The Art of Not Firing Someone on Wall Street
Masa Son, Rajeev Misra and Rise and Fall of The Vision Fund
There are many sly arts on Wall Street, but one of my favorites has always been the non resignation resignation. It's usually a very senior guy who has lost a large sum of money, bringing disrepute upon himself and his firm. Because firing him or cutting ties cleanly represents an even larger loss of face for his boss – usually a CEO, chairman or company founder – he is provided with an off ramp.
Stepping back, ceding responsibility, pursuing new opportunities, it's been a good run….the language itself is an art form.
In the full flush of a bull market, you don’t see a lot of this type of thing. Asset prices are popping, everyone is hiring, greed is good. Reversals, such as they are, can be swept beneath the carpet. There is little need to hold people to account.
Then the market cracks and investors turn tail. Money becomes finite, losses are shocking – something has to be done. Which is where Japanese tech visionary Masayoshi Son finds himself as he contemplates the future of his once high flying Vision Fund – the $100 billion plus technology fund, now bleeding red ink, that he launched in 2017.
Masa first caught the public eye in the early days following the 2016 election.
President elect Trump trotted him out in the lobby of the Trump Tower.
The money printing machine was still going strong, the Trump asset boom was just beginning and big tech was ascendant. Everyone wanted a piece of the action and Masa and his chief lieutenant Rajeev Misra would break the mold of venture investing by buying whatever caught their fancy, regardless of price.
Of course, it did not last. The fund’s investment in WeWork was written down by $45 billion, other ventures blew up spectacularly and last quarter, the fund posted a $27 billion loss.
Masa could not fire himself, so the next person in line was Misra, a brash Indian financier who leveraged his long banking relationship with Masa to secure the job of Vision Fund CEO even though he had no experience as an investor.
The next question: how to let the world know.
Given the embarrassing circumstances, a straight up press release was not going to do the trick. That would provoke difficult questions about why it took so long to get rid of Misra. Better to go with a strategic leak to a trade outlet.
On July 7, Bloomberg ran the story. Rajeev Misra would be stepping back from his responsibilities. He would be keeping a role at the Vision Fund and he had also – if you can believe it – raised $6 billion from investors in the Middle East for a new fund, the article noted.
How Misra would keep his hand in with the Vision Fund while starting up his own separate fund is not explained. It’s a skillful bit of PR legerdemain: Masa pushes Misra to the side, without really seeming to do so. And Misra’s ego is salved by the prospect of a new fund – the details of which are predictably scant.
That Misra actually had the job in the first place, and kept it for as long as he did, says a lot about the nature of relationships on Wall Street. Not least when that relationship has at its nexus, financial engineering and the ability to raise large sums of capital – the life blood of all financial manias.
Misra came to know Masa when he was at Deutsche Bank, where he oversaw a team of credit traders who made big profitable bets against the US mortgage market -- Greg Lippman, the mortgage trader in Michael Lewis’ Big Short, reported to him.
Masa’s ability to transform Softbank from an obscure magazine publisher into the corporate vehicle that would fund his technology ambitions could not have been done without savvy financial magicians like Misra.
In 2006, Misra helped Softbank -- already swimming in debt -- raise another $16 billion needed to buy the cellphone carrier Sprint. And when Sprint’s profits were crushed in price wars with rivals, Misra -- ever the wizard -- concocted a scheme to borrow even more money, mortgaging the company’s handset leases and cell towers.
When Masa needed help raising money for the fund in 2017, Misra stepped up again, tapping his network in the Middle East for $60 billion.
All of which is the very definition of friendship on Wall Street. The two men also bonded as hungry, whip smart outsiders from modest Asian homes who, no doubt, saw their more established peers on the street as soft and complacent.
Many of Misra’s first hires at the fund were of a similar type -- with the first number of them coming from Deutsche Bank’s trading desk. Few if any had substantial buy side experience.
I have always had a fascination with this vanguard of super smart financiers (from the subcontinent and beyond) who, in recent decades, have overturned many of the old Wall Street orders. They get in the door via their rocket science brains; the intricacies of derivatives, swaps, CDOs and the like, all of it comes naturally. Soon they run desks, then divisions and, on occasion, the firms themselves. Don’t call them quants though. They have an outsider’s fury in them, a ferocious drive and appreciation for Wall Street bloodsport, that propels them past the competition.
To name a few: my boss at Morgan Stanley Asset Management in the early 1990s, Madhav Dhar. Arshad Zakaria, Fareed’s brother, who became a top executive at Merrill Lynch in the early 2000s and Anshu Jain, the former chief executive of Deutsche Bank and Misra’s boss and champion while he was there.
There was something ravenous in them, manifesting in edge as well as charisma. They cultivated powerful patrons and were ruthless infighters. Some overreached (Zakaria), others had the markets turn against them (Jain) -- inevitably, the knives came out and there was a reckoning.
For Misra, it was a combination of the two. Conspiring against corporate rivals is par for the course on Wall Street. Misra took it to another level: disinformation campaigns, leaking false stories to the press and even going so far as to try and entrap his target in a sexual tryst.
Misra and his gang evaporated money in absurdities such as cruelty free e-commerce and apps that connect pet owners with pet walkers. Perhaps even more bizarrely, Misra persuaded Masa that Softbank could start up a private equity business to rival Blackstone and KKR. So, Softbank bought Fortress, the investment firm where Misra worked after leaving Deutsche for $3.3 billion. As always, they overpaid -- a 38 percent premium to the flagging stock price at the time. A very nice payday for Misra’s former partners at Fortress.
I remember him pitching the deal to me in 2018. We were barreling down the West Side highway in a black SUV and, as he sucked on his ever-present vape pen, he laid out what he saw to be the synergies that tie technology investing to private equity. We can merge our back offices! Tap into the expertise of Fortress portfolio managers! His sentences were rapid fire, he had a mad man’s cackle, his eyes, dead black pools, bore into you. I have to say, it was hard not to get sucked in. I wrote it all up. The piece was lacking in skepticism. There were no synergies – now Sofbank is looking to unload the position.
Good luck finding a buyer.
At the least, Masa will not be calling on Misra to get the job done.
Tak says “a great punchy read” I have always wondered how one can behave so badly and lose such huge sums and still have a job. Thank you for answering that question