Money Stuff: There Are a Lot of ETFs

My theory of exchange-traded funds is that they are an easy way to package trades. Anyone — any broker or financial adviser or individual investor — can think up a trade, and there are infinite possibilities. “Buy Tesla stock” is a trade, and “borrow money to buy more Tesla stock” is a different trade, and “buy Tesla stock and also buy Ford stock” is a third trade, and “buy Tesla stock and short an equal dollar amount of Ford stock” is yet another trade, and “buy Tesla stock and also buy some Dogecoin,” and “buy Tesla stock and sell call options on Tesla,” and “buy Tesla stock and also put options on Tesla,” and “buy Tesla stock and buy puts and sell calls,” and “buy Tesla stock and buy puts and sell calls but with different strike prices,” and “buy Tesla stock on Mondays and sell it on Wednesdays,” and so on, a tedious infinite list of potential trades just involving Tesla.

All of these are potential trades that someone could do, and many of them exist as actual trades that someone has done, but if enough people all want to do roughly the same trade — or if some enterprising marketer thinks she can get enough people to want to do the same trade — then they can be packaged into an ETF. And then, if you want to do “buy Tesla stock and buy puts and sell calls,” you don’t have to go to your brokerage and get approved to trade options and calculate how many options to buy and sell and worry about margin and click a lot of different buttons. You just click the one button — “buy the Tesla collar ETF” — and you get the trade.

Some investors — mostly high-net-worth ones — have financial advisers or brokers who will call them up with complicated trades, where the complication is part of the sales pitch; “I can put you in this bespoke handcrafted trade with all sorts of different derivatives” seems like good differentiated customer service. But many other investors have financial advisers or brokers who can’t or don’t want to do that, and “I can put you in this ETF that replicates a complicated trade with all sorts of derivatives” is easier for them to manage. Still other investors have just a brokerage app on their phone, and they have to do their trades themselves; they will be attracted to trades that involve just clicking one button.

So as ETFs become more popular and technology makes them cheaper to implement, more trades that were once bespoke and handcrafted will become standardized ETFs. And there are many, many, many, many more potential trades than there are stocks. I just listed 10 possible Tesla trades off the top of my head, and Tesla is just one stock. (Some of those trades involved other stocks, but that vastly expands the possibility set: “Buy Tesla and Ford,” “buy Tesla and short Ford,” “buy Tesla and Toyota,” “buy Tesla and Toyota and Ford,” “buy Tesla and Toyota and short Ford,” etc. are all potential trades that could be ETF-ized.) In the long run the possible universe of ETFs is capped by the (infinite) number of trades, not by the (dwindling) number of stocks. 

This is a change from the old-timey view that ETFs were essentially a way to package index funds. You don’t need that many index funds: Sure every possible combination of stocks could be an “index,” but the goal of indexing is to roughly replicate “the market” or a sector of it, and there are only so many useful categorizations. Certainly fewer than there are stocks. Traditionally ETFs were a way to simplify investing. Now they are a way to complicate it.

Anyway Bloomberg's Vildana Hajric reports:

Thanks to a breakneck pace of new launches, there are now more than 4,300 exchange-traded funds, a figure that for the first time eclipses the total number of stocks, currently hovering around 4,200, data compiled by Morningstar shows. ETFs account for about a quarter of the total universe of investment vehicles, up from 9% a decade ago, according to Investment Company Institute data.

While that variety drives down costs and tax rates for investors, it’s also creating a headache for them. Sifting through page after page of ETFs can be a daunting task.

“Choice is great until it becomes a burden,” Douglas Boneparth, whose Bone Fide Wealth manages approximately $115 million from New York. “There’s a paradox of too many options where investors can feel paralyzed rather than empowered.” …

“There’s an ETF for everything now — AI, pets, cannabis, woke and anti-woke portfolios,” said Boneparth. “It’s hard to tell whether you’re investing in something meaningful for the long term or you’re filling out an online quiz for Buzzfeed.”

This has helped convince many people that they need outside help. The share of self-directed investors — meaning those who are making their own investment selections — has dwindled to 25% in 2024 from 41% in 2009, according to data from researcher Cerulli.

“People are turning to advice because they don’t even know where to start,” said Scott Smith, Cerulli’s senior director of advice relationships. 

I guess that is a problem. In my model, rich people have good financial advisers, and those advisers put them in the bespoke trades that they want; self-directed investors have no advisers, but the availability and marketing of ETFs allows them to get into more or less whatever trade they want. But they have to be able to find the trades they want, and hear about trades that they might want, and with 4,300 ETFs you need an adviser just to read through them all.

Is this a good trade?

President Donald Trump sealed a deal that gives the US government a nearly 10% stake in Intel Corp., part of an unconventional bid to reinvigorate the beleaguered company and boost domestic chip manufacturing.

Under the agreement, the US will receive 433.3 million shares of common stock — representing 9.9% of the fully diluted common shares in Intel — according to a statement from the company. The $8.9 billion investment will be funded by grants from the US Chips and Science Act and Secure Enclave program that had previously been extended but not yet paid, Intel said, confirming a report by Bloomberg News.

That is: The US government had previously awarded Intel $8.9 billion of grants, but those grants hadn’t yet hit Intel’s bank account. Trump decided to tear up the deal and require that, to get the already-awarded money, Intel should have to hand over 9.9% of its stock. (An apparently arbitrary number: The stock closed at $24.80 on Friday, but the purchase price on the deal was $20.47 per share; the government got about $10.7 billion of stock for its $8.9 billion.) Paying $10.7 billion of stock for money that Intel was supposed to get for free seems like a bad trade.

On the other hand, if you’re supposed to get $8.9 billion for free you should expect some risk, and Intel is in a repeated game. Getting $8.9 billion of already-awarded cash from a grudging Trump is probably worth less than $8.9 billion, and there's always the chance that he’d find a way to back out of the deal. But making Trump a 9.9% shareholder of Intel is perhaps worth more than $10.7 billion: Instead of going around trying to get Intel’s chief executive officer fired, now Trump will go around cheerleading for Intel and trying to maximize the value of his investment. (“Trump will likely need to find more ways to support Intel, not wanting it to fail on his watch,” hypothesizes the Wall Street Journal.) For a few hours, anyway. I don’t know. I used to have an “Elon Markets Hypothesis,” where the value of a company was determined not by its cash flows but by its proximity to Elon Musk. But now we have a world where President Trump can inflict arbitrary harm on companies he doesn’t like, and confer arbitrary benefits on companies he does like, and he does both all the time. Giving him a 9.9% stake for free might be a good deal, just to get him on your side.

A very fun guy is Matthew Brown, who did a fake takeover of Virgin Orbit Holdings. In March 2023, as Virgin Orbit was sliding into bankruptcy, Brown lobbed in a last-minute bid to inject $200 million of capital to keep the company afloat. Virgin Orbit grasped at that lifeline, news of the offer became public, Virgin Orbit’s stock went up, and Brown got to go on CNBC to talk about his background in space investing and his plans for Virgin Orbit. But nothing came of it because the offer was fake: “Brown sent Virgin Orbit a fabricated screenshot of his company's bank account purporting to show a balance of over $182 million,” but in fact “the bank account actually had less than $1,” discussions quickly broke down, and in April 2023 Virgin Orbit filed for bankruptcy.

Last year, the US Securities and Exchange Commission sued Brown for securities fraud because you obviously can’t do that, that’s fraud. But there are two versions of this sort of fraud:

1. You buy some short-dated call options on the company, you announce your fake takeover, the stock goes up and you sell the options at a profit.
2. You just like space, and mergers, and going on television, so you do the fake takeover offer for sport, not for profit.

It did seem to me at the time like Brown was in the second category. He likes space! He wanted to be on television! This was a way to be on television! The SEC never alleged that he traded Virgin Orbit stock, or that he made any money from this. Obviously it’s fraud, but, you know, fun jokey fraud, not money-stealing fraud.

Anyway last week a federal judge granted summary judgment to the SEC, finding that (1) there is no dispute about the relevant facts in the case and (2) it’s obviously fraud. From the opinion:

Brown sent Virgin Orbit an edited screenshot of his company’s bank account that purported to show the account had over $182 million when, in reality, it held less than $1.39 Accompanying the screenshot was Brown’s email message, stating “I hope this can get the ball rolling. I do not have access to my [JPMorgan] brokerage acct but this should hopefully paint a decent picture until we get further down the road.” There is no doubt Brown knew, or at least was severely reckless in not knowing, that he was falsely representing his company as holding millions of dollars. These misrepresentations were designed to elicit action on the part of Virgin Orbit. Indeed, Brown testified that he sent the screenshot “[t]o get in the door” with Virgin Orbit.

Sure. But here is a very pro-Brown blog post explaining that no no no no no no the check was in the mail:

In a dramatic docket plot twist, it turned out Brown actually did have access to the money, just not in a form the SEC could mentally process. (Possibly space crypto, ancient Mesopotamian bearer bonds, IOUs signed by Poseidon, or, heaven forbid, actual cash. Spoiler: It was the latter.)

Brown testified that he had arranged a “funding facility,” a standard practice in venture capital and strategic transactions, similar to how Elon Musk publicly referred to his Twitter acquisition as being backed by his “personal” capital, when in fact it was a funding group. Brown’s was the same, because that’s how deals work: shared risk, syndicated funding, and managed capital. Not illegal. Not deceptive. Just… venture capital. The SEC simply couldn’t grasp it… like a dog watching a card trick.

Wildly, Brown confirmed under oath at his deposition that he’s the beneficiary of a quarter-billion-dollar generational West Texas oil & gas trust. His “negative net worth”? A minimalist’s truth: he claims he pays himself $1 annually, lives on $5–$10 daily (he’s a vegetarian and lentils are cheap), and calls hotel suites and his Gulfstream’s fuel “corporate overhead.” Minimalism, now with in-flight catering.

It is genuinely the case that every takeover offer is on a continuum from “real” to “fake.” When Elon Musk first offered to buy Twitter, he really didn’t have the money he would need to do it. He was confident that he would be able to find the money, but other people — including me — were not. And then he did. He’s a guy with a lot of assets and a lot of rich friends and a lot of investors who like him and a lot of banks who want his business, so it was reasonable for him to think that he might be able to scrape together $44 billion to buy Twitter, and he did. But there are closer cases, people who are pretty rich and have a pretty good number of rich friends and some investors who like them sometimes and some banks who will consider doing business with them, and who lob in not-fully-financed bids to buy companies that they hope will work out but that sometimes don’t. And then there’s whatever this guy was up to. Eating lentils?

As of January of this year, Mullen Automotive Inc. was a small Nasdaq-listed public company with a market capitalization of about $37 million, with a stock price of about $0.83 per share and about 44.5 million shares outstanding. [1] This was a problem, because under Nasdaq’s rules, if your stock trades below $1 per share for too long you can get delisted. There is an ordinary solution, which is the reverse stock split: If your stock is below $1, you ask shareholders to approve a reverse stock split in which every (say) 10 shares of stock get consolidated into one share. Each new share represents 10 times as much of the company, so it should in theory be worth 10 times as much, assuming that the value of the company is unaffected by how the shares are divided. So if the stock is at $0.83, and you combine 10 shares into one share, then each share should mechanically be worth $8.30. For small enough companies things do not work quite that reliably — it’s not like that $0.83 stock price reflected a rigorously accurate valuation of the company’s future cash flows — so you want to leave some margin for error. As it happens, Mullen did a 1-for-60 reverse split in February, which should have provided ample breathing room.

Just kidding! While Mullen was reducing its share count by reverse splits, it was also issuing a ton more shares, largely to investors who bought convertible notes in 2024 and got warrants with them. [2] The value of the company did not notably increase, though, so Mullen kept running into Nasdaq trouble. There is an ordinary solution, which is the reverse stock split, which Mullen did over and over again, leading to this breathtaking passage in its most recent quarterly report:

On June 2, 2025, the Company effected 1-for-100 reverse stock split of its common stock, and on August 4, 2025, the Company effected a 1-for-250 reverse stock split, as further described in Note 20 - Subsequent events, which were applied retroactively to these consolidated financial statements. 

In addition to the reverse stock splits referred to above, the Company previously effected an 1-for-25 reverse stock split on May 4, 2023, a 1-for-9 reverse stock split on August 11, 2023, a 1-for-100 reverse stock split on December 21, 2023, a 1-for-100 reverse stock split on September 17, 2024, a1-for-60 reverse stock split on February 18, 2025, and a 1-for-100 reverse stock split on April 11, 2025. The Company retroactively adjusted its historical financial statements to reflect the reverse stock splits.

So since the start of 2025, the company — which in July changed its name from Mullen Automotive to Bollinger Innovations Inc., and now trades under the ticker BINI — has done four reverse stock splits totaling 1-for-150,000,000: 150 million shares in January have been smushed down to a single share today. Of course there weren’t 150 million shares in January; there were 44.5 million. Its entire share count as of January represents less than half a share today.

They did round up, though. The result is that, for accounting purposes, Bollinger/Mullen had one share outstanding in 2024 (adjusting for stock splits). Its quarterly report notes that, in the quarter ended June 30, 2024, its net loss was $96 million, and its net loss per share was also $96 million. I don’t know if that’s the worst earnings-per-share result in the history of US public companies, but it has to be pretty high up there. [3]

Anyway I mention all of this because what do you think Bollinger is up to now? Its most recent stock split happened three weeks ago, but the stock closed at $0.42 on Friday, so it announced last week:

We are asking stockholders to approve a proposed amendment to our certificate of incorporation to implement, at the discretion of the Board at any time prior to the one-year anniversary of the Special Meeting, a reverse stock split of the outstanding shares of common stock in a range of not less than 1-for-2 shares and not more than 1-for-250 shares, with the exact ratio to be determined by our Board of Directors at its discretion without further approval or authorization of our stockholders (the “Reverse Stock Split”). The Board may effect only one reverse stock split as a result of this authorization.

The good news is it’s the last one:

If the Company elects to effect a reverse stock split, such reverse stock split will be the Company’s final reverse stock split. Final reverse stock split means that the Company will not effect another reverse stock split for a period of 36 months from the date of such reverse stock split that is a result of approval of this Proposal 1.

Ah.

The basic idea is that private equity sponsors raise funds from investors (“limited partners” or LPs) to buy companies, they buy the companies, they spruce them up, they sell them, and they return the proceeds of those sales to the LPs. In recent years, private equity funds bought a lot of companies, but they are now having a hard time selling them, which is a really critical part of the process. (It’s how the LPs get their money back.) There are in concept two broad fixes to this problem:

1. The sponsors could raise new equity for the companies. That is, roughly, they can sell the companies to themselves: You have a company worth $1 billion in your current fund, your current LPs are getting antsy, so you go out and raise a new $1 billion fund from new LPs and use that money to buy the company from your current fund and cash out your current LPs. This is ordinarily called a “continuation fund.” [4]
2. The sponsors could raise new debt for the companies. That is, roughly, they can go out and borrow money from lenders (who are sort of desperate to make buyout loans) and use the money to cash out their existing LPs. The collateral for the borrowing can be an individual portfolio company (a “dividend recap”) or the sponsor’s whole fund (a “net asset value loan”).

And in fact private equity sponsors do both sorts of deals. You can mix and match. For instance, if you have a $1 billion company, I suppose you could borrow $500 million to do a dividend recap, and then do a $500 million continuation fund for the rest, why not. Or you can mix and match in time: Borrow money for a little while to cash out your old LPs, and then pay down the loan with equity from new LPs. This is called, approximately, “subscription line financing,” and Bloomberg News reported this weekend:

Firms including Bain Capital and Leonard Green & Partners have started using commitments to continuation funds as collateral, giving them another way to borrow money. …

While continuation vehicles have been around for years, they’re growing in popularity and spawning new variants. The latest twist? Adding leverage by borrowing against the commitments to the funds. Banks extending these loans are generally willing to lend 20% to 25% of the value at a cost of about 3 percentage points over benchmarks, people with knowledge of the matter said.

Such loans allow private equity firms to bridge price disagreements between buyers and sellers by delaying asking investors in a continuation fund to hand over the cash they promised or waiting longer to close the deal, the people said. That can increase the internal rate of return by more than 2.5 percentage points.

The debt, known as a subscription line, credit line or net-asset-value loan, is taken out by the investment fund, generally with the knowledge and support of buyers, the people said.

Sure why not. The core problem in private equity is that the sponsors want to raise more money (for new investments, or for continuation funds), but the LPs don’t have money to give them because it is all locked up in existing funds. This way I guess you can bridge that: Borrow money, give it back to LPs, and then call them a few months later to get it back. 

I don’t know anything about former New York City mayoral adviser Winnie Greco’s alleged attempt to bribe a reporter by handing her “a wad of cash in a red envelope stuffed inside an opened bag of Herr’s Sour Cream & Onion ripple potato chips,” but I write a lot about bribery technique around here and I can’t really ignore this one. The best part is that the reporter, Katie Honan of The City, initially assumed that the bag of chips was just a bag of chips, but turned it down anyway due to journalistic ethics:

Greco and Honan walked to the Whole Foods next door. While inside the store, Greco handed Honan the opened bag of chips with the top crumpled closed. Honan, thinking it was an offer of a light snack, told Greco more than once she could not accept the chips, but Greco insisted that she keep them.

If your target is too ethical to accept a presumed light snack because that would create an apparent conflict of interest, maybe it’s not a good idea to put cash in the bag.

Keurig Dr Pepper to Buy JDE Peet’s for $18 Billion in Revamp. Private equity fundraising slides as sector’s downturn deepens. Weather Traders Are Hedging Against the Next German Wind Drought. Jefferies tells senior bankers to collaborate for biggest bonuses. JPMorgan to Pay $330 Million to Malaysia to Settle 1MDB Case. HSBC’s Swiss Bank Said to Exit 1,000 Mideast Clients Amid Revamp. EU speeds up plans for digital euro after US stablecoin law. OnlyFans hands record $701mn dividend to owner ahead of sale. Cars Are So Expensive That Buyers Need Seven-Year Loans. The Weeknd Looks to Raise $1 Billion Backed by His Music.

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