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What if Matt and I talked super fast, but then you slowed it down to make the podcast longer.
You could pitch me down, so I sounded like this. God, wouldn't that be good?
You sound like a fancy man.
I am a fancy man.
Wow.
Hello, and welcome to The Money Stuff Podcast. You're a weekly podcast where we talk about stuff related to money. I'm Matt Levin and I write The Money Stuff colmed for Blueberg Opinion.
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
What are we talking about today, Katie?
We're going to talk about wrestling and fighting, and we're going to talk about private credit ETF liquidity I frequently visited topic on this podcast. And then we're going to talk about the mirage of the American Dream. Yes, exactly, So let's go right into it. This is complicated. We're talking about Endeavor, we're talking about TKL, we're talking about Silver Lake. Can you explain first all the ownership structure of what we're talking about?
Okay, So Endeavor is like a talent agency slash media behemoth. It's like Ari Emmanuel's talent Agency that became a giant thing. And one reason it's a giant thing is that it owned WWE World Wrestling Entertainment, which then merged with UFC the Ultimate Fighting Championship to form a giant fighting complex.
And that fighting complex is called TKO is the name of the company, and it's now a public company, and Davor owns a little more than half of it, And so Endeavor is a company that owns a little bit more than half of another company. They're both public. Endeavor's public. TKO as public, Endeavor is like seventy percent owned by silver Lake, the private equity firm. Right, silver Lake has
this ladder. It wants to take Endeavor private. Let's buy the shares that it doesn't already own, and it negotiated a merger with the board of directors and it agreed to pay twenty seven to fifty per share for the remainder of Endeavor. That happened like a year ago. It's they're working to get closing. And what has happened in the interim is that the stock price of TKO has gone way out. So what that means is that in Deeva runs more than half of TKO has become a
lot more valuable. That means that Endeavor has become a lot more valuable, or you would think that would be the case. And so all the shareholders of Endeavor who are not silver Lake say, well, you agreed to pay twenty seven to fifty a year ago. The company is more valuable. Now we want more money. Silver Like I said no, they agreed to the deal twenty seven to fifteen.
That's what we're doing. And the shareholders are revolting. They're saying they're going to demand appraisal, which is like in Delaware, if you don't like a merger price, you can go to a judge and say this was an unfair, too low price. I'd like more, and the judge can say yes, here you go. In recent years, it has been tough to win appraisal cases because usually the judges are like no,
for complicated reasons you can get into. But here it's an unusually easy case because they're like, look, most of this company's asked are this public company. The shares have gone up, so we know it's worth more than the great deal, so you should give us more money.
I have two questions here one is that I mean, you write and you just said that it used to be easier to win appraisal crisis. You wrote that it changed in twenty seventeen, which seems I can't like, I can't think of a catalyst, like why did it change in twenty seventeen.
There's kind of two points here. So one is like Delaware judges or experts in corporate law and banking and mergers and see themselves as being expert in like knowing how companies work. And so it used to be you'd go to a Dellary judge and say this company is worth more than the acquirer paid for it, and you'd present like your discattered cash flow model, and the acquirer would present their model, and there'd be an argument, and the judge would think about all of this and be like,
you're right, it's worth more. And people got kind of annoyed with that and said, why should a judge get to decide what the company is worth? And what happened is that, like twenty seventeen is like the turning point people point to you because it's a big case. The dell by a like Michael Debob Dell a judge said no,
he underpaid for it, and he orded more money. And then the Delaware Supreme Court reversed that on appeal and said, basically, like you should give more weight to objective facts, like the company ran a merger process and the highest bid was what it got right, or the company's stock trades in the market and you can sort of look at the stock price and say that's a pretty good indicator
of what the company is worth. So basically since Dell, there's been less of an emphasis on Delaware judges listening to arguments about what a company is worth and like making their own decision, and more of an emphasis on like, what the market says the company is worth is like, most of the time pretty good evidence. So it's not
like you can never have appraise anymore. It's like it's just like a little bit like a higher bar to prove that the company is worth something other than what the market says it's worth or what the merger says
it's worth. And that's what makes this case unusual because here the disgruntled shareholders aren't saying, oh, we want you to take our evidence of value rather than the market's evidence of value, saying no, no, like the market price says this company is worth more than then silver Lake is paying for it. Yeah, and silver Lake is the one saying, no, the market price is fake.
Well do you say that this is a pretty straightforward case of appraisal. But couldn't you make the case that silver Lake just made a good deal here that they saw that this company is It doesn't matter.
That doesn't matter, Like, yes, absolutely in the ordinary course of things, Like they agreed this deal. If you're like, Okay, you agreed on a deal a year ago, and since then the market has gone up, you should get the benefit of yeah, and like, right, as a matter of like merger practice, endeavor shouldn't be able to back out of the deal now because the market went up, right, Yeah,
But that's not how appraisal works. Like appraisal is just like a thing in the law, and the thing says, you know, the shareholders are entitled to the fair value of the company at the time of the closing of the merger, so like technically they're entitled to this.
Okay.
It's just like this is like a weird element of law that people like not to think that much about. Like the difference between signing and closing but here the company has gone up a lot between.
Signing, and actually it's gone up so much that I did some reporting for this podcast. Usually I just show up, but in this case, I asked KEITHA. Rong Goanathan of Bloomberg Intelligence basically, why have TKA's shares gone up so much since Endeavor agreed to that deal with silver Lake It was in April twenty twenty four. Her answer was, they have a big UFC media rights deal with Disney that is expiring at the end of twenty twenty five.
There's reports that are suggesting that they're asking for a doubling of yearly fees to a billion dollars, which would be substantial. There's also a little bit of a Trump effect, not to sure gaft.
You know, it seems like the sort of thing that would thrive.
Yeah, he's shown up at wrestling matches. I thought that was a little bit interesting because there's no one closer to Donald Trump right now than Elon Musk, and Elon Musk obviously has had the opposite experience in the public markets, at least with Tesla.
Yeah, right, it's interesting, Like you think about like the stereotypical Tesla buyer from three years ago, and how they would feel about it. I mus, then you think about like the stereotypical wrestling thing. Yeah, that's a slightly different.
Demographic, that's true, it's totally different markets. I just think about that too. We had Carson Block on Bloomberg Television. This is a non sequitor. We had him on television this week and I asked him, would you bet against Tesla? It's gone down a ton You said a month ago that you wouldn't And he said.
Is he doing irreparable damage to the Tesla brand? I mean maybe, But again, this guy, for years and years and years has done nothing but pull rabbits out of the hat.
So we'll see how long this Tesla draw down continues.
But so, how does.
This end up? This Endeavor Silverlake deal? You wrote that it closes in the next two weeks or so. Hasn't appraisal case actually materialized yet?
No, No, you have to wait until they closes. There's a lot of technical requirements, one of which is that in this case, you need to have held your shares continuously from February fourth. So weird thing is that Endeavor is not trading like more than a dollar above the deal price, And if you're buying the stock now hoping to get more money in appraisal, that won't work. You have to have owned the stock.
Ago.
So I don't really know why the stock is trading like that high. Like I think one answer is there is some expectation that possibly silver Lake will raise the deal price, but they've said they won't. And they've said not only have they said they won't raise the deal price, they've said, if you demand appraisal, and like I read one estimate that like two thirds of shares are going to demand appraisal, they say, if you demand appraisal, we will not pay you anything at closing. We'll wait until
years later when the appraisal cases is finished. And that's a little unusual. It used to be that that was the norm. If you demanded appraisal, you didn't get any money when the deal closed, waited until you went through your appraisal case. But one thing that happened is that when you brought an appraisal case years later, the judgment say, okay,
the deal price was actually fair. You only get the deal price you get in this case twenty seven fifty, but you also get interest, and the interest is at a very high rate, like it' said five hundred basis points over fed funds. And so people would do appraisal cases thinking well, if I win, I get more money than the deal price, and even if I lose, I get the deal price plus like extremely high interest, so
it's great for me. That became annoying enough that it's not become kind of the norm for buyers to just give you the deal price day one and say don't
we won't pay you interest on that. If you later win the case, we'll give you the extra money, but like day one, you get the deal price and silver like case said they won't do that in this case, which I think people will perceive as like trying to smoke out week hounds, because if you're like a arbor treasurer and you have to finance the position for years, you might be like, yeah, never mind. Yeah, But here they're kind of insisting they're not going to raise the
deal price. They're going to fight the appraisal case. They say that the price of TKO is artificial and like it's you know, has to do with arbitrage activity and it's not like a real price, which is not a lot of evidence for and Endeavor has itself been buying TKO shares, so there's some reason to think it's not a completely artificial price, and it has to do more with like tk's business.
Has been doing well fundamentals, perhaps fundamentals. I don't know, I find myself sympathetic to this private equity company.
Oh yeah, me too. It's weird that it's weird that you don't get the benefit of that, right and like right and again, like in the context of like if like Endeavor was trying to back out of the deal, you'd be like, no, you like you signed a deal like had like TKO gone down and Silver like couldn't get out of the deal TKO went up. You can't get out of the deal. It's totally like a reasonable thing for cilvill like to be like, look, we won't. We got the benefit of our bargain.
But it's not how I feel like we're going to be talking about this again.
Yeah, I don't know. I mean, one possibility is they will bump the deal price a little bit, but there's kind of a big gap between what the arbitragures think this company is worth and what so really I quanted to pay, So you know, they may just.
Fight it for years years of content. Well, let's return to something that we have already talked about, sure, and that is private credit liquidity, specifically in ETFs.
I feel like I spent years writing people are worried about bombacking liquidity and making a big joke of it, and now I feel like I've spent one year of this podcast talking every week about people being worried about credit liquidity, and here we are talking about private credit liquidity.
That's true. Well, the b Bank of International Settlements is worried about social warriors. Yeah, they're coming out with a lot of concerns basically about exactly that liquidity. You have this rush for retail hash among just the asset management world, and they're worried that that's going to create vulnerabilities.
I feel we've talked about this on the podcast before, but I wanted to ask you. Yeah, okay, retail private credit vehicles have been a thing for years. Uncontroversially. There's a thing that's called a business development company or BDC. Yeah, it is a retail private credit vehicle. There are lots of them. They trade on the Stock Exchange, they have tickers. They're effectively closed down fund for like direct lending off
in middle market like direct lending. And so you can buy a retail private credit fund in your brokerage account and that's not a liquidity worry. I mean it is a little bit like the BS A little bit worried about BDCs because they're levered, But fundamentally a BDC is a close doun fund, right Like you can put money in, you can't take money out. You can trade shares on the stock exchange, but you can't go to the BDC
and say I want my money back. And so the liquidity where people have is like investors in liquid exchange traded private credit funds will go to the private credit fund and say I want my money back, and the private credit fund will have we have all these liquid loans. We can't give your money back. They're all tied up and loans and then like the world will come crashing down. But BDCs just don't have that problem.
Yeah, go on.
The BIS is worried because like there's one ets, just one et ETF. If you can go to the issuer and say I want my back, my question is why do we need the ETF. I understand that in your world, the best of all things is the ETF. And I understand obviously a marketing benefit, but like if you're a private credits you're like, you're like, okay, the right funding model is a permanent capital closed then fund funding model.
That technology exists. We have billions of dollars in it. Yeah, why do we need to go to the ETF.
You also have interval funds. You have had ways for retail to access privately.
Like interval funds, like you might be a little worry about liquidity, is like a fully closed un fund. But like you're right, you have a lot of things that are not ETFs.
Yeah, you do have ETFs. Does the world need private credit ETFs? I don't know. I'm not qualified to answer that question, but it just speaks to the desire among a lot of these issuers and a lot of these private market folks wanting to tap into this new source of demand. I mean, I know, but like, why.
Is that a new source? Like to me, it's weaks to the desire of retail investors to have specifically an ETF and not a right I guess I get the ETF technology is a little nicer, but.
It's like I think it's this is just one woman's suspicion. I think that's the driving force, is that the muscle memory is there people know how to get their hands on ETFs, that muscle memory might not exist or be developed when it comes to BDCs. This is the same thing, I know, but it's just it's nice.
There's a lot of stuff that's like more like there's like publicly trader well.
I talk to a lot of asset managers and a lot of asset C suites at asset management firms, and they always tell me we're rapper agnostic. We will pick the product that fits best with the asset class that we're talking about. And I have the suspicion that for a lot of retail investors or folks who started investing in the last five years or so, basically the post pandemic period, it's single stocks or it's ETFs. Like people
know how to do that. They know how to go to Robinhood or Fidelity or whatever platform they use and buy an ETF. It's simple.
It's just as simple to buy a BDC.
I know, but I feel like the familiarity isn't there if you have an ETF that says I am a private credit ETF. Give me a name of a BDC. It doesn't read as cleanly. There's so many examples.
It's true that the words BDC make it sound like something other than a close than private equity fund, private credit fund, so right, you could be confused by that.
Yeah, there's so many examples of tickers that tend to outperform, even though there's a fund that offers the same exposure and it's priced lower. But it's just this fund has a nicer name, and it has a more intuitive ticker, and that's why it tends to get If you launch.
A private credityf, then like people read articles about like yeah, the first private credity.
And the SEC might write a letter basically saying how upset it is that this private credit ETF that they allowed to launch actually launched.
Or the BIS might read a report.
Something that I thought was interesting in the BIS report is that it's talking about, basically, it's worried that you're going if you introduce retail into this marketplace that you're going to one day see this exodus and then you see the illiquidity doom loop that people like to talk.
About hotel redeemable retail, Right, Yeah, you have locked up retail.
Yeah, I think that maybe they're worrying about the wrong cohort of investors because I don't know. I think about products that are really popular with retail, and I think about the average vanguard investor, for example, that sort of self directed mom and pop sort of said, or people who are working with financial advisors. There's a lot of sticky retail cash out there. It's more these ETFs that are used as like trading vehicles or liquids sleeves, what
have you. That's where you tend to see more panicky outflows than you do with ETFs that are straight up retail products.
Yeah. I think, like in general, that people are worried about whatever. Liquidity worries are always like a little bit overblown, particularly it comes to retail. Now, ETFs are not a purely retail product, right, And you can imagine if private credit ETFs became a bigger thing, like some more institutional people allocating money to them for whatever reason is like you know, indexy private credit exposure and taking money out
in a downturn. You can also just imagine retail panicking. Like, I agree with you that, like it's often stickier than like the worries that people have, but yeah, it's still a possibility to me. Like the solution to this worry is like, like, the reason I was never that worried about bomb market liquidity is because like, eh, that you can't trade your bonds, like the press will go down. It's not a deal. Yeah, that's not really true. In private credit, it's like not as true, right, because you
kind of can't trade your private credit. But like one thing we've talked about a lot on this podcast is like that's gonna change. There's gonna be a private credit market. You'll be able to trade your private credit, and so there'll be some like outlet for it where if everyone does take their money out of the ETF, there's some way to you know, monetize the underlying hole things so that like the system doesn't freeze.
Won't it be fun to find out though?
Oh yeah, it'll be very fun to watch the development of private credit trading platforms.
I was speaking to Mark lib Schultz of Blue al a couple of weeks ago at Bloomberg invest and I kind of like his stance. I mean, you have the Apollos of the world saying that the private markets are going to become the new public markets, and that's the theme you've written about a lot. His stance is more private markets should be private markets. They're not trying to build out a trading desk like Apollo. I believe that they filed for an interval fund for private assets, but
they're not on board with this. You know, private should be out in the public.
It is true that, like one attraction of private credit to a lot of borrowers is you will have a relationship with a small defined group of lenders rather than like who knows who owns your debt today? Right, Like that's an appeal to borrow Then that's undermined if you sort of a trading desk and want private credit to be super liquid. So it sort of makes sense that a lot of people would not want them. Yeah, but I sort of bet on everything becoming traded over time.
Yeah, that does seem to be the future that we were marching towards. Just a note on the State Street Apollo ETF. There has been a ton of drama over it. Again. The SEC sent a strongly worded letter which was fun and unusual. It really hasn't attracted too many inflows just yet, which.
Waiting to see if it's illegal. Yeah, well not private credit.
Well that's true.
I think it was.
CFR.
I did buy a BDC. It's all private.
Creditsjeez, Louise, I get it. You you run a BDC market, who is paying you? CFRII did an analysis early in so it wasn't quite fair because it hadn't been alive for that long, but they found that like five percent of its portfolio was private credit. But it says it can go up to thirty five percent.
We'll see.
The American Dream is a mall in New Jersey.
We barely have anything to talk about, but we both love malls in New Jersey, and so.
We simultaneously have not that much to say, but also.
A lot to talk about. The American Dream lok.
No, which is crazy. So I drive to New Jersey all the time to go horseback riding. So I passed the American Dream mall probably four to six times a week, and I always just look at it and I can't believe it exists. I can't believe it exists, and it so many times it almost it doesn't exists.
For test purposes to this American Dream is a mall. It's so much more than a mall. We'll get to that, but it's a mall in New Jersey, and it took a very long time to develop. And that's development was filled with trauma, some of which I was involved in as a young lawyer.
Yeah, I want to get into that.
But so as part of the development, they like got some land from the state and like they agreed to make payments and the taxes just kind of like taxes to the local government. And basically the way it where is like you developed them all and you're not making payments because it's like, you know, you're spending all your money to developing them all, and then you're like you're running the mall, you're making money, and you start making the payments and the taxes. And that was the deal.
And the company has been running the mall for some number of years now. It opened in twenty nineteen.
Which is an amazing time to open a mall, such.
A good mall, and they have not been making the payments of the taxes because they said, no, we're not we're not like officially open to the public for business. Sure, some stores are open, the ski slope, the water park, some other things.
There's a roller coaster, there's.
A roller coast ferris wheel, but we're not at one hundred percent occupancy, which like no malls e run one hundred percent occupancy. We're not one hundred percent occupancy, so we're not technically open to the general public, and so we don't have to make the payments yet. And the Lowy government sued and this past week the mall lost and the judge just like, come on, you're open for business, and so they have to make all the payments.
I want to believe that the judge specifically went to the mall just to check it out.
You know, if she went to this mall which you have, which I have, you would think it's open for business. It's like a little bit of a weird mall because it's so big. Yeah, it's like you kind of feel like there must be thousands of people elsewhere and not here. But no, I've been to this mall a couple of times and walked through it on the way to the giant indoor water park that is at the mall.
Amazing, it's so good. You've shown me photos of this water park and it looks like you're on a cruise ship, like it is soize.
I've also recently saw an Instagram video from a friend of mine who took her kids skiing at the American Dream Hall.
So did Kim Kardashian.
Yeah, big indoor ski slope being relative, sure, I don't have a great sample, right, it's not like Aspen. Bigger than slop at my house.
Yes, probably bigger than the ski slope at most indoor malls.
Yes, yeah, I don't know the world record for.
I feel like it's in Dubai or something.
Oh yeah, I think I think there is a big indoor ski slop in Dubai. Anyway, it's a big one for a mall. It's a big mall, and it's very much in operation. You know, it's so in operation that it's open on Sundays, which violates like the local blue laws, and like there's a reporting that like the city of paramis or somebody's going to sue to bake them clothes on Sundays.
I love that the American Dream is not paying taxes, and also it's open on Sundays. It just and it's a new It just feels all of it it is together so deliciously, and I'm I'm just so grateful that it exists. I haven't been, so I drive past it all the time, and usually I'm alone. I'm not going to go by myself. I don't have my horse, I don't have my husband. The mall probably, I mean it's he probably has like a I mean hopefully someone that's listening and getting ideas of how to build out them
all further. I can't believe it exists. I'm worried though it'll be too crowded. Every time I drive past and think about going in, I'm worried that, you know, it just wouldn't even be fun because there's going to be lines for the indoor ski slope.
I don't know. I've only been on weekdays during school breaks, and it's not that crowd. The water break gets busy.
Yeah, I'm sure it's poppin'.
Yeah, but like the mall feels like, you know, it's like a mall.
Why did they change the name from Xanda Do, though Xana Do is such a cool name.
I don't know, actually, But like when I was a young lawyer, I worked in the cell of the troubled company that, among other things, owned meadowlands at Zanta dou as it was then called This was like fifteen years before them all actually opened. Them all opened in twenty nineteen. This is like I was like doing like twenty two thousand five or something, and it became if hecame so famously troubled that it's like there's a picture of it
on the Wikipedia page for the word booondoggles incredible. So I think maybe they were like, this is cursed. We need to change the name.
So like people will we need to make people for cat.
Yeah. Yeah. If you like went to like a retailer and we're like, hey, would you like to open our store in our mall, They're like, what mall? And you're like metalands Xanati the God No, right, So you have to change the name. I think that might be it also just like you know, it's like different companies took it over and like you want to put your own branding on it.
Yeah, yeah, fair enough.
Dad is a pretty good name for them all?
Yeah, pretty good. I don't know. Maybe you'll name a child Sandado. But also part of the reason I can't believe it exists is because I've been traveling the well worn path between Manhattan and New Jersey for my entire life and for a lot of my life. This thing was just on the side of the highway, not open.
Famous dog under construction. Amazing.
Yeah, so I feel like in a way, like I'm not sure it exists right.
Right, You short of get the benefit of that being like our mall isn't open because it's like it wasn't open for twenty years, Like, who would believe it open?
It's only been open for five to six years. Twenty five year history exactly. So I don't know. Maybe in another couple of decades I'll believe it truly that it's open.
Just Endo Skiing Resort is in Shanghaier.
Tells us, Wow, I knew it wasn't here in New Jersey. Also, thank you to everyone who's been emailing into the Money Stuff mail bag. Next week we're going to be doing a mail bag episode. So Katy off, yes skiing, Yeah at an undisclosed location outdoors, Yeah, an indoor outdoor ski slope.
And that was the Money Stuff Podcast.
I'm Matt Levi and I'm Katie Greifeld.
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