The mayoral candidate freaking out Wall Street

view original post

One thing to start: Novo Nordisk has terminated its partnership with US telehealth group Hims & Hers after accusing it of deceptively marketing copycat versions of its blockbuster Wegovy weight loss drug, sending shares in both companies down sharply.

In today’s newsletter:

Why Wall Street’s so scared of Zohran Mamdani

Since a few members of DD interviewed the New York City mayoral candidate Zohran Mamdani last week at his campaign’s Manhattan headquarters, the 33-year-old has been gaining ground in the polls.

A survey released on Monday indicated that the democratic socialist has a 4 percentage point lead against Andrew Cuomo in the final round of ranked-choice voting.

Rising alongside Mamdani’s popularity is fear among financiers on Wall Street, who have ploughed millions of dollars into the election in the hopes of defeating him.

Wall Street’s preferred candidate? Cuomo, the longtime fixture of New York state politics who resigned as governor in 2021 amid sexual-harassment allegations he denies.

Rarely do municipal elections get this sort of attention from Wall Street. But Mamdani has set something off among the billionaire class.

Cuomo’s major donors include Pershing Square’s founder Bill Ackman; Third Point founder Dan Loeb; Steven Roth, the founder of real estate investor Vornado; as well as Anthony Scaramucci and former mayor Michael Bloomberg. 

While Mamdani cited Yvon Chouinard, the founder of apparel-maker Patagonia, and Hamdi Ulukaya, founder of Chobani yoghurt, as business leaders he admires, Wall Street is throwing their weight behind the choice they see as the pro-business candidate.

New York elites’ biggest concerns are Mamdani’s expensive economic agenda and tax plans, which they say would bankrupt the city. 

DD’s James Fontanella-Khan writes that Mamdani’s big tax proposals should raise questions for financiers who oppose the plans, but are also concerned about budget deficits.

On the tax front, he wants a 2 per cent income tax on New Yorkers who earn more than $1mn a year and to raise the corporate tax rate from the current 7.25 per cent levy up to 11.5 per cent.

There is a bit of a wrinkle: If Mamdani does win, he would need the New York state legislature and the governor to greenlight those tax increases. It’s not entirely clear what his contingency plan is if that isn’t possible. 

While Mamdani has said he represents “New Yorkers who feel left behind by the economic policies of this mayoral administration”, he also told the FT he would have no problem attending flashy functions such as the Met Gala, the annual star-studded event at the Metropolitan Museum of Art, where tickets reportedly sell for $75,000.

“It is also a joy, as I found over the course of this campaign, to be able to meet New Yorkers everywhere,” he said. “And why not take a free bus to the Met and tell everyone about the efficacy of public transit that’s accessible, that’s safe, that’s reliable.”

Today, New Yorkers head to the ballot box, though the final results aren’t expected for another week. DD’s still taking bets on who will prevail. 

The ‘Kirklandisation’ of Big Law

For years, some of Wall Street’s top white-shoe law firms resisted abandoning their traditions when it came to promoting lawyers to partner. Being a partner, they insisted, meant owning a stake in the firm. 

Kirkland & Ellis, which has ridden a private equity boom to become the world’s highest-grossing law firm, has for decades used a different model. 

Its lawyers can be made “non-equity” partners after just six years — and allocated an ownership stake years later if they prove their worth.

That structure gave Kirkland a handful of advantages. It could poach the best young lawyers from other firms by offering them the partner title — and its lawyers could bill higher rates during some of the most productive years of their careers.

It also gave the firm a chance to boost profits without diluting the shares held by the elite tier of equity-holding partners.

In a sign of how comprehensively Kirkland has roiled the legal industry and overturned the norms even of its oldest rivals, many of those that held out the longest are now introducing or considering introducing a “non-equity” tier.

Debevoise & Plimpton said this month that it had created a non-equity tier. Paul Weiss, Cravath, Swaine & Moore and Cleary Gottlieb have done so in the past two years. Skadden Arps, Ropes & Gray and Freshfields are also considering the move.

It’s a reflection of how competitive the war for talent has become. “Once it’s out there and everyone has it, you’re too at risk of people being poached”, one US lawyer said. 

But it has also sparked a backlash. In the US, non-equity partners can be on the hook for the full cost of social security and Medicare contributions, rather than splitting it with the firm as they would have done if they’d remained associates.

One lawyer described it as a “costly purgatory”, saying: “The non-equity partner concept takes advantage of a lawyer’s dream of climbing the ladder, while shifting costs away from those who have actual ownership in the firm.”

Steve McLaughlin’s maybe $6bn deal fee 

In just a few weeks time as a public company, Circle Internet Group’s stock price has hit $260, having debuted at $31. 

Perhaps no one is paying more attention to the meteoric rise than Steve McLaughlin.

McLaughlin is the founder of the investment bank Financial Technology Partners and believes he has a contract in place that not only gives him $80mn in fees from Circle’s successful $1.2bn IPO, but a claim on a tenth of the value of any future sale of the stablecoin merchant.

At Circle’s current market cap of around $60bn, that’s an implied fee of about $6bn. You read that correctly.

Circle of course disputes this and the disagreement is in federal court. 

DD’s Sujeet Indap has the details on how McLaughlin, who was trained at Goldman Sachs, built one of the most successful and polarising investment bank boutiques in recent memory. 

Its hallmark is betting early and locking in emerging companies that might one day break into the big leagues.

In a happier outcome, another longtime FT Partners client, AvidXchange, was just acquired for $2.2bn, netting the investment bank $80mn in total fees. The AvidXchange founder and chief executive told the Financial Times: 

“Along with Steve putting real skin in the game as investor and adviser at a time when it was difficult to attract the other top tier investment banks, he has served as a true strategic partner for me in growing our business into the middle market industry leader . . . he definitely deserves the upside 100 per cent.”

Job moves

• Apollo Global Management subsidiary Athene has promoted Grant Kvalheim from president to CEO, Jim Belardi to executive chair and Mike Downing and Sean Brennan to co-presidents. Belardi will also continue as CIO, Downing as COO and Brennan will serve as CCO.

• Citigroup has hired Drago Rajkovic as co-head of M&A. He joins from JPMorgan where he was global chair of M&A.

• The Royal Mail has appointed Alistair Cochrane as its new interim chief executive. He was previously COO.  

• The Berkeley Group has appointed Rob Perrins as executive chair in a reshuffle. He was previously the chief executive. 

• Skadden has hired Mingda Zhao and Emery Choi as partners in its corporate practice in Houston. They both join from White & Case. 

Smart reads

DEI backlash Law firms are surrendering to Donald Trump over diversity, equity and inclusion, the FT writes. The administration says an elite fellowship for minorities is racist, despite the conservative Wall Street titans who back it. 

Bitcoin buzz Bitcoin is trading close to record highs, and sceptics are becoming crypto-curious, the FT reports. But is crypto an asset class? 

Spacs are back The “Spac King” is launching another one (“probably”). Despite his record of starting dumpster fires, FT Alphaville writes, Chamath Palihapitiya wants to make blank-cheque deals hot again.

News round-up

Vanguard cuts fund fees as competition in Europe heats up (FT)

US semiconductor maker Wolfspeed to file for bankruptcy (FT)

Revolut chief in line for Musk-style payday at $150bn valuation (FT)

America’s biggest cement supplier set to make its market debut (WSJ)

F1 owner Liberty Media targets US growth with MotoGP (FT)