Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
It's been two weeks since they've heard.
Speaker 1 (00:10):
Our scratchy voices.
Speaker 2 (00:13):
Yeah, I sound pretty good.
Speaker 1 (00:14):
You do sound pretty good. Yeah, I probably sound most
like myself. But I have been sick.
Speaker 2 (00:18):
Yeah, you also got a haircut. Not that that matters.
Speaker 1 (00:20):
No, it's an audio podcast. But no. We took last
week off because I was taking my children to a
water park. But also I got extremely sick, and so
I couldn't have recorded anyway. I lost my voice. I
was like standing at the water park very quietly saying
don't go in there.
Speaker 2 (00:38):
So really it was in the listener's best interests, was
it ever, Yeah, so that they didn't have to hear
that voice. But we're back now, and boy, we have
some stuff to talk about.
Speaker 1 (00:52):
I'm convincing. Hello, and welcome to the Money Stuff Podcast.
You're a weekly podcast wherever you talk about stuff related
to money. I'm Matt Levine and I write the Money
Stuff column for Bloomberg Opinion.
Speaker 2 (01:04):
And I'm Katie Greifeld, a reporter for Bloomberg News and
an anchor for Bloomberg Television.
Speaker 1 (01:09):
What is all this stuff we have to talk about today? Katie?
Speaker 2 (01:12):
Okay, We're coming in hot because the first ever private
crediting TF has finally launched. We're going to talk about
Bill Ackman's dreams of being a baby Berkshire, and then
we're going to talk about info Wars and an interesting
bid to try and buy it.
Speaker 1 (01:29):
Private CREDITYTF, the.
Speaker 2 (01:31):
Sp D r SSGA, Apollo IG Private Credit ETF. It
launched on Thursday. Yes, and I have to say, I'm
kind of shocked that this launched.
Speaker 1 (01:43):
You didn't he do it? And we've talked about this
like more than fifteen times on the show.
Speaker 2 (01:48):
Yeah, And and a lot of people in the industry
too are shocked that it launched. Interesting, it feels like that.
Speaker 1 (01:54):
I feel like, is this partly like when they filed
for it, it was like there are rules and now
there are no rules. Ors not related to that at all.
Speaker 2 (02:01):
So I was thinking about that. You know, we are
in a brave new world. We have a new SEC.
This was filed in September twenty twenty four. It's launching
February twenty seventh, twenty twenty five. I mean they didn't
make arguments. I don't think that Apollo and State Street
didn't put any meaningful thought into.
Speaker 1 (02:17):
This, but I have no problem, Like I'm not surprised
that it launched. I tell me why, because like you
could do anything, Man, it's an ETF, Like why not?
Speaker 2 (02:25):
Like, what's what if this launched in twenty twenty four?
Would you have been surprised?
Speaker 1 (02:30):
No? I asked about like now that we have no
rules as that would make it, But like I would
have thought it was fine in twenty twenty four, which
is probably why they filed it.
Speaker 2 (02:38):
So there's a lot of question marks about and we've
talked about this too, like how you put securities as
a liquid as private credit into a very public wrapper,
what withdrawals look like, and whether you could run into
some problems there. There's rules that more than fifteen percent
of an open ended fund can't be in a liquid securities.
(02:59):
Private credit oly is considered in a liquid security. But
the CTF is going to invest ten to thirty five
percent of its holdings in private credit. And the argument
that State Street and Apollo made was basically that you know,
Apollo is going to provide that liquidity. They have this
trading desk, They're going to both supply the private credit
(03:21):
assets for this fund, and they're also going to buy
them back. They're contractually obligated to buy them back. So
it seems like the SEC agreed with that argument because
this thing is trading.
Speaker 1 (03:36):
I think that argument is basically correct. Right. There's a
range of stuff that is quote private credit, right, and
like one thing that is private credit is business development companies,
which are you know, often like middle market direct lending
companies that are private credit companies in a public wrapper, right,
like they provide non bank privately negotiated loans to companies,
(03:56):
but like they're provided out of a public buol of capital.
So im I understanding is there's some ability to put
like BBC shares into this thing, which is liquid private credit,
no problem. Some large percentage of what they're going to
do is like Apollo private credit loans that like Apollo
will make a market in and they will be able
to trade with apollow at that market. And yeah, it's
like solves the problem, right, because like the problem is,
(04:18):
you know, you have the possibility of the fund expanding
and contracting each day because like if more public buyers
want to buy, then it'll have to expend. And if
you have a very i liquid, hard to source, hard
to sell asset, like we've talked about like private companies
where it's like, you know, you can only get so
many SpaceX shares. If you have that, it's hard to
(04:39):
expand and contract. But like if you have Apollo, which
has a massive supply of private credit and like you know,
its own balance sheet and its ability to buy some back,
then like Apollo can be the like accordion for the
expanding and contracting of the ETF. And it seems fun.
What's wrong with that?
Speaker 2 (04:58):
Well, let me read you something from morning Star analyst
Brian Moriarity, and I will note that morning Star tends
not to like things that are a little too crazy,
like they hate what's going on.
Speaker 1 (05:08):
I love things that are a little too crazy. That's
the problem right here.
Speaker 2 (05:10):
I'm like, oh yeah, they are very spiritually opposed to
you know, funny business. But this is what moriogy business.
Speaker 1 (05:17):
Is, My whole business.
Speaker 2 (05:18):
Moriarity, I had to say, Apollo's liquidity facility is subject
to a daily limit, and this daily limit remains undefined.
It's possible the fund could have to meet way more
redemptions in a day than the limit. That could force
State Street to sell more liquid public securities first, potentially
leaving the ETF with more liquid private credit instruments as
(05:39):
a percentage of assets, and increasing the risks of a
liquidity crunch. Okay, wait, I like this line. When this happens,
the portfolio often begins to manage the advisor rather than
the other way around.
Speaker 1 (05:51):
Okay, that's a cool line. I agree with that. I
think it's like when they start with like zero dollars
of assets, like it's not irrelevant consideration, right, Like, this
is clearly like they're gonna see where it goes. Apollo's
trading desk has some risk limit, and like that risk
limit is more than adequate to deal with redemptions on
the first day when it will clearly be net creating, right, Like,
(06:12):
they're not gonna have net redemptions for.
Speaker 2 (06:15):
Two weeks, right, I suppose.
Speaker 1 (06:17):
Like if they had net redemptions in the next two weeks,
they would be very small because it's all fun. But right,
if this becomes a twenty billion dollar ETF, then there
will be material risks of Apollo not being able to
absorb all of the private credit if it goes from
twenty billion to zero overnight. Yeah, my assumption is that
(06:41):
everyone's like, Wow, that'll be a nice problem to have
when we come to it, right, Yeah, but no, I
think it like a modest size. It's like, yeah, this
is a fun proof of concept for Apollo, and they
would trade the paper. They also get to make the
price in a not competitive environment, right, like in a
world where Apollo thinks we're doing rate private credit loans
(07:01):
and all of our loans are fantastic and like retail
shareholders of the ETF are pulling out, then for Apollo
to be like the Marcus sixty cents on the dollar,
will buy as much as you want, it seems fine
for them. I don't know.
Speaker 2 (07:16):
Yeah, well, there's skepticism that I've seen the fact that okay,
Apollo is supplying the private credit and it's also contractually
obligated to buy it back. I did see some people
comparing this to like the fox guarding the Henhouse.
Speaker 1 (07:31):
One thing that I think, Yeah, I think they're creating
private credit to sell to the public and they're trying
to make money on it, like of course, well, also,
where do you think they're.
Speaker 2 (07:38):
Doing In the filing, it also says to sort of
I don't know, ease that worry. The ability to sell
the instruments to Apollo is not exclusive. So if State
Street the right find another bid, Yeah, they found a
better bid somewhere else, they wouldn't have to necessarily sell.
Speaker 1 (07:53):
To a sure great Yeah No, I mean look, I
mean like when we've talked about not only the content
of the ECF, right, Like, Apollo is trying to build
up a market for private credit, right, and I think
they'd be thrilled to live in a world where once
State Street wants to sell it's private credit, it can
get bids from twenty anonymous firms on an electronic platform, right,
Like that's that's a good world for a private credit
(08:15):
originator to live in. But yeah, like they think they
are smart evaluators of private credit and this is a
like retail place into which to put it, Like yeah, yeah,
they're hoping to make money. The thing I say is
like on this liquidity worry, The thing I always write
about private credit is that it's a really good funding
model for loans. Right, Like you are Apollo. You raise
(08:36):
money from like classically insurance companies are like you know,
in policy case, they own ans, they are an insurance company. Right,
You raise money from insurance companies and you have this
very like long term locked up capital and you use
it to make long term, somewhat risky loans that don't trade, right,
And that's a good match of liabilities and assets, right,
Like you are raising long term money to make long
(08:58):
term loans, it's a better match of liability and assets
them like classic bank lending, where the banks raise overnight
money to make thirty year loans. The private credit model
has always struck me as being unusually not runnable, right,
Like you can't usually, I mean you sort of can.
You don't really like redeem your life insurance policy, right, So,
like the theene has like really long term money and
(09:21):
if like credit gets worse, like no one is clamoring
to get their money back, so Athene can kind of
ride that out. The theene is Apollo is like captive,
but once you do it in a like instant liquidity
retail vehicle, like that changes a little bit, right, And
it's like for the retail vehicle, the liquidity is like whatever,
it's rodded by Apollo. But for Apollo, it's like you've
(09:42):
shifted your funding model so that it went from being
like arguably one hundred percent of your funding is from
insurance company clients, where like it's like permanent funding to
a small but you hope growing percentage of your funding
comes from retail investors who can take their money out
at any time. I think gets like a little bit
more fragile. It's like, you know, I wouldn't worry so
much about the fund being able to get its money
(10:04):
back out of Apollo. I worry a little bit like Apollo,
like making its funding model a little bit worse. But
you can understand why they think it's worth the risk
because one again, they're starting from nothing, so it's like
day one, that risk is very small. Yeah, and then
too if it gets really big, then it's a nice
problem to have.
Speaker 2 (10:22):
I cannot wait to see how this is received. I
mean day one is Thursday. I mean I can't wait
to see what will look like on Monday, what it'll
look like in two weeks, two months, et cetera, what
the reception will be like.
Speaker 1 (10:35):
It's not that private credity. Yeah, very is like this
hot asset class and subs. But it's also it's like, yeah,
you get like, you know, slightly better than Bonder. Yeah.
It's not like space X, right, It's not like a
lottery ticket. Right, It's like, yeah, it's like a slightly
higher fixed think of an investment.
Speaker 2 (10:52):
That's true, but still, I mean, it feels like there's
been so much anticipation for this, certainly. I mean you
think about the big splash that this filing made at
the time. Maybe that was just a nice podcast as
discussed on the Money Stuff podcast, I was not.
Speaker 1 (11:08):
Like hearing on the subway. People have been like, oh
my gosh, did you see there's a private credit ETF coming.
Speaker 2 (11:13):
Well, this will be a good reality check to see
whether this sort of lives up to the hype, at
least in the ETF world. It's a big moment both
for the ETF world but also for just the world
of private assets.
Speaker 1 (11:26):
Oh yeah, I mean I do think and we've talked
about this too. Like the idea that private credit won't
trade on an electronic platform like m it was just
like a weird like blip in time, Like there's no
reason for that. Like in five years altho it would
be like big electronic trading platforms for private credit loands
like sure are why not? It's fine?
Speaker 2 (11:45):
Yeah. Also, if we stretch our imaginations, and this is
something that I haven't really had time to do yet,
But the fact that this is a partnership between you know,
an ETF firm established ETF firm State Street with Apollo,
which is acting as look provider. You could dream of
how that model evolves. Some people, including morning Star, have
(12:06):
pointed to we'll probably see more of these liquidity partnerships
in the future.
Speaker 1 (12:10):
Yeah, although like that is also possibly transitional, right, And
like in a world where like there is easy liquid
trading of private credit, if you're an ETF provider and
you're looking to start at private credit ETF, you'll pregner
with like Chain Street or something. It's just like a
liquidity provider, not an originator, right, but like for now
the originators are they are the liquidity providers, and right
(12:33):
every other originator is probably going to get into having
an ETF.
Speaker 2 (12:37):
Yeah. Also, the fee seventy basis points is that high.
I mean, it's not low, but considering the I don't
know what the cost for a retail investor, like an
average individual investor to get access to private credit now
without an ETF would cost. I will say there's some
like leverage single stock ETFs that cost more than one percent.
(13:00):
So this is pretty I mean was for credib for
a brand new product, a brand new category, actively managed
obviously some many basis points. Is really cheap all things considered.
Speaker 1 (13:12):
Yeah, this is not their business, you know, Yeah, I
think got a lot going on. This is a fascinating
proof of concept for like, you know, Apollo is pushed
to like be your one stop retirement provider, right yeah,
and you know you don't need to make a lot
of money on this one product in the.
Speaker 2 (13:27):
First week, but maybe they will. Okay, Bill Ackman, friend
of the show, Bill Ackman making some interesting moves, trying
(13:51):
to reinvent himself sort of sort.
Speaker 1 (13:53):
Of only sort of. It's so hard to understand what
a hedgehund is. Like when I was like growing up
in finance, like that dge fund managers where guys like
Bill Aackman who like ran kind of concentrated equity ish
activist ish you know, like got their got in the news,
like got went on TV. And now like a hedge
fund is more back to the classical hedged notion where
(14:15):
it's like these much more you know, multi strategy, multi
manager factor neutrol. Yeah, kind of quantity funds. But like
back when like the kings of the hedgehund world were
like the Bill Ackmans. It was like a lot of
them kind of positioned themselves as success was to Warren Buffett,
it was a hedgehund manager for a little while. Right,
(14:36):
It's like you build an investment partnership where you make
concentrated long term bets on stocks you really like, and
you're smart and have a public persona and go on
TV and that's your business. And like you're self consciously
a like Graham and Dot value investor, and like you're
sort of your your investing framework is kind of similar
to Warren Buffett's. I think that one thing that Bill
(14:57):
Ackman in particular has learned is that in addition to
being good at Graham and Dodd and being folksy, Warren
Buffett has a structural advantage. Like he runs a company
and that's more useful to him than running a hedge fund.
And in particular, it seemed to me that Bill Lackman
really wants to have a thing that is his investment
(15:19):
vehicle that trades at a premium and that people are
like willing to pay up to have money managed by
Bill Ackman. And it has been funny over the last
year or two watching him like fail to achieve that
with like his clothes end fund Ipo.
Speaker 2 (15:32):
Also heavily discussed on this pot I have discussed.
Speaker 1 (15:34):
On this podcast. And now what he wants to do,
He's like, start over. We're gonna do Warren Buffet, We're
gonna do Berkshire Hathway. We're going to do is we're
going to buy a small, weird, random company and turn
it into a gigantic investment vehicle for like Bill Ackman
making some public stock investments, making some one hundred percent
acquisitions of companies, just being Warren Buffett, just being an
(15:55):
acchoir and an investor and a public figure. And I say, like,
buy some random company. But it's not a random company.
It's like Howard Hughes, which is a company that he
has a long history of. It's like spun out of Dtart,
which is one of his most successful investments. He was
the chairman of the company for a while, and Pershing
Square currently owns like thirty something percent of it. And
(16:16):
what he wants to do now is one buy a
little more, partly to get his take up and partly
to just inject money into the company. And then too
like become the head of the company and let the
people who are currently running it's real estate business, be
like one little segment of the company, and then let
him and his investing team make investments for the company,
(16:37):
make acquisitions for the company so that it can become
a borkshare, so that in twenty years you'll think of
Howard Hughes as a you know, insurance and tech and
whatever company, and it's real estate will be an interesting
historical side note. Well, that's also funny that, like it's
called Howard Hughes like a guy's name and it's not
real lacking. Yeah, that's the change in there.
Speaker 2 (16:57):
I was googling about it, and I kept getting the
guy himself. It's not what I wanted. Yeah, it's a
three point nine billion dollar arche cap company. It's heavily
involved in real estate, including the seaport for our Manhattan
natives here. You know what's funny is that they reported
earnings today, which is Thursday when we're recording this, and
(17:17):
I was reading through the earnings call and they did
make a note that the Special Committee of our Border
Directors is responsible for evaluating Pershing Square's most recent scheduled
thirteen dfiling and the associated proposed transactions. Thus they will
not answer any.
Speaker 1 (17:31):
Questions do I love it?
Speaker 2 (17:33):
Well, they got a question about it, obviously it did
take a few questions to get there. But John Kim
from BMO Capital Markets was the brave, brave analyst who
spoke up and said, I was wondering if you could
provide any sense at all as far as timing of
when there will be an update, and I just wanted
to confirm the transaction needs BORD approval and not shareholder
approval to move forward. Question Mark CEO David Riley said
(17:56):
that the Pershing Square thirteen DEEN filing is between the
Special Committe in Pershing Square, and I'm going to leave
any comments in timing or otherwise for them to opine on. So, yeah,
scant detail.
Speaker 1 (18:07):
Actually, in my prior life, knowing whether that transaction buying
like tennis percent of the company when you're already a
thirty percent holder, Knowing whether that transaction required shareholder river
was like a surprisingly large part of my prior life.
But I've never forgotten. Let someone else figure that out.
Speaker 2 (18:23):
God, that would have been so good to bring to
this pod.
Speaker 1 (18:26):
No, it's shockingly boring.
Speaker 2 (18:30):
That's what we aim for here at the Money Stuff Podcast.
Shockingly boring. I have some questions. One, so it's a
three point nine billion dollar company. It's a good company,
he has a long history with it. Why not just
take Pershing Square public?
Speaker 1 (18:46):
Wasn't no, No, because because you have to have a
regular company. Okay, it's the real estate companies.
Speaker 2 (18:51):
It's like, take your hedge fund public and be this.
Speaker 1 (18:54):
Is what this is what he tried. He tried, I
mean not the hedge fund, but he tried to take
a close and fund public. Yeah, but it turns out
that if you just have closed unfund, it won't trade
at a premium, and then like all of the magic
goes away.
Speaker 2 (19:04):
I thought that the closed end fund was launching as
a step in taking Pershing Square itself public.
Speaker 1 (19:10):
Yeah, But taking Pushing Square itself public is is not
quite the same thing, because when you take a hedge
fund company public, you're capitalizing a fee stream. Yeah, And
he doesn't want to sell a fee stream. He wants
to sell a pot of investments at a premium. Right.
It's now breaking my brand a little bit to think
about taking a hedgehund company public and then in that
hedge fund company buying assets. But it just seems it
(19:34):
seems like a weird sort of cannibalism or something.
Speaker 2 (19:37):
Okay, not doesn't like it.
Speaker 1 (19:38):
I don't know why. But to me the question is like, Okay,
you like Howard Hughes, but like there's three thousand companies
out there, just by any one of them doesn't matter.
Like we talked about like Brad Jacobs and QX out buying,
like just like the most random software company to like, yeah,
build his logistics upire out of it. It doesn't matter.
They just get rid of the software company and then
(19:59):
you have your you know, clean sheld to do logistics
that far. I wrote once about GameStop in addition to
being game Stop, it's like controlled by Ryan Cohen's the CEO,
and like at some point they put an announcement being
like he's going to be able to make equity investments
with the company Treasure. It's like you can build Berkshire
Hathaway out of game Stop, and you should because it
will trade it at premium and people will love it. Right,
(20:21):
But it's like that Ryan Cohen already has that one.
But yeah, Bill Ackman could buy you know, all sorts
of weird companies and turn them into Berkshire Hathaway.
Speaker 2 (20:29):
Yeah, I mean you did write in your column that
someone suggested he buy Earl. Yeah, yeah, that would have
been pretty good. I would love to add I mean
I know that I can't that this is the matter
of the Special Committee of the Board of Directors, but
I would love to know how Howard Hughes feels about this.
Speaker 1 (20:46):
Right, it's weird because you're like here, you are trying
to run your business.
Speaker 2 (20:50):
Yeah, trying to do your earning.
Speaker 1 (20:51):
School, like, no, we want to build yeah, totally unrelated
hedge fund. Like if you're like running the textile mill
that is Berkshire Hathaway and like Warren Buffett comes in
and says, I'm going to build a business empire and
like get rid of the textiles. I don't know. It's
like a mixed bag. Yeah, it's like probably good for shareholders,
but it's kind of weird. Yeah.
Speaker 2 (21:11):
I wonder if if this goes through, whether or not
Bill Ackman would tweet us. But no, you thinkin maybe
he'd tweets more.
Speaker 1 (21:18):
Oh yeah, more because you get like, like the thing
you're aiming to do interested in. Yes, the thing you're
aiming to do is like make investments and like be
a creative to the value both of your investments and
of like your vehicle. Howard huesed by, like people would
be like ooh, you know, like yeah, you like Warren
(21:40):
Buffett had the ability for a long time. It's like
go to a company and be like, I will put
a billion dollars into your company at like a thirty
percent discount to your stock price, and the stock would double,
and so it's like worth it to the company. And
like Warren Buffett would make a lot of money off
of it, right, Like he had like the self fulfilling
prophecy ability right where he could invest money in a
company and just that investment would make the company go up,
and so he could like monetize that and like Blackman
(22:02):
wants that too. And the way Blackman gets it is
like one by like making good investments so that people
like his track record, but then two by tweeting a lot.
Speaker 2 (22:09):
Right, well, let me let me refrace. Then I wonder
if peopill tweet about different things. I don't know.
Speaker 1 (22:15):
I don't know either. I think that he thinks that
this is working.
Speaker 2 (22:19):
Maybe it is. I will say, it's interesting to me
reading this column and then preparing for this podcast. You know,
I grew up just with Warren Buffett as Warren Buffett,
and I haven't really thought deeply about his model before.
How he did just buy a random company and start
doing this.
Speaker 1 (22:35):
Yeah, it's like it's it's similar, like he was running
a hedge fund and like they made an investment in
this textile company and he got mad at them. I
forget why he got mad at them. Yeah, they didn't pay.
There's some like he had some fight with him and
he's like, I'm just gonna buy some stock, and they
bought enough stock that he controlled the company. Yeah, and
then he's like, well, all right, I'm gonna take the
treasury of this company and start making investments with him.
(22:57):
And then like he became brick Sure Athora.
Speaker 2 (22:59):
Well, I don't know if I find it surprising or
not that there haven't been more high profile successful Berkshire
Hathaway types. I mean, we just talked about Brad Jacobs,
for example, who's pretty well known, and I don't know,
maybe Blackman will be the next Berkshire Hathaways.
Speaker 1 (23:14):
Yeah, I will say that, like Warren Buffett was kind
of early runing hedge fund and in the nineties and
certainly the two thousands and tens, and twenty twenties, if
you were like good at making investment decisions, the idea
that you would like take over a public company and
invest that treasury and pay yourself, you know, one hundred
thousand dollars a year is Buffett sort of nominally gets
(23:34):
paid at Berkshire and like get all of your returns
from the increase in the fundamental value of the company.
Like people found a better model. Yeah, you can run
hedge fund you charge two and twenty and like you
can you know, make more exotic investments and you know,
have maybe a better ties treatment and like get paid
(23:54):
hundreds of millions of dollars a year. So the idea
of people like wanting to follow exactly the Buffet path,
like that kind of attenuated, and like why does ackman
want to do it? Like some of it is just
like he's made enough money and it's like sort of
like a legacy slash, you know, experimentation kind of.
Speaker 2 (24:12):
Yeah, I don't know the man obviously not well, it
just feels like he wants to be in control of
some publicly traded entity. I don't know.
Speaker 1 (24:21):
I think that's right. I think that like he's had
a good run as being a guy who is mainly
a manager of private hedsphones and there's made a lot
of money doing it, and now it's like this is
somehow more of a satisfying public facing thing. Yeah.
Speaker 2 (24:34):
I mean it's hard to understand not being incentivized necessarily
by money.
Speaker 1 (24:39):
But I suppose when you have you get to appoint man. Yeah,
I feel like I'm sure the money.
Speaker 2 (24:43):
In this, like he'll be fine. Yeah, all right, Matt,
(25:05):
we decided on this topic, Yeah, pretty much. So I'm
a little bit unprepared, but I'm so excited to hear
you tell me about it.
Speaker 1 (25:14):
Info Wars. We tied once about info Wars before we did,
when the Onion was going to buy them, or rather
they wanted to Global Tetra Heton was going to buy them.
So Global Tetra Heaton, which is like the trade name
of the Onion, was going to buy info Wars out
of bankruptcy. It's like Alex Jones, the Info Wars guy,
is in bankruptcy because he has spread conspiracy theories and
(25:36):
hoaxes about the Sandy Hook Elementary School of massacre, and
the families of the victims suit him and got like
a billion dollars of judgments and so now he's in
bankruptcy because he doesn't have a billion dollars and his
main asset is info Wars has like you know, YouTube platform,
and the bankruptcy court has been trying to sell that
to raise money to give to these essentially Santay Hook
(25:58):
victim families. And we talked about it because the Onion
had bid to buy it, and the idea is that
the Onion would like a little bit of cash for it,
but mostly they would run it on behalf of the
Sandiog families essentially both economically and also like to not
promote right wing conspiracy theories but to instead promote gun control. Yeah,
(26:20):
so that fell through for what I thought were kind
of technical administrative reasons, but like it seems to have
really fallen through. When we talked about it, I was like, yeah,
the Onion can just come back and bid again, but
didn't seem to work out that way. So now like
the only bidders are Alex Jones himself in a fake mustache,
you know. Yeah, there's a thing called Fuak that's basically
like some backer of Alex Jones will give him money
to buy his company back. And this thing called wow
(26:44):
dot Ai that's like a Puerto Rican artificial intelligence. It
was like some sort of thing, you know. But its
bid is some cash and a meme coin. It has
launched a meme coin called wars that it wants to
use to pay for in four warst and the idea
is that it has like this mean coin all meme coins.
It's like they issue like ten percent of the meme
(27:06):
coin and they're like, we've reserved fifty percent for some
weird purpose. So this one, they preserve fifty one percent
for the bankruptcy state. They're going to give it to
the bankruptcy estate. It's going to be part of their bid. Yeah,
so like the credit Basically, Sandy Hook families will end
up owning this meme coin and they would buy the side,
and then the holders of the mean coin could vote
on what they would do with the side with I
guess the choices be like let Alex Jones run it,
(27:28):
or like let the onion run it. Yeah, And that's
their bid and that's the plan.
Speaker 2 (27:34):
So you seem to write that this is pretty clever.
Speaker 1 (27:38):
You got to read the whole sentence. Who says you
know how much I hate to say this because I
hate meme couns. Yeah, And the thing that is happening
here at its core is like someone thought, hey, it
would be good to like pre sell stock in in forest,
Like would we get to try to buy it for
worse and like raise the money to do it from
the public, and like that would give us the money
(27:59):
to do it, and then the public can have a
say and how we run info Wars. But you can't
do that because like there are securities laws. But now
there are no securities laws as long as you call
it a token. And so what they have done here
is they've pre sold stock in like their new info
Wars company and call it a meme coin. And it
has some like very clever properties. Right, you can create
a dynamic where people are going to bid up the
(28:21):
price because some people want it to be run one way,
people wanted to run another way, and so there's some
auction dynamic where people will pay more to get the
outcome they want. And you've sold like a relatively small
number of the tokens, and you've reserved a large number
of the tokens, so you can say, oh, the fully
diluted value of this thing is very large because like
the small number of tokens trade trade it like a
(28:41):
relatively high price, and so it's you know, it's not
like trump coin, but you know, I look this morning
and like the fully diluted value is like twenty three
million dollars, which is like implies eleven million dollars for
the Sandy Hook victims, which is more than they'd get
from wuck. It's not necessarily a real value, right, because
it's like it's a thinly traded meme coin there, Like
the main thing about meme coins is like their value
(29:02):
disappears over night. Let's still so like it creates like
a lot of paper value, and it creates it in
a somewhat clever way, and it just gets around the
securities laws because everyone's decided securities laws don't apply to
crypto anymore. Yeah, so it's clever, but not in a
way that like I like.
Speaker 2 (29:17):
Yeah, yeah, like got to give it to them, But
do you have to you do kind of kind of
have to give it to them? A question that I
have a statement, So explain this to me one more time.
So the bid is for three point five million dollars
in cash plus fifty one percent of the total maximum
supply of the War's meme coin, So info Wars would
(29:39):
control the meme coin, and then the remaining the mean
crain is.
Speaker 1 (29:44):
Like I think like ten percent of the meme clign
has been like just sold. Yeah, it's like issued to
the public, and you can trade it, right, right, So
that creates a price, right right, Like there's trading. Anyone
who wants to can own it. Creates a price. They
can you know, in theory, vote on whatever they if
they end up buying info Wars, then the holders of
the token can vote, so like ten percent or so
is public, and then like some percentage of it has
(30:06):
been reserved for like the guy doing this right wowed
out AI the company, right, and then fifty one percent
has been reserved for the bid. The bid would be
in exchange for info Wars will give the bankruptcy a
state three point five million dollars in cash and fifty
one percent of this token. And then the bankruptcy state
(30:28):
meaning the creditors meaning the Sandiak parents would get those tokens,
and there's like some lock up on how one that
could sell them. Okay, but the idea is like the
bankruptcy state the creditors would let's say share in the
economics of future info wars by owning this meme coin. Now,
when I say share in the economics, I'm like rolling
my eyes because.
Speaker 2 (30:46):
That actually said that with a completely straight faced.
Speaker 1 (30:50):
On the inside. Yeah, you can't see me rolling my eyes,
and neither conm kiddie. But the whole thing about meme
coins is that a meme coin is like it's like
linked to the value of this being, but like not
through any methods. Right, It's just like, yeah, maybe it is, right, Like,
it's just like if people feel like it's linked to
the value of the meme, then it's linked to the
value of the meme, but it has no like ownership
(31:10):
of the meme, right, And so like here that meme
coin is not It does not entitle you to cash
flows from intro wars. It's just like a meme coin.
That's the thing. It's like a weird kind of stock
that doesn't convey ownership.
Speaker 2 (31:22):
I was going to say, this coin or token or
whatever we're calling it has clearer fundamentals than most anything else, yes.
Speaker 1 (31:30):
But still no fundamentals. Yeah, I agree with you, clearer
fundamentals than most mime points, but still not Yeah.
Speaker 2 (31:35):
You would have an easier time building a case for
why this has fundamentals though, then yeah.
Speaker 1 (31:39):
Because it gives you voting rights over a thing that
you care about. Yeah right, Like, I mean, you don't
have to care about it, but like the people trading
it probably care about it.
Speaker 2 (31:46):
Right.
Speaker 1 (31:47):
It gives you voting rights about what will happen with
this like culturally salient and controversial property. Right, So it
does have fundamentals, but it doesn't have cash flows. And
so they can say with a somewhat straight face, it's
not stock, it's not a security. It's not an investment.
By the way, if like their bid fails, it just
goes away. Yeah, that's nothing happens.
Speaker 2 (32:07):
I was just gonna ask, So, if you care about this,
you would buy this coin now in hopes of having
voting rights in the future. If this doesn't work, then
it doesn't work. He's well, you tried. Yeah, that's interesting.
Speaker 1 (32:18):
It's not like you know, you would imagine doing this
like ten years ago, going to an investment bank and
trying to build a structure that allowed you to like
prefund your bit and where it's like yo, you put
the money in escro and then like you give it
back if the bid fails, like, there's not I here.
It's just like a mean point. If it fails, it
goes to zero. It doesn't matter.
Speaker 2 (32:36):
How do you think the bankruptcy judge is reading this?
Speaker 1 (32:39):
I assume he's rolling his eye on the inside too.
I don't really know. I don't understand the process there,
because he's sort of like giving up on doing an option.
But uh, the mean cooin guy said to I think
the Wall Street Journal. He said, like, I put in
a three point five million dollar cash component to the bed,
which is was what Fuak offered at one point. Is
I put in that cash component so that people would like,
(33:01):
would take me seriously? Yeah, because like I think if
you just showed up bidding a meme coin, people would
not take you seriously at all. And I don't think that.
Speaker 2 (33:10):
Would you still have written about it.
Speaker 1 (33:11):
I don't know that I would have taken it seriously.
Speaker 2 (33:13):
Wow, there you haven't.
Speaker 1 (33:16):
But right, I don't know how the tanks is gonna
take it whatever rot on Thursday, Like this is gonna
be a thing, right, Like I feel so stupid saying this,
but like this is a good financing mechanism for this situation, right,
for like the situation where you're like bidding in bankruptcy
and you don't know if you're gonna win, and you're
bidding for a relatively small, controversial online like right wing
(33:38):
memi property using a meme coin to fund that, Like
it's like it's like fit for purpose. Yeah, and so
you probably are gonna see like a ton of situations
where that applies. For this will be the last one.
Speaker 2 (33:51):
It's bread new world.
Speaker 1 (33:52):
You know, like the Red Lobster bankruptcy. Someone could have
come in with a meme coin, like you know, like
it's a thing.
Speaker 2 (33:57):
Not if only if they had been able to hold
out for another year, shrimp shrimped to death.
Speaker 1 (34:09):
And that was the Money Stuff Podcast.
Speaker 2 (34:10):
I'm Matt Livian and I'm Katie Greifeld.
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