August 29, 2025 • 32 mins
Katie and Matt discuss Taylor Swift, dating podcasters, the betting markets/financial markets convergence, commodity insider trading, a magical money printing machine, weird preferred stocks, the crypto treasury boom, Money Stuff’s effect on academic tenure, IPO pops, private company pops and security-based swaps.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. So here we are.
Speaker 2 (00:08):
I guess around the clock. It's been approximately six months
since we recorded a podcast together.
Speaker 1 (00:14):
Right, It's good to see.
Speaker 2 (00:15):
It's nice to see you. You look crested, you got
a haircut, you're clean shaven, you have a tan.
Speaker 1 (00:21):
Yeah. Yeah, yeah, it was nice. I missed the podcast,
of course.
Speaker 2 (00:25):
But it was nice being making you're so full of it.
Speaker 1 (00:27):
Yeah. Yeah, we're both like being incredibly insincere. Yeah, here
we are.
Speaker 2 (00:33):
Yeah, I will say it was nice to you know,
roll into Thursday the last two weeks and been like
oh my god, and then have been like, oh wait, no,
everything's fine. I don't have to record anything right now.
Speaker 1 (00:43):
I share that feeling. And also this Thursday was not
like that.
Speaker 2 (00:50):
Yeah. We should set up a Patreon.
Speaker 1 (00:53):
Hello, and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levine and I write the Moneys Doff com
for Bloomberg Opinion.
Speaker 2 (01:05):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (01:10):
Yeah, Taylor shows, gotting engaged.
Speaker 2 (01:12):
Yeah, biggest financial market news of the week. Pretty surprising,
but not to at least one person named Romantic Paul.
Speaker 1 (01:20):
You know, several people sent me this thing, is it right?
So like a guy made a well time you assume
it's a man. Yeah, a user with the account named
Romantic Paul made a well time trade on polymarket on
Taylors just getting engaged. Basically, like that contract was trading
(01:41):
it like twenty five percent, and then it spiked up
to like like forty percent like the day before she
got engaged. Yeah, and several people sent that to me,
and it's like, you know, like people were interested in
that stuff, but like that was a contract with a
couple one hundred thousand dollars of that's outstanding. Yeah, And
Rheumatic Paul seems to admit on the order of three
(02:04):
thousand dollars on this wall time trade. So was it
the biggest financial market use of Oh no.
Speaker 2 (02:10):
I'm just talking about the magnitude of tailor Swift getting.
Speaker 1 (02:12):
Engaged, right right, scenting.
Speaker 2 (02:14):
Ripples across all financial.
Speaker 1 (02:16):
Okay, you're saying, like Treasury is sold off.
Speaker 2 (02:18):
Yeah, yeah, you didn't need a haven asset in that scenario.
America's back.
Speaker 1 (02:24):
Hey, you saw your tweet like you're bearish and Taylor
Swift got engaged in your.
Speaker 2 (02:28):
Bears, You're parish, Taylor Swift gone engaged in your bears.
Speaker 1 (02:31):
Just a risk one moment. Yeah, soa, I'm sorry, I
take it back. I was just talking about the narrow No,
that's so many things. It's like submission markets, like you
can specifically bet on or had a specific thing, but
then like those things often have brought her financial market
implications and so like you can you can structure your
tailor Swift trade by like, I don't know ing the
S and P.
Speaker 2 (02:49):
I have to say, I am surprised that it was
only about twenty five percent odds. I wish I had
known that it was trading that cheap.
Speaker 1 (02:58):
Yeah, it was like it was she gets engaged by
the end of this year. Yeah, that seems cheap.
Speaker 2 (03:02):
It does, I mean, especially right now when she's engaged
after this. For sure, I knew you raised the point
that she got engaged two weeks ago, so theoretically someone
probably knew. So maybe there was an element of insider
trading here.
Speaker 1 (03:18):
Yeah, although again, like you know the amount of money
that you could make insider trading on the Taylor sw
with engagement news is in the like single digit thousands of.
Speaker 2 (03:27):
Dollars single digit thousands. Yeah, what if you uh? Can
you lover these bets?
Speaker 1 (03:32):
The problem is finding people to bet against yours a.
It's a prediction market, and to bet on yes, you
have to find people who are willing to bet on now.
And you know the number of people who wanted to
put millions of dollars into betting that Taylor's with won't
get engaged against the highly motivated buyer.
Speaker 2 (03:47):
That's true. I guess if you knew for sure, you'd
probably just sell to a tabloid.
Speaker 1 (03:54):
But right, right, right, or like you can make a
lot more, just like be friends with Taylor Swift just
seems like a lucid.
Speaker 2 (04:00):
Yeah, there's a few things that point to this being
not insider trading or a person who didn't know for sure.
We were just joking. In hindsight, of course it seems obvious.
But also they got engaged theoretically right after they podcasts.
Actually the Kelsey brother It's funny how that happens. Maybe
(04:21):
I'll go repropose to my husband after this. But anyway,
Taylor Swift, sorry, this is for the Swifties out there.
She hasn't done an interview like that with a previous
romantic partner of that scale. I mean this, you.
Speaker 1 (04:35):
Dated a podcaster before. Maybe I'm wrong, I probably I know.
Speaker 2 (04:37):
But she's dated other famous people where theoretically they could
have done a joint appearance like that. They didn't, I know,
but they could have found a podcast to go on,
is what I'm saying. Like, she hasn't like sat in
an interview or done anything like that with previous partners.
So you could watch the New Heights episode, which millions
(04:57):
of people did, be like, oh wow, these two people
clearly like each other, and that was the.
Speaker 1 (05:04):
Really love that. Like you're like, no, you had to
know they're getting engaged because they podcasted together.
Speaker 2 (05:09):
Well no, it was also a video podcast, which video podcast,
by the way, we should probably do more of anyway,
you could really read their body language. But probably maybe
if you want to give romantic Paul the benefit of
the doubt, he saw that podcast was like, oh shoot,
these are two people who genuinely like each other, and
that that was that they'd get engaged sometime this year.
It's only August. Yeah, yeah, and they're thirty five years old.
Speaker 1 (05:33):
Yeah. You make good points thank you. I really I
don't mean to suggest that Romantic Paul was insider trading
to make three thousand dollars.
Speaker 2 (05:39):
On tellers thirty five hundred.
Speaker 1 (05:41):
Prediction markets are so weird and interesting and so like
growing in importance and strange ways. And I think, you know,
the contours of insider trading around prediction markets are very strange.
Speaker 2 (05:54):
Yeah.
Speaker 1 (05:54):
I think of it mostly in connection with sports betting,
right because and this is not a sports bet, it's
sports that as a sports figure, but I have written
a lot about and we've talked about how prediction markets
are an interestingly important way to make sports bets because
it seems like right now CFTC regulated commodities futures markets
(06:19):
like CALCI are a way to make sports bets that
are not subject to state regulation, so you can like
you know, ignore state gambling laws and get better tax
treatment than actual gambling because right now, gambling losses are
not fully deductible in your taxes, but commodity trading losses
are probably fully deductible. So the prediction markets, that particularly Calshie,
(06:42):
are having a real moment for like becoming the sports
gambling platform. And you know, this week I wrote about
robinhood is pursuing Nevada regulators so that they can be
allowed to offer sports gambling. Robinhoo wouldn't say this, but
I would say, so they can be allowed to offer
sports gambling on their stock trading app, which is like,
you know, kind of amazing, but like just like sort
of where things are heading. And prediction markets are beloved
(07:06):
by like economists and like libertarian weirdos because like in theory,
if you had a prediction market and everything, then you
could like predict everything and like the world would be
better informed because markets would push prices to their correct place.
And there's a lot of skepticism about that because like,
in fact, people don't want to bet on all sorts
of nonsense, and like the big problem with prediction markets
(07:27):
has always been like outside of like the US presidential election,
it's hard to find a lot of people who are
really into betting on prediction markets because it doesn't sort
of serve any savings purpose and it's not a natural
home for gamblers, and so the volumes on prediction markets
(07:48):
are kind of small, and you can have your doubts
about how predictive the prices are. You know, again, outside
of like the US presidential election, and when prediction markets
get into the sports gambling game changes that dynamic entirely.
Speaker 3 (08:02):
Right.
Speaker 1 (08:02):
It means that like, if you look at Calshi and
you think this is the future of sports betting because
it has a better regulatory and tax treatment than the
sports books that are doing billions of dollars of bets,
then you're thinking Calshi is going to offer people campbells
that they want and that they come back to every day, right,
because sports are constantly happening, and so then all of
(08:27):
the ancillary stuff, all of the stuff like betting on
Taylor Swift's baby is like just more appealing because more
people have Calshie accounts and more people are you know,
betting there anyway, so they'll bet on when you know,
when the when the wedding will happen, and yeah, you.
Speaker 2 (08:41):
Know, the network effects will kick in, Yeah.
Speaker 1 (08:44):
The network, so you know people will betting on everything,
and then you know, you'll have a CFTC regulated licensed
US Commodities Exchange for sports betting. And then then what
happens when people start, you know, making insider bets on
sports or on Taylor Swifts And.
Speaker 2 (09:00):
I should know this, but have DraftKings and FANDUL like,
have they tried to offer stock betting on their platforms?
Speaker 1 (09:07):
Yeah, a little bit. It's funny Flutter, which is like the.
Speaker 2 (09:10):
Parent company a fandel right, a FANDL.
Speaker 1 (09:12):
Yeah, they're working on some sort of partnership with CME
to offer essentially sports book bets on yeah, financial outcome,
you know, like, well the s and PB up or
down today, Because yeah, for one thing, if you're a
gambling platform, offering people more bets is just more appealing, right,
just give them you have more touch points. And then
for another thing, if you're a gambling platform and you
(09:33):
look at what Calshi is doing, you have to think
maybe we should be in the futures trading business rather
than the sports book business because it's the same business
and it gets better tax and regulatory treatment.
Speaker 2 (09:45):
Man, that's pretty wild.
Speaker 1 (09:48):
Yeah, there's just like a lot of conversions between gambling
and financial markets.
Speaker 2 (09:54):
Parallels here to private markets becoming the public market.
Speaker 1 (09:58):
Yeah, the betting markets are becoming the the financial markets.
Speaker 2 (10:01):
Yeah, all of the then diagrams are just turning into circles.
Before we leave this topic talking about whether or not
this is insider trading or if it could be insider trading.
You wrote that if Romantic Paul is Travis Kelcey, that's fine.
Is that fine?
Speaker 1 (10:22):
This is not legal advice go on. This is going
to depend a little bit on like the specific terms
of service of the platform, right, I mean, polymarket has
kind of vague terms of service. But if you think
about and this is not it, you have to see
regulated exchange. But if you think about the future that
will live in where all betting takes place on commodity,
(10:45):
then the way commodities insider trading rules work is if
you misappropriate information from someone else, then that's illegal. That's
illegal insider trading. But if you own the information, it's
harder to say that you're insider trading. So if you're
an oil company and you drill a lot of oil
and like you know, you're well as a bust, and
(11:06):
you think, oh, that's going to push up oil prices,
you're allowed to buy oil features because the point of
oil futures is to allow actual oil producers and consumers
to sort of hedge their actual production into bad And
so of course you're trading an inside information about your
own behavior. Right, if you're like a trader at an
oil company and you're front running your company by buying
(11:28):
futures for your own account. That's illegal insider trading. And
there are cases, right, there are cases of people who
are front running, who are misappropriating information get in trouble
for commodities insider trading, but just the owners of the commodity,
the commodity producers that are allowed to trade on their
own information. So I don't know where that leaves you
when your commodity is like will Taylor Swift and Travis
Kelsey get well re engage?
Speaker 2 (11:50):
Will I propose to Tailor Swift?
Speaker 1 (11:52):
Right? But I think it kind of leaves you like, yeah,
go ahead and trade on that. Again, there's like no
money here, right.
Speaker 2 (11:56):
There also is a risk I was going to say,
because he didn't know that she was going to say yes,
but whatever, yeah.
Speaker 1 (12:05):
Rarely.
Speaker 2 (12:07):
Also she had already said yes by the time. But
I was thinking more of the example of he's the
CEO of a company and he knew that earnings were
going to be good, but they hadn't.
Speaker 1 (12:17):
That's not the CEO's information, that's the company's information. And
by the way, companies can't really inside or trade their
stock like in stocks, the rules are kind of different.
Like in stocks, companies have a fiduciarated a shareholders and
they can't really inside or trade their stocks. But in
commodities that's a little bit.
Speaker 2 (12:31):
We're talking about commodities, not stocks. Notes like tailors engagement.
Congratulations Taylor Swift from your friends at the Money Stuff podcast.
Come on, yeah, come on, it worked out really well
your last podcast appearance. Do you want to talk about
(13:01):
Michael Saylor? Yeah, this is a guy that we don't
about sometimes and his company strategy not micro strategy strategy. Yeah,
it's premium is collapsing before our eyes.
Speaker 1 (13:11):
I know, I feel a little bad about that somehow.
I don't know why I cause that no, but like
I've like made fun of this premium for years and years,
and now it's collapsing before our eyes. And I'm like,
you know, I don't wish all on anyone. I want
them to keep running this ridiculous strategy for as long
as they can.
Speaker 2 (13:29):
Strategy strategy, strategy. I mean it's been kind of depressed
for a while. Yeah, the premium.
Speaker 1 (13:37):
Yeah, well they love, they love. Like you have to
like sort of put a lot of signs around things
like this, because like strategy businesses like they buy it a bitcoin.
There's stock trades that like twice they're net asset value.
They sell more stock to buy more bitcoin. Then the
net asset value goes up. The stock goes up by
two times as much, and it's a like perpetual flywheel.
But now instead of two times, it's like one point five.
Speaker 2 (13:58):
Ish times and one point four.
Speaker 1 (14:00):
Yeah. So it's like this trade is a magical money
printing machine. When you can sell stock at a big
premium to your net asset value, and it's like a
terrible disaster. If you can sell stock at a discount
to your net asset value, as you come down, it's
like less and less fun.
Speaker 2 (14:16):
Yeah.
Speaker 1 (14:16):
So they actually, I think they put out guidance that
they would not sell stock at less than two point
five times in that asset value, and then when the
premium went below two times, they were like, well, never mind,
we'll just keep selling stock at you know, whatever we
can get.
Speaker 2 (14:30):
Yeah. So I have to say, I don't really understand
why they did that, because.
Speaker 1 (14:36):
It's at one time it's a good trade, I know,
but you can like sell you know, at a premium.
Speaker 2 (14:43):
You should sell at a premium, I know, But Okay,
they pluged to they.
Speaker 1 (14:46):
Said they wouldn't, but like you know, that was when things.
Speaker 2 (14:48):
Like they were already below and half when they said that.
Speaker 1 (14:52):
Okay, but like the other reason okay, so sorry, and
there was a.
Speaker 2 (14:56):
Two week span there, like they said they wouldn't do this,
two weeks later they did, and they were already below
two and a half times.
Speaker 1 (15:01):
Yeah, okay. So there's two questions, right, One is why
would you sell stock at below two point five times
net asset value? And the answer is because if you
can sell stock at any view into net asset value,
it's a good trade, right, it's a creative to your
shareholders to sell stock for more than it's worth. And
then the other question is why did they say they.
Speaker 2 (15:16):
Wouldn't sell That's what I don't understand.
Speaker 1 (15:19):
Okay, So there's two answers to that. One is the
whole game here is like investor confidence. Right, So if
you can say, oh, it's always going to be at
a premium, then investors will like your stock and the
stock will go up and will be at a bigger premium. Right.
So one thing is you just have to like tell
people what they want to hear, because you're you're in
the business of selling them stock at a premium. But
(15:39):
then the other reason is that they're not exclusively in
the business of selling stock. They have gotten really into
doing weird capital markets trades that I love as a
former weird capital markets banker. And so they've found all
sorts of like straight preferred stock deals to do, which
is like, companies don't do big straight preferred stock deals.
That's not the thing. Like straight preferred stock is not
(16:02):
a real instrument outside of like financials and a few
other weird places. And they were like, we're gonna sell
billions of dollars of preferred stock because essentially it's like
borrowing money perpetually at call it nine percent ten percent interest,
so by bitcoin. And if you think bitcoin will always
go up by fifty percent a year, then borrowing at
ten percent to buy bitcoin that yields fifty percent is
(16:23):
a great deal. Yeah, And so they've been doing a
lot of preferred stock deals. And I think when they
said we're not going to sell stock below two point
five x, they thought, we'll just to fix income financing
to keep buying more bitcoins. And then the market for
that's softened.
Speaker 2 (16:40):
Yeah, just like it's such.
Speaker 1 (16:41):
A weird market, Like people don't need billions of dollars
of preferred stock of a tech company that bitcoin, and
so when that market collaps, they're like, we still need
to buy more bitcoin, so there's longing stock again.
Speaker 2 (16:51):
Yeah, it's funny. Who would be the typical buyer of preferreds?
Speaker 1 (16:56):
I have never really known that. I mean, it's like
it's like income oriented. You know, if you're retiree and
you can get nine percent yield, that's great, you know.
Speaker 2 (17:03):
Yeah, well apparently there's not enough of those people because
they're recent of dollars with like you know, like that
credit profile.
Speaker 1 (17:11):
Yeah, it's weird, weird trade.
Speaker 2 (17:12):
Their most recent sale raise just about like forty seven
million dollars.
Speaker 1 (17:17):
And the stuff they're doing is I mean, for me,
I love it, Like the most recent thing is there.
Speaker 2 (17:21):
You're not buying enough of it, have.
Speaker 1 (17:23):
Bought any of it, But like it's a floating rate
preferred that the rate floats with, just like their feelings.
The rate floats with. I want to keep it to
trading at par, and so the rate will float at
whatever makes it trade at par, which is like essentially
floating with their own credit, which is a truly insane
instrument that no one has ever done before. That like
Michael Sayler is like, I'm going to do this, and
so I shouldn't say no one's ever done it before.
(17:45):
It's kind of auction ary preferred. But it's very strange
and very cool and fun for capital markets nerds, but
like they're not buy billions of dollars stop.
Speaker 2 (17:57):
Yeah. Yeah.
Speaker 1 (17:58):
And also, by the way, when I say something is
and fun, that means I would not buy it.
Speaker 2 (18:02):
Yes, Okay, that's a necessary disclosure. There's also the question
of why the premium is collapsing. I mean, taking a
look at Bloomberg News coverage, it would one of the
reasons pointed to go Ahead is that there's just so
many cryptotature companies. How much is that truly deluding demand
for strategy?
Speaker 1 (18:23):
So one thing that's interesting is, like, you know, people
thought that the premium would collapse when spot bitcoin ets
became a big thing, and it didn't really, Yeah, And
I think the reason for that is, like they really
are two different trades, right. The spot bitcoin ETF is
like you can buy bitcoin and you want exposure to bitcoin,
so you buy bitcoin. Micro strategy trade is you can
buy stock at a premium so that they can sell
(18:45):
more stock at a premium so they can accumulate more bitcoin. Like,
you're really just betting on this is a company that
can sell stock at a premium to buy assets. Right,
that's the bet, And that bet is very circular and strange.
But it was hard to find, right, it's not it's
not replicated with a bitcoin etaf right, Like, that's just
that's just the bet on bitcoin strategies, on selling train exposure.
(19:07):
But now you can find that bet anywhere. There's like
hundreds of companies they're like, oh, we've got a way
to sell's talk at a premium. And some of the
people who are gambling on the generic concept of like
ability to sell stalk at a premium to buy a
crypto or you know, doing it with other crypto companies
that have higher premiums or lower premiums. Yeah, there are
more flavors of that bet, and there are only so
many people who want that bet.
Speaker 2 (19:28):
That's true.
Speaker 1 (19:29):
So I think that's part of why the premium is
not doing it as well. But also just like I
really think that this is the sort of thing where
if you think about it for a minute, you'll be
like you and so you look at like, you know,
Jim Chaino is betting against It's just like some of
the people who look at this who have my or
Jim Chanos's cast a blind are like this is crazy. Yeah,
(19:52):
And you know enough of those people say that, then
maybe like people stop buying it at two point five
x it.
Speaker 2 (19:57):
Is fun to think about. Okay, let's say that the
strategy premium does erode even further. What this means for
this ocean of crypto treasury companies that now exist or
you just kind of all.
Speaker 1 (20:09):
Like they're all the numbers that people have announced for
like their plans, it's tens of billions of dollars of
crypto treasury plans. Like that's not going to happen, Like
we'll see, Like it's just like they're not going to
raise that kind of money. I think some of it
is like people have converted their statues of crypto into
crypto treasury companies because like it's trading at a higher
(20:32):
value and if that arose and it ends up at
a zero premium, and well, you know they'll own a
stash of crypto and someonet inconvenient forum and it's like
kind of fine. But the people who are like we're
going to go sell twenty billion dollars of stock at
the market to buy doagecoin.
Speaker 2 (20:46):
Yeah you are, they're not, So what does that mean?
We're just going to have like a watery graveyard of companies.
Speaker 1 (20:53):
That are acount strategy is a different story because the
real company with you know, eccentric management. But a lot
of crypto treasury companies are sort of more or less defunct,
like biotech companies that have like a you know, one
million dollar market cap and then got acquired so that
someone could pump a billion dollars of crypto into them.
Right before there were biotech companies, there were gold miners. Right,
(21:16):
there's a long history of what are your grave yards
of public company tickers being passed throughund and let let's
go back to that, right, But the fad this year
was crypto treasury companies a fad two years ago. Yeah,
it's like.
Speaker 2 (21:26):
Fine, yeah, okay, I feel better.
Speaker 1 (21:29):
Yeah, crypto treasury companies are quite harmless, Like.
Speaker 2 (21:34):
They're not like negatively impacting the economy.
Speaker 1 (21:37):
No, I mean, you know, in some broad sense, yes,
but like it's not like a crisis could occur in
crypto treasure. So like if the strategy trade stops working.
Like the worst case is kind of it trades to
like eighty percent of that asset value. Right, that's still like,
you know, many tens of billions of dollars company, right,
Like they've really pumped a lot of I don't know
(21:59):
that I've want to say real value, but you know,
in quotes, real value into this small software company.
Speaker 2 (22:05):
Got a lot of Bitcoin've got a lot of bitcoin.
Speaker 3 (22:07):
At the end of the day, at where we are
in the day.
Speaker 2 (22:12):
Okay, well, on the long list of things to worry about,
I will put that at the bottom. IPOs Matt, you
(22:34):
wrote about a paper. It came out of Joseph J.
Henry of Northeastern University and Terence M. O'Brien from the
University of Maryland. And I realized that you're biased here
because they quote you right off the bat.
Speaker 1 (22:51):
That's true. I probably should have dissed.
Speaker 2 (22:53):
Calm No. I think that's awesome. It's like an easter egg.
You actually go to look at the paper.
Speaker 1 (22:58):
That you're something. Is that Like there are a lot
of like finance and law papers on SSRN that have
you know, twelve downloads.
Speaker 2 (23:09):
And this one has more than that.
Speaker 1 (23:11):
Sometimes, right, I don't mean to talk about this one specifically.
Sometimes I come across these papers in various ways, often
because the writer's summoned to me, and then I write
about them money stuff, and then they have more than
twelve downloads, And I think, I don't know how directly
useful money stuff mentions are for like academic tenure, but
(23:35):
like there's some there's going to be a marginals Yeah,
there should be. I want, I really want to see that, Like,
am I getting academics tenure? But anyway, if you quote
me at the beginning of your paper, it probably does
increase your chances.
Speaker 2 (23:48):
Yeah, definitely, So sure.
Speaker 1 (23:50):
Something to think about anyway. Yeah, So they are this
paper at IPO Pops, which we talked about on the
Mailbag episode of our podcast that was aired moster It no.
Speaker 3 (24:01):
The mailbag episode we did, And this paper sort of
formalizes an intuition that I've long thought about, which is
that when you do an IPO, you're a company, and
you sell in the IPO something like ten to twenty
percent of your stock.
Speaker 1 (24:19):
The rest of your stock stays locked up. Right, It's
owned by the CEO, it's owned by the early investors,
it's owned by the employees and it's locked up in
the IPO, so they can't sell for like six months
after the IPO. Something like ten or twenty percent of
the shares come loose in the IPO, but most of
the shares most of the time are being sold to
like long term investors who have had conversations with management
(24:41):
and who management wants to be the shareholders. And so
there's this sort of deal where the management and the
bankers and the long term investors are trying to like
send the stock to people who will hold it for
the long term. And what that means is that when
the stock opens for trading the day after the IPO,
there's not a lot of stock to buy, because you know,
the company is sold tin ish percent of its stock
(25:03):
and then ninety ish percent of that stock goes to
people who don't sell it on the first day. The
amount of stock that's available to buy on the first
day is on the order of one percent of the
shares outstanding. And meanwhile, like you know, there's all these
retail investors want to buy stock, and so when there's
a hot IPO that a lot of retail investors want
to buy, there's just not a lot of supply for them,
(25:25):
and so the stock trades to a price that equilior
rates to blind demand for like that one percent of
the shares that the retail investors want to buy. But
that doesn't tell you what the company is worth necessarily.
Speaker 2 (25:37):
Yeah, And it also.
Speaker 1 (25:37):
Doesn't tell you what the right IPO price was, because
the IPO price is the clearing price for ten, fifteen,
twenty percent of the stock. But then you know, one
or two percent of the stock trades on the exchange,
So the clearing price on the exchange is going to
be a lot higher than the clearing price for the
IPO if like there's a lot of demand on the exchange. Yeah,
but if like all ten percent of the stock came
(25:59):
loose on the day after the IPO, it would probably
trade less of a pop. And so they write about
like there's this question of like how much money are
companies leaving on the table that we talked about, where
like people get really mad that when a stock doubles
on its first day after the IPO. They say, oh,
the bankers should have set the price higher so that
it wouldn't trade up that high, and the company left
all this money on the table. But that's not necessarily
(26:21):
true because most of the stock doesn't trade on the
first day. They couldn't necessarily have sold ten or twenty
percent of their stock at the price that it rose
to on the first day.
Speaker 2 (26:30):
Yeah, this paper, I mean, it's a really good time
for this paper because I feel like this topic has
taken on new life because we're getting IPOs again and.
Speaker 1 (26:39):
We're seeing right, I was going to say, like this
is an evergreen topic. I've been thinking about this for
like fifteen years, but you're right, like for a while
it went pretty dormant because there are no IPOs.
Speaker 2 (26:47):
Yeah. Absolutely, and then twenty twenty five, I feel like
you've seen really dramatic pops even in the last couple months.
You think about Figma Core, we've circle we were talking
like triple digit, multiple percent pops, right, And.
Speaker 1 (27:01):
You think about like you're an institutional stock investor, like
you do some valuation work, you meet with this company
as you think, this is what i'd pay for this
company because it's comparable to like other companies in my portfolio.
Maybe you own other private companies, right, because a lot
of institutions do. And then like the stock opens for
trading and retail investors haven't had fun new IPOs to
(27:24):
buy for years, and so a ton of demand for
very limited supply, and so the stocks go up a lot.
But that's not necessarily reflective of where institutions would price them.
Speaker 2 (27:33):
Yeah, I will say, though, we're not talking about like
one day pops. I mean, in the case of those
three companies fig mccor we even circle, these are like
multi week mostly sustained.
Speaker 1 (27:44):
Yeah. I want to be clear, like this explanation is
like an interesting and important technical explanation for some of
what happens in ipo pops. On the explanation, yeah, there
is a desire to underprice IPOs so that people who
invest in the IPO make a profit, because that's good
for them and for the banks, and also arguably for
(28:05):
the company because it like creates investor goodwill goodwill. But
this explanation is not the only reason that IPOs pop.
Speaker 2 (28:12):
Yeah, it is interesting to look that they find that
the average IPO share price POP is like nineteen percent
higher than the actual offer price on the first day
of trading. Nineteen percent I mean relative to some of
the IPOs I just mentioned. Seems tame at this point.
I don't think that would turn heads in quite the
same way that.
Speaker 1 (28:29):
Whatever happens is a long sample.
Speaker 2 (28:31):
Right and like yeah, thirty years.
Speaker 1 (28:34):
Yeah, And like I do think that the scarcity of
supply means there's more kind of dispersion now.
Speaker 2 (28:41):
Yeah, you know, when there's.
Speaker 1 (28:42):
Two IPOs a week, they're not all going to pop
one hundred percent.
Speaker 2 (28:45):
That's true. It feels like we're always away from that. Like,
I know that the ipo market is normalizing.
Speaker 1 (28:50):
I said, two IPOs a week, that's that's a low number.
I feel like there used to be a lot more
than two IPOs a week.
Speaker 2 (28:54):
Two IPOs that people are exciting about a week. Though
we're now we're now like pretty well, yeah, yeah, it's
been groom for a while.
Speaker 1 (29:01):
And now it's great. I think that this dynamic here
where like very little of the shares are available and
retail wants them, and so the stock pops is exactly
the same dynamic that you see in the private company
stuff that we talk about all the time, like retail
and retail issue, Like you know, accredited retail investors really
(29:22):
want to own shares Open dentists, I really want to
own shares of open AI and SpaceX. It is hard
for a retail investor to buy open air and SpaceX,
but it's not impossible. There's like little bits of open
air and SpaceX and like little you know, there's like
secondary funds. There's like little you know, closing funds that
own a little bit of it. And because there is
(29:45):
a limited but not zero supply available to retail, retail
really bids them up. And so the prices of you know,
open ai shares or proxies or SpaceX shares or proxies
on the retail market the prices higher than what you
see those companies raising money at. And it's the same story,
right like, institutions will buy tens of billions of dollars
(30:07):
of open ai stock at some price, and then retail
investors will buy tens of millions of dollars of that
stock gets a much higher price. That doesn't mean that
like open Aiy's valuation is in the trillions of dollars.
It means that the supply available to retail is really low.
It's the same thing with IPOs, right like, the supply
the first day available to retail is much lower than
what institutions have access to, and so the price is higher.
Speaker 2 (30:29):
I feel like I'm too tired to like neatly make
this point, but it just seems somewhat parallel to what
we're talking about with micro strategy in the premium, and
it's just coming down to supply and demand.
Speaker 1 (30:40):
Yeah, I mean, I guess it's true in the sense
that micro strategy, unlike open ai or these IPAs or Figma,
micro strategy is pretty much willing to supply whatever whatever
is demanded, and that is bad for the premium exactly.
Speaker 2 (30:59):
And also to tie to the first thing that we
talked about, those retail investors don't need to try to
own open ai. They just need to make a prediction
market around it somehow to reflect the movement of these.
Speaker 1 (31:11):
All right, right about that all the time? Yeah, well
there's legal complications, yeah, because that's not a commodity, that's
a security based swap, completely different problem. Pleave it there
on that very boring note.
Speaker 2 (31:24):
Well, that was awesome. I think that was really totillating.
Speaker 1 (31:31):
And that was the Money Stuff Podcast.
Speaker 2 (31:33):
I'm Matt Levian and I'm Katie Greifeld.
Speaker 1 (31:35):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg dot com.
Speaker 2 (31:39):
And you can find me on Bloomberg TV every day
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Speaker 1 (31:45):
We'd love to hear from you. You can send an
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Speaker 2 (31:52):
You can also subscribe to our show wherever you're listening
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Speaker 1 (31:58):
The Money Stuff Podcast is produced Anna Mazerakus and Moses Onen.
Speaker 2 (32:02):
Our theme music was composed by Blake Maples and Stage
Bauman is Bloomberg's head of Podcasts.
Speaker 1 (32:06):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
Bloomberg Audio Studios, Podcasts, radio news. So here we are.
Speaker 2 (00:08):
I guess around the clock. It's been approximately six months
since we recorded a podcast together.
Speaker 1 (00:14):
Right, It's good to see.
Speaker 2 (00:15):
It's nice to see you. You look crested, you got
a haircut, you're clean shaven, you have a tan.
Speaker 1 (00:21):
Yeah. Yeah, yeah, it was nice. I missed the podcast,
of course.
Speaker 2 (00:25):
But it was nice being making you're so full of it.
Speaker 1 (00:27):
Yeah. Yeah, we're both like being incredibly insincere. Yeah, here
we are.
Speaker 2 (00:33):
Yeah, I will say it was nice to you know,
roll into Thursday the last two weeks and been like
oh my god, and then have been like, oh wait, no,
everything's fine. I don't have to record anything right now.
Speaker 1 (00:43):
I share that feeling. And also this Thursday was not
like that.
Speaker 2 (00:50):
Yeah. We should set up a Patreon.
Speaker 1 (00:53):
Hello, and welcome to the Money Stuff Podcast. You're a
weekly podcast where we talk about stuff related to money.
I'm Matt Levine and I write the Moneys Doff com
for Bloomberg Opinion.
Speaker 2 (01:05):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (01:10):
Yeah, Taylor shows, gotting engaged.
Speaker 2 (01:12):
Yeah, biggest financial market news of the week. Pretty surprising,
but not to at least one person named Romantic Paul.
Speaker 1 (01:20):
You know, several people sent me this thing, is it right?
So like a guy made a well time you assume
it's a man. Yeah, a user with the account named
Romantic Paul made a well time trade on polymarket on
Taylors just getting engaged. Basically, like that contract was trading
(01:41):
it like twenty five percent, and then it spiked up
to like like forty percent like the day before she
got engaged. Yeah, and several people sent that to me,
and it's like, you know, like people were interested in
that stuff, but like that was a contract with a
couple one hundred thousand dollars of that's outstanding. Yeah, And
Rheumatic Paul seems to admit on the order of three
(02:04):
thousand dollars on this wall time trade. So was it
the biggest financial market use of Oh no.
Speaker 2 (02:10):
I'm just talking about the magnitude of tailor Swift getting.
Speaker 1 (02:12):
Engaged, right right, scenting.
Speaker 2 (02:14):
Ripples across all financial.
Speaker 1 (02:16):
Okay, you're saying, like Treasury is sold off.
Speaker 2 (02:18):
Yeah, yeah, you didn't need a haven asset in that scenario.
America's back.
Speaker 1 (02:24):
Hey, you saw your tweet like you're bearish and Taylor
Swift got engaged in your.
Speaker 2 (02:28):
Bears, You're parish, Taylor Swift gone engaged in your bears.
Speaker 1 (02:31):
Just a risk one moment. Yeah, soa, I'm sorry, I
take it back. I was just talking about the narrow No,
that's so many things. It's like submission markets, like you
can specifically bet on or had a specific thing, but
then like those things often have brought her financial market
implications and so like you can you can structure your
tailor Swift trade by like, I don't know ing the
S and P.
Speaker 2 (02:49):
I have to say, I am surprised that it was
only about twenty five percent odds. I wish I had
known that it was trading that cheap.
Speaker 1 (02:58):
Yeah, it was like it was she gets engaged by
the end of this year. Yeah, that seems cheap.
Speaker 2 (03:02):
It does, I mean, especially right now when she's engaged
after this. For sure, I knew you raised the point
that she got engaged two weeks ago, so theoretically someone
probably knew. So maybe there was an element of insider
trading here.
Speaker 1 (03:18):
Yeah, although again, like you know the amount of money
that you could make insider trading on the Taylor sw
with engagement news is in the like single digit thousands of.
Speaker 2 (03:27):
Dollars single digit thousands. Yeah, what if you uh? Can
you lover these bets?
Speaker 1 (03:32):
The problem is finding people to bet against yours a.
It's a prediction market, and to bet on yes, you
have to find people who are willing to bet on now.
And you know the number of people who wanted to
put millions of dollars into betting that Taylor's with won't
get engaged against the highly motivated buyer.
Speaker 2 (03:47):
That's true. I guess if you knew for sure, you'd
probably just sell to a tabloid.
Speaker 1 (03:54):
But right, right, right, or like you can make a
lot more, just like be friends with Taylor Swift just
seems like a lucid.
Speaker 2 (04:00):
Yeah, there's a few things that point to this being
not insider trading or a person who didn't know for sure.
We were just joking. In hindsight, of course it seems obvious.
But also they got engaged theoretically right after they podcasts.
Actually the Kelsey brother It's funny how that happens. Maybe
(04:21):
I'll go repropose to my husband after this. But anyway,
Taylor Swift, sorry, this is for the Swifties out there.
She hasn't done an interview like that with a previous
romantic partner of that scale. I mean this, you.
Speaker 1 (04:35):
Dated a podcaster before. Maybe I'm wrong, I probably I know.
Speaker 2 (04:37):
But she's dated other famous people where theoretically they could
have done a joint appearance like that. They didn't, I know,
but they could have found a podcast to go on,
is what I'm saying. Like, she hasn't like sat in
an interview or done anything like that with previous partners.
So you could watch the New Heights episode, which millions
(04:57):
of people did, be like, oh wow, these two people
clearly like each other, and that was the.
Speaker 1 (05:04):
Really love that. Like you're like, no, you had to
know they're getting engaged because they podcasted together.
Speaker 2 (05:09):
Well no, it was also a video podcast, which video podcast,
by the way, we should probably do more of anyway,
you could really read their body language. But probably maybe
if you want to give romantic Paul the benefit of
the doubt, he saw that podcast was like, oh shoot,
these are two people who genuinely like each other, and
that that was that they'd get engaged sometime this year.
It's only August. Yeah, yeah, and they're thirty five years old.
Speaker 1 (05:33):
Yeah. You make good points thank you. I really I
don't mean to suggest that Romantic Paul was insider trading
to make three thousand dollars.
Speaker 2 (05:39):
On tellers thirty five hundred.
Speaker 1 (05:41):
Prediction markets are so weird and interesting and so like
growing in importance and strange ways. And I think, you know,
the contours of insider trading around prediction markets are very strange.
Speaker 2 (05:54):
Yeah.
Speaker 1 (05:54):
I think of it mostly in connection with sports betting,
right because and this is not a sports bet, it's
sports that as a sports figure, but I have written
a lot about and we've talked about how prediction markets
are an interestingly important way to make sports bets because
it seems like right now CFTC regulated commodities futures markets
(06:19):
like CALCI are a way to make sports bets that
are not subject to state regulation, so you can like
you know, ignore state gambling laws and get better tax
treatment than actual gambling because right now, gambling losses are
not fully deductible in your taxes, but commodity trading losses
are probably fully deductible. So the prediction markets, that particularly Calshie,
(06:42):
are having a real moment for like becoming the sports
gambling platform. And you know, this week I wrote about
robinhood is pursuing Nevada regulators so that they can be
allowed to offer sports gambling. Robinhoo wouldn't say this, but
I would say, so they can be allowed to offer
sports gambling on their stock trading app, which is like,
you know, kind of amazing, but like just like sort
of where things are heading. And prediction markets are beloved
(07:06):
by like economists and like libertarian weirdos because like in theory,
if you had a prediction market and everything, then you
could like predict everything and like the world would be
better informed because markets would push prices to their correct place.
And there's a lot of skepticism about that because like,
in fact, people don't want to bet on all sorts
of nonsense, and like the big problem with prediction markets
(07:27):
has always been like outside of like the US presidential election,
it's hard to find a lot of people who are
really into betting on prediction markets because it doesn't sort
of serve any savings purpose and it's not a natural
home for gamblers, and so the volumes on prediction markets
(07:48):
are kind of small, and you can have your doubts
about how predictive the prices are. You know, again, outside
of like the US presidential election, and when prediction markets
get into the sports gambling game changes that dynamic entirely.
Speaker 3 (08:02):
Right.
Speaker 1 (08:02):
It means that like, if you look at Calshi and
you think this is the future of sports betting because
it has a better regulatory and tax treatment than the
sports books that are doing billions of dollars of bets,
then you're thinking Calshi is going to offer people campbells
that they want and that they come back to every day, right,
because sports are constantly happening, and so then all of
(08:27):
the ancillary stuff, all of the stuff like betting on
Taylor Swift's baby is like just more appealing because more
people have Calshie accounts and more people are you know,
betting there anyway, so they'll bet on when you know,
when the when the wedding will happen, and yeah, you.
Speaker 2 (08:41):
Know, the network effects will kick in, Yeah.
Speaker 1 (08:44):
The network, so you know people will betting on everything,
and then you know, you'll have a CFTC regulated licensed
US Commodities Exchange for sports betting. And then then what
happens when people start, you know, making insider bets on
sports or on Taylor Swifts And.
Speaker 2 (09:00):
I should know this, but have DraftKings and FANDUL like,
have they tried to offer stock betting on their platforms?
Speaker 1 (09:07):
Yeah, a little bit. It's funny Flutter, which is like the.
Speaker 2 (09:10):
Parent company a fandel right, a FANDL.
Speaker 1 (09:12):
Yeah, they're working on some sort of partnership with CME
to offer essentially sports book bets on yeah, financial outcome,
you know, like, well the s and PB up or
down today, Because yeah, for one thing, if you're a
gambling platform, offering people more bets is just more appealing, right,
just give them you have more touch points. And then
for another thing, if you're a gambling platform and you
(09:33):
look at what Calshi is doing, you have to think
maybe we should be in the futures trading business rather
than the sports book business because it's the same business
and it gets better tax and regulatory treatment.
Speaker 2 (09:45):
Man, that's pretty wild.
Speaker 1 (09:48):
Yeah, there's just like a lot of conversions between gambling
and financial markets.
Speaker 2 (09:54):
Parallels here to private markets becoming the public market.
Speaker 1 (09:58):
Yeah, the betting markets are becoming the the financial markets.
Speaker 2 (10:01):
Yeah, all of the then diagrams are just turning into circles.
Before we leave this topic talking about whether or not
this is insider trading or if it could be insider trading.
You wrote that if Romantic Paul is Travis Kelcey, that's fine.
Is that fine?
Speaker 1 (10:22):
This is not legal advice go on. This is going
to depend a little bit on like the specific terms
of service of the platform, right, I mean, polymarket has
kind of vague terms of service. But if you think
about and this is not it, you have to see
regulated exchange. But if you think about the future that
will live in where all betting takes place on commodity,
(10:45):
then the way commodities insider trading rules work is if
you misappropriate information from someone else, then that's illegal. That's
illegal insider trading. But if you own the information, it's
harder to say that you're insider trading. So if you're
an oil company and you drill a lot of oil
and like you know, you're well as a bust, and
(11:06):
you think, oh, that's going to push up oil prices,
you're allowed to buy oil features because the point of
oil futures is to allow actual oil producers and consumers
to sort of hedge their actual production into bad And
so of course you're trading an inside information about your
own behavior. Right, if you're like a trader at an
oil company and you're front running your company by buying
(11:28):
futures for your own account. That's illegal insider trading. And
there are cases, right, there are cases of people who
are front running, who are misappropriating information get in trouble
for commodities insider trading, but just the owners of the commodity,
the commodity producers that are allowed to trade on their
own information. So I don't know where that leaves you
when your commodity is like will Taylor Swift and Travis
Kelsey get well re engage?
Speaker 2 (11:50):
Will I propose to Tailor Swift?
Speaker 1 (11:52):
Right? But I think it kind of leaves you like, yeah,
go ahead and trade on that. Again, there's like no
money here, right.
Speaker 2 (11:56):
There also is a risk I was going to say,
because he didn't know that she was going to say yes,
but whatever, yeah.
Speaker 1 (12:05):
Rarely.
Speaker 2 (12:07):
Also she had already said yes by the time. But
I was thinking more of the example of he's the
CEO of a company and he knew that earnings were
going to be good, but they hadn't.
Speaker 1 (12:17):
That's not the CEO's information, that's the company's information. And
by the way, companies can't really inside or trade their
stock like in stocks, the rules are kind of different.
Like in stocks, companies have a fiduciarated a shareholders and
they can't really inside or trade their stocks. But in
commodities that's a little bit.
Speaker 2 (12:31):
We're talking about commodities, not stocks. Notes like tailors engagement.
Congratulations Taylor Swift from your friends at the Money Stuff podcast.
Come on, yeah, come on, it worked out really well
your last podcast appearance. Do you want to talk about
(13:01):
Michael Saylor? Yeah, this is a guy that we don't
about sometimes and his company strategy not micro strategy strategy. Yeah,
it's premium is collapsing before our eyes.
Speaker 1 (13:11):
I know, I feel a little bad about that somehow.
I don't know why I cause that no, but like
I've like made fun of this premium for years and years,
and now it's collapsing before our eyes. And I'm like,
you know, I don't wish all on anyone. I want
them to keep running this ridiculous strategy for as long
as they can.
Speaker 2 (13:29):
Strategy strategy, strategy. I mean it's been kind of depressed
for a while. Yeah, the premium.
Speaker 1 (13:37):
Yeah, well they love, they love. Like you have to
like sort of put a lot of signs around things
like this, because like strategy businesses like they buy it a bitcoin.
There's stock trades that like twice they're net asset value.
They sell more stock to buy more bitcoin. Then the
net asset value goes up. The stock goes up by
two times as much, and it's a like perpetual flywheel.
But now instead of two times, it's like one point five.
Speaker 2 (13:58):
Ish times and one point four.
Speaker 1 (14:00):
Yeah. So it's like this trade is a magical money
printing machine. When you can sell stock at a big
premium to your net asset value, and it's like a
terrible disaster. If you can sell stock at a discount
to your net asset value, as you come down, it's
like less and less fun.
Speaker 2 (14:16):
Yeah.
Speaker 1 (14:16):
So they actually, I think they put out guidance that
they would not sell stock at less than two point
five times in that asset value, and then when the
premium went below two times, they were like, well, never mind,
we'll just keep selling stock at you know, whatever we
can get.
Speaker 2 (14:30):
Yeah. So I have to say, I don't really understand
why they did that, because.
Speaker 1 (14:36):
It's at one time it's a good trade, I know,
but you can like sell you know, at a premium.
Speaker 2 (14:43):
You should sell at a premium, I know, But Okay,
they pluged to they.
Speaker 1 (14:46):
Said they wouldn't, but like you know, that was when things.
Speaker 2 (14:48):
Like they were already below and half when they said that.
Speaker 1 (14:52):
Okay, but like the other reason okay, so sorry, and
there was a.
Speaker 2 (14:56):
Two week span there, like they said they wouldn't do this,
two weeks later they did, and they were already below
two and a half times.
Speaker 1 (15:01):
Yeah, okay. So there's two questions, right, One is why
would you sell stock at below two point five times
net asset value? And the answer is because if you
can sell stock at any view into net asset value,
it's a good trade, right, it's a creative to your
shareholders to sell stock for more than it's worth. And
then the other question is why did they say they.
Speaker 2 (15:16):
Wouldn't sell That's what I don't understand.
Speaker 1 (15:19):
Okay, So there's two answers to that. One is the
whole game here is like investor confidence. Right, So if
you can say, oh, it's always going to be at
a premium, then investors will like your stock and the
stock will go up and will be at a bigger premium. Right.
So one thing is you just have to like tell
people what they want to hear, because you're you're in
the business of selling them stock at a premium. But
(15:39):
then the other reason is that they're not exclusively in
the business of selling stock. They have gotten really into
doing weird capital markets trades that I love as a
former weird capital markets banker. And so they've found all
sorts of like straight preferred stock deals to do, which
is like, companies don't do big straight preferred stock deals.
That's not the thing. Like straight preferred stock is not
(16:02):
a real instrument outside of like financials and a few
other weird places. And they were like, we're gonna sell
billions of dollars of preferred stock because essentially it's like
borrowing money perpetually at call it nine percent ten percent interest,
so by bitcoin. And if you think bitcoin will always
go up by fifty percent a year, then borrowing at
ten percent to buy bitcoin that yields fifty percent is
(16:23):
a great deal. Yeah, And so they've been doing a
lot of preferred stock deals. And I think when they
said we're not going to sell stock below two point
five x, they thought, we'll just to fix income financing
to keep buying more bitcoins. And then the market for
that's softened.
Speaker 2 (16:40):
Yeah, just like it's such.
Speaker 1 (16:41):
A weird market, Like people don't need billions of dollars
of preferred stock of a tech company that bitcoin, and
so when that market collaps, they're like, we still need
to buy more bitcoin, so there's longing stock again.
Speaker 2 (16:51):
Yeah, it's funny. Who would be the typical buyer of preferreds?
Speaker 1 (16:56):
I have never really known that. I mean, it's like
it's like income oriented. You know, if you're retiree and
you can get nine percent yield, that's great, you know.
Speaker 2 (17:03):
Yeah, well apparently there's not enough of those people because
they're recent of dollars with like you know, like that
credit profile.
Speaker 1 (17:11):
Yeah, it's weird, weird trade.
Speaker 2 (17:12):
Their most recent sale raise just about like forty seven
million dollars.
Speaker 1 (17:17):
And the stuff they're doing is I mean, for me,
I love it, Like the most recent thing is there.
Speaker 2 (17:21):
You're not buying enough of it, have.
Speaker 1 (17:23):
Bought any of it, But like it's a floating rate
preferred that the rate floats with, just like their feelings.
The rate floats with. I want to keep it to
trading at par, and so the rate will float at
whatever makes it trade at par, which is like essentially
floating with their own credit, which is a truly insane
instrument that no one has ever done before. That like
Michael Sayler is like, I'm going to do this, and
so I shouldn't say no one's ever done it before.
(17:45):
It's kind of auction ary preferred. But it's very strange
and very cool and fun for capital markets nerds, but
like they're not buy billions of dollars stop.
Speaker 2 (17:57):
Yeah. Yeah.
Speaker 1 (17:58):
And also, by the way, when I say something is
and fun, that means I would not buy it.
Speaker 2 (18:02):
Yes, Okay, that's a necessary disclosure. There's also the question
of why the premium is collapsing. I mean, taking a
look at Bloomberg News coverage, it would one of the
reasons pointed to go Ahead is that there's just so
many cryptotature companies. How much is that truly deluding demand
for strategy?
Speaker 1 (18:23):
So one thing that's interesting is, like, you know, people
thought that the premium would collapse when spot bitcoin ets
became a big thing, and it didn't really, Yeah, And
I think the reason for that is, like they really
are two different trades, right. The spot bitcoin ETF is
like you can buy bitcoin and you want exposure to bitcoin,
so you buy bitcoin. Micro strategy trade is you can
buy stock at a premium so that they can sell
(18:45):
more stock at a premium so they can accumulate more bitcoin. Like,
you're really just betting on this is a company that
can sell stock at a premium to buy assets. Right,
that's the bet, And that bet is very circular and strange.
But it was hard to find, right, it's not it's
not replicated with a bitcoin etaf right, Like, that's just
that's just the bet on bitcoin strategies, on selling train exposure.
(19:07):
But now you can find that bet anywhere. There's like
hundreds of companies they're like, oh, we've got a way
to sell's talk at a premium. And some of the
people who are gambling on the generic concept of like
ability to sell stalk at a premium to buy a
crypto or you know, doing it with other crypto companies
that have higher premiums or lower premiums. Yeah, there are
more flavors of that bet, and there are only so
many people who want that bet.
Speaker 2 (19:28):
That's true.
Speaker 1 (19:29):
So I think that's part of why the premium is
not doing it as well. But also just like I
really think that this is the sort of thing where
if you think about it for a minute, you'll be
like you and so you look at like, you know,
Jim Chaino is betting against It's just like some of
the people who look at this who have my or
Jim Chanos's cast a blind are like this is crazy. Yeah,
(19:52):
And you know enough of those people say that, then
maybe like people stop buying it at two point five
x it.
Speaker 2 (19:57):
Is fun to think about. Okay, let's say that the
strategy premium does erode even further. What this means for
this ocean of crypto treasury companies that now exist or
you just kind of all.
Speaker 1 (20:09):
Like they're all the numbers that people have announced for
like their plans, it's tens of billions of dollars of
crypto treasury plans. Like that's not going to happen, Like
we'll see, Like it's just like they're not going to
raise that kind of money. I think some of it
is like people have converted their statues of crypto into
crypto treasury companies because like it's trading at a higher
(20:32):
value and if that arose and it ends up at
a zero premium, and well, you know they'll own a
stash of crypto and someonet inconvenient forum and it's like
kind of fine. But the people who are like we're
going to go sell twenty billion dollars of stock at
the market to buy doagecoin.
Speaker 2 (20:46):
Yeah you are, they're not, So what does that mean?
We're just going to have like a watery graveyard of companies.
Speaker 1 (20:53):
That are acount strategy is a different story because the
real company with you know, eccentric management. But a lot
of crypto treasury companies are sort of more or less defunct,
like biotech companies that have like a you know, one
million dollar market cap and then got acquired so that
someone could pump a billion dollars of crypto into them.
Right before there were biotech companies, there were gold miners. Right,
(21:16):
there's a long history of what are your grave yards
of public company tickers being passed throughund and let let's
go back to that, right, But the fad this year
was crypto treasury companies a fad two years ago. Yeah,
it's like.
Speaker 2 (21:26):
Fine, yeah, okay, I feel better.
Speaker 1 (21:29):
Yeah, crypto treasury companies are quite harmless, Like.
Speaker 2 (21:34):
They're not like negatively impacting the economy.
Speaker 1 (21:37):
No, I mean, you know, in some broad sense, yes,
but like it's not like a crisis could occur in
crypto treasure. So like if the strategy trade stops working.
Like the worst case is kind of it trades to
like eighty percent of that asset value. Right, that's still like,
you know, many tens of billions of dollars company, right,
Like they've really pumped a lot of I don't know
(21:59):
that I've want to say real value, but you know,
in quotes, real value into this small software company.
Speaker 2 (22:05):
Got a lot of Bitcoin've got a lot of bitcoin.
Speaker 3 (22:07):
At the end of the day, at where we are
in the day.
Speaker 2 (22:12):
Okay, well, on the long list of things to worry about,
I will put that at the bottom. IPOs Matt, you
(22:34):
wrote about a paper. It came out of Joseph J.
Henry of Northeastern University and Terence M. O'Brien from the
University of Maryland. And I realized that you're biased here
because they quote you right off the bat.
Speaker 1 (22:51):
That's true. I probably should have dissed.
Speaker 2 (22:53):
Calm No. I think that's awesome. It's like an easter egg.
You actually go to look at the paper.
Speaker 1 (22:58):
That you're something. Is that Like there are a lot
of like finance and law papers on SSRN that have
you know, twelve downloads.
Speaker 2 (23:09):
And this one has more than that.
Speaker 1 (23:11):
Sometimes, right, I don't mean to talk about this one specifically.
Sometimes I come across these papers in various ways, often
because the writer's summoned to me, and then I write
about them money stuff, and then they have more than
twelve downloads, And I think, I don't know how directly
useful money stuff mentions are for like academic tenure, but
(23:35):
like there's some there's going to be a marginals Yeah,
there should be. I want, I really want to see that, Like,
am I getting academics tenure? But anyway, if you quote
me at the beginning of your paper, it probably does
increase your chances.
Speaker 2 (23:48):
Yeah, definitely, So sure.
Speaker 1 (23:50):
Something to think about anyway. Yeah, So they are this
paper at IPO Pops, which we talked about on the
Mailbag episode of our podcast that was aired moster It no.
Speaker 3 (24:01):
The mailbag episode we did, And this paper sort of
formalizes an intuition that I've long thought about, which is
that when you do an IPO, you're a company, and
you sell in the IPO something like ten to twenty
percent of your stock.
Speaker 1 (24:19):
The rest of your stock stays locked up. Right, It's
owned by the CEO, it's owned by the early investors,
it's owned by the employees and it's locked up in
the IPO, so they can't sell for like six months
after the IPO. Something like ten or twenty percent of
the shares come loose in the IPO, but most of
the shares most of the time are being sold to
like long term investors who have had conversations with management
(24:41):
and who management wants to be the shareholders. And so
there's this sort of deal where the management and the
bankers and the long term investors are trying to like
send the stock to people who will hold it for
the long term. And what that means is that when
the stock opens for trading the day after the IPO,
there's not a lot of stock to buy, because you know,
the company is sold tin ish percent of its stock
(25:03):
and then ninety ish percent of that stock goes to
people who don't sell it on the first day. The
amount of stock that's available to buy on the first
day is on the order of one percent of the
shares outstanding. And meanwhile, like you know, there's all these
retail investors want to buy stock, and so when there's
a hot IPO that a lot of retail investors want
to buy, there's just not a lot of supply for them,
(25:25):
and so the stock trades to a price that equilior
rates to blind demand for like that one percent of
the shares that the retail investors want to buy. But
that doesn't tell you what the company is worth necessarily.
Speaker 2 (25:37):
Yeah, And it also.
Speaker 1 (25:37):
Doesn't tell you what the right IPO price was, because
the IPO price is the clearing price for ten, fifteen,
twenty percent of the stock. But then you know, one
or two percent of the stock trades on the exchange,
So the clearing price on the exchange is going to
be a lot higher than the clearing price for the
IPO if like there's a lot of demand on the exchange. Yeah,
but if like all ten percent of the stock came
(25:59):
loose on the day after the IPO, it would probably
trade less of a pop. And so they write about
like there's this question of like how much money are
companies leaving on the table that we talked about, where
like people get really mad that when a stock doubles
on its first day after the IPO. They say, oh,
the bankers should have set the price higher so that
it wouldn't trade up that high, and the company left
all this money on the table. But that's not necessarily
(26:21):
true because most of the stock doesn't trade on the
first day. They couldn't necessarily have sold ten or twenty
percent of their stock at the price that it rose
to on the first day.
Speaker 2 (26:30):
Yeah, this paper, I mean, it's a really good time
for this paper because I feel like this topic has
taken on new life because we're getting IPOs again and.
Speaker 1 (26:39):
We're seeing right, I was going to say, like this
is an evergreen topic. I've been thinking about this for
like fifteen years, but you're right, like for a while
it went pretty dormant because there are no IPOs.
Speaker 2 (26:47):
Yeah. Absolutely, and then twenty twenty five, I feel like
you've seen really dramatic pops even in the last couple months.
You think about Figma Core, we've circle we were talking
like triple digit, multiple percent pops, right, And.
Speaker 1 (27:01):
You think about like you're an institutional stock investor, like
you do some valuation work, you meet with this company
as you think, this is what i'd pay for this
company because it's comparable to like other companies in my portfolio.
Maybe you own other private companies, right, because a lot
of institutions do. And then like the stock opens for
trading and retail investors haven't had fun new IPOs to
(27:24):
buy for years, and so a ton of demand for
very limited supply, and so the stocks go up a lot.
But that's not necessarily reflective of where institutions would price them.
Speaker 2 (27:33):
Yeah, I will say, though, we're not talking about like
one day pops. I mean, in the case of those
three companies fig mccor we even circle, these are like
multi week mostly sustained.
Speaker 1 (27:44):
Yeah. I want to be clear, like this explanation is
like an interesting and important technical explanation for some of
what happens in ipo pops. On the explanation, yeah, there
is a desire to underprice IPOs so that people who
invest in the IPO make a profit, because that's good
for them and for the banks, and also arguably for
(28:05):
the company because it like creates investor goodwill goodwill. But
this explanation is not the only reason that IPOs pop.
Speaker 2 (28:12):
Yeah, it is interesting to look that they find that
the average IPO share price POP is like nineteen percent
higher than the actual offer price on the first day
of trading. Nineteen percent I mean relative to some of
the IPOs I just mentioned. Seems tame at this point.
I don't think that would turn heads in quite the
same way that.
Speaker 1 (28:29):
Whatever happens is a long sample.
Speaker 2 (28:31):
Right and like yeah, thirty years.
Speaker 1 (28:34):
Yeah, And like I do think that the scarcity of
supply means there's more kind of dispersion now.
Speaker 2 (28:41):
Yeah, you know, when there's.
Speaker 1 (28:42):
Two IPOs a week, they're not all going to pop
one hundred percent.
Speaker 2 (28:45):
That's true. It feels like we're always away from that. Like,
I know that the ipo market is normalizing.
Speaker 1 (28:50):
I said, two IPOs a week, that's that's a low number.
I feel like there used to be a lot more
than two IPOs a week.
Speaker 2 (28:54):
Two IPOs that people are exciting about a week. Though
we're now we're now like pretty well, yeah, yeah, it's
been groom for a while.
Speaker 1 (29:01):
And now it's great. I think that this dynamic here
where like very little of the shares are available and
retail wants them, and so the stock pops is exactly
the same dynamic that you see in the private company
stuff that we talk about all the time, like retail
and retail issue, Like you know, accredited retail investors really
(29:22):
want to own shares Open dentists, I really want to
own shares of open AI and SpaceX. It is hard
for a retail investor to buy open air and SpaceX,
but it's not impossible. There's like little bits of open
air and SpaceX and like little you know, there's like
secondary funds. There's like little you know, closing funds that
own a little bit of it. And because there is
(29:45):
a limited but not zero supply available to retail, retail
really bids them up. And so the prices of you know,
open ai shares or proxies or SpaceX shares or proxies
on the retail market the prices higher than what you
see those companies raising money at. And it's the same story,
right like, institutions will buy tens of billions of dollars
(30:07):
of open ai stock at some price, and then retail
investors will buy tens of millions of dollars of that
stock gets a much higher price. That doesn't mean that
like open Aiy's valuation is in the trillions of dollars.
It means that the supply available to retail is really low.
It's the same thing with IPOs, right like, the supply
the first day available to retail is much lower than
what institutions have access to, and so the price is higher.
Speaker 2 (30:29):
I feel like I'm too tired to like neatly make
this point, but it just seems somewhat parallel to what
we're talking about with micro strategy in the premium, and
it's just coming down to supply and demand.
Speaker 1 (30:40):
Yeah, I mean, I guess it's true in the sense
that micro strategy, unlike open ai or these IPAs or Figma,
micro strategy is pretty much willing to supply whatever whatever
is demanded, and that is bad for the premium exactly.
Speaker 2 (30:59):
And also to tie to the first thing that we
talked about, those retail investors don't need to try to
own open ai. They just need to make a prediction
market around it somehow to reflect the movement of these.
Speaker 1 (31:11):
All right, right about that all the time? Yeah, well
there's legal complications, yeah, because that's not a commodity, that's
a security based swap, completely different problem. Pleave it there
on that very boring note.
Speaker 2 (31:24):
Well, that was awesome. I think that was really totillating.
Speaker 1 (31:31):
And that was the Money Stuff Podcast.
Speaker 2 (31:33):
I'm Matt Levian and I'm Katie Greifeld.
Speaker 1 (31:35):
You can find my work by subscribing to the Money
Stuff newsletter on Bloomberg dot com.
Speaker 2 (31:39):
And you can find me on Bloomberg TV every day
on Open Interest between nine to eleven am Eastern.
Speaker 1 (31:45):
We'd love to hear from you. You can send an
email to Moneypod at Bloomberg dot net, ask us a
question and we might answer it on air.
Speaker 2 (31:52):
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.
Speaker 1 (31:58):
The Money Stuff Podcast is produced Anna Mazerakus and Moses Onen.
Speaker 2 (32:02):
Our theme music was composed by Blake Maples and Stage
Bauman is Bloomberg's head of Podcasts.
Speaker 1 (32:06):
Thanks for listening to The Money Stuff Podcast. We'll be
back next week with more stuff.
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