OpenAI Wants to Go Public. First Sarah Friar Needs to Get It to Grow Up.
The chief financial officer is managing Sam Altman—and ambitions for one of the biggest IPOs ever. She has pulled off impossible ones before.
After a dizzying summer of deals, Sam Altman came to work one day last fall, ready to show just how confident he was in OpenAI’s future. In a livestream broadcast to the public from the startup’s unmarked San Francisco offices in October, he showed a black-and-white slide with a number he said represented OpenAI’s financial obligations for new computing capacity: $1.4 trillion.
The giant number spread like wildfire across the investment world—and not in a good way. OpenAI was set to generate $13 billion in revenue that year. So everyone was asking the same question: how on earth was the company going to pay for it?
For Sarah Friar, OpenAI’s chief financial officer, it was time to clear up the confusion. A veteran CFO who had spent more than a decade at Goldman Sachs, she had been brought into the startup to give it the financial maturity needed to go public.
In the ensuing months, she privately walked back his comments. The company actually planned to spend a much smaller amount, she told investors: $600 billion through 2030. More recently, she has questioned the wisdom of spending even more money on data centers, at times putting her at odds with her freewheeling boss.
Like any corporate CFO, Friar must translate her CEO’s grandest ambitions into something the company can actually afford—and know the right time to say no. She follows a line of women in Silicon Valley asked to tame the wilder impulses of companies—or their younger male founders. Google brought in Ruth Porat after going public to control costs and add discipline to what had become freewheeling spending on moonshots. Mark Zuckerberg got Sheryl Sandberg at Facebook, and Elon Musk has Gwynne Shotwell at SpaceX.
There was Friar herself at Square in 2012, where she became Jack Dorsey’s second-in-command, helping steer the payments startup through a turbulent public offering more than a decade ago. When she announced her departure in 2018, Square’s stock sank by over 10%—a sign of just how important investors came to see her role at the company.
It falls to Friar to pull off what is envisioned as one of the biggest IPOs ever—at the exact moment when OpenAI’s growth has slowed relative to rivals.
Executives from OpenAI have spoken with stock exchange officials about potential IPO plans, according to people familiar with the matter, but haven’t yet kicked off a formal process.
IPOs are always unpredictable, but even more so when the company is in a race to develop world-changing technology, where the winner changes week to week and investor sentiment shifts just as fast.
OpenAI recently missed multiple internal revenue and user targets after facing ferocious competition from its two biggest rivals, Google and Anthropic. The losing streak has rattled executives and employees, some of whom have peppered all-hands meetings with anxious questions about the company’s future.
In recent months, Friar has grown more cautious about OpenAI’s data-center spending, telling company leaders she was worried the company wouldn’t be able to pay for computing deals if revenue didn’t grow fast enough, The Wall Street Journal has reported. She has also told them it might need more time to prepare for an IPO. Altman, on the other hand, has pushed to do it as fast as possible.
The differing approaches show just how tricky Friar’s job is becoming as she helps steer OpenAI through the most crucial stretch of its eleven-year-history. If she moves too slowly, OpenAI could fall behind and hit the market behind Anthropic, missing out on pools of investor money. Move too quickly, and she could stretch the business too far.
In other words, she doesn’t have much room for error.
The company said this past week that its business was “firing on all cylinders,” and that Friar remained optimistic about buying more computing power. She said on LinkedIn that OpenAI’s latest model was a giant leap for coding, currently the hottest application for AI.
Northern Ireland to Goldman
Friar cuts an imposing figure when she walks into any room. She is known for her strategic acumen and comfort in the corporate norms of Wall Street, including a fondness for scheduled meetings and slide decks that ensure nothing is left to chance. Altman, by contrast, likes to come up with ideas on the fly, and is known to duck out of a room almost as soon as he enters it.
Friar, 53, grew up in a mill town in Northern Ireland during the Troubles, as the three decades of conflict over the region’s future are known. Her mother was a nurse and midwife, and her father worked as a personnel manager at the mill. She left for Oxford where she earned an engineering degree in metallurgy, economics and management and rowed crew.
She did an internship at a gold mine in Ghana but has said she felt she didn’t feel welcome given the lack of women who were there. She went to work for McKinsey, which sent her to South Africa just after apartheid ended. She calls the period a major influence in her life.
She got her M.B.A. at Stanford, where she met her future husband. Goldman Sachs then offered her a job and helped with a visa to stay in the U.S.
Friar worked at the bank for more than a decade as an investment banker and research analyst, putting her in the running for partner. And then one morning, she got the phone call that it wasn’t her turn. Friar had to hold back tears in the office, she said in a 2023 Stanford Business School interview. Her husband, David Riley, told her to see it as an opportunity to try something new.
Salesforce CEO Marc Benioff pulled her out of Goldman in 2011 to work in finance at the rising software giant. Then, just a year later, Jack Dorsey hired her as the chief financial officer of Square, a fledgling payments startup with only a few hundred employees.
One of her biggest tests came in 2015, when she had to take Square public in what was a gloomy year for IPOs. Friar struggled to drum up investor interest, who were turned off by the company’s losses. Bankers told her that they would have to cut Square’s share price. “It was awful,” Friar said in the Stanford interview.
On the night of pricing, they considered scrapping the IPO. But there was a sense of obligation; people had flown into New York to ring the bell. Instead, Friar and her bankers agreed to sell less than 10% of the company and price the stock at $9 a share, valuing the company at roughly $3 billion, or half its previous valuation.
Three years later, the stock had shot up.
Ready for a CEO role of her own, Friar found one in the social-networking app Nextdoor.
Nextdoor was a fraction the size of Square, both in terms of employees and valuation. The pandemic injected life into the company: people needed their neighbors for finding anything from toilet paper to friendship.
In 2021, investors poured money into newly public companies, creating the frothiest IPO market in decades. That year, the company merged with a special-purpose acquisition company, or SPAC, to list shares under the ticker KIND. Friar, who often talked about cultivating kindness in community, picked the ticker symbol.
Unlike at Square, Nextdoor’s stock didn’t take off. It tumbled.
The ticker may have been KIND, but the site often wasn’t. Comments could be racist or just sniping between neighbors. In February 2024, Nextdoor’s stock traded around $2 a share, down more than 70% from when it went public. The company announced Friar’s departure.
A few months later, Friar accepted the CFO job at OpenAI.
Trying for order at OpenAI
OpenAI was squaring off against its largest shareholder Microsoft. The tech giant held significant control over the business and was fighting for a large stake in it as part of its restructuring into a for-profit corporation.
Friar worked with Goldman Sachs, where she is still held in high regard, to advise OpenAI on the negotiations. The bank is expected to play a leading role in the company’s IPO.
More importantly, she had been friends with Microsoft CFO Amy Hood ever since the two worked together in their 20s at the bank. That relationship became crucial when the two companies set out to rework their technology partnership last year, in a monthslong negotiation that took a series of twists and turns.
Some OpenAI employees involved in the talks had struggled to get on the same terms as Hood, who came to be known for her tough, unsparing style, according to people familiar with the matter. Friar was a key bridge, and would sometimes fly to Microsoft’s headquarters to sit down with her fellow CFO and get the deal back on track.
OpenAI and Microsoft announced a revised agreement last fall, and another one this past week.
After Meta launched a talent raid on OpenAI last year, offering its researchers pay packages that topped $100 million, Friar worked with research chief Mark Chen to come up with a new framework for approaching compensation that allowed the startup to stay financially competitive without losing discipline.
Friar has been tight-lipped about the company’s public listing plans, even to some of OpenAI’s closest investors. But since last fall, she has been racing to get it ready, hiring a slew of new finance and accounting professionals and kick-starting informal conversations with banks.
Then came a slowdown in OpenAI’s business.
A new version of Google’s Gemini app stole market share from ChatGPT, and the company missed its target of reaching 1 billion weekly active users for the chatbot by the end of last year. (It still hasn’t announced this milestone.) The bleeding continued after Anthropic’s coding tool Claude Code took off among software developers, and OpenAI missed some internal revenue targets.
A company spokesman said the company has internal goals that are different from what it shared with investors. He said the company hit its revenue plans in the first quarter, but declined to specify.
Friar has taken a closer look at OpenAI’s spending commitments, and has privately suggested waiting until 2027 for an IPO, cautioning that the company isn’t yet ready to meet the rigorous reporting standards required of public companies, The Journal has reported.
She is up against a ticking clock.
Banks have told both Anthropic and OpenAI that whoever makes it to market first will get to define the new industry. If Anthropic succeeds in pulling off a mega-IPO, it could suck the wind out of OpenAI. There are large pools of cash eager to back new AI companies, and the first mover will get first dibs.
Q&A: Am I a professional investor?
The City regulator is set to change the rules on client categorisation
This time last year, it was a simple question with a simple answer. Yet a consultation by the City watchdog means the line between professional and retail investors is about to be redrawn.
In December 2025, the Financial Conduct Authority outlined proposed changes to the UK’s client categorisation regime. Under the current rules, retail investors must meet at least two of three criteria to be considered a “professional investor”: making 10 significant trades per quarter over the past year; holding a portfolio of above £500,000; or having at least a year’s professional experience in financial services.
The changes, expected to be confirmed later this year, aim to give firms more discretion when assessing whether a retail investor can be bumped up to professional status. In simple terms, a professional investor is someone deemed capable of understanding complex investments and thus permitted to invest in high-risk assets.
Would you qualify — and what would it mean if you did?
Why might you want to be classed as a “professional”?
The status opens the door to higher-risk investments, including private equity, hedge funds and structured products. The majority of these, including minibonds, peer-to-peer loans and certain crowdfunding investments, are restricted for retail investors as they are considered too risky or complex.
The upside, in theory, is the potential for higher returns. Yet riskier investments have the potential for big losses as well as gains. Tim Jenkins, director of Jencap Partners, says: “When losses occur, hindsight bites hard.” If you’re considering a move into professional status, you need to be comfortable with a higher level of risk.
Do you have enough money?
The FCA proposes that individuals with £10mn or more in investable assets can opt for professional status if they request it. Crucially, they would not face the more detailed assessment applied to investors with a lower net worth.
However, as Dan Moczulski, UK managing director at online broker eToro, pointed out, “being wealthy does not automatically make someone a sophisticated investor”.
As a safeguard, the FCA has said those who qualify would still need to give informed consent and would be warned about the protections they will lose.
Do you understand the risks — and can you afford them?
For everyone else, the test is more subjective. Those who don’t meet the £10mn threshold will face a rigorous assessment of their experience and understanding.
First, firms will look at whether you genuinely understand investment risks. Under the new system, employment in the financial services industry will no longer be assumed to have given a client the capabilities of a professional investor. Equally, knowledge and experience found in other sectors will not be automatically discounted.
Your investment history will also be considered, although frequent trading will no longer be used to determine whether you are a professional investor. Someone who has traded actively in crypto markets, for example, may feel experienced, but that alone would not necessarily mark them as sophisticated.
Firms will also weigh your understanding and ability to assess risk. For example, do you understand the benefits of a diversified portfolio? Do you know what leverage is, and how it could enhance your investment positions? In practice, firms take various approaches to assessing an investor’s suitability, including online questionnaires, adviser conversations, and reviews of past investment behaviour.
Your financial resilience will also be taken into account. If you cannot afford to bear any potential losses, that alone could be enough to disqualify you.
What “red flags” would a firm be wary of?
Even if you appear to meet the criteria, assessors are expected to consider any warning signs in your personal investment history. If you invest mainly in speculative, high-risk assets — such as cryptocurrencies — or leveraged products, this could harm your case, unless you can afford the losses or present strong evidence that you meet the other criteria.
Problems in your trading history, namely a failure to settle margin calls on a timely basis, would also count against you. If you provide any information that is inconsistent or implausible, this will also be flagged.
Firms will also look out for signs of “vulnerability”, such as poor financial resilience, limited investment knowledge or major life events such as illness or a family bereavement. Any one of these could indicate that an investor should not be treated as “professional”, even if they appear to meet the formal criteria.
Do you understand the protections you are giving up?
Your motivation also matters: why do you want to opt out of retail protections in the first place?
The trade-off for professional status is clear: greater freedom, but fewer safeguards. Firms will assume you understand the risks of each investment, and thus there will be fewer checks on whether a product is appropriate for you. You may also lose access to regulatory redress in the event of an investment going wrong.
Of course, firms must still act in your best interests. In short, you are not unprotected, but you are expected to take an active role in protecting yourself more than you did before. For some, that might just be enough to convince them to keep their retail protections in place.
Swiss plan to cap population gains ground ahead of referendum
Proposal to limit inhabitants to 10mn people branded as ‘chaos initiative’ by business lobby
A referendum on capping Switzerland’s population at 10mn people is gaining support just weeks ahead of the contentious vote.
The so-called 10mn initiative, led by the rightwing Swiss People’s Party, is backed by 52 per cent of voters, according to a survey published this week by polling institute LeeWas. The trend comes despite strong opposition from business groups and the federal government, ahead of the June 14 vote on the proposal.
Business and industry groups have warned that any curbs on immigration will limit access to skilled labour and undermine growth.
Economiesuisse, the main business lobby, has labelled it a “chaos initiative” and has cautioned it risks damaging Switzerland’s competitiveness and destabilising ties with the EU, its largest trading partner.
The proposal echoes rising anti-immigrant sentiment across Europe that has reshaped political agendas and boosted support for nationalist parties. The issue has become a defining political faultline, influencing both elections and referendum campaigns.
“The results of the poll this week are a big call to action — people realise it is going to be a heated campaign and there is no certainty of the outcome,” said Frédéric Rochat, managing partner at Geneva-based private bank Lombard Odier.
“The trigger point is initially positive — Switzerland has gained attractiveness in a more uncertain world and net migration has increased significantly. But Swiss people are now feeling similar emotions to those seen in Britain before Brexit — a desire to take back control,” he said.
The campaign is expected to be closely fought, with both sides of the political spectrum intensifying efforts to sway undecided voters.
Much of the unease is directed at migration from the EU, which has risen steadily since Switzerland joined the border-free Schengen area in 2008. It is seen by some as contributing to rising rents and straining public services in cities such as Zurich and Geneva.
A “yes” vote would put Bern on a collision course with Brussels, as any curbs to free movement would be in breach of Switzerland’s obligations as part of its accords with the EU and as a member of the Schengen area.
Critics also point out that the initiative leaves key questions over implementation unanswered, with no clear roadmap for how a population cap will be enforced in practice.
Switzerland’s population has risen to more than 9mn, with official data showing foreign nationals accounted for almost 30 per cent last year. Large Swiss multinationals such as consumer group Nestlé, pharmaceutical companies Novartis and Roche, as well as private markets group Partners Group, rely heavily on foreign talent.
Beyond the proposed population cap, a more complex debate is unfolding over Switzerland’s long-term immigration model. The country operates a dual system: relatively open access for EU citizens under bilateral free movement agreements alongside strict quotas for workers from outside the bloc, who are typically admitted only if they possess highly sought-after skills.
Some policymakers and business leaders favour a shift towards a more selective “Singapore-style” model, where immigration is tightly managed based on economic needs. But such a move would be incompatible with Switzerland’s accords with the EU.
Denis Machuel, chief executive of Adecco, the world’s largest staffing company, said Switzerland’s population growth had “outpaced most European neighbours”, fuelling calls for “appropriate control measures”. But he warned that restricting access to skilled foreign workers or abandoning free movement with the EU would not benefit the country “economically or societally”.
Michael Hermann of Zurich-based pollster Sotomo said that while support for popular initiatives typically declined after initial polling, immigration-related votes had been an exception, with surveys sometimes underestimating the final outcome. “The race is still wide open, but the initiative has a good chance of being accepted,” he said.
The federal government has acknowledged concerns over housing shortages and infrastructure strain but has yet to put forward a comprehensive response.
A proposal last month to tighten rules on real estate purchases from non-EU citizens was intended to signal action but has been widely criticised as insufficient and poorly targeted.
“I think [the latest poll] should be a wake-up call to both the government and opponents of the initiative to get serious,” said an executive at a multinational company based in Switzerland.
“There need to be more credible proposals on urban development planning, as well as clearer thinking on what kind of immigration model Switzerland wants.”
Wealthy raid their pensions to avoid UK inheritance tax shake-up, advisers warn
Unused retirement savings could be taxed as part of overall estates after next year’s reforms
Wealthy families are fast-tracking lump-sum gifts to adult children and bringing forward planned pension income withdrawals ahead of a major inheritance tax shake-up next year.
Advisers and pension providers report a surge in access requests from clients with larger-than-average defined contribution pots, as concerns grow over a potential tax hit.
The urgency stems from reforms taking effect in April 2027, which will bring most unused pension wealth into the scope of inheritance tax.
The government estimates that in 2027-28, an additional 10,500 estates will face IHT after the change, and 38,500 will pay more — adding an average of £34,000 to liabilities.
“There’s now less than a year left before any unused pension savings could be included as part of pension savers’ estates for inheritance tax (IHT) purposes,” said Rachel Vahey, head of public policy at AJ Bell, the investment platform.
“The new rules have forced many people saving for retirement to rethink their plans and deal with a tax they never expected when they started putting money into their pension.”
From April 6 next year, unused pensions could face a 40 per cent IHT charge if the total estate exceeds the nil-rate band of £325,000.
Advisers say interest is rising in the main exemptions that can reduce inheritance tax liability.
These include the £3,000 annual gifting allowance, as well as the “seven-year rule”, under which no tax is typically due on gifts if you live for seven years after making them.
Another option is making regular payments to another person — for example, to help with living costs — provided these can be sustained after meeting your own usual expenses. These are known as “normal expenditure out of income”.
Royal London is among several major pension providers noting an increase in requests for tax-free cash linked to the IHT change.
“We have received a lot of questions from financial advisers about clients who want to gift large amounts to children for house purchases, for example, and that could often come from tax free cash,” said Clare Moffat, pensions and tax expert with Royal London.
“We have also had many queries from advisers about using the normal expenditure from income inheritance tax exemption.”
Jason Hollands, managing director of Evelyn Partners, the wealth manager, believes the IHT change is “likely playing a role” in clients accessing their pensions earlier and in larger amounts, particularly among non-advised investors on the firm’s Bestinvest platform.
Among their advised clients, he said, they are seeing increased “consideration” of earlier or larger pension withdrawals.
Sean McCann, chartered financial planner at NFU Mutual, is also seeing evidence of clients taking lump sums earlier in response to the IHT change, with many relying on the “gifts from normal expenditure” exemption. As these gifts are immediately outside the estate, there is no need to survive seven years.
“Gifts out of normal expenditure are one of the most valuable but least well-known inheritance tax exemptions, allowing those with surplus income to pass on wealth through regular gifting,” said McCann.
“There is no upper limit on the amount that can be given away, as it depends on an individual’s income and standard of living.”
He added: “As the exemption isn’t claimed until after death it’s important to keep records of your income, expenditure and gifts.”
With awareness of this surplus income exemption rising, advisers say it is important to seek advice as it is not “straightforward”.
“The question about whether gifts can be made out of pension income is potentially a tricky one,” said Elsa Littlewood, private wealth partner with BDO, the accountants.
“Where Mum and Dad have purchased an annuity for life, which gives them excess income, it seems reasonable that this could be gifted to their children (or other beneficiaries) under the gifts out of income exemption.
“However, where someone accesses their pension through flexible drawdown over a relatively short period, I can see a situation where [HMRC] might challenge a claim for gifts out of income. Individuals looking to use this exemption should proceed with caution and ensure they take tax advice from a specialist.”
Christine Ross, head of private office, north, with Handelsbanken, the wealth manager, advises clients to tread carefully with the “surplus income” exemption.
“We advise clients to ensure that this is documented and that gifts are made at a similar frequency and of a similar amount, to qualify.”
US to withdraw 5,000 troops from Germany in dispute over Iran conflict
Donald Trump retaliates against Friedrich Merz over chancellor’s criticism of US-Israeli war effort
The Pentagon will withdraw 5,000 troops from Germany amid a public spat between US President Donald Trump and German Chancellor Friedrich Merz over Washington’s Iran war.
The troops will be withdrawn within the next year, the defence department said. Germany hosts the largest number of US troops in Europe, along with several major American military installations.
US defence secretary Pete Hegseth “has ordered the withdrawal of approximately 5,000 troops from Germany”, chief Pentagon spokesperson Sean Parnell said on Friday.
“This decision follows a thorough review of the department’s force posture in Europe and is in recognition of theatre requirements and conditions on the ground,” he added. “We expect the withdrawal to be completed over the next six to 12 months.”
The Iran conflict has strained transatlantic ties, with the US president accusing Washington’s European allies of not doing enough to support the war effort. The economic fallout is hitting Europe hard as energy prices have soared, triggering accusations from important US allies that they are bearing a heavy burden for a fight they did not support.
The economic fallout has become a full-blown domestic crisis in Germany.
The tensions between the US and Europe over the Iran war have been even more acute than they were last year over trade and have raised fears of an enduring strategic rift that could also threaten the Nato alliance.
The Pentagon’s decision came after Merz and Trump traded barbs over the war. Merz on Monday said the US was “being humiliated” by Iran, and that it went into the conflict “without any strategy” and had “no truly convincing strategy in the negotiations either”.
Trump on Thursday launched a review of American troop levels in Germany and wrote on social media that Merz “should spend more time on ending the war with Russia/Ukraine . . . and fixing his broken Country”.
“He’s doing a terrible job”, Trump told reporters of Merz on Tuesday. “He’s got immigration problems, he’s got energy problems, he’s got problems of all kind[s]”.
Merz “criticised me for doing the whole thing with Iran. But I said: ‘Would you like to have a nuclear weapon in the hands of Iran’? He said, ‘No, I don’t’. I said, ‘Well, then I guess I’m right.’ He didn’t have any answer to that,” Trump added.
The president on Friday said he would increase tariffs on EU cars to 25 per cent. Washington has also warned some European allies to expect long delivery delays for US weapons as it tries to replenish its own stockpiles depleted by the Iran war.
About 36,400 US troops are in Germany and roughly 80,000 American troops are in Europe.
The headquarters of US European Command and US Africa Command, which oversee American military operations in those two regions, are in Stuttgart. Germany is also home to Ramstein Air Base and Landstuhl Regional Medical Center.
Trump has also threatened to pull troops out of Italy and Spain, which he has criticised for being unsupportive of the Israeli-US war effort. The US has about 12,600 troops in Italy and 3,800 in Spain.
The president on Thursday said he would “probably” consider withdrawing troops from Italy and Spain.
“Why shouldn’t I? Italy has not been of any help to us. And Spain has been horrible, absolutely horrible.”
Jack Reed, the senior Democrat on the Senate armed services committee, called on Trump to reverse his “foolish” decision.
“Weakening our military footprint in Europe at a time when Russian forces continue to mercilessly attack Ukraine and harass our Nato allies is a priceless gift to Vladimir Putin and suggests American commitments to our allies are dependent on the president’s mood,” he said.
Meta stock might look cheap if it weren’t for Mark Zuckerberg
Not only is the Facebook boss spinning a lot of plates, but his worldview is not like that of a typical chief executive
It was both a bad week for Meta Platforms, and a great one. The Facebook owner’s shares fell 10 per cent after it reported earnings on Wednesday, yet its sales and profit are growing at what, for normal companies, would inspire jubilation. This contradiction isn’t so strange, because there are really two Metas: the one that exists, and the one Mark Zuckerberg is building. One somewhat offsets the other.
Look from a distance and Meta is a surprisingly simple business. Almost all of its revenue comes from selling ads on Facebook and Instagram. Growth is driven by two fairly uncomplicated levers: how many ads it serves, and how much it charges advertisers for each ad. Those have sometimes swung around wildly, but now are both growing smartly. Meta’s ad sales in the latest quarter grew 33 per cent, the fastest rate since September 2021.
That simplicity is also a problem for investors. Ad sales are cyclical, but Meta’s costs aren’t, and its vast spending on AI — which may now hit $145bn this year — follows a different cycle altogether. The more debt it adds to its once-pristine balance sheet, including a $25bn bond sale it disclosed on Thursday, the more the effect is amplified.
The mismatch understandably makes investors nervous. While Google parent Alphabet depends mostly on ads too, it has more diversified revenue. By selling cloud computing and now microchips that it designs, its revenue is more closely linked to the AI infrastructure cycle.
What weighs more on Meta’s valuation is probably Zuckerberg himself. First, he is spinning a lot of plates, from building data centres and selling “smart glasses” to making, and possibly unwinding, big acquisitions. But more importantly, his worldview is not like that of a typical chief executive. As he told analysts on Wednesday, when it comes to developing new products, making a profit doesn’t just come second: it comes fourth, after quality, then scale, then working out a revenue model.
Sometimes, as with its Reels video product, that works. Sometimes, as with the mothballed Metaverse, it doesn’t. As for how superintelligence will make a profit, Zuckerberg seemingly doesn’t think it matters yet.
If all AI does is continue to help Meta grow ad sales faster than the market rate, that’s not half bad; the stock may even look cheap. Analysts forecast that revenue growth will slip below 20 per cent by 2028, according to LSEG. Keep that rate at 25 per cent and, all else being equal, its earnings would beat consensus estimates for that year by a third.
But the friction between how investors think and how Zuckerberg does is stark, and explains why Meta trades at a lower price-to-earnings multiple than the rest of the so-called Magnificent 7. As the company’s controlling shareholder, he’s here to stay. But when the Facebook founder says, as he did this week, that what drives humanity forward is “people pursuing their individual aspirations”, investors should take him at his word.
The Best Way to Invest With Bill Ackman. Hint: The IPO Wasn’t Pretty.
The billionaire’s new stock-picking fund bombed in its IPO but offers longer-term promise. How Ackman’s four investment vehicles stack up.
Despite a rocky debut this past week, Bill Ackman’s new stock-picking fund looks like the best way to invest alongside the famed billionaire.
Shares of the closed-end fund, Pershing Square USA, came public with a thud on Wednesday, falling 18% from their offering price of $50, to around $41, in initial trading on the New York Stock Exchange. They rallied 4% Thursday to $42.71.
Ackman’s star power—including two million followers on X—weren’t enough to ensure a strong reception for the deal in a market where investors favor low-cost and tax-efficient exchange-traded funds. Closed-end funds like Ackman’s, which tend to trade at discounts to their net asset values, have been tough sells for several years.
With the deal, Ackman now oversees an investment empire that includes two publicly traded equity funds, a publicly traded asset manager, and a publicly traded real estate company that he wants to transform into a “modern-day Berkshire Hathaway.” Each of those offer investors an opportunity to align with Ackman, one of Wall Street’s most prominent figures.
Here are the four investment vehicles: There’s Pershing Square USA, which raised $5 billion from investors this past week, and Pershing Square Holdings, a $15 billion-in-assets European closed-end stock fund with a U.S. listing under the ticker symbol PSHZF. Then there is Ackman’s investment management firm, Pershing Square Inc., which he took public in connection with the new closed-end fund. And finally there is Howard Hughes Holdings, a real estate company that Ackman is using as a platform to build a small-scale Berkshire.
Barron’s ranks the new fund as the most promising of the bunch. It offers a way to invest at a discounted price in a concentrated portfolio of what likely will be a dozen high-quality growth stocks.
As a closed-end fund, Pershing Square USA issued a fixed number of shares, which now trade on the NYSE. Closed-end shares can trade at a discount or premium to portfolio value, based on investor demand. We estimate the current discount at about 12% at a stock price of almost $43, given that the fund started with about $49 a share of cash to invest, after deducting underwriting fees on the deal.
Most closed-end funds trade at discounts to their portfolio values, in part because investors can’t redeem shares from the manager. That means the Pershing Square USA discount could persist. One negative is a high annual management fee of 2%, creating a hurdle for Ackman to top low-fee index funds.
A confident Ackman told CNBC that his fund heralded a “rebirth” of closed-end funds. That’s an overstatement. His deal got done because he offered investors a bonus of one share of his management company for every five shares purchased of Pershing Square USA.
Ackman has said that the investments in the new fund likely will be similar to those in the European closed-end fund, which holds such stocks as Amazon.com, Alphabet, Meta Platforms, Brookfield, Uber Technologies, and Restaurant Brands International.
Ackman has a strong record over the past eight years, handily topping the S&P 500 based on his European fund. But he’s behind the index this year by about five percentage points based on recent results. Assuming Ackman can return to form, investors would generate good returns.
Howard Hughes, the next-most-appealing Ackman vehicle, is a work in progress. It could take several years for the Ackman transformation to take hold, but investors now can buy into it at a depressed price.
The shares trade around $62, near a 52-week low and way below a high of $91 in November. The market value is about $3.5 billion.
Two positives: Investors can buy the stock at a big discount to the $100 a share Ackman paid for nine million shares nearly a year ago, when he took control of the company; his firm now owns about half the stock. And Howard Hughes has valued its real estate portfolio at over $100 a share.
The company owns a mix of real estate, including office and multifamily, and sells land to home builders for development in several markets, including Houston, Las Vegas, and Phoenix.
“The stock market never gave it the value it deserved,” Ackman said in a recent investment presentation. The problems, he said, include a diversified real estate portfolio in a market where investors like focus, a lack of a dividend, and lumpy earnings.
As part of the Berkshire-style transformation, Howard Hughes agreed to buy a property-and-casualty insurer, Vantage, for $2.1 billion in a deal that is due to close in the current quarter. The strategy is to harvest cash flows from the real estate portfolio and write more insurance policies and make investments. If the strategy gains traction, the stock should appreciate.
We rank the Pershing Square Holdings fund as third-most-promising part of the group. It is a European version of the new Ackman fund. It has been around for more than 10 years. It trades mainly in London and lightly in the U.S. under the ticker PSHZF, at around $57 a share.
The appeal here is that shares trade at a big discount of about 30% to the portfolio value.
The negatives are a high fee structure—a 1.5% annual base fee and an incentive fee of 16%, with no hurdle rate. It’s also more complicated from a tax-reporting standpoint for U.S. investors, and some brokerage firms don’t let their retail clients buy it because it’s an overseas fund.
Finally there’s Ackman’s management company, Pershing Square Inc. It looks richly valued relative to other alternative-asset managers, like Blackstone or KKR.
At Thursday’s price of $28 a share, the firm is valued at $11 billion with about 400 million shares outstanding, and it now has some $20 billion in fee-paying fund assets. Its ratio of assets to market value is high compared with peers. Its market value looks high, at 30 times its base annual fees. The main positives are high profit margins and a sticky asset base.
Pershing Square has key-man risk, given that the 59-year-old Ackman is critical to its success and its ability to raise new money.
In short, it may be best to steer clear of the firm. Stick with the new fund and Howard Hughes.
Wall Street traders post triple gains of European rivals
Europe’s biggest investment banks missed out on gains from commodities in quarter marked by oil swings
Europe’s largest investment banks captured barely a third of the trading gains posted by Wall Street rivals in the first quarter amid wild market swings, with continental lenders held back by their limited presence in commodities trading and a weaker dollar.
UBS, Deutsche Bank, BNP Paribas, Société Générale and Barclays reported growth of 6 per cent in equities and fixed income, currencies and commodities (FICC) trading during the quarter. Together, the banks posted €13.5bn of trading revenues.
Their performance significantly lagged behind Wall Street’s largest lenders — JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America — which booked a collective $43bn in trading revenues, a 17 per cent jump on the previous year, according to data from Keefe, Bruyette & Woods.
The meagre trading gains delivered by European lenders came despite the conflict in the Middle East and concerns about AI disruption triggering significant market volatility during the first three months of the year — conditions that typically boost banks’ trading desks.
They missed out on the market swings because of some European banks’ decisions to exit their commodities businesses after the financial crisis sparked tighter regulations. A stronger euro also eroded revenues earned in US dollars for European lenders during the quarter.
“European investment banks fell short largely due to the weaker dollar and their lack of commodities exposure relative to US banks,” said Thomas Hallett, an analyst at KBW.
He added that US banking deregulation may also have played a role because US banks’ “capacity to compete just went up yet another notch”.
European banks trail US peers in trading revenues. Since Donald Trump returned to the White House last year, US regulators have eased some bank capital rules and rolled back parts of the post-financial crisis regulatory framework, boosting US lenders’ competitive advantage over more tightly constrained European peers.
France’s SocGen was the worst-performing European bank in trading terms, with revenues at the unit falling 4 per cent on the same period a year earlier, weighed down by an 18 per cent slump in FICC revenues.
SocGen’s chief executive Slawomir Krupa said the poor performance reflected the unit’s “business mix”, which has a fixed-income division that is tailored more towards rates trading. It said its European rates business faced “challenging commercial and market conditions”.
Andrew Coombs, an analyst at Citi, said: “It would appear SocGen is losing market share even in its home region and it raises questions whether the current business mix is the correct one, as it does not play to where the structural growth opportunities currently reside.”
Deutsche Bank — which no longer has an equities or commodities trading business — and Barclays both posted broadly flat revenues in their fixed income divisions.
UBS, whose markets business is geared towards equities rather than fixed income, was the standout performer during the quarter. The Swiss lender delivered a 31 per cent rise in total trading revenues — the biggest gain of any large investment bank in Europe or the US during the period and a record quarter for UBS.
However, the relatively weak performance of European banks’ trading desks underscores how the sector is continuing to lose ground to bigger US rivals, which benefit from greater scale and are less constrained in deploying risk.
While European policymakers have long been calling for more consolidation across the EU’s fragmented banking market — which retrenched in the wake of the 2008 financial crisis — executives say the sector has been plagued by regulatory hurdles and political resistance.