The Epicurean Dealmaker (TED) has replied to my Facebook post. As usual TED is worth reading.
The Epicurean Dealmaker: As Long as the Right People Get Shot
His argument comes down to the IPO discount being a cost of doing business.
However I would like to turn this into a real estate deal. I go to a real estate agent and ask her to sell my property at the best price.
I enter into a contract which obliges the real estate agent to sell at the best price.
She sells it at less than the best price - as she always does.
She has a queue of buyers willing to buy because she always sells at the best price.
In this case I would think she is a shonk more concerned with her own franchise (her queue of buyers) than my best price and her legal and moral obligations.
I think precisely that of investment bankers. Always have.
My view of the morality of this trade differs from TED's view. And I would like to explain how I think that TED has got to his strange position.
To do that I need to look at this transaction from Morgan Stanley's viewpoint
Morgan Stanley (at least on this deal) appear to have broken the cardinal rule of investment banking. The cardinal rule of investment banking is to look after the investment bank (in the hope that at bonus time they will look after you).
Morgan Stanley's interests are clearly damaged by the Facebook IPO. Their ability to do more IPOs of scale is somewhat limited. Their ability to do future deals is contingent on a reasonably predictable IPO discount.
In my post I defended Michael Grimes (the Morgan Stanley investment banker) as he did what the law and ethics required of him. He looked after the client. I stand by that moral assessment.
Michael Grimes should most certainly NOT be investigated by the SEC for this.
But here my deeply cynical side comes out: Michael Grimes should be fired by Morgan Stanley for this deal. He broke the cardinal rule of investment banking which is the investment bank's interests come before the client interests. By selling too much Facebook at too high a price he has damaged the franchise of the investment bank. That is untenable.
People get fired in investment banking for lesser infractions.
So where does the Epicurean Dealmaker's moral position come from
TED is an investment banker. His background is M&A.
Morality for him is defined by the cardinal rule of investment banking. After all that is what you have to do. It is the moral pact of everyone who works in investment banking.
Indeed it is a moral pact that almost all humans make. What feeds you becomes (in your eyes at least) moral.
This was the very point of my post. People's morality is defined not around what is right and just but what they need to do to make a buck. We are human. Even TED.
Investment bankers learn to rip of clients. That is what they need to do to get by.
And the Epicurean Dealmaker - and everyone else in the industry - has accepted that as the new fair and just.
Its not the Epicurean Dealmaker is a bad man. (I like and respect his blog. I think I would like and respect the man.) It is just that circumstances make the morals.
Wednesday, May 30, 2012
Posted by John Hempton at 9:10 PM
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