Morning Coffee: Private credit client lambasts sell-side analyst. The most epic reply-all email of the year

There’s nothing quite like a really good conference call bust-up.  Most of the time, the quarterly interactions between CEOs and equity analysts are legendarily dull affairs, on which everyone’s heart sinks by half an inch every time they hear the phrase “Great quarter, guys”.  But every now and then, someone loses their temper and you get an exchange like the one between John F Barry III of Prospect Capital and Finian O’Shea of Wells Fargo. 

Highlights of the transcript include “Why don’t you do the world a favor and do a little research before you come on an earnings call with absurd questions like this?”, “Here we go again, here we go again” and “You don’t even know what you’re talking about”.  After this charming and informative outburst, the company’s COO apparently jumped on the call to answer the actual questions.

It will have been a nasty experience for O’Shea, but he might end up thinking that it was all for the best. (He’s been in equity research for ten years, all of them at WFC).  For one thing, he’s on the same financials research team as Mike Mayo, who will be able to commiserate and give advice based on his own history of dozens of public feuds with CEOs. 

And for another, although most analysts try to place nice with company management in order to get a little more access, the opposite strategy is often surprisingly effective.  For someone at a brokerage outside the bulge bracket, it’s difficult to get investors to take your calls.  But anyone with an interest in Prospect Capital is now definitely going to remember the name of Finian O’Shea.  It’s a good career move to differentiate yourself from the crowd and build a reputation for independent-mindedness.

Furthermore, there’s a sort of solidarity on the sell side.  Prospect Capital is an asset management firm with a big private credit operation and a real estate investment arm.  These sorts of accounts have been very important to the Street over the last cycle, and speaking frankly, they know it.  Private markets clients are known for being quite demanding and not all of them mind their manners quite as well as they were brought up to do.

So although it’s not clear from the news reports who was on the right side of the exchange between Barry and O’Shea (it seems to have revolved around some questions of accounting, leverage and preferred stock which have been raised by short-sellers), there will be many people in the industry whose hearts are warmed by the sight of someone standing up to a bombastic private credit executive. So when Finian O’Shea goes out looking for his next job move, there may be plenty of potential employers who remember the time that he had the nerve to do something they didn’t.

Elsewhere, coming out in the workplace is often a stressful and frightening decision to make, which is why some people choose to wait until National Coming-Out Day to do so, in the knowledge that their own story won’t be the sole topic of conversation in the workplace.  Christine Chow at UBS, however, managed to amp the stress levels right back up by pressing reply-all to a significantly larger mailing list than she thought she was, and consequently making her announcement to 3,000 recipients rather than a few dozen.

Luckily it ended well; colleagues were apparently overwhelmingly supportive.  As it happened, Ms Chow did end up resigning from UBS, but it wasn’t out of embarrassment at the reply-all; she had been hired by Credit Suisse to be head of “active ownership” on the ESG team and the completion of the merger felt like a natural break.

Meanwhile …

The first moves are beginning to happen in anticipation of Georges Elhedery taking over as HSBC CEO next week.  His former rival for the top job, the wealth and personal banking head Nuno Matos is leaving, as is COO John Hinshaw. (Financial News)

The “anti-ESG” laws in Texas which prevent the state doing business or investing in banks which are insufficiently nice to gun manufacturers and oil producers have been a thorn in the side of Wall Street for a while, particularly for municipal bond teams.  Now the laws themselves are the subject of litigation, from a trade body that thinks they’re unconstitutional. (Bloomberg)

A very strange lawsuit draws attention to “virtual data rooms”, the maintenance of which is normally quite a humdrum task for junior investment bankers, but where some of the data can be incredibly sensitive.  Apparently at some point during an Evercore deal involving a maker of drinks cans, an important document got leaked and a soft drinks company that wasn’t even directly involved in the deal is very angry. (FT)

Arnaud Bouyer, the former head of investment banking for France at Morgan Stanley, has joined Barclays from buyside boutique Groupe Bruxelles Lambert. Ghislain de Brondeau, Barclays’ current head of France and Benelux, will remain at the bank but “focus on client work”. (Financial News)

The most unbelievably gruesome thing imaginable – a bank employee in Arizona died at her cubicle, but was only found four days later.  (NY Post)

Everyone is by now familiar with the joke that ChatGPT is similar to a junior analyst because it makes things up when it doesn’t know the answer.  But hedge funds like Balyasny are still investing in AI models that can actually act like an analyst, in particular by looking out for key words in conference call transcripts.  Possibly including a module to scan for chief executives saying “You don’t even know what you’re talking about”. (Business Insider)

“Elite chef” might be the only job which does worse in terms of normalisation of unhealthy sleep habits and extreme stress than “junior banker”.  Heston Blumenthal recalls the mental health crisis which resulted from prolonged periods of trying to work 120 hour weeks. (FT)

“The era of overpaying for talent is over” and “employers are questioning whether they really need star hires when a workhorse will do”.  From fast food restaurants to McKinsey (and presumably to multi-strategy hedge funds soon), firms are questioning the value of paying up for “unicorns”. (WSJ)

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