Morning Coffee: The former Deutsche Bank traders who invested their own money in Wirecard. No more cheesy movies at Goldman Sachs

As the Wirecard crisis seems to get worse, with CEO Markus Braun under arrest and fired COO Jan Marsalek currently in Manila hunting for documents that might “clarify the case”, it seems that everyone who put their money in this stock is regretting the decision.  But it appears that a sharp-eyed group of traders currently working at Softbank, many of whom appear to be Deutsche Bank veterans, might have avoided the worst of the pain.

The trade dates back to April of last year, just when the rumours were really beginning to get started and Wirecard needed to demonstrate that it had the support of the investment community.  In those days before WeWork, the Softbank name was about as good as it gets in terms of a seal of approval, so Akshay Naheta, one of the many former Deutsche crew working for Softbank Vision Fund chief Rajeev Misra, spotted an opportunity to partially monetise that reputation by making a convertible bond investment in Wirecard on very favourable terms, and benefiting from the consequent share price rally, much in the style of Warren Buffett.

The deal worked, in the short term at least.  And the short term was all that was needed, as Softbank were able to quickly trade out of it by working with Credit Suisse to issue a clever structured note, which passed on all the downside risk to a group of fixed income investors, in return for (what must have seemed at the time to be) an attractive coupon.  Profits were locked in and although the anticipated equity upside didn’t exactly arrive, there was no chance of the deal moving in to loss.

Which must have been particularly important, because although the Wirecard deal involved a strategic partnership with Softbank the company, the Financial Times reported that the actual investment was made by a separate investment pool, in which (along with a sovereign wealth fund) Mr Naheta and Mr Misra were substantial investors, alongside other Softbank employees.  This is not particularly uncommon practice at Softbank – the Japanese company is not only famous for employing a hell of a lot of Deutsche bankers, but also for encouraging them to take big swing-for-the-fences risks, and to take a large amount of their personal wealth along for the ride. 

It all goes to show something that’s often been remarked on – that the old swashbuckling culture of the glory years of Deutsche still lives on.  It looks like great fun if you’re cut out for it, and in fairness they appear to have managed their risks significantly better than their former employer was able to – although the structured note investors are angry and looking for somebody to sue, it’s pretty clear that their quarrel is with Wirecard and its auditors (and to a lesser extent the sell side hall of shame), not the people on the other side of the trade.  One might worry a little bit about reputational damage in the long term, but there’s a lot to be said for the continued existence of a little bit of the principle of “caveat emptor”.

Elsewhere, congratulations to Fiona Carter, previously Chief Brand Officer at AT&T and soon to start as the first ever Chief Marketing Officer at Goldman Sachs.  It might say something about the new direction of GS that the position has never existed before – although there presumably have been people responsible for Goldman’s global image, coming up with the name “Marcus”, designing fonts and so on, it’s never previously rated a C-Suite title.  For most of Goldman Sachs’ existence, everyone who had any business knowing the name would have known it, and most of those would already know what they thought about them.  In the world of banking, “marketing” is what you do in restaurants and on golf courses, and the chief responsibility of the PR team is, in the old saying “to keep the bank out of the press and the press out of the bank”.

But maybe that won’t work for Goldman any more.  As well as a consumer banking brand, it needs to position Marquee as the default option for its trading clients.  And more than that, anyone who watched “Goldman Sachs at 150” can tell you that the top management are genuinely concerned by the whole “vampire squid on the face of humanity” image.  Repositioning Goldman and persuading the man in the street to see the firm as its partners do is going to be quite a task for Ms Carter; we should presumably expect a slightly more subtle approach than commissioning two hour YouTube documentaries about how great Goldman is.

Meanwhile …

There but for the grace of Paul Achleitner … Apparently, at the lowest point for Deutsche’s valuation last year, Wirecard made an offer of a merger, complete with a McKinsey analysis saying that the “value proposition of the combined entities will fundamentally reshape the ecosystem”.  Deutsche “quickly ended the preliminary talks”.  (Bloomberg)

As well as monitoring background noise on traders’ home phones, PwC has an app that will contact-trace any of your employees who have been exposed to coronavirus in the office.  It’s only one of the professional services firms who see a potential bonanza of consultancy fees in trying to pandemic-proof the modern workforce (NYT)

Blackrock has announced that it will increase the number of black employees by 30% by the beginning of 2024,a piece of news presumably greeted by counterparties saying “what, to four?” on trading floors all over London and New York. (Financial News)

A U.S. recruiter organised a “curbside job fair” where candidates were interviewed through their car windows.  It didn’t do as well as videocalls. (WSJ)

JP Morgan have published a white paper on advances achieved by their researchers in the field of quantum computing – frankly it seems a bit too abstract to have immediate financial relevance, but the “halo effect” could be important for recruiting top talent. (Barrons)

“Finance is, like, done. Everybody’s bought everybody else with low-cost debt. Everybody’s maximised their margin. They’ve bought all their shares back . . .”.  After a career in activist investment, ValueAct’s Jeff Ubben moves on to launch an ESG impact fund, exploring new frontiers of telling people what to do  (FT)

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