The Underwriting Read online

  While at HBS, Nick wrote the business plan for ApplyYourself, which would completely disrupt the university application market by forecasting a user’s likelihood to get into the various top programs around the country. The company would start with the Ivy League + Stanford, like Facebook had, then grow to all universities and, eventually, create prediction algorithms for the job market, too.

  When Nick had shown the business plan to Phil Dalton, however, Phil had suggested Nick should instead apply to the open chief financial officer position at Hook. Nick had been devastated: he was ready to be an entrepreneur, not the CFO of a company started by someone younger than him who hadn’t even gone to business school.

  But when Nick had had his first success in failing (all good entrepreneurs had at least one failure) by not raising his one and a half million, he’d remembered that adaptability was another core component of entrepreneurial success, and so adjusted his definition of prestige to confidently accept the CFO role, along with a 0.5 percent equity stake in Hook.

  When Hook had started to take off last spring, growing to over five hundred million users and capturing international media attention, Nick had had a profound moment of faith in the universe’s plan for him.

  That plan, he knew, would make him a person who had real impact on a global scale, and he could feel in his veins that he was on the precipice of becoming one of the world’s great leaders.

  Nick took a deep breath and collected himself, glancing down at his pecs admiringly. The CrossFit package he’d bought on Groupon last month was really paying off, equipping him to be at his best when magazines started photographing him for covers. He traced the line forming around his shoulder muscle with satisfaction and plopped to the ground to do ten push-ups, just for good measure.

  It was six thirty in the morning, but Nick was wide awake as he punched the button on his Nespresso machine to make a forte, sprinkling organic cassia cinnamon into it in order to regulate his glucose levels, a trick he’d learned from The 4-Hour Body. He checked his iPhone to see if Grace had texted since he had last checked ten minutes ago, and told himself to relax when he saw she still hadn’t: she was a hot girl and had a right to play it cool, and he was a cool guy who could roll with that.

  Still, he wished he could tell her what a big deal he was about to make happen—to see her face when she realized what kind of guy she was dating. But the deal would have to stay strictly confidential until the S-1, a hundred-page legal document detailing the investment opportunity, was filed with the Securities and Exchange Commission, and that would take months. He made a note to book a table at Gary Danko every Friday in May to celebrate.

  He finished the espresso and put the mug in the dishwasher, wiping the handle of the machine with a Lysol cleansing pad to remove his finger smudge from its stainless steel finish. He checked his iPhone one more time—nothing—and zipped his Dalton Henley–branded fleece vest as he headed out the door to make the short walk to Hook’s headquarters.

  This was his favorite hour of the workday: the engineers didn’t clear out of the office until the early morning hours, and the HR staff didn’t get in until around ten, so for now the pristine, just-constructed glass office on San Francisco’s Embarcadero was all his own.

  He held his hand to the state-of-the-art security sensor outside the building’s entrance and took the elevator to the sixth floor. He crossed the main floor where the computer programmers sat; it was cluttered with stuffed animals and colorful plastic balls that had spilled from the ball pit in the corner. Next to it, a life-sized gorilla doubled for a helium machine, which the engineers used to fill managers’ offices with balloons on their birthdays, and, more often, to get high.

  Everything about this space made Nick anxious. Converting it into an acceptably professional workspace was the first thing he was going to do with the IPO proceeds. He didn’t care what the engineers had to say about it.

  He reached his corner office and relaxed, embracing the purity of his pristine personal space.

  “Hey.”

  Nick looked up, startled, at Josh’s form in the doorway. “Oh, hi.” He took a moment to process. “What are you doing here?”

  “I was coding,” Josh said. The bags under his eyes were dark and heavy and his head twitched, tilting ever so slightly to the right and straight again. “Lost track of time.”

  “Nice.” Nick smiled affirmatively. Another lesson he’d learned from Phil Dalton was to always encourage engineers when they got lost in their coding. You may not understand what they’re doing, but great things come out of those late nights, Phil had said, and Nick had written it in the Moleskine notebook he carried with him to write down wise advice.

  “I need you for a meeting at eleven on Friday,” Josh announced, turning to leave.

  “What for?”

  Josh turned back and his head twitched again.

  Nick had never figured out what set off the Hook founder’s twitch, but he’d learned to ignore it. If anything, Josh’s quirks just meant Hook would need a different face for all the press that was going to happen when the company went public, and Nick was humbly willing to accept that role. There was a tradition at HBS where all the MBAs put ten dollars in a pot to give to the first person in the class who got his pencil drawing on the cover of the Wall Street Journal, and Nick realized with confidence that it was going to be him. Take that, Stephen Hartley. Who’s the coolest guy in school now?

  “L.Cecil is coming in,” Josh said without further explanation.

  “What?” Nick sat forward. “Why is L.Cecil—”

  “They’re taking us public,” Josh said. “And they’re coming in Friday.”

  “What are you talking ab—” Nick started, shaking his head. “You don’t make those decisions, Josh. I’m Hook’s chief financial officer and that is a financial decision.”

  Josh stared at him. “It’s my company.”

  “It’s partly your company.” They had talked about this before. “You have a responsibility to your invest—” He stopped himself, remembering that the IPO was what he wanted, and feeling like this was one of those times when he was fighting for the sake of winning, something he’d gotten negative feedback for in business school. He said slowly, calmly, “There’s a process, Josh. And, as CFO, I should be in charge of that process.”

  “I know,” Josh said, “I don’t want anything more to do with it.”

  “I mean, there is a process for picking a bank,” Nick said. “You have to do a bake-off and then banks pitch you and you select based on—”

  “Why?” Josh’s eyes bored into Nick’s. Nick felt his face flush.

  “Because—” he started. They couldn’t just skip the bake-off. Banks had to suck up to them. “Even if you could, L.Cecil is a terrible choice. Have you seen the news? They’re under investigation for trading—”

  “I know,” Josh cut him off, his head twitching. “That’s what makes them a good choice.”

  “What?” Nick squinted. L.Cecil hadn’t even made his list of bake-off participants. “How can you possibly think that?”

  “They’re desperate for business. They need us.” Josh stared at Nick; he was irritated that he had to explain his decision. “Always put yourself in the power seat, Nick. Don’t they teach you that in business school?”

  Nick’s blood boiled. It was bad enough when Josh was arrogant about computer things, but business decisions were Nick’s domain.

  “Actually, at HBS we—” Nick protested.

  “The guy I’ve hired has nothing to do with the scandal anyway.”

  “What do you mean ‘the guy’ you hired? You don’t just—”

  “Todd Kent. I met him two years ago at CES,” Josh said. “He’s running the whole thing.”

  Nick’s voice caught in his throat. “Todd Kent? Todd Kent is the coverage banker you picked?”

  “Do you know him?
” Josh studied Nick’s face.

  “We went to school together.” Nick’s head started to pound. “Undergrad, not business school. He didn’t go to business school. I’m sure he couldn’t have gotten in.” He said it automatically, spitefully.

  Josh smirked. “Good. You can catch up at the meeting.”

  Nick watched a ball from the mess outside roll into his office as Josh left. He picked it up and crushed it in his hand before hurling it back at the empty room.

  TODD

  WEDNESDAY, MARCH 5; NEW YORK, NEW YORK

  “You screw this up and we’re fucked.” Larry’s neck was pulsing like a pit bull’s.

  “I know, man. I totally get it.”

  “I’m not talking you fucked. I could give a shit about your year-end.” Larry’s voice loosened a tiny bit at the power he had over Todd’s bonus, but then wound up again when he remembered getting cut out of a deal in favor of his junior employee. “I’m talking about me getting fucked—about this group—about this division—fuck, this whole fucking bank.” Larry paused to take a breath before starting in again. “Jesus fucking Christ. These fucking Silicon Valley fucking idiots.” Todd was silent. “Get out of my office before I cut off your cock.”

  Todd concealed a laugh as he shut the door. Poor guy.

  By the time Todd had gotten to the twenty-seventh floor this morning, where he sat with the rest of the Technology, Media & Telecom group, he was confident that Larry had to be cut out of the Hook IPO. Josh was right: Todd Kent was the man to lead this underwriting, not just because he was a great banker, but because he carried the cachet the app company needed to really convince the markets of its fourteen-billion-dollar valuation. No matter how much experience Larry had leading deals, he was old and going through a divorce resulting from his wife’s discovery of his porn addiction. Definitely not the brand Hook was going for.

  Todd walked proudly across the floor, carrying a confident smirk so that everyone who turned—and everyone did turn—knew that Todd had come out on top of whatever was behind the muffled shouting they’d just overheard in Larry’s office.

  “What’d you do to set him off?” Kal Taggar, the other senior VP in the group, asked without looking up as Todd took a seat at his cubicle in the block of six.

  “You know Hook?”

  “Obviously. Why?” he said to his computer screen, where he was filling in his NCAA tournament bracket.

  “They’re going public.” Todd paused, anticipating Kal’s reaction to the punch line. “And Josh Hart wants me to lead the deal.”

  Kal turned in his seat, his jaw hanging. “What do you mean, Josh Hart wants you to ‘lead the deal’?”

  “I mean he wants me to be in charge of it—no bake-off, I pick the team. Only caveat is no ‘slick dicks,’” Todd said in air quotes.

  “You mean no Larry?” Kal laughed. Todd nodded. “Holy shit,” Kal said with a mix of resentment and respect. “You fucking bastard.”

  Todd grinned. His phone rang and he picked it up merrily. “Todd Kent.”

  He sat up a little straighter when he heard the voice on the other end.

  “Todd, it’s Harvey.” There was only one Harvey in L.Cecil: Harvey Tate. The seventy-year-old executive had once led the most important investment banking deals on Wall Street. Had once led being the operative words. Under the banner of a senior vice chairman title, he now spent his time dispensing clichéd wisdom and taking credit for deals he had nothing to do with from his massive corner office on the forty-second floor.

  “Harvey, it’s great to hear from you.” Todd rolled his eyes and mouthed Harvey Tate to Kal, who watched eagerly.

  “I heard about the deal and wanted to congratulate you,” Harvey said.

  “Thank you, sir.” Todd was surprised but impressed that senior management agreed it was a good thing for a young guy to be leading this IPO.

  “I’ve got a few ideas. Why don’t you come up to my office and we can discuss?”

  Todd hesitated. He had less than thirty-six hours to pull together a team, a work plan and contract; he didn’t have time to pander to Harvey Tate. “Sure,” he said, “I’ll reach out to your assistant to find a time next week.” Harvey was old: maybe he’d forget.

  “Ten o’clock work for you?”

  Todd’s jaw set in irritation. He was also supposed to meet his trainer, Morgan, at eleven, for a workout he desperately needed to clear his brain for all of said work. “Sure,” he heard himself say, wishing for the thousandth time his mother hadn’t instilled him with such good etiquette. Life would be so much easier if he were an asshole.

  “Great. See you in an hour.”

  “Looking forward to it.” Todd hung up the phone. “Fuck.”

  “What?” Kal leaned in. When a man worked sixteen hours a day, six days a week, in a cubicle that smelled like the revolving ethnicity of last night’s takeout, gossip was like Vicodin. And Todd had just become the best dealer in the firm.

  “Fucking Harvey Tate wants to be my mentor.”

  “Ha! The perks of being a big deal, man,” Kal said sarcastically.

  Neha Patel, the group’s overly eager second-year analyst, appeared at his desk, looking down at a stack of papers in her hands, speaking with her standard Adderall-amped speed. “Here’s the deck you asked for. I put in an extra section showing historical earnings reports for similar media companies, and I printed out all my assumptions. The only thing I think we need to discuss is this part about—”

  “Whoa, whoa, whoa.” Todd blinked. “Slow down, hot rod. I haven’t had my coffee yet.”

  “Do you want me to go get you one?” she asked automatically, looking up over her glasses. She had a line of dried spittle on her chin, evidently unnoticed since she returned to her desk from the nap room. Most analysts pulled two all-nighters a week, but Neha averaged two non-all-nighters a week in her unbridled drive to be the best analyst in L.Cecil’s history.

  “No, Neha,” he said, “it’s fine. What is this for?”

  “It’s the Viacom pitch you asked me to put together.” Her voice sounded like a tape on perpetual fast-forward.

  He looked at the deck: he didn’t need this for another three weeks, if ever.

  “Were you up all night working on this?”

  “I took two forty-eight-minute naps,” she said. “As long as you don’t hit fifty-five minutes you don’t go into REM sleep so you don’t actually get that tired.”

  “When was the last time you slept at home?”

  “Last Friday.” Neha said it without any hint it was odd. This was exactly the attitude one wanted in an analyst.

  “Do you want to come to California?” he asked the girl.

  “What?”

  “I’m taking Hook—the dating app company—public. Do you have the bandwidth to be the analyst?”

  Neha’s spittle-flecked jaw dropped. Her face was round and dotted with acne; she definitely didn’t wear makeup and had never been introduced to a pair of tweezers. “You mean the biggest privately owned company in Silicon Valley? The one backed by Dalton Henley Venture Partners with five hundred million users and a two hundred fifty percent quarterly growth rate?”

  Todd looked at her: all she cared about was the financials—she probably had never even used the app. This was also exactly what one wanted in an analyst. “That’s the one,” Todd said.

  “Are you kidding? Of course I want to work on it!” The thought sank in and she got more animated. “I mean, I’ll work my butt off. I mean, thank you. Thank you so much for the opportunity.”

  “Sure thing.” Todd smiled, her enthusiasm making him feel benevolent. “I need you to drop everything else and pull together as much information as you can tonight, as well as an outline for a work plan. We fly Friday morning.”

  “Yes, done! I’ll get going right now!” She scrambled back to her desk, like a thre
e-year-old who’d just been given a new Lego set.

  Todd turned back to his computer, and noticed Kal still looking at him. “What?”

  “You dick,” Kal said. “You’re taking our best analyst, too?”

  “Sorry, bud.” Todd grinned. “You bring in a 1.8-billion-dollar deal and I promise we can draw straws for her.”

  “Whatever.”

  “Hey, what’s an eight percent fee on 1.8 billion?” Todd mused aloud at what the firm was going to make on the deal. “And what’s-his-face that brought in Catalyst last year made, what, a five-mil bonus? His deal was only half that—”

  Kal threw a pen at him. Todd laughed. He could already feel the five million in his bank account.

  “Here,” he said, handing Kal his Equinox card as he stood to go to his meeting with Harvey. “Take my training session. Morgan’s boobs’ll cheer you up.” Todd patted Kal’s shoulder as he moved past.

  The twenty-seventh floor was crowded with loud-talking investment bankers. Analysts and associates, the lowest-ranking employees, sat crammed at three long tables in the center of the room, each appointed a double-monitor computer and a Bloomberg terminal. On either side of the analyst desks were stacks of six cubicles, where VPs sat. Managing directors were rewarded for decades of servitude to the firm with small, glass-enclosed offices on the building’s perimeter, hogging all the sunlight.

  As he walked to the elevator, Todd played the game where he counted the number of people who blushed when he passed: men got half a point, hot women got two. From desk-to-elevator, Todd collected eight points, which was a 72 percent hit rate. Or maybe it was 81 percent. Sonja was a maybe—it was hard to tell when Indian people were blushing.

  The elevator doors opened onto Chad Horton, a fat, pink-shirted trader, and Tara Taylor, a VP in Equity Capital Markets, looking down at her BlackBerry.

  “Hey, buddy! Heard the big news,” Chad said and punched Todd’s shoulder. Tara didn’t say anything, engrossed in whatever she was reading on the device in her hands.

  “Shh . . . not too loud. Don’t want Tara’s people to start fighting over which of them gets to be on the team,” Todd said.