Morning Coffee: Goldman Sachs and Morgan Stanley bankers might not have such a busy summer. Consultants fear the end of billable hours

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Perhaps it always seemed too good to be true. Three massive IPOs, all in the same sector, all within a few months of each other and all with the same advisors? This is the stuff of ECM bankers’ dreams, but with the news that OpenAI is considering postponing its IPO , the dream might be deferred. The stock market reaction – an immediate drop of 4% in the share prices of Goldman Sachs and Morgan Stanley – might be reasonably thought to be a bit overdone. Postponing a deal isn’t the same thing as cancelling it, and spreading out the IPO calendar a bit might actually make it easier to find investors, as well as easing the significant staffing problems . But bankers are quite paranoid about this sort of thing. Long experience has taught them that the world is a strange and surprising place, and that although postponing a deal isn’t literally the same thing as cancelling it, lots of things can happen in the meantime. The unofficial motto of equity capital markets is “git ‘er done”, and for good reason – it’s quite unusual for a postponed deal to end up getting completed on better terms rather than worse than those available when the decision to delay was taken. And there is more going on in the tech sector than just these two deals. Debt investors are beginning to worry about the sheer volume of capex that the sector needs to carry out, and while the SpaceX share price has so far stayed above its IPO level, its recent bond issue has performed disappointingly . Which raises the real worry that the market might be going into a risk-off mode, or at least that investors’ appetites for newly issued equities are not limitless. And that really could bring the party to something of a halt. Although the H1 revenue numbers are about as good as they could possibly be, they are slightly flattered by an easy base for comparison, which gets significantly tougher for Q3 and Q4. Not only that. Although the calendar for AI and datacentre deals is very strong, it might not be enough to carry industry revenues on its own. A material proportion of the private equity industry’s portfolio is in software-as-a-service companies which are at the most risk of being disrupted by AI. It’s hard to see those finding a welcome at the moment; many of them might end up being better income generators for the debt restructuring team than the equity capital markets team. When people were making bullish predictions earlier in the year, they were all based on the expectation that financial sponsors clients would come storming back to the IPO market. They can only do that if the public markets are ready to buy at a price that makes economic sense. So, while equity capital markets bankers are currently in that pleasant state of being rushed off their feet while counting their bonuses, there’s a growing tinge of worry. Let’s hope there isn’t a rush for last minute holiday bookings. Elsewhere, the proverbial wisdom might have it that “it’s not the hours you put in, it’s what you put into the hours”. But this isn’t true for lawyers, management consultants or other professional services firms who have historically charged everything on a “billable hours” model. Which is really problematic in a world in which automation and AI are speeding everything up – being able to do something in ten minutes which used to take two hours is great news for bankers, but for consultants it’s equivalent to a 90% price cut if you’re not careful. So, the industry is being forced to move to a pricing model based on results and fixed prices for a project. But that brings its own problems. Not least of which is that it means that if a project takes longer or requires more resources than expected, it’s going to be the consultant rather than the client who wears the cost. And this isn’t just true of the “billable hour”. Consultants will now have to keep careful track about how many AI credits they are ploughing into a project for which they’ve quoted a fixed price. Perhaps the new proverb will be “it’s not the tokens you put in, it’s what you put into the tokens”. Meanwhile ... The “sweet spot” on psychological tests used by some investment banks is to have about twice as many of the characteristics of a psychopath than the average member of society, but to be well short of the threshold that defines someone as actually a psychopath. (Financial News ) Whenever the weather gets hot, this argument returns – should it be socially acceptable for men to wear shorts in a business setting? (FT ) Arguments in banking can get quite heated, particularly when compliance issues are involved, but at Cathay Bank it seems that one of them may have escalated to a physical scuffle. (Bloomberg ) Vince La Padula was head of workplace solutions in JP Morgan’s wealth management business, but possibly better known for handling the estate planning and investment needs of one of its highest profile clients, one Mr James Dimon. Now he’s gone to be deputy head of the Internal Revenue Service. (NY Post ) Some people take high school sports very seriously indeed, like warehouse multimillionaire Eric Obrotka. His son had dreams of the NFL, so he financed a program for The First Academy in Orlando which cost millions of dollars and recruited players who were literally twice the size of the previous students. It all ended quite badly. (WSJ ) Ken Griffin takes sports seriously too, but has a somewhat more normal way to indulge his hobby. He is the biggest financial contributor to the contract for Mauricio Pochettino, the USA Mens National Team coach. Ken played soccer in high school and was apparently good enough to be on a team that finished second in the state. (Reuters )