Morning Coffee: Never invest in a CEO who takes conference calls in a hot tub. Big Four careers not safe after all
If you aspire to work in private equity, the Financial Times’ Alphaville site has some rule of thumb investing advice that might come in helpful: ‘Don’t invest in a chief executive who takes conference calls from a hot tub, smokes weed and has an intense relationship with the number 18.’
Unfortunately, the ex-Deutsche Bank traders and others who run SoftBank’s Vision Fund didn’t receive this advice in time to dissuade them from getting behind Adam Neumann, a CEO with all those facets and more. Between August 2017 and yesterday, SoftBank’s Vision Fund invested around $10bn in Neumann’s brainchild. Yesterday, SoftBank itself lent WeWork between $4bn and $5bn more.
Having got the advice late, SoftBank is at least acting swiftly upon it: the latest investment appears to sideline Neumann, who is allegedly being asked to cede his special voting rights and step down from the WeWork board in return for $200m. $200m is a lot of money and will buy many hot tubs, but Neumann might feel a bit hard done by given that he thought he was going to become a multi-multi-multi billionaire only a few weeks ago.
An even greater sense of impoverishment, though, should be felt at over at SoftBank which has now poured around $15bn into WeWork in the form of investments and loans even though the company is currently valued at approximately $8bn (down from $47bn in January and $20bn five weeks ago according to bankers at Goldman Sachs and JPMorgan). In an indication that SoftBank recognizes the folly of its ways, WeWork will now be overseen not by the Vision Fund’s operating guru Gerry Lopez, but by SoftBank’s own COO Marcelo Claure who previously ‘clashed’ with Rajeev Misra,the ex-Deutsche trader running the Vision Fund and moved into a new role. Claure has an actual background in turning around companies. He also has an active Twitter account replete with aphorisms like, ‘A goal without a plan is just a wish.’
In effect SoftBank had little choice but to produce the new $5bn. – WeWork was reportedly due to run out of money at the end of this month and had already shopped itself about to 75 alternative financing sources, of which the only one to bite appears to have been JPMorgan which was offering a $5bn rescue package financed by outside investors, but on more punitive terms. For WeWork employees who also believed in their visionary ex-chief executive, it’s all been a bit of a shock. – They too have taken a big cut in the value of their holdings and SoftBank’s new loan means the company can now make thousands of them unemployed; it couldn’t do so previously because it was unable to afford the severance payments.
Separately, if you thought working for the Big Four was a safe option compared to working for an investment bank we have some disappointing news. The Financial Times reports that KPMG has embarked upon a £100m ($130m) cost cutting program which has many of the hallmarks of banks’ own enthusiastic trimming. – There’s a codename (‘Project Zebra’), there’s a rationale (‘zero-based budgeting’ or looking through the eyes of an external investor and removing emotion from cost-cutting) and there’s a program of cutting to invest again later in new technologies (and related headcount). It’s not entirely clear who will be losing their jobs in the short term, aside from 200 personal assistants, but the FT notes that KPMG hired a bumper crop of graduates and qualified auditors this year.
Meanwhile:
Goldman Sachs has set up a new ‘multi-asset platform sales’ group under Kene Ejikeme to add clients through Marquee without significantly increasing its workforce. (Financial News)
UBS is cutting 40 jobs in its markets and investment banking teams in Asia. (FiNews)
Working the phones for Fisher Investments in a dank basement with musty carpets. “I thought Fisher was my dream job. From the very first day, it was just a nightmare.” (Bloomberg)
Renaissance Capital is opening a new office in London’s West End, with space to increase staff by a third. (Financial News)
JPMorgan is now opening to hiring people with criminal records. (CNBC)
Deutsche Bank is considering making more redundancies in its rates business because CEO Christian Sewing has decided that it’s possible to reduce enough of the associated technology costs to outweigh the loss in revenue. (Bloomberg)
30 female executives at a Big Four accounting firm attended a weird company-run seminar about female inadequacies and pandering to the men they work with. (Huffington Post)
A Credit Suisse executive got into a verbal argument and made physical threats to a UBS executive in an upscale Zurich restaurant. (FiNews)
If you work less you don’t necessarily become thinner – you just spend more time on childcare. (Voxeu)
More privileged, intelligent people are clustering in cities and this is creating pockets of people with different DNA. (The Conversation)
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