Morning Coffee: Elon Musk’s exhausted bankers contemplate bonus devastation. The Japanese bank that’s hiring where others fear to tread
If there’s one thing that the latest revelations in the Elon Musk / Twitter takeover saga show us, it’s that there is a good reason why bankers aren’t allowed to use WhatsApp, Signal or personal mobile phones. The text messages uncovered as part of the disclosure process in the Delaware Court of Chancery have been a crucial part of the process. They’ve also been extremely interesting. If everyone concerned hadn’t been so diligent about obeying the “business related communications” policy, we’d have been deprived of a number of insights into a modern tech banking transaction.
From a banking point of view, the thing that jumps out of the messages is the extent to which Morgan Stanley owns this deal. Although plenty of other banks are mentioned in the big court filing made public last week, MS is the only sellside firm where Twitter’s lawyers cite specific bankers working on the deal; Michael Grimes, Anthony Armstrong, Kate Claasen and Owen O’Keefe, as well as leveraged finance head Andrew Earls and CEO James Gorman (who put in some CEO schmooze calling Elon a “rocket ship”).
Goldman, JP Morgan and BoA are all in the disclosure request, and Robert Steel of Perella Weinberg has a small appearance, but it’s Michael Grimes, the notoriously hard-working tech coverage banker, who seems to have been the trusted advisor to Musk. He introduced investors, suggested temporary CFOs and forwarded YouTube links. And although the relationship was occasionally tetchy, it seems that it was genuine – at one point in the quoted messages, Elon says “The Morgan Stanley deal team is truly excellent, and I don’t say such things lightly”.
But, of course, “owning this deal” could be a double-edged sword. Musk has now indicated that the deal is back on, at the original price and subject to the original financing. Banks are expected to supply $13bn. And yet, conditions in the leveraged finance market have changed, a lot, since the terms were agreed for Musk/Twitter. Any bank putting up the finance now would be looking at an uphill struggle to syndicate it, and most likely an immediate writedown. Basically, it would be another, bigger version of the Citrix deal from last week, and the $192m in deal fees would be only small compensation.
Which means that some of the best bankers on the Street might be about to burn the midnight oil on a deal that they really don’t want to be part of, for a client that doesn’t want to do the deal. In terms of the ratio of pain to reward, this might even beat the Saudi Aramco IPO for the nightmare of the century. And unless there’s a last minute ten-dimensional legal chess move, it doesn’t appear that there’s any way out of it. The final irony, of course, is that of the two big banks who have been most discussed on Twitter so far this week – Credit Suisse and Deutsche – neither seems to be in this deal. Sometimes it’s better to be on the outside looking in.
Elsewhere, congratulations to Joseph O’Docherty, who has moved from Barclays to Mizuho Americas, where he will be a Managing Director and the new head of residential mortgage finance, according to Bloomberg. It’s a greenfield site; Mizuho is setting up a brand-new mortgage securitization business, at what might be considered a surprising time in the market cycle.
However, maybe it’s the very best time for them to be doing this. The problems that other players are having in the RMBS market are to do with legacy positions and litigation and high capital requirements. A new player coming in with a clean slate, financed by a parent company with surplus capital and no existing market share to maintain or client base to serve … well, in the short term, Joseph O’Docherty will be able to cherry-pick some of the best deals, and in the medium term, there might be some top talent coming on to the market as players like Credit Suisse cut back. The proverb about being greedy when others are fearful and vice versa might have some validity to it.
It’s finally happened … although Ray Dalio is staying on the board and taking the title “CIO Mentor”, he’s giving up his voting rights and CIO job; he no longer “has the final world”. The new team – CEO Nir Bar Dea and co-CIOs Bob Prince and Greg Jensen – intend to make a few changes to the famous management practices, making them less intense and “investing in tech and people”. Let’s hope Ray doesn’t live to regret it in the way that so many investment management founders did. (Bloomberg)
All those miles hanging around, it seems a shame not to use them – a secretary at Skadden Arps booked over 80 flights for herself and friends and family using the firm’s airmiles before they caught her. She’s now been banned from the legal industry. (Legal Cheek)
A day in the life of a hedge fund junior, from a former Point72 analyst turned fintech founder. (Business Insider)
A knock-on effect of a hot job market earlier in the year is that there have been fewer applications to prestige MBA programs. That might reverse next year if investment banks shed a few employees at the right age and career stage. (WSJ)
The corner of Twitter which had such a good time in 2009 that it wants to repeat the experience has now turned to BNP Paribas; deprived of a good CDS chart or any newsflow, they’re reporting on the short interest, which is high. (Twitter)
The “malicious smears”, as Jes Staley called them, from five years ago don’t seem to have stuck to Tim Main; Main is now head of EMEA investment banking at Barclays, with Reid Marshall taking a global chair role and joining a group of elder statespeople responsible for top client coverage. Barclays makes a point of saying that they intend to grow the EMEA franchise, particularly in healthcare, tech and sustainable energy. (FT)
If you know where to find them (online), a team of maverick misfits might be capable of breaking the encryption and rescuing you from a ransomware attack. (Guardian)
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