Full of Mirth: 401(k), Clubs, TSLA
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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. And I'm Katie Greifeld, a reporter for Bloomberg News and an anchor for Bloomberg Television. Katie, you're off next week. I'm so excited. It's my birthday on Sunday, which is huge. It's my favorite day of the year. On Saturday, I'm riding in a horse show, and then immediately... How is that not your favorite day of the year? You know, I'm not going to the Olympics. It's a fact that I accepted.

a couple years ago. 20 minutes ago. I'm doing this horse show on Saturday and then Saturday night we're leaving the country for Ireland for my birthday and I'm really excited. But that means...

Practically speaking, that we just recorded next week's episode and now we're recording this week's episode. And we've already spent too much time together today. Too much time together. But next week's episode is a special episode of guests. Yes. Our second and third guests. Huge. Talking about a subject dear to Katie's heart. Good Lord.

It's about puzzle hunts. It's about puzzle hunts. Which are cool. Which are dear to my heart and somewhat less dear to Katie's heart than horses. I was just happy for Matt, listening to Matt having fun. As someone who's never done a puzzle hunt, probably never will. It's for the large subset of Money Stuff fans who are also puzzle hunt fans. And for those who want to learn about puzzle hunts. Value and respect all those people that like puzzle hunts. It's amazing.

Katie, I saw you this afternoon checking your 401k. I actually was. I was inspired to after reading about basic capital, which you wrote about in one of this week's Money Stuff. Basically, $4 of leverage for every $1 that you invest. What could go wrong? I didn't actually know this when I wrote this, but there's a fascinating history of this idea. The idea is that when you are a young person,

invest a little bit of money in the stock market. And then as you get older, you move up in your career and you start investing more money. And so by the end of your career, you are investing more of your money as in stocks than at the beginning of your career. And if you think about this from a theoretical perspective, you will think you should have more money in the stock market early on and relatively less money later on, right? That you should diversify your stock market risk by taking more of that risk early and

instead of taking almost all of it at the end. And so people think about this theoretically. And there's a sort of well-known 2008 paper by Ian Ayers and Barry Nalboeff that Ian Ayers taught at the law school I went to, basically saying what you should do is you should lever up your investments early on, your retirement investments early on. You should take a margin loan from your brokerage or buy long-dated call options that kind of look like levered futures.

And you should have more than 100% of your money in the stock market early on and then have less than 100% of your money in the stock market later on. And that's going to smooth your returns over time and give you better returns than if you just invested your cash as it came in over the course of your career. And they wrote this paper. If you look at it on SSRN, the date on the paper is May 2008, which is like...

Ospicious time. Yeah. After I wrote about the basic capital idea, a couple of people emailed me. There's a famous post on the Bogleheads investing forum where this grad student did this starting in 2007, and he just ran into a buzzsaw. He lost all of his money, and then a little bit more than all of his money because he had borrowed to do it. Yeah. I think he got better over time because the point of this is you're spreading your risk, and so he just unfortunately-

took a lot of risk going into a great financial crisis, but then he got better. But anyway, that's the idea. And for various reasons, including that this idea had a brie of vogue in 2008 before it became a terrible idea, there's not like a ton of implementations of it, but basic capital, which Suzanne Woolley at Bloomberg wrote about this week, they are doing a sort of implementation of it where they will let you

borrow money to lever up your 401k. And the pitch is that you're borrowing the money in kind of a nicer way than broker margin loans. They give you a term loan. There's no margin calls. If your stocks go down, they're like, that's fine. Just wait five years. They'll come back. So it's an interesting idea in that respect.

It's interesting that friend of the show, Bill Ackman, is an investor here, only because it seems like we've been talking about him for several weeks in a row, and I wanted to say his name again. The way this works, though, is that most of your exposure is to credit. It's not actually in stocks. Right. This is what I wrote about. It's like you sort of wake up in the middle of the night. You're like, oh, people should be able to get 401 leverage on their 401ks.

You come into the office and you're like, "Okay, how do we do that?" You're like, "Well, we'll just lend them 80% of the money of their portfolio." That's probably fine, right? Because even if stocks go down, if you have a long-term loan, the stocks will come back up. The idea of losing money on a five-year loan against ... like an 80% LTV loan against stocks is not that big a risk.

But then you realize the real problem is interest, right? So you're making this loan and it's going to charge interest. The interest is, you know, like 6%, 7% a year. It's like SOFR plus 2%. So it's like, you know, meaningful interest. And how are these people going to pay that interest? And it's really just optically difficult to make them pay the interest, right? Like you have to either make them make contributions to the retirement fund every year to pay the interest or...

or you have to sell some of their stocks to pay the interest, or you can put enough of the money into fixed income that pays a yield to pay the interest.

And if the fixed income stuff that you buy has a higher yield than the SOFR plus 2% that you charge, then it's fine. But it's like, if it has a 25% higher yield, you have to put 80% of the stuff into fixed income. And so in fact, Basics' proposal is you put something like 85% of your portfolio into fixed income.

Fixed income being maybe a bond fund, maybe some private credit. Which I do want to talk about. Yeah, I want to talk about it too. Put some private credit in your 401k. So the point is that you're levering up your 401k and then kind of like walking most of that back by putting it into bonds rather than stocks. So instead of putting 200% of your retirement account into stocks, you're putting like

75% of your retirement fund into stocks and another 425% into credit. So it's like a nice effort to achieve this interesting theoretical idea, but it doesn't quite accomplish exactly what you'd ideally want it to accomplish. Yeah. So you describe this as cool in your column. It's cool. Which, by the way... I will say, I used to be a derivative structure. And so often you're like, oh, this is a great idea we should do. And then you're like, it doesn't work practically. And then you're like, what is the...

awkward compromise that kind of like captures the spirit of it, but isn't quite what you wanted. This feels like that. It's like, yeah, okay. I like this awkward compromise. Well, you calling it cool is already on the Basic Capital website. It's attributed to Bloomberg. It's a... Ringing endorsement. It's a reasonable compromise to achieve an abstract aim. Yeah.

So leverage to a lot of folks sounds scary. It kind of sounds scary to me if you're talking about your retirement. I feel like everyone's first instinct is like, "Oh my God, you're borrowing money to leverage. You're taking margin loans in your retirement." It's like, "Yeah, fine." But like, okay, this is not margin leverage. So it's like you have a five-year term loan, right?

The chances that your portfolio will end up 20% below where you started and therefore your entire retirement savings will be wiped out, they're not that big. But they exist, right? There's a risk. The story suggests that most people who do this, they dabble in it. They put a little bit into the weird levered thing and then they put a lot into regular stuff. But yeah, it amplifies your risk. It amplifies your returns. I think the case is that right now, virtually everybody...

It makes a huge concentrated bet with 80% leverage in their financial list. Not virtually everybody, but like a lot of people in America buy a house with an 80% mortgage or sometimes more than 80% mortgage. And they are...

taking a very concentrated leveraged risk. And if house prices decline by more than 20%, they will lose all of the money they invested in their house. Now, there are differences. One of them is that you get to live in the house, whereas you don't get to live in your stocks. But another difference is, traditionally, it's hard to get non-callable leverage on stocks. And so your mortgage, if your house price goes down, you don't really notice necessarily because you're just paying the mortgage for 30 years.

If your stock prices go down, then you'll notice and you'll be like, oh no, the equity in my account is zero or whatever. But the sort of trick here is to think about it more like a mortgage and not

worry that your stocks have gone down because like in 30 years they'll probably recover. Yeah. I guess I have a hard time making my brain work that way. I think most people do. I think like everyone's natural reaction is like, oh, this is so risky. But it is in some ways riskier to have everyone have 200% of their net worth concentrated in houses.

And having 200% of your net worth in a diversified portfolio of stock and credit investments is maybe safer than having it all in-house, but maybe not. I'm not investment advisor, but I don't mind the leverage that much. I mind the fact that it's not Fox, but you know, can't win them all. I will say, I will say, the only thing is like, if you told me you can get 80% LTV leverage against the S&P and hold it for 30 years and then retire, I'd be like, yeah, it's a good product.

If you told me the same thing against the broad bond index, I'd be like, well, that's a less good product, but it's like, you're probably not going to lose all your money. Yeah. Against the private credit portfolio, is there some chance that private credit is like in a bubble that is going to burst? Maybe. You're definitely seeing more of those fears out there. Yeah. I'm not like super worried about that, but like, right. Saying, oh, we'll take 80% leverage on a portfolio of private credit. There's not a lot of history to kind of point to there. Yeah.

It's interesting to read this article this week about basic capital and, you know, how much exposure there's going to be to private credit in this. Because you also had Empower come out this week. Bloomberg News reporting that Empower is going to start offering private assets, working with firms such as Apollo and Franklin Templeton. We talk about it every week. It's like there's this gold rush to put private assets into 401ks.

Because like there's a long running tradition in democratic administrations of regulators being very skeptical of regulators.

high fee products in 401ks to the point that people kind of worry that they have a fiduciary responsibility to only put index ones in 401ks. And now there is this complete reversal where it's like, oh no, but people want private assets in 401ks. And obviously those have high fees. And so now everyone's like, let's put high fee products into 401ks. It's a real gold rush. And that's the cynical take. The sensible take is like retirement savers do have

30-year time horizons, and it's really discouraged to take money out of a 401k before retirement. So it's like, if you have a long time horizon, you should be taking illiquidity. You should be taking some risk.

It's truly the case that 401ks are a good place to put private assets. It's just like- But if I have a 30-year time horizon, why would you want to be anywhere but stocks? One of the pitches for private credit is that it's diversified. It is non-correlated to the S&P 500. But if I'm investing over that time period and I'm going to get-

probably low double-digit returns in the S&P 500 on an annualized basis, and I'm investing for 30 years, I'd probably still just want U.S. stock exposure. You can't guarantee that you're getting low double-digit returns on U.S. stock exposure, and diversifying credit is probably going to do it. But, you know, going past... Also, also, also, there's this line that I quote all the time. Someone says, if you can get, like, 12% to 14% returns on private credit, what else would you want to do with your life? And if you can get 12%,

From like pretty solid private credit products? Like why would you want 12% from the S&P? Because I feel like you're going to get it for lower fees and...

That's a big reason why. And I can see it every single day. I mean, this was the first time I checked my 401k in quite a long time. But I mean, history is a guide. You're probably going to get that in public equity. So like, why bother? Yeah, it was Steve Schwartzman said, if you can get 12 to 14% returns in like senior secured private credit, what else would you want to do with your life? I explain a lot of things with fees. I also feel like one of the main things that is happening in the financial world right now is

A lot of people have that same thought of if you can get 12 to 14 percent in like first lien private credit, what else would you want to do with your life? That's why it's hard to do private equity because like if you're in private equity, you're paying 12 to 14 percent. If you're in private credit, you're receiving it. It's a good deal. But I hear you. Yeah, it doesn't quite sway me. I hear you. I think that like if you ask what should...

normal retirement savers be doing. I think there's a decent case to be made that essentially zero cost equity exposure to the US economy is a good product and very high cost exposure to leverage loans and other weird structured stuff

is a great product to sell to you, and possibly less good of a product for you to buy. But that's not obviously true. I do want to say one other thing about private credit and this basic capital structure. In basic capital, they lend you 80% of the value of your portfolio. Where does that money come from? I don't know. I think it might come from their balance sheet early on, because they're just ramping this up. But in the long run, they have to find a source of capital for that.

And I don't know who that source of capital is going to be. I'd be surprised if it's like Citigroup. I would not be surprised if it's private credit firms, like insurance companies or whatever. Where I really want this to go in the long run is the Ouroboros where

Private credit firms are lending at SOFR plus 2% to retirement savers who then use those loans to buy slightly spicier private credit stuff from the private credit firms at like, you know, SOFR plus 6%. Yeah. Like that's a good financial product right there. I also just wanted to talk about the founder really quickly, Abdul Al-Assad. He's 30 years old.

Which is also pretty cool. It's the right age to be thinking about these things. Definitely. How can I leverage my retirement savings? He went to Harvard Business School. That's where he was when he pitched Bill Ackman. He also previously worked in leverage finance at Goldman Sachs. So, of course, you were going to think this is cool. Oh, yeah. Yeah. This is cool. This is like, you know. It's a resume after your own heart. Yeah. This is like. I bet he loves puzzle hunts. Puzzle hunts.

Thank you.

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The president of the private equity club at every university. I was going to say, these poor kids being hazed at these student finance clubs. This really bums me out. It is not anything like what I experienced in college. And it's like a sort of thing that I've been noticing even from my time in banking. But yes, there was a Business Insider article this week about college student finance clubs, which are so insanely competitive.

I think we've talked about this on the show, like where it used to be private equity firms would hire people after their two-year analyst program at a bank because they knew stuff. And they'd like, you know, you'd work as an analyst at a bank and then like, as you came to the end of your two-year program, you'd interview a few new jobs and private equity firms would interview you and they'd hire you. It was an advantage for a private equity firm to...

interviewed two weeks earlier than the other firms. And so it got pushed back to the point that now people are interviewing before they start their banking jobs. You graduate from college, you're about to start a banking job, but first you interview at a private equity firm where they ask you like, so how's your banking job? And you're like, well, I haven't been there yet. But so everything's getting pushed back earlier. And like one symptom of that is that being in these like exclusive elite finance clubs at universities is like

as being important for your resume to get the good finance jobs. I'm sure. And so you interview as a freshman, and they're like,

give you a bunch of difficult financial modeling questions. And there's someone in the story who cried during their interview. If you make it through, then you're in the finance club. And being in the finance club gives you the inside track to getting the investment banking job that'll get you the private equity job. Yeah, it did read suspiciously like getting into Greek life at a college or university. Not that the college I went to had Greek life, but it did sound a lot like rushing a fraternity.

Not a lot. Well, yeah. It's hyper-competitive. You don't drink it until you pass out. Well, no, but there's other forms of hazing. Yeah, like TCF modeling. Yeah. Which would you rather do? I don't know. Someone in the story was like, high school kids before they arrive on campus are like, you know, you spend your senior spring of high school...

Studying up on finance so that you can get into the finance club your freshman year. Seems insane. Yeah. I did not do this. No. I was so far from this. This just bummed me out. Like you said, all of this is getting pushed forward. And I do wonder, you know, what's the breaking point? Like, when does it turn in on itself? And I don't quite know. It just feels like, where does it go from here? There's nowhere else to go if you have high school seniors in their senior spring, you know, studying finance.

Of course, there's somewhere else. Where? Middle school? Yes. That's horrible. It's like someone was like, this is like travel sports, right? Like, this is another thing that people talk about all the time. Like, it used to be that, like, kids played Little League and they played for their high school sports teams.

And it was like sports and fun. And now it's like when you're seven, you try out for like the travel team and you have to spend all this money to be on the travel team. And like it's pitched to parents as like your kid will never get into college if they're not on like the elite team.

seven-year-old soccer team or whatever. And I don't know, man, that's like everything, right? Like all of these markers of status have become so competitive and the people witness that competition and are like, well, if I start a year earlier than everyone else, I'll have an advantage. And everyone does that. And so it just moves further and further back until like the seven-year-olds are trying out for like the travel financial modeling team. As a parent, does this stress you out? Yeah. Yeah. Yeah.

I'm not a parent, but I'm thinking a little- Well, this is why I'm working with my daughter on her DCF model. Oh, very good. Very good. Yeah. Yeah. I have a cat, so it doesn't quite apply to me, but I think of little Xanadu in like, I don't know, 15 years, and I worry about my- That's a great callback. That was so subtle. I was hoping that- I hope that our listeners get it. I shouldn't have even said anything. I should have just like-

Let it hang out in the air. But little Xanadu, your hypothetical child. Named after the New Jersey American Dream Mall. Probably in better than Xanadu. That's kind of why I hope it turns in on itself, because it just doesn't seem sustainable. Yeah, people have said that for a long time about a lot of things, like college admissions and stuff, and the ratchet keeps turning. I will say that there are countertrends to this. I always think of the very prestigious financial firms

I think of Renaissance and Bridgewater and, to some extent, Jane Street is like this. There's a notion that they don't hire people from traditional Wall Street training. They don't hire MBAs or people from the street. They like to hire people who are not tainted by traditional Wall Street thinking. And it's weird for people to channel themselves so intensely into the traditional paths.

But maybe it's not that weird. Maybe those firms are outliers. You know, pre-med, there's certain things you need to learn and know about science to become a doctor. But I could see like a Bridgewater thinking, you know, I want to make sure I have an edge that I'm not just hiring someone who has been programmed by someone other than myself. Like I want the creative thinker. You want the kids doing polo hunts, not the kids doing finance club. So maybe that will be a forcing action for...

turning it on itself. I don't know. The other thing is that, and I wrote about this, when I was in college, there were a lot of aimless, smart people who graduated from college and were like, "Well, I guess I'll do investment banking recruiting because they're there."

And in some ways, that's not good for a bank. Or, you know, some ways, if you're running a desk at a bank and, like, you can choose between the president of the financial modeling club and, like, the classics major who's like, well, I guess I'll do investment banking. You'd rather have the president of the financial modeling club because they can do financial models and they'll be useful to you. But I think, like, taking a step back, if you're, like, the CEO of a bank, there's a real value to having a broad perspective.

selection of ambitious, smart people who don't necessarily care about banking because some of those people will be really good bankers because they're a little bit broader minded and like less rigid than the people who are like just the financial modelers. But some of them will not be good bankers and will be politicians or media people or

you know, other things. Podcasts. Podcasts. And their two years at a bank will reflect well on you and sort of lead you to continue to do well in recruiting. Like, I just think that, like, if you're an investment bank and you're only hiring people who have been interested in investment banking since they were 18, like, you're sort of, like, undermining your own prestige. Yeah. Yeah.

Wow. This is like my very selfish disclosure. I used to work at Goldman. It used to be kind of cool to be like, I used to work at Goldman. And like you'd go around to like different places in life and be like, oh, I also used to work at Goldman, right? Yeah. And probably Goldman is proud of you. Oh, I hope so. Yeah. They better be.

I don't know, it's kind of similar in journalism. You want to hire people, not always, but you want to have some journalists such as yourself that came from outside the industry. Right. And both because it is vaguely prestige enhancing, but also because having that diversity of experience probably does improve the doing of the job. Whereas if everyone has the same training since they were 18, you're probably missing things.

Maybe the training is really good. Maybe these finance clubs are like, you know. They sound brutal. Right. There's this tension in the article where like these clubs are very selective. Yeah. And it's like, well –

You could just take more people and you could probably teach them how to pick stocks. And like maybe they wouldn't be great at it, but like who cares? Like some of them are investing like small portfolios of like the college's money. Some of them are not. Okay, you like didn't pick a good stock. But I think like part of it is they want to be selective because the main thing they're doing is like saying we were selective so that like they are the place where the banks want to hire from. Yeah.

I did love this line from the Business Insider article. Some clubs conduct three to five rounds of interviews, students told BI, which can involve a resume review. Yes, your high school resume, a social assessment, and multiple technical rounds in which you'll be grilled on real-world finance questions. My high school resume was written in crayon. So I would love to see some of these.

I do love the phrase a social assessment, which does that mean that you have to like drink until you pass out once? Because like, you know, it's still a college club. Like they probably still have parties, right? I hope so. I hope so too. Yeah. I don't know. Maybe some of these students will write in and tell us about their investment club. You know, I wrote about it and several people did write in to tell me about their investment club, including one person who pointed out that like

The competition goes two ways. And the banks like compete to get in front of these clubs. Yeah. Because like, you know, if you like have the first meeting with like the club, then like that club is more likely to send students to you. And so you'll be able to pick them off instead of them going to other banks. And so there is like a competition, including like the banks like love to sponsor stuff for the clubs or just give them money because like that helps with their recruiting. And so, you know, it goes both ways.

But yeah, in general, I got a number of emails from people who are in these clubs and none of them were like, no, it's great. That article is all wrong. They're having so much fun. It's pretty bad. Yeah. I have a friend whose daughter is in one of these competitive clubs and they asked me to speak and I talked to their club, but I also found it. I was like, why are you in this competitive club? Yeah.

Did they seem happy? Were there smiles? Was there any mirth? Well, I was speaking, so it was great. Oh, so everyone was laughing. It was full of mirth. And clapping. It was, I mean, stamping, cheering. It's probably the highlight of their college experience. Then they went back to doing DCF models.

Thank you.

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Well, this is really fun to talk about, but I'm really just in knots over how Elon Musk is going to get more money, specifically Tesla options. Yeah. This is not super newsy, but the FT reported that Tesla is trying to figure out a way to give him a giant bag of money. They gave him some stock options in 2018. Going all the way back to 2018. When Tesla was a $60 billion company. I mean, it's not like a $1 point something trillion company, but like

The options all worked out. He did great. They awarded him on the order of $100 billion from these options. And then the shareholder sued in Delaware, and the Delaware judge said, you know, this is a conflicted transaction that was not fair to shareholders, and so the options are gone. And...

Elon Musk and frankly Tesla's board and Tesla's shareholders are all kind of mad about that. We've talked about it in the past. And one thing they did was vote again to give him back the options. And the judge said, no, that doesn't work. The options are gone. And another thing they did was vote to move to Texas. So Tesla's now incorporated in Texas. So like the next time they give him stuff, you can only sue in Texas. And this week, the governor of Texas signed a bill

about limiting how much you can sue a company in Texas? And the answer is, you really kind of can't. It's meant to be much more protective of decisions like this than the equivalent law in Delaware. So if they were to give him another $100 billion today, it would be fine. No one would be able to check. But if they were to give him $100 billion today, they would have a huge accounting hit and he would have a huge tax hit. Basically, it would be

a multi-billion dollar expense to Tesla, which would hurt its income, and it would be a huge tax bill to him. He would pay like 57% taxes on the value of the award. What's nice about what happened in 2018 is that, broadly speaking, there were not a lot of tax consequences or a lot of accounting consequences to giving him this award because the options weren't worth very much in theory because the stock was low and there were a lot of ambitious targets that he had to hit in order to get the options.

And then like seven years later, the options are worth a lot of money because he hit the targets. Like that's how it's supposed to work. Now they're gone. And like giving him new options would be really bad for tax and accounting purposes. So Tesla's trying to figure out what's the right way to solve this in a way that gives him what he wants, which is both like...

a giant pat on the head for being so good and also like more control of Tesla. Yeah. But in a way that doesn't like create a huge tax bill or like an accounting mess. Yeah. Specifically, the FT reported that they formed a special committee to explore Elon Musk's pay. The committee comprises of just the chair of the board, Robin Denholm and Kathleen Wilson Thompson. It's going to explore alternative ways to compensate him for past work should Tesla fail to reinstate that 2018 pay deal. You had...

kind of a suggestion for them. So I've had two suggestions this week. One is my stupid suggestion and one is a reader's. Both of them are somewhat tongue in cheek suggestions. OK. Essentially, the problem is that the stock price of Tesla is too high. In 2018, they were like, we'll give you a huge pile of money if you 10x the stock price. And then he did it. And then now they can't be like, well, we'll give you another huge pile of money for 10x-ing the stock price previously because that would have tax consequences.

A poison chalice. The solution to the stock price being too high is to make the stock price lower. And so I don't think this is original to me. I think like, you know, I've been writing about Elon Musk for years and I've been getting somewhat conspiratorial emails from readers for years. And I think somewhere a reader emailed me like, if they want to give him stock options again, and it's very important that the options be granted at the money and he wants them to be very valuable, right?

The thing to do is to make the stock very volatile, tank the stock, give new stock options at a low price, and then bring the stock back up, and the stock options will now be worth a lot. Turns out- Is that what he's been doing? I mean, the stock went down a lot as he was doing Doge antics, and he's a little bit retreated from the Doge antics and said things like, "I will spend more time at Tesla."

And the stock has gone up. And it's like, well, you know, you could turn the dial all the way to Doge. Stock plummets. Give them stock options. Be like, oh, with these options, I'm now motivated to spend more time in the company. Turn the dial more to...

stock goes up, and everything's fine. Yeah, there you go. That's one solution. It's not a very good solution. That was your solution, so I'm not going to insult you. No, it's pretty stupid. What was the reader's suggestion? The reader's suggestion is there are various ways for Tesla to give Elon Musk stock, let's say. The traditional way to give a CEO stock is to do it as incentive compensation, and that runs into the problems that we have here where, like,

If you want to incentivize him for work he's already done, like you have a big tax bill. Another thing you could do is you could acquire a company that he owns, right? Maybe one that begins with X. Not necessarily. Yes. So there's a business logic to, I mean-

There's arguably business logic to Tesla acquiring XAI, because Tesla's an AI company and XAI is an AI company. But Tesla has in the past acquired SolarCity, which was a company that was partially owned by Elon Musk. And there were some allegations that Tesla was overpaying for SolarCity because Elon Musk wanted it to, and that it was essentially a bailout of SolarCity to enrich the CEO. And the shareholders sued.

He lost, and the Delaware court at the time said, nah, this was good enough. But, you know, in Texas, like, you could probably be even faster and looser. And so the solution that my reader suggested was like, look, you have an Elon Musk company. You overpay for it in the form of Tesla stock by $90 billion. Okay. And you've given Elon Musk $90 billion of stock.

that is not immediately taxable to him and does not reduce your earnings. So it kind of solves the problem of rewarding him for his past work. And the objection to it is that if a Delaware company was like, we're going to just buy our CEOs like random small startup for $90 billion, they'd get sued and they'd go to court and a Delaware chancellor would review whether the transaction was entirely fair to shareholders.

And given both the cynicism with which I'm describing this and Delaware's history with Elon Musk, the chancellor would probably say, no, this is not entirely fair to shareholders. You have to give back the stock.

But being in Texas. Yeah, anything goes. And the thing about this is, I'm describing it in this very cynical way, but you could imagine Tesla's board saying, this CEO is very valuable to us. We owe him for the good work he did increasing the stock price in the past that the Delaware chancellor took the stock away from him for.

shareholders have already voted to give him that stock back, and the chancellor said, no, that doesn't work. So what we're going to do is we're going to give him this stock in this alternate way where we're buying this company from him. You know, and I know, the company isn't worth $90 billion, but he's our guy. We like him. Let's give him the $90 billion. You could imagine disclosing that clearly and the shareholders saying, sure. Yeah. So we have two potential solutions on the board right here.

No one would ever cite this podcast if they implemented either of these solutions because you'd probably get in trouble doing these things explicitly. Right. But like implicitly? Well, this is a watch this space sort of moment. Tesla did say in a filing that its proxy statement will be delayed. That indicates that perhaps their annual meeting will be delayed. Yeah, they're working on how to do it.

Usually the annual meeting is in May or June, so maybe sometime in the summer. They want to come to shareholders with something that the shareholders can vote on to give Yolanda's money. We're going to talk about it on this podcast. But not next week. No, no. Next week. Next week we have something far more sinister.

And that was the Money Stuff Podcast. 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 on open interest between 9 to 11 a.m. Eastern. We'd love to hear from you. You can send an email to moneypot at Bloomberg.net. Ask us a question and we might answer it on 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 Masarakis and Moses Andan. Our theme music was composed by Blake Maples. Brandon Francis-Nunem 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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