As per the old adage, a lot of change can be wrought in seven days. A week ago, the SoftBank Vision Fund was getting ready to invest an extortionate amount of money in WeWork and was the edgy attractive person at the centre of the party. One week on, and it's the vilified outsider who's been fraternizing with undesirables.
SoftBank's problem is its main sponsor: Saudi Arabia. The desert kingdom has been subject to a rising international backlash following the disappearance of journalist Jamal Khashoggi after he entered the Saudi consulate in Istanbul. As a result, Jamie Dimon has pulled out of Saudi Arabia's coming “Davos in the Desert” convention. So has Stephen Schwarzman. So has Larry Fink. Links to Saudi Arabia have become a reputational liability.
SoftBank and its Vision Fund can't disentangle themselves quite so easily though. 45% of the $100bn Vision Fund was provided by Saudi Arabia and yesterday's revilement of the kingdom contributed to an 8% drop in SoftBank's share price. This threatens to become a problem for the coterie of ex-senior Deutsche bankers who have assembled there.
The Vision Fund is run by Rajeev Misra - the former head of credit trading at Deutsche Bank, who seemingly earned $4m for his efforts there in the 16 months to March 2018. It also houses Colin Fan, the former co-head of Deutsche's investment bank. Other Deutsche Bank alumni, Nizar Al-Bassam, Michele Faissola and Wayne Grigull, work for or advise (Faissola is an advisor) Centricus Advisors (formerly known as F.A.B. Partners) and helped the Vision Fund raise its Saudi money. Many worked together at Merrill Lynch before joining Deutsche Bank. They have history.
Now, though, the whole SoftBank thing threatens to lose its thrust. As the New York Times observed yesterday, links with Saudi Arabia could hurt the Vision Fund at both ends. On one hand, start-ups are likely to be less likely to take its money. On the other, if it distances itself from Saudi Arabia then it could find it difficult to raise capital for future funds.
Of course, it's not all bad. Misra et al are still sat atop a fund with $100bn burning a whole in its pocket. Saudi Arabia might even be rehabilitated once the world recalls its dependence on the kingdom's oil - Donald Trump seems to have had this revelation last night. Then again, Saudi Arabia's allegedly approaching admission that it accidentally killed Khashoggi during "interrogation" is unlikely to sit too well with Silicon Valley companies that claim they're changing the world for the better. "Nobody needs to raise from SoftBank,” one founder, who’s currently fund-raising, told Vanity Fair. “I wouldn’t take that money right now.” Maybe SoftBank will find some start-ups that silence journalists to invest in?
Separately, Bloomberg notes that the moral high ground is not always what it appears. It points out that Robinhood Markets Inc, a start-up based on the ethos of taking from the rich and giving to the poor, has been making around 40% of its revenues by selling its customers’ orders to high-frequency trading firms, or market makers, like Citadel Securities and Two Sigma Securities. This creates a potential conflict of interests, where customers can be taken advantage of and so lose out.
“I know we can do better,” said Paul Donofrio, chief financial officer, blaming a loss of market share in M&A advisory work and in leveraged loans, where he said rivals, especially non-bank lenders, were taking a more aggressive approach. (Financial Times)
Perella Weinberg hired Jérôme Brassart from Credit Suisse to head its coverage of utility and infrastructure companies in Europe. (Financial News)
Chris Tyrer, the head of Barclays "digital assets project’ has left the bank after it stopped working on a cryptocurrency trading project. (Financial News)
Young people in search of purpose want to work for family offices with the freedom to invest in good things.. “It’s almost like family offices have this kind of halo now because they’re doing sexy things with their capital.” (Financial Times)
With $1 billion in funding, MIT will create a new college that combines AI, machine learning, and data science with other academic disciplines. The new college of computing is being built with $350 million in funding from Stephen A. Schwarzman, the CEO and cofounder of Blackstone, a private equity firm. (Technology Review)
A social mobility charity has developed an algorithm that raises grades in accordance with how bad your school was. It says it should enable employers to increase the proportion of state-school educated, poor or working class graduates they hire by between 10 and 20 percentage points. (The Times)
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