Moelis Sees Growth As Bigger Banks Face ‘Unbelievable’ Regulation

Moelis Sees Growth As Bigger Banks Face ‘Unbelievable’ Regulation

In an interview with Bloomberg’s Cristina Alesci, Kenneth Moelis said he is fully aligned with investors – and not one asked why he was leaving money on the table – and said he sees growth as bigger banks face ‘unbelievable’ regulation.

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Moelis & Co. CEO: Fully Aligned With Investors

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Moelis on decision to decrease his offering:

“I thought it was a very good transaction. The market got very volatile. You have to price for where your comparables are and they all traded off at about 10%. We thought it was a very well executed deal and we wanted the stock to trade up. Look, my first question and my last question was, tell me a deal size and a price that our investors will make money”

Moelis on whether he will beat last year’s revenue:

“Based on our first quarter, I would be disappointed if we don’t, but I cannot give any projections. We would hope that the market stays strong and we are able to improve on what we’ve done.”

Moelis on what he is doing to reassure investors that this is not another The Blackstone Group L.P. (NYSE:BX) situation:

“67% of the stock is still held by employees. Nobody sold a share today. I think we priced it to go up. Our stock is trading well today. I think we have to perform.  We have to perform. And we intend to perform.”

Moelis on whether he is worried that it could be the top of the market:

“I cannot worry about the market.  Do I worry every day? I worry every day about the execution, our clients and our culture. I worry about the things I can control.

Moelis on whether it would have been better to be the only independent bank that is not public:

“In some ways, for the last five or six years it has been [an advantage], we have been able to grow without thinking about our earnings per shares. But I think there’s more growth in the future than the past. The regulatory pressure on the big financial conglomerate competitors is unbelievable. I’ve never seen such pressure on the larger competition than I’ve seen today. I think the talent will come out, and having a liquid tradable currency to attract them to come join us will be very helpful.”

Moelis on bankers wanting cash rather than stocks at the end of the day:

“Yes, but we want to give them stock because we want owners.  The worst thing you can have is a culture of ‘gimme cash and walk away.’ We want an ownership culture. We want our employees to be owners. 67% of the stock is owned by the managing directors. That is key to the culture.”

Moelis on whether it is nothing to do with the fact that it provides security for him and his partners:

“Our partners have been working at it for seven years and with very little liquidity. They have been getting stocks in the firm for seven years. This will attribute some liquidity to them, which they will have access to. It is great for them. And we can all move forward and focus on clients.”

Moelis on how he got investors to buy into this offering with the use of proceeds being a one-time payment to him and his partners:

“I think they want to be part of this business. I think the cycle is good for M&A. The secular wins. Our competitors will have some troubles. And I think they are buying into the future… Giving liquidity after seven years of non-liquidity, I think it is fine.”

Moelis on why someone should be buying when it looks like he is taking money off the table:

“I met with 50 institutions and not one asked me that question. I don’t know why they would be interested in it, because nobody asked it. They want to be part of our future. I did not get asked that question. I don’t think it is a worry.”

Moelis on what his plans are when an investor comes to him and says ‘you need to reduce your costs and not pay people as much on a cost revenue basis’:

“I will say, they are right alongside of me. I happen to be the largest owner and investor. What is in their interest is in my interest. I will say, we’re completely aligned here. 67% of the stock is held by the employee base. When I talked to our own employees, the great part is more owners than partners and employees. If we have to put that confidence up here, I think we will be talking to our own owners. It will be much easier.”

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