My rule of thumb is that every bad thing that a public company does, or that happens to a public company, is also securities fraud. This is not literally true — really it’s only securities fraud if the company is lying to investors about the bad thing [1] — but it is a useful rule of thumb. If you find a bad thing that has happened to a public company, I will find you a securities fraud case, even if it doesn’t seem like anyone is lying.

For instance: If an executive of a company is murdered, is that securities fraud? Brian Thompson, an executive at UnitedHealth Group Inc., was shot and killed outside an investor meeting in Manhattan last year by a gunman who seems to have objected to UnitedHealth’s business practices. The stock was down about 5% the next day, and is Is that securities fraud? [2] Not in the traditional sense, or even in most of the “everything is securities fraud” senses. It’s not like UnitedHealth kept the murder secret from its shareholders: It was national news from pretty much the minute it happened. And it would be hard to make a case like “UnitedHealth should have warned shareholders that its executives might get shot, which would be bad for the stock price, but it didn’t disclose that risk so shareholders were misled.” That could happen to any company; seems like a weird thing to put in the risk factors.

Still, find a bad thing and I will find you a securities fraud case:

A group of investors sued UnitedHealthcare Group on Wednesday, accusing the company of misleading them after the killing of its CEO, Brian Thompson.

The class action lawsuit — filed in the Southern District of New York — accuses the health insurance company of not initially adjusting their 2025 net earning outlook to factor in how Thompson’s killing would affect their operations.

On Dec. 3 — a day before Thompson was fatally shot — the company issued guidance that included net earnings of $28.15 to $28.65 per share and adjusted net earnings of $29.50 to $30.00 per share, the suit notes. And on January 16, the company announced that it was sticking with its old forecast.

Bloomberg Law adds:

This was misleading, [the plaintiff] said, as it didn’t disclose the company was “no longer willing” to “use the aggressive, anti-consumer tactics” it needed to achieve its prior forecast as it was embroiled in heightened public hostility.

The theory is that Thompson’s murder caused UnitedHealth to become more patient-friendly, which made it less profitable, but UnitedHealth didn’t immediately tell shareholders that, so the shareholders assumed it would continue to be patient-unfriendly and profitable. Here is the complaint, which sort of combines (1) the allegedly patient-unfriendly business practices, (2) the murder and (3) the public statements into one broad critique:

Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) UnitedHealth had, for years, engaged in a corporate strategy of denying health coverage in order to boost its profits, and ultimately, its share price; (2) this anti-consumer (and at times unlawful) strategy resulted in regulatory scrutiny (as well as public angst) against UnitedHealth, which ultimately resulted in the murder of Brian Thompson; (3) animus towards UnitedHealth was such that, subsequent to the murder of Mr. Thompson, many Americans openly celebrated his demise, expressed admiration for his accused killer, and/or otherwise demanded that UnitedHealth change its strategy even if they condemned Mr. Thompson’s killing; (4) the foregoing regulatory and public outrage caused UnitedHealth to change its corporate practices; (5) notwithstanding the foregoing, UnitedHealth recklessly stuck with the guidance it issued the day before Thompson’s murder, which was unrealistic considering the Company’s changing corporate strategies; and (6) as a result, Defendants’ public statements were materially false and/or misleading at all relevant times.

So what was the securities fraud? Was it:

1. That UnitedHealth “had, for years, engaged in a corporate strategy of denying health coverage in order to boost its profits, and ultimately, its share price,” without telling shareholders that, but that strategy was unsustainable and eventually shareholders realized that (because of the murder) and the stock dropped? Or
2. That UnitedHealth stopped doing that, without telling shareholders that the change would reduce profits?

Treating consumers badly to boost profits is securities fraud, but treating consumers well and reducing profits is also securities fraud, because everything is securities fraud.

If you start a stock mutual fund, what will happen is people will give you money and you will invest their money in stocks. If they give you a little bit of money at first, you will invest a little bit of money in stocks. As they give you more money, you will invest more of it. Perhaps as you get bigger you will buy more stocks — perhaps you’ll start with 20 stocks and slowly grow to 100 — but perhaps not; perhaps you really like the same 20 stocks and just buy more shares of each of them. Your inflows might be bit lumpy — no new money for a month, then a ton of new money at the end of the quarter — which will pose some administrative difficulties for you; buying a ton of stock all at once might take effort or move prices. But broadly speaking it’s fine.

If you start a private equity fund, this doesn’t work. If people give you a little money at first, you can’t go out and buy a little bit of a company: You are in the business of buying whole companies. If they give you a lot of money at first, that doesn’t work either: You are in the business of buying whole companies, which means that you have to find them and negotiate acquisitions. You can’t just deploy a billion dollars in a day; it takes time. What will you do with the money in the meantime? Also, if you are successful and people want to give you more money, the same problem recurs: What will you do with the new money? You can’t just put a new little bit of money to work in your existing deals. To start a private equity fund, you will want to raise a lot of money all at once, but then have a few years to actually invest it.

There is a standard solution to this problem: Normally investors in private equity funds commit a lot of money all at once, at the start of the fund, but they don’t actually hand over the money. Instead, the fund draws down their capital commitments over time, as it finds deals. So the fund knows that it has $5 billion to spend on deals, rather than having uncertain inflows over time. But it doesn’t have to spend that $5 billion all at once, and can wait to spend it as it finds deals.

One way to describe this distinction is that public stocks have a deep liquid secondary market, and private equity deals don’t. If you want to buy stock in a big public company, you can do it in a minute by pressing a few buttons, because that stock already exists, and other people already own it, and they will sell it to you at a well-defined market price. If you want to buy private companies, you have to call them up and negotiate prices with them directly, one at a time.

So starting a public stock fund means buying readily available stuff in the secondary market; starting a private equity fund means going out and creating brand new private-equity assets in the primary market. And this is also roughly true in the credit markets: You can start a bond fund by buying bonds that already exist, and if you get new money from investors you can quickly buy some bonds with it. In private credit, though, you are mostly finding new deals, one at a time, so you will probably have some sort of drawdown fund.

Another way to describe this distinction is that mutual funds are open to individual investors, while private equity funds tend to be open to sophisticated institutional investors. If your investors are institutions, you can do a drawdown fund pretty easily: They sign a limited partnership agreement and agree to put up capital when you call them, and you can be confident that they will. They are big and creditworthy and do this stuff all the time. If your investors are hundreds of individuals, this is harder: They might die or go bankrupt or forget or have cash-flow issues, and you don’t want to have to round them up for every deal. So stereotypically retail investors tend to invest in products where they pay in the cash up front, while institutions are more able to invest in products where they commit capital over time.

But, as we discuss a lot around here, the next big thing in private markets is raising big funds from individual investors. One thing that this means is finding ways to structure funded vehicles, where you go out and raise a bunch of cash and have to deploy it immediately. (And, relatedly, where you raise some extra cash each quarter and have to deploy that when it comes in, rather than when you find a good deal.) 

And one way to solve that problem is to create a deep and liquid secondary market for private assets, so that, when you raise a $1 billion retail fund, you can go out and find a diversified pool of $1 billion of private assets in like a week. Instead of having to discover and source and negotiate new deals, you just buy some of the private assets that already exist.

This also solves another problem. If you are a private fund manager and your existing institutional investors want to take money out, you will need to sell some private assets. Who do you sell them to? Well, a deep and liquid secondary market would be nice. A deep and liquid secondary market where the buyers are funds for relatively less sophisticated individual investors that have to deploy a lot of capital quickly would be even nicer.

Anyway here’s a Financial Times article about these things:

Big private equity investors are taking advantage of a flood of capital from wealthy individuals to cash out their buyout fund holdings at higher prices despite the industry’s years-long downturn.

Some of the largest evergreen vehicles, which allow retail investors to deposit and withdraw cash at regular intervals, have bought swaths of private equity fund stakes from institutional investors seeking liquidity after a dearth of distributions.

That extra demand has helped prop up prices for stakes in private equity funds on the secondary market, even as some institutional investors have cooled on investing in new funds because of the difficulties buyout firms have had exiting investments and returning cash to their backers. 

“There’s a lot of money flowing into these [evergreen] vehicles,” said one leading adviser, which they said were under pressure to deploy it quickly. 

Stakes in existing funds — so-called secondaries — are more flexible to buy and sell than direct investments in companies, making them attractive to evergreen fund managers because their investors deposit cash upfront and can regularly withdraw it. ...

“A lot of money is raised on a monthly basis and the funds want to invest it immediately,” the adviser said. 

Retail funds have offered higher prices for secondary stakes than others in the market. That has helped the buyout sector to weather a challenging period by making it easier for institutional investors to cash in holdings, at a time when dealmakers are unwilling or unable to sell the underlying assets.

We have talked about these issues before, for instance last year when we discussed a Blackstone fund for individuals that had to find ways to quickly deploy capital, or last week when we discussed the appeal of mixed public/private funds, which is in part that you can put money to work in public secondary markets while you wait to find private primary deals. We also talked last week about the push to sell private credit to retail, and I said that “a more cynical market-timing-based explanation is also available, along the lines of ‘sophisticated institutions will pay 50 cents on the dollar for this stuff so let’s sell it to retail at 100.’” Well. Yes.

Has anyone ever looked at Trump Media & Technology Group’s financial statements? Yes, absolutely: I have, and so have a lot of other financial journalists, and I think all of us have come to the financial statements with the same purpose, which is to make fun of them. They’re funny! Last quarter, Trump Media lost $31.7 million on revenue of $821,200. Last year I described the company as making about as much revenue “as a top Substack newsletter,” but of course with much higher expenses. It is a singularly un-lucrative online media business, with a singularly lucrative stock: Its equity market capitalization is more than $5 billion. There are no $5 billion Substacks.

My point here is that you could stare at these financial statements all you want, you can build whatever fancy models you want, but you cannot extract a price for Trump Media’s stock from its historical financial statements. If you are feeling generous, you could say that the price of the stock embeds optimistic assumptions about future revenue from future lines of business that are not even hinted at in the historical financials. If you are feeling less generous, you could say that Trump Media is a meme stock, an index of Donald Trump’s power and his ability to extract money from that power; historical and future financials have nothing to do with it. But in any case, historical financials have nothing to do with it.

I make this point not as investing advice, but as a way to think about a certain genre of stories about Trump Media, stories to the effect of “it is possible that there might be problems with Trump Media’s financial accounts.” Last year, Trump Media’s former auditing firm got in trouble for various hilarious deficiencies, which might have troubled you if you were relying on Trump Media’s audited financial statements, but you absolutely absolutely absolutely were not. I wrote: “If you have decided that investing in Trump Media is a good idea, it is probably not because you thought the financial statements looked good, which means that Trump Media has no particular incentive to make its financial statements look good.”

Anyway like four people have emailed me about this:

Trump Media & Technology Group Corp. showed “material weakness” in internal controls over financial reporting, raising risks of misstatements, the firm’s latest quarterly result showed.

The company carried out an evaluation of its disclosures and controls and found that procedures were not effective, the report said. It cited “failure to design and maintain formal accounting policies, processes, and controls to analyze, and account for complex transactions as well as a need for additional accounting personnel who have the requisite experience in SEC reporting regulation.” …

“TMTG’s management determined that the material weakness primarily related to its failure to design and maintain formal accounting policies, processes, and controls to analyze, account for and properly disclose income recordation as well as a need for additional accounting personnel who have the requisite experience in SEC reporting regulation,” the company said in a statement.

Is it surprising that Trump Media has not done a bang-up job of designing and maintaining formal accounting policies and procedures? Absolutely not. Does it matter? Absolutely not.

We talked recently about lawsuits, real and hypothetical, against artificial intelligence agents. I wrote that “it’s possible that they have too little independent agency to be legally responsible for their actions, but enough to make nobody else responsible for their actions.” If an AI bot lies to you and you are harmed, who is responsible? The maker of the chatbot might have done their best, and not be negligent in a traditional sense; the chatbot, meanwhile, doesn’t seem capable of things like negligence. So who is responsible? I confess I missed the obvious answer, “the insurance company.” The Financial Times reports:

Insurers at Lloyd’s of London have launched a product to cover companies for losses caused by malfunctioning artificial intelligence tools, as the sector aims to profit from concerns about the risk of costly hallucinations and errors by chatbots.

The policies developed by Armilla, a start-up backed by Y Combinator, will cover the cost of court claims against a company if it is sued by a customer or another third party who has suffered harm because of an AI tool underperforming.

The insurance will be underwritten by several Lloyd’s insurers and will cover costs such as damages and legal fees. 

Seems right. I assume they’ll use an AI model to price the risk. 

“Betting on the Pope was the original prediction market,” the No Dumb Ideas blog wrote in March, which I guess makes sense; there’s a long history of papal elections and people like a gamble. Certainly this year there was a lot of action at online prediction markets about who the next pope would be, though they were not particularly accurate. Here’s Nate Silver’s analysis of why the pope market wasn’t very good:

The choice of the pope presumably doesn’t have broader implications for financial markets, so well-capitalized institutional investors are unlikely to be involved. The modal trader probably knows little about the Catholic Church. Papal elections occur extremely rarely. And papal conclaves include relatively few participants, and they’re sequestered to prevent any leaks to the outside world.

In such situations, the conventional wisdom can just feed back on itself.

One important upshot of this is that, if you did know that Cardinal Robert Prevost was going to become Pope Leo XIV, you could have made a lot of money betting on him at long odds. But you didn’t. Even if you had inside information — even if you could have called a cardinal before the conclave and asked “so who’s it gonna be?” — you couldn’t have put much confidence in it. Even the new pope’s brother didn’t know: 

John Prevost knew there was a chance his brother could be elected pope.

“Last Saturday when I was at church, one of the priests came over and told me the odds in Las Vegas were 18 to 1,” said Mr. Prevost, who lives in suburban Chicago. “He didn’t have a doubt. He thought it would definitely be my brother.”

But Cardinal Robert Francis Prevost, who was preparing for the conclave, shrugged it off when his older brother called from Illinois.

“He said, ‘No way, not going to happen,’” recalled Mr. Prevost, 71, who is retired from a career as an educator and school principal.

I assume that Prevost, armed with that absolute denial, didn’t short his brother’s chances on Kalshi, but it would have been funny if he did.

Elsewhere, here is an X post from a guy who says he made $100,000 on the papal prediction markets, mostly by shorting overvalued favorites but also by buying a few lottery tickets, including the winner.

Apparently the way commercial property taxes work in the UK is that (1) the tenant of a commercial property pays the tax to the local council, (2) if the property is unoccupied, the owner pays the tax and (3) “agricultural facilities” are exempt from tax. If you own an office building and can rent it out to businesses, you should do that, because they will pay you rent (and the tax). If you own an office building and don’t currently have a tenant, though, your incentive is to do agriculture in the building, because then at least you don’t have to pay taxes, and I suppose you can sell the agricultural products you produce.

What sorts of agriculture can you do in an empty office building? I feel like there are plausible answers that involve the word “hydroponic,” but if you are looking for the minimum viable answer — the agricultural use that you can most quickly abandon if you find an office tenant — it is apparently a box with two snails in it:

In a £32 million office block on Old Marylebone Road, a short walk from Hyde Park, sat more than a dozen sealed boxes marked “L’Escargotiere” — the Snail Farm.

To the surprise of officers from Westminster city council, a few doors down the road in a second empty office there were more.

The unusual discovery in the heart of London is what the local authority claims is a “ludicrous” tax avoidance scheme it has spent the past three years trying to tackle, losing more than £280,000 of revenue in the process. Each box is said to contain snails that have turned two empty offices, which would be liable for business rates, into “agricultural facilities” exempt from the tax. …

It is not clear how many snails are inside each box or how regularly they are tended to, but L’Escargotiere’s website says its “unique breeding terrariums are occupied by just two helix maxima breeding snails”. Rural snail farms in the UK that supply restaurants breed tens of thousands of snails. ...

Snail farms have popped up in empty office blocks across the country, causing a headache for local authorities who say they are being deprived of thousands of pounds of revenue. The companies behind the city centre snail farms argue they are legitimate enterprises entitled to the agricultural exemption.

And then when a hedge fund wants the space presumably you just chuck the snail boxes in the garbage? The Times article includes photographs of the outsides of the snail boxes, but not the insides, which raises the obvious question: Does a box labeled “two snails” satisfy the agricultural exemption, or do you actually have to have the snails inside? I think the latter — some council inspectors have apparently popped open the boxes and found the requisite two snails — but that seems a little wasteful; these are pretty abstract snails. These are snails for tax purposes, not so much for eating. I don’t know why a pot of basil on the windowsill wouldn’t work, but the Times asked an accountant and he apparently drew the line at two snails:

“All that is driving this is cost,” said Philip Vernon, head of business rates at PwC. “Empty [business] rates on some city office buildings are not an insubstantial amount of money. Since 2008, empty rates have been levied at the same level as occupied rates. The sheer weight of the cost of the empty rates on buildings which are essentially economically inactive does force some owners and property holders to take drastic action.”

Vernon added: “It’s on the very edge on what [PwC] would consider reasonable practice. We don’t think it is appropriate to create artificial arrangements to take advantage of the tax rules [on] business rates.”

I just like the idea of going to an accountant for a ruling on what is and is not reasonable tax practice and the accountant has a chart where like “raze the building and plant soybeans” is at the top and “pot of basil in a closet” is at the bottom and there’s a dividing line between “tax exempt” and “come on” somewhere toward the bottom, and “two snails in a box” is right exactly on the line; the tax status of two snails in a box is uncertain, but everything more agricultural than two snails in a box is fine and everything less agricultural is not. And you’re like “some lobsters in an aquarium?” and your accountant is like “hmm seems a bit more agricultural than two snails, wave it in” and you’re in the lobster business until you find a tenant.

Xi Defiance Pays Off as Trump Meets Most Chinese Trade Demands. Citadel Lobbies for Four-Year Non-Competes in Home State of Florida. OpenAI negotiates with Microsoft to unlock new funding and future IPO. OpenAI Stake Cushioned Tiger Global’s Megafund Losses. The Giants of Silicon Valley Are Having a Midlife Crisis Over AI. SoftBank Stargate Venture With OpenAI Hits Snags on Tariff Fears. Celsius Founder Mashinsky Gets 12 Years for Crypto Fraud. Trump Administration in Talks to Accept New Air Force One as Gift From Qatar. Boy Accidentally Orders 70,000 Lollipops on Amazon. Jalen Brunson … said of the pope, “It’s really cool for him and I’m very happy for him, but I’m focused right now.” 

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