Tech pushes for some di­ver­sity on Wall Street

High-tech turns to mi­nor­ity- and women-owned un­der­writ­ers “No­body’s just hand­ing out money,” says one firm

Bloomberg Businessweek (Europe) - - CONTENTS - −Laura Colby, with Ian King

On the prospec­tus for $7 bil­lion of In­tel bonds is­sued in July 2015, the top billing was un­sur­pris­ing: the bank­ing pow­er­houses Wells Fargo and Bank of Amer­ica. Then, in small print, came two lesser-known un­der­writ­ing firms:

Leben­thal & Co. and Wil­liams Cap­i­tal Group. Not ex­actly ti­tans of Wall Street. So what were they do­ing there?

The an­swer has some­thing to do with the push for di­ver­sity in Sil­i­con Val­ley. U.S. tech­nol­ogy com­pa­nies are mak­ing a point of giv­ing a piece of the un­der­writ­ing ac­tion—long dom­i­nated by mostly male, mostly white com­pa­nies—to firms owned by women and mi­nori­ties. The name Leben­thal, for years syn­ony­mous with mu­nic­i­pal bonds, dis­ap­peared from Wall Street more than a decade ago. Then Alexandra Leben­thal, the fam­ily scion, re­con­sti­tuted the 90-year-old busi­ness and po­si­tioned it as a top womenowned un­der­writer. Christo­pher Wil­liams, a for­mer Lehman Brothers and Jef­feries Group in­vest­ment banker, founded Wil­liams Cap­i­tal in 1994 and built it into one of the largest mi­nor­i­ty­owned un­der­writ­ers.

In­tel says it is “step­ping up ef­forts” to work with mi­nor­ity- and womenowned fi­nan­cial firms, ac­cord­ing to its web­site. Ap­ple turned to mi­nor­ity-and women-owned un­der­writ­ers for the first time last year.

“What we used to think of as mi­nor­ity groups are start­ing to feel their own eco­nomic power,” says Ron­ald Hill, a pro­fes­sor of mar­ket­ing and busi­ness law at Vil­lanova School of Busi­ness. “If you’re look­ing at growth, ig­nor­ing that puts you be­hind.” Oth­ers, how­ever, see the Sil­i­con Val­ley move mainly as pub­lic re­la­tions: Al­lo­cat­ing a tiny frac­tion of deals to the firms costs cor­po­ra­tions next to noth­ing. “It’s en­tirely cos­metic,” says Roy Smith, a pro­fes­sor of fi­nance at New York Univer­sity and a for­mer part­ner at Gold­man Sachs. “It’s a sign of good be­hav­ior.”

Ex­ec­u­tives at women- and mi­nor­i­ty­owned firms say they earn their fees by plac­ing se­cu­ri­ties with in­vestors the big boys of­ten over­look. They also say get­ting busi­ness is fiercely com­pet­i­tive. “No­body’s just hand­ing out money,” says David Jones, co-founder of CastleOak Se­cu­ri­ties, a black-owned firm in New York. “Maybe we get a look be­cause we’re a mi­nor­ity firm, but you don’t get re­peat busi­ness.”

Jones has been ex­pand­ing his fixed­in­come sales and trad­ing team, but he has no il­lu­sions about where CastleOak stands in the peck­ing or­der. “You can’t say we’re go­ing to be the next Gold­man Sachs,” he says.

On Wall Street, like else­where, it’s not al­ways clear who ben­e­fits from good in­ten­tions. CastleOak, for in­stance, is 45 per­cent-owned by Can­tor Fitzger­ald, whose top man­age­ment is made up of nine white men and one woman. A Can­tor spokes­woman says CastleOak has a sep­a­rate ad­vi­sory board of three peo­ple, all African Amer­i­can.

In 2015 the two dozen largest tech com­pa­nies is­sued $80.7 bil­lion in debt, ac­cord­ing to data com­piled by Bloomberg. Firms owned by women, mi­nori­ties, or veter­ans played a role in 11 of 14 deals, un­der­writ­ing from 1 per­cent to 6 per­cent of each.

Mi­crosoft hired a half-dozen mi­nor­ity firms, in­clud­ing CastleOak and Wil­liams Cap­i­tal, to un­der­write $65 mil­lion each of a re­cent $13 bil­lion is­sue.

Rain­bow PUSH Coali­tion, the lob­by­ing group led by the Rev­erend Jesse Jack­son Sr., has been prod­ding tech com­pa­nies to in­clude mi­nor­ity-owned firms in their un­der­writ­ing. Qual­comm, for one, heeded the group’s mes­sage. “Af­ter a thor­ough eval­u­a­tion, we de­cided it was a good op­por­tu­nity,” says Emily Kil­patrick, a spokes­woman for the wire­less equip­ment maker. Qual­comm is­sued $10 bil­lion in bonds in May. CastleOak and Drexel Hamil­ton, a vet­eran-owned firm, were among the un­der­writ­ers.

The bot­tom line Un­der­writ­ing firms run by women and mi­nori­ties are ben­e­fit­ing from a Sil­i­con Val­ley push for more di­ver­sity.

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