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Hello and welcome to the Money Stuff Podcast. You're a weekly podcast where we talk about stuff related to money. I'm Matt Levin and I write the Money Stuff column he Bloomberg Opinion.
And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.
What are we talking about today, Katie?
We're going to talk about a Donnie Sure, what's going on. We're going to talk about micro strategy. There's a lot to say there, and we're going to talk about short selling, which is one of the favorite topics in the money Stuff universe.
That's good or saying yeah, you don't care about.
It, I'm going to politely agree. This was interesting. So got I'm a Donnie. US prosecutor's a qu a Donnie who is one of the world's richest people of promising to pay more than two hundred and fifty million dollars in bribes to Indian government officials to win solar energy contracts. This was very interesting on a number of different levels.
Yeah, I don't read a lot about brivary I love bribary cases. I read about them some it's so interesting. One thing that's interesting is like usually when you have a bribery case, it's like and then they handed the bag of cash to the official right, or like there's emails being like the official would really like to buy
his mansion now here. It's like all of the like emails they quote sound legitimate because what it says is like, to win these power contracts, they had to pay incentives to the state power companies, And so they would say things like we need to pay incentives to the state power companies. And it's like, well that sounds fine. Paying the state power companies rebate for buying power seems fine. Now paying the state power company executives two hundred million
dollars is that? But so the stuff they quote makes it clear that it's going to these people personally. You know, I read a lot about like how if you were
to pay bribes. None of this is ever legal advice, but I read a lot about how if you were to pay bribes, you should try to make them look business like and not like a sack of cash and like winking emails saying I've given you the chickens, but just like, yes, we're paying incentives to make a commercially viable contract with the state power company, you know, and if it happens to go to the executives personally, then like you can prove it.
Hearing you describe that kind of reminds me of the Eric Adams emails with the airline, and one of his staffers was like, no, you got to make it look a little legit. He put that in an email or she I don't know, yeah, put that in an email.
I only read like the charging documents from the SEC and from the Department of Justice, and so one assumes they have evidence and testimonies saying oh, yeah, we gave them the money personally. But it's actually weird because it's like, for one thing, these numbers are so large. If you're paying two hundred million dollars, it doesn't sound like you're paying two hundred million dollars to the power company. It's like that's a big bribe.
Oh yeah, two hundred and fifty million.
Yeah. And the bribes are weird because it's like one of them is like they did deals with different Indian states and so one of them it's like they paid several hundred thousand dollars. So yeah, that sounds like a bride and when I was like, they paid several hundred million dollars, Like that sounds like a legitimate business expense.
Yeah.
And like also the guy who got two hundred thousand dollars must be annoyed reading this indictment, like I could have gotten two hundred million dollars. Strange.
Something that maybe you can expand upon is how this ties into the US, Like US prosecutor, yes, are alleging that he bribed the Indian government. Like why is the US getting involved?
Okay, So part of the answer is the US loves to get involved. Like there are much crazier cases than this, right, I love like Olympic doping cases where it's like, you know, in Paris, a foreign athlete gets drugs from a foreign doctor and the US is like, ah, that's undermining international sport and they'll bring charges.
Well, you know, you know when an American athlete could have won that race.
That's a good point, thank you.
I think about this a lot anyways.
Go on doping your horse. But everything sort of flows through New York, you know. Like part of the answer is that a Donnie Green, which is the a Donnie Group entity that allegedly paid the bribes, like they had like a partner on these power deals, and that's a company called the Azure Global Power and that was for a while listed in New York. But the main answer, particularly in like the SEC case, is that a Donnie
Green issued bonds. They did like an international dollar nominated bond offering, and some of those bonds were sold to US investors, and so allegedly they defrauded US investors. And it's very interesting. Freud I wrote that this is basically a green washing case because what happens is they issue these bonds in twenty twenty one when they're paying the bribes, and they're allegedly paying the bribes, and they paid the bonds back in twenty twenty four. So like nobody lost
any money. The investors are fine, the US investors a fine.
How are they defrauded? Well, they were defrauded, because the SEC makes a big point of saying, look at all, like the ESG promises that a Donnie puts in the bond offering, like they're like, not only are we a renewable power company, but we're also one that works in developing countries and doesn't pay bribes and like you can imagine being an ESG investor in twenty twenty one and saying, I would love to put money into a company that does like renewable power which is green and very like
E and also works in developing countries, so it's like, you know, providing clean power to places where it's like not as easy to fund solar projects. So it's like s And then it doesn't pay bribes because like a lot of you know, energy projects in developing countries, you worry about it they pay bribes.
Good G.
It's some good G. And like the SEC says that Donnie Green position itself as a leader in environmentally conscious, socially responsible and good corporate governance principles, and it sought to differentiate itself from its peers and other potential investments or issuers and developing countries that might be susceptible to corruption and bribery issues. Oh, if you're an ESG investor, like you're looking at solar projects and development countries and like, oh,
these probably pay bribes and that's not very ESG. But then Donnie's like, we do solar projects in India and we don't pay bribes, and you're like, great, and those people were defrauded because they allegedly invested in a company that did pay bribes.
Yeah. So there you go a detail that I love about this whole thing. You talk about a Donnie Green, you think about gotam a Donnie himself. The reason why he is so rich and like so systemically important to the government and their ambitions and also the Indian stock market. He made his money in coal mining. Oh sure, and like this is all part of his broader reinvention.
Well yeah, although like that's actually not that uncommon, Like a lot of like energy and infrastructure companies are like we also do green energy because like if you're in the energy business, you have some advantages and like yeah, entering energy contracts better solar energy.
Yeah.
I just like that he became greener and also allegedly that's true pp Yeah yeah, well you say started doing We don't know that's true, you know, I.
Mean obviously, like there's the there's like the Hindenburg allegations a while back.
Yeah, January twenty twenty three.
Yeah, so I don't think this is like particularly confirmatory of those, but it's a sort of general.
Like I was wondering about that. I was trying to rack my brain for that information, and I guess I could have looked it up.
But the Hindenburg stuff is like very miscellaneous. It's not like Donnie is bad because of this one bad thing they did. It's like, oh, look at this nephew, right, So it's a little hard to like, somewhere in the Hindenburg report there might be like something about this, but it's hard to tell. I was gonna say something else.
What was it we were talking about before Edinburgh cold bribes? We could talk about Donald Trump a little bit, like it would be interesting to see what happens here with a new US attorney in New York.
Yes, I want to get to that, but I want to go back to the thing I was going to say. A Donnie himself is very closely associated with power in de He's like most with Mody and like he's a political figure as well as a business figure. And it's
interesting to me if you read this case. The way that the deal works is that step one, a Donnie Green wins this enormous contract with the Indian federal government green power thing, and then step two, to like make that contract work, they have to go out and win contracts with each Indian states power company, and like allegedly they win the power contract, the federal contract first, and then they go out and start bribing the state governments.
There's no suggestion that they won the federal contract illegitimately, which is like it's a little interesting. I don't know. Yeah, they're like so politically connected in the Indian federal government. It's like, it's like interesting that they're like pan bribes that say, it's just on the rais an eye brat Donald Trump.
Donald Trump. So Donnie really likes Donald Trump, at least according to his social media presence after Trump. I think, yeah, I.
Think, if you're a business person, this is not true in twenty sixteen, but it's true in twenty twenty four. If you're a business person, you really like Donald Trump according to your social media presence.
Yeah, that's actually that's very true across nationalities.
It's just like, why not, Well, on that trem.
He didn't just congratulate him. He also committed to invest ten billion dollars in the US create as many as ten thousand jobs.
Incentives.
Yeah, incentives sometimes are another word for bribes.
But yeah, though again it's like if he committed to invest ten billion dollars in the United States, that's a good incentive. That's like, the United States in this relationship is the principal. If he committed to invest ten billion dollars in Trump Media, then that would be that that's like, that's the agent. But now I don't I don't think that's happening. I remember in the first Trump administration being interested in what sort of foreign corupt Practices Act prosecutions
there would be given Trump's whole thing. And I remain interested in the second Trump administration about that because in the first administration Trump owned a hotel or foreign governments would put people up at high rates. But now there's like there's Trump Media. There's like a lot going on.
So we'll see, we'll see.
Oh my gosh, micros Strategy, Micro's strategy is buying so much bitcoin. Micro strategy shares are going up so much. Micro Strategy has another short cellar after it. Where do you want to start?
Its strategy is so interesting, but it's so simple, it's so simple. We were talking to John Collison. I remember on this podcast he argued for the view that companies should focus on doing their business well and that a company that spends too much time focused on like doing stuff with stock or like optimizing its stock. Probably just doing stock trades is probably it's probably a bad idea,
and you should focus on building the great business. Mega said he has a business, right runs an enterprise.
Software nominally a software Yeah.
Right, totally has a business. But one gets the sense that most of what it's executives focused on day to day is is sharing lots of stock and using the proceeds to buy lots of bitcoin.
How do we get more bitcoin?
And then talking up the fact that they've bought more bitcoin with the proceeds from selling stock. And I don't know how that has affected the customers or their enterprise software business. I don't know if like the enterpres yeah, I know, right, but as a shareholder value maximization strategy, right now, they've made the right choice, like clearly, like they have made their stock go up so much by
doing this insane perpetual motion trade. Where there are stock trades that, like I wrote, like one hundred and fifty percent premium to the value of the underlying bitcode, it's actually more than that because you take into leverage and stuff. Let's say there's stock trades like three times the price of like their underlying bitcoin, And so they just sell a dollar worth of stock, they use it to buy a dollar worth of bitcoin, and their stock goes up
by three dollars. So they just perpetually expanding their market cap. And like, when I think about that trade, you know, we talked about the Destiny Attack one hundred fund, where like it was trading at like a thousand percent premium to the underlying private company shares because you could get those shoes. And so I was like, why they should is your stock because that'll compress the premium, right, Like you sell more stock, that puts selling pressure on your stock.
Your stock goes down. Meanwhile you buy the underlying assets, the underlying assets go up. You sort of eventually get to a place where you're fairly valued. That's what micro shategy is doing. But the premium keeps going up, like it doesn't work. Like it worked great for them, but it doesn't like actually compress the premium. So eventually they will have a market cap greater than like the entire world's economy because they found a perpetual motion machine.
And I look forward to that reality. It is interesting. I mean I have my ETF glasses on all the time. But there's all of these. But no, there's leveraged micro strategy and ETFs that are doing incredible trading volume, which is nuts. There's been a couple of days where like
they've been the most traded stock, which is crazy. And there is a theory out there that, you know, some of the people I follow on Twitter or x are entertaining that whether all the money that's coming into these ETFs is like just part of the reason why you have that big premium. Like Mike Green overhead Simplify has made the case that yes, like some of these ETFs have powered micro strategy just just like this insane premium. Maybe that's why it's not getting arbitraged away.
I hope that's not true. It just seems like such a tail wagging the dog situation.
So yeah, yeah, it's just like one of the thought exercises.
One thing that I've heard argued is that micro strategy is a pot of bitcoin. Why would you buy it at a three times premium to the underlying bitcoin rather than buying bitcoin or a bitcoin ETF or something like that. One answer is, like, you want to see where this is going, and you think the premium will expand, which.
Is like you know, like science experiment.
Like you could have a theory that the premium will expand. Like micro Strategy is argued, like we're actually a better way to hold bitcoin because we can get leverage. You can't get leveraged, like you can leverage your bitcoin, but like you're trying get three x the bitcoin, So it's like it's it's not it's not really a leverage plan. We would have a fundamental view that the premium will expand.
Another thing is like for some reason, you cannot own any other bitcoin instrument, and so you own this thing. I don't know, I don't know who that would be. I have heard people say iras, you can't buy the Queen ETF and your IRA, but you can buy micro Strategy in your IR which sounds terrifying. This is perhaps a less institutionally held stock than like a lot of other stocks, perhaps, but there are some institutional investors in it.
And you could imagine being an equity fund manager where your mandate is like you can't really buy ETFs in your equity fund, but like can you buy this corporate stock?
Yes you can, you.
Can, and like if you like you're like an equity fund manager is like, really, I love bitcoin, this is like your best way to get Yeah, the three X celebrity, Yes, maybe, but like there's something amazing going on. Oh yeah, and they are like capitalizing on it to the health.
Well to that point, maybe one of the reasons why you buy micro Strategy at this premium is because you love Michael Sailor, Like he does have a cult following.
Yes, you know who's not doing that trade Michael Sailor.
Yeah, that's true. And I know there's this daily Mail cover from like March two thousand that's been making the rounds on X about him losing like six billion dollars in a day on micro Strategy, and it's just amazing to think that just the evolution of this company and the evolution of Michael Saylor, and he's now obviously a very wealthy man.
To be clear, I really respect. Respect is maybe not the right word.
I really cherish and in mind.
I cherish and MMA is by the idea of like, we run a software company, but that's boring, so we're just going to get all in. I'm buying as much bitcoin as we can and it does so well.
Yeah, well, so you said, you know, it's a pot of bitcoin. Yeah, and so it owns about thirty billion dollars worth of bitcoin and its market cap is one hundred and five billion dollars. And I think it's interesting to compare that to like a traditional asset manager, like a black Rock, who has a market cap of like one hundred and fifty three billion dollars with eleven something trillion dollars in assets.
Yeah, but this is not the market cap of the manager. This is the market cap of the fund.
Yeah.
This is a fund that trades at three x the value of its underlying stuff.
Yeah.
Yeah, it's not actually a fund.
Right, It's not actually a fund, it's just it just is a fund as a software company.
It's a fun slash software company that now Citron is trying to short.
Yeah. So this is like a famous widow maker, right, because people have noticed this for a long time, Yeah, and have tried to short it and then carry out.
Carry Stale did it just in March, and I was seeing a look at it. They did the same thing long bitcoin short micro strategy. Their reasoning at the time was that they're trading history and basic common sense suggests that the current inflam right there, premium will contract much as it has on prior occasions, providing a compelling opportunity for a pair trade. Since that Bloomberg News article, micro strategy is up one hundred and seventy five percent and bitcoin is up thirty eight percent.
I mean they're right, like, yeah, before the end of the universe that premium will contract.
Are the heat death of the year universe?
But like before carrots Dell gets out of the trade, who knows, Yeah, right it is has a famous whoto maker. Sidron didn't like put out a report being like we're all in on anti micro strategy. They were like, we're hedging our long bitcoin with a little bit of short micro strategy. But yeah, the same basic trade. Yeah, and the stock went down, which I was impressed by, Like I write about how I heard this is and nobody sells it, so.
I don't know, amazing. Maybe you didn't tweet about it enough, because that's what Ciitron did. It was cool to see that, but you I don't know. I want to make the common sense argument that oh, maybe it went down on this specific one just because it's come up so much, But I feel like that's never stopped.
Yeah, like who knows, right, Like there's a lot going on, including you know, micro Strategy is in the middle of selling twenty one billion dollars worth of stock. They sold like four point six billion dollars of stock last week. Sorry not last week. It's yeah, it actually was last week.
I was this week, but time is a flat circle.
Well, but the point is, like they disclose like this Monday that it's WLD four point six billion dollars or stock last week. They're probably doing roughly that clip this week, so like, you know, maybe the stock went down because they were like sold a bunch of stock. In any case, they're selling stock buying bitcoin. Bitcoin is going up to one hundred thousand dollars. There is no reason that what
they're doing should increase the premium. But like taking a step back, if you're all in on bitcoin, having enormous firepower to buy all out of bitcoin makes bitcoin go up and it makes your strategy look better. Right, If micro Strategy was buying bitcoin and bitcoin is going down, like people would be like, yeah, that's annoying, right, But they're buying bitcoin. Bitcoin is going up. People like, oh, their geniuses. Look, they keep buying bitcoin. It keeps going up.
So it's like there is like a virtuous cycle component to it, where like they're enormous buying firepower gives them some momentum, like both in terms of like the value of their assets and also in terms of like how they look to the market because they look like they're buying a thing that goes up.
Yeah, well, good game, Michael Saylor, whatever you are on your yacht in Miami. Shall we keep talking about short selling and short squeezes? And sure you wrote this week that short squeezes are legal now.
So I wrote this week about the appeals cart decision from last month. Sorry it's a slow week.
Yeah, I was wondering, like what's what's the next?
So often, you know, things just sit on the back burner for a while, and I'm like, well today I'm going to write.
About let's look at what happened last month.
You know, you can't always be it makes.
For a great podcast, Yeah right.
We love to read timely. So I read this week about something that happened last month, which is appeals court decided that it's okay to do a short squeeze. So it is is like companies most prominently overstock dot com I thought they invented it. Someone emailed me with Pegasus Wireless might have invented this. I wasn't following shorts squeze anyway. Companies do this thing from time to time where they try to squeeze out their shorts. So a company will
get mad at short sellers. They'll think, oh, there's naked short sellers like those story. They'll just be mad at like people betting against them. And so they'll say, what we're gonna do is we're gonna give each shareholder some magic token. Now it's a crypto thing, like overstocked it with a crypto thing. But it doesn't have to be a crypto thing. It can be like a paper certificate saying you're entitled to you know, ten percent of the company, and you give them this magic thing in a way
that can't be traded. So people who get the magic thing can't sell it. And what that means is that short sellers can't buy it. And so if you're a short seller, you borrowed stock from someone else, you sold the stock short, and you owe the person you borrowed the stock from the stock back and whatever else comes with the stock. So I stock is a dividend, you have to pay them a dividend. If there's a spinoff,
you have to give them shares of the spinoff. If the company gives out this magic token, then the short sellers owe the magic token back to their share lenders. If they can't get the magic token because it doesn't trade, then they can't fulfill their obligation and they fall into
a black hole. That's the idea. And so the effect of this is that do you announce, oh, we're gonna pay out this magic token in like a week, and then before you pay the magic token, all the short sellers say, oh wait, if that happens, then I'll be, you know, in this black hole. And so I have
to buy back my stock now to avoid that. And so the short sellers all buy back their stock and the stock goes up, and the short sellers lose money and are sad, and you, as the CEO, are happy because one your stock went up and frankly, you are probably selling stock into that rally, because of course you're
this kind of ceo. But then two, the short sellers lost money, and like that's what you really wanted because you hate them, And this is like a controversial thing because it just so clearly is like a form of market manipulation, right, Like you're creating artificial demand for the stock by doing this weird non traded dividend that like clearly has no corporate finance purpose. Like clearly giving people a non traded thing is not good for your shareholders
compared to giving them a traded thing. But you do it to hose the short sellers, and the SEC hates it and has brought fraud charges against a company that is something kind of like this. And when Overstock tried to do this a couple of years ago, the SEC kind of told them to knock it off, and so they had to delay their dividend. Ultimately, Overstock decided, we'll just do a traded dividend, and so what happened is
they announced this weird magic token thing. The short sellers got nervous and like covered some of the shorts, and the stock went up, and the Sea of our stock sold a lot of his own personal stock into that rally, and then ultimately over Stocks said never mind, We're not kind of do that and it's not going ba time. And they said never mind because the SEC stopped them.
But it's never been clear that it's illegal, and so some short sellers who got squeezed by Overstock sued Overstock and they lost and the court said, well, this maybe creates an artificial price, but there's no deception involved, like they said very clearly what they were doing, and so if there's no deception, it can't be market manipulation. You have nothing to sue for. So that's that's the current state of things.
So it's like you said, it's legal.
Now, yeah, you know, it's like it's the Tenth Circuit. So it's not like where most securities cases are brought. It's not clear what would happen if the sec brought a case like this is private short sellers who no one really sympathizes with. But yeah, it kind of seems like it's like it's legal to do this.
I feel like you wrote about this just so you could write about that guy that you love.
Yeah. Phil Falcom did an amazing short squeeze with these bonds that are delightfully called the max Zips in like two thousand. He bought these distressed bonds because he thought they were an investment, and then like he found out that his prime broker was also shorting them, and he
got so mad, which is rude. And he got so mad that he bought up more and more bonds until he owned like one hundred and thirteen percent of the bonds because like, you know, he'd buy all the bonds and then the prime broker would be like, I'm going to short some more bonds, and Phil Falcon I'd be like, ah, right, buy those two, and like he ended up owning more than one hundred percent of the bonds, and then he like called in his borrow, like he called the prime
broker and said, I want all my bonds that you owe me, and the prime breker is like, okay, I'll go find them. And the prime breaker tried to buy them and there was no one selling, and so ultimately they got on a call with Phil Falcon and Falcon said, just keep bidding. Sometimes you are just on the wrong side of the trade, which is amazing, Yeah, And then Phil Falcone also said somebody owns more than one hundred percent of these bonds, which is probably why you can't
buy them. And the prime worker is like, what, how do you know that? Because I owned them. God it incredible, And then the SEC sued him and said it was marketing mapulation. Then he got in trouble.
I do love him sending them on just like a wild goose chase, only just keep bidding a lot of life lessons there. Did he make money ultimately, I mean the SEC sued him.
It's sort of like the subsequent sec an things and problems were probably not worth it to him in the long run. He did make money on the trade.
That's good. And also he did win something which is very real, and that is frequent mentions in the money stuff column.
Much Yeah, but you know it's it's like is that trade legal now? Well, the problem is that, like I don't think he did anything really deceptive, but he wasn't like going around telling everyone that he was buying more than all of the bonds until he had actually done it and then he was telling everyone because it's yeah, but there is some difference between that and like the oversicked case, where it's like these companies are really really clear.
They're like, we're going to go out and get those shorts and so there's like no deception at all there. Sometimes there is like sometimes they're like a little KOI about it because the SEC doesn't like it when you say I'm just going to go out and burn the shorts. But like they can't be that CHOI because they really hate short sellers and so they really are going around on Twitter all day being like those short sellers. Yeah, I'm excited for Elon Musk to like learn about this decision.
And I feel like he's a little bit busy right now.
I think he is not spending a lot of time thinking about how much he hates short sellers right now. But I'm fairly confident that the time will come again when Elon Musk spends a lot of time thinking about how much he hates short sellers. Yeah, and when he does, there's like a whole new technology for him.
Well, he'll be good to that point. Carson Block from Muddy Waters was on Bloomberg Television sometime on Thursday, and he said that he does expect more anti short seller rhetoric under Trump. The exact quote is, we've already had some rhetoric. We might have some more anti short seller rhetoric. He didn't know. He doesn't think that Trump and Musk believe that short sellers are responsible for their company stocks falling, et cetera. But we know Elon Musk Cage short sellers.
Yeah. And by the way, what's his name block, No, Devin Nuns. Yeah, the chief executive officer of Trump Media and Technology Group has like written letters to Congress about, oh, the naked short sellers are getting our stock, which I think it is very, very very hard to argue that the stock of Trump Media and Technology Group has been systematically manipulated down to reflect less than its fundamental value. But you know, there's like, oh, there's weird fails, there's
naked short selling. So you've already seen, you know, from the Trump camp, a increase in anti short seller rhetoric, and there's anyways to burn short sellers, including like the government can say it's illegal, which has happened in my you know, financial career, but otherwise, Yeah, And that was the Money Stuff Podcast.
I'm Matt Levian and I'm Katie Greifeld.
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