One thing to start: Elon Musk must raise significantly more cash to finance his $44bn takeover of Twitter after allowing a $6.25bn margin loan commitment backed by his shares of electric carmaker Tesla to lapse.
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The fund manager behind a €7bn sell-off
Spirits at Deutsche Bank and Commerzbank had finally begun to lift earlier this year.
Their respective chief executives Christian Sewing and Manfred Knopf had made headway in steering their institutions away from years of scandals, dwindling assets and the failed 2019 merger talks between the two.
So DD can only imagine the frustration ringing throughout the C-suites of Germany’s two largest banks when a single investor sold stakes of more than 5 per cent in each of the lenders several months ago, and the European banking chieftains realised that they were no longer in the driver’s seat.
Instead it was Nick Grace behind the wheel, a portfolio manager at Capital Group, who helped drive the $2.7tn-in-assets fund’s €7bn sell-off of European bank stocks this year after the war in Ukraine and the looming threat of a recession caused the firm to sour on the sector.
The London-based New Zealander, who has spent more than three decades at Capital, has spent the past few years placing big bets on a comeback story for European banking.
This past April though, Capital dumped its shares in Deutsche and Commerzbank worth €1.27bn and €475mn, respectively, under Grace’s direction. The sales occurred a little more than two years after it became one of the largest shareholders at both lenders.
The sales have shone a light on the inner workings of Capital, one of the most influential, and most secretive, investors in the world. It has also sparked concern from bankers over how an entire sector could become so reliant on one large conviction buyer, as the FT’s Stephen Morris was told at Davos this week.
Capital operates differently from many of its fellow active investors, granting portfolio managers the freedom to manage their individual allocations the way they see fit.
These methods have begun to look increasingly attractive lately, as DD discussed last week. Hedge funds that craft their strategies around a single manager like Tiger Global have been caught off guard by tech sell-offs, while so-called multi-manager funds like Izzy Englander’s Millennium Management and Ken Griffin’s Citadel have plugged ahead.
Grace’s solid reputation persuaded many Capital managers to make the same contrarian bets on European banks, while others remained bearish, one person familiar with the funds’ investments told the FT.
The latter group may now be patting themselves on the back.
The Spac made out of lawsuits
The once-roaring blank-cheque market went “to the moon” in 2020 with the listing of space tourism company Virgin Galactic. Now it appears to be going out with a bang.
On Tuesday, MSP Recovery, a healthcare litigation company founded by Miami-based lawyer John Ruiz, went public with a $33bn valuation, only to plunge by more than 60 per cent in its first two days of trading.
The Florida-based company was the second-largest Spac transaction on record when it was announced last July, though it currently produces no revenues and has a strategy to conjure cash from legal claims.
It is important to note that unlike most Spac transactions, there were no external investors in the deal. The valuation is essentially an agreement between Ruiz and the Spac’s sponsor Ophir Sternberg. Together they already own a luxury boat racing company and are investors in a condominium unit located at the Ritz-Carlton Residences in Miami Beach.
“This one has it all,” Nathan Anderson of Hindenburg Research told DD. “Vapourware technology, related party deals, and a valuation that I assume someone came up with while hallucinating at Burning Man.”
The firm originally sought to float 0.7 per cent of the company at the $33bn valuation by merging with a Spac named Lionheart Acquisition II, which raised $230mn and counted hedge funds Magnetar and Marshall Wace as large investors.
To entice investors, Sternberg offered sweeteners but most shareholders decided no amount of free warrants would compensate for MSP’s heady valuation. Approximately 90 per cent redeemed, leaving the Spac with just $25mn, including $11mn purchased by underwriter Cantor Fitzgerald.
Shareholders who stuck around have already lost over half their money.
There were some winners, though. Underwriters including Keefe, Bruyette Woods and Nomura, and law firms Weil, Gotshal and DLA Piper were paid about $70mn for the deal. Where that cash is going to come from remains to be seen.
Ruiz and Sternberg also stand to make a fair bit of cash, which is just as well because the Florida lawyer recently had his private jet, a Boeing 767 that was formerly a Qantas passenger plane, refurbished to the tune of $10mn.
Above the bathroom there’s a painting of a Monopoly man standing on a private plane carrying bags of cash. Sometimes life imitates art.
The Hong Kong hedge fund getting the cold shoulder from banks
Simon Sadler, Blackpool FC owner and the man behind Hong Kong-based Segantii Capital Management, once called himself “the calmest man in Wembley”.
He may benefit from channelling that inner tranquillity once more as Bank of America and Citigroup have suspended all equity trading with his firm, the FT’s Tabby Kinder and DD’s Arash Massoudi reported.
Both banks informed Segantii that it had been cut off from trading equities and various other financial instruments due to their concerns about the hedge fund’s bets on the sale of large blocks of shares, according to the people. The fund has not been accused of any wrongdoing.
This is not the first time block trades have come under scrutiny. For months US authorities have been investigating whether banks have been improperly profiting from large share sales, with Morgan Stanley’s block trading business being probed by officials.
Launched by Sadler in 2007, Segantii has become one of the first points of call when bankers are seeking to trade large blocks of shares in Asia, several bankers and traders told the FT.
A number of other major banks including Goldman Sachs are still trading with Segantii, according to a person familiar with the matter.
Prudential has appointed former Citi banker Anil Wadhwani as chief executive, its first Asia-based boss as the life insurer deepens its focus on the continent.
Barclays has appointed Tracy Corrigan, who previously held roles as chief strategy officer of Dow Jones and editor of the FT’s Lex column, and former NatWest chief risk officer Vanessa Bailey as independent non-executive directors.
Peter Cowgill is stepping down as executive chair of JD Sports as Britain’s largest sportswear retailer accelerates the separation of the roles of chair and chief executive.
Glossier founder Emily Weiss is stepping down as chief executive of the beauty group backed by venture capital firms including Sequoia. She will be replaced by chief commercial officer Kyle Leahy.
Payment purgatory Twitter shareholders aren’t the only ones anxious to see whether Elon Musk’s takeover goes through. Investment bankers working on the deal have been left in limbo along with the huge fees they expected to rake in, DD’s Sujeet Indap writes in the latest Lex newsletter.
Bucking the trend Oil and gas bankers lost one client after the next last year as poor returns caused investment firms to back out of the sector. Paul Singer’s Elliott Management was a notable exception, Reuters reports.
And here’s one smart listen Recent sell-offs in so-called stablecoins marketed by crypto exchanges as “safe investments” have shaken investors’ faith in digital assets. The FT’s Behind the Money podcast investigates whether a crypto vibe shift is under way. Listen here.
Twitter shareholders vote against Silver Lake’s Durban continuing in board role (FT)
UK government clears £4.25bn Chelsea FC sale to Todd Boehly (FT)
Japanese state fund considers Toshiba takeover as bid deadline nears (FT)
Andreessen Horowitz bets on crypto ‘golden era’ with new $4.5bn fund (FT)
UK to review Chinese takeover of semiconductor plant (FT)
Klarna CEO says fintech will focus less on growth and more on ‘short-term profitability’ (FT)
Wendy’s/Peltz: billionaire weighs taking a bite out of burger chain (Lex)
ExxonMobil investors back push for fossil fuel transition audit (FT)
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