One scoop to start: BlackRock’s push into alternative investments led it to hold talks with Warburg Pincus as the world’s largest money manager seeks a transformational deal that could reshape the $27tn private funds industry.
And one note from team DD: We’ve made it to the final DD edition of this year. We’re taking a little break for the holidays and will return to our regular scheduled programming on Tuesday, January 9 (but look out for a special edition in your inbox in early January. Thanks for reading and happy new year.)
In today’s newsletter:
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SoftBank’s bad bet on Better
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A JPMorgan star fades at HKEX
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New hope for breakaway football leagues
How SoftBank’s Better bet went sour
When WeWork filed for bankruptcy in November, DD’s Eric Platt and Ortenca Aliaj revealed that SoftBank was forced to wire $1.5bn to a number of the property’s lenders days before it sought Chapter 11 protection.
The episode showed how SoftBank’s tendency to enter into complex financial arrangements left it footing the bill even when it didn’t want to.
SoftBank found itself caught in a not too dissimilar situation with mortgage provider Better.
At the start of 2021, two of Masayoshi Son’s top lieutenants were hashing out the details of an investment in the New York-based start-up. The company, founded by Vishal Garg, appeared promising. Unlike some of SoftBank’s other high-profile investments, it had already turned a profit.
SoftBank’s Vision Fund, run by Rajeev Misra, and investment firm SB Northstar, which until early 2022 was run by Akshay Naheta, hatched a plan to make two concurrent investments in Better.
The Vision Fund would buy $500mn worth of shares in the US mortgage group at a $6bn valuation — a 50 per cent increase to six months earlier. SB Northstar would invest a further $1.3bn as part of a deal between Better and a special purpose acquisition company set up by Icelandic billionaire Thor Björgólfsson.
SoftBank executives encouraged Better to go public through the Spac as the market for blank-cheque companies and mortgages was booming. But just a few months after the deal was announced in May 2021, it became apparent that Better was in trouble.
The company’s business was hard-hit by interest rate increases and SoftBank wanted to wriggle out of the agreement it had signed to hand over $1.3bn, people familiar with the matter said, but had little luck.
Instead SoftBank has put in a total of $1.7bn in Better, which is currently worth just under $500mn. Since the deal was agreed, the mortgage originator has cut its workforce by almost 90 per cent and racked up more than $1.5bn in losses. It will probably have to do a reverse stock split to get its share price above $1 and keep its New York listing.
It isn’t just Better’s business model that has come under pressure. The presence of its CEO, who hit international headlines after unceremoniously firing 900 employees on Zoom just before Christmas 2021, is listed as a risk factor in regulatory filings, which state he has “detrimentally affected” productivity, financial results and third-party relationships.
One curious thing Ortenca and Eric came across was a disclosure by Better that claimed Garg’s “continuing leadership” was a factor in a decision by Barclays to wind down a $500mn credit line it had provided to the group. People familiar with the bank disputed this account, saying Better itself had cancelled the facility.
While Better has so far avoided WeWork’s fate, time will tell whether it will be added to SoftBank’s long list of blunders.
A JPMorgan star’s turbulent time at HKEX
One of the earliest moves that the star JPMorgan Chase banker Nicolas Aguzin — nicknamed “Gucho” — made when he joined Hong Kong’s stock exchange as chief executive in 2021 was to pitch a left-field idea to its management committee and board.
His plan: the exchange should issue tokens to listed companies, based on how diverse their boards were. Modelled partly on crypto and partly on carbon credits, it could have compelled companies with all-male boards to either appoint women, or buy tokens from those that had.
It didn’t take long for colleagues to start privately making the obvious point — that it brought a new meaning to the phrase “token women”. The idea was “not prioritised for development”, Hong Kong Exchanges and Clearing told DD’s Kaye Wiggins when asked about the scheme.
It was an inauspicious start. Hiring Aguzin — an Argentine who does not speak Chinese and was the first non-Hong Kong or mainland Chinese citizen to run the exchange — had been a bold bet that a smooth-talking banker could help HKEX attract listings and capital from around the world.
Within months of his arrival, Beijing launched crackdowns on technology and education companies that wiped more than a trillion dollars from the value of internationally listed companies, and reduced appetite for the mainland stocks that dominate Hong Kong’s market.
Last week, just over two and a half years into his tenure, HKEX announced Aguzin would stand down when his term ends next year. His replacement, Bonnie Chan, is less well-known on the international stage but her responsibilities as co-chief operating officer have included “mainland development”.
Relations with mainland China will be all-important. An executive wrote in a document for colleagues, just as they departed the company, that as China develops its markets infrastructure, the balance of power could shift away from Hong Kong.
“Any discussion of HKEX strategy should keep in mind that, when viewed from a mainland vantage point, [Hong Kong] may appear smaller and smaller every year regardless of how big we might feel,” the executive wrote.
The ruling that could lead to a Super League 2.0
The European Super League could be on its way back from the dead, with more breakaway sports competitions potentially following its revival.
In a landmark ruling on Thursday, the EU’s top court determined that Uefa, which oversees European football, and the global body Fifa acted unlawfully in threatening to impose sanctions on players and clubs that joined the Super League in 2021.
In other words, the European Court of Justice has opened the door to new entrants seeking to pitch ideas or launch rival competitions with the potential to upend European football’s existing power structures.
The Super League, which aimed to create a rival to Uefa’s Champions League, unravelled within days of its plans being leaked after a fierce backlash from fans, national governments and domestic leagues.
But the motivation behind the Super League — money, power and an inability to copy the “closed league” system favoured by American sports — haven’t changed for the rebel teams or their billionaire backers (Florentino Pérez, president of Real Madrid and an early architect of the Super League, has already sprung into action).
Our colleagues at Scoreboard will be covering all the action on Saturday — make sure you’re signed up here to get the play-by-play in your inbox.
Job moves
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Albert Garner will retire from Lazard at the end of the year after more than 40 years at the boutique investment bank. He most recently led Lazard’s special committee practice.
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Vista Equity Partners has announced six senior leadership promotions including Alan Schwartz to chief legal officer and Gwen Reinke to chief compliance officer.
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Houlihan Lokey has acquired private equity placement agent Triago. The latter’s chief executive Matt Swain will join as head of direct placements and secondaries, a new practice within Houlihan’s private funds group. Triago founder and chair Antoine Dréan will become chair emeritus of the unit.
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Macfarlanes’ corporate crime and investigations head Neill Blundell is leaving to lead the white collar crime team at White & Case.
Smart reads
Narendra Modi’s state of the union The Indian prime minister discusses the country’s growing relationship with the US and responds to claims he represents a threat to democracy in an interview with the FT.
Stuck in the past US objections to Nippon Steel’s deal to buy US Steel reflect an outdated view of how close Japanese companies are to the state, the FT’s Leo Lewis writes, just as US PresidentJoe Biden has called for an investigation of the deal.
Inside PDD The owner of online retailer Pinduoduo and cross-border ecommerce platform Temu has quickly emerged as a formidable opponent to Amazon and Alibaba. But such rapid success can come at a human cost, Nikkei Asia reports.
News round-up
UK’s Harbour Energy agrees $11.2bn deal for Wintershall Dea assets (FT)
Hipgnosis warns investors on asset value (FT)
Co-op Bank enters exclusive merger talks with Coventry Building Society (FT)
Allen & Overy rolls out AI contract negotiation tool in challenge to legal industry (FT)
Wells Fargo branch workers vote to form union in a first for major US bank (FT)
Barclays agrees deal to stay at London’s Canary Wharf until 2039 (FT)
Paris’s La Défense tries to reinvent office life as deals plummet (FT)
How will professional services handle the Great Stagnation? (FT)
Read the full article here