Crispin Odey takes a pound of flesh

One scoop to start: Jens Welter, one of Credit Suisse’s most senior remaining dealmakers, has quit to join Citigroup less than nine months after being named co-head of global banking, prompting a reshuffling at the Swiss lender. Keep reading for details.

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In today’s newsletter:

Things are looking up at the Bank of Odey

Whenever there’s doom and gloom in the UK, there’s one thing you can pretty much bank on — hedge fund manager Crispin Odey is somewhere making money.

While the British public were digesting the shock result of the referendum to leave the EU in 2016, and subsequent carnage in markets, Odey was on the BBC bragging about the £220mn his eponymous fund had made virtually overnight by betting the market would collapse if Brexit happened.

Odey had donated £800,000 to pro-Brexit campaigns, including £32,000 to the rightwing UK Independence Party when it was led by Nigel Farage.

Unable to wipe the smile from his face, he bragged to the interviewer that he felt “fresh as a daisy” then briefly worried that someone might take all his winnings away from him.

The only person who could do that was Odey himself, of course. Odey Asset Management ended 2016 down about 50 per cent and performance since then has been volatile to say the least.

But no fear, Britain is facing a cost of living crisis, soaring inflation and a new free marketeer chancellor who used to work for Odey as an analyst. Kwasi Kwarteng’s tax-cutting, high borrowing plans have sent UK markets into a tailspin with sterling and UK government bonds hard hit on fears of high inflation.

Odey is back to running his victory lap. In an interview with the FT’s Laurence Fletcher, he described his bet against UK government bonds as “the gifts that keep on giving.” His flagship European hedge fund is now up about 145 per cent this year, and he’s predicting the pound could reach parity against the dollar.

The UK fund manager has dismissed any suggestions that his politics influence his investment decisions but they do at times seem to align. Odey’s bets against the British economy have helped him stage a major comeback and recoup years of losses that have led to investors fleeing his fund.

Odey famously used the Italian proverb il mattino ha l’oro in bocca, meaning “the morning has gold in its mouth”, to describe the feeling of winning. Better check that it’s not a pound coin instead.

Porsche: all gas, no brakes

Earlier this month at Formula One’s Italian Grand Prix, Red Bull’s Max Verstappen outsped Ferrari’s Charles Leclerc for first place, closing in on a second world title.

Watching irritably from the stands, DD imagines, were Porsche executives who had hoped to one day be part of such a victory. After months of rumours, talks between Porsche and Red Bull about an acquisition of a stake in the racing team collapsed earlier this month.

It won’t be the last time Porsche, which had wanted to buy 50 per cent of Red Bull, would follow in Ferrari’s tire marks.

The German sports car maker, which is owned by Volkswagen, aims to emulate its luxury Italian rival’s successful public markets debut, hoping to raise €9.4bn and achieve a valuation of more than €75bn if it sells shares at the upper end of its target range.

Such a feat would make the IPO one of the largest in Europe’s history. But Porsche could find itself on a crash course with reality.

Porsche is attempting to imitate Ferrari’s blockbuster listing in 2015, which proved that carmakers can transcend their manufacturing roots to achieve the valuations of luxury businesses.

The Italian group’s shares have gained more than 200 per cent since its IPO, and its shares currently trade at 30 times its projected earnings, within the range of LVMH, Hermes and Christian Dior.

Critics say measuring Porsche against Ferrari is a stretch, however.

The latter has cultivated an air of exclusivity with expensive sports cars in limited supply, a classic play by luxury groups adept in turning sticker shock into staying power. Porsche, on the other hand, has focused on accessibility.

It leaves Porsche more vulnerable to economic downturns as its customers are more likely to cut spending, according to analysts. A brutal slump in financial markets amid soaring interest rates this year has surely culled the ranks of those wealthy enough to consider buying a 911 Carrera.

Complexity is another risk. DD outlined several weeks ago how the carmaker’s convoluted ownership structure and questionable corporate governance decisions have made the offering a tougher sell.

Volkswagen is listing a 12.5 per cent non-voting stake in Porsche to fund its continued push into electric vehicles.

Bankers are hoping Porsche’s “luxury with scale” pitch will rev up a dormant IPO market.

One acknowledged to the FT that the concept is a bit of an oxymoron. So too is listing an ultra-luxury car company ahead of a looming recession.

Cold cuts and (alleged) conspiracy in New Jersey

When DD Mark Vandevelde visited the Hometown Delicatessen in Paulsboro, New Jersey, early last year, the credit card machine did not work properly, diners barely outnumbered the staff, and a sign above the bar urged customers to “eat so we both don’t starve”.

The deli gained notoriety on Wall Street in April last year after the deli’s parent company Hometown International was named by hedge fund manager David Einhorn as an example of the “quasi-anarchy” that he said had taken hold in financial markets.

Now the feds think they can explain how Hometown’s share price soared from $1 in October 2019 to nearly $14 by April 2021, even as revenue hovered at about $40,000 and lawyers for the company acknowledged that it was having “limited success operating its . . . delicatessen”.

Peter Coker, 80, and James Patten, 63, were arrested on securities fraud charges related to their alleged role in inflating the share price of Hometown International on Monday. Coker’s 53-year-old son Peter Coker Jr, who lives in Hong Kong, also faces charges and is still at large.

The FT has the full story. In brief, the feds say Patten and his associates executed co-ordinated trades designed to make it look as though Hometown shares were in demand.

On one occasion last January, an account belonging to a Staten Island resident who was an associate of Patten was used to sell shares at a price of $13.99, prosecutors said. The buyer, who lives in New Jersey, turned out to be a close relative of Patten’s romantic partner, they added. Both orders were traced by law enforcement to an internet connection serving Patten’s home, according to the indictment.

“We have spent an enormous amount of time curating this asset,” Coker Jr wrote in a November 2020 email cited by prosecutors, in which he seemed to hold out hope that the deli might soon earn a listing on Nasdaq.

He concluded: “[We] are now ready to take Hometown to the next level.”

Job moves

• Following Jens Welter departure from Credit Suisse, who will join Citigroup as co-head of European investment banking and chair of its consumer and retail advisory business, David Wah will become the Swiss group’s sole global head of banking, according to a memo seen by the FT. Cathal Deasy and Giuseppe Monarchi will become co-heads of investment banking and capital markets for Europe, the Middle East and Africa.

• AJ Bell’s chair Lady Helena Morrissey has resigned from the fund platform after a disagreement with the UK’s Financial Conduct Authority over the future role of the company’s founder Andy Bell.

• John Witherow, one of Rupert Murdoch’s longest-serving editors, has stood down from the position at The Times and is to be replaced by his deputy Tony Gallagher.

• Private equity firm PAI Partners has hired Winston Song as a partner to lead its consumer activities in North America, based in New York. He joins from Vestar Capital, where he was a managing director and co-head of its consumer division.

Smart reads

Against the grain Vivek Ramaswamy has become the face of rightwing backlash against ESG investing as he seeks to convince investors that “woke” boardrooms hamper growth. The FT’s Brooke Masters spoke to the activist asset manager about his claims.

Unintended consequences So-called super-regional banks are increasingly coming under the same level of scrutiny as Wall Street titans such as JPMorgan Chase and Bank of America. But the heightened regulation could backfire, writes Reuters’ Breakingviews.

Change of ownership Barclays is set to take over a contract with start-up accelerator Tech Nation from the UK government. Founders have complained the move “feels wildly anti-competitive” and puts the UK tech scene in jeopardy, the FT’s Sifted reports.

News round-up

Wall Street banks to pay $1.8bn over messaging violations (FT)

FTX US wins auction for Voyager Digital assets with $1.4bn bid (FT)

Biffa accepts lowered £1.3bn US private equity bid (FT)

Kwasi Kwarteng seeks to reassure City bosses over UK economy (FT)

Dubai developer Nakheel nears $4.6bn debt restructuring to fund expansion (FT)

Do Kwon says he is not hiding as crypto manhunt intensifies (FT)

India’s Adani Group plans to invest over $100bn in next decade (Nikkei Asia)

Chinese company aims to sell 3 US resorts for $1.3bn (Wall Street Journal)

Sanctioned Russian billionaire’s superyacht auctioned for $38mn (Bloomberg)