Lutnick makes Spacs great again

One big allegation to start: World Economic Forum founder Klaus Schwab allegedly manipulated the organisation’s research to curry favour with governments, according to whistleblower claims that led to his resignation as chair of the organisation over the Easter weekend.

And a big interview: Ivorian opposition leader and former Credit Suisse chief executive Tidjane Thiam told the FT he would “use every legal means” to fight a ruling that has barred him from running for president later this year.

In today’s newsletter: 

• Cantor’s Trump-fuelled Spac deal

• Jane Street’s whopper earnings

• Pension funds’ PE climbdown

Cantor goes all in on crypto, Spacs and Trump

Howard Lutnick, the longtime chief of Cantor Fitzgerald, left the brokerage in February to become US commerce secretary, becoming the executor of President Donald Trump’s trade wars. 

But though Lutnick stepped down from Cantor and divested his corporate holdings, the New York-based brokerage stands to be a major beneficiary of the president’s policies. Others in the Lutnick clan are getting in on the action.

Brandon Lutnick, the 27-year-old son of Howard, was named chief executive of a special purpose acquisition vehicle Cantor raised last year that has for months been hunting for a deal.

The FT scooped on Tuesday evening that the younger Lutnick finally inked one: a massive crypto deal that the company says will be a beneficiary of Trump’s policies. 

The Cantor Spac is partnering with tech conglomerate SoftBank, the controversial stablecoin Tether and crypto exchange Bitfinex to create a $3.6bn “bitcoin acquisition vehicle”.

The three investors will plough billions of bitcoin into the Spac, which will be renamed Twenty One Capital, and plans to go on a crypto buying spree.

It’s trying to recreate MicroStrategy, the one-time software company that became a $90bn giant after pivoting to crypto buying, using financial engineering. (Behold the structure of the Spac deal.)

Spacs — blank cheque companies that raise money then merge with a target business — had their heyday in 2021 before many plunged in value. But Cantor is spearheading a comeback of the chequered financial vehicle. 

The MicroStrategy copycat is just the first in a series of Cantor Spacs. It has raised two other Spacs that are currently searching for deals with Brandon Lutnick as its chief executive. Cantor has also underwritten a clutch of Spac deals recently.

But it hasn’t always been smooth sailing for Cantor. In December, it settled charges with the Securities and Exchange Commission, relating to Spacs, without admitting any guilt.

The SEC, then led by Gary Gensler, was brutally tough on the crypto market. But Gensler’s replacement, Paul Atkins, is a crypto advocate who was sworn in on Monday. 

And as Twenty One Capital noted in a presentation, “Trump’s new administration is viewed as strongly pro-crypto”.

So it makes sense that Cantor wants in on the action. The elder Lutnick is a longtime crypto cheerleader who has worked with Tether for years.

The brokerage has already benefited from the shift in tone. It advised Tether’s $775mn investment in rightwing video-sharing company Rumble earlier this year after taking the company public in 2022 via another Cantor Spac.

Most of Wall Street feels somewhat shut out from the Trump administration, but Cantor is ascendant and its DNA reaches the top ranks of the White House. 

Jane Street goes toe-to-toe with Wall Street banks

Last year the FT christened Jane Street one of the new titans of Wall Street. 

The high-speed trader’s 2024 results, disclosed publicly for the first time in the FT, show why that title’s so fitting.

The New York-based trading outfit generated $20.5bn of net trading revenues last year, up 94 per cent from 2023, according to people familiar with the matter.

Its high margins — the envy of traditional investment banks and their sales and trading arms — meant profits surged to a record of nearly $13bn last year, up from $5.9bn in 2023.

The results show Jane Street’s growing might in global markets, as it and rivals including Citadel Securities elbow into a business once dominated by banks such as Goldman Sachs and JPMorgan Chase. 

They’ve been able to benefit from traditional banks’ restrictions from proprietary trading after the financial crisis. Plus, bank executives generally viewed their trading arms with less enthusiasm than asset management or advisory units. 

The fresh results were disclosed as Jane Street borrowed about $1.4bn through traditional US corporate debt markets, which it has tapped before to fund its expansion.

Demand was so strong to lend to Jane Street — with order books on the high-yield bond more than four times covered — that the company was able to secure relatively cheap debt.

“With Trump in office, they’re going to benefit from his policy volatility,” said one investor who planned to invest in the deal.

Jane Street expects to report net trading revenues of about $7.2bn in the first quarter, up more than 60 per cent from the same period a year ago.

That would exceed the $6.7bn in first-quarter trading revenues reported this month by Morgan Stanley and would bring Jane Street within striking distance of the $8.6bn earned by Goldman. 

Pension funds stop competing with PE

Once upon a time, some of the world’s biggest pension plans devised a way to avoid paying some of the fat performance fees and profit shares that they were obliged to pay to private equity managers. Their strategy: do buyout deals themselves.

What could be so hard about buying and selling companies, thought the chief investment officers of some of the biggest pension plans in countries such as Canada.

Some of the biggest plans in Canada’s $3.2tn pension system started doing their own leveraged buyouts in recent years, while still investing into private equity funds.

Some ended up as massive private equity managers in their own rights. But private equity’s downturn is now prompting a rethink. 

Top Canadian pension funds are stepping back from their direct investment strategies as a tough period for exiting investments has descended on the market. 

Caisse de dépôt et placement du Québec and the Ontario Municipal Employees Retirement System are scaling back the proportion of their funds exposed to directly owned private companies, while Ontario Teachers’ Pension Plan has said it’s eyeing more strategic partnerships.

“We are facing a shortage of viable projects and difficulty in exiting from our existing investments,” said an executive at one of the funds. 

Pension funds are also facing pressure to continue investing in traditional buyout funds to win co-investment deals to invest directly in portfolio companies at lower fees. They have also found it hard to compete with buyout firms for talent.

When markets are buoyant, private equity deals seem almost easy to pull off. But surviving downturns can be a brutal experience and outsourcing the stress to professionals can often be worth the cost. 

Job moves

• Freshfields has appointed 25 new partners worldwide, across its antitrust, competition and trade, dispute resolution, global transactions, people and reward, and tax practices.

• Sullivan & Cromwell has hired Lawrence Elbaum and Patrick Gadson from Vinson & Elkins. The pair will join the firm’s corporate governance practice later this month.

• Brunswick has hired Sharon Soderstrom as a senior adviser based in Washington, DC. She most recently served as chief of staff to former Senate Republican leader Mitch McConnell.

Smart reads

Rollercoaster ride Audacious retail traders are making huge make-or-break bets on market swings as Trump’s tariffs roil markets, The Wall Street Journal writes.

A smart listen Matthew Freud, thought to be the inspiration behind Succession’s Tom Wambsgans, has spent decades as a PR adviser to the rich and powerful. He sat down with The News Agents podcast last week for a rare interview.

Fintech blow-up Major banks such as Citigroup and Natixis thought they were backing a $1bn fintech darling, Bloomberg writes. Turns out, many of the start-up’s supposed partners had never worked with the company. 

News round-up

Investor support for Goldman bosses’ pay sinks to 9-year low (FT)

EU fines Apple and Meta total of €700mn for antitrust violations (FT)

Grant Thornton US goes global in private equity-backed buying spree (FT)

BT agrees deal to sell Italian business (FT)

Donald Trump to exempt carmakers from some US tariffs (FT)

ExxonMobil beats Occidental in US lithium race (FT)