© Financial Times

One thing to start: German financial watchdog BaFin has filed a criminal complaint against one of its employees who is suspected of having used insider information when trading Wirecard shares last summer, just before the German payments company disclosed that €1.9bn in corporate cash was missing from its accounts. More here.

Felix Hufeld, president of BaFin © Bloomberg

Welcome to the Due Diligence briefing from the Financial Times. Not a subscriber to DD? Sign up here. Drop us a line and join the conversation: Due.Diligence@ft.com 

The perks of working at SoftBank (for some)

Japan is a place where there is not much tolerance for the gilded executive pay packages enjoyed in places like the US. 

Just look at what happened with Carlos Ghosn, whose cover-up of his salary at Nissan left him, for a fact, an international fugitive, and as it was widely reported, at one point sequestered in a musical instrument box to escape the country.

So, if you were a billionaire tech entrepreneur at the helm of Japan’s largest investment conglomerate, how might you avoid the spotlight, but still offer your top executives salaries competitive enough to rival the biggest money machines out west?

DD readers may at this point realise we’re talking about Masayoshi Son and his sprawling SoftBank empire.

DD’s Arash Massoudi and Robert Smith and the FT’s Kana Inagaki have revealed that four of the company’s top lieutenants, including Rajeev Misra, who lead SoftBank’s Vision Fund, and chief operating officer Marcelo Claure are sitting on a potential collective gain of up to $1.2bn after receiving unusual loans from the company last year to buy its shares.

SoftBank’s Marcelo Claure, Masayoshi Son and Rajeev Misra © FT montage; Bloomberg

After a one-year lock-up, they have the option to begin cashing in. Misra and Claure, who already rank among the highest earners in Japan based on their annual salaries, stand to make up to around $500m each depending on the timing of their individual share prices. Not too shabby.

Beyond the huge sums, here’s why it’s worth pondering on the revelations: SoftBank has been battling an activist campaign waged by Elliott Management for more than a year now. After quietly amassing a $3bn stake, the hedge fund has used it to press for governance changes, which has coincided with the departures of Misra, Claure, and strategy chief Katsunori Sago off the board as directors in November.

Some investors have asked the company to clarify whether the board shake-up had something to do with the men trying to avoid disclosure on the details of their pay, loans included.

The internal loans and the broader issue of executive compensation have also caused tensions at SoftBank, according to two people with knowledge of the matter, leading to demands by some to receive greater pay or upside from successful deals.

Another interpretation of the situation is that Son has found a way to incentivise his top ranks and simultaneously ensure their incentives are aligned closely with his own, which is to raise the value of SoftBank’s share price.

Line chart of Yen per share  showing SoftBank shares have bounced back

One asset manager whose fund holds a significant stake in SoftBank said that investors were likely used to the idea that Son uses vast holdings of SoftBank stock to keep his friends close. “But what we are seeing now seems to be taking that to the extreme,” the manager said.

“It adds into the picture of a company that is basically one guy calling every single shot, and your choice whether to take whatever risks come with that.”

Silver Lake and AMC’s cinematic ending

The vest-clad investing titans at Silver Lake Partners would never be confused for pitchfork-wielding populists. But the private equity group was an unlikely winner this week amid the Robinhood market mayhem. 

Silver Lake bought a $600m convertible bond from US cinema chain, AMC Entertainment, three years ago.

For much of 2020, that investment looked disastrous. Lockdown orders left Americans sticking to Netflix for their movie entertainment, as the biggest vulture investors piled into AMC senior loans hoping to perhaps take control of AMC in bankruptcy.

Egon Durban, Silver Lake managing director © REUTERS

But the company was still able to issue new debt and even some stock. On Monday it said that it had raised more than $900m in recent weeks, including a new $100m debt financing from hedge fund Mudrick Capital.

It was an auspicious week to have grabbed a lifeline. While GameStop got most of the attention on the Reddit forum r/WallStreetBets, the #saveAMC hashtag quickly caught fire too. After closing at $3.51 a share last Friday, AMC shares had rocketed to $19.90 at the end of business on Wednesday. 

Out of nowhere, Silver Lake’s convertible bond, with a strike price of $13.51, was magically in the money.

Before the market opened on Thursday, Silver Lake said it was converting the bond into 44m shares. Its paper profit was $280m. (Mudrick Capital was also a big winner, having separately received separate shares as a part of the $100m rescue financing worth $164m on paper).

© REUTERS

By the close on Thursday, however, the backlash was swift, and AMC shares had fallen to $8.63. It wasn’t immediately clear if Silver Lake sold its shares or was otherwise hedged.

Still, the group was in a much better position than it was last week or last month, all thanks to a group of renegades wanting to stick it to the masters of the universe.

Shipwrecked: Fincantieri and Chantiers de l’Atlantique merger

The combination of Italy’s Fincantieri and France’s Chantiers de l’Atlantique now lies in ruins on the sea floor of the Mediterranean.

Both Rome and Paris blamed the shipbuilders’ failed merger on the pandemic, arguing that the deterioration of market conditions (they build cruise ships which pretty much are going nowhere) was the cause of their break-up.

Bruno Le Maire, French economy minister, takes a picture of French President Emmanuel Macron (not pictured) during a visit to the STX Les Chantiers de l’Atlantique shipyard in Saint-Nazaire, in 2017 © REUTERS

But in reality, as people close to the deal told DD’s Javier Espinoza and the FT’s David Keohane, the tie-up was treading water from the start. Regulators in Brussels worried it would wield too much power in an already highly concentrated sector.

The companies were hoping that the cruise line industry’s crash of iceberg-esque proportions would be an argument to convince regulators that they should let them merge.

But the market is looking healthy post-pandemic. The EU’s competition supremo, Margrethe Vestager, even told the FT recently that the outlook for cruise ships being built looked strong. 

“Customers keep buying tickets for cruise ships. If going on holidays is taking a cruise, then you are really longing for the cruises to come back. So even though the market is as it is right now, the order books of those building cruise ships are still filled,” she insisted.

If all goes well it’s “anchors aweigh” for the cruise ships that have been docked since March. Not the dealmakers. 

Job moves

  • Joud Abdel Majeid has been named BlackRock’s deputy finance chief after spending two years as chief of staff to chairman and chief executive Larry Fink

  • Skadden has hired Cody Carper as a partner within its corporate practice. He joins the firm’s Houston office from Willkie Farr & Gallagher.

  • Moelis & Company has hired Rodney Reid as a managing director and global head of private funds advisory based in New York. He joins the group in April from Evercore.

  • Marcos Colomer has been promoted to head of corporate and investment banking at Banco Sabadell in London. Before joining as a senior banker, he worked in the corporate and investment banking division of BBVA.

  • Justin Bateman has joined the French private equity group ArchiMed as a partner in its New York office, after 20 years at buyouts group BC Partners

  • Clifford Chance has added James Grayer to its US corporate practice as counsel. Grayer was most recently a senior executive at managing general underwriter Concord Specialty Risk.

Smart reads

From Reddit to reality The platform’s r/WallStreetBets forum sent GameStop shares into hyperdrive and nearly brought down a hedge fund. But its creator never sought out to disrupt the stock market — just to further democratise it. (WSJ)

Under the radar Jane Street has become one of the world’s largest money machines, trading $17tn in securities last year. But little is known about the secretive Wall Street group. (FT)

The makings of a private equity tycoon Jon Gray was the architect behind Blackstone’s transformation into the dealmaking force behind fresh-faced millennial brands like Bumble and Oatly. Behind his buoyancy is a cunning knack for getting what he wants. (Business Insider)

News round-up

LSE boss says London must ‘move quickly’ to attract prized companies (FT) 

Tesla profits held back by Elon Musk’s pay and cheaper models (FT)

Hedge funds rush to get to grips with retail message boards (FT)

Commerzbank to cut one in three jobs in Germany (FT) 

WeWork in talks to combine with Spac or raise money privately (WSJ)

UK competition watchdog launches probe into $400m Facebook-Giphy deal (FT) 

Kuaishou goes from humble roots to $5bn IPO to take on ByteDance (Nikkei Asia) 

Prudential to demerge US business and raise up to $3bn of equity (FT)

Norway oil fund chief warns market exuberance cannot ‘go on forever’ (FT)

Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Francesca Friday in New York and Miles Kruppa in San Francisco. Please send feedback to due.diligence@ft.com


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