Bill Ackman’s IPO needs some profound love

One thing on Musk to start: Tesla chief executive Elon Musk said he will seek board approval to invest $5bn in his artificial intelligence start-up xAI, potentially further entwining his network of tech companies.

In today’s newsletter:

• Bill Ackman’s potentially not-so-big IPO

• Revolut secures its banking licence

• The future for US antitrust

The ‘leap of faith’ for Bill Ackman’s IPO

Billionaire Bill Ackman is receiving a tough lesson on managing investors’ expectations.

The public offering for his US investment fund Pershing Square USA was initially expected to fetch as much as $25bn in investments.

But now Ackman expects that figure to land somewhere between $2.5bn-$4bn — as much as a 90 per cent drop from the initial target.

In a private letter sent on Wednesday to investors of his Pershing Square holding company, Ackman implored potential backers to commit their money now. (The banks leading the listing include Citigroup, UBS, Bank of America and Jefferies.)

In an unusual move, Pershing Square distanced itself from Ackman’s comments by disclaiming the letter in a regulatory filing. (Read more about that from Alphaville’s Robin Wigglesworth.)

Ackman’s been a busy man. Aside from his prolific political postings on social media platform X, he’s spent the past two weeks on an IPO roadshow in which he’s had more than 150 meetings.

Ackman is in part betting on retail investors to show up, anticipating them to be a “huge source of after-market demand”. (No doubt he thinks his social media “notoriety” would attract some of these regular traders.)

But how much money will retail investors actually plough into the Pershing Square stock, especially before it lists?

And one of the more surprising lines: Ackman admits investing in the listing requires a “significant leap of faith” that this “closed-end company will trade at a premium” after it lists, when “very few in history have done so”.

So, where will Ackman’s IPO ultimately land next week? DD’s taking bets.

Revolut gets its licence, at last

More than three years after it first applied for a banking licence in the UK, the big day has finally arrived for Revolut.

On Thursday, the UK’s most valuable fintech announced it had secured the sought-after permission after a long tussle between regulators and the company over questions about its operations and internal controls.

The licence will not only bolster expansion plans but should also help support the company’s valuation, which could reach up to $45bn if Revolut can pull off a planned sale of existing shares, the FT reports in a deep dive this morning.

If the company hits that new target — as DD’s Ivan Levingston and the FT’s Akila Quinio previously scooped — it would make Revolut a contender for the title of the UK’s third-most-valuable bank. It was last valued at $33bn in 2021.

While securing a UK banking licence typically takes a year, Revolut’s application was stalled by a series of setbacks including the departure of senior executives, accounting problems and concerns about its ownership structure.

Revolut’s leaders have privately concluded that it was a mistake not to apply for the licence when the business was much smaller, according to current and former staff.

The approval paves the way for Revolut to challenge the UK’s biggest domestic banks, allowing it to offer full banking services, including mortgages.

In the UK, a priority would be attracting more deposits by paying interest to customers, according to a person familiar with the plans. This will help fund customer loans.

At Revolut’s Canary Wharf headquarters, neon signs exhort staff to “get shit done”. Now they can.

Is time up for the world’s most-feared regulator?

Tough antitrust policy has been a hallmark of President Joe Biden’s administration, largely thanks to his no-holds-barred Federal Trade Commission chair Lina Khan.

Khan’s agency sued to block Microsoft’s $75bn acquisition of game maker Activision Blizzard, and Nvidia’s proposed multibillion-dollar deal to buy Arm. Even when Khan hasn’t directly intercepted a deal, the fear alone that she will has killed big potential tie-ups.

A case in point came recently when talks for Google to buy start-up Wiz for $23bn unravelled. (Board members on both sides were reportedly concerned it wouldn’t get past regulators.)

Khan’s record at the helm of the FTC has given Wall Street dealmakers pause for thought with an election a few months away. While many may favour a laissez-faire candidate at the ballot box, they now have to factor in a Republican vice-presidential candidate who leans populist.

With Kamala Harris running for president and JD Vance on the Republican ticket, M&A bankers and advisers are trying to read the tea leaves on what either administration would mean for dealmaking.

In a bit of a plot twist, some of them see Harris as potentially more moderate than Vance, an economic populist who could double down on antitrust policies spearheaded by Biden’s trustbusters.

In his speech at the Republican National Convention last week, Vance was blunt: “We’re done, ladies and gentlemen, catering to Wall Street. We’ll commit to the working man,” he said.

LinkedIn co-founder Reid Hoffman said in an interview with CNN that he thought Harris was “much more of the pro-business candidate than Trump and Vance”. But he also said that he hopes Harris, if elected, ousts Khan.

One top dealmaker agreed with Hoffman’s take: “While I’m reluctant to say this, implementing JD Vance’s policies would actually make Wall Street long for the return of Lina Khan.”

Job moves

• Centrica board chair Scott Wheway is stepping down from the role and will be replaced by Kevin O’Byrne starting in December. O’Byrne was chief financial officer of J Sainsbury until 2023.

• Perella Weinberg has promoted William Glass, Alexandra Gottschalk, Sam Tanzer and Rebekah Weissburg to partners in the US.

• Intuit has appointed Forrest Norrod to its board of directors. He is the executive vice-president and general manager of AMD and previously worked at Dell.

• Tebbs Capital, an event-driven equity consulting firm advising hedge funds and institutional investors, launched in July. Based in Ontario, it focuses on M&A and special situations.

Smart reads

Error-riddled Citi’s flawed loan reports — and subsequent multimillion-dollar fine — show how Jane Fraser is struggling to resolve chronic issues plaguing the bank, the FT reveals.

‘Texas miracle’ Hundreds of corporations have been drawn to Texas as a result of its low-tax, light-touch approach, the FT reports. But how long can its popularity last?

Debt fights European heavyweights Patrick Drahi and Paul Coulson’s messy debt fights have led many money managers to swear off dealing with dominant individuals, Bloomberg reports.

News round-up

Murdochs split as legal battle looms over control of family trust (FT)

Apollo strikes £2.7bn deal for UK parcel group Evri (FT)

Strong debut for cold storage company listing could signal recovery for US IPOs (FT)

Elon Musk to seek Tesla board approval for $5bn injection into xAI start-up (FT)

Uber and Lyft score victory in California gig economy case (FT)

GB Energy tie-up with Crown Estate raises questions about future of UK wind sector (FT)

Abu Dhabi’s Masdar beats Apollo to Spanish solar farm deal (FT)