In today’s newsletter
US prosecutors prod Icahn Enterprises
China cracks down on due diligence
Big Law’s Gen-Z dilemma
Can Wall Street’s most feared bruiser take a punch?
When short seller Hindenburg Research released its report on Icahn Enterprises last week, we wrote in DD that most of Wall Street would be watching.
It turns out that prosecutors were too. On Wednesday, Carl Icahn’s eponymous investment firm disclosed in filings that federal prosecutors in New York have contacted the company seeking information on its business.
The news sent shares in Icahn Enterprises down as much as 20 per cent, making it a brutal start to the month for the activist investor.
According to the filing, prosecutors got in touch on May 3, the day after Hindenburg’s report was published. Icahn Enterprises marked Nathan Anderson’s third big target this year alone, with the others being Indian conglomerate Adani Group and Jack Dorsey’s Block.
The New York firm said it believed Icahn Enterprises was overvalued, especially in comparison with peer funds such as Pershing Square Capital Management, the vehicle belonging to Icahn’s once arch-nemesis Bill Ackman.
We haven’t yet touched on the mudslinging we witnessed on live television between Icahn and Ackman while they held opposite bets on Herbalife, the multilevel marketing company, but things are getting interesting.
Icahn released a rebuttal to Hindenburg’s claims on Wednesday, shortly after the request from prosecutors had been disclosed, saying the firm should be called Blitzkrieg Research for “its tactics of wantonly destroying property and harming innocent civilians”.
The legendary investor, who’s famous for tormenting corporate chieftains with his “poison pen”, has so far fired back at Hindenburg with rubber bullets.
Icahn conceded he had lost money on hedges to protect his empire from an unravelling of financial markets and would pull back on those short bets to focus on activism. He also said he had the resources to cover margin loans he took out from Morgan Stanley with some 60 per cent of his Icahn Enterprises shares pledged as collateral.
Ultimately, the activist has characterised himself and shareholders, the vast majority of whom are retail investors lucky enough to invest alongside “the iconic Mr Icahn”, as victims.
We’d all like to write our own reviews.
Due diligence gets complicated in China
Xi Jinping’s number two Li Qiang has been on a charm offensive this year to persuade foreign investors to strike deals in China.
But investors need due diligence on acquisitions and potential partners, as DD readers are well aware, and the process is beginning to look more difficult to achieve in the world’s second-largest economy.
This week, viewers of Chinese state TV were shown a 15-minute report, including footage of a phalanx of officers raiding Capvision, which connects investors and consultancy firms such as Bain & Company and McKinsey with subject specialists. The raid comes after similar ones at Bain and due diligence group Mintz in recent months.
The message from Beijing seems clear: beware of sharing information with foreigners.
“They’re obviously trying to scare everyone and send a message,” one former due diligence professional told DD’s Kaye Wiggins.
Beijing has also curtailed foreign access to public data such as academic theses and business ownership records. Private and government-run databases with Chinese corporate information, patent information, court records and procurement tenders have snapped shut.
“The lawyers and the due diligence people are like swamp guides,” Ker Gibbs, the former president of the American Chamber of Commerce in Shanghai, told the FT. “If you don’t have a swamp guide you are not going into the swamp.”
So what can international investors do? One US fund manager told the FT his company was concentrating on consumer stocks, which seemed to have fewer national security complications. Still, he said, he couldn’t be sure this was the right approach.
“We don’t know where the bottom line is,” he said. “What is a safe topic today can become sensitive tomorrow.”
Big Law struggles to win over Gen Z
For Gen Zers considering a career in Big Law, a scroll through TikTok yields “day in the life” videos like this one depicting a glamorous balance of billable hours and bottle service.
But the path of a young work-hard-play-hard lawyer is becoming less common than social media might suggest.
Students and early-career attorneys are increasingly neglecting the biggest global law firms, a survey by recruitment firm Major, Lindsey & Africa has found, out of fear of a poor work-life balance and assignments that clash with their values.
Nearly 80 per cent of respondents said they believed “a sexist culture” to be pervasive within the sector, and 65 per cent said they took a firm’s racial, ethnic and gender composition into account when applying for jobs.
Gender diversity has remained stubbornly low at top Big Law firms, with women making up just 27 per cent of partners last year, a rise of just 1 percentage point since 2021, according to industry analysts Leopard Solutions.
“Perhaps more so than any other generation currently practising law, this generation highly values social justice and altruism,” said Nathan Peart, a co-author of the survey.
Now that the dealmaking slump has all but swallowed up the six-figure sums paid to junior lawyers in the form of sign-on or retention bonuses last year, launching an ethical appeal presents a far cheaper recruitment strategy.
While he isn’t surprised young lawyers are motivated by the prospect of helping society, said DLA Piper’s global co-chair Frank Ryan, large law firms as “an incredible place to learn” and allow staff to “feed their soul” with pro bono activities.
Convincing new recruits that they’ve made strides in the areas of mental health and burnout, on the other hand, is a separate challenge entirely.
Bank of America has hired former BNP Paribas banker Benoit Nevouet to head its new Luxembourg unit, per Reuters.
Swedish oat-milk maker Oatly has named global president Jean-Christophe Flatin to take the place of chief executive Toni Petersson — who will transition to the role of co-chair — as it continues to combat falling profits.
Dechert is planning job cuts in London that will affect 5 per cent of its workforce, The Lawyer reports.
Law firm DLA Piper’s head of finance David Trott has resigned less than two years after joining from Freshfields Bruckhaus Deringer.
Smiths Group has named Steve Williams, the chair of aluminium producer Alcoa, to succeed George Buckley as chair after he retires in November.
Pearson has appointed Rightmove chief financial officer Alison Dolan and The New York Times’ chief product officer Alex Hardiman as independent non-executive directors.
Sign of the times Turnround specialist Melrose has sworn off dealmaking to focus on aerospace. The shift is a sign of the UK’s waning equity market, the FT’s Helen Thomas writes.
The American dream Debate has flared up in the UK over whether wage constraints have caused the country to lose its top talent to the US.
Fizzling out Upheaval in the crypto industry has damped Miami’s once fiery love affair with crypto, The Wall Street Journal reports.
Australian lithium producer Allkem strikes merger deal with US rival Livent (FT)
Glass Lewis backs Carl Icahn’s bid to oust Illumina chief and chair (FT)
First Citizens makes huge gain on Silicon Valley Bank deal (FT)
KPMG and PwC faulted by US regulator over Chinese audits (FT)
Brookfield predicts consolidation in asset management amid downturn (FT)
Saudi-backed group explores launch of English news channel to rival Al Jazeera (FT)
Singapore: foreign billionaires drive record profits for banks (FT)