There’s a conspiracy running around the last few weeks about Bill Gates’ divorce.
Ever since Bill & Melinda Gates announced they were divorcing, people are speculating as to why. The juiciest theory? The Gates are divorcing because they are expecting a market downturn and are creating a legal separation of assets to protect against bankruptcy.
AKA Bill makes a few risky investments, sees bankruptcy as a possibility. So they decide to split up to shield half of his assets behind Melinda. If Bill’s bad investments go bankrupt, Melinda keeps the winners.
Problems With This Theory
First: what in the world would Bill invest in that would risk his entire portfolio? The Gates’ largest position is Berkshire Hathaway, run by Warren Buffett. If the once-richest man in the world is relying on the greatest investor in the world, they’re probably talking. Buffett is notoriously cash-heavy, a value investor (lmao) and pays attention to broad market indicators.
If Buffet sees risk, he will avoid it. He knows lenders are disgustingly overleveraged which is why he is heavy in cash.
Why would JP Morgan be posting crazy net profit yet face a stock dip? Maybe because sophisticated investors (of which I am not) have called bullshit. These macro indicators typically aren’t sudden. Buffett is better at tracking these than anyone, which is why he dumped the last of his JP Morgan shares in February and Wells Fargo a few months later.
Buffett spent several months offloading these bank stocks, and held a pittance of each compared to his previous investments. This last exit shouldn’t come as a surprise to anyone who follows him.
Second: if he saw market declining, why couldn’t he simply take out some hedged positions? Buy some puts or even short a few stocks…
…wait a minute.
Gates Did Start Dumping Positions
Gates did dump his stock of Apple and others right before announcing their divorce. Perhaps the timing of the divorce announcement was what they needed to exit the most fragile positions in order to avoid vulnerability to frontrunners for the inevitable selloff.
Gates allegedly alluded to having a Tesla short position months back. Tesla was notoriously bad for shorts. With an incredibly overvalued share price, so many short sellers expected it to fall and lost billions on their bets. Cathie Wood of ARK became an investing legend (to me) for going long on Tesla against the grain of Wall Street.
While the Gates Foundation discloses their long positions on their 13F form, viewable on the SEC website, 13F forms do not disclose short positions. This is why we still don’t know who was shorting Tesla or if Bill was or not.
Tin Foil Hat Time
What if he was shorting GameStop—and AMC and some of the other meme stocks? Their price action was incredibly correlated the past week, generally operating inverse to the market. When the market broadly goes down, it reduces collateral available to post with margin for the (underwater) short positions.
Quick GameStop lesson: the reason the stock hype is the infinite squeeze theory, or mother of all short squeezes (MOASS). The idea is that the stock is shorted over 100% of its shares. Shorts have to cover eventually and buy back the shares. If those who own those shares simply hold onto them and refuse to sell, the price can go infinitely higher. Technically, this can actually happen. So retailers main strategy is to simply buy and hold shares and refuse to sell no matter what. Meanwhile short sellers pay interest on the shares they’ve borrowed and lose money over time until they finally capitulate.
If Gates is in too deep shorting GameStop, it will be incredibly painful to close the position. His position would be too large, so the more shares he buys back to close the position, the higher the price will go, creating a cycle of pain.
If the short squeeze thesis is correct and no one sells (or not enough sell) he can technically lose all of his money and be forced to liquidate every single other ones of his positions. Bill Gates’ divorce will create a legal separation of assets allowing his wife to keep the strong assets while he holds onto bad assets, soon to become massive liabilities.
So What’s the Truth About Bill Gates’ Divorce?
Of course no one knows—at least no one who is going to say anything in public.
We won’t know until after the GameStop situation resolves. That itself could be the financial episode of the decade.
If GameStop moons and Gates goes bankrupt, I will completely throw my hat into the ring of this conspiracy. “Divorce is a legal hedge against bankruptcy.” If GameStop moons and Bill’s net worth isn’t affected or he doesn’t face a mass liquidation in his long positions, then this is a plain-old rich people divorce.
Time will tell.