Morning Coffee: How the rudest man in finance attracts investors. Traders are worried about their chaperones

Literally everyone in banking, if they’re honest, will admit to having at one time or another fantasised about standing up at a roadshow and telling some unfortunate investor exactly what they think of them and their stupid questions.  Chamath Palihapitiya, the tech industry rebel and internet loudmouth, seems to have managed to live the dream at a meeting to promote the SPAC he was launching to float Virgin Galactic.  After a sweary tirade, he concluded by telling a conservatively dressed investor that he was “lazy”, “hadn’t read the prospectus” and that “I don’t even want your [redacted] money”.

It was a high risk strategy, but the thinking seemed to have been a little bit more strategic than the language might have suggested.  As someone else in the room at the time recounts, the victim was a mutual fund manager, well past middle age and was beginning to ask a series of value-investing type questions about financial projections.  It was pretty obvious that no amount of polite treatment would ever have induced him to invest.  On the other hand, all the younger people in the room now had a classic “Chamath story”, and once the word spread round, momentum investors who wanted a story stock about space travel were lining up for the deal.

Mr Palihapitiya seems to be keen on proliferating this kind of legend, seemingly on the basis that since nobody can invest a negative amount in your SPAC, it’s better to have equal numbers loving and hating you than everyone being lukewarm.  This is particularly true if even the ones who hate you think you might make good television, and so they invite you on CNBC to insult them for fun.  In a world where memes, NFTs and Elon Musk tweets are the currency of investing, he’s not even necessarily all that far out of the mainstream.

Of course, the Wall Street wisdom is that it makes sense to be nice to the people you meet on the way up, because you tend to bump into them again on the way down.  Although Chamath has made a fortune as an early employee of Facebook, another one in cryptocurrency and a few more on his story stocks, his claim that SPACs are allowing ordinary people to get rich off startups might be ringing a bit hollow given the actual performance of some of them since flotation.

Elsewhere, it seems that the practice of “chaperoning” might be no more effective at preventing misbehaviour on trading floors than it is at school discos.  Rather than preventing them from sneaking off behind the bicycle sheds, chaperones at London-based investment banks are meant to listen in on client calls with European clients and step in if any regulated business is about to be done.  In principle, the idea is that the chaperone is either based in Europe or authorised there, and so they can take over and keep everything legal, in the absence of a post-Brexit deal on financial services.

In practice, the regulators are very suspicious of this practice.  Not unreasonably, given all that everyone knows about bankers, they don’t believe that anyone is going to hand over a phone call just when it gets to the exciting bit.  They also don’t believe that it passes a laugh test to claim that when an experienced London banker advises a long-term client on a deal, the transaction was actually initiated by a chaperone who happens to have the right license, but who never met either party up until five minutes before the phone rang.

Senior financial lawyers are saying unlawyerly things about the practice like “firms don’t want their cross border activity looked at too closely”.  It’s one of the many awkward beasts thrown up by Brexit – everyone knows what the legal position is, but neither banks nor regulators really want a situation where huge amounts of business couldn’t happen at all.  What tends to happen in these cases is that in the period while everyone is trying to achieve a permanent solution, the most blatant offenders get punished but a blind eye is turned to rest.  Effectively, the chaperones need to crack down on offences against public decency, but maybe not look too closely at who’s sneaking back onto the dancefloor with their lipstick smudged.

Meanwhile …

The Swiss banking scene has long been fascinated by David Solo’s ability to dive into a snakepit and come out unscathed with a brand new snakeskin wallet in his hands.  As more detail has come out about his role in helping Lex Greensill get started, it seems that his powers of salesmanship work at Credit Suisse as well as UBS, Julius Baer and GAM. (FT)

Leon Black’s troubles don’t seem to be over by a long way; the former model who he has accused of trying to extort him has now hit back with a lawsuit and some very nasty looking allegations. (Business Insider)

Ken Jacobs of Lazard is the latest to try won't-somebody-think-of-the-children as a justification for not liking remote working.  While he admits that it hasn’t slowed down dealmaking, “investment banking is an in-office experience”. (Bloomberg)

Meanwhile, Deutsche says that “Our home base will always be the office”, but has confirmed that the norm will be 40-60% working from home, with detailed arrangements to be sent out to teams in due course. (Bloomberg)

If you try to mix business with pleasure, you get “bleisure”.  It’s the new trend in business trips, possibly. (FT)

According to Jim Cramer, Gamestop should stop selling video games in shopping malls and use capital from “meme stock traders” to pivot to selling cryptocurrency in shopping malls. (TheStreet)

Looking like a classic follow-on recruitment –Alejandro Przygoda, the Credit Suisse global head of FIG went to Jefferies a few weeks ago, and now the rumour is that Armando Rubio-Alvarez, the EMEA head of FIG is also going to Jefferies too. (Reuters)

“I’m sorry, I don’t know what you mean by that”.  A customer gets very angry with Revolut’s support staff. (Inside Paradeplatz)

Photo by Bryan Padron on Unsplash

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