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Riot Blockchain, Inc. (RIOT) Q4 Earnings and Revenues Surpass Estimates

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How Masayoshi Son’s ‘Money Guy’ Lex Greensill Went From Hero to Zero

(Bloomberg) — In February 2020, SoftBank Group Corp.’s Masayoshi Son visited Indonesia, providing to take a position billions of {dollars} towards the event of a brand new capital metropolis. Lex Greensill, on the time a favourite of Son’s, was a part of the entourage.SoftBank had invested $1.5 billion in Greensill’s eponymous finance firm, however in a gathering with Indonesian president Joko Widodo, Son launched Greensill because the “cash man,” in accordance with native TV footage.One yr later, the cash man has turn into a cash pit. Greensill Capital collapsed in March in one of the crucial spectacular monetary blow-ups of current years, sending shock waves by way of a Swiss banking big, two of Japan’s largest corporations and a British tycoon’s industrial empire.Son has needed to write down his funding, making it among the many worst within the historical past of his Imaginative and prescient Fund, alongside the implosion of WeWork Cos., one other SoftBank portfolio firm. That’s unlikely to stop SoftBank from posting its strongest quarter on report, together with a revenue of greater than $30 billion on the Imaginative and prescient Fund, because of the IPO of South Korean e-commerce agency Coupang Inc. and a hovering valuation of Chinese language ride-hailing startup Didi Chuxing Expertise Co., in accordance with individuals with information of the matter. Nonetheless, the episode underscores the dangers of Son’s technique of taking huge fairness stakes in startups after which encouraging these portfolio firms to collaborate with one another.Spokespersons for SoftBank Group in Tokyo and Greensill Capital in London declined to remark.Son’s relationship with Greensill started haphazardly: A junior govt on the Imaginative and prescient Fund reached out searching for an introduction, individuals with information of the matter stated. By Might 2019, SoftBank had invested $800 million in Greensill. It put in a further $655 million that October.Quickly the 2 had been speaking usually, though SoftBank had investments in additional than 80 startups and Greensill was removed from the largest, in accordance with individuals near the executives. Son touted Greensill at SoftBank occasions for example of the cooperation he anticipated from his portfolio firms, the individuals stated.Greensill bought the identical star remedy as former WeWork Chief Government Officer Adam Neumann earlier than him and, extra just lately, Ritesh Agarwal, head of India’s Oyo Inns, which has since needed to retrench. A presentation at a 2019 SoftBank shareholders assembly featured images of the three males, figuring out them as synthetic intelligence entrepreneurs in “the largest revolution in human historical past.”Greensill, in flip, basked within the consideration, boasting about his conversations with the SoftBank founder, executives at his firm stated.“One of many nice issues about becoming a member of the SoftBank Imaginative and prescient Fund household hasn’t simply been the community, the capital and the recommendation, it’s really been having Masa as a associate and a mentor,” Greensill was quoted as saying on a now-deleted Imaginative and prescient Fund internet web page. “He has labored with us, and significantly with me, to consider our core enterprise and the way we are able to really take that core enterprise and deal with different inequalities and different challenges that exist within the international market.”Greensill was a key a part of what Son dubbed his “Cluster of No. 1’s” technique, taking non-controlling stakes on the planet’s main tech firms and inspiring them to cooperate. In principle, startups would faucet WeWork’s community of co-working areas or use Uber Applied sciences Inc. drivers for deliveries. Greensill’s position was to supply struggling SoftBank startups quick access to financing with out having to pledge onerous collateral.A former Morgan Stanley banker, Greensill, 44, based his agency in 2011, specializing in extending short-term loans secured in opposition to invoices. However a number of the financing supplied to SoftBank firms was based mostly on predicted future gross sales, not on precise invoices, individuals with information of the apply stated.The loans, securitized and became bond-like devices often known as notes, had been introduced to some buyers as backed by transactions, in accordance with advertising paperwork and other people accustomed to the matter. Buyers thought they had been getting short-term debt, the individuals stated.Most of the loans had been made by way of supply-chain funds at Credit score Suisse Group AG that attracted $10 billion from buyers. Among the many debtors had been SoftBank portfolio firms Oyo, cell software program agency Truthful Monetary Corp. and modular development startup Katerra Inc.SoftBank was additionally an investor within the Credit score Suisse funds, resulting in conflict-of-interest accusations in opposition to the Japanese agency. That sparked an inside evaluate on the Swiss financial institution, and SoftBank pulled $700 million out of the funds.“Having an organization inside Imaginative and prescient Fund that makes it straightforward for startups to get liquidity will not be a good suggestion,” Kirk Boodry, an analyst at Redex Analysis in Tokyo, informed Bloomberg Information. “Simple cash can confuse issues as a result of the suggestions will get muddled, and also you don’t know if you’re doing issues proper.” He known as the Greensill loans an instance of damaging synergies.“On the finish, no matter constructive synergies they get are in all probability going to be irrelevant,” he stated. “However the damaging one will come again to hang-out them.”It was seeking such synergies that Son had supplied to put money into Indonesia’s new capital on the island of Borneo and a brand new metropolis Crown Prince Mohammed bin Salman is constructing on Saudi Arabia’s Purple Coastline. It was Son’s dream that portfolio firms akin to Katerra, Oyo, ride-haling startups Ola and Seize and facial-recognition agency SenseTime Group, would win contracts. Greensill would assist present financing.Greensill’s identify stored cropping up in Imaginative and prescient Fund conferences and displays, in accordance with individuals accustomed to the matter. When managing companions challenged funding concepts introduced by deal groups, the questions would usually deal with liquidity, a standard downside for startups. These discussions usually led to Greensill, the individuals stated.However by March 2020, a month after the journey to Indonesia, the connection between Son and Greensill started to bitter. The pandemic was squeezing provide chains, and buyers pulled billions of {dollars} from the Credit score Suisse funds, Greensill’s largest supply of funding.Greensill turned to Son for capital, saying he may need to name within the financing he had supplied to SoftBank portfolio firms, in accordance with individuals with information of the conversations. Immediately, the weekly telephone calls got here to an finish.Colin Fan, the previous Deutsche Financial institution AG govt who managed the funding for the Imaginative and prescient Fund, stopped attending Greensill board conferences on the Savoy Lodge throughout the road from its London workplace.Fan wanted to deal with different investments, in accordance with an individual accustomed to the matter, and a spokesperson for the Imaginative and prescient Fund stated different SoftBank representatives remained energetic and shared their considerations with Greensill administration. However the two fund executives who continued to attend Greensill board conferences as observers principally took notes and didn’t ask many questions, in accordance with two individuals accustomed to the matter.That was the case whilst Greensill’s troubles escalated and one in all its insurers, an Australian unit of Tokio Marine Holdings Inc., informed the agency it wouldn’t renew protection on notes bought to buyers together with Credit score Suisse.In December 2020, with Greensill more and more determined for money, SoftBank invested a further $400 million within the finance firm, in change for canceling Katerra’s debt, so Greensill may redeem notes within the Credit score Suisse funds. It additionally put $200 million extra into the development firm.“After WeWork, SoftBank promised to not throw good cash after the unhealthy, however right here we’re once more,” stated Boodry, the analyst. “They knew there have been issues with Greensill, and so they nonetheless put more cash in. It’s virtually like they take the failure of those firms personally.”SoftBank owned about 25% of Greensill on the finish of final yr, in accordance with individuals accustomed to the matter. It’s now searching for $1.15 billion as a creditor of Greensill, which filed for insolvency within the U.Ok. on March 8.Fan, who additionally managed Imaginative and prescient Fund investments in Flexport Inc. and Truthful, each of which acquired financing from Greensill, stepped away from his position as a managing associate on the Imaginative and prescient Fund in January to turn into a senior adviser. The corporate didn’t give a purpose.In the meantime, Credit score Suisse is inspecting the position of govt board members together with CEO Thomas Gottstein as a part of its probe into dealings with the defunct lender. And, in Germany, regulators have requested prosecutors to look at how Greensill’s Bremen-based financial institution booked property tied to British industrialist Sanjeev Gupta. Greensill has stated it sought the recommendation of regulation corporations earlier than classifying its property and has complied with requests from German regulators.As for Indonesia, Son has but to observe by way of on his promise to put money into the brand new capital. He has backed the merger of e-commerce supplier Tokopedia, a SoftBank portfolio firm, with one other Indonesian startup, ride-hailing big Gojek, doubtlessly reserving a wholesome revenue.For extra articles like this, please go to us at bloomberg.comSubscribe now to remain forward with essentially the most trusted enterprise information supply.©2021 Bloomberg L.P.


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