🚨 [Practical Edition Part 4.5: Extra Edition] The Never-Ending Fee Game Exposed by 'The Big Short' and the Truth About the Arm IPO That Even Stockbrokers Don't Know

Dear readers, thank you so much for joining me on this long journey through the tumultuous [Part 1] to [Part 4] dissection of the 'AI Bubble Collapse Trigger'.

[Links to Part 1 through Part 3 are included]👆

This time, let's take a breather. I'm bringing you a 'palate cleanser' (extra edition) column that you can read while taking a break from staring at your screen, perhaps with a cup of coffee.

I was just rewatching the movie 'The Big Short'. It's a masterpiece that depicts a small group of outlaws who noticed the deception on Wall Street against the backdrop of the 2008 subprime mortgage crisis, but there are so many parallels to the current AI bubble frenzy that I couldn't help but smile bitterly.

[A market crash is not an 'act of God'. It is a man-made disaster created by margin debt]

As soon as stock prices crash, social media influencers and media analysts make a huge fuss, shouting 'It's a 〇〇 shock!' or 'It's the end of the world!'. However, they are merely 'weather reporters shouting that it's raining after the downpour has already started,' offering post-hoc reasons (interest rates, macro environment, etc.) only after looking at the fallen charts.

A market crash is not a natural disaster that suddenly and unreasonably strikes one day.

It is a 'man-made disaster' that inevitably occurs as a result of the 'solid foundation for a crash'—such as the abnormal expansion of 'margin debt,' excessive leverage by private equity funds, and the limits of collateral value—being built up to the breaking point beneath the surface.

No matter how much eras or technologies evolve, there is an 'immutable truth of the financial market' that never changes.

That is, for the wolves of Wall Street, beautiful dreams like 'the evolution of humanity through AI' are irrelevant. Their supreme objective is always just one thing.

'How to offload risk onto the masses (others) while safely skimming off fees and spreads for themselves'

That is all it comes down to.

No matter how overheated the market becomes, players in the financial industry are desperate to protect their own positions.

• Banks: They cannot survive unless they solidify their positions (collateral) in a way that ensures they never lose money, and skim 'spreads' from a safe distance.

• Private markets (funds, etc.): Those who pour massive amounts of capital into private stocks try to generate 'unrealistic, ultra-high spreads' that justify that enormous risk by utilizing extreme leverage (debt).

• Securities companies: They incite the masses, who are frantic not to 'miss out on the AI boom,' and continue to rake in massive 'trading commissions'.

That madness during the 2008 financial crisis, where they bundled rotten mortgages and sold them off as safe financial products (CDOs) to earn massive fees.

That is simply being executed right before our eyes today, just rebranded as 'non-cancellable futures contracts that bind SaaS companies' or '3.1 trillion yen in margin loans held hostage by Arm stock'.

Only the packaging (box) of the financial engineering has changed; the essence remains exactly the same. It is always the uninformed general investor who ends up drawing the 'Joker' left behind after the wolves have devoured all the fees and spreads.

[The 'surprise' for stockbrokers. The truth hidden in the Arm IPO]

“As long as we can earn the fees, the substance doesn't matter.”

Let me introduce a powerful episode that symbolizes this pathology of the financial industry.

In 2023, when Arm went public (IPO) on the Nasdaq market, the media made a huge fuss, calling it “the largest IPO of the year!” and “the heart of the AI revolution!”, and investors from all over the world rushed to pour in their capital.

However, I had read Arm's prospectus (Form F-1) submitted to the SEC and confirmed a decisive fact. It was clearly stated in the “Use of Proceeds” section.

“We will not receive any proceeds from the sale of the ADSs by the selling shareholder (SoftBank).”

In other words, this IPO was not for Arm itself to raise growth capital, but merely a “cash-out event (secondary offering)” for the parent company, SoftBank, to release its holdings into the market.

Even more decisive is the fact that the majority of the Arm shares SoftBank kept (a staggering 75% of outstanding shares) had already been pledged to Wall Street as “collateral” for their own massive debts (margin loans), leaving them unable to move.

The massive $5 billion in capital that the market enthusiastically poured in did not go a single dollar into Arm's balance sheet (cash on hand); it went straight into SoftBank's pockets, and the remaining shares were locked away as collateral for debt. This was the true face of the IPO that was touted as the “heart of the AI revolution.”

Later, when I told a friend who is close with someone at a securities firm about this “truth regarding Arm's use of proceeds and collateral,” I received a surprising response.

That stockbroker actually said, “I had no idea. It came as a complete surprise.”

This is the reality of Wall Street and Kabutocho.

Even professional stockbrokers who recommend stocks to clients do not read the “Use of Proceeds” or “Risk Factors” in the hundreds of pages of English prospectuses. All they read are the pretty sales brochures sent from headquarters with “AI Special Demand!” written in big letters.

Regardless of a company's true value, meeting assigned quotas and selling stocks to clients to generate “fees” is their supreme mission.

【The Darkness of Japan Across the Sea: Fund Exits and 'MS Warrants'】

And this is by no means a story about a distant foreign land called Wall Street. The Japanese stock market, which is our main battlefield, is in some ways rife with an even nastier “system of exploitation.”

For example, large-scale projects involving PE funds (such as Bain Capital). They use news and social media to incite the masses, claiming “the future potential is outstanding,” creating a frenzy where the stock price multiplies tenfold in just half a year. However, the moment the fund side completely “sells out (exits),” the mechanical buying support (algorithms) that had been propping up the stock price vanishes instantly. What remains are the corpses of the locusts (individual investors) who jumped in at high prices and a ruthless, plummeting chart.

Even more malicious is the alchemy known as “MS Warrants (Moving Strike Warrants),” commonly called the “Death Spiral,” which is rampant among groups of companies like Metaplanet, S Science (which will change its name to “Escrypt Energy” in April 2026), and Taiyo Bussan.

This is an extremely malicious scheme where, no matter how much the stock price falls, the underwriting fund always obtains shares at a discounted price lower than the market price and immediately sells them on the market to skim profits without risk. Existing individual investors are plunged into a hell of bottomless “dilution,” while only the funds and securities firms are guaranteed to make money.

The ultimate example is the Nikkei 225 itself. The current Japanese stock market has a distorted structure where foreign funds can control the entire index at will simply by mechanically manipulating the stock prices of the top three contributors using algorithms.

Whether it is Wall Street margin loans or MS warrants in the Japanese market, the essence is exactly the same.

"Even if a company is rotten on the inside, wrap it in a legal scheme, sell it to individuals, push the risk onto them, and skim off the fees." To beat this cold-blooded game, there is no choice but to ignore the news that stirs up the masses and the analysts who speak with hindsight, and to read and interpret the "primary information" in EDGAR and timely disclosures with your own eyes.

[Preview of the next dissection: The 'shadow banks' lurking in tech companies]

Now, this is where we get to the main point.

In fact, this lucrative "fee and margin game" is no longer the exclusive domain of Wall Street banks and PE funds.

In the upcoming [Part 5], we will finally pry open a box from a completely new angle.

The targets are traditional tech giants like IBM and HPE (Hewlett Packard Enterprise).

While they wear the face of "IT companies," behind the scenes they operate "massive captive finance (in-house financial and banking divisions)." To sell their own servers and infrastructure, they set up huge loans and leases themselves, earn interest, and then shift that credit risk externally—running a terrifying alchemy of "IT x Finance."

Just how much in assets are they holding, and what kind of interest rate schemes are they using to maneuver?

The mechanism of the "modern CDO (ABS)" run by tech giants

When they sell their own servers and AI infrastructure, they set up leases or loans for their customers. And they are not so naive as to just let the resulting "loan receivables (the right to be repaid)" sleep in their own vaults (balance sheets) forever.

1. Pooling of receivables: They bundle a large volume of loans and lease receivables lent to customer companies.

2. Separation into an SPV (Special Purpose Vehicle): They transfer the bundled receivables to an "SPV (or VIE)," which also appeared in the CoreWeave case, and separate them from their own main entity (off-balance sheet treatment).

3. Selling to Wall Street as ABS (Asset-Backed Securities): The SPV uses those receivables as collateral to issue securities (ABS) and sells them off to institutional investors and funds.

It is exactly the "same structure" as the method used by mega-banks in the movie 'The Big Short', where they bundled home loans into MBS and CDOs to sell to investors, pushing the risk onto others. The only difference is that the target has changed from "low-income housing" to "corporate IT infrastructure and servers."

Why do they continue to do this even now?

Because they can avoid bearing the risk of default (credit risk) themselves, and by securitizing and selling to investors, they can "recover cash immediately." They use the recovered cash to sell servers to new customers on loan again. By running this infinite loop, they are inflating their "sales" as IT companies to the limit.

In the next [Part 5], we will dive back into the deepest parts of EDGAR to expose the darkness of the "tech giants' financial business" that no one talks about. Please look forward to it.

[Postscript: Stories lie, but numbers never lie]

Finally, I will add one important fact about the movie 'The Big Short'.

In the movie, the protagonists, including Michael Burry, are dramatically portrayed as eccentric oddballs who blast heavy metal music or as outsiders of Wall Street. However, the reason they were able to foresee the global market crash in advance was by no means due to some 'eccentric intuition'.

The core of what they were doing was extremely unglamorous and cold-blooded 'number analysis'.

While Wall Street elites, the government, and rating agencies were spinning a 'beautiful story' that 'housing prices will rise forever' and 'these bonds are safe,' brainwashing the masses, they were the only ones picking up thousands of pages of prospectuses and 'raw data' on loan obligations that no one else would read. And they simply trusted the data, concluding, 'No, the actual numbers are wrong. There are clear signs of a total collapse.'

The current AI bubble is exactly the same.

News outlets, social media influencers, and even government announcements sometimes nonchalantly hide the reality and sell us a 'story of frenzy'.

However, 'raw numbers' like the balance between assets and liabilities on a balance sheet or the depletion of cash flow can never be faked.

Stories lie, but numbers never lie.

However, there is one terrifying fact that must not be forgotten. As depicted in the movie, 'there is a time lag between when the numbers collapse and when the market actually crashes.' Even though actual home loans were defaulting, Wall Street banks colluded with rating agencies to intentionally keep prices high until they had secured their own exit positions (escape routes).

The current market is the same. Even if a company's finances are in ruins, stock prices will be kept unnaturally high until large funds and banks complete their 'exit.' And the moment they reach safety, the support vanishes, and the dominoes of a massive crash begin to fall.

That is why we must not be swayed by the movements of stock prices (charts). Without being misled by the time lag they create, we must coldly hold onto the primary source data and wait until 'the day the collapse switch is pressed.' That is the only way to survive this cruel fee game.

With this cold truth engraved in our hearts, let's go and expose the massive deception in the next [Part 5] by digging out only the 'numbers that don't lie' from the deepest parts of EDGAR.

Everything is for the readers!!!

#KatoChanAnalysis

(Disclaimer: This text is for informational purposes only and does not constitute a solicitation for specific stocks, investment advice, or a guarantee of the completeness of financial analysis. Investing involves risks. Please make final investment decisions at your own responsibility.)

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