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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 Money Stuff column for Bloomberg Opinion.

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

Hello, Katie.

Hey, Matt.

You're very far away.

I know.

This is the first time that we've done this podcast where we're in different locations.

Yes.

You're at Bloomberg.

I am.

Not at Bloomberg.

I'm in a secret location.

I've been in my house.

You're in your house, and I'm in my house because I don't actually leave this building.

What are we talking about today, Katie?

We're going to talk about Texas, a potential stock exchange coming to Dallas.

We're going to talk about Bill Ackman, of course.

And then we're going to talk, of course, about Roaring Kitty, also known as Keith Gill.

All right, let's get into it.

Equities in Dallas.

Equities in Dallas, the Texas Stock Exchange.

That was a big splashy report from the Wall Street Journal this week that this company would like to start a new stock exchange headquartered in Texas.

It's very exciting.

I guess.

It is.

So there's so many ways that we can attack this.

Let's get on it head on in that there's been a lot of attempts to sort of launch exchanges as you go through through in many columns.

The long-term stock exchange, we have the members exchange, we have the investors exchange.

I feel like it's kind of easy to launch an exchange and get to one to two percent share.

What's interesting about this is that this is political.

This is a politicized stock exchange, even if they're trying not to be the introduction of Texas.

I feel like makes it political.

Yeah, I mean, there is like this sort of movement in American business politics to move stuff to Texas, right?

I mean, you see it with Elon Musk trying to move his companies to Texas from Delaware.

There's this sense that like a lot of corporate rules are set from, you know, New York and Delaware, and that people who don't like those rules might find a more sympathetic audience in Texas.

I don't know that that's exactly relevant to this.

company, but yeah, they're sort of making noises about the listing standards.

You know, most companies are listed on either the New York Stock Stock Exchange or NASDAQ.

And there are rules about corporate governance that apply to listed companies in those stock exchanges.

And I think the people starting this exchange are at least hinting that some of those rules are either too onerous and expensive or they're too like woke and left-wing.

And so they will offer a different set of rules in Texas.

The SEC still has to approve their listing rules so they can't be like too crazy and out there.

Yeah.

I think like some of what's happening here is like there's this notion that Nicea and NASDAQ set the listing rules.

And like that's not exactly true.

They sort of do it with pressure and input and approval from the SEC.

So NYCEA and NASDAQ listing rules don't differ from each other all that much because it's not like Nicea and NASDAQ are out there making crazy decisions.

It's like kind of done in concert with the SEC.

So there's only so far that the Texas Stock Exchange can differ.

So I have a free idea for the Texas Stock Exchange.

I was waiting for you.

I was waiting for your reaction.

I'm sure they'd pay you a lot of money for that idea, Katie.

But well, you haven't heard it yet.

So let me lay it on you.

So, like I said, you can get to one to two percent share, but as we've seen with some of these other upstart exchanges, it's really hard to attract listings.

That is a nut that has yet to be cracked.

What the Texas Stock Exchange should focus its efforts on is getting Musk to switch Tesla from NASDAQ to the Texas Stock Exchange and be like the anchor big name listing.

That's a really good idea.

I think that should pay you for that idea.

I mean, it is a really good idea, right?

It's so hard to get listings because most companies don't think that much about their listings anymore, right?

Like if you're listed on like the top tier of NASDAQ or you're listed on the top tier of NYC,

it's fine.

Like you're not getting that many perks from switching from one to the other.

And it's like an administrative hassle and it's confusing.

So why would you switch, right?

Most companies think about listings only really when they're going public.

And when you're going public, it is such a high-pressure situation.

It is so important to get it right.

And if you list on some untested exchange and you're the first company listing on that exchange, there's that small potential for catastrophe.

And you really, really, really don't want that when you're going public.

If you are going to compete for listings, you do have to start probably with already public companies.

And you want companies that are interested in doing weird stuff and not afraid of the like weird stigma of being the only company listed on a weird new exchange with lower listing standards.

And that all does sound like Tesla.

Yeah.

And I feel like the risk of catastrophe isn't necessarily going to deter Elon Musk away.

Oh, yeah.

I think the risk of catastrophe is much lower for an already public company, right?

Like the risk of catastrophe is mainly for an IPO, right?

If you're already public, it can only go so wrong on your first day of trading.

Like the worst thing that happens is like there's a little extra time to open you for trading.

But yes, also, I agree that even if there were a risk of catastrophe, Elon Musk would say, great, sign me up.

So I think it's a good idea.

Yeah.

Not to step on your territory, but like I would think

that the other listings that they would want to compete for are for ETFs, right?

Because I assume that, you know, if you're an ETF issuer, you have a lot of ETFs, it's a little bit less higher stakes each time to like pick a listing exchange.

And I assume they're angling for that product.

I don't know.

Yeah, if you take a look, I mean, at their various press releases, that's in there that they do plan to compete on exchange-traded product listings through lower fees.

ETF listings, this is, you know, something that I'm actually reporting out right now.

But I am curious

how much of a business and how bigger of a business that might become for exchanges because you think about the current IPO market and there's very little going on relative to, you know, the halcyon days of like 2021 or whenever the last big rush was.

But, I mean, there are hundreds of ETFs that launch and list every single year.

And I mean, those ETFs, they pay an initial listing fee and then they pay annual listing fees.

So, I mean, that continues to hum along.

It was just so fascinating to see that press release that that specifically is an area that they want to target.

Because right now, it's NYSE, it's NASDAQ, it's also SIBO.

And SIBO, for example, has been

SIBO's Bats Exchange is not a major listing venue for public companies, but it is for ETFs.

Yeah.

It's the easiest place to compete in.

It's the second biggest venue.

So we'll see.

But aside from just listing fees, which I mean, who knows?

But when it comes to transaction volume, you think about BlackRock's Bitcoin ETF, which is now, since it launched in January, the biggest Bitcoin ETF in the world, it does a lot in trading volume.

It's listed on NASDAQ.

I mean, it's done much better than some of the recent IPOs from this year.

So you have to imagine the ETF business, the ETP business for these exchanges, it's a nice cushion from what's going on in IPO land.

Yeah.

And if you're starting from scratch, it does seem like an easier thing to pursue.

I do think that, you know, as you said, it's like a lot of exchanges have started and gotten to like 1% to 2% of market share and then kind of plateaued there.

My impression is that's not the worst business because the economics of exchanges are very weird.

And

one thing that sort of happens is that if you are a big broker or a big electronic market maker you're sort of obligated to connect to every exchange because you have obligations to get your clients the best execution and so you have to know what every exchange is doing so even if you sort of say yeah i don't think the texas stock exchange is ever going to have almost ever going to have the best price on any stock you can't be sure of that so you have to like connect and check their prices before you trade somewhere else and so you're paying them for like connections and for data fees.

And so anyone who's like a certified official national stock exchange can get some revenue from just like charging for data.

So it's this interestingly regulatorily protected business model that when you start an exchange and you go out and pitch investors, you have to like tell a story about how, you know, we're going to do the anti-woke exchange.

But like to some extent, once you have the exchange, it doesn't matter what you do.

You can just collect the data fees.

Sounds pretty good.

Unless you actually intend to like display as NYCE and NASDAQ as one of the major listing venues, which I think is much, much, much harder to do.

Yeah.

I mean,

I feel like I've done a good job of not exposing my bias thus far.

So

I want to say one other thing about the Texas Stock Exchange.

Two other things.

One is the phrase equities in Dallas, which of course comes from Liar's Poker, where it is used as an insult because the worst trainees in the Solomon training program were sent to trade equities in Dallas.

Yeah, I missed that reference.

Oh, did you?

Oh, yeah.

Let me tell you, I had a reader email me.

Literally, I wrote the newsletter about the stock exchange, and the section header was equities in Dallas.

And someone replied saying, I can't believe the section header for the Texas Stock Exchange wasn't equities in Dallas.

I was like, wait, it was.

Just read it.

People were so keen to come up with that joke on their own that they were like emailing me that joke after I already read it.

I didn't come up with it on my own either, but someone else told it to me.

But anyway, equities in Dallas, like a great Wall Street insult, which is now like the actual business model of the Texas Stock Exchange.

Maybe it will soon be a compliment, perhaps.

I think Dallas has sort sort of self-consciously reclaimed its stature as a financial center and been like, no, no, it's not equities in Dallas anymore.

Now it's good.

But the other thing I want to say about this exchange is that I wrote that, you know, it's all electronic, right?

No one really stands on the floor of a stock exchange except like TV reporters now.

But you know, I wrote that their computer for trading stocks would be in Texas.

And they actually told me, no, they will have a data center in somewhere in Dallas, but they will also have a data center in Secaucus.

As they should.

As they should, because

all U.S.

stock exchanges sort of have to be in northern New Jersey because it is all this interlinked web of trading venues where like everyone trades on every venue and you sometimes have to do arbitrage trades where like a stock is trading at one price on bats and another price on Nasdaq.

And so you want to do the trade between them.

To do that, you have to move data.

And it takes longer to move data over long distances than it does over short distances.

And this business is so like competitive and so focused on speed that people locate their computers in the data center with the exchange computers.

And the idea of sending your data all the way to Dallas would be weird.

It would be so far away.

It would take so long for your data to get there.

So, of course, the Texas Stock Exchange will actually have computers in Secaucus next to all the other stock exchanges' computers.

I love that

the beating heart of the financial world is in northern New Jersey.

Equity is in Sekakis, right?

It's like suburban northern New Jersey, is like where everything is.

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I just, my brain is cooked.

I can feel it like sizzling and frying.

That's okay.

Because now we're going to talk about

Bill Ackman.

Bill Ackman.

Bill Ackman.

There's a lot to talk about with Bill Ackman.

There usually is.

But now we're talking about his closed-end fund.

Of course.

No.

Among other things.

That's the only thing I was referring to.

I am so excited to talk about his closed-down fund plans, specifically in the U.S.

And then there's also the IPO.

Yeah, right.

They go together.

Right.

Yeah.

He's got a lot of stuff going on.

Where do you want to start, perhaps?

The IPO?

I don't know.

Yeah, so they're linked.

So basically, starting last week, the Wall Street Journal reported, and then there's been some good Thloomberg follow-up.

There's this package of Bill Ackman news.

So Bill Ackman runs Pershing Square Capital Management, which is a hedge fund firm.

has been a hedge fund firm.

Now most of its money is in the form of a closed-end fund in Europe called Pershing Square Holdings.

It runs like $18 billion, not all of which, most of which is in Pershing Square Holdings.

U.S.

investors, they kind of can buy Pershing Square Holdings, but not really.

It's like bad for taxes and they can't market it.

So it's mostly European investors.

But Bill Ackman is in New York and the fund mostly invests in U.S.

companies.

And so he wants to open a closed-end fund in the U.S.

that would do the same investing.

It would buy U.S.

companies, but it would be much more convenient for U.S.

investors and he could market it to U.S.

investors.

But then last week, the journal reported that he's also planning an IPO of the management company of Pershing Square.

So the management company itself would go public probably like at the end of next year or something.

And in the lead up to that, he sold a stake, he sold like 10% of the management company to some private investors for a billion dollars.

So valuing the management company at $10 billion, which is really quite rich.

for a hedge fund firm that manages $18 billion to value the management company at $10 billion.

It's like, yeah, pretty rich.

But then also, Bloomberg reported that he's planning to raise $25 billion for the U.S.

closed down fund, which helps explain the valuation of the management company.

He's like, oh, he's going to run like a lot more money.

But on the other hand, that's a sort of ambitious target to raise.

So that's kind of where the news is.

Yeah.

I mean, starting with the $10.5 billion valuation, that's something close to 60% of its assets.

And according to the Wall Street Journal, they reported that Ackman told investors to compare Pershing Square to Brookfield Asset Management, Blue Owl, et cetera.

But then you take a look at how they're valued.

And this is something that Aaron Brown pointed out in Bloomberg opinion that typically they have market capitalizations that are like 15 to 18% of their assets.

So, I mean, comparing them to that peer group, it's still quite rich.

But I guess if you are planning to quadruple assets or something, it makes a little bit more sense.

I mean, like my dumb math is like, you can charge some fees on your assets, right?

And like, eh, what kind of fees can you charge?

If you're Blue Owl or Pershing Square or somebody like that, you can charge 1% or 2% of assets, right?

You know, maybe a little more if you're making big performance fees.

And so if you're charging 1% or 2% of assets, you capitalize that at like 10 times, then the value of the managing company is 10 to 20% of assets under management.

So 60% is really big, right?

Like if you're charging 6% of assets per year, then you can get that kind of valuation.

But then, you know, if you're charging 6%,

who would pay you 6% of assets to run their money?

But yeah, I mean, I think that the idea is that you're comparing them to these other asset managers, but you're baking in a lot of growth in the very near future, which is ambitious, right?

Blue Owl and Brookfield also want to grow assets under management, but like Pershing Square is going to double assets under management in like six months.

Okay, maybe.

I do think the other thing that's like a little bit fascinating about Pershing Square's business model and like why they think they can get a premium valuation is it's so simple, right?

Like they have one investing team.

They buy like 12 stocks.

They hold them for the long term.

They're all like liquid public us stocks so like there's plenty of capacity and so like blue owl you're paying a lot for a lot of people like go out on the road and like find companies and try to make direct loans to them manage the credit risk and like the loans are constantly like maturing you have to find new loans your money is in funds that have a limited life and so you have to like go raise new funds and all this stuff and bill acknowledgement is like i just have like this one permanent fund or two permanent funds now and I buy 12 stocks and like, that's it.

That's the whole business.

So it's really cool.

I love that.

I'm fascinated with this investing style just because it is so simple i should say i'm exaggerating a little bit he has made a lot of money doing like asymmetric derivative trades where like he'll pay like a little bit of money for cdx indexes like just before covet hits and like make a hundred times his money on these derivative trades so he's like putting some of that into the product too so it's a little hedge fundy but from day to day it kind of looks like buying 12 stocks yeah i mean i tend to think of those as just hedges and thus don't think of them very much but maybe i should be thinking about them more.

Well, they are hedges, but like, you know, if you buy the SP 500, you're not getting those hedges, right?

This is true.

What you're getting here is exposure to large cap US stocks, plus some hedging for bad situations, which is like, you know, it's just a hedge fund product.

I do really just find the simplicity, though, really appealing.

And it's something that's coming a little bit back in vogue.

If you think about what's really hot in the ETF world where I live, you have all these income products, these very options overlay products, and then you have just super concentrated equity ETFs that are launching with greater and greater frequency.

Because I don't know, it feels like a while we swung into, at least in the ETF world, like these basically closet indexing type active funds.

And now people are just going super active because they found out that's actually a really hard way to beat the benchmark.

But I mean, it kind of always mixes my brain up a little bit that, like, you have a hedge fund that is going public.

And I know there's a few examples of that.

But if you're an equity investor in Pershing, I feel like you're just buying a stock with a ton of key man risk.

And that doesn't make a ton of sense to me.

You definitely are.

I mean, it's interesting because you're making two bets, right?

One is the business model of Pershing compared to other hedge fund firms is very appealing because all their money is really locked up.

You know, it's the Pershing Square Holdings closed down fund in Europe and then this anticipated fund in the U.S., which are permanent capital vehicles.

So like the money can't go away.

And their revenue comes mostly from management fees, right?

So like investors are very nervous about paying for incentive fees for hedge funds because like if the fund has a bad year, it doesn't earn any incentive fees, right?

Like if you're buying a management company that makes a lot of money on incentive fees, you value those at kind of a low multiple because you can't be sure they're going to be consistent from year to year.

Crushing Square is like going to make all its money on like 2% management fees.

So it's very consistent revenue on very locked up money.

So on the one hand, it's like a very safe bet, right?

But the other thing you're buying is like Bill Ackman as a person, right?

And you're buying like his his ability to go raise $25 billion, which again is like really ambitious, right?

Again, like every other investment firm would love to double their assets next year, but like Bill Ackman is selling his ability to double his assets to investors, right?

And I agree, it's a lot of key man risk.

It's like, there's like kind of a meme stock vibe to it where like you're buying this guy who is like a financial celebrity who's on Twitter, who's on television, his personal life is in the news.

you know, like a guy who has a lot of retail appeal and who's like very explicitly marketing that as part of the business proposition.

So yeah, like that's what people are investing in is like his ability to like monetize that celebrity to raise a lot of money.

But yeah, like what if he gets bored?

His number two is not the same celebrity.

You're not getting like a super institutional asset manager.

You're getting like kind of one guy.

Yeah.

Which again is cheap compared to like, you know, you're picking 12 stocks.

The sort of cost structure is fairly lean, but like you are relying a lot on him continuing to do it and his celebrity continuing to work.

Let's talk a little bit more about closed-end funds, the closed-end funds specifically.

You mentioned the European one.

The European one is really interesting because it's actually done super well.

It's returned 50% over the past year, but the discount, it's trading at a 25% discount.

And I have to say, I don't super understand why.

I mean, if you look at some of these muni CEFs and other ones, I sort of get it with performance like this.

I don't quite understand why it's trading at such a big discount.

I don't fully understand the European tax situation.

I've been told there is some tax overhang, and that's part of the discount.

I'm not sure if that's true.

I think that the traditional explanation for closed-down fund discounts is often fees, right?

Like, you know, again, it has like a fairly small portfolio of fairly long-term holdings and fairly liquid stocks.

If you look at that portfolio, you could replicate it.

You just buy the 12 stocks.

You wouldn't get the discount buying those 12 stocks, but you also wouldn't pay Pershing Square any fees for owning the 12 stocks, right?

You just own the 12 stocks directly.

So the fees eat into the value of the fund and explain part of the discount the other thing that i think sort of explains the discount is just investor segmentation like as i said it is hard to buy pershing square holdings if you're a us retail investor it's got some weird tax attributes and they can't market it and it's just like you know you can like find it on your brokers but it's not a thing that a lot of us investors buy and it's otherwise like very US centric, right?

It's like a guy who's a celebrity in the U.S., who tweets in the U.S.

and who invests in U.S.

companies.

So So like, who's going to buy Pershing Square Holdings in Europe?

It's like open to European investors, but it's otherwise targeted very much to the US.

So I think that's part of it is like, it's just not the most attractive product.

And clearly, Pershing Square's hope is that when they do, you know, kind of the same product, Pershing Square US is not that different from Pershing Square Holdings.

But when they do that product in the US and like market it very heavily to U.S.

investors, they will get a lot of U.S.

investors and it will not trade at a discount.

If you ask them, I think they will hope that it will trade at a premium because people will be so excited to have Bill Ackman manage their money that they'll pay more than the net asset value for the fund, but we'll see.

It'd be great to ask Bill Ackman that.

But to that point, I do wonder once the U.S.

fund launches, who would buy the European fund other than Europeans, of course.

I mean, if you think about the difference in the fees, right now, the European one charges a 1.5% management fee and a 16% performance fee.

You think about what the U.S.

one is going to charge, and it's just a 2% management fee.

So it's free for the first year.

Yeah.

So it's clear what the better product is.

Yeah.

I mean, like part of the reason I think that they originally did this fund in Europe is that you can't really charge performance fees on a publicly listed closed-in fund in the U.S.

And so that's why this will not charge performance fees.

But also, like, you think about it with the IPO, like performance fees are bad for public investors in the management company, right?

Like they don't ascribe a lot of value to those performance fees because they fluctuate.

So if you're thinking about taking your management company public, you're less excited about the performance fees and you're more willing to just sort of do it for a flat 2% because that's what investors will pay for.

So if you think about the actual Pershing Square IPO, I mean, that's not happening for a while, but the U.S.

closed fund could become a reality pretty soon, like in the next couple months or so.

Let me ask you, as a connoisseur of closed end funds, do you think they will raise $25 billion?

I don't know.

Actually, there was an interesting...

It's a lot of money.

It's a lot of money, but I mean,

Bloomberg Intelligence had a report out this week and didn't downplay that number at all.

I mean, you think about the size of some of the most retail-friendly ETFs, and I think 25 billion could be possible.

Yeah, I mean, think about Kathy Wood, for example.

She doesn't manage that much money now, but I mean, she got in the 40 billion dollar range.

Also, for all the shade that we just threw on the European closed-in fund, it has $15.3 billion in Europe.

So, I guess $25 billion in the US, putting it through that lens, looks very realistic.

Yeah, I mean, I think that's right.

I mean, he manages a lot of money and he has a good track record.

And so, yeah, why shouldn't he be able to raise $25 billion?

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So I'm going to do a weird transition here.

Yeah, do it.

At some point in the last few months, people started sending me Instagram ads for Bill Ackman's investing masterclass or his investing newsletter or something where you'd sign up and it's like, I'm Bill Ackman.

I picked all these great stocks and I can teach you how to pick all these great stocks.

People kept sending me these being like, look at what Bill Ackman is doing.

These are obviously fake.

Like these are completely obviously fake.

His eyes were hazel.

Yeah.

No, no.

They were real pictures of Bill Ackman taken from the internet and used to market a fake Bill Ackman newsletter product.

I didn't click on them, so I don't know what the product is.

I don't know like what the scam is exactly.

But someone is like, I'm going to like pretend that Bill Ackman is starting an investing newsletter.

I'm going to get people to like send me their credit card to like sign up for this newsletter.

And they bought Instagram ads saying it.

I always thought these were like super obvious fakes.

I think I actually saw like they were served to me on Instagram, and then people send them to me, but they're just, they're fake.

This week, I have gotten several people sending me Instagram ads for Keith Gill.

starting an investing masterclass or newsletter or what have you.

I'm also fairly confident those are fake.

And the reason I'm confident those are fake is that anyone, almost anyone, not literally anyone, but almost anyone who's selling you an investing class or like a stock picking newsletter, you should ask the question: if they're so good at picking stocks, why aren't they just making a lot of money picking stocks?

Why do they need my $49.95 for this investing newsletter?

And like Bill Ackman, yeah, he's like a billionaire running a hedge fund.

He doesn't need your $49.95.

That's why you know the Bill Ackman investing ads are fake.

But Keith Gill

has owned like $300 million

trading GameStop stock.

He does not need your money.

He is not starting an investing newsletter.

He is, however,

going on YouTube to do a live stream to talk about GameStop at noon on Friday, June 7th, which is unfortunately after we record this podcast.

and before we release this podcast.

So by the time you hear this, Keith Gill will have said something newsworthy that we haven't talked about.

Here's an instance where time just really becomes a concept, you know?

I know, right?

This podcast is meant to feel timeless and unchanging, but in fact, we're recording it before Keith Gill says some stuff on YouTube and releasing it afterwards.

Sorry.

All we can definitively say about the

transition.

Now we're talking about Keith Gill.

That was actually, I threaded that needle quite well.

I was a little nervous.

I think it's interesting.

Like there are the two that I've seen, like fake investing newsletters have been Bill Ackman and Keith Gill.

Maybe there was one for Warren Buffett years ago and I just missed it, but those are the guys.

Yeah, those are the guys to do it.

I'm really interested to see the Keith Gill live stream at 12 p.m.

All we can totally say about it right now is that it will put to bed whether or not the posts that we've been getting from Roaring Kitty have actually been Keith Gill, whether it truly has been him posting.

Can we take a step back?

So, I don't know, Keith Gill.

Oh, should we introduce?

Yeah, we've talked about him before, but he's the guy who started the GameStop frenzy in like January 2021.

He was like a guy who got long GameStop and said, I like this stock.

And he would do these like four-hour YouTube videos about why he thought GameStop was an undervalued business.

And then when GameStop had a huge rally in January of 2021, he was like the sort of patron saint of that and got a lot of media attention.

And then last month, he tweeted some weird stuff.

He tweeted like a cartoon and then he tweeted some video clips and GameStop stock came just roaring back, a huge rally.

Then he like posted on Reddit his E-Trade account information.

Back in 2021, he would periodically post his GameStop positions and how much money he had made and how he was holding them.

And he posted that last week, and it was hundreds of millions of dollars of GameStop stock and options.

And at one point, Bloomberg calculated that he had a portfolio worth like $300 million of GameStop.

And so he's back.

He's back.

And now, as you say, he's going to do a video thing.

where we'll see him.

And unless AI has advanced tremendously, we will know if Keith Gill has actually be on this account, which I think we already do like i think there were a lot of rumors when he came back because he was just tweeting inscrutable stuff there were rumors that like someone had like bought or hacked his account and someone else was doing this and it wasn't really him and this was all like some sort of weird fake out and i think that now we know that's not true because there was a wall street journal story about e-trade getting increasingly nervous about his trading because they worry that it's market manipulation.

And if E-Trade is worried about his trading, they do KYC.

They know who's trading it, right?

And so if they know what his portfolio looks like and he's posting that portfolio, then like that means this is all real.

This is actually his Twitter, actually his Reddit.

And now we'll see him tomorrow on YouTube.

Can I tell you how tired I was when I saw those headlines that E-Trade might kick him off?

I know.

It's just conspiracy theory fodder.

It's reasonable that people would make conspiracy theories out of that.

Like, didn't anyone at E-Trade watch Dumb Money?

Well, I mean, to be clear, like, that's the debate they're having.

They're like, on the one hand, we worried that he's committing market manipulation.

On the other hand, we're going to get so much flack if we kick him off our platform.

So, I mean, like, ordinarily, if you're like some guy, some retail trader might be committing market manipulation, but we're not sure that the charges would stick, you're like, yeah, who cares?

We'll kick him off.

It doesn't hurt you.

But you don't want to skate too close to the regulatory line if you're a big broker dealer.

But with Keith Gill, if you kick him off, it's going to be a real firestorm.

And so I think, you know, so far they haven't.

By the way, the controversy about him being a market manipulator, I find it's a little strange.

Yeah.

Well, I was just going to say, I'm so thrilled and grateful to be doing this podcast with you because on Twitter, after he posted some of the screenshots, I saw a few different tweets to the effect of, I won't be saying how I feel about this until Matt Levine tells me how to feel.

So tell us how you feel about market manipulation and whether Keith Gill is manipulating markets.

I mean, I love him.

Like,

how am I?

You can just leave it there.

I love it.

So

I want to quote a few things.

There's another journal article about like, the gist of it is like, everyone is running around like chickens with their heads cut off because they don't know if this is market manipulation and they don't know like what the rules are.

So they quote Matt Stoller, who's a sort of left-wing journalist and market analyst, saying, this is obviously market manipulation.

I can't believe we're even having this conversation.

If market manipulation law doesn't handle this, then what's it for?

Which is like...

What is it for?

I mean, like, to me, like market manipulation is like, like, if you move a stock by doing something deceptive.

And the thing about Keith Gill is that he's definitely moving stock.

He's definitely like when he tweets, the price of GameStop stock goes up.

And it's definitely like, not for any fundamental reason.

You know, it's definitely like his fans and his followers are buying the stock because he's tweeting about it.

But none of them are deceived, right?

None of them are being lied to.

There's no deception guy.

And so I don't think it's manipulation.

I think it's just this mysterious new thing.

It's like coordination, right?

Like people are having fun with their friends.

There's like this social element to like all buying GameStop together.

And when Keith Gill tweets, that's the thing that makes everyone like go buy GameStop together.

It is strange.

It is a way of moving stock prices that has nothing to do with the fundamental value of the cash flows.

But market mutation law is about using deceptive devices and there's no deception going on here.

It's weird if you're like a fundamental investor who wants to buy a GameStop at a reasonable price or wants to be able to short GameStop if it gets too high and are worried about being blown up.

You know, it's like bad for market efficiency.

But the stock market rules are not about market efficiency.

They're about honesty.

And like usually those things kind of work together.

And so if you're not lying about a stock, the stock will probably come to the correct price.

But Keith Gill has discovered this mysterious new thing where like you cannot lie about a stock, but still make the price not be correct.

So I don't know.

I don't think it's market mutilation, but I understand why people get mad about it.

Yeah.

I also from that same article, I want to quote another complaint.

So Jay Clayton, who used to be the chairman of the SEC, the journal says that he suggested in an interview that Gil should publicly answer questions about his trading.

Such questions include, is he working with anyone else?

How did Gil, an individual investor, finance his purchases of GameStop shares?

Has he hedged any of his bets on GameStop?

And what are his ultimate intentions?

And it's like, yeah, I understand why you want to hear all that, but he actually doesn't have any obligation to do that.

There are actual disclosure rules about who has to disclose what about a stock.

And he hasn't triggered any of those disclosure rules.

He's not an institutional investor.

He's not above 5% of the stock.

He's like getting there.

You know, he's just like a guy buying stock.

There's no rule that says he has to answer your questions about his intentions.

It's like driving people crazy because it is not covered by the rules.

And everyone has this intuition that there's something wrong about it, but it's technically fine.

Boy, is that not legal advice?

But

I mean, in his own words, he just likes the stock.

Well, he hasn't said, maybe he'll say that on this YouTube live stream.

Yeah.

He said that like two years ago, but we don't know if he likes the stock now.

If his intentions have changed.

Yeah.

I'm curious to see how many more headlines like this we get, because after he posted on Reddit that screenshot that showed his stake, Bloomberg News reported that Andrew Left, the founder of Citron Research, placed a new short bet against GameStop, immediately just went back and shorted it.

I have to imagine he's having a pretty lousy end to his week.

Yeah, I mean, I'll tell you, if you're shorting GameStop now, that's not like a fundamental bet.

That's not like, oh, like I've looked at the, you know, business model and I think that this is overpriced, right?

Like if you're shooting GameStop, fundamentally what you're betting on, I think, is that Keith Gill will get diminishing marginal returns for his tweets, right?

Like what you're betting is like, oh yeah, like when he first tweeted that, everyone's like, oh, excited he's back.

And when he tweeted his profits, everyone's like, oh, he's excited he's back.

And if this YouTube video does even better than the tweets, then like, yeah, Andrew Left is going to get blown up.

Although I think he said that he's scaling back his short bets on CamStop because he got last time.

But like, yeah, like, you know, if Keith Gill continues to have this wild power to move the stock every time he does some stuff, he'll keep doing more stuff and the stock will keep going up and the short sellers will lose a lot of money.

But I think there has to be some sort of bet on fatigue here where it's like, well, you know, like eventually people will stop doing this.

I don't know if that's right.

I mean, so two points there.

The first one on diminishing returns, that makes a lot of sense to me.

And yet I still keep getting surprised and it still keeps popping double digits out of nowhere.

And I probably would have said that in like 2021 as well.

And here we are in the year of our Lord 2024.

To your point,

yeah, go on.

No, you go ahead.

No, I won't.

No, he's done a great job.

I don't want to use the word manipulate because I just said it's not market manipulation.

He's done a great job of slow rolling this out to like maximize impact.

He like did that weird tweet and the stock jumped.

And then like he waited a while doing other weird tweets where you're like, oh, is it?

Is it?

What is he saying?

What does it mean?

And then he revealed his position, which is enormous.

And people were very excited about that.

And that moved the stock.

And now he's going to go on YouTube.

And he was originally more than anything else like a YouTube guy like he would do these long in-depth four hour discussions of GameStop and so he's come back in other formats and now he's finally rolling out like I don't know if he were you know designing this to maximize his impact he's done a nice job of dripping it out and also like it's maximizes impact but also like kind of maximizing pain for short sellers because if like Keith Guild tweets and the stock gaps up and you're a short seller and you're like ah this can't last and you short it and then like the next day he does like another thing he's done a nice job of making life hard for short sellers I don't know.

You want to take a step back to appreciate like

he made almost 300 million dollars basically trading one stock.

You know, it's not Nvidia.

Like the company hasn't done anything in the last three years.

But in the last like three years, he went from kind of like zero from like regular kind of middle class person amount of money in the stock market to $300 million on one stock.

through some combination of being really media savvy and being really like stock market savvy and kind of being legally savvy.

And it's just amazing.

No wonder he has a fan base.

Our friend Mary Child said to me that he's the first self-made person in the history of the world.

I'm like, that's kind of true.

Like he's really kind of gone from nothing to like immense wealth through a very odd and particular set of skills.

And like, you know, no wonder people are interested in seeing what his trading is.

You know,

again, we're recording all of this before the live stream.

So I hope that he doesn't reveal himself to just be a villain and in the pocket of someone tomorrow on the live stream after you said all those nice things.

I mean, look, there's all sorts of ways this could end a villain, right?

Like how could you go?

It is kind of the case that his $300 million wealth has been extracted from,

you know, his fans, the stock market, like someone's on the other side of those trades.

And like, where does this ultimately end up, right?

I mean, like, the last GameStop rally, a lot of people lost a lot of money.

A lot of people made a lot of money, including Keith Gill.

If you piled into GameStop stock at the top and then lost a lot of money, like maybe it's not completely irrational for you to blame Keith Gill for that.

Maybe like in some people's eyes, he is a villain, but like I don't know, man, he's made a lot of money on his own cleverness, I think.

And that was the Money Stuff Podcasts.

I'm Matt Levine.

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 between 10 to 11 a.m.

Eastern.

We'd love to hear from you.

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

Ask us a question, or we might answer it on the air.

You can also subscribe to our show wherever you're listening right now and leave us a review.

It helps more people find the show.

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

Our theme music was composed by Blake Maples.

Brendan Francis Noonam is our executive producer.

And Sage Bauman is Bloomberg's head of podcasts.

Thanks for listening to the Money Stuff Podcast.

We'll be back next week with more stuff.

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