Among other things, crypto developed an alternative way to take companies public, or at least to take quasi-companies quasi-public. Traditionally, if you had a business idea, you would form a company to do that business. The company would receive the future profits of doing the business, and to raise money you would sell shares of the company, that is, rights to a portion of those future profits. Those shares are securities, and US law regulates how you can sell them: If you want to sell them to the general public in the US, you have to register them with the US Securities and Exchange Commission and provide financial and other disclosures.

Crypto found a new approach. I mean, sort of; arguably it found new labels for the old approach. If you had a crypto business idea — “I am going to start a platform to store value and do transactions and program smart contracts and trade derivatives” is the main crypto business idea — then you could form a decentralized crypto ecosystem to do that business. Instead of future profits accruing to a company, the future economic value of that business would accrue to the users of the ecosystem. Tokens of the ecosystem would be required to use the ecosystem, would represent a sort of quasi-ownership stake in the ecosystem, and would grow in value as the economic value of the ecosystem grew. And to raise money to start the business, you would sell some tokens.

And then you could argue that this is an entirely different sort of thing, that the tokens are not shares, so you didn’t have to comply with SEC disclosure rules.

There are two problems with this approach:

1. It might be wrong. Until 2025, the SEC mostly took the view that these offerings — of tokens representing economic interests in some business idea — were securities, and were therefore subject to registration and disclosure rules. People who issued tokens to raise money for business ideas would get sued, and crypto exchanges that listed those tokens would also get sued.
2. It might be right. If it’s right, then the essential features of these tokens are that (1) they do not have any claim on the future profits of the business idea, (2) the developers of the business do not have any fiduciary or contractual obligations to the holders of tokens, (3) the developers don’t have to disclose anything about the business to potential investors and (4) if there’s fraud, the SEC can’t do anything about it, and maybe nobody else can either. These features are not obviously attractive to investors. If you buy stock, you have some pretty clear expectations about your shareholder rights, based on decades of law and practice. If you buy tokens, who knows, man.

For a little while, neither of these problems mattered: Early in the crypto boom, the SEC was too slow to stop a lot of token offerings, and the enthusiasm for those offerings was great enough that you could raise hundreds of millions of dollars for a crypto idea without much disclosure or investor rights. But plausibly there is a cap to this, and if you want to raise billions of dollars from serious investors after the initial enthusiasm wears off, you might have to offer them, you know, disclosure and governance rights and protection from fraud.

In the Trump administration, more or less anything goes, crypto-wise, so you can go ahead and raise money for crypto projects by issuing tokens without worrying about registration or disclosure or fraud liability. (Not legal advice!) The first problem is solved. That doesn’t help with the second problem, though. Arguably it makes it worse. If crypto tokens are wholly unregulated, there may be some fairly binding limit to how much money you can raise from sophisticated investors by selling them tokens with uncertain economic and governance rights.

How do you solve that problem? Well here is a weird, clunky, yet somehow appealing approach:

1. Start a crypto project, with tokens, MattCoin or whatever.
2. Sell the tokens to anyone who wants them, but keep a lot for yourself.
3. Put your tokens in a corporate box, and give the box the name of your crypto project. “MattCoin Inc.”
4. Issue shares of the box: regular shares, on the stock exchange, with disclosure, in an ordinary initial public offering.

This way, your business idea exists in two mildly contradictory forms. On the one hand, there is a corporation that seems to own, and kind of does own, at least a portion of your business idea; if the MattCoin ecosystem prospers then surely MattCoin Inc. will be valuable. On the other hand, MattCoin remains a decentralized crypto ecosystem with a token; you still have the crypto credibility of saying “this is not a centralized system owned by a corporation controlled by Matt. Rather it is a decentralized ecosystem, not owned by anyone, whose token holders participate in its economic growth and governance, and Matt just happens to own a lot of tokens and be the chief executive officer of MattCoin Inc.”

If you succeed, this ends up in a strange place. There is a big decentralized ecosystem for storing value and doing transactions and so forth, and people buy MattCoins to participate in the system, and the MattCoins have governance rights and participate in transaction validation as they would in a 2020-era crypto project, but then there is MattCoin Inc., which owns a lot of MattCoins and is run by Matt. Does MattCoin Inc. control the system? Is the system a corporate product, the way Facebook is a product of Meta Platforms Inc.? Not quite, and that’s certainly not what you want the token holders to think. But is it maybe a little true? Is it maybe what you want the shareholders to think?

Anyway here’s this:

Crypto billionaire Justin Sun’s digital asset platform Tron is set to go public in the US, four months after market regulators agreed to pause a fraud investigation into several of his companies.

Tron will go public in a reverse merger with Nasdaq-listed SRM Entertainment in a deal orchestrated by Dominari Securities, a New York-based boutique investment bank with ties to Donald Trump Jr and Eric Trump, according to two people briefed on the matter.

The new venture will buy and hold the Tron token, mimicking the tactics of Strategy, formerly MicroStrategy, which founder Michael Saylor has turned into a leveraged bitcoin vehicle, one of the people said. ...

The deal will involve Tron injecting up to $210mn of token assets into the new company and marks the latest in a surge of crypto tie-ups fuelled by Donald Trump’s warm embrace of the digital asset industry since he began his second term as US president.

Here is the press release; Sun will be an “adviser” to the company, which will be renamed Tron Inc.. What does it mean to say that “Tron is set to go public in the US”? Tron’s TRX tokens are currently traded on lots of crypto exchanges, though not the big US ones. (Because until recently the SEC thought that TRX was a security — and in fact went after Tron for unregistered token sales and also some alleged market manipulation — so US crypto exchanges couldn’t list it.) The TRX tokens are … not “shares” of Tron, exactly, but the closest thing you can get; TRX is “the mainnet native token of the TRON Protocol issued by TRON DAO,” “the basic unit of accounts on the TRON blockchain” that “connects the entire TRON ecosystem,” carries voting rights and has “abundant application scenarios that power transactions and applications on the chain.” 

But now there is Tron Inc. Will the Tron blockchain be a product owned by Tron Inc.? No, not really. “Decentralize the web” is apparently Tron’s slogan, which is probably inconsistent with corporate ownership. Also Tron Inc. will apparently own $210 million of TRX tokens, less than 1% of its market capitalization of more than $26 billion, so it won’t have that much control. Perhaps Tron Inc. is just a random crypto treasury company that happens to own Tron tokens, though the name change and Sun’s role suggest otherwise. 

I suppose one way to think about it is that Tron Inc. is a US-securities-law-compliant wrapper for Tron tokens. Tron tokens are, among other things, a way to invest in the growth of the Tron ecosystem. That investment is securities-like enough that it has historically been off-limits to US investors: “Invest in the growth of a business” feels like stock, and Tron tokens were not registered with the SEC, so Tron couldn’t sell them to US investors easily, and they couldn’t be listed on US crypto exchanges. But Tron Inc. can hold Tron tokens, and it is registered with the SEC, so Tron Inc. can sell shares to US investors and have them listed on US stock exchanges. If you are a US investor and want to own TRX tokens, this is maybe the simplest way to do it.

Also, let’s not forget: I write all the time around here that the US stock market will pay $2 (or more) for $1 worth of crypto. One (sort of dumb) way to think about that premium is what I wrote above: US stocks have better legal protections, disclosure, fiduciary duties, anti-fraud policing, etc., than most crypto tokens do; arguably a crypto token wrapped in a stock should be worth more than a naked crypto token. [1]  If US stocks are worth more than crypto — if you’d pay more for a claim called “stock” than a claim called a “token” — then obviously token issuers should wrap their tokens in US listed treasury companies, because that way they can raise more money.

Here, Tron Inc. is selling up to 420 million [2] shares for $0.50 each, and presumably buying about $210 million worth of TRX with the money. At noon today, the stock was trading at about $9.10, roughly a 1,700% premium, suggesting that the stock market will pay $18 for $1 worth of TRX. If you have $210 million worth of TRX, as Justin Sun surely does, it would be crazy not to sell it to US stock investors for $3.8 billion.

To the outside observer, it sure looks like, in 2025, President Donald Trump can just tell US companies what to do and they’ll do it. Like if Trump doesn’t want a company to raise prices, or say favorable things about his political opponents, or donate to those opponents, or employ people he doesn’t like, he just tells them not to do those things, and they say “sorry boss” and stop. This is not a formal power that he has; there’s no statute or constitutional provision saying that the president has the power to approve companies’ hiring decisions. It’s just that he has the ability and willingness to make life pretty miserable for companies that do stuff he doesn’t like, so companies try to do stuff that he likes. 

This is pretty contingent, though. He has not always had so much unchecked power and willingness to make life miserable for companies, and in his first term as president companies regularly and openly did stuff he didn’t like. You could imagine it changing again: Stuff that he does keeps getting struck down by courts, and perhaps in the long run his threats will be less compelling than they seem in 2025.

I suppose if you are Donald Trump and you like having the ability to tell US companies what to do, the thing to do is to formalize that power, now, while you can. It is not at all certain that, if you tell companies what to do in 2027, they’ll do it. But if you tell them what to do now, they will. So you might as well tell them: “I would like you to sign an agreement giving me the power to tell you what to do in perpetuity.” Then, if you want them to do something in 2027, and the political and legal dynamics have changed so that they are no longer so inclined to do whatever you want, at least you’ll be able to point to the agreement.

The New York Times reports:

To save its takeover of U.S. Steel, Japan’s Nippon Steel agreed to an unusual arrangement, granting the White House a “golden share” that gives the government an extraordinary amount of influence over a U.S. company. ...

Under the terms of the national security pact, which the companies said they signed Friday, the U.S. government would retain a single share of preferred stock, called class G — as in gold. And U.S. Steel’s charter will list nearly a dozen activities the company cannot undertake without the approval of the American president or someone he designates in his stead.

Activities requiring the president’s permission include the company transferring production or jobs outside the United States, closing or idling plants before agreed-upon time frames and making certain changes to how it sources its raw materials.

Here is the press release, which is a little light on details. It seems to me that if a big US manufacturing company announced, in 2025, “we are going to transfer all of our production outside of the US,” and Donald Trump didn’t like it, he’d post about it a bit on social media and the company would quickly change its mind. But that might not work forever. Perhaps the golden share will.

Sell-side research analysts are unusual in that they are white-collar knowledge workers whose work quality is (1) public and (2) objectively measurable. Research analysts publish reports telling you what stocks to buy and sell, with price targets and estimates of future earnings; plausibly the best analysts are the ones whose recommendations, price targets and earnings estimates most accurately predict future stock prices and earnings. [3]  Also they’re mostly on LinkedIn. So you can ask questions like “which characteristics make an analyst good,” and use publicly available information to get answers that are (1) plausibly true and (2) plausibly generalizable to other sorts of white-collar knowledge workers.

This leads to a lot of academic studies of research analysts. We have discussed a paper examining analysts’ taxi trips to visit companies (result: an analyst who visits a company before it reports earnings will tend to have a good earnings estimate), and another one examining analysts who have the same first name as the chief executive officers of the companies they cover (result: also good for estimate accuracy). 

Covid-19 provided a series of natural experiments for this sort of study: When Covid-19 hit, many white-collar workers worked from home for a while, and then companies mostly required them to return to the office, but some companies were more or less strict about that and there was sort of random selection of who had to go back to the office and when. Perhaps white-collar work is improved by working from home: Perhaps people are more creative, less distracted, less stressed, less susceptible to groupthink, have more time to work without having to commute. Or perhaps it is improved by working from the office: Perhaps people are less diligent, less collaborative, less connected to their work and their colleagues and their customers.

And one way to find out is of course to look at analysts’ earnings estimates. Here’s “The Impact of Return-to-Office Mandates on Equity Analysts,” by Peixin Li, Baolian Wang and Jiawei Yu, which finds “that RTO mandates significantly enhance forecast accuracy,” reducing earnings forecast errors by about 15% and also improving “forecast timeliness.” Also:

Forecast accuracy gains are greater for younger, less experienced analysts, consistent with the notion that WFH deprives them of critical mentoring opportunities. Female analysts exhibit larger accuracy improvements than their male counterparts, possibly due to greater domestic distractions during WFH. Third, RTO mandates have a more pronounced impact on analysts' first forecasts issued after earnings announcements compared to other forecasts. This is consistent with the understanding that analysts are generally expected to release updated forecasts within a few days of earnings announcements, often under heightened time pressure. Fourth, the effects are stronger for analysts based in Democratic-leaning states than in Republican-leaning states. One possible explanation is that analysts in Republican states were already more inclined to voluntarily work in the office prior to the imposition of formal RTO mandates, thereby dampening the marginal effect of such mandates.

These findings suggest that RTO entails productivity gains, suggesting that WFH is associated with increased distractions or diminished collaboration efficacy

Also “RTO effects concentrate on stocks that are less important to analysts’ careers (e.g., those with smaller market capitalization, lower trading volume, or lower institutional ownership),” suggesting that the analysts were able to focus on the most important parts of their jobs from home, but at the office they have to do all the other parts of their jobs too.

In January, at precisely the wrong time, Bally’s Corp. launched a stock offering for its planned Chicago casino resort. The stock offering had an unusual feature, which is that it was open only to women and people of color: As part of its deal with the city of Chicago to build the casino, Bally’s had agreed that the casino would be 25% owned by women and people of color, so it launched a public offering to sell that 25% stake to women and people of color.

We talked about the deal at the time because it had (1) some interesting financial features and (2) terrible timing! A lawsuit was quickly filed against the deal, which we discussed in February. Now it has settled:

Bally’s Corp. said it has settled a lawsuit brought by two white men and a conservative legal group that challenged a $1.7 billion Chicago casino project that offered ownership stakes only to women and people of color.

The settlement comes after Bally’s revised the share-sale terms in April by opening it up to other investors. No terms were disclosed Friday in a federal court filing, which said all parties in the case had agreed to a dismissal of the case. The men sued the company and the city of Chicago in January alleging discrimination.

Here is the revised April prospectus, which no longer restricts sales to women and people of color. But as far as I can tell the agreement with Chicago has not been revised; only the share sale has. The prospectus says:

Under the Host Community Agreement, Bally’s commits that 25% of Bally’s Chicago OpCo’s equity will be owned by Minority individuals and Minority-Owned and Controlled Businesses (as such terms are defined in the Host Community Agreement) no later than twelve months following July 13, 2022 or such later date as may be determined by the City of Chicago, and will continue for no less than five years thereafter. As of the date of this prospectus, 2,141 shares of our Class A-4 Interests and 30,000 shares of our Class B Interests are held by Bally’s Chicago HoldCo, and 1,185 Class A Interests are, to our knowledge, held by various investors that have satisfied these criteria. We regularly communicate with the City of Chicago and provide updates regarding our compliance with the City’s ownership requirements, including the original time frame set forth in the Host Community Agreement, which may be extended by the City of Chicago. As of the date of this prospectus, we have no knowledge of non-compliance with such requirements and intend to continue to engage in our best efforts to meet such requirements in the future.

That is: (1) The Chicago casino is still required to be 25% owned by women and minorities, (2) it is still selling a 25% stake to the public, (3) it is no longer restricting those public sales to women and minorities but (4) ehhhh it’s probably still fine anyway?

Which might be true? Sort of depends on (1) how good a deal it is and (2) how effectively it is marketed to its target audience. It is possible that the people who sued were not primarily motivated by the desire to get in on a great deal. Their lawyer “declined to comment on whether Fisher and Aronoff had purchased any shares of the offering since it had been opened up to other investors.” I wrote in February that limiting sales to women and people of color (1) can’t really be allowed but (2) might be a good negging-based marketing ploy, but I’m not sure that’s right. Maybe if white men are allowed to buy the stock, they won’t.

Okay sure:

The timing of Israel’s plan to attack Iran was top-secret. But Washington pizza delivery trackers guessed something was up before the first bombs fell.

About an hour before Iranian state TV first reported loud explosions in Tehran, pizza orders around the Pentagon went through the roof, according to a viral X account claiming to offer “hot intel” on “late-night activity spikes” at the US military headquarters.

“As of 6:59 pm ET nearly all pizza establishments nearby the Pentagon have experienced a HUGE surge in activity,” the account Pentagon Pizza Report posted on Thursday.

Not confining its analysis to pizza, the account noted three hours later that a gay bar near the Pentagon had “abnormally low traffic for a Thursday night”, and said this probably pointed to “a busy night at the Pentagon”.

Here is that X account. I hope they sell a slightly faster direct feed to hedge funds; crude oil prices spiked on the news and you could have been early to buy crude if you knew about the pizzas. I guess I don’t really hope that. If you offer “open-source tracking of pizza spot activity around the Pentagon,” I assume the main consumers of your data are:

1. People who work at (or near) the Pentagon and want to order pizza when it’s not too busy.
2. Hedge funds who want to know when geopolitical volatility is coming, for hedging and/or speculative purposes.
3. Foreign intelligence agencies who want to know when missiles are coming, for fairly obvious reasons.

If you’re selling that direct feed to a hedge fund, you had better make sure it’s a hedge fund and not, you know, the Iranian military.

I suppose one point here is that the rise of “alternative data” — credit card transactions, satellite pictures of parking lots, etc. — has largely been about predicting corporate earnings, but perhaps that is just accidental. To the extent that investing edge came mostly from predicting earnings, people wanted the data that would help them do that. To the extent that markets now move more on geopolitical whimsy, you will want high-frequency differentiated data that will help you predict that whimsy. Yes of course that’s mostly Truth Social feeds but I am sure that people have more creative data sources. 

Another point here is that if you have made a lot of money by flying drones over mall parking lots to predict which retailers will have good earnings this quarter, that does not mean that you should go fly drones over the Pentagon’s parking lot to predict oil price spikes. They probably won’t like that, though this is not legal or investing or spycraft advice.