Bloomberg Audio Studios, Podcasts, Radio News. Hello and welcome to The Money Stuff Podcast. You're a weekly podcast where we talk about stuff related to money. I'm Matt Levian and I write The Money Stuff Colm for Bloomberg Opinion.
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
Katie, you're you're off thanks week.
I'm so excited. It's my birthday on Sunday, which is huge. It's my favorite day of the year. On Saturday, I'm riding in a horse show. And then immediately, how is that not your favorite day of You know, I'm not going to the Olympics. It's a fact that I accepted a couple of years ago. I'm doing this sour show on Saturday, and then Saturday night we're leaving the country
for Ireland for my birthday. And I'm really excited. But that means practically speaking that we just recorded next week's episode, and now we're recording this week's episode, and we've already spent too much time.
Together today, too much time together. But next week's episode of a special episode of Guests, Yes, our second and third guests huge talking about the subject deer to Katy's heart.
Good lord, it's about puzzle hunts.
It's about puzzles, which are cool, which are dear in my heart, and somewhat less dear to Katy's hard than horses.
I was just happy for Matt listening to Matt having fun as someone who's never done a puzzle hunt probably never will.
It's for the large subset of money stuff fans who are also a puzzle hunt fans, and.
For them you want to learn about puzzle value and respect all those people that are like puzzle hunts.
It's amazing, Katy. I saw you this afternoon checking your furrow, and k.
I actually was. I was inspired to after reading about basic capital, which you wrote about in one of this week's Money Stuff basically four dollars of leverage. Yeah, for everyone dollar that you invest, what could go wrong?
I didn't actually know this when I wrote this, but like, there's a fascinating history of this idea, right. So the idea is that when you are a young person, you invest a little bit of money in the stock market, and then as you get older, you move up in your career and you start investing more money, and so by the end of your career, you are investing more of your money is in stocks than at the beginning
of your career. And if you think about this from a theoretical perspective, you will think you should have more money in the stock market early on and relatively less money later on, right that you should diversify your stock market risk by taking more of that risk early instead of taking like almost all of it at the end.
And so people think about this theoretically, and there's a sort of well known two thousand and eight paper by Ian Ayres and Barry Nelbuff that Ianire's taught at the Lost cal I went to basically saying, like, what you should do is you should lever up your investments early on your retirement investments. Early on, you should take a margin loan from your brokerage or like buy long dated
call options that kind of look like levered features. And you should have more than one hundred percent of your money in the stock market early on, and then have less than hundred percent of your unning the stock market later on. And that's going to like smoothier returns over time and give you better returns than if you just invested your cash as it came in over the course
of your career and they wrote this paper. If you look at it on like SSRN, the date on the paper is like May two thousand and eight, which, yeah, after I wrote about like the basic capital idea, a couple of people email me. There's a famous post on the bogel Heads investing for him, where like this grad student did this starting like two thousand and seven, and he just ran into a buzz saw, like he lost all of his money and then like a little bit more than all of his money because he had borrowed
to do it. Yeah, I think he got better over time because, like you know, the point of this is like you're sort of spreading your risk, and so he just unfortunately took a lot of risk going into a great financial crisis. But then he got better. But anyway, that's the idea. And for various reasons, including that this idea had to brief a vogue in two thousand and
eight before beking a terrible idea. There's not like a ton of implementations of it, but basic Capital, which Susanne Willie at Plumberg wrote about this week, they are doing a sort of implementation of it where they will let you borrow money to lever up your furrow NK. And the pitch is that you're borrowing the money in like kind of a nicer way than broker margin loans, Like they give you a term loan, there's no margin calls. If like your stocks go down, they're like, that's fine,
just wait five years, they'll come back. So it's an interesting idea in that respect.
It's interesting that friend of the show Bill Ackman is an investor here only because it seems like we've been talking about him for several weeks in a row and I wanted to say his name again. The way this works, though, is that most of your exposure is to credit. It's not actually in stocks.
Right, This is what I wrote about. Like it's like you sort of like you like wake up in the middle of and you're like, oh, people should be able to get photo one levers on their four own case and you'll come into the office not okay, how do we do that? And you're like, wow, we'll just lend them eighty percent of the money of their portfolio, and like that's probably fine, right, because like even if stocks go down, like if you have a long term loan,
like the stocks will come back up. The idea of like losing money on a five year loan against like an eighty percent ltview loan against stocks is like, yeah, it's not that big risk. But then you realize the real problem is interest. Right, So you're making this loan and it's going to charge interest, and the interest is you know, like six seven percent a year. It's like so pur plus two percent. So it's like, you know, meaningful interest, and how are these people going to pay
that interest? And it's really just optically difficult to make them pay the interest, right, Like you have to either make them make contributions to the retirement fund every year to pay the interest, or you have to like sell some of their stocks to pay the interest, or or or you can put enough of the money into fixed income that pays a yield to pay the interest. And if the fixed income stuff that you buy has a higher yield than the like SOFA plus two percent that
you charge, then it's fine. But it's like if it has like a twenty five percent higher you have to put eighty percent of the stuff into fixed income, and so like, in fact, basics proposal is like you put something like eighty five percent of your portfolio into fixed income, fixed income being maybe a bond fund, maybe maybe some private credit.
Which I do want to talk about it.
Yeah, I want to try about it too. Yeah, put some private credit your thro own k. But so the point is that like you're levering up your frown K and then kind of like walking most of that back by putting it into bonds rather than stocks. So like, instead of putting two hundred percent of your like retirement account into stocks, you're putting like seventy five percent of your retirement fund into stocks and another four hundred and
twenty five percent into credit. So it's like a nice effort to achieve this interesting theoretical idea, but doesn't quite accomplish exactly what you'd like ideal they wanted to accomplish.
Yeah, so you described this as cool in your school, which, by.
The way, you know as like I will say, like I used to be a derivative structure, and like, so often you're like, oh, this is a great idea we should do, and then you're like it doesn't work practically, and then you're like, what is the like awkward compromise that kind of like captures the spirit of it? But isn't quite what you wanted. This feels like that. They're like, yeah, okay, I like this awkward compromise, well.
You calling it cool is already on the Basic Capital website. It's attributed to Bloomberg. It's a great endorsement.
It's a reasonable compromise to achieve an abstract damn.
Yeah, so leverage to a lot of folks sound scary. It kind of sounds scary to me. You're talking about I.
Feel like everyone's first instinct is like, oh my god, you're borrowing money to your taking margin loans in your free tim Again it's like yeah, fine, but like so okay, this is like not margin leverage. So it's like you have like a five year term loan, right, Like the chance that your portfolio will end up twenty percent below where you started and therefore your entire retirement savings will be wiped out. They're not that big, but you know what,
they exist, right, there's a risk. The story suggests that like most people who do this, like you know, they dabble in it. They put a little bit into the weird leverage thing, and then they put a lot into like regular stuff. But yeah, like it amplifies your risk, it amplifies your returns. I think the case is that right now, virtually everybody it makes a huge concentrated that
with eighty percent leverage in their financial list. Not virtually everybody, but like a lot of people in America buy a house within eighty percent mortgage or sometimes more than eighty percent mortgage, and they are taking a very concentrated leverage risk, and if house prices declined by more than twenty percent, they will lose all of the money they invested in their house. Now, there are differences. One of them is that you get to live in the house, whereas you
don't get to live in your stocks. But another difference is, like traditionally it's hard to get like non callable leverage on stocks and so your mortgage, if your house price goes down, you don't really notice necessarily because like you're just paying the mortgage for thirty years. If your side prices go down, then you'll notice and you'll be like, oh, no,
the equity in my account is zero or whatever. But this sort of trick here is to think about it more like a mortgage and not worry that your stocks have gone down, because like in thirty years they'll probably recover.
Yeah, I guess I have a hard time making my brain work that way.
I think most people do. I think like everyone's natural reaction is like, oh, this is so risky, But it is in some ways riskier to have everyone have two hundred percent of their networth concentrator in houses, and having two hundred percent of your net worth in a diversified portfolio of stock and credit investments is maybe safer than having it all in house, but maybe not. I'm not investment advice here, but I don't mind the leverage that much.
I mind the fact that it's not thocks, But you know, I can't win them all, I will say. I will say. The only thing is like, if you told me you can get eighty percent LTV leverage against the SMP and hold it for thirty years and then retire, I'd be like, Yeah, that's a good product. If you told me me same thing against the broad bond index, I'd be like, well, that's a less good product. But it's like you're probably not gonna lose all your money. Yeah, against the private
credit portfolio. Is there some chance that private credit is like in a bubble that is going to burst?
Maybe you're definitely seeing more of those fears out there.
Yeah, I'm not like super worried about that, but like you're right saying I will take eighty percent leverage on a portfolio of private credit. There's not a lot of history to kind of point to there.
It's interesting to read this article this week about basic capital and you know how much exposures there's going to be to private credit in this because you also had Empower come out this week Bloomberg News reporting that Empower is going to start offering private assets, working with firms such as Apollo and Franklin Templeton.
We talk about it every week. It's like there's a gold rush to put private assets into frohen K's because like there's a long running tradition in democratic administrations of regulators being very skeptical of high fee products in FROH and K, to the point that people kind of worry that they have a fiduciary responsibility to only put index
ones in fur own case. Yeah, and now there is this complete reversal where it's like, oh no, but people want private assets in frow in case and obviously those have high fees, and so now everyone's like let's put high fee products into fur own case it's a real gold rush. And that's the cynical take. Yeah, the sensible take is like retirement savers do have thirty year time horizons, and it's like really discouraged to take money out of
a four O NK before retirement. So it's like, if you have a long time horizon, you should be taking I liquidity, you should be taking some risk. It's truly the case that Furro and k's are a good place to put private assets.
It's just like, if I have a thirty year time horizon, why would you want to be anywhere but stocks? Like sort of one of the pitches for private credit is that it's diversified. It you know, is non correlated to the S and P five hundred. But if I'm investing over that time period and I'm going to get probably low double digit returns in the sa P five hundred on an annualized basis, and I'm investing for thirty years, I'd probably still just want US stock exposure.
You can't guarantee that you're getting the double visit returns on US stock exposure, and diversifying credit is also also there's this line that I quote all the time someone says, if you can get like twelve to fourteen percent returns and private credit, what else would you want to do with your life? And if you can get twelve percent from like pretty solid private credit products, like why would you want twelve percent from the.
SMP Because I feel like you're going to get it for lower fees And that's that's a big reason why. And I can see it every single day. I mean, this was the first time I checked my four one K in quite a long time. But I mean history as a guide, you're probably going to get that in public equities, so like why bother?
But yeah, it was still shorts sentence. If you can get twelve to fourteen percent returns in like senior secured private credit, what else would you want to do with your life? I explain a lot of things with fees. I also feel like one of the main things that is happening in the financial world right now is a lot of people have that same thought of as you can get twelve to fourteen percent in like first lean private credit, what else would you want to do with
your life? That's why think it's hard to do private equity because like if you're in private equity, you're paying twelve to fourteen percent. If you're in private credit, you're receiving it. It's a good deal.
But I hear you, Yeah, it doesn't quite swimmy.
I hear you. I think that, like if you ask what should normal retirement savers be doing, I think there's a decent case to be made that essentially zero costs equity exposure to the US economy is a good product, and very high cost exposure to leverage loans and other weird structured stuff is a great product to sell to you and possibly less good of a product for you to buy. But that that's not obviously true. I do want to say one other thing about private credit and
this basic capital structure. In basic capital, they lend you eighty percent of the value of your portfolio. Where's that many come from? I don't know. I think it might come from their balance sheet, like early on, because they're just ramping this up. But like in the long run, they have to find a source of capital for that, and I don't know who that source of capital is going to be. I'd be surprised if it's like City Group.
I would not be surprised if it's private credit for it or like you know, like private credit ish firms like insurance companies or whatever. Like where I really want this to go in the long run is like the robberos, where private credit firms are lending it so for plus two percent to retirement savers who then use those loans to buy slightly spicier private credit stuff from the private
credit firms, like you know, the sover plus six percent. Yeah, like that's a good financial product right there.
I also just wanted to talk about the founder really quickly, Abdul all aside. He's thirty years old, which is also pretty cool.
It's the right age to be thinking about these things.
Definitely lover my retirement service. He went to Harvard Business School, that where he was when he pitched Bill Ackman. He also previously worked in leverage finance at Goldman Sachs. So of course you were going to think this is cool. Oh yeah, this is like, this is like resume is I Betty loves puzzle hunts. You know who else probably loves puzzles.
The president of the private aquity club at every university.
I was going to say, these poor kids being hazed at these student finance clubs. This really bumms me out.
It is not anything like what I experienced in college, and it's like a sort of thing that I've been noticing even for my time in banking. But yes, there's a Business Insider article this week about college student finance clubs, which are so insanely competitive. I think we've talked about
on this on the show. Like where it used to be private equity firms would hire people after their two year analyst program at a bank because they knew stuff, and they'd like, you know, you'd work as an alis at a bank, and then like you came to the end of your two year program, you'd interview if your new jobs, and private equity firms would interview and they'd hire you. It was an advantage for a private equity firm to interview two weeks earlier in the other firms.
And so I got pushed back to the point that now people are interviewing before they start their banking jobs. You graduate from college, you're about to start a banking job, but first you interviewed a private equity firm where they ask you like, so, how's your banking job, and you're like, wow, I haven't been there yet. But so everything's getting pushed
back earlier. And like one symptom of that is that being in these like exclusive elite finance clubs at universities is like viewed as being important for your resume to get the good finance jobs. And so you like interview as a freshman and they like give you a bunch of like difficult financial modeling questions, and like there's someone in the story like cried during their interview in there. If you make it through, then you're in the finance club.
And being in the finance club gives you the inside track to getting the investment banging job that'll get you the private equity job.
Yeah, it did read suspiciously like getting into greek life at a college or university. Not that the college I want to had greek life, but it did sound a lot like rushing of fraternity.
Not a lot.
Well, it's hyper competitive, you pass out? Well, no, but there's other forms of hazing.
Yeah, like DCF modeling.
Yeah, which would you rather do?
The story? It was like high school kids before they arrive on campus are like, you know, you spend your senior spring of high school studying up on finances that you can get into the finance club your freshman year. It seems insane.
Yeah, I did not do this. No, I was so far from this. This just bummed me out. Like you said, all of this is getting pushed forward, and I do wonder, you know, what's the breaking point, Like when does it turn in on itself? And I don't quite No, it just feels like where does it go from here? There's nowhere else to go if you have high school seniors in their senior spring, you know, studying.
Of course there's somewhere else.
We're middle school.
Yes, It's like someone who was like, this is like travel sports, right, Like, yeah, this is another thing that big people talk about all the time. Like it used to be that like kids played little league and they played for their high school sports teams and it was
like sports and fun. And now it's like when you're seven, you try out for like the travel team and you have to spend all this money to be on the travel team, and like it's pitched to parents as like your kid will never get into college if they're not on like the elite seven year old soccer team or whatever.
And I don't know, man, that's like everything, right, Like all of these markers of status have become so competitive, and the people witness that competition and are like, well, if I start a year earlier then everyone else, I'll have an advantage. And everyone does that, and so I just moves further and further back until like the seven year olds are trying out for like the Travel Financial Modeling Team.
As a parent, does this stress you out?
Yeah?
Yeah, yeah I'm not a parent, but you know I'm thinking, well.
This is why I'm working with my daughter on her DCF model.
Yeah. Yeah, I have a cat, so it doesn't quite apply to me. But I think of little Xana do in like I don't know, fifteen years and I worry.
About like great callback, I hope anything I should just like little Xanada, You're you're.
Hypothetical named after the New Jersey American Dream Mall Medal. That's kind of why I hope it turns in on itself, because it just doesn't seem sustainable.
Yeah, people said that for a long time, had a lot of things like college admissions and stuff, and the ratchet keeps turning. I will say that, like there are like counter trends to this, where like I always think of like the very prestigious financial firms, you know, I think of like Renaissance and Bridgewater and like to something Chain Straight is like this. There's a notion that they don't hire people from traditional Wall Street training. They don't
like MBAs or people from the street. They like to hire people who are not tainted by Yeah, like traditional Wall Street thinking. And it's weird for people to channel themselves so intensely into traditional the traditional paths. But maybe it's not that weird. Maybe those firms are outliers, you know, pre med.
There's certain things you need to learn and know about science to become a doctor. But I could see like a Bridgewater thinking, you know, I want to make sure I have an edge that I'm not I'm not just hiring someone who has been programmed by someone other than myself. Like I want the creative thinker.
You want the kids doing polon, it's not the kids doing finance club on.
So maybe that will be a forcing action for turning it on itself.
I don't know. I mean, like the other thing is that, like you know, and I wrote about this, like when I was in college, there are a lot of like aimless smart people who graduated from college and they're like, well, I guess I'll do investment in banking recruiting, because as they're there, and in some ways that's not good for a bank, or you know, some ways, if you're running a desk at a bank, and like you can choose between the president of the Financial Modeling Club and like
the classics major who's like, well, I guess I'll do investment banking. You'd rather have the president of the financial modeling Club because they can do financial models and they'll
be useful to you. But I think, like taking a step back, if you're like the CEO of a bank, there's a real value to having a broad selection of ambitious, smart people who don't necessarily care about banking, because some of those people will be really good bankers because they're a little bit broader minded and like less rigid than
the people who are just the financial modelers. But some of them will not be good bankers and will be politicians or media people or you know other things podcasters, and their two years at a bank will reflect well on you and sort of lead you to continued to do well in recruiting. Like I just think that, like, if you're an investment bank and you're only hiring people who have been interested in investment banking since they were eighteen, Like you're sort of like undermining your own prestige.
Yeah.
Wow, this is like my very selfish disclosure. I used to work at Colban and do you see kind of cool to be like, ah, I used to work at Colvin, and like you'd like go around to like different places in life and be like, oh, I also used to work at Colvin.
Right, because yeah, and presonably Goldman is proud of you.
Oh I hope, so yeah, they'd better be.
I don't know. It's kind of similar in journalism, like you want to hire people not always, but like you want to have some journalists who, such as yourself, that came from outside the industry, right, and like.
Both because like it is vaguely prestige enhancing, but also because like having that diversity of experience probably does improve the doing of the job. Whereas if everyone has the same training since they were eighteen, like you're probably missing things. Maybe the training is really good. Maybe these finance clubs are like you know, they sound brutal, right, there's this
tension in the article where like these clubs are very selective. Yeah, and it's like, well, you could just take more people and you could probably teach them how to pick stocks, and like maybe they wouldn't be great at it, but like who cares, right, Like some of them are investing like small portfolios of like the college's money. Some of them are not, Okay, you didn't pick a good stock.
But I think like part of it is they want to be selective, because the mean thing they're doing is like saying we were selective, so that like they are the place where the banks want to hire from.
Yeah. I did love this line from the Business Insider article. Some clubs conduct three to five rounds of interviews, students told p I, which can involve a resume review, yes, your high school resume, a social assessment, and multiple technical rounds in which you'll be grilled on real world finance questions. My high school resume was written in crayon, so I would love to see some of these.
I do love the phrase a social assessment, which does that mean that you have to like drink until you pass out once? Because like it's you know, it's still a college club, like you still have parties, right, I hope, So I hope.
Yeah, I don't know, maybe some of these students will write in and tell us about their investment club.
You know, I wrote about it, and several people did write it tell me about their investment club, including one person who pointed out that, like the competition goes two ways, and the banks like compete to get in front of these clubs because like, you know, if you like have the first meeting with like the club, then like that club is more likely to send students to you, and so you'll you'll be able to pick them off instead
of them going to other banks. And so there's like a competition including like the banks like love to sponsor stuff for the clubs or just like give them money because like that helps with her recruiting, and so you know, it goes both ways. But yeah, in general, I got a number of emails from people who are in these clubs, and none of them were like, no, it's great, that article is all wrong there.
I think so much fun.
It's pretty bad. Yeah. I have a friend whose daughter is in one of these competitive clubs, and they asked me to speak and I talked at their club. But I also found it. I was like, why are you in this competitive fight club?
Did they seem happy? Were their smiles? Was there any mercy I was speaking?
So it was great.
Yeah, it was full of mercy and class.
It was I mean, yeah, stamping cheering.
Probably the highlight of their college experience.
I definitely in fact in doing DF models, Well, this is.
Really fun to talk about, but I'm really just in knots over how Elon Musk is going to get more money, specifically Tesla options.
Yeah, this is not super easy, but like they have to reported that Tesla is trying to figure out a way to give him a giant bag of money. They gave him some stock options in twenty eighteen.
Going all the way back to twenty eighteen.
When Tesla was a sixty billion dollar company. I mean, it's not like a one point something trillion dollar company. But like, the options all worked out and he did great.
They awarded him on the order of one hundred billion dollars from these options, and then the shareholder sued in Delaware, and the Delaware judge said, you know, this is a conflicted transaction that was not fair to shareholders, and so the options are gone and Elon Musk and Frankly Tesla's board in Tesla's shareholders were all kind of mad about that. We talked about it in the past. And one thing they did was vote again to give him back the options,
and the judge said, no, that doesn't work. The options are gone. Another thing they did was about to move to Texas. So Tesla's now incorporated in Texas, so like, the next time they give him stuff, you can only sue in Texas. And this week the government Texas signed a bill about limiting how much you can sue a company in Texas. And the answer is, you really kind of can't. Like it's it meant to be much more protective of decisions like this than like, you know, the
equivalent law in Telware. So like, if they were to give him another hundred million dollars today, like it would be fine, like no one would no one would be able to ject. But but if they were to give him hundred million dollars today, they would have a huge accounting hit and he would have a huge tax hit. Basically, it would be a multi billion dollar expense to Tesla, which would start its income, and it would be a
huge tax bill to him. He would pay like fifty seven percent taxes on the value of the award, like what's nice about what happened in twenty eighteen is that, probably speaking, there were not a lot of tax consequences or a lot of accounting consequences to giving him this award because the options weren't worth very much in the theory, because the stock was low and there were a lot of ambitious targets that he had to hit in order
to get the options. And then like seven years later, the options are worth a lot of money because he hit the targets, Like that's how it's supposed to work. Now they're gone, and like giving him new options would be really bad for tax and accounting purpose. So Tesla's trying to figure out what's the right way to solve this in a way that gives him what he wants, which is both like a giant pat on the head
for being so good and also like more control of Tesla. Yeah, but in a way that doesn't like he created a h tax bill or like an accounting this. Yeah.
Specifically, the FT reported that they formed a special committee to explore Elon Musk's pay. The committee comprises of just the chair of the board, Robin Denholm, and Kathleen Wilson Thompson. It's going to explore alternative ways to compensate him for passwork should Tesla fail to reinstate that twenty eighteen pay deal. You had kind of a suggestion for them.
So I've had two suggestions this week. One is my stupid suggestion and one is the readers. Both of them are somewhat tongue in cheek suggestions. Okay, Essentially the problem is that the stock price of Tesla is too high. Right like in twenty eighteen, they're like, we'll give you a huge pile of money if you tenax the stock price, and then he did it, and then like now they can't be like, well, we'll give you another huge pile of money for tenexting the stock price previously because that
would have tax consequences. So the solution to the stock price being too high is to make the stock price lower. And so I don't think this is original for me. I think, like you know, I've been writing about elin Mus for years, and I've been getting somewhat conspiratorial emails from readers for years, and I think somewhere a reader email will be like if they want to give him stock options again, And it's very important that the options to be granted up the money, and he wants them
to be very valuable. The thing to do is to make the stock very viatile. Tank the stock, give new stock options at a low price, and then bring the stock back up, and the stock options will not be worth a lot.
Turns out, is that what he's been doing.
I mean, like, you know, the stock went down a lot. Yeah, as he was doing doge antics, and he's like a little bit retreated from the doge antics and said things like I will spend more time at Tesla. And the stock gone up, and it's like, well, you know, you could like turn the dial all the way to doage. Stock plummets, give him stock options, be like, oh, with these options, I'm now motivated to spend more time in the company. Turn the doll more to Tesla. Stock goes up and everything's fine.
Yeah, there you go.
That's one solution. It's not a very good solution.
That was your solution, So I'm not going to insult you.
No, it's pretty stupid.
But what was the reader's suggestion?
The reader's suggestion is there are various ways for Tesla to give elon musk stock. Let's say, the traditional way to give a ceo stock is to do it as incentive compensation, and that runs into the problems that we have here, where like if you want to incentivize him for work, he's already done, like you have a big tax bill. Another thing that you could do is you could acquire a company.
That he owns, right, and maybe one that begins with.
X not necessarily yes, So there's a business logic too, I mean arguably business logic too. Tesla acquire xai because
Tesla's an AI company and as an AI company. But you know, Tesla has in the past acquired solar City, which was a company that was partially owned by Elon Musk, and there were some allegations that Tesla was overpaying for solar City because Elon Musk wanted it to and then it was essentially a ballout of solar City to like enrich the CEO and the shareholder sued and he lost, and the Delaware Cord at the time said, nah, this was good enough, but you know in Texas like you
could probably be even faster and loser. And so the solution that my reader suggested was, like, look, you have an Elon Musk company, you overpaid for it. In the form of Tesla stock by ninety billion dollars, and you've given Elon Musk ninety billion dollars of stock that is not immediately taxable to him and does not reduced your earnings. So it like kind of solves the problem of rewarding
him for his past work. And the objection to it is that if a Delaware company was like, we're going to just buy our CEO is like random small startup for ninety billion dollars, they'd get sued and they'd go to court, and a Delaware chancellor would review whether the transaction was entirely fair to shareholders. And given both the cynicism with which I'm describing this and Delaware's history with Elon Musk, the chancellor would probably say, no, this is
not entirely fair to shaholders. You have to give back the stock. But being in Texas, and I think the thing about this is like I'm describing it in this very cynical way, but like you could imagine Tesla's board saying this CEO is very valuable to us. We owe him for the good work he did increasing the stock price in the past. That the Delaware chancellor took the stock away from him, for shareholders are already voted to give him that stock back, and the chancellor said, no,
that doesn't work. So what we're going to do is we're going to give him the stock in this alternate way where we're buying this company from him, you know, and I know the company isn't worth ninety billion dollars, but like he's our guy, we like him, Let's give him the ninety billion dollars. You could imagine like disclosing that clearly and the shelder saying sure, yeah, So we have.
Two potential solutions on the board right here.
No one would ever cite this podcast if they're implemented either of these solutions, because you'd probably get in trouble doing these things explicitly, like impleasantly.
Well, this is a watch this space sort of moment. Tesla Hid say in a filing that it's proxy Samen will be delayed. That indicates that perhaps you'll learn how to do it. Yeah, their annual meeting will be delayed. Usually the annual meeting is in May or June, so maybe sometime in the summer we'll want to come.
To Shrelders with some thing that the Shelders can vote on to giv Alan of his money.
We're going to talk about it on this podcast, but not next week. No, No, next week we have something far more sinister.
And that was The Money Stuff Podcast.
I'm Matt Livian and I'm Katie Greifeld.
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