Last week we focused on how Goldman Sachs is facing some difficulties with its losses in digital bank, Marcus. This has been aggravated by bad earnings from the investment banking division at the Wall Street giant. A similar story across many of the major banks and financial institutions on Wall Street since last week. Apart from one company. Moelis & Co. Despite difficult results last quarter, the investment bank continues to spend and invest. We looked into why the firm is spending so much on talent and tech.
Founded in 2007 by former President of UBS Investment Bank Ken Moelis, Moelis & Co. is best described as a boutique investment bank. Its not quite the same as the others, and nor is the way the firm is run.
Today Moelis & Co. shares trade on NYSE. The stocks best days were in late 2022, a year in which the firm reported revenues of $970.2 million, down 38% from the previous year. 2023 hasn’t started well either. In the first quarter 2023 the firm reported revenues of $185.3 million, down also by 38% from the same period in 2022.
On first glance Moelis & Co. gives the impression of a company that is shrinking. At least on paper. The ‘Technicals’ on TradingView suggest ‘buy’, the analysts suggest ‘sell’. In the meantime the company has been on something of a hiring spree. Adding at least thirteen new managing directors across the business over the last few quarters. Moelis & Co. is also involved with blockchain. Heavily involved.
If you feel a little confused. Worry not. #DisruptionBanking have been keeping an eye on Moelis & Co. Especially as the firm is declaring second quarter 2023 results today.
Who is Moelis & Co. Hiring?
Ken Moelis, Chairman and Chief Executive Officer of Moelis & Co. talks about talent a lot. He also stated in April that “we are positioning ourselves to be an even stronger partner [to our clients] in the next cycle.”
There are a lot of reasons that Moelis is able to release a statement like this. To look to the future with confidence is a compelling characteristic in a leader. Is there any substance behind it though?
In March Bloomberg reported that Moelis & Co. hired at least seven senior managing directors from SVB Securities. One of the largest ‘poachings’ of an investment banking team in recent years. SVB Securities and Silicon Valley Bank are related, but SVB Securities might be going through an MBO, to separate itself from the group. Losing top talent from the firm would have affected the MBO process, or the price.
The other managing directors being recruited come from Goldman Sachs, Eaton Partners, Deutsche Bank, Guggenheim Securities, Campbell Lutyens, and several from Morgan Stanley.
On the topic of disruption. Almost exactly a year ago, in July 2022, Moelis & Co. showed its ambition by announcing the launch of its Global Blockchain Group. The firm appointed Lou Kerner as Senior Advisor to the new Blockchain Group. Our readers may be more familiar with Lou Kerner as the founder of Crypto Mondays.
What we Know about Ken Moelis and Moelis & Co.
Ken Moelis is often quoted talking about disruption. On the topic of COVID Moelis famously let 20 of his bankers work from Florida. If talent wants to be based in Florida, then “that’s where we’ll support them,” he said.
As for blockchain, Moelis has been an investor in blockchain firm Paxos since 2020.
In the many reports available about the company Moelis leads there are further reasons to be encouraged.
The investment bank is debt-free. There is a ‘fortress balance sheet’ mentality to the way that the finances are run. And the firm doesn’t seem to have any issues at all attracting top talent.
One last important thing is worth considering. Who the shareholders of Moelis & Co. are. These include Vanguard, BlackRock, AllianceBernstein, JP Morgan to name but a few. In fact, the majority of shares in Moelis & Co. are held by the leading institutional investors.
Second Quarter Results 2023 – What Were They?
“Our strategic investments in talent over the last year better position us to provide innovative solutions to clients in the largest and most disruptive areas of the global economy,” Ken Moelis said in today’s earnings call.
This quarter revenues were $179.9 million as compared with $245.5 million in the second quarter of 2022. During the first half of 2023 the revenues were $367.7 million, down 31% from the first half of 2022.
It will be interesting to watch whether Ken Moelis bet on innovation and talent will pay off.
Author: Andy Samu
See Also:
Silicon Valley Bank: An Extinction Event for StartUps | Disruption Banking
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How does Capula Investment Management produce consistent returns? | Disruption Banking
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
