Prof G Markets - Will Paramount & Skydance Merge? + A Visit with Sam Bankman Fried in Prison — ft. William Cohan

Episode Date: June 6, 2024

William Cohan, New York Times bestselling author and founding partner of Puck, joins the show to break down the terms of Skydance’s offer to merge with Paramount. He explains one sticking point that may be holding up the deal, and offers his thoughts on who could benefit from this saga. He also shares what he learned from his visit with Sam Bankman Fried in prison. Further listening: Hear Ed’s full take on Britain’s culture and economy Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Join Capital Group CEO Mike Gitlin on the Capital Ideas Podcast. In unscripted conversations with investment professionals, you'll hear real stories about successes and lessons learned, informed by decades of experience. It's your look inside one of the world's most experienced active investment managers. Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Today's number five.

Rupert Murdoch just had his fifth wedding at 93 years of age. His wife was asked what it was like to have sex with Rupert, and she said it's like playing pool with a rope, Ed. Like playing pool with a rope, Ed. Like playing pool with a rope. Welcome to Prop G Markets. Today, we're speaking with William Cohen about the Paramount Skydance merger and his visit with Sam Bankman Freed in prison. But first, here with the news is Prop G media analyst, Ed Elson. Ed, what is the good word? How much? I'm doing very well. How's it being back in London?

I went to the UEFA final. I saw Dortmund lose to Real Madrid. No way. That's incredible. It was great. And we'll talk about this, but I didn't like it, but a few people came up to me and asked me about you and specifically a subject you brought up, and we'll revisit that. But it was great. I took my two boys and a friend of theirs, Santi from Florida, my kind of older brother's close friend. It was fantastic. The game was great.

Were you rooting for Dortmund or Real Madrid? Oh, totally Dortmund. You got to think the Dortmund fans wanted it more. And I just love the fan base there. I think it's fantastic. I'm actually really excited. I'm going to Dortmund

for the Euros. So I'm excited about that. But yeah, I'm excited. I really wanted Dortmund to win. They came close. They had a couple fantastic shots on goal,

but it wasn't to be. We just start a football podcast, maybe. I feel like we're talking football every pod now. Yeah, but we come at it it we seem like we know what we're talking about as soon as people who understand football started listening it'd be pretty it'd be pretty clear that we are tourists actually that happened a few weeks ago i i i had a take on on uh i forgot

we were talking i think we talked about the new club world, and I just got absolutely harassed by these football fans saying that I didn't know what I was talking about. It's unforgivable when a Brit doesn't know. With an American, they kind of expect it. They're like, whatever, he's American. Of course he doesn't know what he's talking about. Get on to the headlines. Let's do it.

Now is the time to fly. I hope you have plenty of the whale at all. Shares of GameStop surged as much as 75% after Keith Gill, also known as Roaring Kitty, posted a picture of a portfolio that contained a $116 million position in the meme stock. Dell reported first quarter earnings that beat expectations with sales up 6%. Despite that, the stock fell 18%, its largest drop in six years due to concerns over its AI server business. And finally, Bill Ackman is preparing to take his investment firm Pershing Square USA public as soon as next year. He also sold a 10% stake in Pershing Square Capital Management at a $10.5

billion valuation earlier this week. Around half of the proceeds will be rein% stake in Pershing Square Capital Management at a $10.5 billion valuation earlier this week. Around half of the proceeds will be reinvested in Pershing Square USA at its IPO. Scott, your thoughts? So the GameStop thing is really, I mean, I love what Josh Brown said, that the sequel is never as good as the original. And the first time it was just a, it was a movement, right? Or a movement. It was pretty, it was a movement right or a movement it was pretty it was the most interesting business story of that moment and then a few weeks ago when it happened the stock popped i forget it was i think it doubled or even more this time it was up 70 now it's down now it's up i think about 30 it just feels like the sequels are getting more and more tired if you will well

yeah let's i let's just go over what he has, because I think it is kind of remarkable. I mean, according to the screenshot, he has 5 million GameStop shares, which he bought for an average of $21. And right now it's trading at 30. And in addition, he has 120,000 call options that allow him to buy the stock at $20 per share. So if he exercises those options, he's going to add another 12 million shares to his position, which would make him the fourth largest shareholder in the company. And so if you total all that up as of Monday morning, and assuming he exercises those options, his stake is worth $700 million. Last time we discussed this, after he had posted on Twitter and then GameStop ripped, I posed a hypothetical to you where I said, you know, imagine if he had bought all of these call options before he posted on Twitter and started this rally and then he sold them.

Your view was, you know, that's okay, it's within his rights, it's free speech. That situation no longer looks hypothetical. I mean, he did buy call options. And if GameStop rises further, he could become a billionaire and he could dump the whole thing. So I'm just wondering if your view has changed now that we know that the hypothetical is actually true. No, it's so he's got some quote unquote paper games right now. But here's the problem. I think if he lies, if he tries to give the indication, this is where we should have a legal expert, or he tries to head fake people into

believing that he's buying when he's selling, he might raise the antennae of the SEC or a prosecutor. We should get a securities lawyer on. But if he just says, I like this, I think it's undervalued, I think I can move it by virtue of the fact I've chosen to gone into it. You see stocks pop every time an activist says, I'm here, or indicate or have a filing indicating they've taken a position, the stock pops. The fact that this stock popped more doesn't mean he's guilty of anything. Now, if he makes several hundred million dollars, if this thing, you know, this thing is very volatile right now. And if he starts to sell that position, I'd be curious what percentage of total outstanding shares that position represents, he might have the same volatility on the way down.

So yeah, on paper, he has gains, but no one's going to probably loan him money against those gains. This is an incredibly volatile stock. I was looking at the options this morning. The stock was trading at $30. You could sell call options with a strike price of $35, expiring on Friday for $5, meaning that if it doesn't go up another 33% by Friday, you make money. And I'm not suggesting anyone write options. It's very risky. But what's interesting is, per Josh Brown's comments, it looks like every time this happens, the pop gets smaller and smaller and smaller. It'll be really interesting to see what happens when he finally liquidates to see if he made money, because he's going to have to rush out

of the same crowded door that took the stock up. Yep. Thoughts on Dell? I think this is so interesting. I think we have income inequality gone berserk in the markets, and that is NVIDIA shares have accounted for, get this, said, 34% of the S&P 500's gains so far this year. Get one stock, one. It's the S&P one. One stock is responsible for a third of the gains. And what's happening is there's income inequality amongst the most fortunate. So SaaS companies trade at a multiple of six times revenues, which is huge.

Consumer companies trade at 0.2 to, you know, Ford probably trades at 0.1 or 0.2 times revenues. SaaS, software companies trade at six times. And even that is nothing compared to AI, which are trading at anywhere, you know, between kind of 10 and 20 times revenues to 150 times revenues for some of these private companies. What I think is happening is the kind of investors who are in salesforce and dell are saying we're just piling into nvidia because if nvidia's stock is up i think it added seven or three quarters of a trillion dollars just in may that's not that's got to be a lot of money coming in and so much money coming in it's not new money into the market that money

is coming out of other shares and i would imagine the kind of people that are going into nvidia right now are probably the kind of people that might have been invested in Dell or Salesforce who are disappointed and want to ride this momentum. a tear up 90% year to date, up around 200% in the past 12 months. And the reason is because it now sells these servers that are designed specifically for AI. Now, in this most recent quarter, that AI server shipment revenue doubled to $1.7 billion. So that's, you know, big growth. What's interesting, as you point out, is that number wasn't good enough for Wall Street. As you say, I think this is the same thing we saw last week with Salesforce. And that is investors, they're not looking for good growth or even great growth. They're looking for crazy astronomical growth. And I think they look at this report and they see,

okay, you know, doubling in revenue. But then they look over at NVIDIA's earnings from the same quarter and they see a 450% increase in the data center revenue. And then suddenly triple digit growth just feels a little underwhelming. My God, Jensen Huang is like Brad Pitt in high school. Everybody wants to hang out with Jensen. Everyone's like, hey, what are you doing this weekend?

Except for you, who doesn't know who he is. You're too cool to know. He comes up, love your videos. Great boss. I got a big line here. You want to take a pic? Sure. That was Jensen Huang.

Who's Jensen Huang? The guy who wants some video. Oh, really? Jensen! Jensen, come back. My good friend. My good friend. Yeah.

Thoughts on Bill Ackman and taking Pershing public? I don't like this stuff. I think it's better. My viewpoint is the only reason you would go to the public markets is that you think retail investors won't demand the same returns or won't have the same corporate governance as a sovereign wealth fund. Because if you're Bill Ackman, you should be able to raise all the capital you want in the private markets. So he sees an opportunity to, quite frankly, arb. I've been watching, I don't know if you've seen this, WME, Waymore's Endeavor went private, or was second private by Silverlake. And I saw some of the numbers and the top two or three executives got just this ridiculous pay day when the company went public. And they're getting an even bigger pay day taking it private. I feel like a lot of this is just these guys figuring out ways to come up with cloud cover for an extraordinary one-time kind of ketamine hit. Like, wow, this is great. I can under the

cover of this up my ownership or what have you. But generally speaking, these funds or these publicly traded investment vehicles don't do well. What are your thoughts? He's pretty famous now. He's been in the news for the past 12 months with his crusades against universities. Do you think maybe the fact that he's so famous and probably so famous among retail investors is playing into this at all? It might be. We live in a kind of attention capital or attention economy where you just want to be known. And so this will be a mid-cap company that'll get a lot of attention. And a lot of people might say, well, he's a brilliant investor.

I'll buy some shares for my kid or I'll put some money in. And he might be just capitalizing on his brand equity. And I don't know if this, but this is true of everyone that's registered a little bit of success. so it's not a criticism of Bill. You generally hear from the people who just think you're fucking awesome, unless you're on social media. And I would imagine that a lot of people have said to him, including the bankers who want to take this public, your public profile is so positive that it'll trade up. People want an opportunity to invest alongside Bill Ackman. I wouldn't do this if I were him. The guy's already a billionaire.

Why would he want to subject himself to the kind of full-body cavity search that you have to subject yourself to on earnings calls with the SEC? And if the stock gets cut in half, it's one thing to call PIF or Ottawa Teachers Fund that you've made a bunch of money for

and funds five, six, and seven and say, aid sucks. It's another thing when you start losing, you know, orphans and widows money and CNc starts reporting on it so i don't understand why personally he would do this yeah i mean it feels like the main upside with him and for a lot of these guys is fame i think they just love being in the news he's been accused of being an attention monster and i don't think that's i don't think that's not

accurate and you know a lot of us are like that a lot of us like who oh like like like the guy you owe your living to so i'm at you i'm at the match and all these people kept coming up to me saying hey how are you like and anyone with a british accent this happened to me three times came up and they were fascinated with what ed elson said last week on this pod about how you said that there is a dangerous zeitgeist in the UK of being accidentally successful. And I have received emails, I've gone to dinner parties here, and right after you said that, I saw Boris Johnson interviewed on the BBC or something talking, and someone said, you know, Brexit has been a failure. And he's like, oh, rubbish. And then everyone laughed. And first off, he didn't offer any data. It's clearly been a fucking disaster. And the fact that he can't

even admit that at this point shows that he has absolutely no integrity. And also, he looked like such a hot mess. He looked so ridiculously out of shape and his hair was ridiculous and he was so blotchy. And I'm being very luxist right now, but for God's sakes, you represent London and the United Kingdom, get your shit together. And it was obvious that he is fully embraced. He's gone full accidental success. Like it's clearly catered. You've touched a nerve, Ed. You've touched a nerve, Ed. You've touched a nerve. This is what I call your first viral moment. I'm glad I'm providing value. Yeah, no, I think that's exactly right. I think Boris is a really good example. I think another great

example is this interview with Kwasi Kwarteng, where he's in conversation with Rory Stewart and Alistair Campbell. And he's talking about basically why nothing gets done in Parliament. Nobody actually talks about politics in Westminster. It's terrible. They talk about... No, they talk about politics, but not policy. They talk about gossip. Yeah, you're right, you're right.

They talk a bit about gossip, or they talk about very particular issues, but they don't talk about policy. No one... I've never had, really, a conversation. Why not? I don't know. I think it's...

We don't talk about policy all the time I know but I think there's something I think it's a very British thing where you don't want to be seen

to be talking shop I think it's a cultural thing actually so you know it's like if you're bringing up some tax issue in the tea room

it's kind of bad manners and he is a flashing red example of what's wrong with politicians in the UK. I mean, he was a massive failure, and he just nails precisely what was wrong with Liz Truss's administration and what is wrong with him as a politician.

We'll be right back with our conversation with William Cohen. Stay with us. picture an online scammer, what do you see? For the longest time, we have these images of somebody sitting crouched over their computer with a hoodie on, just kind of typing away in the middle of the night. And honestly, that's not what it is anymore. That's Ian Mitchell, a banker turned fraud fighter. These days, online scams look more like crime syndicates than individual con artists. And they're making bank. Last year, scammers made off with more than $10 billion. It's mind-blowing to see the kind of infrastructure that's been built to facilitate scamming at scale. There are hundreds, if not thousands, of scam centers all around the world. These are very savvy business people. These are organized criminal

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So we are all at risk and we all need to work together to protect each other. Learn more about how to protect each other. Learn more about how to protect yourself at vox.com slash zelle. And when using digital payment platforms, remember to only send money to people you know and trust. Welcome back. Here's our conversation with William Cohen, New York Times bestselling author and founding partner of Puck. Bill, thank you for coming on. I just want to say I'm one of your biggest fans, so we're very excited to have you. Thank you. It's great to be here, Ed. Appreciate it. Let's start with the big news in streaming today, which is that Paramount, the saga with Paramount Global is finally coming to an end. Paramount agreed to merge with Skydance Media this week, pending

approval from Shari Redstone. As we've discussed before, Paramount was previously in talks with Apollo, as well as at one point Warner Brothers Discovery. But in the end, they went with Skydance. Skydance is owned by David Ellison, who is the son of Larry Ellison, the billionaire founder of Oracle. If you've been listening to the podcast, you know the story. The deal is valued at $8 billion, but the terms of the deal are a little confusing to me. I mean, there's this injection of cash under the balance sheet. They're buying out the non-voting shares, but not all of them. It's all a little messy, and I don't fully understand it. So could you just give a breakdown of what has happened here with Paramount? And what does this deal actually look like? Sure. I mean, I think the first thing to note, and you sort of said it relatively quickly,

but it's really important, which is that while it may seem like this is a done deal, until Sherry Redstone blesses it, it's not a done deal. And one of the things about this deal is it's pretty creative as far as M&A deals go. If it does happen, Paramount Global will remain a publicly traded company. Along with that, there'll be a lot of new steps. There'll be, obviously, new ownership. The Redstone family will leave the picture. Sherry may roll over some of her stock, but that this combination of David Ellison, you know, perhaps his father Larry, Redbird Capital, KKR, will first buy Sherry Redstone's holding company, National Amusements, which controls 77% of the voting stock of Paramount Global, as well as around 10% of the economics. They'll probably pay her something around $2 billion for that stake, which is controversy number one, because, you know, on an economic basis, you know, her stock is probably,

you know, even after stock traded up today, probably worth around $900 million. And so she'd be getting $2 billion for that, which other shareholders won't get that kind of premium. Then the next step is that Paramount Global buys David Ellison, inject something like $3 to $4 billion into the company, some of which will be used to pay down Paramount Global, buying up stock in the public market at $15 a share, but there's only a finite amount of that cash. So if everybody tenders and wants to get out of this thing, which I gather a lot of people do, then it'll be pro rata. And, you know, you know, who knows what they'll ultimately get, depending on how many people tender their shares into this offering. And that money, by the way, that's coming from Redbird and KKR and Larry Ellison will probably go in as some sort of convertible preferred. And then the final step is, of course, they wipe out the whole management

team and bring in a whole new slate of people to run this thing. You mentioned the idea of Sherry blessing it. Why want legal cover here because, as I said, she's getting a big premium for her stock, which to some extent is justified because% or some number like that, whereas the public shareholders, it was trading at 12 on Friday. It's offered 15. That's like a 25% premium. It's up to 13 now. So she's probably looking for legal cover, and the way she gets legal cover, so she isn't sued and blows up the whole damn thing down the road in Delaware court, is that she sort of demands that the majority of the minority investors, in other words, the non-Redstone holders of the various classes of stock here, vote to approve this deal, the majority of these minority shareholders. I'm told that that's what she is seeking, but I'm also hearing that if she insists

on that, that'll be a deal breaker for Ellis and Redbird. And so we may be back to square zero sooner than we think here. Hey, you and I have been around the corporate governance game and investment banking for a while. This strikes me as just the quintessential example of what dual-class shareholder stocks are just a fucking mess. That, okay, it's one thing if she were to get 1.1 billion on our 900 million. It sucks to be a grown-up. But I didn't know this until you told us this a few minutes ago. She's demanding 122% premium on her super vote. I mean, it strikes me, I immediately started thinking we should go raise money, buy a bunch of common and just raise hell and say, okay, we're comfortable with a 20% premium, but we want 700700 of that $1.1 billion to go to the common. I mean, it strikes me this is a pretty good suit if the common bring a suit against the board and Sherry or just try and block the deal on the notion that, okay, let me get this. That $1.1 billion should be distributed equally to the shareholders. Maybe we'll give you a small

premium here. I thought this was going to go through. And now after speaking to you for two or three minutes, I'm wondering if this thing gets queered at the finish line. What my M&A legal friends tell me, Scott, is that, you know, caveat emptor, in effect, that you knew that Sherry Redstone and the Redstone family controlled the voting shares of this company when you bought, whether you bought the voting shares like, say, Mario Gabelli, who's owned them for a long time, or just the non-voting shares, which a bunch of hedge funds now own, you knew that going in. So, you know, it's your own damn fault for buying into a company, the stock of a company, where you knew that there was a controlling shareholder and that she could exercise her controlling shareholder rights and not even give you a reason for doing that.

See, what Redbird and Ellison are counting on is that she's just going to say, OK, and that's going to be the end of it. There's not going to be like a proxy statement filed. There's not going to be a vote. There's going to be nothing. But if she insists on and demands or the special committee demands that there's this majority or the minority vote, then of course that gives all these other players who are pissed a vote, they'll probably vote it down. So if that even gets demanded by Sherry as a part of this deal, that could, you know, I think at that point, Ellison and Redbird walk. So who knows?

It's a very dicey leverage dynamic right now between these two sides after all this time. I think it's like, you know, fascinating, riveting from an M&A point of view. But I'm also told that, you know, by these, you know, M&A lawyers that if it goes, you know, into a Delaware court situation, that Sherry's going to win because, you know, people just knew going in. It's like your friends, Scott, the Sulzbergers or the Murdochs or Google or any of these other situations or Meta where there's dual class stock. You knew that going in. And so most of the time it doesn't matter. But when it comes to important things like selling the company or change of control and votes and things like that, it's Sherry's way.

I mean she's fired her CEO in the middle of this a month ago. Four board members left. I mean, she can just do whatever she wants and has been doing whatever she wants for years now. And this is just another example of her doing whatever she wants. We'll see what she does. But, you know, you don't really have much leverage as a non-Redstone shareholder in this situation. If you follow that logic, then she could say the non-voting shares get a buck and I get $3 billion. There's got to be a breaking point in which a judge would say this is not fair play or it's so onerous. Or is it that the non-voting shareholders just don't have to tender and if a majority of them don't tender, the deal is off. Do they effectively have a voice? No, no, they don't. I mean, unless there's a

majority of the minority provision, you know, which we'll have to just sit here and wait and see what happens. The promise here, Scott, is that under this new management, this stock, which is now about $13 a share today and was $10, $9, $8, $12, you know, has been floundering for years. You know, what Redburn and Ellison are promising is that this stock, you just hold on, everybody, and this is going to be a $30 to $40 stock. So you're going to be rewarded for your patience here. I want to put forward a thesis, and you tell me if you agree. These are trophy assets. I think it would be really fun to go to these movie premieres, try and reinvigorate MTV, whatever it is, try and go to the opening of Yellowstone. I would love to own this company. And you have some really talented people, Jeff Zucker, Jeff Schell, who are looking for something to do. You have an excess of capital. You have the son of one of the

wealthiest men in the world who's a smart guy, who's shown some success around movie production. It all adds up to an irrational deal that loses money to me. And when I look at every single media company, whether it's John Stankey or the guys at Verizon or David Zaslav saying, I want to play Hollywood, and coming up with rational reasons why, oh, this thing can be consolidated or I have a new vision for it, they find cheap capital, they go in, and nothing has worked. Nobody wants to acknowledge that they're pilots for Pan Am in the 70s. And while they might be banging stewardesses and people are really impressed by them, this thing is going away. The golden age is over.

Why am I wrong here? What is the vision that's going to make this turn chicken shit into chicken salad here. So on the one hand, I mean, you know, CBS, you're old enough to remember, you know, it used to be called the Tiffany Network, you know, the home of Edward R. Murrow. I mean, you know, it still has 60 Minutes, which is, of course, a jewel. All in the family, MASH, 60 Minutes. It was the network. Yeah. Ed, ask your parents.

They'll tell you. But let me put it this way. Is it that it's gotten so cheap that they might be able to make money here? Has the thing traded down to the point where maybe with a private equity-like mindset, we have to cut costs faster than the decline? Because I have gone into distressed assets and made money, but we have acknowledged we're no longer teenagers. We just need to make Nana and Pop-Pop comfortable for as long as possible and cut costs faster than revenue declines. I don't get the

sense that's the mentality here. I mean, look, Redbird Capital is private equity. KKR is private equity. And they own a big chunk of David Ellison's business, which has been very successful. So they know how to cut costs. And I think they will cut costs, but they don't want to be saying that now. They don't want to be upfront about that now. I think they're just trying to lay low and win this thing, get control of it, and then Jeff Schell is going to go to town. And it's going to be a rough ride under whichever ownership. And even if Sherry does nothing and tells these other two suitors to go away, which she still could do, it's going to be a rough ride for CBS and those

cable channels. Because, you know, with declining cash flows and declining revenues, as profitable as they are, you know, that just spells cost-cutting left and right. But, you know, as I have written before, I think, you know, David Zaslav at Warner Brothers Discovery could be a beneficiary here. He's always wanted CBS. I could see, you know, no matter who buys this, that CBS could get sold to, like, a David Zaslav combined with CNN. Whether that's good or not, I don't know. But he also would like Paramount Plus and all those subscribers. And I think we're in a period where there's going to be a lot of dramatic change as a derivative fallout from this

transaction, if it ever occurs. We'll be right back. small business, while you're so focused on the day-to-day, the personnel, and the finances, marketing is the last thing on your mind. But if customers don't know about you, the rest of it doesn't really matter. Luckily, there's Constant Contact. Constant Contact's award-winning marketing platform can help your businesses stand out, stay top of mind, and see big results. Sell more, raise more, and build more genuine relationships with your audience through a suite of digital marketing tools made to fast-track your growth. With Constant Contact, you can get email marketing that helps you create and send the perfect email to every customer, and create, promote, and manage your events with ease,

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Could you tell us a little bit about what you learned from your conversation with him? and scatterbrained, and, you know, somewhere on the spectrum, and, you know, guys like that, you know, who were once really rich, and still people think they're rich, whether they're rich or not. Those kinds of people do not, I would think, do particularly well in a prison setting. But he seemed to be sort of in a better frame of mind, better than I thought. He'd figured out a way to, you know, buy bags of rice and beans at the commissary and, you know, trade those. You know, that became like, that's the kind of currency inside this place. And people come up to him and want him to give them his bags of rice so that they can use them to buy other things. He's in a dormitory-style setting with 35 other guys, most of whom are in the witness protection program,

and others are high-profile, white-collar criminals like Sam. What's your sense of the actual case itself, given that it looks like all the creditors are going to get all their money back? Do you think that he has a chance of anything being overturned or a reduction in the sentence? It strikes me that he could not have handled this any worse as a defendant. Where do you think the case stands, and how do you think this plays out? Does it change, or is it just it is what it is and it's over? I mean, he sort of has certain like Trump-like characteristics as a defendant, you know? Yeah, agreed.

Trump has said like in the state attorney general case, you know, where he's accused of over-inflating the value of his assets and that, you know, creditors were mizeled as a result of that. So, well, they all got their money back. There's no harm, no foul. And I think Sam is saying a little bit of that. Look, everybody's going to get their money back here. As I said, they would. You know, it was a kind of momentary. It was like a period of time where the confluence of events, it was a run on the bank, you know, liquidity crunch. I was trying to solve the liquidity crunch. You know, you guys took the, Solomon Cromwell took the company from me, gave it to John Ray, he filed it for bankruptcy, and then I get arrested and, you know, I'm the bad guy here. And now, you know, things have turned out well, you know, you've talked

about Anthropic a lot, Scott, you know, his investment in Anthropic has worked out. And it looks like, you know, the creditors are in fact going to do relatively well. Now, it's, of course, based on their claims as of the filing day, which was November, whatever it was, 2022. But, you know, I don't think that matters. I mean, that's just a nice consequence. I mean, you know. It was fraud. What's not clear to me, I mean, he was obviously convicted of a crime. He's been rewarded for that conviction with 25 years in prison. I still don't know for sure whether he actually knowingly stole this money and intentionally stole the $8 billion so that he could use it personally or whether it was just some sort of Sam being Sam. Just to play a little bit of legal economic history here, and we're dating ourselves out so you can take a break here, but why is John Corzine not in prison? I mean, wasn't what happened at MF Global exactly?

So if I understand this correctly, it's not that people are getting or not getting their money back. It's just that when people put their money into a deposit account thinking it's being invested in one thing and you borrow it to use it in riskier investments and you don't disclose that, that's fraud. And then when you try and cover it up and you purposely don't have a board and you purposely incorporate in the Bahamas and then you go on an apology tour or I'm not guilty tour that just further and further sends you into a rabbit hole and then everyone around you turns state's evidence on you. You just become

the absolute defense attorney's nightmare. And it feels to me like Corzine did exactly the same thing. The former governor of New Jersey, people invested in deposit accounts, and then somehow it ended up in investor accounts. There was a run on the bank. I forget if it cost the government money, but he had smart lawyers and didn't go to prison. Do I have this wrong? No. And Sam and I actually talked about that during my visit with him. We talked about what's the difference between, I mean, if in fact it was, quote unquote, a run on the bank, such as the FTX exchange obviously wasn't a bank, but people wanted their money back when the rumors started and they couldn't get bank, but, you know, people wanted their money back when

the rumors started and they couldn't get it. I mean, is that any different than what happened at Bear Stearns or Lehman or Merrill? And none of those people were prosecuted. Why wasn't Jimmy Cain or Dick Fould prosecuted for, you know, running their banks over the cliff? Especially Dick Fould, who after he saw what happened, you know, at Bear Stearns, you know, had six months to do something about it and didn't do anything about it. And, you know, and or Silicon Valley Bank or Republic Bank, you know, borrowing short and lending long is a very dangerous business. It always has been. People forget how dangerous it is. And but when it happens, we usually just say or sometimes we say, oh,

you know, mistakes were made and nobody's held accountable for it. I mean, Preet Bharara didn't hold anybody accountable for what happened on Wall Street in 2008. And along comes Sam. And again, I don't want to sound like a Sam apologist, but, you know, we did talk about this. Along comes Sam, you know, in 2022, you know, the richest person in the world under 30 on the cover of Forbes and Fortune and everybody wanted a piece of Sam. And then they, you know, build him up and then they tear him down and he gets prosecuted. All of his direct reports get deals to turn on him. It just seemed like he was too delicious a defendant, again, not unlike Trump, too delicious a defendant not to go after. And, you know, Sam was sort of left hanging out there by himself. There is a distinction, though, just briefly, my understanding, and tell me if this is correct, between MF Global and FTX and something like SVB.

MF Global and FTX took in deposits from people who thought they were putting their money into an account, at which point they could instruct them to buy crypto, and then that asset they purchased would be in that account, and they thought they knew what was in that account. Whereas SVB took depositors' revenues or deposits and invested in long-term treasuries, which then experienced a massive spike in interest rates, but that wasn't illegal. They were just caught in a classic bank run that says a lot about your access to phones, and no one lost any money covered by the FDIC. One is plain, you know, vanilla fraud. The other is poor investment, poor risk management, right? I mean, there is a distinction between the two, correct? I don't think anyone at SVP should go to jail, in my view.

Well, I mean, obviously, no one from SVP is going to go to jail. You know, Sam is in jail, and Ryan Salameh, another FTX executive, just got sentenced to seven years, so he's going to jail too. But I would argue, Scott, that the CEO, and if there even was a chief risk officer at Silicon Valley Bank, should be prosecuted because how can you invest in treasuries after 13 years of zero interest rates, of quantitative easing? You have to have your head examined to invest in the bond market at that point in the cycle. You've got to believe if you have any sense on your shoulder, and how many millions was that guy getting paid, to not realize that you are skating on extremely thin ice and that the quantitative easing was going to end, the zero interest rate policy was going to end.

And if that were the case, you cannot have possibly invested in the bond market because those bonds are going to get trashed. And when that happens, you're going to need to, you know, everybody's going to find out about it. You're going to need to raise capital. You're going to need to sell some of that portfolio, which is what they did through Goldman Sachs. They got whatever, 70 cents on the dollar. Then they couldn't raise more equity. And then, you know, les jeux sont fait. The game was over. So I so rarely disagree with you. I think there's a difference between fraud and stupidity. It's not illegal to be stupid. The CEO of SVB was stupid. He should

never work again. He should have all his money clawed back. But I don't think he thought knowingly he was taking deposits he wasn't supposed to and using them for things he wasn't allowed to do. Did he invest at the absolute top of the cycle? Idiotic, stupid, never working in. Yeah. But it's not illegal to be stupid. I do think there's a sharp distinction that let's, let's, what I'd love to get from you, Bill, you're, I'd love to get a little bit of a, I don't know, we'll call it a preview, but you're writing a book on Apollo, right? Yes. And my sense is there's a new set of players that are, are really dominant. Some have lost power, some have gained power. And you're writing about a player that has always been powerful and now, in my view, is just so good at what they do.

Remember how we always used to say Goldman always ends up on top? I wonder, I don't feel like that's quite the way, you know, they've had some stumbles recently. Their forays into consumer banking. I don't think that's as true. If anyone was kind of the golden child right now, I would say it's probably Apollo. But I'm curious, give us your state of play of who you think has come up in power and who's lost currency write this book. I mean, most of my other books are sort of like histories, whether it's Lazard or Bear, what happened or Goldman, you know, looking sort of backward. One of the reasons I wanted to write this book

is maybe in my Wayne Gretzky phase of life, where I was trying to skate to where the puck is going to be. You know, I feel like Apollo is skating to where the puck is going to be and maybe even already has that puck and is so far ahead of others who are like trying to copy it. They are incredibly creative, incredibly scrappy, incredibly smart, and they've got this

funding mechanism which just provides them with billions and billions of capital that they have to pay up for, but at least, you know, it's reasonably priced and it's locked up capital for seven, you know, or more years. And, you know, they're dominating the private credit market, which is a huge new market. You know, their assets under management are growing by leaps and bounds. And, you know, he's made it a much more kind of user-friendly place, Marquez, than when it was sort of that hard-edged, sharp-elbowed, you know, pure private equity firm that it was for, you know, like the 20 years of its existence. Who's lost the most currency in your mind as a player? You know, I think it's kind of sad. But, you know, you and I can both remember when in the 90s, when the Glass-Steagall Act came down and, you know, because Sandy Weil was trying to create Citigroup and Citigroup was the most powerful bank in the world.

And now Citi is just a shadow of its former self. Nobody can even be sure what they're doing. They're kind of retrenching everywhere. I think, you know, Jane Frazier has probably done as good a job anybody could hope for with that. But that's, I think that's the saddest. I mean, given where Citigroup was in the end of the 90s and where it is today. But, you know, I think all of Wall Street. Credit Suisse, a lot of them, right? I mean, there's so many fallen heroes. J.P. Morgan merger and all these other things they tried to do. And Jamie came along and really picked that place up by his bootstraps and made it the number one bank in the country, obviously,

and he's, you know, King Jamie. So he's really come up in the world. But Wall Street generally, since the Dodd-Frank law has been put in a box, intentionally so, by the Fed, they can't take nearly, you know, they're in the moving business. They got to, and they're not in the storage business. They got to move that stuff off their balance sheet. They got to syndicate it. They got to sell it off. They can't hold it. The Fed regulates all of Wall Street now. That never used to be the case. And basically, they said, we don't want Wall Street to be the cause of the next financial crisis. We know there's going to be another financial crisis. We just don't know when it's going to be. But we don't want Wall Street to be the cause of it. So therefore, Wall Street is just not make a lot of money, especially since you're not putting up capital. But it's places like Apollo and Blackstone

and, you know, various hedge funds that are much more interesting. And that's why, you know, they're kind of getting the best and the brightest now, all of whom used to be like, you know, Scott Galloway and go to Morgan Stanley or Bill Cohen and go to Lazard. Just to wrap up here, Bill,

we've been asking some of our guests to give their advice to the class of 2024, considering its graduation season. You've had a very interesting career. You were an investigative reporter turned Wall Street banker turned author. Do you have any career or life advice to give to any graduating seniors who might be listening right now? I'm not going to say follow your passion because I know Scott does not believe in that. He listens to the pod. I think you just sort of, here's what I really think. I think you get in the current.

Even if you have to take a job that you don't really think you want or doesn't suit everything you want, you get in that current and you get in that workforce and then opportunities will come, you know, when you least expect it and eventually you'll hopscotch around. We all know everybody's going to move around now. Nobody stays in their job at GE for 50 years anymore. Just get in that flow and things will happen. That's what happened to me. I went from covering Wake County public schools to financing leveraged buyouts. Only in America,

right? Bill Cohen is a New York Times bestselling author and a founding partner of Park. Bill, thank you so much for joining us. Thank you, guys. Always great to see you. Love William Cohen. All right. Going to see him in Nantucket. See hair. If I had that hair, I'd be the junior senator from Pennsylvania. Life is not fair. You'd be great for that. Right. All right. Take care, guys.

Take care. Algebra of Wealth. Scott, you mentioned in our conversation with Bill that Paramount, because it's a media company, sounds like a sexy investment. At the same time, it also looks distressed right now. It seems like two of your tenets of investing are battling each other here. On the one hand, you often say boring is sexy, steer clear of the sexy stuff, get into the boring stuff. On the other hand, you also say boring is sexy, steer clear of the sexy stuff, get into the boring stuff. On the other hand, you also say run into the fire. And some of your best investments have been in distressed assets. How do you think about balancing your own advice

when it comes to an investment like Paramount? Yeah, look, investing in sexy stuff, that's just consumption. There's nothing wrong with it, but just realize your returns will probably be lower. I'm investing in Yahoo after it was one of the least sexy things on the planet. I mean, Yahoo's, you know, Yahoo was at one point considered one of the, you know, Yahoo was the meta of its day in the 90s, but it has been kind of left for dead, had probably one of the worst tech CEOs in recent memory, Marissa Mayer, take it down dramatically. So a couple of the things I'm looking at right now are really, really out of favor. I still hold to that strategy that your return on your invested capital, both your financial and your human capital is inversely

correlated to how sexy the business is. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producers is Alison Weiss. Our executive producers are Jason Stavis and Catherine Dillon. Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Property Markets from the Vox Media Podcast Network. We'll be back with a fresh take on markets on Monday. Five times You held me In kind Reunion As the world turns And the dove flies Do you feel like your leads never lead anywhere?

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