Bloomberg Audio Studios, podcasts, radio news. We had a really important update. We talked last week about the enhanced games where people take drugs to be faster, and the one hundred meters dash was run by a guy who is not on drugs and afterwards he gloaded. They got to get on that some more, which is just a perfect use of the English language.
I mean it really you can apply it to so many different areas of your life, including the podcast.
Arriving later at the podcast.
Hey it's okay, we have a tight on drugs. We have a tight twenty nine minutes.
It's all right, no, no, no, keep banering, no more.
How about them Nicks?
Well yeah, the next Yeah, they're on more.
They certainly are they really?
This is a swearing then there's ever been on this podcast. Yeah, the next one. Last night, we're recruiting the on Thursday.
Yeah, what's the next game?
You're exhausted because you're.
Watching partying at.
Expend game one the Jeffrey.
There's so many ways to get into this. For a second, very quickly.
Say hello podcast, your weekly podcast, were talking about sepilated, money and met Levine. Are the many fim your opinion and.
I'm Katie Greifeld. I should do it really slow since you did it really fast. And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
I did not watch the Knicks at all or at the Jeffrey. But the Jeffrey is like a Bloomberg bar. I know it's been to like farewell parties of the Jeffrey.
That's the thing. In your newsletter you described it as a New York bar, which is so impersonal given that you and I have literally been there together.
The Jeffrey is a Bloomberg bar h on the East six eighth Street. It's also I learned this, I think from a bloomber of person. The owner of the Jeffrey is not just some bar owner. No, he is one of the nations leading activist hedge fundlers. It's just like a fun.
We should have lunch, we should he sounds really interesting.
So, yeah, the Jeffrey. Many many people send me this story about the Jeffrey doing a promotion where if the Knicks won on Wednesday night, if the next one Wednesday night, which they did, then your bar tab at the Jeffrey was free and so presumably the point of this promotion is that a lot of people would storm into the Jeffrey order you know, champagne and caviar or whatever one gets to the Jeffrey that's expensive, and hope for the Knicks to win so that their part tab would be free.
And if the Knicks lost, they would be like ah and pay a thousand dollars for their night out and the Jeffrey, you know, if the next lost would be up these giant partabs. If the nixt won, there would be out all these give artabs to the differy hedge.
Yes they did by going.
To Vegas and no, sorry, we're going to Calshi betting on the next to it. And so this is very like straightforward beat on the Knicks to win. But Kalchi put out a pressless about it.
Calsh was excited, they loved it.
The bar like put out a video, you know, a little video you know, promotion. But they also had like a little like white boarded explanation of the hedge that I think Calshi probably helped with. It's just like this is from Calsh. Small businesses are exposed to real world risk every single day, whether politics, sports, economics, with no efficient way to manage it. Traditional insurance is expensive, slow,
and not built for this kind of operational exposure. Calshi changes the equation liquid transparent markets that let any business take an upsetting position on the risks that affect their bottom line. Also says, if the Knicks lease the bark likes, I normally have revenue from the promotion, having paid only
a small premium for the peace of mind. No, it's a sports bet, the Knicks for underdogs, and so like I was looking, like I think historic, Like the pre game price of the Knicks was about thirty six per cents on the dollar, so you'd pay, you know, for like a five thousand dollars head, you'd pay like eighteen hundred dollars. Not bad, So it's not that small. Yeah anyway, Yeah, so they bet on sports, and now betting on sports
is a hedge. And so many people send me this, including after I write about because people don't originally unt of money stuff.
It's really long.
It's sorry, sorry, sorry, he's.
Just got so many thoughts I summarize it.
So many people said to me, Yeah, because like my view is that when people say prediction markets, they want to be like Oh, it's we're hedging a real world risks. But they're really talking about sports betting, and so this is like the overlap of the vent diagram, where it's like it's sports betting and it's hedging a real world risk, which is not true because they are hedging a sports bet like they didn't have to do this. They're hedging on sports.
But whatever, Matt is banging the table, he is passionate about this point. A few things. I do want to say that this was up to one hundred dollars per guest, so champagne and cavia are you could probably get like a little bit of both. Also, tax and gratuity were not included, so I mean the bartenders still made money regardless, which is nice. Were you Were you aware of the
other promotion that they ran for their game against the Calves? Okay, so for Game four of the Knicks versus the Calves, the Jeffrey said that for each point in the Knicks margin of victory, the bar would reduce patrons bill by one percent. Yes, yeah, so it turned out to be a blowout. As I understand, I barely understand.
You're not expecting to reduce the tab by twenty seven percent or whatever.
No, it was thirty seven percent, which is nuts. So the total tal.
By the way, like by game four, like the Knicks had blown out everyone for the last like two series.
It's amazing. You might have predicted the total discount for customers in that promotion amounted to twenty seven hundred and fifty dollars. So it'll be interesting to see what Wednesday night's game came out to.
I wonder if they will report that. I feel like they don't have will obligations.
But the reason I know about what they did for Game four was because there was a Bloomberg News article that reads piked on the terminal, which is how I got to know about this because again, the Jeffrey is a Bloomberg bar, so obviously all your Bloomberg buddies were sending it to you. Right, It's ry like if you're.
A bar owned by a hedge fund lawyer that has two blogs from Bloomberg, then yes, you have very important real world economic risks that you have to hedge by doing sports betting on CALSHI. But by the way, you can also do sports betting on a sports book like it's legal now, like you could Kelshi will do a nice whiteboard for you.
I don't know, is there anything else to say? I just love it. I wish I could drink.
I feel like some markets are sports gambling now and here we are. Let's not tell you about SpaceX this week. We'll tell you about SpaceX last week. Week.
We're doing really well. And then you mentioned SpaceX. Uh, I think it's not.
Google selling some stock like.
A lot, like a lot, like eighty billion.
Dollars more than spacexan.
Were adapted IPO.
It's actually eighty five billion AiZ.
It's nice, so.
Much demand for Google stock. Yeah, the eighty five billion is like not quite right, because like forty billion of that is an at the market offering. So it's not like they just bashed out.
Ten billion is Berkshire Hathaway.
Ten billion is Berksu Hay. I'm going to count Berkshire Hasway. That's the anchor order that counts. But the forty billion is like they didn't bash it all out this week. It's an out the market offering. So the next like few months or whatever, when they feel like it, they'll sell some stock and the total might come to forty billion,
or it might not. We don't get there. But yeah, they did about thirty five billion of common stock and mandatory convertible this week plus ten billion properately place the Berkshire Hathaway to you know, pay for data centers, Yeah, pay for pay for chips, pay for the boom.
I feel like there's a few different sign of the times in here. One of them, which you highlighted in your newsletter is that equity issuance net equity issuance was declining for a long time, yea, and buybacks for like the thing to do.
Yeah, and did like sixty billion in buybacks like last year.
Yeah. But now maybe we're starting to see that trend reverse and companies are going to issue more stock. Also, we have IPOs coming back.
It's just like a wild chips in the markets where when you think about the big US companies, you know, even five years ago, you would have said stotypically they're capital light, right, Yeah, I joked for years like Facebook is a website, you know, and it's like worth a trillion dollars, right, it's a website. How capital intensive could a website be? And like, you know the answer to that question is right, I have a lot of data centers to run your.
Website, yeah, Matt.
And also you have to pay a lot of people a lot of money to run your website. But you know, now there's just like beind a real change and how capital intensive the like leading US businesses are, and that just leads to a different financing universe where you know, instead of raking in money and using it to buy back stock, you're waking up and saying, wow, we need so much money we have to sell stock.
Yeah.
I mean Google has been first of all, raking in money. Secondly like selling debt, right, I mean, like you can finance a certain amount of stuff with that. But ultimately, you know, these are very highly rated, investment in grade companies that have portress balance sheets, and eventually you're like, you know what, I'd rather be more equity financed.
Yeah, so they're doing it. I always wonder in thinking about that that shift in markets and you know, financing, like what does this mean for investors who like hold index ones because like Google shares, the alphabet shares went down a bit, this is diluted, et cetera. But like, what does it mean if you do see a c change where there's just more equity issuance overall, I don't
really know. Yeah, like if you shift from from stock buybacks net negative equity issuance to a world where it's positive, I don't know what that means other than being interested from the perspective of an investor.
Right. One thing that's just like sort of philosophically interesting is, you know, we got a question on our last mailbag, right, like what does the company stock price matter after it goes public? Right? And like you they are great answers to that, and I was like, oh, the market for corporate control. Oh, but like the answer to that a few months ago was not, Well, companies sell stock all the time, so they need a high stock price so they can you know, raise money without diluting share elders
too much. Because that is not how public companies think until this week. And now it's like, well, you know, stock price matter is because you got to build data centers, like you'll be thinking about your cost of financing, and the higher your stock prices, the cheaper your equity financing is. So for one thing, it just changes how companies think
about their stocks. But for anything, like, I've lived my life in a financial world where the stuff that you do on the stock market is mostly not directly tied to building factories to make widgets, you know, Like the stock market is not primarily a way for companies to raise money to do stuff. And if you are buying stock on the stock market, it's vanishingly unlikely that you are buying it from a company that will use your
money to make a you know, to do stuff. Right, It's all just like a sort of like secondary trading market where like ultimately the price of the stock sort of reflects back into the company's capital allocation decision. But it's not like you're giving the company to money. But now it's like, yeah, you're giving the company money. Like the thing that you're doing as an index one investor really is like giving your cash to big companies to
build the AI future or whatever. Yeah, unless you don't like that.
Also, what does the stock price matter after company goes public? It matters for the employees in terms of their net worth, Which leads me to an interesting nugget about this ATM program that I want to get your thoughts on, because in it it was buried that the ATM program is intended primarily to facilitate, for a period of time, an administrative change in how alphabet makes tax obligations associated with employee equity grants. This approach will mimic a cell to
cover model. Upon vesting of restricted stock units, shares will still be delivered to employees net of taxes, and the company will use corporate cash to settle taxes on behalf of employees. The company intends to issue stock for equivalent proceeds through its ATM program. So that's interesting. So basically they're going to pay the taxes for their employees.
Yeah, which they do already, but they're going to pay them with stock now basically, Yeah, I wrote and we talked about like the idea that companies do not use the stock market to raise money and the net equitations, and I got pushfact like, in fact, these companies too, in a sense issue stock to raise money, but they do it in a barter system where instead of issuing stock to raise money to pay giant salaries to employees,
they just pay the giant salaries to employees in stock. Right, And so if you're an employee and these big tech companies, you get paid a lot in stock where stock options are restricted stock. And so a lot of how companies fund themselves is by using stock to pay employees, which is, you know, economically equivalent to selling stock to the general public to get cash and then using the cash to
pay the employees. Right, but has you know, like accounting and optical and tax benefits and so people you know, do a lot of pay in stock. But the way that that works is you still have to pay them a little in cash, which is traditionally the normal way
you do this. You deliver the stock, and they have some big tax obligation when you deliver the stock, and typically what you do is you deliver net so like you know, you deliver them sixty percent of the stock, you withhold forty percent for taxes, and instead of like sending the stock to the irs, you send the cash
to the irs. It's it costs you cash. If you're Google or whatever and need to conserve cash, you might do what Google is doing here, which is still the same thing, which is you deliver the net shares to the to the employees, you withhold the taxes. You send the cash for the taxes to the IRS, except that you get that cash by selling stock. So every time they need to withhold money to pay employee tax bill, they sell a little bit of stock under the ATM
program and use that to pay the taxes. So they are issuing stock toories cash to meet their employment comp publications.
That's interesting because I read that. I didn't know that they were already doing that, and I just wondered if it fit into like the broader discussion we've been having on AI talent wars and how fiercely competitive it is.
Like the reason Google is selling eighty five billion dollars are stuck is you know AI, right, And so some of that is like Capex to build you know, data centers and like their chip program, But some of it is just salaries, and the salaries are stuck and that's expensive too, and you know there's a there's a limit on that much you can do without raising equity.
For sure, can I read you a headline without contacts that just crossed and you can tell me if you don't want to talk about it?
Sure? Is it good? Free register? I bet I'm not going to want to talk about it.
Jane Street is planning to build data center. Yes, yes, the headline is Jane Street plants new data center as compute power runs scarce. So Jane Street also getting in.
Sure, like All the big quant firms have been AI firms forever, right. I mean they have like a big machine learning model that takes stock prices and predicts future stock prices, and so you know, they need data centers and all the rest of it. It's the same model frontier AI lab or you're a you know, electronic quantrating for him, it's the same thing. That's why deep seek is both it's it's the.
Same models, turtles all the way down.
Yeah. Yeah, the data centers are bigger when you're doing like a frontier AI lab, but it's the same idea.
I just feel like I should be building a data center. Why am I sitting in this room talking about it.
I just like living my lip in a way that I do not need to build a data center. We're shoot him on the pod.
Yeah, I mean he's not sentenced until August thirty first, so he's out and.
About and like pretty vocal and like not wrong. Yeah, he was going to be kind of short selling this week, did you see. Yeah, the prosecutor who prosecuted him tweeted Los Angeles Federal Jury. This is quoting the presetar. Los Angeles Federal Jury has found Andrew Left guilty of market manipulation.
He used media appearances and his company to illegally influence share prices and make quick profits, known as shortingh He later walked I back a little bit to like shorting is not illegal, but like you know that he thinks it is. Yeah, but yeah, Andrew Left did some short selling charge with market medization convicted this week. Not great for short selling.
No, I'm going to steal a line from Carson Block. Muddy Waters Research tweeted this rate before we started recording. It's a very long tweet. It's like a Bill Ackman length tweet. But he said that the jury convicted Andrew of not actually believing the opinions he stated in his tweets, which is interesting.
I think it is pretty clearly legal to do the following research a company find out that it's a fraud, short at stock, do active as shorting. I announce it your short announced that it's a fraud, put out your research, wat's the stock up, and then have a paper profit from the stock dropping. But what Andrew Left did that
upset prosecutors was two things. One is that he closed his positions very soon after tweeting, and that is ugly right, if you take all of your profits from the immediate reaction to your tweet rather than from like the stock ultimately going to zero because it's a fraud, then like is that because you really thought the stock was going to zero or because you were just trying to manipulate retail investors to sell the stock and you were like
buying into their demand. And if you do it the other way, if you say I love the stock that you've got a cure for cancer, and people buy the stock and it goes up and you immediately sell all of your stock, that really looks like a pump and dump. And by the way, like Andrew Left did some of that right, but he didn't for like Nvidia, where like you know, if you bought into his tweets, you did great, So it's fine, except that he was convicted of frauder day.
So like one thing that he did was to close out his position very quickly, which I don't have a huge problem with, but like it's ugly. And the other thing he did is that there's like evidence there's like internal messages that don't say like I don't believe this opinion, but sort of sound like he was pretty sloppy and wasn't putting out reports because he had done months of deep fundamental research and was deeply convinced of his thesis.
But he was putting them at because he thought, if I put out this report, the stock will drop and I'll immediately take profits. And I don't think there's like smoking gun, slammed on evidence over there, those things. But yeah, like I can see how he was convicted. It's just like it's very troubling because like there's no bright line anywhere,
you know, when he was charged. One thing that Andrew Left did as a sort of publicity stunt was that he like sent the SEC letters saying, please, like publish a rule about how long I have to maintain a position, Like I just want to Well, if you tell me, I'll do it. Like if I'm not allowed to cover my shorts for twenty four hours after I tweet them I'm short, then like fine, I will do that. But like I don't know what the rule is. There's no
bright line. Tell me what the rule is. And the SEC ignored him, And I think the SEC is right to ignore him because it's clearly just a matter of intent, right, Like if you really truly believe this company is a fraud and you short the stock and you say this company is a fraud and the stock falls ninety percent, and you're like, well, there's a matter of risk management. I've you know, made ninety percent of the profits I was hoping to make, and like, I need to conserve
capital and move on to the next trade. I'm going to cover. And then like you announce your cover, you're honest about like maybe it's fine. Maybe it's fine if you have like a really good, well documented process. But if you have a very sloppy process and you cover in five minutes, then that looks bad.
Yeah, I was gonna say, it's hard to prove intent.
It's hard to prove intense. And I think that the prosecutors were obligated to prove that Andrew Left had the bad and they convinced the jury that he had the bad intent because like the way you prove intent is they have messages from him to like his buddies, saying things like, I have a hot voice in cannabis. It's it's cannabis but spelled.
Cannabass, delicious fish.
I have a hot voice in cannabis. Let's take advantage of it. I don't know. Doesn't that sound like he's trying to get retail traders to dump the stock rather than he believes that these companies are front But the things, it's like it can be both, right, Like it's clearly both, like he clearly believed these companies were bad. And also like at this trial they had people testify who are like I put my life savings to these cannabis stocks and then he told me they were frauds and they
went down. I lost my life savings. What a monster. It's like, no, they were frauds, like they stayed down. Yeah, it's not like it's only they went down momentarily because he was lying, Like they stayed down, like he was right. And again like he was convicted of pumping and dumping in Vidia. Yeah, in Vidia in like two thousand seventeen ors on that great trade buying in video.
Who is influential enough that they could pump and dump in.
Before it was like in video It's still it was a good trade if you bought in video.
Yeah. Well, it sounds like Andrew Left is going to appeal this.
It's awesome really, like I could see this going anither way, But I'm I think most people in finance are kind of sympathetic to Andrew Left here, Like the messages are not all great, but like it's really it's a very blurry situation where you.
Got who among us US hasn't sent a sloppy.
Everything is security is right. You can't really hold a little securities right against people.
But he also testified in his own defense, which is unusual.
I think he's gonna say everyone says it's unusual.
I'm going to say, you're a lawyer.
I'm not a real lawyer.
You're more of a lawyer than I am.
No. I know a lot of real criminal defense layers, and they all, for the most part share the view of every other criminal defenseiler in the world is that you should never testify on your own defense. But me, it's just the guy. I'm like, I don't know if you think you're in It's like they bet Andrew left was a belligerent but credible witness, Like I bet he did a good job. Apparently not good enough, but well again.
Sentencing on August thirty first sounds like he's going to appeal.
I think the right outcome here is that he should be convicted, and he should get zero days in prison. I think it's like, yeah, he did a little light security sprout, it's fine, but like he didn't hurt anyone.
There is the question about what effect this is going to have on short cellars.
Yea, it is back when he got charged. Kristol is another like active at short seller. They put out some report on some company that had this big, like sarcastic disclaimer at the end that was like, we don't know like what we're allowed to do now, but you should just assume that we covered our short immediately. Yeah, which I don't think works as a disclaimer, but.
We definitely discussed that on this podcast.
Right, no one knows what the rules are, and like the rule, there's a rule, right, the rule is like don't have a bad intent.
But be good, be good.
Yeah.
There were interesting numbers in this story from the Wall Street Journal on the chilling effect that basically this case and probably other things have had on the short selling industry overall. That apparently there were thirty one activist short selling funds that have published research so far this year. That compares to fifty five in twenty twenty. That is, according to research firm breakout points by the way, Like.
What else has changed between now and twenty twenty is.
The lines going up.
The line's going up, and particularly the line's going vertically up at certain dubious smallish cap stocks that were heavily shorted. Right, Yes, the memestock thing was not great for activist short sellers either.
Fair point, fair point, there's a number of potential factors there.
This is bad. Like if you say a stock is good and the stock goes up and you immediately sell, that's a pump it dump. That looks bad, right, But if you say a stock is bad and the stock goes down and you immediately cover, like that is symmetric, but it's it's like it's prudent risk management. Yeah, hard to be a short seller and you're like lightly capitalized
and you're at a lot of risk. And if you do the work of identifying the problem in a company and the market reacts to your identifying the problem and you're like, Okay, my work here is done. I'm going to cover this and move on. Like I am sympathetic to that, and that is now much riskier.
Well, it seems like the neatest solution would be the one that you already mentioned, which is basically what Andrew left ask the sec to do, which is tell.
Me how old it's an intent thing?
How do you prove that?
And by the way, like you know, having to wait a day is makes the responishment harder. But how do you prove intent? Like you don't write emails saying like I have a hot voice and cannabis, let's take advantage of it.
Well that's easy, yeah, you say.
That, But like, as someone who writes a lot about like securities, fraad Case has, like the hardest thing in the world is not putting your criminal intent and your messages to your buddies.
I guess I just don't do enough crimes, you know, God, I.
Mean I try to every so often. I fedotic sense. I want a dumb text and be like, not o crimes, but just you know, like the texts I would move on on the front page of the Wall Street Journal, and I think, have I learned nothing from my career? And that was the Money Stuff podcast.
I'm Matt Levine and I'm Katie Greifeld.
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Maples Amy Keen as our executive producer. Thanks for listening to The Money Stuff Podcast. We'll be back next week with more stuff. M