Funny Business Is My Business: PRIV, HHH, WARS

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Podcasts, radio, news.

It's been two weeks since they've heard our

scratchy voices.

Yeah.

I sound pretty good.

You do sound pretty good.

Yeah.

I probably sound mostly like myself, but I have been sick.

Yeah.

You also got a haircut.

Not that that matters.

No, it's an audio podcast.

But no, we took last week off because I was taking my children to a water park, but also I got extremely sick.

And so I couldn't have recorded anyway.

I lost my voice.

I was like standing at the water park very quietly saying, don't go in there.

So really, it was in the listeners' best interests.

It wasn't ever.

Yeah, so that they didn't have to hear that voice.

But we're back now, and boy, we have some stuff to talk about.

Unconvincing.

Hello, and welcome to the Money Stuff Podcast, your weekly podcast where we talk about stuff related to money.

I'm Matt Levine, and I write the the Money Stuff column for Bloomberg Opinion.

And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television.

What is all this stuff we have to talk about today, Katie?

Okay, we're coming in hot because the first ever private credit ETF has finally launched.

We're going to talk about Bill Ackman's dreams of being a baby Berkshire, and then we're going to talk about Infowars and an interesting bid to try and buy it.

Private Credit ETF: The SPDR, SSGA, Apollo, IG, Private Credit ETF.

It launched on Thursday.

Priv is the ticker.

Yes.

And I have to say, I'm kind of shocked that this launched.

You didn't think it would?

We've talked about this like more than 15 times on this show.

Yeah, and

a lot of people in the industry too are shocked that it launched.

Okay, interesting.

It feels like the.

I feel like, is this partly like when they filed for it, it was like there were rules and now there are no rules or is it not related to that at all?

So I was thinking about that.

You know, we are in in a brave new world.

We have a new SEC.

This was filed in September 2024.

It's launching February 27th, 2025.

I mean, they didn't make arguments.

I don't think that Apollo and State Street didn't put any meaningful thought into this.

I have no problem.

Like, I'm not surprised that it launched.

Tell me why.

Because, like, you could do anything, man.

It's an ETF.

Like, why not?

Like, what's like, like, why?

If this launched in 2024, would you have been surprised?

No.

I asked about, like, now that we have no rules, is that what made it?

But like, I would have thought it was fine in 2024, which is probably how they felt it.

So there's a lot of question marks about, and we've talked about this too, like, how you put securities as illiquid as private credit into a very public wrapper, what withdrawals look like, and whether you could run into some problems there.

There's rules that more than 15% of an open-ended fund can't be in a liquid securities.

Private credit, obviously, is considered in a liquid security, but this ETF is going to invest 10 to 35% of its holdings in private credit.

And the argument that State Street and Apollo made was basically that, you know, Apollo is going to provide that liquidity.

They have this trading desk.

They're going to both supply the private credit assets for this fund and they're also going to buy them back.

They're contractually obligated to buy them back.

So it seems like the SEC agreed with that argument because because this thing is trading.

I think that argument is basically correct, right?

There's a range of stuff that is, quote, private credit, right?

And like one thing that is private credit is business development companies, which are, you know, often like middle market direct lending companies that are private credit companies in a public wrapper, right?

Like they provide non-bank, privately negotiated loans to companies, but like...

they are provided out of a public pool of capital.

So my understanding is there's some ability to put like BDC shares into this thing, which is liquid private credit, no problem.

Some large percentage of what they're going to do is like Apollo private credit loans that like Apollo will make a market in and they will be able to trade with Apollo at that market.

And yeah, it's like solves the problem, right?

Because the problem is, you know, you have the possibility of the fund expanding and contracting each day because like if more public buyers want to buy, then it'll have to expand.

And if you have a very illiquid, hard to source, hard to sell asset, like like we've talked about, like private companies where it's like, you know, you can only get so many SpaceX shares.

If you have that, it's hard to expand and contract.

But

if you have Apollo, which has a massive supply of private credit and like, you know, its own balance sheet and its ability to buy some back, then like Apollo can be the like accordion for the expanding and contracting of the ETF.

And I don't know, it seems fine.

What's wrong with that?

Well, let me read you something from Morningstar analyst Brian Moriarty.

And I I will note that Morningstar tends not to like things that are a little too crazy.

Like, they hate what's going on.

I love things that are a little too crazy.

That's the problem right here.

I'm like, oh, yeah.

They are very spiritually opposed to, you know, funny business.

But this is what Moriarity.

Moriarity had to say.

Apollo's liquidity facility is subject to a daily limit, and this daily limit remains undefined.

It's possible the fund could have to meet way more redemptions in a day than the limit.

That could force State Street to sell more liquid public securities first, potentially leaving the ETF with more illiquid private credit instruments as a percentage of assets and increasing the risks of a liquidity crunch.

Okay, so

wait, I like this line.

When this happens, the portfolio often begins to manage the advisor rather than the other way around.

Okay, that's a cool line.

Yeah.

I agree with that.

I think it's like when they start with like zero dollars of assets, it's not a relevant consideration, right?

Like this is clearly like, they're going to see where it goes.

Apollo's Trading Desk has some risk limit, and like that risk limit is more than adequate to deal with redemptions on the first day when it will clearly be net creating, right?

Like, they're not going to have net redemptions for two weeks, right?

I suppose.

Like, if they had net redemptions in the next two weeks, they would be very small because it would be a small fund.

But, right.

If this becomes

a $20 billion ETF,

then

there will be material risks of Apollo not being able to absorb all of the private credit if it goes from 20 billion to zero overnight.

Yeah.

My assumption is that everyone's like, well, that'll be a nice problem to have when we come to it, right?

Yeah.

But no, I think at like at modest size, it's like, yeah, like this is a fun proof of concept for Apollo, and they would trade the paper.

They also get to make the price in a not competitive environment, right?

Like in a world where Apollo thinks we are doing great private credit loans and all of our loans are fantastic, and like retail shareholders of the ETF are pulling out, then

for Apollo to be like, the mark is 60 cents on the dollar, we'll buy as much as you want seems fine for them.

I don't know.

Yeah.

Well, there's skepticism that I've seen.

The fact that, okay, Apollo is supplying the private credit and it's also contractually obligated to buy it back.

I did see some people comparing this to like the fox guarding the hen house.

One thing that I think.

Yeah, I think think they're creating private credit to sell it to the public and they're trying to make money on it.

I don't know.

It's like, of course.

Well, also

in the filing, it also says to sort of, I don't know, ease that worry, the ability to sell the instruments to Apollo is not exclusive.

So if State Street theoretically...

That found another bid.

Yeah, if they found a better bid somewhere else, they wouldn't have to necessarily sell to Apollo.

Sure, great.

Yeah.

No, I mean, look, I mean, like, one, we've talked about not only in the context of the EGF, right?

Like, Apollo is trying to build up a market for private credit, right?

And I think they'd be thrilled to live in a world where when State Street wants to sell its private credit, it can get bids from 20 anonymous firms on an electronic platform, right?

Like that's a good world for a private credit originator to live in.

But yeah, like they think they are smart evaluators of private credit, and this is a like retail place into which to put it.

Yeah, they're hoping to make money.

The other thing I'll say is like on this liquidity worry, the thing I always write about private credit is that it's a really good funding model for loans, right?

Like you are Apollo.

You raise money from like classically insurance companies, or like, you know, Apollo's case, they own an insurance, they are an insurance company, right?

You raise money from insurance companies and you have this very like long-term locked-up capital and you use it to make long-term, somewhat risky loans that don't trade, right?

And that's a good match of liabilities and assets, right?

Like you are raising long-term money to make long-term loans.

It's a better match of liabilities and assets than like classic bank lending where the banks raise overnight money to make 30-year loans.

The private credit model has always struck me as being unusually not runnable, right?

Like you can't usually, I mean, you sort of can, but you don't really like redeem your life insurance policy, right?

So like

Athene has like really long-term money.

And if like

credit gets worse, like no one is clamoring to get their money back.

So Athene can kind of ride that out.

Athene is Apollo's like captive of care.

But once you do it in a like

instant liquidity retail vehicle, that changes a little bit, right?

And it's like for the retail vehicle, the liquidity is like whatever, it's provided by Apollo.

But for Apollo, it's like you've shifted your funding model so that it went from being like arguably 100% of your funding is from insurance company clients where like it's like permanent funding to a small but you hope growing percentage of your funding comes from retail investors who can take their money out at any time.

And it gets like a little bit more fragile.

Yeah.

A little bit more fragile.

It's like, you know, I wouldn't worry so much about the fund being able to get its money back out of Apollo.

I'd worry a little bit like Apollo making its funding model a little bit worse.

But you can understand why they think it's worth the risk.

Because one, again, they're starting from nothing.

So it's like day one, that risk is very small.

Yeah.

And then two, if it gets really big, then it's like it's a nice problem to have.

I cannot wait to see how this is received.

I mean, day one is Thursday.

I mean, I can't wait to see what it'll look like on Monday, what it'll look like in two weeks, two months, et cetera, what the the reception will be like.

It's not that private credit.

Yeah, it's not that.

Fair encredit is like this hot asset class in some sense, but it's also, it's like, ah, you get like, you know, slightly better than Bond or you know, like, yeah.

It's not like SpaceX, right?

It's not like a lottery ticket, right?

It's like, yeah, it's like a slightly higher fixed income investment.

That's true, but still, I mean, it feels like there's been so much anticipation for this, certainly.

I mean, you think about the big splash that this filing made at the time.

Maybe that was just in

this podcast.

Talked about it.

I was going to say that was mostly in your world.

As discussed on the Money Stuff podcast, I was not like hearing on the subway people being like, oh my gosh, did you see there's a private credit ETF coming?

Well, this will be a good reality check to see whether this sort of lives up to the hype, at least in the ETF world.

It's a big moment both for the ETF world, but also for just the world of private assets.

Oh, yeah.

I mean, I do think, and we've talked about this too, like the idea that private credit won't trade on an electronic platform, like, it's just like a weird blip in time.

Like, there's no reason for that.

Like, in five years, will there be like big electronic trading platforms for private credit loans?

Like, sure, why not?

It's fine.

Yeah.

Also, if we stretch our imaginations, and this is something that I haven't really had time to do yet, but the fact that this is a partnership between an ETF firm, established ETF firm, State Street, with Apollo, which is acting as liquidity provider, you could dream up how that model evolves.

Some people, including Morningstar, have pointed to we'll probably see more of these liquidity partnerships in the future.

Yeah, although like that is also possibly transitional, right?

And like in a world where like there is

easy liquid trading of private credit, if you're an ETF provider and you're looking to start a private credit ETF, you'll partner with like Jane Street or something, which is like a liquidity provider, not an originator, right?

But for now, the originators are the liquidity providers.

And right, every other originator is probably going to get into having an ETF.

Yeah.

Also, the fee, 70 basis points.

Is that high or low?

That's, I mean, it's not

low, but considering the, I don't know what the cost for a retail investor, like an average individual investor, to get access to private credit now without an ETF would cost.

I will say there's some like leveraged single-stock ETFs that cost more than 1%.

Sure.

So this is pretty, I mean, 70 basis points for for a credit investment.

Yeah,

for a brand new product, a brand new category, actively managed, obviously, 70 basis points is fairly cheap, all things considered.

Yeah, this is not their business, you know.

Yeah.

They got a lot going on.

This is a fascinating proof of concept for like, you know, Apollo's push to like be your one-stop retirement provider, right?

Yeah.

And, you know, you don't need to make a lot of money on this one product in the first week.

But maybe they will.

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Okay,

Bill Ackman, friend of the show, Bill Ackman, making some interesting moves, trying to reinvent himself, sort of.

Sort of.

Only sort of.

It's so hard to understand what a hedge fund is.

Like, when I was growing up in finance, like the hedge fund managers were guys like Bill Ackman, who like ran kind of concentrated, equity-ish, activist-ish, you know, like got their, got in the news, like got went on TV.

And now like a hedge fund is more back to the classical hedged notion where it's like these much more,

you know, multi-strategy, multi-manager, factor neutral kind of quanti

funds.

But like back when like the kings of the hedge fund world were like the Bill Ackmans, it was like

a lot of them kind of positioned themselves as successors to Warren Buffett, who was a hedge fund manager for a little while.

Right.

And it's like you build an investment partnership where you make...

concentrated long-term bets on stocks you really like and you're smart and have a public persona and go on tv and that's your business And like, you are self-consciously a like gram and Dodd value investor.

And like, you're sort of, your, your investing framework is kind of similar to Warren Buffett's.

I think that one thing that Bill Ackman in particular has learned is that in addition to being good at gram and dodd and being folksy,

Warren Buffett has a structural advantage.

Like he runs a company and that's more useful to him than running a hedge fund.

And in particular, it has seemed to me that Bill Ackman really wants to have a thing that is his investment vehicle that trades at a premium and that people are like willing to pay up to have money managed by Bill Ackman.

And it has been funny over the last year or two watching him like fail to achieve that with like his closed-end fund IPO.

Also heavily discussed on this podcast.

Heavily discussed on this podcast.

And now what he wants to do is like, start over.

We're going to do Warren Buffett.

We're going to do Berkshire Hathaway.

What we're going to do is we're going to buy a small, weird, random company and turn it into a gigantic investment vehicle for like Bill Ackman making some public stock investments, making some 100% acquisitions of companies, just being Warren Buffett, just being an acquirer and an investor and a public figure.

And I say, like, buy some random company, but it's not a random company.

It's like Howard Hughes, which is a company that he has a long history of.

It's like spun out of DTR, which is one of his most successful investments.

He was the chairman of the company for a while.

And Pershing Square currently owns like 30-something percent of it.

And what he wants to do now is one, buy a little more,

partly to get his stake up and partly to just inject money into the company.

And then, two, like become the head of the company and let the people who are currently running its real estate business be like one little segment of the company.

And then let him and his investing team make investments for the company and make acquisitions for the company so that it can become a Berkshire.

So that in 20 years,

you'll think of Howard Hughes as a, you know, insurance and tech and whatever company, and it's real estate will be an interesting historical side note.

Although it's also funny that, like, it's called Howard Hughes, which is like a guy's name, and it's not Bill Hackens name.

Yeah, I was

Googling about it, and I kept getting the guy himself.

It's not what I wanted.

Yeah, it's a $3.9 billion Archetap company.

It's heavily involved in real estate, including the Seaport for our Manhattan natives here.

You know what's funny is that they reported earnings today, which is Thursday when we're recording this.

And I was reading through the earnings call, and they did make a note that the special committee of our board of directors is responsible for evaluating Pershing Square's most recent scheduled 13D filing and the associated proposed transactions.

Thus, they will not answer any questions about it.

I love it.

Well, they got a question about it, obviously.

It did take a few questions to get there, but John Kim from BMO Capital Markets was the brave, brave analyst who spoke up and said, I was wondering if you could provide any sense at all as far as timing of when there will be an update.

And I just wanted to confirm the transaction needs board approval and not shareholder approval to move forward, question mark.

CEO David Riley said that the Pershing Square 13D filing is between the special committee and Pershing Square, and I'm going to leave any comments on timing or otherwise for them to opine on.

So yeah, scant detail.

Actually, in my prior life, knowing whether that transaction buying like 10-ish percent of the company when you're already a 30-ish percent holder, knowing whether that transaction required shareholder approval was like a surprisingly large part of my prior life, but I've now forgotten.

So I'll let someone else figure that out.

God, that would have been so good to bring to this podcast.

No, it's a shockingly boring subject.

That's what we aim for here at the Money Stuff Podcast.

Shockingly boring.

I have some questions.

One,

so it's a $3.9 billion

company.

It's a good company.

He has a long history with it.

Why not just take Pershing Square public?

Wasn't it?

No, no, because you have to have a regular company.

Okay.

Like it's a real estate company, so it's like not really regular.

You can't just take your hedge fund public and be happy.

This is what he tried.

I mean, not the hedge fund.

He tried to take a closed-end fund public.

Yeah.

But it turns out that if you just have a closed-down fund, it won't trade at a premium.

And then like all of the magic goes away.

I thought that the closed-down fund was launching as a step in taking Pershing Square itself public.

Yeah, but take Pershing Square itself public is not quite the same thing because when you take a hedge fund company public, you're you're capitalizing a fee stream.

Yeah.

And he doesn't want to sell a fee stream.

He wants to sell the pot of investments at a cream.

It's now breaking my brain a little bit to think about taking a hedge fund company public and then in that hedge fund company buying assets, but it just

seems like a weird sort of cannibalism or something.

Yeah.

Okay, Matt doesn't like it.

I don't like it.

I don't know why.

But to me, the question is like,

Okay, you like Howard Hughes, but like there's 3,000 companies out there.

Just buy any one of them.

It doesn't matter.

Like we've talked about like Brad Jacobs and QXO buying like just like the most random software company to like build his logistics empire out of it.

It doesn't matter.

They just get rid of the software company and then you have your clean shell to do a logistics empire.

I wrote once about GameStop, in addition to being GameStop, it's like controlled by Ryan Cohen, who's the CEO.

And at some point, they put an announcement being like, he's going to be able to make equity investments with the company treasury.

It's like, you can build Berkshire Hathaway out of GameStop.

and you should because it will trade at a premium and people will love it, right?

But it's like that, Brian Cohen already has that one.

But like

Bill Ackman could buy, you know, all sorts of weird companies and turn them into a Berkshire Hathaway.

Yeah, I mean, you did write in your column that someone suggested he buy Erkshare Hathaway.

Earlife,

that would have been pretty good.

I would love to, I mean, I know that I can't, that this is the matter of the special committee of the board of directors, but I would love to know how Howard Hughes feels about this.

Right.

It's weird because because you're like, here you are trying to run your business.

Yeah.

Trying to do your earnings call.

It's like, no, we want to build

a totally unrelated hedge fund.

Like if you're like running the textile mill that is Berkshire Hathaway and like Warren Buffett comes in and says, I'm going to build a business empire and like get rid of the textiles.

I don't know.

It's like a mixed bag.

It's like probably good for shareholders, but it's kind of weird.

Yeah.

I wonder if...

if this goes through whether or not Bill Ackmund would tweet less, but no.

You think so?

Maybe he'd tweet more.

Oh, yeah, more.

Because you get like

the thing you're aiming to do.

The thing you're aiming to do is like make investments and like

be accretive to the value both of your investments and of like your vehicle, Howard Hughes, by like

people being like, ooh, you know, like,

Warren Buffett had the ability for a long time to like go to a company and be like, I will put a billion dollars into your company at like a 30% discount to to your stock price, and the stock would double.

And so it was like worth it to the company.

And like Warren Buffett would make a lot of money off of it, right?

Like he had like the self-fulfilling prophecy ability, right?

Where he could invest money in a company and just that investment would make the company go up.

And so he could like monetize that.

And like Bill Ackman wants that too.

And the way Bill Ackman gets it is like, one, by like making good investments so that people like his track record, but then two, by tweeting a lot, right?

Well, let me rephrase that.

I wonder if he will tweet about different things.

I don't know.

I don't know either.

I think that he thinks this is working.

Maybe it is.

I will say it's interesting to me.

Reading this column and then preparing for this podcast, you know, I grew up just with Warren Buffett as Warren Buffett, and I haven't really thought deeply about his model before, how he did just buy a random company and start doing this.

I'm a little bit more.

Yeah, it's like it's similar.

Like he was running a hedge fund and like they made an investment in this textile company and he got mad at them.

I forget why he got mad at them.

Yeah.

They didn't pay.

There's some like, he had some fight with them, and he's like, I'm just going to buy some stock.

And they bought enough stock that he controlled the company.

Yeah.

And then he's like, well, all right.

I'm going to take the treasury of this company and start making investments with it.

And then, like, he became Berkshire Hathaway.

Well, I don't know if I find it surprising or not that there haven't been more high-profile, successful Berkshire Hathaway types.

I mean, we just talked about Brad Jacobs, for example, who's pretty well known.

And I don't know, maybe Bill Ackman will be the next Berkshire Hathaway.

I will say that, like, Warren Buffett was kind of early to running a hedge fund.

And in the 90s and certainly the 2000s and 2010s and 2020s, if you were like good at making investment decisions,

the idea that you would like take over a public company and invest its treasury and pay yourself $100,000 a year as Buffett sort of nominally gets paid at Berkshire and get all of your returns from the increase in the fundamental value of the company.

People found a better model.

Yeah.

You can run a hedge fund.

You can charge $2 and $20, and you can, you know, make more exotic investments and, you know, have maybe better tax treatment and get paid hundreds of millions of dollars a year.

So the idea of people wanting to follow exactly the Buffett path, like that kind of attenuated.

And like, why does Ackman want to do it?

Like, some of it is just like...

Like he's made enough money and it's like sort of like a legacy slash, you know, experimentation kind of thing.

Yeah.

I don't know the man, obviously.

Not well.

It just feels like he wants to be in control of some publicly traded entity.

I don't know.

I think that's right.

I think that he's had a good retinas, being a guy who's mainly a manager of private hedge funds and has made a lot of money doing it.

And now it's like this is somehow more of a satisfying, public-facing thing.

Yeah.

I mean, it's hard to understand not being incentivized necessarily by money, but I suppose when you have you get to a point, man.

Yeah.

I'll say, I'm sure the money in this, like

he'll be fine.

Yeah.

Okay.

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All right,

Matt, we decided on this topic 10 minutes ago.

Yeah, pretty much.

So I'm a little bit unprepared, but I'm so excited to hear you tell me about it.

InfoWars.

We talked once about Infowars before.

We did.

When the Onion was going to buy them.

Or rather,

Global Tetrahedron was going to buy them.

So Global Tetrahedron, which is like the trade name of the Onion, was going to buy InfoWars out of bankruptcy.

So like Alex Jones, the Infowars guy, is in bankruptcy because he spread conspiracy theories and hoaxes about the Sandy Hook Elementary School massacre.

And the families of the victims sued him and got like a billion dollars of judgments.

And so now he's in bankruptcy because he doesn't have a billion dollars.

And his main asset is Infowars, his like, you know, YouTube platform.

And

the bankruptcy court has been trying to sell that to raise money to give to these essentially Sandy Hook victim families.

And we talked about it because the Onion had bid to buy it.

And the idea was that the Onion would pay a little bit of cash for it, but mostly they would run it on behalf of the San Diego families, essentially, both economically and also to not promote right-wing conspiracy theories, but to instead promote gun control.

Yeah.

So that fell through for what I thought were kind of technical administrative reasons, but like it seems to have really fallen through.

When we talked about it, it was like, yeah, the Onion can just come back and bid again, but it didn't seem to work out that way.

So now like the only bidders are Alex Jones himself in a fake mustache, you know, FUAC.

Yeah, there's a thing called Fuak.

That's basically like some backer of Alex Jones will give him money to buy his company back.

And

this thing called Wow.ai that's like a Puerto Rican artificial intelligence, like some sort of thing, you know.

But

its bid is some cash and a meme coin.

It has launched a meme coin called Wars that it wants to use to pay for info wars and the idea is that it has like this meme coin all meme coins it's like they issue like 10% of the meme coin and they're like we've reserved 50% for some weird purpose so this one they reserve 51%

for the bankruptcy estate they're gonna give it to the bankruptcy estate it's gonna be part of their bid yeah so like the creditors basically the sandy hook families will end up owning this meme coin and they would buy the site and then the holders of the meme coin could vote on what they would do with the site with i guess the choices be like let alex jones run it or like let the onion run it yeah and that's their bid and that's the plan

so

you seem to write that this is pretty clever you got to read the whole sentence which says you know how much i hate to say this because like i hate meme questions yeah like and like the thing that is happening here at its core is like someone thought hey it would be good to like pre-sell stock in Infor Wars.

Like it would be good to try to buy Infor Wars and like raise the money to do it from the public.

And like that would give us the money to do it.

And then the public could have a say in how we run InfoWars.

But you can't do that because there are securities laws.

But now there are no securities laws as long as you call it a token.

And so what they have done here is they've pre-sold stock in like their new InfoWars company and called it a meme coin.

And it has some like very clever properties, right?

You can create a dynamic where people are going to bid up the price because some people want it to be run one way.

Some people want it to rerun another way.

And so there's some auction dynamic where people will pay more to get the outcome they want.

And you've sold like a relatively small number of the tokens and you've reserved a large number of the tokens.

So you can say, oh, the fully diluted value of this thing is very large because like the small number of tokens trade, trade at like a relatively high price.

And so it's got, you know, it's not like Trump coin, but,

you know, I looked this morning and like the fully diluted value is like $23 million, which is like, implies $11 million for the Sandy Hook victims, which is more than they'd get from Fuak.

It's not necessarily a real value, right?

Because it's a thinly traded meme coin.

They're like, the mean thing about meme coins is like their value disappears overnight, but still.

So it creates a lot of paper value and

it creates it in a somewhat clever way.

And it just gets around the securities laws because everyone's decided securities laws don't apply to crypto anymore.

Yeah.

So it's clever, but not in a way that I like.

Yeah.

Yeah.

Like, gotta give it to them, but do you have to?

You do, kind of, but yeah.

You kind of have to give it to them.

A question, then I have a statement.

So explain this to me one more time.

So the bid is for $3.5 million in cash plus 51% of the total maximum supply of the Wars meme coin.

So

InfoWars would control the meme coin and then the remaining

meme coin is like, I think like 10% of the meme coin has been like just sold.

Yeah.

It's like issued to the public and you can trade it, right?

Right.

So that creates a price, right?

Right.

Like there's trading.

Anyone who wants to can own it.

It creates a price.

They can, you know, in theory vote on whatever they, if they end up buying InfoWars, then the holders of the token can vote.

So like 10% or so is public.

And then like some percentage of it has been reserved for like the guy doing this, right?

Or wow.ai, the company, right?

And then 51% has been reserved for

the bid.

The bid would be

in exchange for InfoWars, we'll give the bankruptcy estate $3.5 million in cash and 51% of this token.

And then the bankruptcy estate,

meaning the creditors, creditors, meaning the Sandiac parents, would get those tokens.

And there's like some lockup on when they could sell them.

But the idea is that, like, the bankruptcy estate, the creditors would, let's say, share in the economics of future InfoWars by owning this meme coin.

Now, when I say share in the economics, I'm like rolling my eyes because Matt actually said that with a completely straight face.

I did.

I was rolling my eyes on the inside.

Yeah.

You can't see me rolling my eyes, and neither can Katie.

But the whole thing about meme coins is that a meme coin is like, eh, it's like linked to the value of this this meme, but like not through any mechanism, right?

It's just like, eh, maybe it is, right?

Like, it's just like if people feel like it's linked to the value of the meme, then it's linked to the value of the meme.

But it has no like

ownership of the meme, right?

And so like here, the meme coin is not,

does not entitle you to cash flows from InfraWars.

It's just like a meme coin connected to the thing.

It's like a weird kind of stock that doesn't convey ownership.

I was going to say, this coin or token or whatever we're calling it has clearer fundamentals than most anything else.

Yes, but still no fundamentals.

Yeah.

I agree with you.

Clearer fundamentals than most meme coins, but still none.

Yeah.

You would have an easier time building a case for why this has fundamentals, though, than yeah, because it gives you voting rights over a thing that you care about.

Yeah.

Right.

Like, I mean, you don't have to care about it, but like the people trading it probably care about it.

Right.

It gives you voting rights about what will happen with this like culturally

salient and controversial property.

Yeah.

So it does have fundamentals, but it doesn't have cash flows.

Yeah.

And so they can say with a somewhat straight face it's not stock it's not a security it's not an investment and by the way if like their bid fails it just goes away right yeah that's what nothing happens i was gonna ask so if you care about this you would buy this coin now in hopes of having voting rights in the future sure if this doesn't work then it doesn't work he's

all right well you tried yeah yeah that's interesting it's not like you know you would imagine doing this like 10 years ago going to an investment bank and trying to build a structure that allowed you to like pre-fund your bid and where it's like, yo, you put the the money in escrow and then like you give it back if the bid fails.

Like, there's nothing that he's just like a meme coin.

If it fails, it goes to zero.

It doesn't matter.

How do you think the bankruptcy judge is reading this?

I assume he's rolling his eyes on the inside, too.

I don't really know.

I don't understand the process there because he's sort of like given up on doing an auction.

But

the meme coin guy said to, I think the Wall Street Journal, he said,

I put in a $3.5 million cash component to the bid, which

was what Fouak offered at one point.

He's like, I put in that cash component so that people wouldn't like would take me seriously.

Yeah.

Because like, I think if you just showed up bidding a meme coin, people would not take you seriously at all.

And I don't think that...

Would you still have written about it?

I don't know that I would have taken it seriously.

Wow.

Yeah.

Yeah.

There you have it.

But right, I don't know how the tanks are judges are going to take it what I wrote on Thursday.

Like, this is going to be a thing, right?

Like, I feel so stupid saying this, but, like, this is a good financing mechanism for this situation, right?

For like the situation where you're like bidding in bankruptcy and you don't know if you're gonna win and you're bidding for a relatively small controversial online like right-wing meme

property using a meme coin to fund that like it's like it's like fit for purpose yeah and so you're probably gonna see like a ton of situations where that applies but this won't be the last one

it's brave new world you know like the red lobster bankruptcy someone could have come in with a meme coin like you know like it's a thing god if only they had been able to hold out for another

year.

Shrimp coin.

Shrimped to death.

And that was the Money Stuff Podcast.

I'm Matt Levian.

And I'm Katie Greifeld.

You can find my work by subscribing to the Money Stuff newsletter on Bloomberg.com.

And you can find me on Bloomberg TV every day on Open Interest between 9 to 11 a.m.

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You can send an email to moneypot at bloomberg.net.

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The Money Stuff Podcast is produced by Anna Mazarakis and Moses Anbaum.

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And Sage Bauman is Bloomberg's head of podcasts.

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