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I am so tickled that Bloomberg just has like loose starbursts is a snack option, at least for this week.
I'm most tickled by the chocolate covered Swedish fish. Yeah, my children are occasional Swedish fish eaters. Katie's going to unwrap and chew a Star Wars.
On this podcast. Amazing. We're gonna silk the mic away as I chew it.
I haven't headline, and I have a bucket of Star Wars.
I'm hoping you're going to talk for like at least fifteen seconds.
So I can heap this fifteen seconds. I feel like a Star Wars. There's like a two minute proposition anyway. Swedish fish, chocolate covered Swedish fish. I'm killing time now with Katie cheese chocolate covered Swedish fish just loose in a big tank. My children are sort of Swedish fish eaters, and I want to bring to them the imubious pleasures of chocolate covered Swedish fish. But I can't just take a.
Handful of No, you gotta wrap in a napkin or something.
To figure it out. Transporting the chocolate cover.
Fish to your point on time about starbursts, I eat a lot of starbursts. I keep a bag of star Wars. Yeah, pretty much in my car. So I pretty much optimized my process and I.
Have not time. I'm not going to attempt the starbursts during this podcast.
That's going to take you a while. You've got a lot of starburst there.
So do you tell about real estate? Is it boring?
No, it's been pretty cutthroat. This past week has been pretty harrowing in terms of, you know, the tight ropeer' walking when it comes to our real estate dealings. Right now, I can't care about anything. I don't know. I just like if it's not interrupting the flow of nutrients to my placenta. Like I just I can't make myself care about anything.
Hello, and welcome to podcast.
I think that listen, I'm here. It's amazing that I'm here.
We're not going to call the episode of nutrients to Santova.
It's pretty good though, right all right, Hello.
And welcome to The Money's Podcast, your weekly podcasts where we're talk about stuff and Katie doesn't care about we're talking about stuff related to money. I'm Matt Levine. And I write the money Stuff column for Bloomberg Opinion.
Okay, I definitely care about money. My name is Katie Greifeld. I'm a reporter for Bloomberg News and an anchor for Bloomberg Television.
Should I read my favorite news story of the week, which he was really a new story of last week, but we didn't get to it because you were out. GameStop is by.
Amazingly. This wasn't a huge topic of conversation at Milkin, but I would have liked it to be.
It should have been Michael Milkan. He neted the highly confident letter, which in my time as a mergers and acquisitions lawyer, he did not see a lot of highly confident letters because they were replaced by commitment letters. But game Stuff is brought back the highly confident letter. But yeah, so games up, I guess last week put in a bid to buy Evey for half cash half stock. Game Stuff has neither the cash nor the stock, which is funny.
People are like, well, game Stuff doesn't enough stuck because ebased so much bigger. That's not a real thing. You can issue as much stock as you want in the general case, but game Stop can't because it doesn't have enough authorized shares. No, it's trying to authorize more shares. But yeah, so it's going to pay twenty eight billion in cash for eBay, which requires borrowing twenty billion dollars
from TV Bank. Yeah, gave it a highly confident letter saying that we could probably raise that money, no problem, no commitments, and then I was going to issue stock for the rest, and they lobbed in that bid. Last week, everyone scratched their heads. This week Evey said no, thank you.
Yeah.
The latest news is that Ryan Cohen, the CEO of game Stop, is going around giving interviews and sending letters to EVA saying no, no, no, you you should take my bid seriously.
So, man, I aren't allowed to talk unless we're in this room with microphones in front of us. So it's been interesting through your columns, watching your sort of like wrestling with the idea of this a fag takeover offer. Two. Maybe this was a job application all along.
Yeah. My thinking is about because obviously I know, I know and love game Stop as a meme stock, and this feels very stunty in a lot of ways, one of which is that they don't have the money. In other words, they don't have the stock, which is hard to do. You have to like work hard to not have the ability to issue stock for a takeover that
you're planning to do. Another is that Ryan Cohen has did a little stunt where he listed some of his personal possessions, including his socks, on eBay as like research slash financing for the takeover.
I feel like you're maybe going to bid on those socks. You've mentioned them so many times. The socks are they used?
I think they are, but I'm trying not to think about that now. I'm not gonna been on the socks in any case. But so so I was like, this is like a joke, This is a fake takeover. This is poorly thought out. But the more I think about it, and this is based in part on interviews that Cohen has given. He wants to be CEO of eBay, and this is a convoluted, poorly thought out way for him to say, make me CEO of eBay. His case for being CEO of eBay is not crazy, right, He ran well, Okay,
Katie's Rolling Rise and it's crazy. But but like he ran a big he like founded and ran a big e commerce company, Chewy. He I don't think that you would say that he has succeeded in his dreams of making GameStop a serious competitor to Amazon, but he's cut costed games. If you've turned around the business a little bit. He's had a good run running game Stop, and now he wants to run eBay, and this is his application
to run eBay. The handy ret is, if you offer to buy a company for cash, it doesn't matter what your plans for the company. You might say them because you know it might be might appeal to someone, but ultimately, if you're like, I'm gonna pay you cash, then the shareolders are like, okay, I'll take cash, and then I'll be out of the company, and whatever you do with the company is your problem, not mine. Right. If you're like Meta and you're offering to buy a small startup
for stock, it's almost the same thing. What Meta does with that startup sort of doesn't matter to the startups owners because they're just getting stock in this giant entity. But when you are game Stop offering to buy eBay for stock, and eBay is really quite a lot bigger than game Stop, Owen's math is like eBay would ownt twice as much of the company as game Stop. But it's like, really more than that. But so in that scenario, the only thing that matters to eBay shareholders is what
are your plans for eBay? Would you do a better job of running eBay than eBay's current management would And you know, Coen is making that case. He's like, yeah, I've provided over a value to collide and I will do you know, jazzy memestock stuff. So that's where we are. He's making the case that he could run it better than eBay does. And all this stuff about half cash, half stock, takeovers, one hundred and twenty five dollars, takeover for sure of takeover, p has all that is kind
of fake. It's really do you want him to be your CEO?
Then?
I don't get the sense that eBay shareholders are clamoring from. It's more of a game Stop old thing.
But first of all, I have to commend you for watching the Ryan Cohen interview with the Reddit. You did you didn't watch the palm video.
I didn't do that. No, well, okay, not Coen did, because it's you know, eliciting materials.
I did think it's interesting in that that interview. First of all, he was appealing that he should be a CEO of eBay, that he gives a hoot. Basically, yeah, he said a bad word, but basically he put his money where his mouth is. You do on a lot of eBay shares, et cetera.
This is like such standard activist playbook. Active is always five percent, not the doesn't five.
Percent of Yeah, but he also said that he doesn't really want to be game stops. You that's crazy.
He did say that.
Yeah, I read that a few times because I'm like, that is crazy work. This is what he said. I have always long admired eBay's business, and I didn't want to be the CEO of game stops.
Yeah, game stuff to take over EVA.
But I looked at GameStop share price because then naively thought it was like, does anyone care that the CEO said that that they don't want to be the CEO and it seems like they don't.
They enjoy being nagged.
Yeah, apparently, I don't know what sort of psychological experiment is going on with game stop shareholders, but it's fascinating.
Yeah, I'm sure you didn't mean it like that. I mean, I don't know how I meant it, but I.
Mean, neither of us watched the video, so all we're doing is reading the naked words. But the naked words say I didn't want to be the CEO of game Stop, so it's wild I do find it.
I think it was like he you know, took over, like he bought a big position in game Stop and gave them some suggestions and then ultimately was like, I need to be running this company.
Yeah.
It was not like he started an activist campaign to put himself in charge in the beginning. It was more like he liked, yeah, and then now I need to fix it.
Yeah.
Also just like he's like retired after two and then he was like, no, I need to shake the pups.
Yeah, well we'll see if it works. It doesn't seem like it's going to. No.
The next thing he do is run a proxy fight. But of what's happened here is this is so disorganized and not real, Like, you know, he offered to do a takeover with enough authorized shares. Their annual meeting is coming up, the deadline fornominations is long past. They can't actually do a proxy for it for months now at least, So it's it's not a real a real activist. It's more just sort of like poking around and seeing what will happen.
Yeah, and just stirring it up. I do find it interesting that he's so enamored with eBay, like he just this is his white whale. He just he just wants eBay, which is mostly good.
You know, start an e commerce company.
Yeah.
Also he now runs a I don't know what these companies are. He runs a collectibles company. Sure, eBay is like the white whale of online collectibles.
That's where you go for collectibless. That's true, and.
There's a huge energy where you can both go to eBay's website or walk into your local game stop and get your collectibles created and auctioned. I watch this space. I'm hoping he continues to do nonsense. This is the case where even if it just fizzles, it's still interesting because game stop owns five percent of the based stock, and if it fizzles, they're gonna have to sell that. That's going to be kind of awkward if they do it,
they take over and then sell the stock. You're not really supposed to do that.
Yeah, it's kind of to He gave.
It interview on the NBAC that was like super super super awkward, although honestly it wasn't entirely.
I had to take breaks as I was watching it.
Yeah, one thing that I've written is again, like people's initial reaction to this was like, how could game Stop pay twenty eight billion dollars of stock for eBay if it only has twelve billion dollars stock? And I think that's the wrong way to look at it. Like, you can issue as much stock as you want, and twenty eight billion dollars stack for eBay would just be stock of eBay. It would just be like eBay shareolders would
be given ownership interest in their own company. And the thing that would change was it would be one it would be smitshed together with game Stop, and two, more importantly, Ryan con would run the whole thing. So if you think Ryan Cohn running it is a good thing, then you'll think, oh great, twenty eight billion dollars of stock in this acquisition is valuable. It doesn't have anything to do with how much game Stop is currently worth, right, It only has to do with what you think the
future combined company is worth. So my, you know, I watched that interview and I was like, why are people giving him a hard time about not having enough stock. You can issue as much stock as you want. Then I went and read their certificate of incorporation and I realized he can't actually issue an his stock and in fact, no one had thought this through at all.
It was so good.
It definitely made me think more that in the socks thing made me think, Ah, a fake takeover socks.
Game bay E Stop Games is not bad, thank you. Speaking of Michael Milkin. Yeah, CDOs, No.
They're not. Closs A slightly different thing. No, I know, there's a Bloomberg article that's like Apollo is bringing back a thing that looks like.
Says, there's like CLOS but better.
Yeah. But there's CLOS in the simple sense that we live in a world where there was a giant market where companies take out syndicated loans floating rate secured loans, and those loans gets packaged into a pool and the pool sells rated debt securities on them, and that thing is called the CLO right, and Apollo is like, let's do that, but instead of with probably syndicated loans, we're going to do it with private credit loans. It's a CLO yeah, I think it's a CDO in the sense
that CDO collateralized. That allegation is the sort of umbrella term for all debt that you put in a pool. But like, there's a big existing market right now of things called clos, which is floating right, loan securitizations, and there's not such a big existing market of things called c doos because those went out of favor in two thousand and eight.
Yeah, they led to an even scarier acronym. Or we're a starring character in the GFC.
The GFC, but these are clearly clos. These are clearly like, if you're a company and you want to borrow money, you can borrow in the broadly syndicated loan market, in which case ultimately your loans will end up in a CLO. Or you can borrow from Apollo in a direct credit in a direct loan, in which case your loan will end up in.
A it's called a MAPS, a Maps Apollo.
Multi Asset Prime Securities. I guess once it becomes genericizeder you just call it MAPS multi Asset Prime Securities, but probably just call it a private credit CLO, which is what it is, right And if you borrow from Apollo. Your loan will end up in an am apse, which is like a CLO, and in either case there will be like a highly rated investment grade tranch that is most of the pool and that is sold to insurance companies. And in Apollow's case, the insurance company will be a Thian,
which is the insurance company you knows very well. So it's just the CLO.
You're not fussed about this, would anyone be? People are certainly fussed about this. There's a little bit of fuss in going on. Okay, I'm going to name the name of Michael Hislop. I hope I'm saying you're right. He's an analyst over a Cure Acid Capital Management. These are words that I like to read, not say out loud, but basically, he's saying that it's inevitable. He thinks it's a CEO saying that it's inevitable that this would make
a comeback. And structured finance innovations tend to arise when there is an issue or need for them rather than just investor appetite. So basically saying this is Apollo doing this for Apollo's needs.
When I think about Apollo's needs here. I think there are two things going on. One is that I have written for years that private credit is ultimately going to be it'll be quaint to talk about private credit. It's going to be a broadly syndicated, liquidly traded asset class, just like bank loans are now. Not everyone agrees with that, right. Some people are like, no, no, it's very important that it'd be a relationship driven not trading is a big
part of the appeal of the product. But you see from Apollo's actions that they're like, no, no, we want to trade it right. They've set up a trading desk. They are talking about really pricing, which only really makes sense if you think there's going to be a trading market. Yes, and so you know, how does the bank syndicated load market work, How does that trading work? Well, part of it is that clo is, you know, by the stuff.
So setting up a COLO product for private credit makes total sense if you are someone like Apollo who really wants the trade private credit and have it be liquid and broadly distributed and all the things that the bank line market does. The other reason I think that Apollo is interested in the sort of thing is that Apollo owns a big insurer. A lot of Apollo's private credit
origination is to put stuff into the insurer. Insurers are not huge consumers of junk rating direct loans to LBO companies because they have, you know, capital requirements and ratings requirements. And so if you can smush a bunch of loans into a pool and issue a rated security is on the top eighty five percent of that pool, you can sell those to your insurance company at a good spread and in a good rating and get good capital treatment
for your insurance company. This is not like a CLO manager where they want the equity for the upside and they're selling all of the highly rated tranches to outside insurance companies. This is like Apollo is an insurance company. They want the highly rated tranches because that's how they get yield with good capital treatment. So that's a CLO wow whatever I mean. CDOs were driven by investor demand for ye for yield the triple A paper, and so
there is a portion of what's going on here. So sure, look, any securitization is driven by investor demand for yield the triple A paper. You can't get around that.
Yeah, Well, Paul has cast this as the future of securitization.
So it is the idea that private credit would just be like sleepily sit on the balance sheets of funds forever is clearly falling apart, right, I mean, yeah, sitting in the balance sheets of PDCs that are getting redemption requests. And now it's sitting on the balance sheets of securitizations that gets sold to insurance companies, and yeah, it's the future of everything. Yeah, okay, sliced uff and securitized.
So not a cdo a different type of CLO. Well. Mark Rohan said that basically the idea that they have behind a MAPS is that it takes the benefits of clos and adds greater numbers of issuers, less leverage, a better structure for investors. So they prefer the CLO comparison.
Yeah, I mean, I say, is it the future of private credit? Yes? I feel like people in the credit world would have some complaints about the effect of clos on the credit You know, like in the olden days, banks made loans and they the loans to maturity. Then you had a relationship with your bank and if you needed to restructure the loan, you went to the bank and talked about it and it was all very sort
of sleepy. And now the thing that it's called a bank loan or broadly syndicated loan is mostly owned by clos and it trades more liquidly and you have less of a relationship, and you know, the clos are not the same sort of credit analysts as the banks and all this stuff. And private credit two years ago would be like, we're long term relationship holders, and like the people making the loan are going to hold the loan and if you need to restructure, you'll come to talk
to one person, you know. And now we're going to Colo is a private credit and that market will evolve the way the bank line market does.
Yeah. I mean it feels like Apollo in particular is driving a lot of this shifting conversation.
I want to trade it.
Yeah, daily pricing it's coming by September anti September. Yeah, according to Apollo.
Yeah, you send me an article that Pimco I did.
Yeah, Pimco took some umbrage with that. Basically, an analyst over there said that more frequent pricing is not more accurate pricing, so some skepticism there over. Okay, there's daily prices, but are they accurate?
Okay, I don't know, but like two points. One point is if you are in the business of providing daily pricing, then you have a model. I think you have to have a model that updates daily based on something. So one possibility is that your model updates daily based on public market data, right, Like, if you know public market DOUBLEB spreads move out by five basis points, then you
move your spreads out by five basis plans, right Like. Otherwise, like if you're not actually changing things day to day, then you're not providing real daily pricing. And so if you're doing that, like that's something, right, Like it's introducing some public market volatility comps to private credit and so like you're getting some possible indication because there is a link between these markets. You're getting some possible into ca of what is actually happening in your birthflete. But also
I think this is all fake. And like the reason Apollo wants to do daily pricing is because they want to set up a trading desk where they'll actually trade the stuff then get real daily marks. Yeah, I think that's the future of this, right, And so I think daily pricing is a way to nudge everyone in the direction of daily trading. And if you're doing that, then the prices are, you know, more or less real.
Yeah. Well, PIMCO kind of gets there in this note. And first of all, they never say Apollo by name, but you know, it came out in reaction to that news. There's an incremental fix that PIMCO proposes, which is to rely more on third party validation evaluations. The second, more ambitious way to address this is basically to have a more functional and transparent secondary market for private credit assets. Let's just yeah, so Paula would agree with that.
So they're not going to provide daily marks for like ten years without ever trading it.
Yeah, I'm going to trade it. Yeah the hope. So Apollo and Co. They can live in harmony here.
Sure.
You know what isn't harmony.
The big AI companies and the people selling shares of their stock on the secondary market.
Yeah. Anthropic in particular, Anthropic name names in their blog post, which I thought was cool.
The actual update histories of these webages is a little bit obscure to me, but I think the point is that now both Anthropic and Open AI have websites saying Basically, our stock has transfer restructions. If someone is coming to you and saying that they'll sell you stock or that they own our stock in an SPV, or that they'll sell you a stock in a forward agreement, call the
call the police, because that's all fake and void. Yeah, and that like caused a dostir because everybody on Earth owns some Anthropic stock through an SPV orly and if they're serious about those well being void, then that is going to create some drama.
Yeah, it did say on an anthropics blog posts that literally get in contact with your securities regulator if someone approaches you and trying to call the sec Yeah.
Right, this is a long running thing we've talked about d x y Z that yeahs tech one who caught the ire of Stripe a couple of years ago this sort of thing. Basically, like most of the big tech companies have transfer restrictions on their stock saying if you, you know, are an employee or an investor in your own stock, you can't sell it without telling the company, maybe even the company. I write a first refusal, getting
permission from the company. And my guess is that all of these trans a restrictions say you also can't sell it in a forward contract, where you know forward contract is you give me money, now, I promise that when the company goes public, I'll delivery of the stock, which seems to get around the transferreratations with no company believes that.
The companies will say you can't sell the stock even in a forward contract, but then people do sell it in the forward contract, thinking well, you know, when the company was public, all deliver the stock. They won't be transfer restricted them, so who's harmed at And these companies assert that if you do that, then the transfer is invalid and the company can take the stock back. And I'm not aware of high profile examples of this ever being actually fought over. Yeah, because the goal is to
stop them from doing it now. But once they go public, what they're going to see it take the stock bag. But they'll say they will.
Yeah. Also, I mean, we've talked a lot about like SpaceX in SPVs, but you know, there's a lot of purported exposure to open AI, et cetera in SPVs, So I mean there would be a lot of cleaning up to do, and I don't know.
Right on the one hand, it is probably not like super in the best interests of open AI or Anthropic to go around suing to take backstock from shareholders once they go public, Like they'll have bigger fish to fry once they go Yeah. On the other hand, there's like tens of billions of dollars of stock that was invalidly transferred. Then it's oh, yeah, we'll take back tens of billions of dollars of you know, dilution for our shareholders by
suing these dentists who bought in an SPV. Like, I don't know, I don't know.
You know, I do tempted those frisky dentists. Do you think this is the end of it? That they just make scary blog posts and sort of hope that they're discouraging. Yeah, this is it. This is it, right.
I don't think they're going to sue, but they might. And they're not legal advice, not investing advice.
I know. Again, Anthropic did name names in their blog posts.
Right, some of which are like, you know, kind of big secondary Yeah.
Forge for example. Hive is also their open door. The list goes on. Yeah.
So one thing they're saying is if someone writes a hard contract on Anthropic or open I shares that they own that might be invalid and we might take it back from you, and so you shouldn't buy that forward. But another thing they're saying is they might be lying. And those things do go together, right, like if you're trying to get around the transfer restrictions, like you might also be lying about owning this thought in the first place.
The thing is not quite right because in fact, there seems to be a norm of kind of like trying to get around the transfer restrictions. But yeah, I mean you can see why someone willing to violate their contract might also be willing to lie about owning the shows.
I could see the spiritual similarities between those two urges. Yeah, I haven't checked the price of our friend Destiny Tech.
I have either continues to last trade it well above matt out the value.
Do you want to tell you about human assembly lines? Yeah? I just wanted to give a shout out probably the best headline I saw this week. Goldman says banks quote human assembly lines, face automation. That was a real thing that John Waldron said. He is the president and chief operating officer over at Goldman, giving an interview on c saying, I often describe Goldman sacks as a human assembly line, which is amazing.
Right, so like Henry Ford had an assembly line where cars were assembled by humans. Yeah, does John Waldrin mean M and A Deals are assembled by humans on an assembly line? Or yeah, I mean humans are assembled at Goldvin, which as a Goldman alum. Yeah, I felt a little bit like I was being assembled on an assembly.
Right, they were building your personality.
But mostly I think she means deals for being assembled on the assembly line, and some of the some of that assembly line will not be taken over by robots.
It's pretty great. This is another interview where I didn't watch it. I just read it without any context.
I don't think he meant human assembly lines in the like dystrophia and yeah.
Like here's here's a leg we're going to connect it to appelvi.
But that is a little bit working.
But even in the more sane reading where it's humans working an assembly line, it's pretty great. Yes it is. We're going to replace all these humans with AI.
No, it's going to be like a car assembly line. Those they'll be like, you know, humans with like specialized technical skills who now have a relatively physically undemanding job because the robots are welding the car together, and the humans are doing complex programming to make the robots work.
They're putting the computer in the car.
Yeah, you know, I mean right, it's not definitely implies that some jobs will be lost on the example. Yeah, let's be clear.
Yeah, you let me read the rest of the quote. Okay. He says, if you think about what's happened in manufacturing, it's become much more robotic, it's become much more automated. The banks really haven't been on that journey to the same extent.
Yeah, I do think that when you think about the activities of an investment bank, there's a lot of like kind of robotic stuff that gets done by twenty three year olds with ivy league degrees, and like having robots do some of that is probably like both efficient and a win for society and also the probably nice for those twenty three year olds who don't have to do the robotics stuff.
But what are they going to make sure something want.
To not be hired? Yeah, robotic stuff.
Well. Waldron also did say I'm not sure dynamically how the overall headcount will change.
No one's ever sure, because this is like the this is like the whole thing, right, Like a lot of technological innovations have the effect of increasing the amount of work that the firm can do, and so like you actually end up hiring more people. Yeah, that's the story of Excel and right, what would be the story of AI. I think I don't know, there's reasonably to be pessimistic.
But yeah, but I don't know. They might just do.
Many more deals on their robotic sized assembly line. It's the twenty three year old analysts will be like providing high powered oversight of twenty robots and it'll all be wonderful.
Yeah, the robot overlord.
Or the robots will be the overload.
Yeah, the same. I could see it both ways. Well to that point. Thank you for all the book recommendations. We did good.
Oh yeah we have the book. Yeah as a as an economist fantasy novel.
Yeah.
Someone so probably not what it sounds.
Someone sent that over. I am going on a flight because I'm off next week. So, by the way, if you're still listening, there won't be a podcast next week.
It is dark next week.
Yeah great, right, I think terrific.
I won't tells me anything, man, And that was the money Stuff Podcast.
I'm Matt Levine and I'm Katie Greifeld.
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