| Just a real "private markets are the new public markets" moment: OpenAI is in early talks about a potential sale of stock for current and former employees at a valuation of about $500 billion, people briefed on the investment discussions said, marking an enormous gain in value for the artificial intelligence leader. The company is targeting a secondary stock sale in the billions of dollars, the people said, asking to remain anonymous because they weren't authorized to discuss the matter publicly. Existing investors including Thrive Capital have approached OpenAI about buying some of the employee shares, the people said. ... The latest move follows news last week the startup had secured $8.3 billion from a syndicate of investors for a second tranche of [an earlier] $40 billion financing, which was oversubscribed by about five times, according to one of the people briefed on the discussions. ... Major US startups often negotiate share sales for their employees as a way to reward and retain staff, and also attract external investors. The company run by Sam Altman is looking to leverage investor demand to provide employees with liquidity that reflects the company's growth, according to one of the people familiar with the investment negotiations. Of course the traditional way "to leverage investor demand to provide employees with liquidity that reflects the company's growth" is to do an initial public offering: When a startup has grown sufficiently big, it is ready to go public, and it can go public to leverage investor demand (by letting employees sell stock to investors). But modern private markets are so big, liquid and enthusiastic that you don't need to do that: OpenAI can do multibillion-dollar stock offerings that are multiple times oversubscribed whenever it feels like it, and it can arrange multibillion-dollar employee secondary sales to make sure that the employees can cash out. Traditionally, employees of private startups weren't supposed to cash out: They were supposed to work toward an IPO, and to keep skin in the game until they succeeded. Now, though, companies are in no rush to go public, so investors are perfectly happy to let early employees cash out millions of dollars of stock while staying private. In the olden days, startup employees were supposed to subsist on ramen and be totally devoted to the mission, but in 2025 top AI researchers are supposed to own multiple yachts, and the market has to keep up. One other question. These days I think the famous line has to be updated: "You know what's cool? A trillion-dollar valuation." Is OpenAI a trillion-dollar company? I mean, no, not yet, not if it's in talks to do a trade at $500 billion. But one thing that we talk about a lot around here is that there is a lot of retail demand for hot private startups — and few are hotter than OpenAI — at large premiums to their private-market prices. If you got your hands on $50 million of that OpenAI stock in the secondary offering (0.01% of the company at a $500 billion valuation), and you put it in a special-purpose vehicle and sold shares in the vehicle to private-wealth clients, could you get $100 million for it? Could you find some dentists willing to pay a 100% premium given the scarcity of publicly available OpenAI shares? It seems plausible to me. (Not investing advice!) Figma Inc. did its initial public offering last week. Figma was valued at $20 billion when it agreed to sell itself to Adobe a few years ago, but that deal fell through and Figma ended up going public at a slight discount to that $20 billion valuation. But then the stock shot up, peaking on Friday at a valuation of around $68 billion. One way to analyze that is something like "Figma was worth about $20 billion in the private market and about $68 billion in the public market," but that is a little oversimplified. Bloomberg's Anthony Hughes has a more nuanced explanation: Figma and the banks considered pricing the shares above the ultimate $33 per share set in the IPO, according to a person familiar with the matter. In the end, Dylan Field, Figma's co-founder and chief executive officer, wanted to bring on board certain long-term institutional shareholders, and Field signed off on the final $33 price, the person said, asking not to be identified as the information isn't public. With shares oversubscribed by more than 40 times, a blockbuster debut was by no means unpredictable. Had Figma and Field opted for a higher price, however, some institutional investors may not have been willing to buy the shares. ... Another clear contributor to Figma's outsized pop was the size of the offering. The number of shares sold, including the over-allotment shares, represented just 7% of the outstanding stock, a relatively small amount though not unheard of among hot tech IPOs. That may have left retail investors largely empty-handed. In social media posts, several users complained that after putting in orders with Robinhood Markets Inc., they received only one Figma share each. That is: - Only 7% of 93% of Figma's stock was offered in the IPO; the other 97% doesn't trade yet.
- Of that 7%, most was sold to "certain long-term institutional shareholders," whose distinguishing feature is that they were not planning to flip the stock for a quick profit.
- So only, like, what, 2% of the stock is freely available to trade?
- Everyone on Robinhood wants some, but they have to pay.
And so one analysis could be something like "the 98% of Figma that is locked in the hands of long-term institutional investors and still-restricted employees [1] is worth $20 billion or so, but the 2% of Figma that is freely available to everyone trades at like a 200% premium." [2] That is not particularly correct or rigorous — there's only one actual market for Figma's stock, you can't really separate it like that, and probably the free float is considerably above 2% — but it's a useful way to think about it. The price of Figma's traded shares is relatively high, because they are relatively scarce. OpenAI's are much scarcer. If you had a few — not $500 billion worth, but $50 million worth — could you sell them to dentists at a 100% markup? If Thrive is buying billions of dollars of OpenAI at a $500 billion valuation, and dentists are buying millions of dollars of OpenAI at a $1 trillion valuation, would that make OpenAI a trillion-dollar company?  | | | I wrote yesterday that one way to find out about a company's stock is to sit down with its chief executive officer and ask her "should I buy your stock?" Then I discussed various problems with that approach. One big one is that, if you are just some random person, what are the chances the CEO will want to meet with you? If you are a big portfolio manager at Fidelity or Wellington and you have owned 5% of her stock for a decade, sure, yeah, she'll be there. If you are a big portfolio manager at Point72 and you own 2% of her stock this week, maybe; most of our discussion yesterday was about the big multistrategy hedge funds graduating from the "kids' table" in corporate access. But if you're a retail investor who owns 100 shares, the CEO just has better things to do with her time. Or so I thought. There is a literature? Here is a new paper on "Discrimination in Access to Corporate Insiders," by Austin Moss, Roshan Sinha, David Volant and Donald Young, which finds that if you cold email a public company's investor relations department you have about a 16% chance of getting a meeting: We implement a 2×2×2 between-subjects design, systematically manipulating three investor characteristics in meeting requests sent to IR departments: race (Black or White), gender (female or male), and investor type (retail or professional). … In our experiment, we send meeting requests to 2,731 firms and receive 433 meeting approvals, for an overall 15.8% approval rate. … Investor type does not independently affect the likelihood of being granted a meeting as retail investors secure meetings at rates similar to professional investors. We caution against overgeneralizing this particular result to widely known investment firms (e.g., Vanguard, BlackRock, Citadel) as our experimental implementation most closely matches smaller or lesser known investment firms. Nonetheless, at a minimum, this finding challenges the conventional wisdom that retail investors cannot readily obtain meetings with corporate insiders. The "retail investors," in the experiment, are identified by an email address with one of "three popular, free email providers: @gmail.com, @yahoo.com, and @outlook.com," while the "professional investors" work at customized fake asset managers: For the professional investor condition, we create email addresses with fictious investment firm domains: @bluewillowcapital.com, @fusionpointequities.com, and @globalviewsinvestments.com. Each professional investor email includes a corporate signature. To enhance the credibility of these fictitious firms, we had a professional website designer develop a corporate website mirroring those of typical small investment firms. To mitigate domain-specific biases, we randomize the use of specific domains within each condition.
When I get around to selling Money Stuff merch, there will have to be a Blue Willow Capital vest. The emails to IR do not specifically ask for a meeting with the CEO, [3] and they never actually did the meetings, [4] so it's not quite "you have a one in six shot of getting a CEO meeting with a cold email," but still, better than I would have expected. There is, however, racial discrimination: We manipulate investor race and gender perceptions through the use of racially- and gender-distinctive names in email addresses. This approach builds on a well-established methodology in discrimination research. ... We find that White investors are 34% more likely to be granted meetings than Black investors. This racial disparity is robust and does not vary based on the investor's gender or type. Thus, our results suggest taste-based discrimination plays a role in creating the racial disparities we observe, as signals of the investor's sophistication or resources do not moderate the racial gap by reducing it for professional investors. Every stock and bond trade is an extension of credit. You and I meet on the exchange, and we agree that I will sell you some shares of stock. Then we go home, and we meet back up the next day so that I can give you the stock and you can give me the money. If something bad happens to one of us in the interim — if you go bankrupt, or I decide I'd rather sell the stock to someone else — then the trade might fall through. If I was really counting on getting the money, and you don't show up, I will be pretty sad. People don't think about this too much, because the market has developed pretty good mechanisms for dealing with it. There are clearinghouses that guarantee trades, and a system of capital requirements to make sure that brokers will be able to settle them; the number of trades that "fail" is pretty small, and most fails are temporary (I need an extra day to find the stock) rather than permanent (I have run off with the stock). But the simplest mechanism for dealing with this extension of credit is to make it short. When I started my career, US stock trades settled "T+3": We'd agree to a trade on Monday, and then meet back up on Thursday to settle it. That left three days during which stuff could go wrong. But then the market moved to T+2, and last year it moved to T+1: We trade on Monday and settle on Tuesday. Stuff could still go wrong overnight, but roughly spekaing — if my probability of running off with the stock, and your probability of going bankrupt, are uniform — the move from T+2 to T+1 reduced the chances of stuff going wrong by 50%. In some very theoretical sense, this should make it cheaper to trade. When you buy or sell a stock or bond, you are paying some set of intermediaries — mostly your broker and a market maker — to get the trade done. Those payments conventionally cover mostly: - Market risk: If you sell a stock to a market maker, and then the stock goes down, the market maker will lose money. So it wants to buy from you at a bit less than the fair value of the stock, to reduce its chances of losing money. [5]
- Salaries, computers, rent, data feeds, etc.: Brokers and market makers are businesses, they provide a service, they have costs, and they have to cover those costs by making a bit of money on each trade.
But also you should be paying a little bit for the credit risk, either directly (your broker worries that it will lose money by selling you stock that you don't pay for, so it charges you a fee for that credit risk) or indirectly (your broker has to post capital to a clearinghouse to cover your trades, and that capital has a cost that it passes on to you). And so when that risk goes down, the cost of trading should go down. Bloomberg's Isabelle Lee and Caleb Mutua report: More than a year after the US adopted one-day settlement, a key measure of corporate bond trading costs is down 12%. [6] Margin requirements — the cash or collateral firms must post to cover the risk of failed trades — have dropped 29%, according to Barclays Research. That's capital that can now be put back to work. Plus, there are signs that those savings have boosted credit market liquidity. … "Think of it as an efficiency boost to the system — or, put differently, as if your insurance premium just went down," Zornitsa Todorova, head of thematic fixed income research at Barclays, said in an interview. "That capital can either be used to trade more actively or deployed elsewhere." By the way, it was not obvious or inevitable that costs would go down. This cost — the credit risk of trades — obviously went down, but you could have imagined that other costs would go up to more than offset that improvement. For instance, if it is much harder to settle trades T+1 — if every bank and broker had to hire more people to work the overnight shift to get trades settled in time — then the increasing personnel costs might eat up the credit-risk savings. But in fact, Lee and Mutua note, "banks and other intermediaries have generally seen their expenses decline in the T+1 era." We talked on Monday about a new special purpose acquisition company backed by Eric Trump and Donald Trump Jr., whose draft prospectus explicitly disclosed that it will try to acquire a company "well-positioned to benefit from federal or state-level incentives, such as grants, tax credits, government contracts or preferential procurement programs." Arguably any company run by the Trump sons, in 2025, is well-positioned to benefit from federal incentives? A year ago I would have said "but you are not supposed to say that explicitly in writing." Now I would no longer say that! Go ahead! "We plan to use our father's job as president to make ourselves rich," yes, of course, why not. Well they revised the prospectus to tone it down a bit: In an amended version of the document filed later the same day, that description and others were removed. The reason for the changes weren't immediately clear, though the Associated Press reported the edit followed questions about potential for conflicts of interest, given the Trumps' involvement. Spokespeople for the White House and the Trump Organization didn't reply to requests for comment, nor did Kevin McGurn, the chief executive officer of New America Acquisition. Here's the new prospectus; the main deletions are on page 5. It's not like the strategy has changed. The new prospectus doesn't say, you know, "we will avoid buying any businesses that might raise the specter of a conflict of interest." It's just not so explicit now. I still think they're going to merge with Fannie Mae. We have talked a few times, over the years, about the funniest guy in crypto, James Howells. Howells is the guy whose partner threw away a hard drive containing the private key to 8,000 Bitcoins. In 2013, this was the sort of thing you might absent-mindedly do; in 2025, that hard drive is worth $900 million, oops. But Howells is pretty sure he knows the Welsh garbage dump where the hard drive ended up, and he has spent much of the last 12 years trying to get people to let him dig it up, with no success. In addition to being very funny, there is something metaphysically pleasing about this. The Bitcoins aren't "on" the hard drive, in any real sense. In some sense, the Bitcoins aren't anything. They are just a set of social conventions, and if everyone in the Bitcoin community agreed that Howells still had those Bitcoins, then he would. On the one hand, Bitcoin is resistant to that sort of "off-chain" social agreement — immutable code on the blockchain and all that — but on the other hand, you can always create new tokens. In 2021, I wrote: I have joked enough about the "object-fire-token-money" cycle of non-fungible tokens to say that the obvious solution here is that Howells should mint a non-fungible token representing, like, "I threw away 8,000 Bitcoins." This would have two benefits: 1. He'd own a tangible (ish) thing representing his Bitcoins in the dump, which might make him feel better, and
2. Maybe he could sell it? Or a share of it? How much would an NFT representing 8,000 vanished Bitcoins be worth? Search me, but maybe something? That was in 2021, when NFTs were hot, but really this analysis did not require a nonfungible token. If he issued 8,000 GarbageDumpBitcoins, they would presumably trade at a discount to the price of regular Bitcoins, but it's not obvious that the discount would be 100%. You could imagine people saying "well, Bitcoins at the bottom of a garbage dump aren't worth as much as Bitcoins on the blockchain, but they are still Bitcoins, and if I can get them at 30 cents on the dollar that's a good deal." Yeah, well. The Block reported yesterday: Howells said he has simply "pivoted" his strategy, but has not given up on his lost bitcoin, as he remains the legal owner of the 8,000 BTC, citing a High Court ruling in January this year. "The Council may own the hard drive, but they do not own the digital contents of that hard drive - the 8,000 bitcoin are legally mine in law - the balance of which can be verified by anyone worldwide at any time," Howells told The Block. That is: The normal, crypto-y way to prove that you own a stash of 8,000 Bitcoins is to have the private key for that stash, allowing you to send those Bitcoins over the blockchain. But being constantly in the news for a decade for owning that stash of 8,000 Bitcoins is also a kind of proof of ownership. Like, I could go around saying "actually those 8,000 Bitcoins are mine," and Howells has no more cryptographic proof of ownership than I do, but you wouldn't believe me, would you? He's been telling this story forever and he seems to be quite sincere about it. Anyway: Howells said now he is planning to tokenize his legal ownership of the lost 8,000 BTC into a new Bitcoin Layer 2 smart token named Ceiniog Coin (INI), utilizing the upcoming network update that removes the 80-byte cap on the OP_RETURN opcode in bitcoin transactions to free up space for more functionality. The token is slated for launch after October, and an ICO is planned for later in the year, Howells added. "The intention is to bootstrap the Ceiniog ecosystem and launch a successful high-speed, high-scale, fast-confirmation, payment-focused web3 environment secured by the Bitcoin blockchain and backed by 8,000 BTC," Howells told The Block. Man, he's still got it. Against very tough competition he remains the funniest man in crypto. Not only is he going to "tokenize his legal ownership of the lost 8,000 BTC" — a great idea that I've advocated for years — he is also somehow going to turn it into "a successful high-speed, high-scale, fast-confirmation, payment-focused web3 environment." The future of payments infrastructure will be built on top of a hard drive in a Welsh dump. Bank of America Junior Bankers Face Reassignment If They Accept Other Jobs. Tiger Cub Maverick Looks to Raise Money After Trouncing Rivals. Apollo Global to Buy Builder of Large-Scale US Data Centers. DeepSeek-Linked Quant Fund Caught Up in Kickback Scandal. OpenAI Releases Open-Weight Models After DeepSeek's Success. How Palantir Won Over Washington—and Pushed Its Stock Up 600%. Uber Boosts Buybacks by $20 Billion After Upbeat Forecast. Government Steps Up Campaign Against Business School Diversity. Galaxy's Mike Novogratz Says Crypto Treasury Rush Has Peaked. "Suniel Kumar Sharma … has repeatedly surfaced in far-flung countries, established ship registries, and then moved on when local authorities raised concerns about his operations." "We've got quite a nice yacht in Croatia, and my kids are 22, 19 and 14, and they prefer to boat around the Med on the yacht rather than go to Wales." Sand shortage. USDA Is Blasting Audio of Scarlett Johansson and Adam Driver's Fight in Marriage Story to Help Farmers Scare Off Wolves. 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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