Public Investment Fund’s desert mirage | USAEMALL.com

One massive fundraise to start: Boeing has clinched one of the largest stock sales in history, raising $21.1bn as its new executive team races to shore up its balance sheet and avoid its credit rating being downgraded to junk.

In today’s newsletter:

• Riyadh’s big investment week

• What happened to Topgolf?

• HSBC insists bank is not breaking up

Global financial titans descend on Riyadh

The world’s top leaders in finance filled Riyadh this week for the country’s eighth edition of its high-profile Future Investment Initiative conference — otherwise known as “Davos in the Desert”.

The chief executives of Goldman Sachs, Morgan Stanley, Citigroup, Apollo, Blackstone and BlackRock all are headlining the conference at the ornate King Abdulaziz International Conference Center.

But the real action was happening at the Ritz-Carlton next door, where investors and advisers mingled over $15 cappuccinos and talked deals.

The subtext is clear: heavyweights of the global economy are in Saudi Arabia hoping to cash in on the kingdom’s oil wealth and plans to diversify its economy.

But a bit of cold water was poured on their hopes at the start of the conference, when Yasir al-Rumayyan, the governor of Saudi Arabia’s $930bn Public Investment Fund, said the sovereign wealth fund was pivoting to focus on domestic spending.

The answer came as a response to a question from Carlyle Group co-founder David Rubenstein, who jokingly asked, “Is the biggest problem with being the governor of the PIF fund that you don’t have enough requests for money?”

Rumayyan responded the fund has changed over the years and PIF has cut its target for overseas spending from a high of 30 per cent in 2020, to a range between 18 per cent to 20 per cent, the FT’s Ahmed Al Omran and DD’s Ivan Levingston reported from Riyadh.

That means a pullback from overseas deals that has included the likes of Uber, SoftBank’s Vision Fund, the Newcastle United football club and Lucid Group.

But it hardly damped the mood of attendees at the conference, which also included appearances by the likes of SoftBank boss Masayoshi Son and Elon Musk (the latter by video).

Many of the world’s top dealmakers had combined their visit with other stops in the “neighbourhood” with the Middle East an increasingly important destination for finance.

Indeed, the PIF governor said that in absolute terms overseas spending will still grow as it aims for $2tn in assets by 2030.

“We’re more focused on the domestic economy and we’ve been achieving and doing so many big things,” Rumayyan said.

Topgolf veers off course

Adebayo Ogunlesi, John Lundgren, Thomas Dundon and Michael Klein would make quite the foursome on the links. Unfortunately, each instead has made a cameo in one of the great single sports business blow-ups in recent memory.

In 2020, Callaway, the venerable golf equipment maker, spent $2bn in stock to take control of Topgolf, a fast-growing gamified driving range operator.

Topgolf is less about sports and more about selling cocktails and chicken wings, DD’s Sujeet Indap explains. (For even more background: read this 2016 Topgolf primer, also from Sujeet.)

Four years later, the round is abruptly over.

Topgolf and Callaway are splitting up as the entire company has only a $2bn equity valuation even as the latter’s golf club business remains in decent shape. The hospitality business proved too capital intensive for Callaway shareholders.

Ogunlesi, the private equity billionaire (member of Deepdale and Shinnecock Hills Golf Club) and Lundgren, the former chief executive of Stanley Black & Decker, are longtime Callaway board members.

Dundon, a Texas consumer finance tycoon (member of Trinity Forest Golf Club) is a Topgolf investor. Klein, a Wall Street dealmaker, tried to buy Topgolf through a Spac in 2020 but, thankfully for him, got turned down.

Callaway will hope that after the company streamlines back to its core business, its valuation will rally in line with arch-rival Acushnet.

As a standalone company on the public markets, Topgolf will have to show that its real estate and capex heavy business can become a cash machine.

As for this formidable quad: they may just be hoping to get back to thinking about golf as strictly pleasure, and not business.

HSBC: we’re not breaking up

When the new chief executive of one of the world’s biggest banks opens an earnings call by stressing that he isn’t breaking up the company, you know things have taken an interesting turn.

That’s what Georges Elhedery, the boss of HSBC, did on Tuesday, DD’s Kaye Wiggins and Ortenca Aliaj report. “I want to be clear that this does not signal in any way preparation or intention to split the group,” he said of his plans for a major overhaul of the UK-based lender.

He was talking about restructuring plans he had announced just days earlier. They involve setting up the bank’s Hong Kong business and its UK ringfenced bank as separate units.

The scheme also divides its other businesses into “eastern markets” in Asia-Pacific and the Middle East and “western markets” in the UK, continental Europe and the Americas.

For those who had been following HSBC’s saga with its largest shareholder Ping An, this sounded a lot like the Chinese insurer’s calls to break up the bank and spin off its Asia division.

The restructuring plan had also caused confusion among some clients, who started asking whether the bank would still be serving them globally.

And it led Rajiv Jain, founder of one of HSBC’s top-20 shareholders GQG Partners, to say it was becoming difficult for the bank to keep straddling China and the west. Instead, the “direction” for the bank “should really be an eventual break-up”.

All of this culminated in a strenuous denial from Elhedery, who said that splitting the bank isn’t part of his plans, even as tensions continue between Beijing and the west.

“There is no geopolitical reason why we have done this, and there is no intent or preparation whatsoever for it being more than just a simpler and faster way to deliver to our customers,” he said.

Really, he insisted, it’s about something much simpler: cutting out an expensive and inefficient layer of senior bankers. “There will inevitably be [a] reduction of senior roles in the organisation,” he said. And it will happen “in a matter of months”.

Job moves

• FII Institute chief executive Richard Attias, who has previously produced events such as the World Economic Forum’s annual meeting in Davos and the Clinton Global Initiative, is stepping down from the role. 

• Rothschild & Co has hired Antoine de Guillenchmidt for its equity markets solutions business. He joins from Goldman Sachs and will begin the new role in January.

• Vivendi’s supervisory board chair Yannick Bolloré, the son of French billionaire Vincent Bolloré, will be chair of three of the group’s four units in its proposed split later this year.

Smart reads

Snap revival Snapchat creator Evan Spiegel has grand ambitions for the company’s augmented reality and online advertising, the FT reports. But it’s running into stiff competition from arch-rival Meta.

Mortgage-backed For the first time since the great financial crisis, what were supposed to be top-rated commercial mortgage-backed securities are notching losses, Bloomberg writes.

Book dealer Glenn Horowitz amassed a fortune by selling the archives of famed writers such as Vladimir Nabokov, The New Yorker writes. The 69-year-old’s tactics, however, are controversial.

News round-up

PwC profits fall in Asia after scandals in China and Australia (FT)

Peter Thiel’s Founders Fund leads $500mn fundraising for Crusoe Energy (FT)

Vivendi activist urges shareholders to oppose break-up plan (FT)

Adani Enterprises profit rockets on growing airports and green business (FT)

Pfizer CEO defends performance after Starboard activist criticism (FT)

S&P downgrades Thames Water debt further into ‘junk’ territory (FT)

US and Taiwan set for talks to end double taxation for companies (FT)

Elon Musk’s xAI in talks to raise funding valuing it at $40bn (WSJ)