The Capital Note

The End of Bezos’s Amazon

Amazon CEO Jeff Bezos speaks at a news conference in Seattle, Wash., 2014. (Jason Redmond/Reuters)

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: Robinhood files to go public, Bezos prepares to step down as Amazon CEO, and a public-relations firm with ties to the Clinton family unravels. To sign up for the Capital Note, follow this link.

Robinhood’s IPO
One day after settling a complaint with financial regulators for $70 million, retail brokerage Robinhood has filed its S-1 to go public. Robinhood claims nearly 18 million monthly active users and $80 billion in assets under stewardship. While it had a blockbuster 2020, its first year turning a profit, the first quarter of 2021 was more challenging, with the company reporting over $1 billion in losses.

As the Wall Street Journal points out, now is as good a time as any for Robinhood to raise public capital:

Robinhood is set to be the buzziest company to tap the U.S. IPO market this summer, and it enters one of the most welcoming markets in years. Volatility is low, and major stock indexes are at or near records. This past week was the biggest of the year for traditional IPOs as measured by money raised, according to Dealogic.

Unlike other IPOs, though, Robinhood is tapping its own customers for capital:

The popular stock-trading app plans to set aside as much as 35% of shares in its coming initial public offering for individual investors, the company said in a regulatory filing Thursday, a much larger retail allocation than in a typical deal. Robinhood wants people to sign up to buy the shares on its new platform that gives users access to IPOs before they start trading.

The document also revealed that 17 percent of Robinhood’s total revenue in the first quarter came from cryptocurrency trading, to which the surge in Dogecoin contributed 34 percent. The brokerage’s reliance on so-called meme stocks and cryptos points to inevitable volatility in its quarterly performance. As a public company, Robinhood will be a useful proxy for retail activity in markets.

Bezos’s Reign at Amazon Comes to An End
Jeff Bezos will officially step down as CEO of Amazon this Monday, putting Andy Jassy at the helm of the e-commerce company led by Bezos since its founding in 1994. As the pioneer of Amazon Web Services, the company’s remarkably profitable cloud-computing business, Jassy has been . . .

The Financial Times reports:

Several people who have worked with Jassy speak of his affable yet precise manner — with an impressive recall of relevant data and technical detail — that should serve him well under the political spotlight, as he contends with unprecedented levels of hostility aimed broadly at Big Tech, and Amazon in particular.

“This is where he’s different to Bezos,” says Skok. “He’s massively factual in his arguing, and his approach is to get into the weeds if you need to go toe-to-toe with people on details.”

Bezos will stay on as chairman of the board, but will only be involved in “irreversible” decisions. His departure comes at a time when the company is under massive regulatory scrutiny. Insiders hope the promotion of Jassy will give the company a lower profile:

There is hope within Amazon, according to several people familiar with its political strategy, that Jassy will replace Bezos as the public face of Amazon. The goal is to swap out the world’s most recognisable businessman, who to some is the very embodiment of capitalism’s excesses, for an understated sports fan. Jassy’s stake in Amazon is worth just over $300m, compared with the $175bn fortune of Bezos.

Judging by Amazon’s stock price, investors have full faith in Jassy’s ability to lead the company. While succession plans often lead to a decline in market capitalization, Amazon’s $1.7 trillion valuation has barely budged.

Around the Web
A tight labor market for investment bankers

Many Wall Street firms are trying to lure new hires with improved compensation packages and juicy benefits. But they’re also fighting morale issues, a problem highlighted earlier this year when a group of Goldman Sachs Group Inc. analysts drew attention to the difficult conditions they’re facing in investment banking.

This week, Barclays Plc lifted base salaries of all U.S. analysts by $15,000 and its U.S. associates and vice presidents by $25,000, while JPMorgan Chase & Co. boosted salaries for its junior bankers. Jefferies Financial Group Inc. earlier this year put a selection of coveted fitness perks — including a Peloton Interactive Inc. bike and Apple Inc. products — up for grabs for some employees.

Oil prices are skyrocketing

Oil prices rose above $75 a barrel as OPEC and a Russia-led group of producers met to weigh surging demand from the industrialized world—and delayed a decision about what to do about it.

Thursday’s meeting of the Organization of the Petroleum Exporting Countries comes at a time when some of the historical dynamics of the oil markets have been thrown upside down by the pandemic. Demand growth from the developed world, which for years has stagnated, is on a tear as it emerges furiously from Covid-19 lockdowns. Meanwhile, the developing world—the source of almost all new oil demand in years past—is still sputtering.

Random Walk
The Financial Times has a long and fascinating story on Teneo, the PR firm founded by former associates of Bill Clinton:

It took Declan Kelly and Doug Band just a decade to build Teneo into what they could call, with only a little of the PR men’s trademark topspin, “the world’s pre-eminent CEO advisory firm”.

With unmatched political and corporate connections, they were trusted to protect the reputations of some of the world’s most powerful chief executives. The fees they managed to charge — as much as $1m per month — left rivals slack-jawed with envy.

Yet it has taken just six months for Teneo to hit two reputational crises of its own, costing both co-founders their jobs and casting doubt over the future of an expansionist 1,250-person consultancy into which private equity firm CVC has poured $450m.

First to quit was Band, a former aide to Bill Clinton, who helped launch the Clinton Global Initiative, a series of annual meetings at which politicians and business leaders gathered to pledge action on global challenges.

In December he gave an interview to Vanity Fair describing his bitter break-up with the Clintons. Having watched him lean heavily on his Clinton ties to build Teneo, friends and former acquaintances saw the interview as extraordinarily reckless for a man paid to advise others on controlling their message.

That set off an unraveling of the firm’s leadership, with another co-founder resigning shortly thereafter.

Emails revealed via WikiLeaks showed Chelsea Clinton, the former first daughter, was soon complaining about Teneo “hustling” for business at CGI’s not-for-profit events.

Its founders disputed that notion, but the young firm was soon identified as an efficient conduit for chief executives angling for a spot on the CGI stage, where they could discuss favourite topics such as their efforts to operate more sustainably, create jobs and advance women’s prospects.

Band defended himself in a memo to the Clinton Foundation in November 2011, writing: “I have sought to leverage my activities, including my partner role at Teneo, to support and raise funds for the Foundation.”

Teneo’s clients such as Allstate, Barclays Capital and BHP Billiton had stepped up their giving, he said. And it had “created and secured” paid speeches by the ex-president to UBS, Ericsson and others.

Teneo charges as much as $1 million a month for its services. A lawsuit between two corporate giants offered a glimpse as to why:

The lengths to which Kelly and his team could go to in an effort to aid CEOs in high-pressure moments were set out in a Delaware trial that concluded last year.

The case stemmed from Anthem’s $54bn bid for rival health insurer Cigna, which was announced in 2015 but blocked on antitrust grounds in 2017, leaving Anthem facing a possible $1.85bn termination fee.

As both sides went to court accusing the other of breaching their agreement, it turned out that all was not as it seemed. The Delaware judge, Travis Laster, found that Cigna’s management, its law firm and Teneo had conducted a “covert communications campaign” to sabotage the deal after the insurer became upset that its CEO would be sidelined at the merged company.

Laster concluded that Teneo was “skilled in the darker arts of influencing the media and public discourse”.

— D.T.

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