Citadel’s $1.15 billion money infusion is not a bailout however the last check of Ken Griffin’s ‘Demise Star’
If you add more than a billion dollars worth of liquidity to a market maker who has executed more than one in four trades a day in the US markets, while giving them state-of-the-art access to the fastest growing asset class in modern financial history, that is no bailout. It’s a warning.
Citadel Securities announced a $ 1.15 billion investment by venture capital giant Sequoia and cryptocurrency investment firm Paradigm early Tuesday, and it blew many, even if some were clearly blown in the wrong direction.
Social media immediately flared up in response to the announcement with speculation among retail-investing “monkeys” that the funding was an emergency move from Citadel Securities founder – and meme stock arch villain – Ken Griffin, who they believe is in need is of huge sums of money to fend off MoASS, or the “mother of all short squeeze”.
These theories looked like this:
And on Reddit, where the word “bailout” erupted like a rash, users leaned towards what we would best describe as “wishful thinking.”
“Sounds like the Citadel is falling apart,” wrote one user on the r / GME subreddit. “Those puts that expire this month are going to hit them hard, hence the bailout.”
“It’s like Citadel and SAC ‘invested’ in Melvin,” said another user on the r / Superstonk subreddit, referring to Griffin’s hedge fund that poured millions into the infamous short seller Melvin Capital just before stocks like GameStop GME went tight, -0.65% and AMC Entertainment AMC, + 0.04%, came to a sudden and controversial halt almost a year ago. “Bullish.”
We get Griffin vilified by the Ape community and that he embodies everything they see as unfair and manipulated about the American financial system – and buying the Constitution didn’t help at all – but Griffin doesn’t need money anymore to run one Market making company now valued at $ 22 billion and a hedge fund with approximately $ 43 billion in assets under management.
Any talk of “bailouts” or liquidity crises within Citadel is not based on reality, which is a shame because the reality of this deal is so much more interesting and should dominate any meme stick discussion on social media.
You see, this deal is not about retail investors. It’s about the rest of Wall Street. And Griffin could really use an additional $ 1.15 billion to show his real rivals that he is serious.
It’s been an open secret for years that Griffin wants Citadel to be the next Goldman Sachs GS, + 0.97%,
a financial services superpower with global reach that can create markets, dominate stock trading, and fund transactions of spectacular size.
This deal gives him the liquidity to go bigger and abroad.
And since Goldman Sachs is no longer “Goldman Sachs,” Griffin has just made his first investment to make it clear to all observers that Citadel is ready to take on that cloak. (So fair warning Morgan Stanley MS, +1.72%.
Sequoia has invested in some companies you may have heard of – Apple AAPL, +1.68%,
Google GoogL, + 0.77%,
Instagram FB, + 1.92% and LinkedIn MSFT, + 0.23%,
to name just a handful – and their reach in the fintech area is limitless.
Paradigm invests fully in crypto and Web3 startups and gives it an important glimpse into the direction this space is headed in as opposed to its location, which is an interesting gimmick for Griffin who was publicly cynical about crypto but is now This paradigm is in his ear, how he can use the future by creating markets that have not yet been invented.
Citadel’s entry into crypto would enrag the people who got into crypto to avoid the citadels of the world, but we can only imagine how angry they will be when Citadel enters this market and the limit of every asset class into a mayonnaise blurred.
An alliance with Sequoia and Paradigm is now similar to colleague Virtu Financial VIRT, + 2.08%, got support from private equity titan Silver Lake Partners years ago, albeit much more forward-looking … and on steroids.
It should of course be mentioned that Sequoia is also a major investor in Robinhood HOOD, + 5.12%,
another crease that elicited conspiratorial moans from the monkeys, but actually something that should be of far greater interest to the aforementioned Goldman Sachses and Morgan Stanleys of the world.
By the way or not, Virtus shares VIRT closed that day with + 2.08%, more than 2%.
Now, Morgan Stanley jumped into the retail pool with the $ 13 billion takeover of E-Trade in early 2020, while Goldman, apparently still intent on growing its consumer product, Marcus, has no such toy available.
So if Ken Griffin is to use the money and influence of Silicon Valley to expand, then perhaps Goldman should start putting Sequoia’s largest fintech toy and the company that receives hundreds of millions from Citadel in payment for the flow of orders on the tires to kick?
Given that Robinhood’s market cap is around $ 14 billion, this might make sense. And that might not be an original idea considering that Robinhood closed more than 5% on Tuesday, the best day in a long time.
This deal is not a bailout, but a moment for many on Wall Street to see what the boom in meme stock trading has done to Citadel and begin rethinking Griffin’s new power.
There are also rumors that the venture deal anticipates an IPO for Citadel, but no one seems to believe this is happening anytime soon, and why should it be?
For retail investors blinded by their animus towards “Kenny G”, we offer this final piece of advice: When you look at Griffin and see the Emperor from “Star Wars” trying to crush the Noble Rebellion, do not interpret this investment as an opportunity to attack a weakened emperor on an unfinished Death Star.
See it for what it is: a Death Star that just got a little bigger and a lot more operational.
If it is able to break bank sockets on its own, it will go public.