Morning Coffee: Goldman Sachs & Morgan Stanley bankers need to decide who their friends are. Traders are about to curse the blockchain

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This is something of a “champagne problem”, but if you're a banker in Goldman Sachs or Morgan Stanley’s tech coverage and equity capital markets (ECM) teams, it could be a difficult summer. Fresh from occupying lead roles on the SpaceX IPO, bankers at each firm now have lead roles in the coming IPOs of both OpenAI and Anthropic . This duplication will require some delicate handling. - It’s quite unusual for two large companies in the same industry to go public at the same time, and very unusual for them to choose the same two lead banks to advise them on doing so. 💥Follow us on WhatsApp for news alerts. 💥 While this is a credit to the dominance of GS and MS in the AI space (and perhaps quite embarrassing for other banks), it creates a potential conflict of interest which will have to be managed carefully. You cannot be a banker who is working with both OpenAI and Anthropic simultaneously. The Wall Street Journal reports that Goldman and Morgan are therefore creating entirely separate “deal teams” for each transaction, to prevent leakage of confidential information between the two. They have even eliminated bankers who worked on the SpaceX deal from the preparation of paperwork for OpenAI and Anthropic, because SpaceX has an AI business that could be seen as a competitor to both. All of this creates issues. The political problems are likely to start right away at the staffing stage. The two deal teams at Goldman and Morgan Stanley will be in competition for the best associates, VPs and even analysts to work with them, and some managing director (MD) egos may need to be smoothed over if they can’t get their first choices. Even the names given to the teams will need a bit of choosing, because bankers are quite sensitive souls, and will resist anything which implies one team has priority over another. When the actual transaction starts, competition is likely to get even more intense. Although the capital markets and advisory teams will split in two, it isn’t really practical to do the same thing with trading, so both teams will need to liaise with the same people on the sales desks to collect investor feedback. The opportunities for bad feeling and conflict are huge simply from the possibility of perception of unequal treatment here, let alone any worries about information leaks. And that’s just the internal problems. Deals this big usually require a huge syndicate of other banks, further down the list among the “passive bookrunners” and “co-managers” . Many of these will be too small to maintain separate teams, and lots won’t want to go to the effort for the lower fees they’ll be getting. It’s likely that as much as possible, GS and MS will try to recruit different partners for the two deals, but there’s bound to be some overlap, which creates another possible conduit for information. All in all, the second half of the year is likely to be a nightmare for the “deal captains” and their compliance departments. An extremely exciting, highly profitable nightmare, but one nonetheless. The only advice it’s possible to give is that everyone involved in the competing teams should remember that one day these transactions will be in the past and everyone will be friends again – there’s no need to get too competitive with your colleagues. Elsewhere, Nathanaël Cohen of crypto market making firm SH Digital says that “most [conventional equity and bond traders] will curse the blockchain until the end of their days ”. He is used to a world of 24/7 trading, and although Wall Street has always resisted this, the “tokenisation” of conventional assets is beginning to encroach on their market share, providing opportunities to trade stocks and bonds out of hours. If prices are being made without a break, then someone is going to need to be available to pick up the phone – which has serious consequences for weekends, holidays and even family events like weddings. It sounds horrible, and it’s understandable that traders are determined to defend the convention of “the market close” for as long as they can. But maybe they don’t have too much to be scared of? Even in crypto markets, weekend trading volume is pretty thin and most of the activity takes place during the day. Forex traders have let their positions “follow the sun” for ages, and bar the occasional episode when big moves happen in thin Asian markets, it doesn’t seem to cause too much damage. According to Cohen, “it’s the constant possibility of something that can happen that lingers in the air” that causes the stress. But that’s true even if the market is closed. Meanwhile ... Jonathan Gold has moved from Morgan Stanley (where he was head of UK & Ireland FIG) to Bank of America, to be co-head of EMEA FIG with James Gill. (Financial News ) If you are lucky enough to work for an extremely profitable proprietary trading firm, some bad news; the UK tax authorities treat your share of the profits as liable to income tax rather than corporation tax. Alex Gerko’s XTX has lost a case, but it looks like it has wider applications. (FT ) “Talent is global, but opportunity is not.” A profile of Igor Tuchinsky and WorldQuant, and its extraordinary quest to find really good mathematicians living in out-of-the-way places. If you’re a top PhD and Math Olympian and don’t fancy moving to the USA from Montevideo or Budapest, it’s an employer of choice. (Rupak Ghose ) Sam Bankman-Fried is writing a prison memoir and a vegan cookbook, and continues to play computer games while he’s on the phone. He is hoping to get a Presidential pardon, but for the moment things look pretty bleak. (Intelligencer ) Daniel Vorcaro, founder of Banco Master (which was liquidated last November) is keeping his mouth shut while in jail, to the annoyance of the Brazilian police, but the alleged relief of a lot of other people. (El Pais ) Lloyds of London is a strange entity, in which there are separately managed pools of capital, but some central risk management and guarantees. It’s a lot like a pod shop. (FT Alphaville ) Apparently if you got an invite to Peter Thiel’s exclusive conference, there were sessions on things like ““How’s Your Sex Life?,” “Build-a-Cult” and “Navigating WWIII”. If you didn’t, there’s always Davos. (NY Post ) Follow me on X . Follow me on LinkedIn. Have a confidential story, tip, or comment you’d like to share? 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