Picture: 123RF/RAXPIXEL
Picture: 123RF/RAXPIXEL

The tiny activist that won seats on ExxonMobil’s board showed how one investor — in this case Engine No 1 — can hold immense sway when it speaks for many stakeholders, Jeffrey Smith, CEO of investment firm Starboard Value, said.

“Shareholders can make a difference, especially when shareholders are doing what we look to do, which is to speak for the rest of the shareholder base,” Smith said at the Bloomberg Deals Summit. “What they accomplished is eye-opening.”

If you are speaking for the majority, then you can rally their support, Smith said.

When he first started, it wasn’t possible to for a shareholder that owned less than 5% of a company to effect big changes, he said.

That’s changed in the past 10 years or so. Smith pointed to his firm’s push against Yahoo!, where he wanted the company to sell assets, as an example of the shift.

“We could have owned one share in that situation and we would have had the support of shareholders,” he said.

The hardest part of going public through a direct listing was connecting the supply and the demand for shares, according to Alesia Haas, Coinbase’s CFO.

“You’re not allowed to ask your investors what they plan to sell, and so you go in with a lot of unknowns,” Haas said at the Bloomberg Deals Summit, adding that this can create a “bumpy path,” for a listing.

The cryptocurrency exchange went public in April, and is currently trading with a market valuation of almost $46bn.

Haas also said Coinbase didn’t want to be the first company to use the new option that allows private companies to raise money as part of a direct listing.

“We were the first crypto company, and we really wanted to see where the stock would trade once we were public, once we were fully liquid,” she said. The company instead raised money later, once the stock had stabilised.

Bill Ackman’s potential Spac deal is indicative of how innovative capital markets can be, according to blank-cheque pioneer Betsy Cohen.

The transaction, which could see Ackman’s special purpose acquisition company take a pre-IPO stake in Vivendi’s Universal Music Group while continuing to pursue a separate business combination, isn’t something that everyone will be able to pull off, Cohen said.

“I’m sure there will be others that will try,” said Cohen. “Will they do it with success? I’m not quite sure.”

Capital markets are “plastic”, Cohen added. “I think we saw the plastic being stretched in this particular transaction, but in a very creative way.”

Ken Moelis says five-day weeks might not be the norm for everyone in the post-pandemic word and that he’ll let people decide what’s best for them.

Though the veteran dealmaker maintains the office is a good place, where creativity can flourish, he acknowledged that a shift towards flexible working is also a generational one, and some younger company executives will be all for it. Moelis said he won’t impose his way of doing things on clients either.

The CEO of investment bank Moelis & Co also likened the market for meme stocks to gambling. A lot of people aren’t making an investment decision, they’re making an emotional one, he said.

“You’re in a global craps game where everybody is talking to each other and they’re having a blast,” Moelis said.

Moelis doesn’t see excess leverage in the market and notes a dramatic slowdown in restructuring work at his firm. But he’s not getting too comfortable, saying it’s left him wondering about the corners of the market where leverage might be lurking. Something like the collapse of Bill Hwang’s hedge fund, Archegos Capital Management, will happen again, according to Moelis.

“Never underestimate people to devise a way to hide the risk they’re taking,” he said.

Companies could rush to do deals ahead of proposed changes to capital gains taxes by the US administration of President Joe Biden, says Michal Katz, head of investment and corporate banking at Mizuho Financial Group.

Some large shareholders in companies that may have been thinking about selling could be saying to themselves that it’s better to do it sooner rather than later, said Scott Barshay, chair of the corporate department at law firm Paul Weiss Rifkind Wharton & Garrison.

Barshay, Katz and EQT’s Marc Brown all agreed that the market for special purpose acquisition companies (Spacs) is here to stay, though Barshay sees a small slowdown in deals after a frantic start, and a flight to quality ahead. There will be fewer transactions involving smaller companies that haven’t yet built a compelling business case.

“I think you’re going to see less deals where there’s really no cash flow and really no business yet,” Barshay said. Instead, there’ll be “a preponderance of good, strong companies using Spacs to go public”.

Dealmaking is rampant across the board, says Barshay. Technology and healthcare deals led the immediate recovery in global merger and acquisitions from the middle of 2020, and now the industrials, financial services and consumer sectors are all catching up, he said.

Tellingly, there are no distressed deals, Barshay says. All of this is being fuelled by an easy loan and bond market where financing is almost free. Barshay sees no slowdown unless there’s a big shift in the macroeconomic story.

Dealmaking is booming, with more than $2-trillion of deals announced so far in 2021 as big acquirers move past the pandemic slowdown and blank-cheque companies snap up targets.

At the same time, companies have raised more than $140bn in IPOs in the biggest going-public drive since 2010, with Spacs not far behind. New unicorns are being minted almost every day as start-up funding in the US hits a record high, and CEO confidence — a crucial catalyst for transactions — is soaring.

Against the backdrop of one of the most exciting years in deals history, the Bloomberg Deals Summit invites the top dealmakers, CEOs, investors, and insiders sharing their insights on the landscape and debating whether this historic boom is likely to continue.

Bloomberg News. More stories like this are available on bloomberg.com


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