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00:00 Leo Ashenbrrener, the boy wonder dubbed the next Warren Buffett, the man who took a $225 million fund and turned it into over 20 billion in value in just 2 and 1/2 years. But today, it all came crumbling down with the news that he has been forced to unwind all public stock positions after some mega losses. And Citadel, yep, Ken Griffin sweeps in to buy his public book.
00:24 Yet again, Big Ken wins. So, what happened? Well, AI selloff started to happen this month and some of his core positions like Coreweave, Irene, Nebius have all been hit mega hard. So much so that he's down 35% just this month alone. That feels pretty bad, right, baby? It gets way worse. He was using some intense leverage on those positions. 4x leverage.
00:52 Leverage means borrowing money to invest more than you actually own. Imagine you have $100. Borrow another $100 and you buy $200 of shares with that money. If it rises 25%, you make $50. But if they fall 25%, your $200 becomes $150, but you still owe the bank $100. So you're left with only 50. You've lost half your money. That is how leverage destroyed Leo.
01:21 In this case, AI stocks fell and his lenders demanded more money through what is called margin calls and instead of being able to wait for the stocks to recover like one might do if they didn't have the pressure of leverage, he was forced to sell. Ken Griffin Citadel then swooped in and bought the overwhelming majority of Situational awareness's public stock portfolio, reportedly about $16 billion before the unwind.
01:47 But Citadel did not buy the entire firm or its private investments. And most notably in those private investments, Leo kept the most valuable part, a major stake in Anthropic, reportedly worth around $5 billion. So, we're not exactly crying for Leo with what's been left. But what do we take from all of this and what happens now? Well, naughty Leo managed his risk like a 9-year-old after a sugar overdose.
02:17 Forex leverage on such a high beta stock portfolio frankly is beyond reckless and this could have been seen ahead of time had some of those leverage positions been known. But Leo will be fine. He has already made hundreds of millions of dollars in performance fees. He's got a mega position in Anthropic which will go public later this year. So don't cry for Leo. He's going to manage a much smaller firm. He'll still be a billionaire, but the legendary public firm that he longed to build is less likely today than ever