Good evening, I'm William D. Cohan.

Welcome back to Dry Powder. Each week, I receive feedback from readers and sources about Wall Street's biggest characters and concerns. Today I'm opening my notebook to address questions about what Wall Street really thought about Elizabeth Holmes, the trouble with Softbank, and Tesla's new price target. Plus, in the spirit of Thanksgiving, I reflect on a few of the greatest Wall Street dealmakers of all time. Or at least those whom I've been lucky enough to observe up close. 

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Bill

Elizabeth Holmes, Softbank’s China Woes, and More Tesla Inanity

Plus: Giving thanks for some of the greatest Wall Street dealmakers of all time.

Each week, I receive feedback from readers and sources about Wall Street’s biggest characters and concerns. I’ll be engaging with some of those questions here—in addition to a few observations of my own.

The Elizabeth Holmes trial is reaching a momentous inflection point with her decision to testify. Just curious: When Theranos was the toast of Silicon Valley, what were your Wall Street sources saying? 

Holmes testified for about an hour on Friday afternoon, and her testimony is expected to continue into early next week. But, to be honest, it was years before more than a handful of people on Wall Street cared a whit about Elizabeth Holmes. It was only after she started appearing on the covers of Fortune (June 2014), Forbes (September 2015), Inc. (October 2015) and T: The New York Times Style Magazine (also in October 2015) and the valuation of Theranos kept ratcheting up and up and up, to $9 billion, that Wall Street began to take notice of the company in a big way. (Never underestimate Wall Street’s ability to get excited about a potentially hot I.P.O.; see WeWork.) 

Of course it all came crashing down that same October with the publication of The Wall Street Journal reporter John Carreyou’s front-page article, “A Prized Start-up’s Troubles.” The rest, as they say, is history. The arc of Theranos’ narrative on Wall Street lasted about 15 months, from June 2014 to October 2015. During that time, Holmes was a Wall Street darling, showered with capital and attention. 

The brief period of adulation looks foolish in retrospect, but you have to understand that few people on Wall Street ever take a critical view of a high-flying company, even when warning signs are strewn across the financial landscape. Wall Street thinks in terms of “wallets”—as in, how much in fees can be made from underwriting the debt or equity of a company, or how much money can be made raising venture capital for a company, or how much money can be made advising a company on its sale or on an acquisition or merger. “Oh, this Theranos is a total mess, I’m not going to get near it with a ten-foot pole,” said no one on Wall Street ever. The banker who says something like that gets fired because at the end of the year, he or she has no revenue on his or her ledger, which means there is no way to justify paying him or her a bonus, which means there is no reason to keep him or her around.

Ultimately, Wall Street is a very Darwinian business. Those that survive the longest generate boatloads of fees year in and year out. And the only way that happens is doing deals that close...

FOUR STORIES WE'RE TALKING ABOUT