FT : Everton buyer 777 Partners accused of fraud by lender

Everton buyer 777 Partners accused of fraud by lender
New setback for Miami-based investment firm’s attempted takeover of Premier League football club

777 Partners has been accused by one of its lenders of a fraud running into hundreds of millions of dollars, in the latest setback for the Miami-based investment firm’s attempted takeover of Everton Football Club.

According to the lawsuit, which was filed in a federal court in New York on Friday, 777 owes more than $600mn in debt to London asset manager Leadenhall Capital and Leadenhall Life, a related investment company.

Leadenhall is seeking damages after accusing 777 and co-founder Josh Wander of pledging more than $350mn in assets that “either did not exist, were not actually owned by Wander’s entities, or had already been pledged to another lender”.

“Wander acknowledged that there had been a ‘screwup’ and [an] ‘embarrassing’ problem caused by 777 Partners’ antiquated computer system,” the complaint said.

A spokesman for 777 declined to comment.

The lawsuit raises further questions about 777’s ability to close the Everton deal following months of delays. Wander’s firm has been a pioneer of the so-called multi-club ownership model that has transformed football, buying stakes in a series of football clubs.

Backed by Bermudian reinsurer 777 Re, 777 has acquired a portfolio of football club investments, including Genoa in Italy, Vasco da Gama in Brazil, Hertha Berlin in Germany and Standard Liège in Belgium.

777 had aimed to complete the acquisition of Everton by the end of last year but it is yet to obtain approval from the Premier League, which has said 777 must meet a series of conditions for the takeover to go ahead.

The lawsuit portrayed Everton as “the latest shiny object of Wander’s fraudulent scheme”. It alleged that Wander’s strategy has been based on “using debt to acquire new assets that he can then use as collateral for more debt, which he then fails to timely pay off, in a seemingly never-ending cycle of ‘robbing Peter to pay Paul’.”

Everton has climbed to 15th in the table, 11 points clear of the bottom three, the relegation zone that results in demotion from the top flight. Clubs and their owners dread the prospect of dropping out of the Premier League because it cuts them off from lucrative broadcast revenues.

Everton has built a points cushion at a time when its finances are stretched. The club’s net debt position increased to roughly £330mn at the end of June 2023 from £141mn a year earlier. Net losses widened to £89mn in the year ended June 2023, from £38mn the prior year.

Everton’s lenders include New York-based MSP Sports Capital, which is part of a group that has provided £158mn of financing for the club’s new stadium in Liverpool. 777 is required to repay this loan as a condition of the takeover. The other major lender is a company called Rights and Media Funding.

Separately, 777 has provided more than $200mn of loans to Everton since September last year to fund working capital requirements.

British-Iranian businessman Farhad Moshiri agreed to sell Everton after the club ran into financial difficulties due to heavy spending on players and the new stadium, and hits to revenues from the pandemic and its decision to cut ties to sponsors linked to Uzbek-born oligarch Alisher Usmanov after Russia invaded Ukraine.

But 777, Moshiri’s chosen buyer, has come under scrutiny from regulators, rating agencies and the media. The firm’s ties to A-Cap, an insurance group led by chief executive Kenneth King, have also raised concerns.

Leadenhall’s complaint alleged that A-Cap was the “Wizard of Oz behind the 777 Partners’ curtain”. Wander allegedly “disclosed on calls” that A-Cap had a first-priority “all asset lien” over 777’s assets.

“The enterprise is propped up and able to attract new lenders and investors only by the patronage of A-Cap, which pays off the enterprise’s last-minute obligations — including 777 Partners’ own payroll — in ‘Whac-A-Mole’ fashion to keep 777 Partners’ creditors at bay, if only temporarily, and to avoid the entire scheme from being laid bare in public,” the complaint said.

However, A-Cap, which has been told by US regulators to slash its exposure to 777, hit back in a statement to the FT.

An A-Cap spokesman said Leadenhall’s claims were “sensational and unfounded” and represented “yet another desperate attempt by Leadenhall to elevate its collateral seniority and seek payment from A-Cap while undermining A-Cap policyholders”.

“A-Cap, similar to Leadenhall Capital, serves as a lender to 777 — there are no ownership ties. The key distinction lies in the fact that A-Cap holds senior rights to collateral associated with 777,” it said.

“A-Cap will take all necessary measures to safeguard the interests of its policyholders and vigorously defend itself against these baseless allegations,” the spokesman said.

Leadenhall did not respond to several approaches for comment.

FT : Could ketamine be the next fix for workplace depression?

Could ketamine be the next fix for workplace depression?
Employees are being offered the ‘party drug’ through company health schemes as psychedelic-assisted therapy grows in popularity

Liz Kost had “never experimented” with ketamine, an anaesthetic with a reputation for being a party drug. But she decided to give it a try when she was offered it by her employer. “It was awesome,” she says.

The experience was not for fun, but for therapeutic reasons. Dr Bronner’s, the California-based organic toiletries company, where Kost is a marketing operations manager, provides fully paid-for ketamine therapy as part of its employee benefit package.

The offer coincides with a “dramatic growth in interest in ketamine-assisted psychotherapy over the past few years,” says Jeffrey Zabinski, assistant professor of psychiatry at Columbia University Medical Center.

Ketamine has been approved by the US Food and Drug Administration for use as an anaesthetic since the 1970s. But more recently, specialist clinics have begun touting it as a mental health treatment. While it has not been widely approved by the FDA, it is legal for doctors, psychiatrists or in some states nurse practitioners to prescribe the drug “off label” for these new purposes.

The perk arrived at a “desperate time” for Kost. “I had a pretty traumatic time as a child. I’d suppressed my emotions but when Covid hit . . . that uncertainty unearthed my traumas.” She had anxiety attacks and couldn’t sleep. “I was stuck in a trauma loop.” 

Kost initially sought more conventional psychotherapy, but after watching her company’s founder Mike Bronner talk about the new benefit, she decided to give it a go. “He’d been open about depression in the past and [spoke about] how ketamine had helped.” 

Patients usually have three to six sessions through a specialist clinic, sometimes after being referred by another medical professional. Kost had six over a couple of weeks, with a booster session later. After a consultation with Flow Integrative, a ketamine therapy provider, the service was overseen by Enthea, a health insurance administrator that offers employers psychedelic treatment for staff.

It comes as more companies look to help employees with mental health, offering access to therapy, or apps. Saïd Business School professor Sally Maitlis says employers’ interest in ketamine is at best motivated by “real concern” for depressed employees. But she warned it could also be part of a “scattergun approach”, that avoids tackling complex root causes of mental ill health.

Kost first took the ketamine in lozenge form at home, supervised by a trusted adult and virtually-connected therapist. “I was terrified, I’d never done anything like this. Ketamine immobilises you. When you come from trauma you’re not excited to be immobilised,” Kost says. The home setting wasn’t helpful. “All I could do was think about the laundry.”

Next, she had it intravenously in a clinic. “You sit in a big comfy armchair, they give you a weighted blanket, they hook you up to the IV, and play music. You spend an hour thinking about your life and people you love.” The practitioners were “kind and caring . . . If it was more of a cold clinical setting I might not have done it.”

Ketamine, she says, helped her overcome her tendency to ruminate. “I call it a massage for the soul. It helps kick you out of your trauma,” she says. “[I thought] wow, the universe is a larger place than I imagined. It puts you in a positive mood and mindset.” Having access to therapy, to process thoughts and feelings, was essential, she believes. 

Allan Young, director of the Centre for Affective Disorders at King’s College London, says there is good evidence ketamine helps treatment-resistant depression. Among his patients suffering from it, up to half improved after taking a nasal spray derivative of ketamine, which is approved for use in many countries.

Sherry Rais, Enthea chief executive, says new uses of ketamine are “widely considered normal, safe, and effective” — an example of “off-label” prescribing already common in cases such as the drug propranolol, approved for heart conditions but often prescribed for anxiety.

However ketamine comes with risks. The FDA warns of “sedation, dissociation, psychiatric events or worsening of psychiatric disorders”. Abuse has been linked to bladder and heart problems. Last year, actor Matthew Perry, who had received ketamine-assisted therapy in the past, accidentally died from “acute effects of ketamine”, according to the Los Angeles coroner. This, Young says, means ketamine must “be part of a well formulated care package” following a “thorough assessment” by professionals.

Yet while much about long-term effects is still unknown, Zbinksi says commercial clinics offering the drug for an array of condition are springing up faster than new research. “Some places seem to have minimal screening requirements — as if they’re willing to treat almost anyone who has the ability to pay.”

Ketamine seems unlikely to go mainstream as an employee perk. Kost suspects most companies are too cautious for it to become “a big business trend”. But she remains an evangelist. “It’s definitely worth it . . . I don’t want people to think we’re sitting around taking a bunch of party drugs.”

FT : Windfall tax weighs heavy on North Sea producers

Windfall tax weighs heavy on North Sea producers
Smaller independent operators say they have taken the brunt of the pain from the 75% tax rate on profits

Investment in the UK’s North Sea has been damaged by a windfall tax on producers that also threatens to derail mergers needed to help the sector survive, industry bosses and analysts have said.

Shares in UK-focused producers have slumped despite a 30 per cent rise in the MSCI’s global energy index since Russia invaded Ukraine in early 2022, and government data shows a big drop in their profitability.

While there has been an 8 per cent rise in the price of crude oil since the end of 2021, the gross operating surpluses of North Sea operators fell from £11.1bn in the third quarter of 2022 to £2.3bn in the final three months of 2023.

The UK introduced an “energy profits levy” on oil and gas producers in May 2022 with the aim of raising an initial £5bn, after an outcry over record profits at BP and Shell. In March, it was extended by a year to end in 2029. Including this 35 per cent levy, industry profits are now taxed at 75 per cent in the UK.

The smaller independent operators that mainly work the North Sea — after the majors retreated in recent years — say they have taken the brunt of the pain from the high tax rate because UK waters account for a bigger proportion of their operations. They argue that benefits from oil price movements since the start of the Ukraine war have generally accrued to the majors, which have diversified businesses, and trading companies.

Many in the industry are worried about the future for investment in the UK’s ageing basin.

“When I started out in this industry there were only major companies mostly with global presence operating in the north sea but in recent years they have all been moving out,” said Mark Lappin, chair of Deltic Energy, who has been in the industry for more than 40 years.

UK oil and gas production was just over 1.2mn barrels a day equivalent last year, its lowest since 1977, according to trade body Offshore Energies UK, which estimates that a further loss of investment in the sector could cost 40,000 jobs by the end of 2030. The body estimates that the industry supports 200,000 jobs, down from about 500,000 a decade ago.

“There are many [producers] that have exited, or are exiting the UK,” said Amjad Bseisu, chief executive of independent operator EnQuest and a former UK business ambassador for energy. “The continuous decline in production and jobs isn’t good from a macro perspective.”

Energy consultancy Wood Mackenzie said buyers had shown “little appetite” to expand in or to enter the UK continental shelf and estimated that £16bn in potential investment could be lost because of uncertainty about tax policy.

The Labour party, which is currently favourite to win the next general election, has proposed increasing the total tax rate to 78 per cent and removing tax relief on new projects.

The industry is likely to feature in election campaigning in Scotland as a weakened Scottish National party seeks to ward off challenges to its dominance.

In one of the few major deals in the UK North Sea since the introduction of the windfall tax, London-listed Ithaca Energy last month agreed to buy almost all of the UK upstream operations of Italian major ENI for about £750mn. This includes the UK assets of Neptune Energy, which ENI agreed to buy last year for $4.9bn.

Under the deal, ENI will receive a 38 per cent stake in the enlarged group.


Chris Wheaton, oil and gas analyst at Stifel, said consolidation in the sector was an essential “defensive move” that would allow companies to combine resources and fund the decommissioning of old assets.

“The UK needs a national champion to manage the decline [in oil and gas production],” he said, adding that while two Norwegian groups — Equinor and Aker BP — accounted for about four-fifths of production in Norway, the top five in the UK were responsible for 45 per cent.

While Labour’s proposed tax rate is the same as that in Norway, analysts argue that Norway has a less mature basin, which makes is cheaper to exploit, generous investment allowances and a tax regime that has not changed for more than three decades.

“After four tax changes in two years . . . the appetite for investment in the UK continental shelf is in a worrying place,” said Ryan Crighton, policy director at Aberdeen & Grampian Chamber of Commerce.

UK-focused producers are trailing a 30 per cent rise in the MSCI World Energy Sector Index since the start of Russia’s Ukraine invasion. Shares in Serica Energy are down 37 per cent, while Harbour Energy, the biggest independent UK producer, has lost 23 per cent.

Gilad Myerson, executive chair of Ithaca, said the prospect of unexpected changes in taxation meant it was “easier to do mergers” than pursue acquisitions that are funded with cash.


“Before you consolidate, you have to put a value on the assets, and it’s very difficult to do that if you don’t know what the fiscal regime is going to be,” said Mitch Flegg, the former chief executive of Serica, who has become an adviser to the company.

Australia-listed Hartshead Resources, one of the smallest producers in the UK North Sea, said earlier this year that it had cut jobs on a gas project in the North Sea because of uncertainty about taxes. Chris Lewis, chief executive, told the Financial Times the company had delayed awarding contracts for the project.

“That has a direct impact on jobs, on supply chain companies in the UK, and on receipts to the exchequer because if you delay our gas production, you delay us paying tax on it.”

FT : Shell sold millions of ‘phantom’ carbon credits

Shell sold millions of ‘phantom’ carbon credits
Subsidy scheme in Alberta allowed oil major to register carbon credits equivalent to twice the volume of CO₂ captured

Shell sold to Canada’s largest oil sands companies millions of carbon credits tied to CO₂ removal that never took place, raising new doubts about a technology seen as crucial to mitigating greenhouse gas emissions.

As part of a subsidy scheme to boost the industry, the Alberta provincial government allowed Shell to register and sell carbon credits equivalent to twice the volume of emissions avoided by its Quest carbon capture facility between 2015 and 2021, the province’s registry shows. The subsidy was reduced and then ended in 2022.

As a result of the scheme, Shell was able to register 5.7mn credits that had no equivalent CO₂ reductions, selling these to top oil sands producers and some of its own subsidiaries. Credits are typically equivalent to one tonne of CO₂.

Some of the largest buyers of the credits were Chevron, Canadian Natural Resources, ConocoPhillips, Imperial Oil and Suncor Energy.


Keith Stewart, a senior energy strategist with Greenpeace Canada, criticised these “phantom credits”.

“Selling emissions credits for reductions that never happened . . . literally makes climate change worse.”

Shell said carbon capture played “an important role in helping to decarbonise industry and sectors where emissions cannot be avoided” and that realising its potential “requires creating market incentives now.”

Alberta’s environment ministry said the crediting support scheme had not resulted in “additional emissions” by industrial polluters.

Chevron, Canadian Natural Resources, ConocoPhillips, Imperial Oil and Suncor Energy declined to comment.


Energy companies in Canada and around the world are lobbying for more state support for carbon capture and storage. The province of Alberta is home to one of the biggest and most carbon-intensive oil deposits in the world. Production there has boomed in recent years, slowing Canada’s progress towards its emission reduction targets.

The Quest plant is operated by Shell Canada and owned by Canadian Natural Resources, Chevron and Shell Canada, and is part of the Scotford processing and refining complex.


At Quest, CO₂ is removed during the process of making hydrogen gas, which is used in the energy-intensive process of turning the bitumen extracted from oil sands deposits into synthetic crude oil.

Canada has among the most generous incentive schemes for carbon capture and storage, according to energy research group Wood Mackenzie. But the industry still struggles to be commercially viable even there.

According to Quest’s annual report, its total cost per tonne of carbon avoided was $167.90 in 2022, compared with a carbon price for Alberta’s big industrial emitters that year of $50.


According to documents obtained by Greenpeace Canada in a freedom of information request and shared with the Financial Times, Shell originally requested a three-for-one deal on carbon credits at Quest.

Alberta announced the two-for-one scheme in 2011 for plants operational before the end of 2015, applying only to Quest, which started running that year. The bonus fell to three-quarters of a credit in 2022 and was then phased out as the carbon price rose.

Shell is in the process of making an investment decision about a second carbon capture plant, Polaris, at Scotford.

The International Energy Agency has warned that an “inconceivable” amount of carbon capture and storage will be needed to keep production of oil and gas at existing rates while cutting greenhouse gas emissions.

Jonathan Wilkinson, Canada’s minister of energy and natural resources, told the FT a two-for-one system for carbon credits was “probably not appropriate”. “At the end of the day, the oil and gas sector and the oil sands firms in particular need to get going with respect to emissions reductions,” he said.

FT : Michael Platt’s BlueCrest prepares to expand trading teams

Michael Platt’s BlueCrest prepares to expand trading teams
Secretive family office in late-stage talks with 30 portfolio managers after several years of outperformance

Billionaire Michael Platt’s BlueCrest Capital is planning to expand its number of trading teams by 10 per cent by the end of the year after a run of performance in which the family office has trounced many of its macro hedge fund rivals.

The secretive investment firm is in talks with 30 portfolio managers across the industry, according to a person close to the matter, as a war for talent rages with multi-manager hedge funds such as Citadel and Millennium.

BlueCrest was once one of the world’s biggest hedge funds, managing as much as $36bn at its peak, before it returned investor capital and became a family office in 2015 after suffering losses and investor withdrawals in the early 2010s.

Without investors to answer to, the firm has been able to take more risk in the markets, an approach that has reaped rewards with performance that has beaten many of its hedge fund rivals. BlueCrest was up more than 20 per cent last year, according to the person, after gaining more than 150 per cent in 2022 betting that higher inflation and rates would hit bond values.

The family office is now hiring people to join its trading teams in macro, commodities, systematic strategies that involve trading with computers, and other areas.

BlueCrest now has roughly 170 “pods”, industry jargon for trading teams, up from about 150 halfway through last year, according to the person. Pods can range from a single portfolio manager to a bigger team with multiple analysts, with an average size at BlueCrest of two investment staff.

The popularity of multi-manager hedge funds has resulted in an escalating war for talent, which could make it tricky for BlueCrest — which shares some characteristics with such firms — to hit its target for additional trading teams.

Multi-managers typically employ tens or hundreds of portfolio managers to trade a wide variety of strategies, all supervised by a centralised risk team, and have been the fastest-growing part of the hedge fund industry for the past several years.

One BlueCrest insider said that because the firm keeps the gains on its bets rather than use them to pay investors, it is able to pay more than competitors.

While about two-thirds of the firm’s trading teams are focused on macro-related strategies, Platt has worked to diversify its capabilities into other areas such as commodities.

Huge volatility in commodities including natural gas, nickel and oil during the pandemic convinced many hedge funds that it was a growth area. BlueCrest has outposts that trade commodities in Houston, Austin and Dubai.

The firm has moved away from so-called relative value strategies, where traders exploit small price differences between bonds and derivatives to make money, as more hedge funds have piled in.

Regulators have sounded the alarm on a version of this strategy called the Treasury basis trade, where hedge funds use borrowed money to bet on the price of Treasuries and futures converging. US rules approved by regulators last year should bring down leverage in the strategy, theoretically making it less profitable.

BlueCrest employs about 600 people including non-investment staff, with offices in locations including London, New York, Jersey and Singapore.

There are signs the war for talent could cool, after some multi-manager hedge funds had a disappointing 2023. Rival macro hedge fund Brevan Howard cut roughly 100 jobs last month.

BlueCrest declined to comment.

FT : Online retailer Mytheresa says it will benefit from luxury ecommerce implos

Online retailer Mytheresa says it will benefit from luxury ecommerce implosion
Shares in New York-listed platform have climbed this year even as rivals such as Matchesfashion and Farfetch collapsed

German luxury ecommerce platform Mytheresa says it will be one of the few winners following the implosion of industry competitors including Farfetch and Matchesfashion.

The New York-listed company’s share price has gained over 30 per cent so far this year giving it a market value of roughly $362.5mn — still significantly below the $2.3bn it was valued at during its 2021 IPO at the height of optimism about tech valuations and online luxury sales, but an indication of where investors are placing their bets.

“I think there is an understanding in the market that the industry is consolidating, and that there are some winners and some losers,” said Michael Kliger, Mytheresa’s chief executive. “We believe, and the stock market certainly believes, that we are one of the winners.”

Mytheresa, which sells luxury brands including Prada and Gucci has held fast as its rivals have faltered. Since December, Farfetch has been sold at a cut price to Korean online retailer Coupang in order to avoid bankruptcy while Matchesfashion was put into administration by Mike Ashley’s Frasers group in March a mere three months after it was acquired.

Meanwhile Swiss luxury group Richemont has been trying to offload its lossmaking online retail division Yoox-Net-a-Porter for years and has taken billions in writedowns on the venture.

Mytheresa is among potential bidders who could buy the lossmaking business, with private equity firms Bain Capital and Permira also weighing up a bid for the business, the Financial Times reported last month. Mytheresa declined to comment.

“The valuation we received [at IPO] was sumptuous, generous, maybe was overrated . . . then we went into a situation where ecommerce started to become a bad word,” Kliger said. 

After a challenging 2023 for both ecommerce players and the luxury industry more broadly as the industry slows from a multiyear boom “we are pivoting . . . as a company for sure and as a sector, I have confidence as well”, Kliger said.

The tumult has exposed structural weaknesses in many luxury ecommerce groups, especially for platforms that aimed for mass appeal as opposed to a more curated experience. Rapid expansion without profitability was exacerbated by spiralling costs, while a race to the bottom on discounting as competition between platforms stiffened alienated top luxury brands who jealously control their pricing and image. 

Mytheresa — which focuses on wealthier, slightly older customers looking to purchase a wide range of products as opposed to those shopping for individual items — is emerging as one of the last major players standing. Its target audience is someone who spends six figures annually on clothing and accessories, according to Kliger. The platform also has a restrained approach to discounting, appealing to brands. 

“Consumers that you attract with a high discount will only come back with high discounting. If you start with that, you will have to find a model that supports continuous discounting. That’s not our business model,” he said.

Mytheresa gives top clients access to regular exclusive events around the world with designers and labels, as well as offering products that can’t be found elsewhere — such as a 60-piece capsule collection with Dolce & Gabbana or early pieces from the first collections designed by Gucci’s new creative director Sabato de Sarno. Kliger estimates that about 10 per cent of Mytheresa’s product offering at any given time is exclusive.   

“[Our clients] are busy people. That’s one of the reasons why people go online . . . they have a need for luxury in the sense of occasions: they travel, they represent companies and organisations. They have very busy social calendars which drives the need to dress,” Kliger says.

Preliminary figures for its most recent quarter to March 31 show Mytheresa’s net sales increased by at least 15 per cent to €230mn compared to a year earlier and its margins improved, although the group still suffered a loss.

It also reported a loss for 2023, described by Kliger as “a very tough year for the whole sector”.

Nevertheless Mytheresa remains one of the only online luxury retailers to have consistently reported positive operating income over time, albeit with slim margins and high fixed costs. 

“We go back to retail. Our founders were boutique owners, not magazine or tech people,” Kliger said. 

The slowdown in luxury growth has revealed a widening polarisation between the strongest brands such as Hermès and weaker players including Gucci, where sales have plummeted, as well as among the platforms who sell the brands.

“We see this on the retail side too . . .[but] I don’t think there is an issue with ecommerce,” said Kliger. “There is an issue for undifferentiated, price driven models. This was glossed over during the boom times.”

FT : How Goldman Sachs grew up: 25 years since Wall Street’s elite firm went pub

How Goldman Sachs grew up: 25 years since Wall Street’s elite firm went public
Lloyd Blankfein, Hank Paulson, David Solomon and others on what has changed since its seminal listing in 1999

Goldman Sachs this week celebrated 25 years as a public company. The Wall Street investment bank has not always wanted to act like one.

In the early years after the initial public offering, longtime chief financial officer David Viniar was said to privately joke that “disclosing the weather is too much information”.

Goldman’s IPO in May 1999 was a seminal moment for the then 130-year-old investment bank, and its 221-strong partnership, which had already spent almost 15 years debating whether to seek public equity capital.

The firm plans to mark the occasion by assembling a replica of the New York Stock exchange balcony where then-chief executive Hank Paulson rang the opening bell, so employees can take their own picture.

“The need for permanent capital made it inevitable we would go public,” said Lloyd Blankfein, the second of just three chief executives of the bank since its IPO, and a partner before the float.

“We feared we would lose our distinctive partner culture that had propelled our success. Miraculously, that culture has largely survived, and still affects how people conduct themselves and meet their responsibilities,” Blankfein told the Financial Times. “And the title still has cachet on the Street.”

But being a partner in Goldman Sachs in 2024 no longer means what it once did.

In the quarter of a century since the bank called time on its partnership structure and handed ownership of one of New York’s most prestigious financial institutions to stock market investors, Goldman’s bankers have sometimes struggled with the shift in accountability to outside shareholders.

In addition to Viniar’s private joking, chief executives Paulson and Blankfein would not speak on earnings calls, while the bank did not set regular public financial targets.

“The disclosures of Goldman after it became public would be laughable if it wasn’t so awful for investors,” said Mike Mayo, research analyst at Wells Fargo who has tracked Goldman’s stock for around two decades.

Insiders said Goldman’s level of disclosure at the time was not particularly bad compared with peers such as Bear Stearns or Lehman Brothers, both of which failed in the financial crisis.

Still, “their disclosures lagged peers for a while, many years even after the IPO”, said Jason Goldberg, a research analyst at Barclays who has covered Goldman for more than 10 years.

The bank’s early success meant that it could afford to be more opaque. It wooed potential IPO investors in glitzy hotels including the Ritz. “That just shows the aspirational multiple they were looking for,” recalls one investor.

For its first decade as a public company, it handed investors swashbuckling profits from its money-spinning investment banking and trading businesses. Profits tripled between 2000 to 2007. It is alone among the big six US banks in outperforming the S&P 500 over the past 25 years.

“When things are good, you get away with a lot more,” said Goldberg.


In the early years after its float, Wall Street analysts struggled to understand how the bank made its money. “It wasn’t until John Waldron [bank president since 2018] that I actually had . . . a good meeting at Goldman Sachs,” said Mayo.

“Very nice and smart people, don’t get me wrong. David Viniar is a star CFO. He just wouldn’t answer questions in meetings. He’d talk and then at the end, like what did we get out of that? I don’t think we got anything out of it. I think that was their goal.”

The start of its second decade as a public company, in the depths of the 2008 global financial crisis, paled in comparison to the first — and opened it up to a far harsher regulatory spotlight as it switched from a brokerage firm to a bank holding company.

When David Solomon became chief executive in 2018, his “mandate was to make Goldman function more as a public company even though it had been public already for two decades”, said Mayo.

Solomon has tried to make the bank more shareholder-friendly, hosting the company’s first investor day four years ago and speaking on quarterly results calls. “They’ve now made strides under Solomon’s tenure,” Goldberg added.

Still, if analysts now understand how Goldman makes its money, in recent years it is the bank that has grappled with how best to generate it for investors.

Following the 2008 financial crisis, the bank wound down its proprietary trading arm. For several years, Goldman kept wagering its own capital on investments such as private equity and real estate. It is now in the process of paring back that business to make its earnings less volatile.

Instead, it has sought more predictable earnings elsewhere.

A foray into consumer lending, with the launch of its Marcus brand in 2016 and the subsequent $1.7bn purchase of online lender GreenSky, later written down, proved an expensive misjudgement. The bank is now emphasising its growth in asset and wealth management franchise: a move its longtime rival Morgan Stanley made more than a decade ago.

Goldman makes money today largely as it did before its IPO: from investment banking, trading and managing money for the wealthy.


It also managed its own IPO in the way it has managed countless others for clients in the years since. It priced the shares astutely, towards the top of its target range, but sufficiently low to allow a pop of more than 30 per cent on the first day of trading on the New York Stock Exchange on May 4.

“After years of telling clients to leave an opportunity for the stock to rise in the pricing, we had to show we had priced it responsibly,” said Dan Dees, who as a young investment banker worked on Goldman’s IPO and now co-runs its banking and markets division.

Another person familiar with the roadshow said Paulson had made clear that the deal could never trade below its IPO price. “Lehman, Morgan Stanley, Bear [Stearns] were all waiting to say these guys couldn’t even do their own IPO,” the person said.

In other ways the firm — and Wall Street — have changed far more fundamentally over the past 25 years. Of the 13 underwriters on its equity offering, only three — Morgan Stanley, JPMorgan and Goldman itself, which led the float — have avoided being subsumed into other financial institutions.

“Look at how many of our competitors don’t exist anymore,” said Goldman partner Tim Ingrassia, one of only six current Goldman employees who was a partner at the time of the IPO.

The firm still bestows the title of partner on its 400-odd most senior employees, with a new class made up every two years. But even after 25 years, only 19 per cent of its partners are women — up from 6 per cent at the time of the IPO.

The float handed a windfall to the class of pre-IPO partners that not even Solomon, who joined the bank months after Goldman listed, can rival.

Solomon told the FT that his predecessors Paulson, Jon Corzine “and the partners at the time made the right decision”.

“You have to evolve and grow, but the remarkable thing is how they set us up to retain our partnership culture,” Solomon said. “We worked very hard to ensure that being a partner here is aspirational and that partners continue to contribute to our culture of excellence.”

But for selling the bank, the pre-IPO partners received just under 265mn shares, worth about $14bn in total or $63mn for the average partner. Paulson’s stake was worth $219mn at the IPO price, while the shares of his Corzine were worth more than $230mn.

“The result was there were partners that were worth more than they ever expected,” said one Goldman banker who worked at the firm during the IPO. Goldman’s stock has since risen around eightfold. The $14bn of shares would be worth about $113bn today.

By comparison, Solomon’s shares in Goldman are worth about $66mn.

Perks for new partners today include special access to funds managed by Goldman, a guaranteed salary of $1mn, plus a bonus, an annual private gathering, and funds to donate to charity through the bank’s philanthropic arm.

The IPO bred a dynamic of “haves and have nots” between the partners who had benefited from the public share sale and the more junior employees who had no equity interest in the firm, according to people who worked at Goldman at about that time.

Part of the work by Paulson was to reward younger employees who were top performers. Another ex-Goldman employee said: “There was a clear emphasis from [Paulson] to make sure the organisation benefited from the talent that was there that had not benefited from the windfall of the IPO.”

Paulson told the FT: “Goldman Sachs needed to grow significantly to meet the needs of our investing and corporate clients — the elephant was becoming too big for the partnership tent. We were solving for size and capital, and we needed to do so in a way that maintained our culture.

“We created a partnership structure within the public company and broadly shared the economic benefits across the firm,” said the man who served as chief executive for seven years before he left to become US Treasury secretary.

“It went seamlessly. In the ensuing years, we increased our position as the leading investment bank in the US, Europe and Asia, and we did so while maintaining a one-firm, teamwork culture.”

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: The East African Crude Oil Pipeline (EACOP), the world's longest heated oil pipeline

Cover:
-The East African Crude Oil Pipeline (EACOP), the world's longest heated oil pipeline, faces challenges from forest fires and deadly snakes as it clears land from Africa to the Indian Ocean. The project, which will meander almost 900 miles and carry up to 246,000 barrels of crude a day to the Tanzanian port of Tanga, is a $10B steppingstone that could transform Uganda's economy and provide the world with a new source of oil at a time when conflicts in Ukraine and the Middle East have raised supply fears. Western lenders have shunned EACOP amid environmental and human-rights concerns, leaving Beijing as the obvious savior. China's decision on the pipeline will shed light on whether it still wants to regularly fund legacy megaprojects in the developing world. TotalEnergies, EACOP's biggest corporate backer, faces lawsuits from activists and pressure from shareholders on climate goals after years of delay on the pipeline.

Interview:
-Dev Kantesaria, founder and managing partner of Valley Forge Capital Management, has developed a concentrated strategy that has proven successful for the firm. Currently, the firm owns eight stocks and rarely holds more than 20. Kantesaria focuses on long positions in U.S. stocks that he expects to outperform the S&P 500 over the years. The money manager seeks companies with ample operating leverage and minimal capital-spending needs in industries with secular growth trends. Valley Forge's hedge fund has returned nearly 15% annually since 2007, beating the S&P 500 by more than five percentage points a year. Assets under management have grown to more than $3 billion from $500 million in 2019.

Tech Trader:
-Apple's earnings report for Q3 showed a 4% decline in revenue, the fifth decline in the past six quarters. However, Apple shares were down 10% on the year, indicating investors were prepared for the worst. Despite the disappointing results, Apple's performance was better than expected. The stock rallied 7% on the results, but it's likely that investors' questions about Apple's future will take more time to resolve. Key storylines from the quarter included a surprise in China, where iPhone sales in "Greater China" were up year over year, despite the initial feared loss of market share to Huawei. Apple is also lagging behind other tech giants in generative artificial intelligence software, with expectations growing for the unveiling of its AI strategy in a few weeks.

The Trader:
- Stocks have seen a boost following Friday's jobs report, with the S&P 500 index increasing 0.4% to 5120. The Nasdaq Composite is 1.3% higher, and the Dow Jones Industrial Average is rising 1.1%. The employment report showed fewer jobs than expected in April, but enough to indicate a growing economy. This could help keep inflation down, prevent the Federal Reserve from raising rates again, and potentially allow it to cut them. However, there isn't enough evidence that the central bank is about to cut rates, and the payrolls report doesn't significantly increase the odds of the Fed remaining on hold in July.
-Sherwin-Williams shares have fallen 12% since March, with shares down to $305. Higher inflation readings suggest the Federal Reserve is unlikely to cut rates soon, which may impact new-home sales and home-related spending. However, Sherwin continues to raise prices, with its largest and most profitable business, Paint Stores Group, expecting to ramp up throughout the year. Management expects total sales to range from flat to up in the low single digits for the full year, bringing full-year revenue to at least $23.1 billion. KeyBanc Capital Markets analyst Aleksey Yefremov upgraded the stock to Overweight with a $400 price target. The volume of paint sold is expected to recover soon, and mortgage rates are nearing their peak levels. Evercore ISI's "home improvement leading indicator" shows that broader home-improvement revenue dropped year over year at the end of 2023 but has recently flattened out and could rise into the low single digits.

Features:
-Shareholders are attending Berkshire Hathaway's annual gathering in Omaha, Nebraska, where Warren Buffett, CEO and investing mentor, will speak. The estimated attendance is between 30,000 and 40,000, depending on the year. Buffett once said he wish he knew who Berkshire shareholders were, as there was no comprehensive record of them. The annual meeting is a huge weekend for Omaha hotels, restaurants, Uber drivers, and other businesses. The local newspaper, the Omaha World-Herald, calls the meeting the "gift that keeps giving," quoting a local business person who describes it as "our Christmas." Berkshire board member and investor Chris Davis believes the meeting is a reminder about a certain value system and a way of looking at the world, becoming deeply part of the culture of the people attending and being a lot of fun.
-A legal case involving the director of a company tied to former President Trump is unfolding in a federal court in Manhattan. The case, filed in June 2023, alleges insider trading by a former director of Digital World Acquisition Corp., the blank-check company that took Trump Media public. The former director, Florida investor Bruce Garelick, left the position before the merger was completed and has pleaded not guilty to the charges. The trial is continuing, and his lawyers say he has reserved the right to testify in his own defense. Barron's stopped by the federal courthouse in lower Manhattan this week to catch a portion of the insider-trading case. Meanwhile, Trump is being tried on charges that he concealed payments to former adult actress Stormy Daniels. Both cases provide a window into the financial feeding frenzy that began when Trump's name became associated with a stock about three years ago.

Europe:
-Novo Nordisk shares fell on Thursday after sales of its weight-loss drug Wegovy fell short of estimates in the first quarter of the year. Sales were 9.4B Danish kroner ($1.4B), more than double the total from the same quarter last year, but short of consensus expectations for 10.4B kroner. Investor enthusiasm for Wegovy has ballooned Novo Nordisk's share price, making it Europe's most valuable company last year. However, the Danish pharmaceutical firm's earnings report showed a 22% increase in net sales to 65.3B Danish kroner ($9.1B) in the first quarter, beating estimates. Sales of the popular diabetes treatment Ozempic rose 42% to 27.8B kroner. The lower-than-expected Wegovy sales result might not mean much for the company over the long term, as sales are currently limited by supply. Novo's parent company agreed to buy drug manufacturer Catalent earlier this year and acquired three manufacturing sites to increase production. If successful, sales would quickly accelerate.

Emerging Markets:
-The G-7 Western economies have set a goal of achieving a sixfold increase in renewable energy storage by 2030, primarily through battery energy storage systems (BESS). The cost of storage batteries has dropped by 90% over the past 15 years, making the G-7 target realistic. Storage is a crucial link to a lower-carbon future, as solar generation matches fossil fuels on cost but remains unreliable. However, Chinese producers dominate utility-scale storage batteries, relying on lithium and iron and phosphate (LFP) for electricity storage. Contemporary Amperex Technology (CATL) supplies two-thirds of the world's larger LFP batteries, while South Korea's Samsung SDI and Stockholm-based Northvolt are distant runners-up. Although CATL shares have bounced 30% this year, geopolitics are a factor. The European Union is open to CATL producing on its turf, and the company has multibillion-dollar investments in Germany and Hungary. The furthest it's gotten in the US is licensing battery technology to Ford Motor, which has drawn ire on Capitol Hill.

Commodities:
-Hershey, a leading chocolate seller, reported better-than-expected profits and sales in Q1 2024, driven by higher prices. Adjusted earnings per share were $3.07, up 3.7% from last year, while analysts expected Hershey's earnings to shrink by 6.8% to $2.76 a share. Net sales of $3.25 billion also exceeded the consensus of $3.1 billion. The company said that sales were primarily driven by price realization. Ahead of earnings, investors were concerned about the high cost of cocoa, influenced by droughts in West Africa and rot-causing diseases, which could have affected Hershey's input costs and earnings. However, Hershey raised prices of its products to cover the elevated cocoa costs, with prices rising by 5.2% from a year ago on top of the 6.5% increase seen in the previous quarter. Volumes overall increased by 3.4% in the quarter from a year earlier.

Hershey is highly exposed to the cost of cocoa because most of its revenue is from chocolate. However, there may be a limit to how high prices can go or how much consumers are willing to pay when everything else is getting more expensive. Hershey has been diversifying its revenue by selling salty snacks such as pretzels and popcorn, but those products are not selling as well as the company had expected.

Streetwise:
-Bob Bakish is out as CEO of Paramount. He will be replaced by an executive trio of unlikeliness to counter Shari Redstone's plan to parlay her economic stake and voting control into a cash-out favoring herself. Bakish has been reportedly getting $50M on the way out, after presiding over losses for ordinary shareholders of 48% over the past year and 73% over the past five years.
The next episode involves Paramount Global entering a high-stakes standoff with cable provider Charter Communications over terms of a television carriage deal. The old one just expired, and historically, the network owner wants a percentage increase and the cable company says it will only pay y. Last fall, when Walt Disney wanted x, Charter said it would rather exit the subscriber-losing television business and just do broadband than keep getting squeezed by carriage hikes. Disney, which needs cash flows from legacy TV to support its streaming services until they're profitable, folded and agreed to cut Charter in on selling its streaming services.

>>> Weekend Papers Summary

Weekend Papers Summary

FINANCIAL TIMES
-US stocks saw their best day in over two months after a jobs report undershot expectations, boosting hopes for interest rate cuts later in the year. The US added 175,000 jobs in April, well below the 241,000 forecast and the smallest rise for six months. The cooling labor market led to a 1.3% gain for the S&P 500 index. Federal Reserve chair Jay Powell signaled that rates would remain at a 23-year high of 5.25-5.5% for even longer than anticipated.
-Warren Buffett's longevity has led to potential successors either dying or falling by the wayside. As Berkshire's shareholders gather for the group's annual meeting, the question of the future holds as the legendary investor is no longer in charge is increasingly pressing. The Financial Times examines whether Greg Abel will be able to deliver on Buffett's promise that Berkshire, America's last great conglomerate, was built to outlast a founder whose investment record, folksy charm, and professorial wisdom have made him the country's most admired business leader. Bill Stone, the chief investment officer of Glenview Trust, said that Berkshire has built up goodwill over the years and that it doesn't completely go away when Buffett is gone. Abel, who joined Berkshire in 2000 and was revealed as CEO-in-waiting by Charlie Munger, will be tested on multiple fronts.
-Former Trump aide Hope Hicks testified at his Manhattan criminal trial, revealing that Trump tried to prevent newspapers containing allegations of extramarital affairs from being delivered to his home to avoid angering his wife Melania. Hicks, who worked for Trump's 2016 campaign and followed him to the White House, described how she was ordered to keep copies of the Wall Street Journal, which contained a story about "hush money" payments to a porn actor, from her employer's spouse.
-The US Securities and Exchange Commission (SEC) has shut down the auditor of Donald Trump's social media company, BF Borgers, and its founder, Ben Borgers, for "massive fraud". The SEC accused Borgers and the firm of falsely representing to clients that its audit work would comply with US standards and fabricating documentation. The firm has agreed to pay a $12mn penalty and Ben Borgers to pay $2mn. Borgers, one of the most prolific auditors of US public companies, has expanded rapidly to become auditor to hundreds of small and microcap companies, including the former US president's Trump Media & Technology Group. The SEC said three-quarters of its audits were faulty, and advised Borgers' clients to check past financial statements for errors.
-Private equity firms like Apollo Global, KKR, Blackstone, and Brookfield are boosting their low-risk lending efforts, aiming to originate over $200B a year in new loans. This is compared to $97B issued last year, including to investment-grade companies like Vonovia and Air France-KLM. Apollo's long-term forecasts suggest that US economic growth, driven by increased public and private spending on infrastructure projects, is driving a significant demand for loans. However, the traditional channels of investment-grade public debt or equity may not be suitable for these companies.
-South Korea has imposed a crackdown on "shrinkflation", requiring food and daily necessities producers to inform consumers of any product size reductions or face fines. The Korea Fair Trade Commission has labeled the practice of slimming down products while keeping prices unchanged as an "unfair transaction". The move comes amid international criticism of companies downsizing products to pass on inflation costs to consumers. US President Joe Biden and French finance minister Bruno Le Maire have criticized shrinkflation, calling it a "scam" and requiring supermarkets to label products with reduced volumes.
-The German government has vowed consequences for Russia following intelligence agencies revealing the Kremlin was behind a cyber-attack on the party of Chancellor Olaf Scholz in January 2023. The attack was carried out by the same Russian hacker group that leaked damaging information about Hillary Clinton in her 2016 presidential bid. The German foreign minister, Annalena Baerbock, attributed the attack to the APT28 group, controlled by the Russian secret service GRU. The foreign office is considering punitive measures, including EU sanctions and diplomatic expulsions, to prevent, deter, and respond to Russia's cyber aggression.
-The island of Mayotte has sparked a dispute between two of the EU's largest far-right parties, Alternative for Germany and the French Rassemblement National. The AfD suggested France should hand over control of its impoverished overseas department to the Union of the Comoros, comparing the EU's refusal to recognize independence referendums in eastern Ukraine with its acceptance of similar plebiscites in the island nation. French far-right leader Marine Le Pen reacted furiously, stating that the AfD would better deal with Germany's problems and teach her allies geopolitics lessons. The dispute is part of a series of confrontations between the two parties.
-US regulators have accused former Pioneer Natural Resources CEO Scott Sheffield of attempting to co-ordinate production levels with the OPEC cartel to boost energy prices. The move, which came alongside ExxonMobil's $60B takeover of Pioneer, has sparked tensions in the oil industry, with insiders questioning how past comments could be scrutinized and fears of a broader crackdown before the November presidential election. James Lucier, an analyst at Capital Alpha Partners, said the implications go far beyond Sheffield, as the FTC has not taken an adversarial approach toward oil industry mergers.
-Canada has arrested three Indian nationals for the fatal shooting of a Sikh separatist leader in British Columbia last year. The incident heightened tensions between Ottawa and New Delhi. The Royal Canadian Mounted Police arrested Karanpreet Singh, Kamalpreet Singh, and Karan Brar in Edmonton, Alberta. They were charged with first-degree murder and conspiracy to commit murder for the killing of Hardeep Singh Nijjar outside Vancouver in June. The incident complicated relations between Canada and India, leading to diplomatic removals and temporary visa restrictions for Canadian citizens. Police are collaborating with international partners, including US agencies, to prevent further assassinations.

THE NEW YORK TIMES
-The University of Southern California has announced updated commencement plans, including increased security and modified festivities. The university will host a "Trojan Family Graduate Celebration" at the Los Angeles Memorial Coliseum, where over 100 school-specific graduations and smaller receptions will take place. Access to campus for these ceremonies will be limited to students, faculty, staff, and registered guests. The Trojan Marching Band will perform, and a special gift will be given to the Class of 2024. Security measures will be similar to those at sporting events.
-The University of Chicago's president has stated that the pro-Palestinian encampment on the campus's quad cannot continue, a move that has been closely monitored due to the university's reputation as a national model for free expression. Initially, administrators defended the camp's permissive approach, citing the Chicago statement, but President Paul Alivisatos argued that these protections were not absolute and the encampment violated university policies.
-Tensions over the Gaza war have continued to rise at American universities, with dozens of arrests made in New York and clashes between pro-Palestinian demonstrators and counterprotesters at the University of Chicago. Over 2,300 arrests have been made on US campuses over the last two weeks, according to The New York Times. The wave of student activism has spread to universities outside the US, with some universities agreeing to consider some demands, bringing peaceful ends to demonstrations but also condemning some Jewish groups. Deals have been struck at Brown, Northwestern, Rutgers, and the University of Minnesota.
-Barry Sternlicht, a billionaire real estate mogul, has criticized Brown University's board vote on cutting investments tied to Israel, calling it "unconscionable" and paused donations. Sternlicht criticized the arrangement as sympathy for Hamas and criticized students protesting Israel's actions in Gaza as "ignorant." He argued that no deal with protesters could be fruitful due to disagreements on facts and moral clarity, as well as the scale of Israel's invasion.
-Rebel drone units in Myanmar have disrupted the power balance, using cheap drones to disrupt the civil war. The military, equipped with Russian fighter jets and Chinese missiles, has used crowdsourced instructions and parts from China to add ballast to the conflict. This technology is similar to those used in Ukraine, Yemen, and Sudan. In Gaza, Hamas used low-cost drones to blind Israel's checkpoints, while in Syria and Yemen, drones are used alongside missiles, forcing American troops to make difficult decisions.
-Turkey has announced that it will suspend all trade with Israel until a permanent cease-fire in the Gaza Strip is reached. This move is part of the latest international sanctions against Israel, highlighting the growing global pressure to end the war in the region. Despite this, Israel continues to warn of an offensive in Rafah, which the UN has deemed a "slaughter" in Gaza. Turkey's President, Recep Tayyip Erdogan, has expressed his decision to stand with the persecuted, despite anticipated backlash from Western countries.
-Israeli and foreign officials are concerned that the International Criminal Court (ICTY) may issue arrest warrants against senior Israeli officials, possibly over accusations of preventing aid delivery to civilians in Gaza. The humanitarian crisis in Gaza is escalating due to months of restrictions and the active nature of the conflict, which has curbed aid distribution. The Israeli military has stated that since Hamas's attack, Israel has been "engaged in a war against the terror organization" and has worked in coordination with the U.S., Egypt, and international aid groups to get aid to Gaza residents.
-A cooler-than-expected jobs report in April rekindled hopes that the Federal Reserve may cut rates before the end of the year, as job and wage growth in April came in lower than expected. The S&P 500 rose 1.3%, while the Russell 2000 index of smaller companies rose 1% for the day. This shift in labor market data suggests the Fed may be considering rate cuts.
-Two states with near-total abortion bans are set to have citizen-sponsored measures on the ballot this year, allowing voters to reverse those bans by establishing a right to abortion in their state constitutions. Missouri and South Dakota have already secured signatures for these amendments, more than double the required 172,000. Both groups aim to build on the momentum of other states where abortion rights supporters have prevailed in seven out of seven ballot measures since the Supreme Court overturned Roe v. Wade. Other states, including Arizona and Nevada, are hoping voters' renewed support will help President Biden win re-election.
-Two states with near-total abortion bans are set to have citizen-sponsored measures on the ballot this year, allowing voters to reverse those bans by establishing a right to abortion in their state constitutions. Missouri and South Dakota have already secured signatures for these amendments, more than double the required 172,000. Both groups aim to build on the momentum of other states where abortion rights supporters have prevailed in seven out of seven ballot measures since the Supreme Court overturned Roe v. Wade. Other states, including Arizona and Nevada, are hoping voters' renewed support will help President Biden win re-election.

THE NEW YORK POST
-The Biden administration has warned Iowa Gov. Kim Reynolds that legal action will be taken if she enforces a new law allowing authorities to arrest migrants who were previously denied entry or deported from the US. The Justice Department has called the measure unconstitutional and given the state a May 7 deadline to suspend enforcement of Senate File 2340, which was signed into law earlier this month.
-US employers increased payrolls by 175,000 in April, a slowdown from the average 276,000 new jobs per month created this year. This shift in hiring pace suggests the economy may be heading towards a slowdown worthy of an interest rate cut. April's job growth fell short of analysts' predictions, suggesting a potential slowdown. Unemployment rose to 3.9%, the 27th consecutive month it held below 4%, despite the Dow Jones consensus expecting it to remain unchanged.