Elon Musk’s RTO

One thing to start: Tim Leissner, the disgraced former Goldman Sachs banker at the heart of the multibillion-dollar 1MDB scandal, has been sentenced to two years in prison, ending one of the most infamous prosecutions in Wall Street’s history.

And another thing: Wall Street is warning that a little-publicised provision in Donald Trump’s budget bill that allows the government to raise taxes on foreign investments in the US could upend markets and hit American industry.

In today’s newsletter:

• Musk returns to the corporate world

• Evercore embraces SaaS analysts

• Dispatch of crypto revelry in Vegas

Musk heads back to the office(s)

If you’re a dedicated DD reader, you might remember that one of our predictions for the year was that Donald Trump and Elon Musk would soon have a falling out. “Better to ask when, not if.”

While the duo outwardly appear to still be on fine terms, the tech billionaire’s time in the White House leading the so-called Department of Government Efficiency (Doge) has come to an end.

He’s now heading back to focus on his stable of companies, including Tesla, X, xAI, SpaceX and the Boring Company. 

Even while providing his services of cost-cutting in DC, Musk remained busy elsewhere. Just this week, he agreed a deal with messaging app Telegram. Musk met the company’s founder Pavel Durov in Paris recently as their tech “bromance” grows.

Still, Musk’s political dalliances have been mostly beneficial to the entrepreneur, and they were a lifesaver for many of his bankers. 

Banks holding billions of dollars in loans made to finance his takeover of Twitter have been able to ride the South African-born founder’s proximity to Washington to offload billions of dollars in debt.

The seven banks that stepped up to fund his takeover in 2022 finally sold out of the $12.5bn loan in late April, cleansing their balance sheets of a debt package that looked toxic almost immediately after it was issued. 

Musk tried to back out of the deal even before it closed, leaving banks with little choice but to stand by him and hold the debt in hopes they could eventually sell out near par.

They had held on in part out of necessity, and in hopes of staying in Musk’s good graces, boosting their chances of winning future business with his other companies, including SpaceX and xAI.

There was one other benefit the banks enjoyed lending to X, even as they faced regulatory scrutiny and pressure from risk committees to sell the debt: they split roughly $1.5bn of annual interest payments on the loans. 

The coupons were so attractive that one of the underwriters discussed internally how selling the loans would hit their bank’s profits, a person familiar with the matter told the FT.

“We made fees. We wrote the loan back up. But we didn’t see that reflected in bonuses,” one banker involved in the X financing said. 

But they acknowledged: “You can’t ring the bell on something you had to hold for two years.”

Evercore embraces SaaS analysts

College seniors are doing LBO models in coffee shops these days to get private equity jobs, even before their junior investment banking analyst job begins, as the FT described earlier this week. 

Those spreadsheet tests may eventually be one of the last times the kids get deep into Excel.

Last year, DD’s Sujeet Indap brought you the tale of Mosaic, the start-up that had created automated financial models for private equity transactions. Mosaic’s LBO model requires only a few inputs and can crank out internal rates of return and debt/ebitda stats within moments. 

For PE firms such as Warburg Pincus and CVC, that allowed junior associates to spend their time on due diligence or portfolio operations instead of plugging and chugging.

Now Mosaic, founded by former PE investor Ian Gutwinski, is getting to future rainmakers even earlier. 

On Friday, the company announced that it had reached a deal to supply the financial sponsors group at Evercore with its number-crunching tools, Mosaic’s first large-sized banking deployment. 

Financial sponsor groups cover PE firms and give them ideas for potential buyouts. 

An LBO model can often take several hours to get done — Evercore now says that with that time freed up, its junior employees can be more productive on other activities (and maybe leave the office a little earlier, too).

Evercore had “been impressed by the Mosaic platform and think it represents an opportunity to streamline financial modelling, allowing our teams to focus on creative and compelling solutions for our clients”, said Neil Shah, who co-heads the financial sponsors effort at Evercore. 

Banks have also been active in piloting chatbots (the FT brought you the story of Rogo, the AI start-up that just raised money from Thrive).

What was a pretty static job for decades (living in Excel, PowerPoint and Google) is changing quickly with the advances in computing power.

Senior investors and bankers tend to be old-school. So expect the kids to have to maintain the skills to run the numbers by hand, when requested.

But at Evercore and other firms soon, life at the bottom of the totem pool seems like it should be getting better. 

Crypto goes Vegas: Whales, nightclubs and JD Vance

There have been plenty of spectacles at the bitcoin conference in Las Vegas this week, where the FT’s Alex Rogers has been on the ground reporting.

Hodlers and whales hit the nightclubs; attendees attempted a pit-stop for a Formula 1 car, climbed into a Blue Origin space capsule, and entered sweepstakes for an orange Tesla Cybertruck.

Away from all that sat Fred Thiel, chief executive of bitcoin mining company Mara, in a quiet, private room in the Venetian Hotel.

In his 60s, Thiel is an elder statesman who wants to see his business enter, as JD Vance put it this week, the “mainstream” of the US economy.

“The more integrated bitcoin becomes in the traditional financial world, the less volatile it becomes, the more attractive it becomes,” Thiel told the FT on Thursday.

Thiel sees Trump’s Washington delivering a series of wins for the crypto community.

He thinks the White House’s new stance will legitimise stablecoins and other digital assets, establish more favourable tax treatment, and create a bitcoin strategic reserve, whereby the US government will move to directly acquire more bitcoin. 

Thiel, of course, is shooting for the moon: “The US needs to own a million bitcoin.”

While some crypto executives have looked askance at the president and his son’s direct involvement in a series of crypto endeavours — memecoins, stablecoins, bitcoin mining and acquisition — Thiel demurred on potential conflicts of interest.

But the kin of Trump was on hand in Vegas to lay it all out.

“I hate using the word hate, but honestly, I would love to see some of the big banks go extinct,” Eric Trump, son of the president, said. “Honestly, they deserve it.”

That’s a provocative statement from a family that controls almost unilaterally the levers of US power and just struck a deal earlier this week to plough $2.5bn into crypto.

Job moves

• JPMorgan Chase has named Kamal Jabre and Marc Pandraud as vice-chairs of M&A in Emea. Jabre was previously the global head of M&A at HSBC and Pandraud has been with the bank since 2016. 

• Jardine Matheson has appointed Lincoln Pan, a partner from private equity group PAG, as its new chief executive, in the Anglo-Asian conglomerate’s latest effort to transform its business model. He will succeed group managing director John Witt in December.

• Perella Weinberg Partners has hired David Wyles as a partner in London, DD has confirmed. He previously worked at Greenhill & Co, where he helped run the Emea business.

• Hargreaves Lansdown chief executive Dan Olley is leaving the UK’s largest investment site, to be replaced by Richard Flint on an interim basis. Flint was previously chief executive of Sky Betting & Gaming.

Smart reads

To the moon Crypto has won a champion in the White House, the FT’s editorial board writes. But the Trump family’s enthusiasm for the asset class creates a glaring conflict of interest.

Ouroboros US banks are lending less and less to companies these days, FT Alphaville writes. But the business of lending to so-called shadow banks is booming.

Legal throwdown Judges across the political spectrum have now said Trump’s executive orders against Big Law firms are unconstitutional, The Wall Street Journal writes. 

News round-up

Donald Trump orders US chip software suppliers to stop selling to China (FT)

French business schools fast-track entry for foreign students blocked from US (FT)

Ryanair boss Michael O’Leary hits €100mn bonus target (FT)

ECB governing council member convicted of bribery (FT)

Germany eyes 10% digital tax on tech giants (FT)

UK to make it easier for companies to access pension surpluses (FT)

Prediction market with Trump ties threatens US sports bet sector (FT)