The WeWork IPO papers contain an interesting omission. Despite having pitched hard for the deal, Morgan Stanley won’t be appearing anywhere in the prospectus. Unusually, having tried and failed to get the “top left” position as lead underwriter, MS declined to participate in a less lucrative role further down the underwriting food chain and to sacrifice economics for a face-saving credit.
It’s interesting to ponder the reasons why Morgan Stanley might have taken this step. – After its experience with Uber showed that not all tech deals are an ornament to the credentials slide of a Powerpoint presentation, the bank might have felt that the risk return ratio wasn’t worth it unless it was getting top fees. But the Bloomberg write-up seems to suggest that there was also a distinct lack of chemistry between WeWork’s Adam Neumann and Morgan Stanley’s top rainmaker, Michael Grimes.
This is unusual – Grimes is banking's biggest schmoozer, and is famous for his rapport with founders and for going the extra mile to get inside their heads and corporate culture. He famously moonlighted as an Uber driver, gave his tie to the founder of Ancestry.com and made his team wear rock band t-shirts to pitch for Pandora Music. In principle, the “gimmicky close” for WeWork shouldn’t have been that difficult – just move the MS tech investment banking team to a WeWork office for a few weeks and slurp down a few of their free beers. But somehow, it didn’t happen.
This might possibly be because WeWork’s Mr Neumann seems to be quite a demanding client. Not necessarily in terms of the interpersonal relationships, but definitely in terms of the things he demands. The firms with top roles in the underwriting have also put up considerable equity and debt investments. A a key reason for Morgan Stanley losing the current deal was the bank's refusal to participate in a $500m personal loan to Mr Neumann with his WeWork shares as collateral.
Of course, it's also possible that Grimes just couldn't get that enthused about Neumann's Kool-aid. It’s pretty fundamental to this IPO that WeWork has to be thought of as a tech company running a community based platform service, because if you look at it as an office rental company, you’re never going to get anywhere near the valuation it wants to achieve. But the company doesn’t really act all that much like a Silicon Valley startup; it has a complicated corporate and financing structure and the “community” and “platform” assets are physical things that need to be heated and cleaned every day. All of this is disclosed in the financial statements, of course, and investors can make their own decisions, but there’s a lot of old economy assets in this new economy company. Perhaps the real reason why Morgan Stanley didn’t land this deal is just that it’s pretty difficult to look a CEO in the eye and tell him you think he’s the new Mark Zuckerberg if you don’t really think that’s the case?
Elsewhere, a physical resemblance to George Clooney, like that possessed by Goldman Sachs’ Andrea Vella, might generally thought to be an unambiguous benefit. When regulatory trouble strikes, though, one might start to look down filmography and, from “Three Kings” to the “Ocean’s” series, notice how very often Mr Clooney seems to play characters with serious compliance issues. At Goldman, Mr. Vella seems to have gravitated to high-risk high-return clients and deals and was involved in a short space of time in deals with the Greek government pension fund and the Libyan sovereign wealth fund, both of which went spectacularly sour. (Mr Vella was not accused of wrongdoing in Greece and the courts ruled against Libya).
Next, Vella was put into one of the top roles for Goldman’s investment banking in Asia. Consequently, he was in a chain of command which included the disgraced Tim Leissner at the time that the 1MDB deal was put together. Goldman maintains that Leissner was a single rogue employee who deceived everyone about the deal, but the U.S. Assistant Attorney General assigned to the case seems to think Vella was aware. And so he’s been on the bench for the last year, training for triathlons and improving his Hollywood tan. One might say his future is “Up In The Air”.
Another banker currently “enjoying” the more restful side of the financial market is UBS economist Paul Donovan. After the “swinegate” furore two months ago, UBS is still in the position where they can’t bring him back without angering Chinese clients and can’t fire him without looking like they’re giving in to pressure. Quite a high price to pay for an unintentional infelicitous choice of words (Finews)
When trying to understand the new world of negative yields, it helps to have a few former central bankers on your staff. Blackrock have now published a report jointly authored by their head of macro research, Philipp Hildebrand (former president of the SNB), Stanley Fischer (former Fed vice president and governor of the Bank of Israel) and Jean Boivin (former deputy governor of the Bank of Canada). (Bloomberg)
Although some banks have been reducing investment in “dark pool” trading systems, volumes on them are up strongly this year (The Trade)
Bill Ackman has bought a stake in Berkshire Hathaway. No word yet as to whether he is planning an activist campaign against Warren Buffet. (CNBC)
Contactless payment points have been set up in the City of London so that people who don’t carry cash any more can donate to the homeless. The donations will go to a charity, rather than to actual rough sleepers nearby, but have been set up outside some of the biggest banks and tourist attractions. (Financial News)
The stuff nightmares are made of – give out your mobile phone number, and security experts, or crooks, can find out your name, address, criminal record and the identities of family members. (New York Times)
The story of Tiamat Legion Medusa, the former JP Morgan Chase VP who has had some wild cosmetic procedures including ear removal and horn implants, to become an androgynous reptilian dragon lady. We have not been able to find her LinkedIn profile. (The Sun)
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