Signs of the Times

I went to a dinner this past week for a well-known charity, an advocacy group. It was their annual "Wall Street dinner," run by hedge fund managers and private equity types. Top notch speaker, good food, good company. I had attended the dinner last year. The one difference: last year the room, at famous Cipriani's in midtown Manhattan, was absolutely packed to the rafters - they put tables in places that probably broke the fire codes. This year, tables comfortably spread out and no exits blocked. A visibly smaller crowd.

Another sign - a client who told me a year ago his meetings with potential investors in PIPE deals would end with requests for wire instructions to send money. These days, he says, the meeting ends with investors saying, "Thanks for inviting me, I'll get back to you."

Wall Street is hurting. Major layoffs are taking place at pretty much every brokerage house. The New York Times reported that these layoffs are more "stealth," being done a bit at a time rather than en masse. The M&A world was rocked by the subprime mess leading to tight credit for deals. That is only now beginning to thaw just a bit. The Dow is all over the place. The country is in a recession and real estate values are plunging in many areas.

However, in parts of the finance world, there is continued activity. In the RM world, we see no reduction in deal flow in my law firm. Quite the opposite in fact. There remain many growth companies around that can benefit from being publicly held. They are less concerned about today's market conditions and know that, as always, this down cycle will lead to an up cycle.

PIPEs took a brief pause in the first quarter, but public companies still need money, and they can only wait so long when their stock price dips before they need to raise the money no matter what, so sure enough we are now busier than ever representing investors and broker-dealers in PIPEs. SPACs have slowed slightly, but that appears to be more a function of the need to absorb the deals that are in the marketplace than any negative long term trend.

So it is difficult to watch friends at places like Bear Stearns get hurt. But anyone who has been through a down market knows (a) that it is inevitable and (b) this too shall pass. Next upturn, make sure to put something away for a rainy day. In the meantime, let's be pleased to be in an area of finance that, while it doesn't shoot for the moon when things are great, it also isn't as badly affected when things turn down.