FT : Ken Moelis predicts the death of the M&A banker

FT : Ken Moelis predicts the death of the M&A banker

Death of the M&A banker
Who doesn’t love a good freewheeling vibe check from Ken Moelis.

At Goldman Sachs’ annual financial conference this week, the founder of the eponymous boutique bank didn’t disappoint in his hot takes on Wall Street.

Moelis, who cut his teeth at Drexel, weighed in on how the blow-up of big banks in 2008 not only created fertile ground for the golden age of private credit, but why he thinks firms like his are going to clean up as a result.

In case you’re not familiar with Moelis’s background: he went to Wharton in the early 1980s and came up through the House of Milken alongside Apollo Global Management chief executive Marc Rowan.

He’s been around the block on Wall Street. Before he started his own boutique bank, Moelis had stints at Drexel, DLJ, Credit Suisse and UBS. He started his own shop at the beginning of the financial crisis — which turned out to be fortuitous timing.

His comments at the Goldman conference were such a gold mine that our friends at FT Alphaville teamed up with DD’s Sujeet Indap to publish an unedited, annotated transcript. But it’s just so good we decided to distil some of the highlights ourselves, too.

Point #1: Private equity is passé. The big alternative investment managers know that their real future is in private debt.

If you go to the big managers like KKR and Blackstone, “none of them are talking about private equity”.

Point #2: Huge fees can be made brokering non-M&A deals, especially in private credit.

Take the $1.5bn preferred debt in a deal Moelis just sourced for a direct lender (which has yet to be announced, so he didn’t name the deal). Moelis is being paid about $30mn in fees for that transaction.

“So it’s M&A type fees for coming up with capital for the other parts of the firm,” he said. “So again, I think people are underestimating these large chunks of capital.”

Point #3: The next generation of rainmakers could specialise in capital markets. That’s at least how Moelis — the bank — is positioning itself.

“I’ve been very much pushing our capital markets [coverage] to make sure [our bankers are] in that market,” he said. “I think it’s going to explode and it’s not going to be easy to get the talent.”

He added: “Some of them just want to be M&A advisers.” But they might be poorer for it.

FT : Albert Edwards’ favourite ‘bonkers-on-stilts’ chart of the year

Albert Edwards’ favourite ‘bonkers-on-stilts’ chart of the year
Not all bears hibernate

Last week we noted that a lot depends on SocGen’s Albert Edwards not throwing in the towel on bearishness, which really would be a sign of end-of-times that the top was in.

Fortunately his latest note is true to gloomy form, and features his award for the most “bonkers-on-stilts” chart of 2024:


Edwards argued that this huge surge in corporate profits as a percentage of GDP — even after a 20-year secular increase — is partly due to “greedflation” (with corporate pricing outpacing labour costs) but is mostly attributable to America’s “fiscal dysentery”:

. . . It is easy to rationalise the US valuation excess. We all know the arguments because we hear and read them almost every day. In essence, the argument is that US stocks deserve a huge premium because profits are growing much faster in the US than in any another major economy, a trend likely to continue given its dominance in tech related companies. That makes some sense — even to a bear like me! 

But one simple driver of the success of US inc is often overlooked. The US government deficit since Covid has remained super expansionary at around 7.5% of GDP in 2023, 2024 and forecast for 2025 (IMF data). This compares to the eurozone and even Japan (for example) with deficits of ‘only’ 3% of GDP. That’s a big gap. 

We think many investors widely under-appreciate how crucial US fiscal dysentery is as the propellant of far superior US profits growth which in turn ‘justifies’ far higher equity market valuations. It is much ‘sexier’ to latch onto a story around US corporate exceptionalism in tech. Understanding the true (fiscal) source of US corporate superior profits growth gives us a handle on figuring out just how sustainable the US equity bubble is.

Naturally Edwards thinks the end is high — highlighting how the US unemployment rate this year moved above its 36-month moving average, a reliable indicator of an incoming recession, he reckons.
Be alert: a recessionary crossover occurred in May 2024 but to add to the caution, the 36m mav (dotted line) just started rising too in November, which usually only ever happens deep into a recession. Either this time is different, or the US might just be slip-sliding into a profits crushing recession.

Nature is healing etc.

>>> US After Hours Summary: RH +18.2%, AVGO +11.3% sharply higher on earnings; C

After Hours Summary: RH +18.2%, AVGO +11.3% sharply higher on earnings; COST -0.5% a bit lower on earnings; EVGO +13% jumps after closing on US Dept of Energy loan facility

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: RH +18.2%, AVGO +11.3% (also increases dividend)

Companies trading higher in after hours in reaction to news: EVGO +13% (closes on $1.25 bln loan facility from the US Dept of Energy), VIR +6.3% (receives FDA Breakthrough Therapy Designation and EMA PRIME Designation for Tobevibart and Elebsiran), CAN +3.2% (to provide 2,000 Bitcoin mining machines to AGMH), RWT +2.6% (increases dividend), BLND +2.5% (partners with PHH Mortgage), EDIT +2.1% (to transition to in vivo gene editing co; to reduce workforce by 65%), BMEA +1.7% (announces presentations of Icovamenib), CIM +1.5% (CIO bought 66000 shares), ASND +1.4% (FDA accepts sBLA for TransCon hGH), DAR +1.4% (CFO to retire, names new CFO), SEIC +1.4% (increases dividend), CORT +0.8% (announces results in treatment phase of CATALYST trial), RDDT +0.7% (Texas Atty Gen launches investigations in Reddit, Instagram), ERIE +0.5% (approves mgmt fee rate; increases dividend), ACA +0.1% (renews its $50 mln share repurchase program), NEU +0.1% (authorizes new $500 mln share repurchase program)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: NX -0.8%, COST -0.5%, PBA -0.3%

Companies trading lower in after hours in reaction to news: RPTX -35.8% (announces results of lunresertib and camonsertib combo), CADL -23.7% (launches $80 mln share offering), INO -20.7% (files for stock offering to purchase shares of its stock), WASH -4% (commences $55 mln stock offering), CLSK -2.7% ($550 mln convertible notes offering), NOG -2.1% (enters into Appalachian joint development program), UPBD -1.8% (to acquire Brigit), WPC -0.9% (increases dividend), DCOM -0.9% (provides update on investment portfolio repositioning), EIX -0.8% (increases dividend), META -0.4% (Texas Atty Gen launches investigations in Reddit, Instagram), MG -0.1% (names new COO), PFE -0.1% (increases dividend)

WSJ : Activist Starboard Value Takes Stake in Bitcoin-Mining Company Riot

Activist Starboard Value Takes Stake in Bitcoin-Mining Company Riot
Starboard wants Riot to convert some of its bitcoin-mining facilities into space for big data-center users

Activist investor Starboard Value has built a significant position in Riot Platforms RIOT 10.48%increase; green up pointing triangle and is pushing for changes at the bitcoin-mining operator, according to people familiar with the matter.
The details
Riot, based in Castle Rock, Colo., has a market value of nearly $4 billion, with its stock price down almost 25% year to date, even during a broad cryptocurrency rally.

The exact size of Starboard’s position couldn’t be learned.

As a crypto miner, Riot uses high-powered computers to process bitcoin transactions by solving complex mathematical problems, receiving bitcoin as payment.

Starboard has been in discussions with Riot’s management team to push the company to convert some of its bitcoin-mining facilities into capacity for so-called hyperscalers, or large data-center users, the people said.

Hyperscalers are companies that operate large-scale data centers designed to handle massive amounts of computing power and storage capacity. Data centers operated by companies such as Amazon Web Services and Alphabet’s Google Cloud have grown increasingly important as the artificial-intelligence boom gobbles up even more computing power and resources.

The context
Riot’s share price came under pressure this year while the company was pursuing a merger with another bitcoin miner, Bitfarms. Riot built a nearly 20% stake in its rival in hopes of forming the largest publicly traded bitcoin miner, but talks for a full sale didn’t result in a deal. Riot later struck a settlement with Bitfarms in September for a spot on the board.

Crypto companies have rallied since the November presidential election, fueled by hopes for more friendly regulations under the incoming Trump administration. Riot shares still have trailed the massive gains at others in the sector, including MicroStrategy and Coinbase.

Starboard would like to see Riot take a similar path as bitcoin miner Core Scientific, which has been working with CoreWeave—an Nvidia-backed startup—to supply power infrastructure for the cloud-computing company’s operations, the people said.

A flurry of other bitcoin miners have been vying to take advantage of the lack of data-center space and the need for large amounts of power amid the AI craze. Riot Chief Executive Jason Les has said the company would be open to those deals if the right one came along.

Starboard has had a busy few months. The firm, run by Jeff Smith, invests across many sectors but is especially active in technology, including its recent efforts at Autodesk and Tinder parent Match Group. Starboard also recently revealed stakes in Pfizer and Tylenol-maker Kenvue.

Reuters : Iberdrola plans UK smart meter unit sale, sources say - Reuters News


Alerts History
  • 12 Dec 2024 03:00:33 PM - EXCLUSIVE-IBERDROLA PLANS UK SMART METER UNIT SALE, SOURCES SAY
  • 12 Dec 2024 03:00:34 PM - IBERDROLA UNIT COULD FETCH 1 BILLION POUNDS, SOURCE SAYS

Iberdrola plans UK smart meter unit sale, sources say - Reuters News
Sentiment:
Mostly Positive

  12 Dec 2024 03:01:24 PM

LONDON, Dec 12 (Reuters) - Spanish utility Iberdrola IBE.MC is planning to sell its smart metering business in the UK and has lined up advisers, according to three sources with knowledge of the situation.
Iberdrola is looking to raise around 1 billion pounds ($1.27 billion), one of the people said.
The sources, speaking on condition of anonymity as the deal is private, cautioned that the sale process is at an early stage and no deal is guaranteed.
Iberdrola and RBC declined to comment.
The move comes as Iberdrola seeks to capitalise on an uptick in interest from infrastructure funds in such businesses.
According to the 2023 accounts published on its website, ScottishPower, Iberdrola's subsidiary in the UK, manages over 2.5 million smart meters through its unit SP Smart Meter Assets Limited.
Earlier this month, private equity firm EQT EQTAB.ST and Singapore's sovereign wealth fund GIC acquired a majority stake in Calisen while Arcus' Horizon Energy Infrastructure merged with KKR's KKR.NSmart Metering Systems (SMS).
Smart meters provide real-time information about electricity consumption for households and suppliers, helping them to save money.
In August, Iberdrola agreed to purchase a majority stake in British power network Electricity North West (ENWL), in a deal that valued the company at approximately 5 billion euros, expanding the Spanish group's operations in Britain.
Iberdrola has been focusing on upgrading and expanding power grids like those controlled by ENWL, drawn by the steady and predictable returns these investments offer at a time when the renewable energy sector is grappling with high interest rates and debt costs.
($1 = 0.7845 pounds)

(Reporting by Andres Gonzalez, editing by Anousha Sakoui and Elaine Hardcastle)
(( andres.gonzalez@thomsonreuters.com ; +44 (0) 7551 790019; Reuters Messaging: andres.gonzalez.thomsonreuters.com@reuters.net ))
(c) Copyright Thomson Reuters 2024. Click For Restrictions - https://agency.reuters.com/en/copyright.html
Keywords: IBERDROLA-SMARTMETERS/SALE (EXCLUSIVE, PIX)

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