Morgan Stanley’s post-Gorman era begins

Wall Street’s real-life “succession” is over

One of Wall Street’s most-watched succession races is over as Ted Pick prepares to become Morgan Stanley’s next chief executive. He will take over the reins in January from James Gorman, who has transformed the company from an investment bank into an asset-management giant since 2010.

The path set by Gorman has made Morgan Stanley the envy of the financial world and helped it overtake its longtime rival Goldman Sachs. Pik will face the challenge of maintaining momentum as volatile markets impact core businesses such as deal making.

The pick won a competition worthy of an HBO drama. Morgan Stanley’s board selected him Andy Saperstein, who leads wealth management, and Dan Simkowitz, who oversees asset management. Both of those divisions are growing rapidly.

But Morgan Stanley’s lifer pick, who oversees investment banking and trading, is familiar with the most complex parts of the firm, which in some ways makes him a better fit. safest option, (Morgan Stanley wants to retain Saperstein and Simkowitz, making both co-chairs and giving them expanded departments.)

Pick says he doesn’t plan to deviate from Gorman’s strategy, This led Morgan Stanley to move from the more profitable but volatile business of investment banking to the stable business of wealth management. That approach included buying businesses such as online trading platform E-Trade and asset manager Eaton Vance.

It has yielded good results. Morgan Stanley shares have risen 62 percent over the past five years, and the company has shrugged off the troubles that plagued Goldman, which had taken an unfortunate detour into consumer banking. Commentators have praised Gorman., an Australian former consultant whose M.&A. I have no background. or high-risk trading, appreciating their slow and steady approach.

But Pik must also overcome obstacles. Morgan Stanley’s investment banking business lags behind Goldman and JPMorgan Chase. And regulators are investigating the company about it block-trading business After bankers were accused of defrauding favored customers.

And then the question is what’s next. One possibility Gorman hinted at last week was international expansion: “I would be very surprised if this firm doesn’t do some transactions in both wealth and asset management in the next three years outside the US,” he said.

Save the date: The DealBook Summit will take place on November 29th. Guests also include Vice President Kamala Harris; Disney CEO Bob Iger; and Leena Khan, FTC Chair. you can Apply to attend here,

What’s going on over here

The House finally got a speaker. Representative Mike Johnson, a hard-right lawmaker from Louisiana, won enough support from his fellow Republicans to be elected, ending three weeks of dormancy in the House. johnson is least experienced speaker More than a century in the making and next month the focus should be on issues including avoiding a government shutdown and deciding on foreign aid to Israel and Ukraine.

Economists expect that the GDP data on Thursday will be excellent. They predict that third quarter forecast from the Commerce Department, at 8:30 a.m. Eastern, will show its fastest pace in two years. This will dismiss recession fears and raise questions about whether the Fed will continue to raise interest rates.

Police in Maine are searching for a shooter who killed at least seven people. Residents of several cities in the southern part of the state, as well as Bates College, were ordered to shelter-in-place after fatal shootings at a bar and a bowling alley. Authorities named 40-year-old Robert Card a “person of interest.”

A breakthrough in UAW strikes

The union last night reached a tentative agreement on a four-year contract with Ford after a week-long strike that has wreaked havoc on Detroit’s three major automakers. Some observers called the agreement “a major victory for the union” that could set a new standard for labor negotiations in American industry.

What’s in the deal:

• An hourly wage increase of approximately 25 percent over four years (the UAW had initially sought). 40 percent increase, Two weeks ago, Ford had offered a 23 percent raise.

• wage adjustments to the cost of living, pension benefits and job security, and the right to strike when a plant is closed.

among unknown: Issues like union representation at Ford’s battery plants, a major talking point as the auto giant moves forward on electric vehicles.

UAW officials and labor experts said the deal vindicated the union’s bargaining strategy. By simultaneously striking Detroit’s Big Three – Ford, General Motors and Stellantis, Chrysler’s parent – ​​and keeping them guessing as to which plants would be affected, workers ensured that the companies remained constantly unbalanced.

Investors also expressed happiness over this successGiven the strike’s toll: Deutsche Bank analyst Emmanuel Rosner, estimated The work stoppage last month cost the trio about $2.1 billion and shaved billions of dollars off their market value.

Ford shares are up in premarket trading. Shares of GM and Stellantis have also risen on hopes that they too will soon reach an agreement with the union.

The deal is not done yet – It is dependent on the approval of Ford’s 57,000 union members. (They can go back to work in the meantime.) President Biden, who joined the autoworkers’ picket line last month, called the initial agreement “historic.”

AI is not enough to overcome the tech recession

Meta reported impressive earnings on Wednesday due to healthy ad sales and steep cost cuts. But that doesn’t seem to have allayed investors’ concerns that artificial intelligence isn’t boosting tech stocks as much as promised.

Nasdaq futures are down 1 percent this morning The tech-heavy index fell to a five-month low on Wednesday due to heavy selling in Alphabet. Shares of Google’s parent company fell Over $165 billion in market cap — its worst one-day decline since March 2020 — after reporting weak results in cloud computing, which clients need to power their AI initiatives.

Meta offered only a brief respite from the despair, Quarterly profit more than doubled year-over-year to $11.6 billion, according to the report. It also revealed strong user growth, with Threads, a rival to Elon Musk’s X, now claiming nearly 100 million users.

But its stock is down in premarket trading due to investors’ fears that the advertising business is facing a slowdown. ,Revenue outlook uncertain“The economy is on shaky ground for the next year,” Meta CFO Susan Lee told analysts Wednesday.

And the meta faces more unknowns. The company’s “Year of Efficiency” appears to be coming to an end as it prepares to hire more engineers, especially those with AI expertise. Whether investors will welcome the end of cost-cutting to focus on AI is uncertain.

There’s a clearer picture for the company’s Reality Labs division, which focuses on the metaverse. The deficit there is expected to continue through 2024.

Bankman-Fried prepares to take the stand

Sam Bankman-Freed’s criminal fraud trial resumed Wednesday and his lawyers say he will testify in the coming days, calling it a huge legal gamble.

It is not unusual for defendants in white-collar criminal fraud cases to testify. Elizabeth Holmes, founder of blood-testing start-up Theranos, and can take And Jeff SkillingFormer Enron heads have stepped up to defend themselves in recent years. (And on Wednesday, Donald Trump testified in his civil business fraud case in New York about the gag order violation.)

His testimony was not much help. Holmes and Skilling Found guilty and sentenced to prison. Le was also convicted, but died before he could be sentenced.

Since her arrest last year, Bankman-Fried has repeatedly turned to the media to tell her side of the story. But taking a stand and portraying yourself as a “visionary genius” may backfire, Renato MariottiBrian Cave is a partner at Leighton Paisner and the former prosecutor told DealBook. Mariotti said prosecutors may also be waiting to exploit alleged misstatements or inconsistencies in Bankman-Fried’s story.

In addition to Bankman-Fried, the defense plans to call three witnesses. One is financial services consultant Joseph Pimbley, who is expected to testify about the finances of crypto exchange FTX and its sister trading firm, Alameda Research. Those businesses founded by Bankman-Fried closed, causing billions in losses to customers and investors. Bankman-Fried has pleaded not guilty.

A Bahamian lawyer involved in the case will also testify, as well as an expert on the preservation of corporate records. Bankman-Fried is expected to testify after him.

A Herculean Effort to Silver Lake

Shares of entertainment group Endeavor rose as much as 25 percent after hours on Wednesday after its main backer, private equity titan Silver Lake, said it was exploring a bid to take the company private.

Silver Lake is in a prime position to make this move, as it holds 71 ​​percent of the voting stock. But a deal to take full control of Ari Emanuel’s Hollywood powerhouse Endeavor may still be difficult.

It’s clear why Endeavor wants to sell: The company has long argued that it is undervalued in the public markets. Despite owning talent agencies WME and IMG, as well as a controlling stake in TKO, parent of the Ultimate Fighting Championship and World Wrestling Entertainment, Endeavor’s shares are down 35 percent since going public two years ago.

Endeavor could potentially thank a rival for resetting price expectations. French billionaire François-Henri Pinault bought a majority stake in Creative Artists Agency last month at a reported valuation of $7 billion.

Endeavor currently has a market capitalization of $8.5 billion – but about $7 billion of that is made up of the stake in TKO, which suggests investors are not valuing the bulk of Endeavor’s business as much.

Silver Lake will have to deal with questions related to conflict of interest. As both the bidder and the seller, he or she must prove that the sales process is completely fair. (It and Michael Dell faced lawsuits from minority investors over a similar deal to take Dell private a decade earlier.)

Such disputes are generally handled by a special board committee. But Endeavor is positioned as a up-cWhich means investors including Emanuel own shares in both Endeavors And A parent company. This may make it difficult to ascertain which shareholders are truly independent for deal approval purposes, potentially leading to additional scrutiny from the courts.

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Policy

• Is Ken Griffin, billionaire financier and Republican megadonor turning his attention From Ron DeSantis to Nikki Haley, (insider)

• Anthony Welters, a health care executive, forgave a $267,230 loan he made to Justice Clarence Thomas to buy a luxury motor coach, raising questions about ethics and taxes, according to a Senate investigation . (NYT)

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