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Money Stuff: Impostors on the Due Diligence Call

by
Matt Levine
Money Stuff
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Ozy and Goldman's Due Diligence Call

  • Ozy, a digital media startup, was looking to raise a $40 million investment from Goldman Sachs. Ozy's COO, Samir Rao, impersonated YouTube executive Alex Piper to trick Goldman into investing in Ozy.
    • While this case would most definitely be securities fraud if Ozy were a public company, Ozy could get away with it simply because they are private.
    • While making bold claims won't kill a deal for a startup, blatantly lying during a due diligence call will.
    • Even if Goldman didn't notice at first and invested in Ozy, they would have eventually noticed and demanded their money back.

Mind Your Own Business Act

  • US Senator Marco Rubio introduced the Mind Your Own Business Act, which will require corporate directors to prove their "woke" corporate actions were in their shareholders’ best interest.
    • Usually, corporate law is a matter of state law and is generally deferential to directors (which is smart).
    • This law reverses this idea: it makes corporate law federal and requires courts to reverse directors' business decisions unless they could prove that they were the correct decision (which is a dumb idea).

Public Benefit

  • A shareholder proposal asked Fox to become a public benefit corporation by providing viewers with "an accurate understanding of current events through the exercise of journalistic integrity."
    • Engine No.1's proxy fight made sense because they wished to generate long-term value for Exxon by making it more sustainable.
    • This proxy fight makes no sense at all because it will generate no long-term value for Fox.

Muni Bonds

  • The 5 investment giants are working with underwriters, Loop Capital and Siebert Williams Shank & Co. to develop a questionnaire that governments have to fill out before new bond deals are arranged.
    • If the government doesn't like what big investors are doing, they can threaten them with changes to fiduciary law.
    • If investors don't like certain governments' views on social matters, they can go around threatening them as well.

Wash Trading

  • The SEC charged 2 Florida residents for collecting liquidity rebates from exchanges by wash trading put options of certain meme stocks.
    • Trading with yourself is called "wash trading" and isn't allowed because 1) it's illegal 2) brokers don't allow you to do this 3) it's incredibly risky if you accidentally trade with someone else.
    • Since you are trading with yourself, you only collect the marginal profit from the contracts. Thus, you need to do this in huge sizes to make any money.

Everywhere in options trading

  • Options trading has boomed in 2021. While most of this trading is done by Wall Street firms, individuals embracing risky options trading has risen fourfold over the past 5 years.
    • We can probably blame this on Robinhood: they want to make trading fun, and options trading is more fun than normal trading.
    • Has Robinhood's optimization for fun, and higher PFOF, caused an explosion of retail options trading? And is that bad?

NFT Stuff

  • Jens Haaning, a Danish artist, stole $84,000 from the Kunsten museum. The money was originally lent to him so he could replicate an artwork that displayed the annual incomes of an Austrian and a Dane.
    • The museum is deciding whether or not to report Jens to the police.
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