their accountants were like, but I found it amusing that they would not have a high degree of confidence of him meeting these very limited performance conditions.

[Matt Levine]

But it seems like, I don't know, listening to that, that they seem somewhat confident that the Delaware decision made.

[Katie Greifeld]

It's weird to go to your accountant and be like this. The hundred page opinion by the Delaware chancellor is obviously wrong. And the accounts are, yeah, it's obviously wrong that's going to be overturned. And then like, you know, I don't think they got a legal opinion saying this is definitely going to be overturned. Maybe they did. I don't think it's crazy, by the way. Like, it's kind of a weird opinion. It's kind of a weird outcome. Like there's this weird political environment where Delaware is losing companies. You could imagine it being. There's the reasons it would be overturned, but it's not like, oh, it's definitely going to be overturned. I don't know.

[Matt Levine]

History in real time. And we are chronicling it not for.

[Katie Greifeld]

The next two weeks. Or not.

[Matt Levine]

That's true. Who knows? It didn't say anything about his political activities. Like, you think about this.

[Katie Greifeld]

Oh, come on.

[Matt Levine]

This serious overhang over the stock.

[Katie Greifeld]

No, no, you're the Tesla board and you're like, okay, Elon, in order to get your $28 billion of options, you have to not do a list of bad things, right? Or the list of bad things. Like, okay, sure. It starts with, like, enraging customers by doing political activities and then goes on to like, ketamine and like, you know, run other companies. Like, no, he would much rather have his complete freedom to do whatever he wants than $28 billion. I mean, I'm speculating there, but I.

[Matt Levine]

Talked to him this morning.

[Katie Greifeld]

I don't know. Like, it's easy for me to say I'd rather have the $28 billion.

[Matt Levine]

We're just talking about funny money at this point, right?

[Katie Greifeld]

He's like, right, we are talking about funny money at this point. Like, he lives in a state in which if he wanted any number of dollars to do anything, he could snap his fingers and it would like, magically appear. So, like, there is a sense of fairness. There is a sense of like, you know, wanting to have a certain ownership of Tesla. There's all this stuff that goes into him wanting to have tens of billions of dollars of Tesla options. But, like, if he needs money to do something, he'll find money to do something.

[Matt Levine]

He's gonna be all right, guys.

[Katie Greifeld]

He's gonna be fine.

[Matt Levine]

He wants gonna be okay.

[Katie Greifeld]

I mean, yeah.

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[Matt Levine]

How about corporate access?

[Katie Greifeld]

How about corporate access?

[Matt Levine]

Bradley Sachs over at Business Insider, Bloomberg alum, great piece out about like the.

[Katie Greifeld]

Big hedge funds and corporate access. I love corporate access because it's like it makes no sense. No, it makes total sense, but it makes people insane. Corporate hiking is like investors, largely big institutional investors, hedge funds and mutual fund managers. Investors like to meet with the companies whose shares they own and the companies whose shares they're considering buying. And they will sit down with the CEO and be like, so how's business? And they learn things in these meetings?

[Matt Levine]

Theoretically, no.

[Katie Greifeld]

Theoretically they don't. Right? Because like, you know, the US has rules saying that regulation FD says that companies can't disclose material non public information to some investors without disclosing it publicly to everyone. And yet these meetings happen. And you know that they learn something because one, they keep doing the meetings, right? You know, people don't waste their time for no reason. Right? Like they think they're learning something. And then two, you know, it's like a little hard to study, but there are some empirical studies where academics like look at these meetings and they find that investors who have meetings with management then make more informed trading decisions than they do if they don't have the meetings. So it's clear that these meetings have some value. Yeah, and you know, it's like this gray intermediate area between they can't get material, nonpublic information. The company can't be like, oh, our earnings are going to be really good next quarter if they haven't already given guidance on the earnings. They can't be like, oh, we're getting acquired next week. Right. They can't give like big material information, but they can talk about how they think about the business. They can, like, you know, talk through the model. They can do a lot of helpful stuff for the investors where the investors come away learning something without being spoon fed next quarter's earnings.

[Matt Levine]

Yeah.

[Katie Greifeld]

The thing that people always say about this to make themselves feel better is that the investors can get a read on the executive's tone and body language, which is like, on its face, absurd.

[Matt Levine]

Yes.

[Katie Greifeld]

But people keep saying it. They're like, oh, yeah, they don't say anything that they haven't already said. But the body language tells you something. What does it tell you?

[Matt Levine]

It probably lost its edge during the pandemic when we were all on zoom, and it's a lot harder to see.

[Katie Greifeld]

Oh, that's an interesting question. I feel like there are studies and I don't know them because, like, that would tell you something, right?

[Matt Levine]

Yeah.

[Katie Greifeld]

If it in fact lost its edge on the pandemic, then that would tell you that tone and body language mattered a lot.

[Matt Levine]

Yeah.

[Katie Greifeld]

And when people were only getting zoom calls, they got less information. Whereas my thesis is that in fact they're being told information and tone and body language is just a euphemism. And so in the pandemic, you get on a zoom call and you're like, so walk me through how you're thinking about strategy and the executive tells you they're like, still informative.

[Matt Levine]

Yeah, Someone should do that.

[Katie Greifeld]

Yeah, probably someone has to.

[Matt Levine]

I guess I come at it from a skeptical lens as a journalist who talks to a lot of CEOs. Not to besmirch any CEOs, but a lot of them just follow the script. And I mean, you listen to them speak at conferences and, you know, it's hard to get new news out of someone in the C suite.

[Katie Greifeld]

Maybe three answers to that. One, you don't own 5% of their stock. It's possible that a conversation with an investor is a different framework from a conversation at a conference with a journalist. Right. Like, they're media trained, but they're trained differently to talk to investors. Right. Two, you do not have CIA interrogators to understand their body language, which apparently some hedge funds do. And then. Wait, did I have a third point?

[Matt Levine]

You said you had three, so I.

[Katie Greifeld]

Said I had three.

[Matt Levine]

You got to think of something.

[Katie Greifeld]

Okay.

[Matt Levine]

I'm reading your body language right now, and it seems like you're really trying to think about it.

[Katie Greifeld]

I had two points.

[Matt Levine]

Okay.

[Katie Greifeld]

The third point is like, you can imagine the investors asking different questions because they're not trying to make news that's like they're trying to make very incremental news. Right. They're trying to find out, like, update their model.

[Matt Levine]

Well, that was part of the piece Bradley wrote about how one of the complaints is that the questions that are being asked are like, becoming so niche to the point that they're not useful anymore.

[Katie Greifeld]

Oh, I know what my third point was.

[Matt Levine]

Okay.

[Katie Greifeld]

My third point was that actually in this piece, several investors complain that in fact they have the same complaint you do, which is that the CEOs are now so scripted that these meetings have become less useful than they used to be. Yeah. Not just because the questions are very granular, which is like their questions are granular because hedge funds are competing to add extremely granular information to the information set. And so they have very detailed questions, which sometimes annoy CEOs who want to talk about the big picture.

[Matt Levine]

Big picture. Come on. Here's my strategy. Isn't it great?

[Katie Greifeld]

Right? The point of this piece and what I wrote about it is that in my world, you think of the prestige and importance of investment firms. And right now, the big four multi strategy hedge funds like the Citadel, Millennium 0.72 Valley housings of the world are really on the ascendant. They're really prestigious. They're really sort of top employers in the asset management business. But when you think about what a CEO wants, they don't want to meet with those guys. They want to meet with Fidelity and Wellington. They want to meet with long only managers for a number of reasons. One of which is that the long only managers have longer tenure. Both they hold the stock for decades and also they employ portfolio managers for decades. Whereas the big hedge funds, they're constantly churning through portfolio managers and they're constantly churning through stocks. If you talk to Citadel because they own your stock this week, they may not own it next week, or it may be a different person. But there are other reasons. One of which is that the hedge funds have these really granular questions. They're really interested in what's going to drive the stock in the next couple of weeks. They're not going to ask you about your strategy. If you're the CEO and you want to pontificate about the big picture for a while, you'd Much rather talk to a long term, long only investor than to a hedge fund who has very specific questions about margins. And then the other reason is that they're all 27 and wearing t shirts and the people at Fidelity know how to dress to meet with the CEO.

[Matt Levine]

Just amazing.

[Katie Greifeld]

Yeah, it's literally true that 0.72 now mandates Blazers because they were having trouble booking meetings because they didn't too many.

[Matt Levine]

27 year olds and whatever. Yeah, that was a fun tidbit. This was partly addressed in the article and in your column. I feel like part of the reason that these meetings are in such high demand is just because time is finite and anything that's scarce is going to be valued. And time is scarce and time with these CEOs is scarce. So even if it doesn't add that much of an edge, you still have it, right?

[Katie Greifeld]

I think there's an enormous culture in finance and business generally of like, if you think that doing a thing has a 1% chance of adding 1% to your returns, you're just hardcore and you do it anyway.

[Matt Levine]

I got to get it right.

[Katie Greifeld]

I have transcended that. But you're in that seat because you work really hard and do everything you possibly can to get edge. Even though the meeting will probably be worthless, you'll go to it anyway. The other thing about scarcity is that at these firms, the big hedge funds have multiple teams trading the same sector. You know, if you're the CEO and you book a meeting with Citadel, there's like 5PMs at Citadel who are fighting each other tooth and nail to be the one in the meeting or like the two in the meeting.

[Matt Levine]

You know, honestly, it reminded me so much of working in a large newsroom.

[Katie Greifeld]

I know I was gonna. Right? Yeah, right.

[Matt Levine]

Like, it's very. You have a beat and you're pretty protective of your beat. And it's funny to read about it becoming like part of a recruiting perk is that you're the only person covering this. You don't have to fight for your lane. This is only your lane.

[Katie Greifeld]

Or it's even worse. It's like Bradley Sags writes that the most tenured PMs will often get the best meetings. If Citadel has a meeting with a company, they'll be like the guy who's been here the longest and does the best work gets to have the meeting. But sometimes they'll hire someone and the new guy gets the meeting because that's a recruiting perk. And then the long tenured person doesn't get that good of the meeting. And then it's just like, there's a.

[Matt Levine]

Lot of parallels, right?

[Katie Greifeld]

No, no. Right. I've been in meetings with many other journalists where one, it's competitive to get into the meeting, and then two, everyone's like, it's competitive to get your question answered. And it seems similar in this case.

[Matt Levine]

It's so funny.

[Katie Greifeld]

The other thing I wanted to say is I wrote about this and I wrote about, broadly speaking, CEOs would rather meet with Fidelity or Wellington than with Citadel 72. And then as a throwaway, I was like, and they probably won't be with. If you own 100 shares and you're a retail investor, they probably won't be with you. And I found an academic paper I wrote about Wednesday where they basically tested that out by sending cold emails to a lot of investor relations departments. And the cold emails, some of them were from a Yahoo.com email address, like, hi, I'm an individual investor. I'd like to buy your stock. Could you meet with me? And some of them are from fake investment firms. Like, I'm like, I work at Blue Willow Capital and I'd like to meet with you.

[Matt Levine]

Sounds right.

[Katie Greifeld]

Yeah. They found, first of all, that about 16% of these messages resulted in meetings.

[Matt Levine]

Okay.

[Katie Greifeld]

Which is higher than I would have thought.

[Matt Levine]

Bad.

[Katie Greifeld]

Right. And second of all, there's no distinction between retail investor and Blue Willow Capital. Like, retail people could get the meetings just as easily as Blue Willow. They did find racial discrimination, though.

[Matt Levine]

Yeah, don't love that. This reminds me, we were talking about hims and hers earnings on air this week, and the Hims and her CEO has made a big show of giving questions in the earnings call to retail investors.

[Katie Greifeld]

Yeah, right. My perception of it being hard for retail is an old school perception. Now with meme stocks, it's a different game.

[Matt Levine]

Also somewhat related to this, I was talking to a CEO who reported earnings this week, and the CEO said that, okay, if you report in the afternoon, then you do the earnings call. But then the CEO was answering questions from analysts until like 10pm that night. Like, you have the earnings call and they ask the questions and the transcript goes out and you can see it, it is public. But then like, the real questions come after the earnings call. So you have the earnings call and then you have all your individual calls.

[Katie Greifeld]

And this is the thing that people naively think regulation FD prevents. Right. It's like everything has to be public. But no. And you see it on like public earnings call transcripts. You know, ask questions and the CFO will be like follow up with me afterwards and we'll walk through that, right? And like, you know, it's obviously the case that companies talk to analysts and investors outside of the, you know, one hour public earnings call and it seems to be obviously the case that those conversations are useful, but they exist in this weird regulatory limbo.

[Matt Levine]

I find that frustrating because as a journalist I'm not allowed to sit in on those one on one meetings. Yeah.

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[Matt Levine]

Should we check in on the state of on cycle recruiting?

[Katie Greifeld]

Let's check in.

[Matt Levine]

Bank of America. Yeah. Well, bank of America, the news came out this week written by Catherine Dougherty that their junior bankers face reassignment if they accept other jobs. Just the latest in a string of the big banks pushing back against on cycle recruiting.

[Katie Greifeld]

Right.

[Matt Levine]

It's been a busy summer.

[Katie Greifeld]

One thing I wonder about is like why are they pushing back?

[Matt Levine]

Why are they pushing back?

[Katie Greifeld]

In general, the dynamics here are like JP Morgan led the charge of saying we're not going to allow on cyclical recruiting.

[Matt Levine]

We're mad about it, we'll fire you.

[Katie Greifeld]

And then a number of big private equity firms announced they would wait to do on cycle recruiting, led by Apollo. It feels like most banks did not join in saying we were going to fire you. And most private equity firms did not announce we're not going to do on cycle recruiting for two years. But also it didn't happen. Everyone is quietly, tacitly going along with this process started by JP Morgan. And it's like a two sided. The banks and the private equity firms everybody seems to have, there's a possibly fragile equilibrium where they're not doing the recruiting. And so there's not really a need, I don't think for the banks to say we'll fire you if you do it because it's not happening. But you got to get ahead of it. So some of the banks are joining in. And so this week bank of America said accept an offer elsewhere, you'll be reassigned. Which is very ominous because they don't say where. Bank of America has tellers.

[Matt Levine]

A lot of possibilities. Yeah, that was more dire than I was thinking. I do.

[Katie Greifeld]

They don't say, yeah. And it's the idea of on cycle recruiting is so strange. Right. But essentially it's you'll at the beginning of your investment banking analyst job, accept an offer at a private equity job. But that private equity job is contingent on you spending two years being an investment banking analyst. Because you do need to learn the stuff that you do as an investment banking analyst to be an effective private equity associate. And so you have two years of working in an industry group or an M and a group or a lev fin group at a bank where you learn enough to become a useful associate at a PE firm. And if you get fired at your bank, the PE firm will probably rescind your offer because you haven't done the training that they require. And if you could reassign to being a teller, then also not the training they would have wanted.

[Matt Levine]

Yeah. You can kind of feel for these analysts because also they're probably not having a lot of fun in general.

[Katie Greifeld]

Oh, sure. And one thing reassigned could mean is if you work in the tech group and you get a job at a tech focused private equity firm, then bank of America will say, okay, we're going to reassign you because there's conflict of interest there. So we're going to move you to the natural resources group. That would be a fairly benign interpretation of this. One doesn't get the sense that's what's happening. You get the sense that it's a punitive reassignment.

[Matt Levine]

Yeah. Going by what the story said, this is according to people familiar with the matter. Junior bankers are being asked by their managers to divulge whether they have a new employment opportunity. And if future offers are accepted, those individuals will likely be moved to another area within the bank. So searching for detail there, but they have a week. Apparently those who fail to disclose accepted offers within a week would be deemed in violation. It's interesting to see how different banks are approaching this. Apparently Goldman has you.

[Katie Greifeld]

Right? Goldman has the carrot approach where they're like, well, sorry, they do have.

[Matt Levine]

Well, you have to restate your loyalty every three months or something.

[Katie Greifeld]

Yeah, every three months you have to say you haven't taken a job elsewhere. But they also have. There's three tiers of prestige. Right. There's private equity and then there's investment banking and then there's operations, back office tellers. And Goldman says, if you stay here for two years, we're going to try to move you into our own. I was going to say private equity division. Their own ALTS division, which is private equity. Ish. And then bank of America says, if you don't stay here for two years, we're going to move you into being a teller. Gosh.

[Matt Levine]

Yeah. So Jamie Dimon, it feels like he started this all off a couple months ago. I do wonder if it had been Wells Fargo who led the charge, would we be seeing this cascade of other banks lining up and saying, we're also not okay with this. This is what we're going to do. Or is it uniquely like Jamie Dimon and JP Morgan are doing this and all the other big banks feel pressure to follow?

[Katie Greifeld]

I think Jamie Dimon has a lot of moral leadership. I don't even know about the other banks feeling pressure to Follow, Yeah, the other banks feel cover to follow. This is a competitive market and if one bank says, and this has happened before, if one bank says we're going to fire you if you take a private equity job too early and no other bank says that, then people won't go work at that bank because they'll want their private equity job. But if J.P. morgan says J.P. morgan's pretty big and so you have cover. But the other thing is also the people who run private equity firms care about what Jamie Dimon thinks. Not even as a markets and competitive manager, like, oh yeah, they respect that guy. And so when he says it, they're like, oh yeah, he's right. Because by the way, everyone knows he's right. It's not super controversial. Like no one's like that upset about it. And I think if you like, if you talk to the paramedic people, they are not thrilled with the current process. The current process does not do a good job. The old process, the process where they interview before people started banks, does not do a good job of finding people who are knowledgeable, does not do a good job of finding people who are really motivated. Because you don't know anything yet. They haven't worked as bankers yet.

[Matt Levine]

They're just the babies.

[Katie Greifeld]

Yeah. If you interview them after a year and a half in banking and they're like dead eyed and have built a thousand models, it's easier to find out who really wants to be there, who's really interested, who's learned a lot. And so it's a better system for them. And then the other thing is we live in a very uncertain world about the hiring needs of private equity firms two years out.

[Matt Levine]

That's true. Robots are coming.

[Katie Greifeld]

Robots are coming.

[Matt Levine]

The death of the universe.

[Katie Greifeld]

The deal flow situation is there's less need for associates right now than people might have predicted two years ago. And so why predict two years out when you can just wait? And if everyone can wait, then everyone can wait.

[Matt Levine]

So you called it the old system and that.

[Katie Greifeld]

I'm sorry, the system as of six months ago.

[Matt Levine]

Right. Well, I was gonna ask, do you think that this changes anything? Like have we seen the end of this cycle? Is this a lasting fragile, what did you call it? I liked that fragile equilibrium.

[Katie Greifeld]

I think that between the AI stuff and the relative slowdown in PE, no one is desperate to hire the best possible 22 year olds to start in two years. Those are separate points from Jamie Dimon's moral authority. I think in five years, in two years, if private equity is booming, and they're desperate for people to do deals. And the AI thing was just hype. And they think, how do I get the best possible 40 bodies and seats? They'll be interviewing earlier. These things always break down, but I.

[Matt Levine]

Guess that's what it says.

[Katie Greifeld]

They break down because of competitive pressures. Right? And if there are no competitive pressures for them to break down, they won't break down. So I don't know when that'll be.

[Matt Levine]

So watch this space.

[Katie Greifeld]

All right. Goodbye.

[Matt Levine]

Okay. All right, Matt. Bye.

[Katie Greifeld]

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

[Matt Levine]

And I'm Katie Greifeld.

[Katie Greifeld]

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

[Matt Levine]

And you can find me on Bloomberg TV every day on Open Interest between 9 to 11am Eastern.

[Katie Greifeld]

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.

[Matt Levine]

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.

[Katie Greifeld]

The Money Stuff podcast is produced by Anna Mazarakis and Moses Andam.

[Matt Levine]

Our theme music was composed by Blake Maples and Sage Bauman is Bloomberg's head of Podcast.

[Katie Greifeld]

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

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