The Prof G Pod with Scott Galloway: Prof G Markets: The Broken IPO Market, Disney’s Parks Investment, and Buying FTX Bankruptcy Claims

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This week's number? 46%.

That's the share of American men who believe they could successfully land a passenger plane.

True story, my grandfather killed 50 German pilots.

He was a shitty mechanic.

Welcome to Prop G Markets.

Today, we're discussing the IPO market, Disney's Parks Investment,

and FTX's suit against Sam Bankman-Freed's parents.

Here with the news is Prop G Media Analyst and someone who I think would be an outstanding flight attendant, Ed Elson.

Ed, get me a ginger ale and some peanuts, bitch.

Did you hear that we just got nominated for an award for our podcast, Scott?

I literally had not heard that, say more.

You know how much I'm desperate for other people's affirmation.

You just got nominated for the Signal Award for Best Money in Finance podcast.

The Signal Award, what is that?

I mean, they're obviously a clearly an outstanding organization with great judgment.

We're up against the Financial Times and Barron, so that's something.

Oh, God.

Come on.

We've already won.

Well, everyone, please vote for us.

The voting ends October 5th.

Oh, they can vote.

Where do they vote?

Leave a link in the notes and the YouTube description.

Okay, it's a podcast.

Where do they go?

You want me to read out the URL?

Earn your keep here.

Land the plane.

Clay, you want to help me out?

Yeah.

It's vote.signalaward.com.

Can I fax it in?

All right.

Okay, good.

Please vote for us for the Signal for Best Business podcast.

Very exciting.

Enough of this shit.

Get to the headlines.

We're going to leave it in the comments.

Let's start with our weekly review of market vitals.

The S&P 500 fell, the dollar rose, Bitcoin dropped, and treasury yields hit 15-year highs,

shifting to the headlines.

The Federal Reserve paused its interest rate hiking campaign for the month, holding rates

at a 22-year high.

Still, a majority of the Fed's board indicated they're prepared to deliver one more increase

this year.

The Bank of England also held interest rates steady, ending its 14-month streak of increases

after UK inflation fell for the third month in a row.

Cisco struck a deal to acquire the analytics and security software company Splunk for $28

billion.

After this acquisition, Cisco says it will be one of the world's largest software companies.

Cisco stock fell 4%, while Splunk's rose more than 20%.

And finally, Rupert Murdoch stepped down as the chairman of Fox and News Corp at 92-years-old.

Both stocks rose slightly on the announcement.

Scott, thoughts?

So, I think Chairman Powell loves the kind of the macho.

I think he likes, I think he gets in front of Congress and he threatens to rate, you

know, hike rates more and then he goes home and he just has like hot sex with his companion

or wife.

Because I think that guy likes, I think he just feels his, you know, he feels his Riz

or whatever it is.

He feels his mojo when he says to the world, I don't, you know, Senator Warren or, you

know, Holly or whoever wants to try and beat up on me for raising interest rates.

How do you like me now?

We have the lowest inflation of any G7 economy.

So, I think this guy is, I think he's more inclined to keep raising rates if he feels

pressure to not raise them.

So, good for him.

I'm glad that we're starting to see inflation come down in the UK.

Literally something like two-thirds of the stocks that have gone public in the United

Kingdom over the last 10 years are below their offering price.

The entire footsie, the 100 biggest companies in the United Kingdom are worth less than

Apple.

And just investing in the UK or in the UK stocks just hasn't worked.

And I believe it's the only country in the European Union that hasn't grown in the last

five years.

So, the last thing they needed was like a crazy dose of inflation.

So, I'm glad to see it come down.

At the same time though, it's still at 6.7%.

And you compare that to the US, we're down to 3.7%.

We've made this point before, but we're just completely blowing all of our competitors

out of the water when it comes to fighting inflation.

You've got France at 5%, Germany at 6%, Sweden at 7.5%.

The US wins here.

It's funny to have the Brit talking up in America.

And I'm literally sitting here drinking tea and eating biscuits.

But look, it's all about momentum and direction and its head in the right direction.

So, let's hope that rates keep coming down and Arsenal beats Tottenham.

Do you know Ed, my son won't go to the Arsenal Tottenham game with me unless we sit in the

away section of Arsenal because he's a Tottenham fan?

I mean, what the fuck?

He's a good fan.

I respect that.

It's not like he's that vocal at Tottenham games.

Come on.

Anyways, Cisco systems.

Cisco is so interesting.

Cisco reminds me that any company, any company can go down, its stock can go down 90%.

Amazon from 1999 to 2001 went down 90% as did Cisco.

And when the dot-bomb implosion happened, no one knew what to do.

So, everyone thought, oh, go to hardware and infrastructure just to be safe.

So, the company that was safe was Cisco because everybody, no one knew it.

It was run by a guy named John Chambers who was sort of the, I don't know, the Tim Cook of

his era just was considered the best CEO in tech.

And it was like, okay, I don't know where to put my money.

So, I'll just put it in Cisco.

And I think Cisco lost 90% of its value.

Oh, and by the way, Cisco at one point was the most valuable company in the world.

The learning here is that every company, you know, we talked about this notion of core confidence.

What Cisco was great at is they would kind of map out the technology ecosystem and they would figure

out where they were weak and then they would go acquire companies.

And they were the best acquirer in the 90s.

And they just made their corporate development team there was super strategic, super smart.

And they'd show up and say, all right, we need some sort of payment technology or the software that does this.

And they'd say, congratulations, we're going to overpay, but you're going to fill this whole force.

They were fantastic acquirers.

I think the most interesting thing here just because I don't know, the most interesting thing to me is that Rupert Murdoch stepping down.

One, and this sounds very macabre, I think it means he's dying.

I don't think this guy gives up control unless he is totally unable to participate.

And he's been out of the public eye and also he's 92.

If I sound ageist, I am and so is biology.

What's more interesting though is that if you look at the corporate governance, there's three kids that are in some sort of trust

or have the voting shares, if you will.

And I think this all adds up to one thing and that is I think that Fox gets sold or starts disposing of their assets

or starts selling them in again into this larger conglomeration of ad supported cable assets where they cut costs.

So I think that Fox and the news core of all that we know and Rupert Murdoch, the sun is setting really, you know, when the sun is in the ocean,

it seems like it's an optical illusion or as my father's say, an optical conclusion that all of a sudden it looks like the sun's descent.

It feels like it starts diving faster.

Fox as we know it has come to an end and it's going to be super interesting.

There's going to be a ton of kind of legacy review of the incredible business it is, but also the incredible damage it's done.

I just don't think there's any getting around it.

I think I'm kind of have a lot of mixed feelings and capitalism is important and it's important to have a dissenting view.

I mean, you want to talk about the biggest white space in the world that no one saw except for Rupert Murdoch.

Media has a liberal bias.

There are usually people who are overeducated and live in urban cities that skew wildly democratic.

And there was like this upwards spiral or I should say this leftward inexorable spiral towards more progressive values.

And he came in and just said, you know what, somewhere between 47 and 51% of America is not progressive and no one is talking to them.

No one is speaking to them.

Everyone's just mocking them and media has totally ignored them.

And he created what is arguably one of the most powerful and profitable news franchises in history.

And he's also spread conspiracy theory, targeted women with coordinated attacks across his properties.

Fox, they've engaged in some, what feels like a better term, anti-American activities.

But this is going to be, there's going to be a lot of stories about the legacy of Rupert Murdoch.

He's definitely a central figure, not only in media, but in American history over the last 20 or 30 years.

Any thoughts or reactions, Ed?

Well, I was just going to say the guy we should talk to about this is my old boss, Michael Wolf, who just came out with a book about this called The Fall.

And his conclusion is the same as yours, which is that this is the end of Fox News.

And there are a few great little pieces and anecdotes in that book.

The first one was that Murdoch hates Trump, called him a fool, called him an idiot, called him nuts.

The second most interesting is that he completely underestimated the Dominion lawsuit.

Apparently he thought it was going to cost the company around $50 million and it ended up costing close to $800 million.

And then the third is the same conclusion as yours, which is that Fox News has doomed and that this thing has gotten basically too old and too conservative.

And that it's in the process of being superseded by this younger, more tech-focused, Twitter-happy, right-wing world.

And I think he's probably right.

The thing that really struck me that people don't talk about in terms of the Dominion suit is I think there's an algebra of deterrence that is super important in any society.

And it goes like this.

The likelihood that you get caught doing something wrong times the fine of the penalty once you're caught has to be greater than the profits you're going to get from continuing in this malfeasance or illegal activity.

What's interesting here is that the inaccuracies and the impact and the slander and the defamation were exponentially greater on another media platform called Meta.

But here's the thing, it wasn't a problem for Meta because Meta is protected by the shield of 230, Section 230, which says that they're not a media company.

It says they're a platform and that they aren't subject to content that is on their platform.

And so this kind of highlighted the problem.

There was an algebra of deterrence that even put some guardrails around Fox, but those guardrails just don't exist when it comes to social media networks.

We'll be right back after the break with a look at the IPO market.

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We're back with ProfG Markets.

Marketing platform Clavio went public on the New York Stock Exchange last week.

The IPO priced the company at a roughly $9 billion valuation, but the stock popped 23% at the open before retreating to close up 9%.

This was the third largest tech IPO in less than a week.

The day before, Instacart went public and its shares popped 40%.

In five days before that, Chipmaker Arm went public, finishing opening day up 25%.

But all three stocks have slumped since their debuts.

So, Scott, it seems like we're witnessing a trend here.

These companies have a strong pop and then they retreat.

What do you make of these results?

I've been thinking about this a lot.

One, just disclosure, I got into the oddity IPO.

Super happy.

I'm a baller and I a genius.

It goes from 35 to 55.

It's now technically a broken IPO.

I think it's trading at, it might even tip below 30 today.

But that seems to be what's happening to all these folks is that there's a pop, a bit of a run up, and then sooner rather than later.

I mean, shit oddity sound to 27 and a half.

And I'm in it for the long term here and I like kind of beauty meets AI.

So I'm going to hold on.

But what it looks like just from a market dynamic standpoint is they have a lot of hot money.

People are buying the IPO.

They're not buying the company.

And when they don't see a pop or they don't see like a lot of upward momentum or they start to see it getting wobbly, they're out.

And typically the banker's job is to find sticky money that's in for the long term.

And it doesn't appear that that's happening here.

It appears that there's a kind of a short-term sugar high.

What's also appears to be kind of true or evident is that valuations have just come down.

That the market is saying these might be great companies, but they're just not worth the valuation the banks are taking them out at and that they're recalibrating down.

And I think what that means is moving forward is that the IPOs probably won't get the price they had hoped for.

I think there's also a dynamic here that the IPO markets are just losing relevance, that the liquidity and valuations companies get in the private markets are now in many ways more appealing than the valuations they get in the public markets.

In addition, they don't have the same reporting or administrative costs.

So the question then becomes, why go public?

And the answer is a lot of companies aren't.

The number of IPOs has declined dramatically over the last 20 or 30 years.

Fewer companies, I guess from 1980 to 2000, there were 6,500 IPOs.

And then from the turn of the millennium to last year, there were fewer than 3,000.

So what is that?

They're down 60%.

It used to be a company when public after an average of six years, now it's 11.

It just strikes me that the IPO market, kind of the NYSE and the NASDAQ are the big losers here.

And that it also generates a certain amount of income inequality because the public markets used to be an opportunity for a fireman to participate through his pension fund.

And now the private markets are kind of soaking up.

In other words, the VCs and other investors say, no, you don't need to go public.

We want to capture all of that upside, all of those gains.

So say private longer, we'll give you the valuation you want, we'll give you the liquidity you want.

So the question is, are public market stocks in structural decline?

And that is, are we going to see because of mergers, because of companies going out of business and because of companies waiting longer or just deciding not to go public?

Do you need the public markets if you can have liquidity and you can have fundraising?

Unfortunately, you don't have the same level of transparency.

But if you look at the valuations of a lot of these companies, a lot of these companies technically the IPO was a down route.

Do you think that it's also possible though that there's an argument to be made that, you know, the float on these IPOs is pretty small.

That is the number of shares that are actually sold on the public market.

So for Clavio, there were 19 million shares, Instacart 22 million.

And then you compare that to when Facebook went public and it sold nearly 450 million shares.

The floats are becoming smaller, which leads to heightened sensitivity on trading activity, which creates these exaggerated swings in the stock price.

But now they're back to where they were at the IPO.

So do you think there's an argument to be made here that they were just, you know, priced correctly?

I don't think so.

I think generally speaking, when your stock is back to its, when it pops and it's back to your IPO, the initial price within a week or two weeks.

The bottom line is a lot of these companies are either near or are broken IPOs.

And I think the lower floats are a function of they were able to raise so much money in the private markets.

And also a lower flow creates a mismatch of demand and supply, hoping that the stock gets a pop.

And so what do they do if they don't need the capital?

They take a small number of shares out.

We can hope that they have 12 to 15 times over subscribe when they go public and that the stock pops.

And the stock price is a signal.

I mean, Instacart was valued at $40 billion at one point in the private markets.

And some of that sometimes is a head fake going into an IPO saying, oh, smart people think it's worth $40 billion.

So you dump shit investor on the retail side should buy it at $50 billion.

But by the way, all those late stage investors basically lost money on this.

Oh yeah.

I mean, if you invested like after the A, you're underwater.

Yeah, I think that's right.

And then, I mean, there's a couple of things.

The IPO market is, I think you'd have to say it's thawing, right?

They've already raised more money than they did in 2022 where they've raised almost no money.

Or I think IPOs are up year to day versus 2022, which is literally a nuclear winter.

But it's not the IPO market doesn't have the momentum we thought it had one or two weeks ago because these are good companies.

Instacart, I think has been profitable.

It's scaling well.

All the numbers are heading the right direction.

But at the end of the day, it's in the grocery business, the media business, which are both, you know, kind of difficult slash shitty businesses.

And these things just, they feel like they were priced.

They feel like they were priced for the existing investors to get out at a good price.

And you got to imagine if these folks were in Instacart for years and years and years, and you're down 75% at whoever the late stage investors are, that you're probably your legs aren't that fresh.

You're probably kind of ready to sell and move on.

And I think that's what we're seeing.

But no doubt about it.

The market isn't holding up for IPOs the way we'd hoped.

Disney shares fell 3% after the company announced its ambitious new spending plan.

In the next 10 years, it will invest $60 billion in its parks and cruises business.

That amount is double what Disney spent on parks and cruises over the past decade.

It's also triple what Disney paid, adjusted for inflation, for Pixar, Marvel and Lucasfilm combined.

CEO Bob Iger described the parks division as Disney's, quote, key growth engine.

He's already increased investment in the Paris and Hong Kong parks and plans to add three more ships to the Disney cruise line.

Scott, the market didn't like this.

The stock fell and it was already sitting at a nine-year low.

Do you think Iger is making the right call here?

So it's really interesting.

I just got off a call with some Hollywood execs talking about a project that I'm involved in.

And they think that the rider strike is going to be solved or they're going to come to an agreement in the next 24 hours.

And when this episode goes out, by the way, that may have already happened.

There you go.

So we're recording this on a Thursday evening.

But I found that really interesting.

And I said, well, what's happening?

I said, the biggest thing that's happened in Hollywood from kind of an emotional standpoint is not the rider strike,

but what is perceived as the absolute staggering decline of Disney.

And that is, it feels like all of a sudden Disney is kind of threatened and going away.

In Disney, we're always the smartest people in the room and just this icon of success and kind of the elephant in the room.

And overnight, it feels like all of a sudden they've been hobbled.

Socks at a 10-year low and they're trying to shed.

They've basically put their ad-supported cable assets, their networks and their affiliates in the front yard and said no reasonable offer decline.

I think in terms as it relates to announcing a big investment in their parks, I think it's a great move.

And I think of what Peter Drucker, the economist, the actually Austrian economist who taught at the Claremont College, Claremont McKenna, I think,

he said, invest in your opportunities, not your problems.

And that always stuck with me.

And here's the thing.

We've been talking about, I think the operating profits at the cable affiliates went from like 10 billion to five and a half billion.

They're off like 46% year on year.

The parks in the last 10 years have gone from 2 billion in profits to 10 billion.

And in addition, let's just look at this strategically.

Let's look at the three businesses that Disney plans to be in.

Let's ignore the cable assets.

Let's assume they're going to be out of that business.

They've basically said these things are for sale and my guess is they're going to go in the next 60 days.

But let's look at the three businesses they're going to be in.

Parks, they're going to be in movies or movie production and they're going to be in streaming.

Streaming, they have unbelievable assets.

They were kind of rookie of the year three or four years ago, got off to a big start.

The Galloway household loves the Mandalorian, WandaVision.

It's hemorrhaging money because they're competing against Netflix and Apple and Amazon Prime.

And everyone's playing, you know, try and follow the leader into the rabbit hole of billions of dollars of expenses.

And that rabbit is Netflix.

All right.

And growing business, but shit, it's expensive to play streaming.

Let's look at movies, very competitive.

You could argue a certain amount of structural decline.

Now you can feed it in.

It does have synergy with your streaming company, but, you know, it's as sexy as it is.

The movie business and as excited as we got about Oppenheimer and Barbie, it's a shitty business.

It's just a difficult business and it's getting harder and harder and harder.

And then there's the Parks, which is an amazing business.

And who does Disney have as competition?

You could argue, okay, there's Universal, but guess what?

There's no depocketed irrational investor nipping your heels there.

Netflix, Amazon and Vidya are in opening parks.

So they sort of, they don't have a monopoly on this, but they have a very strong duopoly.

Nine in 10 Americans have been to a theme park or amusement park.

And three quarters of people have visited a Disney park.

Eight of the 10 largest theme parks on the planet as measured by attendance are affiliated with Disney.

And you want to talk about ringing the register?

I've told you about my experience, my VIP tour thing.

It's 700 or 800 bucks an hour for six to eight hours.

And a high EQ person usually from Kansas meets you at the parking lot.

You go behind in the kind of bowels of Disney across all the parks and you can hit the two or three best rides.

Check this out. Okay, I did the math.

I talked to Bob from Kansas and I'm like, Bob, how many tour guides do you have a day doing these VIP things?

And he said, we're up to, I think he said 60.

I'm like, okay, 60 times 8,000.

That's a half a million dollars times.

Call it 300.

Let me get this.

You're making $150 million a year and 90% margins, 90% margins on $150 million a year.

$135 million times what a multiple of 10.

This is a one and a half billion dollar enterprise value offering.

And I think they're hiring more and more of you.

I mean, basically they're LVMHing the whole goddamn place and saying to people with all the incremental income because of a regressive tax policy in America is we're going after the top 1%.

This thing is a juggernaut.

And so for them to be investing here makes a ton of sense.

The interesting thing is that the stock actually declined on this news and I was trying to think of some of the reasons for that.

You know, the thing that I think that people might be reacting to is the fact that maybe the success of the parks are dependent on the continuing production of existing strong IP, which Disney has completely fallen short of in the last few years.

I mean, you look at the movies they've released in the past year, Little Mermaid, Reboot, Pinocchio, Reboot, Lightyear, Prequel, Avatar, Sequel.

I mean, the list goes on.

Don't you think Disney needs to also stop pulling its weight in terms of creating original iconic content like it has done for the past several decades?

Or do you think it's acceptable to continue relying on its existing IP?

Well, this is the challenge that every CEO faces and that is to what extent do you make forward-leaning investments that will pay off in the future versus trying to harvest profits in the short term.

And essentially, there's so much short-term pressure on these guys, especially in a media market and a movie market that's got an increasingly difficult.

And it's not just Disney.

I mean, basically it's like, okay, let's put the Batman tights on them again and call it Batman 9, even darker Bruce Wayne, you know, or whatever.

I mean, everything can come together.

You can produce a great independent film.

Hopefully it costs you three million bucks and hopefully you get one or two back.

This is an incredibly hard business.

And the big guys, the studios, the Cheryl, the German guys basically go with the tent pole, you know, men in tight strategy or think about a Top Gun Maverick.

You know, it's just all the same fucking thing.

How many toy stories did they do?

And I mean, they did come up with Frozen, Elemental got off to a slow start, but now I think did pretty well.

But what the fuck is Elemental?

I mean, it's the Elemental.

It's a Pixar film.

Well, it's because you don't have kids.

I literally remember being in the Emoji film and I'm like, God, this is horrible.

And I say to the two of them, like, you guys good?

And they're like, yeah, we're fine.

I go out, I picked El Rey.

Gotta love it.

Gotta love it.

They have a bar.

I ordered one Zacapa Coke.

I ordered two Zacapa Coke.

And then it dawns on me.

And I hadn't eaten lunch.

And I'm like, Jesus, I saw him.

I'm like, I'm a little bit fucked up.

And I thought, okay, I'm at the movie theater with my young boys and I'm supposed to drive home and I'm too deep in cocktails and a movie.

So I roll back into the theater and ordered some greasy food and just made sure that I was good to drive.

Two hours later, of course.

But anyways, that movie was enough to like risk child services for me.

We'll be right back after the break with a look at the latest in the FTX saga.

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Shark Tank returns for its 15th season.

I didn't know I was going to cry right now.

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We're back with ProfG Markets.

FTX, the crypto exchange that collapsed a year ago, is suing the parents of founder Sam Bankman Freed.

The lawsuit accuses the parents of fraudulently transferring and misappropriating millions of dollars of company funds for their own personal gain.

They allegedly use that money to buy gifts for friends, go on expensive trips, and even donate to their own Democratic Super PAC.

Mr. Bankman and Mrs. Freed are both tenured professors at Stanford Law School.

In response to the suit, their lawyers issued a joint statement saying this was a, quote, dangerous attempt to undermine the jury process just days before their child's trial begins.

Scott, it's been a long time since we discussed FTX and crypto for that matter.

We obviously can't draw any conclusions from a pending investigation, but did you have any general initial reactions to this?

I just love this.

I think it's hilarious.

I remember being at Andrew Ross Sorkin's and the New York Times dealbook conference, which is an outstanding conference, and Sam Bankman Freed was doing it.

So I just fell out of bed and slipped onto and fell on a bunch of, you know, felony theft over and over and over again.

I remember thinking, this guy's going to jail, and clearly everyone is turning on him.

And now it looks like his parents are in deep water.

My favorite email they've uncovered and discovery is that his father was pissed off that he was going to get less than a million dollars a year.

And so he cc'd Sam's mother on the email chain writing, open quote, G, Sam, I don't know what to say here, putting your mom on this.

I mean, that's pulling out the big gun.

When you're not paying dad seven figures and he gets really pissed off, he cc's mom.

Cool mom.

I mean, I'll tell you, that is, I'm telling you this, that is really as someone, you know, because you're not married yet.

Let me just tell you, that describes pretty much every family dynamic perfectly.

Like you do not want to bring mom.

When you want to pull the big guns out, you bring in mom.

But we're talking about a 31-year-old here.

And, you know, the standard definition of a child is under 18.

But I just think these folks got so caught up in making money without thinking and thinking that they were above the law and that, oh, no, this is innovation, not fraud.

Oh, no, this is crypto, not a Ponzi scheme.

It's just, you know, it's like that movie with Matthew Broderick and Sean Connery and Dustin Hoffman called a family business where they're all criminals.

It's the whole thing's beginning to smell.

You used to feel really sorry for the parents and now you're like, oh wait, maybe the parents are the problem.

And then the other news on FTX is that this is the final week for FTX's creditors to submit a claim to get their money back.

Obviously, FTX went into bankruptcy last year.

So far, $16 billion worth of customer claims have been filed.

Only about 10% of them have been resolved.

But more importantly, when we discussed this yesterday, Scott, you casually dropped that you've spent, what, a million dollars buying those claims.

So could you give us the full rundown on that investing strategy, which I find fascinating?

Yeah, so this is not investment advice.

Part of this program is we want to be transparent.

I find that the majority of people on financial news telling you what to do just are totally opaque as to what they are actually doing.

So I like the idea of running into the fire and I have made good money in what you would call the stressed assets.

I do not own a single coin of crypto.

I'm on the board of ledger because I wanted to learn more about crypto.

They're doing a great job.

They're coming up with what I think will be sort of the apple of digital storage called stacks.

But I'm a crypto bearer and I think the evidence shows that that's true.

However, however, you can go out now.

So FTX has gone bankrupt and now it's up to the court administrator to try and uncover all of the different assets hidden everywhere.

As a matter of fact, I think that one of the co-founders had a billion dollars and the court administrator is going to get that back or claw that back.

And then once they clawed all back, they pay their lawyers 100 or 200 million and then they distribute it based on your ownership and based on where you are in the capital structure, et cetera.

And I was approached by someone who said, I think this is a great investment opportunity and you can buy claims for about 25 cents on the dollar.

Describe what that actually means buying the claim because it's kind of a strange like derivative concept.

The company goes bankrupt.

It was a brokerage technically or an exchange and they had a million dollars in my money.

I have no access to it.

I have technically a million dollar claim against FTX.

A claim is worth something unless the company has no assets.

And this is a company that has a ton of coins, it has cash, it has investments.

For example, they have an ownership stake in Anthropic, which is going to likely be worth a lot given the mania around AI.

So anyways, the point is these things stink as they should.

They really have a foul stench to them and people are running from the fire.

I like this a lot.

So I just bought a claim.

I think there was originally a million dollar claim against FTX and I bought it, I think for $270,000.

And I'm willing to go illiquid.

That's going to be hard to resell.

I'm willing to wait.

I have no needs.

I can go illiquid.

I have a long-term time horizon.

This is something that requires both, which usually connotes a higher return.

And I'm thinking, and you know, it's easy to think this way, but I'm thinking I'll get 50 or 60 cents on the dollar.

And I bought these claims at about, you know, 25 or 27 cents.

Whose claim is that?

Like where do you find someone who's got a million dollar claim against FTX?

Oh, they're everywhere.

A hedge fund invested a million dollars or put a million dollars in there because it was buying coins or they're, I mean, think about it.

It was a, this company had, was doing billions in transaction and had all kinds of money flowing through it and all kinds of, you know, it's like if Charles Schwab went out of business tomorrow, a lot of people would have a claim against Charles Schwab.

And how do you find that?

Did you have, was it the advisor who came to you and said, hey, I'm doing this claims operation?

I heard about him.

He's a really talented guy.

He's out of Italy, kind of a lifestyle guy, but he's worked at hedge funds before.

And this is all he does is he tries to track down and reach out to claimants and ask them if they're interested in selling their claim.

And I think there's a pretty active market in it.

Again, sort of the secondary market.

And the market, there's some price discovery and you find that, okay, claims against FTX of this type of claim are worth between X and Y.

He makes an offer and then he calls me and he says, do you, are you interested in buying this million dollar claim for $270,000?

And I say, I say yes.

Yeah.

I think looking at the court filing, there was some interesting statistics.

Basically, the court has recovered $7 billion worth of assets and $2.6 billion of that is cash.

They also have $0.2 billion in real estate.

They have this massive real estate portfolio and in the Bahamas.

And then three and a half of that, three and a half billion dollars is in crypto.

And it's interesting, the bankruptcy lawyers say that the crypto assets are, quote, category A, which basically means it's liquid, it's secure.

And I sort of assumed, okay, that probably means that they have a bunch of Bitcoin and Ethereum.

But then I looked at the actual court filing and actually Bitcoin and Ethereum only account for 20% of that pool of category A assets, which are supposedly liquid.

The rest are all these coins you've never heard of, like XRP coin, APT coin, Telecoin, just crazy coins.

In other words, you've got two and a half billion dollars worth of tokens that in my view are not liquid at all.

Because if you tried to sell $2.5 billion worth of XRP token, whatever that is, you'd completely tank the price because there's just not enough out there.

So I think what will be interesting to look at as this trade unfolds for you is how are they actually going to sell all of those tokens?

Because they can't do it all in one go.

They're going to have to probably do some savvy method, selling the stakes in little slices over time so that they don't tank the price of those tokens and lose out on the investment.

So I think that will be an interesting thing to watch out for.

Let's take a look at the week ahead.

We'll see earnings from Nike and we'll also see the personal consumption expenditures index for August.

Do you have any predictions for us?

I think Disney is going to overperform or Disney stock.

It's at a 10-year low.

It's been beaten up pretty badly.

Its price of sales is 1.7 versus 5.4 Netflix, 1.5 Warner Brothers, which doesn't in my opinion have nearly the assets or the business that Disney does.

I think this is a company that's going to overperform and my other prediction is that the rider strike comes to an end in the next 48 or 72 hours.

This episode was produced by Claire Miller and engineered by Benjamin Spencer.

Our executive producers are Jason Stavros and Katharine Dillon.

Meal Severio is our research lead and Drew Burroughs is our technical director.

Thank you for listening to Property Markets from the Vox Media Podcast Network.

Join us on Wednesday for office hours and we'll be back with a fresh take on markets every Monday.

And the drop flies

In love, love, love, love

Machine-generated transcript that may contain inaccuracies.