| If you are trying to decide whether to buy the stock of some company, one thing you could do is sit down with its chief executive officer and ask her: "Should I buy your stock?" This probably won't be too informative: For reasons of incentives (her wealth is tied to the stock price) and general CEO optimism/confidence, she will almost certainly say yes. [1] But you can ask follow-up questions. If you say "okay, you think I should buy your stock, does that mean that you will have a good profit next quarter," and she says "no," or "define good," or "oh look at the time I gotta go," or if she says "yes absolutely" but starts sweating and looking around nervously, then perhaps those are useful indications that you should not buy the stock. And if she looks you in the eye and says firmly "it's gonna be amazing," go ahead and buy it. This is a little bit fanciful, but not that fanciful. CEOs do regularly meet with investors, and the investors ask questions and the CEOs answer them. In the US, securities regulations prohibit the CEOs from disclosing material nonpublic information in these meetings, so in theory, if you ask the CEO about next quarter's earnings, she shouldn't tell you anything the company hasn't already said publicly. In practice, though, these meetings do happen, which suggests that investors get some value out of them. And empirical studies find that, as you'd expect, investors who have meetings with CEOs make more informed investing decisions. They're definitely learning something in the meetings. The polite way to reconcile these facts — the CEO isn't allowed to give investors material nonpublic information, but the investors do get useful information out of these meetings — is to talk about "tone and body language." [2] Like, I guess, you ask "will earnings be good next quarter," and the CEO says "of course I can't tell you anything beyond what we have publicly disclosed," and she winks, so you buy the stock. Or she says it in a gloomy voice so you sell the stock. I assume that this is almost entirely euphemistic, [3] and what actually happens is that you ask good granular questions about the company's operations and finances, and the CEO thinks "well this is not the sort of material nonpublic information that I am not allowed to disclose" and answers your questions, and you come away with a better understanding of the company's prospects and a more informed investment thesis. The CEO gives you information that is useful and new, but somehow not material and nonpublic. So it's entirely understandable that you would want to meet with the CEO: She can tell you things that are useful in making your investment decision. But why would she want to meet with you? I think there's a cluster of related answers: - For incentive reasons (her wealth is tied to the stock price), she wants you to buy the stock, and for general CEO optimism/confidence reasons, she thinks she will be a good salesperson for the stock.
- For corporate finance reasons, she wants you to want to buy the stock, in case the company needs to raise money by selling stock.
- For fiduciary reasons, she wants to meet with the owners of her company's stock, because they are the owners of the company and she works for them. So if you are currently a stockholder, you're her boss and she'll make time for you, and she'll extend the same courtesy to people who are considering buying stock.
- For governance reasons, she knows that it is useful to her to have the support of her shareholders. So she will want to be helpful to you, so you will do things like vote to approve her compensation package or support her in a proxy fight.
But she's pretty busy, and there are a lot of shareholders, and she probably can't meet with everyone. She will need to prioritize, and those answers give you a sense of whom she should prioritize: - She should meet with investors who are likely to buy a lot of stock, and not with investors who aren't, or who might short the stock.
- She should meet with big owners of the stock, not investors who only own a little, or none, or are short.
- She should meet with big stable owners of the stock, who will still own it in a year when she needs a favor, and who are management-friendly and not likely to do a proxy fight themselves.
Also, like anyone else, she will want these meetings to be pleasant. If you ask friendly questions and are polite, you're more likely to get a second meeting. If you are rude and slovenly and ask difficult questions and push back on her answers and try too hard to get her to reveal material nonpublic information, she won't have a good time, and you won't be invited back. This all suggests that the CEO will want to meet with analysts and portfolio managers at Fidelity and Capital and Wellington, big long-only asset managers who own large chunks of stock for long periods. She will not want to meet with most retail investors, because they are too small, unless she has a very conscious meme-stock strategy. But she also may not want to meet with the long/short equity teams at big multimanager hedge funds. Those funds are big and important, but they often have short holding periods, so if she gets them to buy stock today they might sell it in a week. They tend to be market-neutral, and short stocks as well as buying them, so if she meets with them today they might go out and short her stock. And they are in the business of finding edge that no one else has, so they are more likely to ask tough questions and push for detailed information that she is uncomfortable disclosing. They are not good reliable long-term partners for a CEO; they are informed investors looking to do a smart trade. Also: possibly slovenly? At Business Insider, Bradley Saacks has a fun story about corporate access at big multistrategy hedge funds. For understandable reasons, CEOs used to prefer not to meet with them: Twenty-seven-year-olds in T-shirts. Cameras off during pandemic-era Zooms. Typing on laptops or phones while CEOs spoke. Twenty people on a call, all vying to ask a hyperspecific question, often related to next quarter's earnings. ... At bank-held conferences, alongside tenured portfolio managers from long-only funds and asset management giants like Fidelity and Wellington, "we were always the kids' table," one multistrategy executive admitted. It was "pretty common" between 2018 and 2021 for executives to say no to meeting with some of these firms, or sharply curtailing the number of seats allotted to these funds, said Christopher Melito, a former corporate access pro at Cowen, Citi, and Credit Suisse. Even with how much these firms paid the sell-side, "at the end of the day, a C-suite could say 'don't confirm that request, we aren't meeting with them,'" said Melito, who is now the head of investor access at consulting firm ICR. But things have improved, at least sartorially: For example, "a lot of top four funds stopped putting junior members in these meetings," Melito said, and started training younger investment team members on protocol. One former PM said that at Point72, blazers are required when meeting with an executive. At other large firms, Melito said, young analysts start by meeting with smaller-cap companies before shadowing more senior investors in meetings with large-cap corporations. Still there are problems. One problem is that, at the big hedge funds, there are a lot of portfolio managers covering similar sectors, so it's possible for a company to get five different calls asking to schedule meetings with "Citadel," which is pretty annoying: One portfolio manager at a large firm said the biggest fights he ever saw were between two teams wanting access to the same executive — and there would only be room for one. Firms often give more tenured teams the right of first refusal for a meeting, but sometimes big-name new hires will jump the line, causing a rift, another PM said. … In the ongoing war for talent that has top moneymakers getting offers of tens of millions of dollars in total potential compensation, an important question for candidates is how many other teams trade their specialty or sector, one recruiter said. "It's a make-or-break kind of question," he said. No one wants to be one of 20 investing in technology companies "unless the money's just stupid," he added. Another problem is: Are these meetings actually useful? Again, as a regulatory matter, they're not supposed to be, and it's at least possible that companies have gotten better about not disclosing nonpublic information in meetings with investors: One European equity investor said CEOs have become more scripted than ever, so meetings are basically a rerun of what they've previously said on earnings calls or at conferences. Another, based in the US, said the biggest value from these meetings used to be a sentiment check on how other teams were thinking about the stock — but now questions are often too specific and narrow to give any kind of indication into their thinking. [4]
But there is always body language: Tiger Global's billionaire founder, Chase Coleman, sees merit in these meetings and still attends them, a person close to the firm said, and funds have brought in former CIA interrogators to help investors dissect body language and read between the lines of a prepared statement.
Yeah, see, this is why the CEOs prefer meeting with Fidelity? Hedge fund: Hi, we are considering buying your stock, would you be willing to meet with us? CEO: Sure I love meeting my investors. Hedge fund: Great, we'll set up a meeting. On our side it will be our tech portfolio manager and two analysts. CEO: Cool, make sure they wear blazers. Hedge fund: And our CIA interrogator of course. CEO: Actually I just realized I'm busy that day. Private credit is the new banking | Citigroup Inc. is pushing into an innovative new line of business, which is lending money to its corporate clients. Bloomberg's Todd Gillespie reports: Deals in the expanded scope could include lending to small or mid-sized corporate clients of Citigroup, including companies that can't easily access syndicated markets or bank loans, according to Achintya Mangla, Citigroup's head of financing. … "We already have the corporate client relationships with the commercial and corporate bank — not all of them ready necessarily for a syndicated market, not all of them may be rated, not all of them are ready for the bank market," Mangla said in an interview. "Banks have limitations." One of the most interesting developments in modern finance is the gradual retreat of banks from their traditional core lending businesses, and their replacement by private credit firms. This is in some ways a very natural development, a move in the direction of "narrow banking." From first principles, banks are badly set up to lend companies money. Banks are funded by deposits, the deposits could be withdrawn at any time, and if a bank uses the deposits to make long-term loans there is a dangerous mismatch between its assets and liabilities. Private credit funds, which raise long-term funding to make long-term loans, do kind of make more sense as corporate lenders than banks. But, you know, banks were making loans funded by deposits for hundreds of years, and the other interesting modern development is that … everyone forgot that? "Banks have limitations"? "We already have the corporate client relationships"? What was the relationship? The banker would call on a mid-sized company and say "hi we'd love it if you'd use us for your checking accounts" and the borrower would say "great and can we talk about loans," and the banker would say … "no"? "Oh we don't lend companies money, sorry, we're a bank." Anyway now Citi will lend companies money, but in 2025, when a bank lends companies money, that is called "getting into private credit." Gillespie: The bank is hiring Aashish Dhakad from Ares Management Corp. to become head of private credit origination for North America, a new role focused on sourcing deals from corporate and commercial banking clients for private credit investors, it said Monday in a memo seen by Bloomberg News. ... The expanded focus indicates the bank's aim to deliver a larger suite of private-credit options for its clients — in addition to its traditional underwriting business in public debt markets — and to chase fee revenue across a larger variety of lending models. Such deal referrals already happen, but it's unusual for a bank to have a banker dedicated to them. The traditional business of a bank, in 2025, is underwriting deals in the public debt markets, and it's unusual for a bank to have a banker dedicated to lending companies money. Elsewhere in private credit, Bloomberg's Kat Hidalgo reports: After pouring billions into asset-backed finance, private credit managers and investors are starting to scrutinize what exactly they get back if their bets sour. With types of collateral ranging from mortgages, to music royalties, to physical assets like aircraft, the answer to that question can mean the difference between an easy recovery and being stuck with something hard to sell. … These days, [Kartesia Asset Finance] only lends against mobile assets — like helicopters — and it keeps a bank of video monitors trained on every piece of collateral backing up its investments to make sure they don't get lost or stolen. "I can see where any asset I finance is in the world at any time," managing partner Fabrice Fraikin said in an interview. "The few situations where we've been faced with having to recover assets, we have learned from those experiences." Over the centuries when banks loaned companies money, they figured out how to deal with collateral. Now that private credit has taken over that role, it is learning. One of the core ideas of crypto is that a token can be both: - The useful currency of some crypto project, and
- An investment in that project.
So you might buy Bitcoin because you find it to be a useful form of "digital cash," a more convenient way to pay for things than dollars. Or you might buy Bitcoin because you think other people will find it to be useful, so its value will go up. You could buy Bitcoin to use it, or just to bet on its future adoption. Crypto projects that came after Bitcoin took this idea one step further. The people who built Ethereum, for instance, realized that its ETH tokens would not be particularly useful until they actually built out the network. But it would cost money to build out the network. Where would they get that money? Well, by selling ETH tokens. People could pay for ETH, and then the Ethereum developers would have money, and then they would develop Ethereum, and then the ETH tokens would be useful. Why would anyone buy the ETH tokens, which were not useful? Well, perhaps because they were hoping to use them one day, when the network was developed. (It's like a Kickstarter, where you pay in advance for the product, so that the team has the money to make the product.) Or perhaps because they were betting that the network would be popular and ETH would be worth a lot of money. (It's like a startup, where you pay to buy stock so that the team has money to make the product, and then if they succeed your stock is worth more.) I once wrote that Ethereum's "initial coin offering" (selling ETH before building the network, to fund building the network) "was the original sin of crypto as a financing tool." Because: Is that a securities offering? Kickstarter is not a securities offering, probably; putting down money to buy a product makes you a customer, not an investor. A stock offering is a securities offering; putting down money to buy stock makes you an investor. Buying tokens is somewhere in between; tokens are kind of like a product and kind of like stock. There is all sorts of analysis on this question — "utility tokens," simple agreements for future tokens, etc. — that I will not worry about here. Here my point is that, for most of the last decade, there have been two main positions in US securities law: - Tokens are not securities, so people who sell tokens to build crypto projects do not have to register them with the US Securities and Exchange Commission, so they can do whatever they want.
- Tokens are securities, so people who want to sell tokens to build crypto projects have to comply with SEC regulations, filing all the financial statements and other disclosures that a public company would have to do.
The first theory is straightforward enough although also, I think, kind of crazy: It would effectively mean that any company could raise money by selling stock to the public, without any disclosure, as long as it called the stock a "token." The second theory strikes me as more legally defensible but annoying. An important point of crypto is to enable decentralization, to build projects whose governance and economic rights are held not by corporations but by their users. It's just very hard to do that and comply with SEC regulations. How do you file financial statements if there is no corporation in charge? Maybe there is an answer, but it requires a certain amount of accommodation from the SEC. The registration and disclosure process for, like, Ethereum will be different from the process for a tech company. Also, if tokens are securities, they might have to trade only on securities exchanges, which makes them not particularly useful as tokens. It's hard to pay for a sandwich with ETH if you can only buy or sell ETH on the stock exchange. The second theory makes tokens only securities, and not at all products, which is not quite right. You could imagine a third position: "Tokens are securities, but they are different from stocks. You have to register them, so that investors know what they are getting into and have disclosure and fraud protection, but there are special registration and trading rules to accommodate the realities of crypto." This strikes me as more or less the correct position, and there have been glimmers of it from time to time, but most people seem to be on one extreme or the other. Either tokens are securities and mostly illegal, or they are not securities and a free-for-all. When Gary Gensler ran the SEC, he was a strong proponent of the second theory, which in practice meant that crypto was mostly illegal in the US: Most tokens were securities, so they had to register with the SEC, but it was impossible for token issuers to register with Gensler's SEC, so most tokens were, in the SEC's view, illegal. (Gensler's SEC did not always win on these arguments, but it made them.) Now Gensler is out at the SEC, and Paul Atkins is the new chair. My rough impression of the current SEC is that it leans pretty far the other way, and takes pains to say that most tokens are not securities even while saying that it will regulate them for securities fraud. But it is possible that it will take the middle ground, saying "sure, selling tokens to retail to raise money to build a project is a securities offering that you have to register, but unlike the Gensler SEC we will actually let you do that." Anyway here's a speech Atkins gave last week about what he calls "Project Crypto": A key priority of mine will be to establish—as swiftly as we can—a regulatory framework for distributions of crypto assets in America. Capital formation is at the heart of the SEC's mission, yet for too long the SEC ignored market demands for choice and disincentivized crypto-based capital raising. As a result, crypto markets pivoted away from offering crypto assets and deprived investors of the opportunity to use this technology to contribute to productive economic enterprises. The SEC's head-in-the-sand posture—as well as its shoot first, ask questions later approach—are days of the past. Despite what the SEC has said in the past, most crypto assets are not securities. Okay, see, when I read "deprived investors of the opportunity to use this technology to contribute to productive economic enterprises," I think "yes right he's describing a securities offering," but then he goes right on to say "most crypto assets are not securities." There is a tension here. But then he goes on: In addition, it should not be a scarlet letter to be deemed a security. We need a regulatory framework for crypto asset securities that allows these products to flourish within American markets. Many issuers will prefer the flexibility in product design that the securities laws afford, and investors will benefit from the opportunity to earn distributions, voting rights, and other features typical of securities. Projects should not be forced to establish decentralized autonomous organizations and offshore foundations or decentralize too early if this is not their desired plan of action. I am excited to see new use cases for crypto asset securities in commerce, such as the ability to participate in blockchain network consensus with tokenized equities. Thus, for those crypto asset transactions that are subject to the securities laws, I have asked staff to propose purpose-fit disclosures, exemptions, and safe harbors, including for so-called "initial coin offerings," "airdrops," and network rewards. Regarding these sorts of transactions, our goal should be that issuers no longer exclude Americans from their distributions to avoid legal complexity and lawsuits, but instead choose to include Americans to enjoy legal certainty and an accommodating regulatory environment. Two points here. One is that this seems to me to be the substantively correct approach: Many crypto projects are securities-ish, so investors should have securities-ish protections, but they are not quite the same thing as stock, and those protections should be tailored to what they are. Under Gensler, the SEC occasionally hinted that it might help token issuers to register their offerings, but its actions were pretty resolutely hostile. Atkins's statements suggest that the SEC might actually make it feasible to register crypto tokens, which is probably the right approach. The other point is that this is definitely, in 2025, the correct approach for the SEC as a matter of politics. The Gensler SEC took the approach of "crypto tokens are securities, so they are under the SEC's jurisdiction, and the SEC will outlaw them." I think there is a real appeal to that position (lots of dumb stuff in crypto!), but that ship has sailed and crypto is way too globally influential to just ban it in the US. The SEC is in many ways the best agency to regulate crypto — because crypto tokens are obviously securities-like, and because the SEC has long experience in investor protection, disclosure regulation and trading supervision — but it has to affirmatively apply for the job. "We will ban crypto" is no longer feasible for the SEC, and "we will ignore crypto because it's not a security so not our problem" is not very attractive for the SEC. The only choice left is "we will regulate crypto, but in a way that you like." Wall Street Bonuses Are on Track to Rise Despite Tariff Uncertainty. Regional Banks Are Ripe for Mergers as DC Warms to Consolidation. White House Preps Order to Punish Banks That Discriminate Against Conservatives. Taiwan Arrests Six in Probe of TSMC Chip Technology Leak. Core Scientific shareholders balk at terms of CoreWeave merger offer. What Happens to AI Startups When Their Founders Jump Ship for Big Tech. Cognition Offers Buyouts to Newly Acquired Windsurf Staff. Push to Add 'Buy Now, Pay Later' Loans to Credit Scores Hits a Snag. A Generation Is Turning to 'Buy Now, Pay Later' for Botox and Concert Tickets. Deutsche Bank chief approved controversial trade he was later asked to probe. Russia's Secret War and the Plot to Kill a German CEO. HelloFresh Is Investing $70 Million to Have AI Help Plan Dinner. A Zoo in Denmark Wants to Feed Your Pets to Its Predators. If you'd like to get Money Stuff in handy email form, right in your inbox, please subscribe at this link. Or you can subscribe to Money Stuff and other great Bloomberg newsletters here. Thanks! |
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