A Goldman C.E.O. also-ran gets to lead
Carlyle said this morning that it had hired Harvey Schwartz, a former co-president of Goldman Sachs, as its new chief executive. It’s a bet by Carlyle that it has finally found the right leader — and a chance for Mr. Schwartz to finally become a Wall Street chieftain, after losing a succession race at his former employer.
Schwartz is joining Mr. Carlyle seven months after its last C.E.O. stepped down. Kewsong Lee, who became the firm’s co-chief executive in 2018 and then sole C.E.O. in 2020, resigned after clashing with the private equity giant’s co-founders over priorities and control. (So sudden was Mr. Lee’s departure that Carlyle didn’t have a replacement lined up; a co-founder, Bill Conway, has been serving as interim chief.)
Carlyle’s board reportedly considered a variety of potential candidates, according to The Financial Times, including John Waldron, Goldman’s current president; Mark Mason, Citigroup’s C.F.O.; and current Carlyle executives including Mark Jenkins of its credit unit and Peter Clare of its private equity business.
The job gives Mr. Schwartz a new chance to lead a major firm. After arriving at Goldman as a commodities trader in 1997 with an un-Goldman-like background — he graduated from Rutgers, where he earned money as a bouncer and a worker at a butcher shop — Mr. Schwartz quickly rose up the ranks, becoming C.F.O. in 2012 and then co-president in 2016. He developed a reputation as hard-working but also as a tightly scripted and tough boss, some critics said; he tended to treat subordinates differently depending on how useful they were to his objectives.
But he lost a closely watched race to succeed Lloyd Blankfein as C.E.O. to his fellow co-president and chief rival, David Solomon, and left the bank in 2018. (Mr. Solomon has since grappled with numerous challenges at Goldman, while famously, and sometimes controversially, pursuing a side hustle as a D.J.)
Mr. Schwartz will have his work cut out for him. Despite being one of the biggest names in private equity, Carlyle has struggled with slower-than-expected fund-raising and a more challenging environment for investing, lagging traditional rivals like Apollo and KKR. Its stock price has fallen about 25 percent over the past 12 months, compared with an 8 percent drop for the S&P 500.
Carlyle’s board reportedly also expects Mr. Schwartz to keep an eye on expenses while finding new ways to grow, according to Bloomberg.
HERE’S WHAT’S HAPPENING
Over 1,300 die in Turkey and Syria after powerful earthquakes hit the region. The death toll from the temblors, the biggest of which was 7.8, is expected to rise, as countries around the world pledge aid. Prices of crude oil remained stable, despite a pause in petroleum flow to a key export terminal in Turkey.
U.S.-China tensions grow after the downing of a spy balloon. Beijing this morning escalated its criticism of the Pentagon’s shooting down the balloon, which drifted across the continental U.S. last week and drew bipartisan condemnation of China. The balloon’s appearance in U.S. airspace, which led Secretary of State Antony Blinken to call off a planned trip to China, is likely to exacerbate already considerable distrust between Washington and Beijing.
The Koch network may oppose Donald Trump in 2024. The alliance of political and advocacy groups and ultrawealthy conservative donors plans to get involved in the Republican presidential primary, according to an internal memo. But it didn’t call out Mr. Trump by name, leaving open the possibility of falling in line should he secure the G.O.P. presidential nomination.
The Adani Group stock market rout worsens. The Indian conglomerate shelved a bond sale on Monday, sending shares and bonds of its various listed companies tumbling again. Gautam Adani’s business empire has now lost roughly $118 billion since Jan. 24, when a short seller accused it of fraud and stock manipulation.
England’s Premier League accuses Manchester City of financial violations. The soccer league said the highly successful club, owned by a member of Abu Dhabi’s royal family, repeatedly broke its rules for more than a decade. The fight could lead to one of Europe’s most dominant and popular clubs being ejected from the Premier League.
FTX faces difficult task in clawing back donations
As it seeks to claw back billions on behalf of a long list of creditors, FTX’s new management is threatening fresh legal action against politicians and others who fail to turn over funds donated by Sam Bankman-Fried and former associates at his crypto exchange before it collapsed into bankruptcy.
FTX may not get what it wants, even if some recipients would rather distance themselves from Mr. Bankman-Fried. The 30-year-old disgraced crypto mogul, who is awaiting federal trial this autumn on charges of criminal fraud and campaign finance violations, was a major donor to President Biden’s 2020 presidential campaign, to Democrats and Republicans in the midterm elections, and to groups aligned to various social causes.
It won’t be easy for FTX to recover money. It can ask the bankruptcy court for any funds transferred within 90 days of filing — and as far as two years back if it can be proven that fraud was involved in the transfer. Winning approval is tough. Legislation protects religious groups and charities from bankruptcy clawbacks with limited exceptions, and courts rarely take back those kinds of donations.
FTX management faces a big burden of proof. Bankruptcy courts won’t act to take back donated funds unless it can be shown that recipients were aware of the empire’s insolvency and fraudulent activities. Another complication: Crypto values have fluctuated sharply; and Bankman-Fried and his leadership team assumed inflated values for the group’s assets.
FTX’s collapse has meant trouble for some who got gifts. Many have rejected the funds retrospectively, pledging to donate them to charity or, in some cases, hanging on reluctantly. The media start-up Semafor has said it wants to return a Bankman-Fried investment of roughly $10 million, but that it’s waiting for the authorities to say where the money should be directed.
FTX management has said that “making a payment or donation to a third party (including a charity)” won’t prevent it from trying to recover the funds. That may be a tactic to heighten pressure on past recipients. Still, it could take years for all the cases to be resolved.
What’s at stake in Slack’s case before the Supreme Court
Salesforce’s $27.7 billion megadeal to buy Slack two years ago may have ended the messaging app’s life as a stand-alone tech company, but an ongoing tussle between Slack and a shareholder has set the stage this year for a high-stakes case before the Supreme Court.
Some top securities officials are siding with Slack in a case involving its 2019 direct listing. A Slack shareholder says the company made false statements in its prospectus, and seeks damages. Slack counters that the plaintiff doesn’t have the right to sue.
In a new amicus brief, the former S.E.C. chairman Jay Clayton and the former commissioner Joseph Grundfest say that the plaintiff’s argument threatens to vastly expand legal risk for businesses. “There are already many avenues of liability,” Mr. Clayton told DealBook. “This makes up a whole new one, and adds an imbalance.”
The case is about standing: whether a shareholder lawsuit against Slack can even proceed. Last year, a lower court ruled that the shareholder, who was unregistered, had the right to sue Slack, saying he was misled by statements made in the company’s listing. Slack appealed to the Supreme Court, arguing that the provision the plaintiff used to sue was limited only to registered shares. The company, and its supporters, including the U.S. Chamber of Commerce, say an expansive interpretation by the courts would inject confusion into the public markets, and chill listings.
Those with registered shares are afforded extra protections, and have an easier path to sue. That registered versus unregistered distinction matters, Mr. Grundfest said. Otherwise, companies could face a far larger pool of litigants seeking damages, he said, which is not what Congress intended for securities law. “It’s important in our constitutional structure that each branch of government respects its role and stays in its lane,” he told DealBook.
Fiyyaz Pirani, the lead plaintiff aiming to sue Slack, is an entrepreneur turned trader. His lawyers contend that the shareholder registration requirement creates a loophole protecting listed companies that engage in bad behavior. If shareholders are powerless to challenge them in court it could lead to market harm, they say.
The justices will hear arguments in April; a decision is expected in June.
“Last 3 months were extremely tough, as had to save Twitter from bankruptcy, while fulfilling essential Tesla & SpaceX duties. Wouldn’t wish that pain on anyone.”
— Elon Musk, tweeting about his workload as C.E.O. of three companies. He added that Twitter was now “trending to breakeven.”
The week ahead
Corporate earnings, economic data and even an I.P.O. top this week’s agenda. Here’s what to watch.
Monday: Activision Blizzard kicks off a packed week of earnings reports.
Tuesday: President Biden delivers the State of the Union address at 9 p.m. Eastern, his first speech to a Republican-controlled House; here’s what to expect. Elsewhere, SoftBank, KKR and Chipotle report.
Wednesday: Shares of the Hesai Group, a Chinese manufacturer of sensors used in self-driving cars, will begin trading on the Nasdaq after its I.P.O. On the earnings front: Disney, Uber and Moller-Maersk.
Thursday: Credit Suisse, PayPal, PepsiCo and Toyota report.
Friday: The latest consumer sentiment data from the University of Michigan is scheduled for release. Chinese consumer and producer price index results, as well as British G.D.P. numbers, round out a big day for economic data.
THE SPEED READ
Deals
The Rothschild family plans to bid for full control of the banking empire that bears its name. (FT)
The shareholder advisory firm Innisfree M&A sued Twitter, saying it hadn’t been paid $1.9 million it was owed for work on Elon Musk’s takeover.(NYT)
Public Storage unveiled an $11 billion hostile takeover bid for a rival, Life Storage. (Reuters)
The National Enquirer tabloid has been sold to an investor group that includes a former chairman of MoviePass. (NYT)
Goldman Sachs has named Matt Gibson, a co-head of its tech, media and telecom banking team, to help lead sales for its asset management business. (Bloomberg)
Policy
“The Pentagon Saw a Warship Boondoggle. Congress Saw Jobs.” (NYT)
Liz Truss, who briefly served as Britain’s prime minister, drew criticism for asserting she had been ousted by the “economic establishment.” (FT)
Want to clerk for the Supreme Court? It helps to go to one of three Ivy League schools. (NYT)
Best of the rest
Beyoncé set a record for Grammys won by a single artist — but was again shut out of the music industry award’s biggest categories. (NYT)
Unions representing about 32,000 full-time workers at Disney World have rejected the entertainment giant’s offer for a new five-year contract. (NYT)
How Bernard Arnault is trying to head off a succession battle at LVMH. (Bloomberg)
“America’s offices are now half-full. They may not get much fuller.” (WaPo)
Bob Born, who made Peeps marshmallow candies into a cultural icon, died last week. He was 98. (NYT)
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