BILLIONS - Differences and similaritities between the show and real life.

So........

The title says it all.
All experienced users are welcome to share their thoughts.
Is the legendary Axe Cap an example of how the world's leading hedge funds engage in their day to day activities?

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Comments (28)

Apr 16, 2018
andreas7_cyp:

Is the legendary Axe Cap an example of how the world's leading hedge funds engage in their day to day activities?

The one recent episode that I've seen had people wearing polo shirts on the trading floor. Not true - you can't wear a short-sleeve shirt on S cough Axe Cap trading floor cause the place has AC blasting on high all the time...

PS. On a more serious note, there was an interesting conversation about the emotional toll of making right calls about wrong events

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Apr 19, 2018

LMAO. Why is it that all Tech/HF offices are frigid cold all the time? I remember noticing that during interviews, all HF or techy prop-trading shops were always super brightly lit, with all white interiors, and the AC was constantly fucking blasting.

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Apr 19, 2018

I would think the cold keeps you sharp and white is just a brighter setting for employees

Source: sitting in cold office with white interiors :)

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Apr 19, 2018

Haha, I worked in an office like that as a SA and it was dope except for when you're hungover with a throbbing headache and everything is too damn bright.

Apr 17, 2018

even if it is, hedge fund employees won't admit to it.

the show in 5 words: Insider trading and market manipulation.

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Apr 17, 2018

I think Axe Cap is closer to HFs in real life than Suits is to law firms.

The insider trading is glorified and is kinda BS, because our compliance is SO INTENSE that I can't even get close to inside info. But the pressure, the feeling of a younger person replacing a more experienced analyst, the search for the truth irrespective of the source is very similar to how we operate at least

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Apr 17, 2018

Does anyone actually believe that Suits is a good representation of lawyers and law firms? Lawyers wearing nicely tailored Tom Ford suits is really pushing it.

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Best Response
Apr 19, 2018

Completely agree. Worked with enough lawyers in my life to tell you all that that show is way too overdramatic and none of that shit is even close to being true. Work at an HF and I can tell you that there's at least an "attempt" to mimic some portions of what really goes down. Perhaps because Sorkin is involved and there's legitimate research that went behind creating the show. Maybe not the insider trading BS, but some other aspects (the emotional trauma and personal conflicts for sure)..

I used to like Suits a lot before but the goddamn over-the-top acting just got to me. Like take it easy already - everyone thinks they're such a BSD in that show. It's annoying. Lastly some parts of the story line are complete nonsense. For e.g. they can't seem to figure what "investment bankers" actually do. They show them really executing deals, buying and selling stock, whatever random shit they can lump into finance. Far from the truth. Annoying to watch if you actually know wtf happens.

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Apr 17, 2018

Yea haha, I deal with lawyers all the time on distressed situations and while they are definitely all very sharp... I make all the decisions not some lawyer at Milbank

In Suits they switch from corporate to trial to divorce law like its nothing

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Apr 20, 2018

Completely agree on your last part. In real life lawyers try to become experts in their niche in their course to partnership. In the series they become experts in every single field of law there is overnight.

Also the idea that lawyers come up with business ideas... Bankers/Investors come up with the ideas, lawyers just come up with the best way to structure it legally. Or how it is said in the show "We'e not lawyers, we are investment bankers (sic). We call you for the paperwork".

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Apr 20, 2018

Very true on the portrayal of the lawyers making decisions, however, the politics (in the early seasons) were pretty spot on.

Source: Worked in law for 8 years

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Apr 16, 2018
roversam:

I think Axe Cap is closer to HFs in real life

Funny enough, according to my neighbor, the DA office in the show is very similar to the actual DA office where he works. I quote - "except we are less well spoken and much bigger assholes".

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Apr 20, 2018

Not an experienced user, but there was one event that was very unrealistic. That was the short on Ice Juice made by Axe. On the first day of IPO, it is nearly impossible to short an underlying. First, there are limited amount of shares trading in the market given the lock-up period in effect. With that said, any broker-dealer (whether IB, retail brokerage, and etc.) do not have the inventory to lend the shares for Axe to short. The only possible way I can see the short being possible is those who are long the stock are willing to lend it for others to short, which is VERY unlikely.

Just my two cents.

Source: Close relationship with founders of a few reputable broker dealer firms

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Apr 17, 2018

@000killa is right. We've tried and its not possible to be short Day 1

You could use options though theoretically

Apr 16, 2018
roversam:

@000killa is right. We've tried and its not possible to be short Day 1

You could use options though theoretically

Well, for the purposes of bona fide hedging you can borrow the shares from the company and sell them into the IPO. For example, Mr. Z did a collar on his shares and the dealer was able to borrow his shares for the hedge. You could then, theoretically, imagine that if that dealer had the borrow and an incredible relationship with Axe he'd let him use the borrow. Even if both do happen, it's very unlikely since the dealer is letting himself get run over - he's short vol on the downside.

One could come up with other "explanations" that are even less likely, but again, theoretically possible. You know, stuff like borrow against the dealer greenshoe, pre-IPO or IPO-day forward transactions, IPO day straddles (has been done) and finally, borrowing shares from Chuck Norris.

Then again, that story is just as plausible as some genius asexual college grad getting hired with a buck guarantee and literally the next month becoming a CIO of the fund. Or that some genius trader is "never wrong". Or that every hedge fund trader uses cocaine but never smokes weed :P

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Apr 20, 2018

Totally agree with this one, it's about time someone knows what they're talking about.

"Or that every hedge fund trader uses cocaine but never smokes weed", LOL.

+1 SB

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Apr 21, 2018
Mostly Random Dude:

that every hedge fund trader uses cocaine but never smokes weed :P

I wanna know how this could possibly come to happen, even in theory. Who's really going "Yeah I've turned down weed my whole life, everyone knows that stuff will kill you! But fuck it, scrape me out a few lines, those CDC reports are bullshit anyway"

Seems to me like if you work in a serious finance job and you don't smoke from time to time, you're doing yourself a great disservice. Stuff probably does wonders for mental health and stress.

I digress.

Apr 16, 2018
000killa:

Close relationship with founders of a few reputable broker dealer firms

I can't think of any reputable US broker-dealers where the founders are still alive :)

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Apr 20, 2018

You can definitely short IPOs on Day 1-sometimes in decent size as well. Not on the opening print, but in the first couple hours.

Apr 16, 2018
xqtrack:

You can definitely short IPOs on Day 1-sometimes in decent size as well. Not on the opening print, but in the first couple hours.

Out of curiosity, is that a hands-on experience? It's not my game (I never get involved until the stock has options) so I could be speaking out of my ass, but intuitively finding borrow gotta be very tough.

My logic is that
(a) The underwriters can't lend the shares for 30 days (I think ex-GS for some reason, but I can't recall why), so that's out.
(b) The retail brokers, in general, do not lend shares until they settle, IPO or no IPO, that's T+3. (c) That leaves institutional investors which usually excludes fast and most smart investors will restrict their shares.
(d) Most larger shops restrict IPO shares anyway, since it's a massive compliance risk.

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Apr 20, 2018

Yes, it's hands on. I have done it on many an occasion, as have many other people I know. This is in an institutional setting.

Banks will work to secure borrow pretty quickly if they know clients want it and will pay for it. Yes the borrow rates can be higher, but as pointed out below, they are annualized rates and they often come down as more stock lending becomes available.

Apr 16, 2018
xqtrack:

Banks will work to secure borrow pretty quickly if they know clients want it and will pay for it. Yes the borrow rates can be higher, but as pointed out below, they are annualized rates and they often come down as more stock lending becomes available.

Very interesting, good to know! Did you know the sources of borrow when you did that?

Apr 20, 2018

Would love to hear more about shorting IPOs on Day 1 as my logic is well aligned with that of Random Dude's.

Apr 26, 2018

You can do it on day 1. I've even done it in my IBKR account. It's just a matter of whether you can secure borrow or not, which is typically difficult. More commonly i'll be able to short starting day 2 but the borrow will be absurd (40%+) and there will be no margining. Eventually borrow goes down to normal and I can margin

Apr 17, 2018

Yeah if you can elaborate, it would be great and @000killa would be happy too!

My understanding is as below:
Lets just say theoretically on Day 1 you find a long only who really wants to own the stock long-term. And then they are willing to lend the shares to you because they like it anyway so they'd rather clip the borrow fees. This obviously depends on how big/broadly marketed the deal was. So great, you're now ready to sell into the market.

BUT, the underwriters have a mandate to keep the price stable so they'll keep buying. I've seen this on IPOs I've worked on and desks are totally willing to put real $$$ to make sure their deals don't fall apart.

But let's just say you're HUGE and start just pouring money into the short, you crush the dealers but by now your cost of borrow is like 20%+ (because you have run out of longs who are willing to let you speculate). So to make money you need the stock to go down >20% from your entry point.

At this point you're vulnerable to a short squeeze and that's no fun, especially on a newly listed name which has low float and unpredictable liquidity

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Apr 22, 2018
roversam":

to make money you need the stock to go down >20% from your entry point.

Only if you keep the position on for a year.

Apr 26, 2018
Apr 21, 2018
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