🛑 Greensill Capital’s $40B disaster


March 19, 2021

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The NCAA men’s basketball tournament — AKA March Madness — tipped off last night. Good luck with your brackets… but we all know the real March madness is that it’s already the 19th of the month! Dafook is going on!?!

The big idea
Lex Greensill

Greensill Capital was headed for a $40B IPO before imploding. What happened?

Meet Lex Greensill.

He founded Greensill Capital to disrupt supply-chain finance, an industry that supports $7T in global trade activity.

As reported by the Wall Street Journal, Greensill — with a big investment from SoftBank — was potentially headed for a $40B IPO last year. Instead, it just declared bankruptcy, sending shock waves through global finance.

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First, what is supply-chain finance (SCF)?

Imagine you are a manufacturer that sells widgets to a car company (CarCo). Typically, you will give CarCo 90-120 days to pay off its goods invoice.

Waiting for money sucks, though.

Enter a supply-chain financier, usually big banks. Let’s say the invoice is $1k. The financier offers to buy it from you for $990 upfront and — when CarCo pays the bill later on — it profits $10.

This type of financing is low margin and reserved for big business

The JPMorgans of the world will do it as a way to upsell other services.

From a young age, Lex Greensill was obsessed with making SCF more accessible. He grew up on his family’s Australian melon farm and saw how long (sometimes 1yr+) it took his parents to turn crops into money.

After doing SCF lending at Morgan Stanley, he launched Greensill Capital in 2011 to create a platform that would make such financing available to more people.

To break into the industry, he cut corners…

… by giving lax lending terms and providing money to nontraditional clients (skyscraper builders, plane leasing companies).

His most controversial deals included:

  • Opaque loans to UK steel magnate Sanjeev Gupta
  • Self-dealing with other SoftBank portfolio companies

Greensill’s portfolio was filled with time bombs

It all imploded on March 1, when a required insurance policy lapsed and the insurer refused to renew it. A week later, Greensill declared the business insolvent.

Here are some of those taking the biggest Ls:

  • German citizens: 26 towns across Germany linked to a Greensill-owned bank may lose $300m+ in deposits.
  • SoftBank: After a scorching hot run of investments (Coupang, DoorDash), Masayoshi Son has another WeWork on his hands and will write down its $2B investment.
  • Citi: The global bank has assets in a $10B supply-chain fund related to Greensill frozen.

Regulators, investors, and borrowers are only now starting to dig through the mess (a coal company owned by West Virginia’s governor just sued).

Keep an eye on this space… there’s sure to be more news to come.

A sampling of WSJ headlines around the Greensill affair (Source: WSJ)

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Investing’s new whiz kid
Invstr app

Invstr raised $20m to make investing more social

Watch out, Robinhood — this one’s coming in hot. And sans GameStop baggage (*cue mental shudder*).

Meet Invstr: the investing app that teaches trading know-how.

It just raised a $20m Series A and recently crossed 1m+ users (same as another trading app, Public). In contrast, Robinhood has ~13m.

Not your normal investing platform

Invstr appeals to younger generations by tugging on these trends:

  • App-based: Consumers want to be self-directed and autonomous when it comes to investing.
  • Distrust of banks: Users prefer tech solutions as they don’t trust traditional financial institutions.
  • Socially based: Users want to interact and learn from each other.

A focus on financial literacy

Founder Kerim Derhalli, a former banker, saw an opportunity to create an investing platform that was both social and substantive, with:

  • Creative financial tools: The app’s Fantasy Finance stimulation teaches users to manage a $1m portfolio.
  • Banking and investing in one spot: AKA no more waiting 3+ days to transfer cash from an external bank account. Goodbye, slow death by ACH.
  • Detailed analytics: Subscribers in the premium version can view trading behavior and performance metrics.

Here’s to savvier trading. We wish you bull markets and low interest rates.

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SPONSORED

Here’s how to hedge against the crazy volatility of the stock market 

Real estate.

(Yes, it is that simple.)

When it comes to risk-reducing alternative investments, real estate is historically one of the best options because…

  1. It has historically beaten the stock market over the last 30 years
  2. It doesn’t let Reddit control it’s future

Unfortunately, it’s also one of the markets that’s largely inaccessible to anyone who’s not the “my pet horse has its own pet horse” type of rich.

Until now.

DiversyFund is making real estate investing available to everyone — and that’s a big deal. 

For as little as $500, you can invest in their Growth REIT right here.

That Real Estate Investment Trust puts your money towards a portfolio of high-performing real estate investments, without the need to dump 6- or 7-figures in.

DiversyFund’s Growth REIT also gets you…

Ready to get financially savvy in the new year? Check out DiversyFund:

Invest in the REIT →
#Fail
NYT building

“Hey, is the NYT Facebook cooking group in this building?” (Source: Angela Weiss / Getty Images)

What happened to the New York Times’ cooking community Facebook group?

Managing a Facebook group at scale is hard (we know 😉).

While we haven’t mastered it yet… there’s definitely one way NOT to do it.

Over at the New York Times…

… members of its Facebook group for cooking enthusiasts are roasting the New York Times over a half-baked plan to abandon the group.

Here’s a quick breakdown of the fiasco from reporter Erin Biba:

  • NYT’s Cooking Community Facebook group has ~77k members
  • The group was moderated by 4 NYT employees that had full-time jobs outside of moderation
  • As it turns out, managing a Facebook group is a huge undertaking

Rather than take the heat, the NYT is getting out of the kitchen, disassociating itself from the group and precipitating a free-for-all to see which members will take over.

Per our Ethan Brooks, the full NYT Cooking subscription is a ~$43m business. But when it comes to managing brand communities, there’s no such thing as a free lunch.

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The Hustle Says

Hear founders listen up: Hear from Metalab’s VP of Client Services, Co-founders of The Athletic and The Yes as they break down what it takes to run a business. Tune in to the Live event on Tuesday, March 23rd @ 2pm CST.*

Here’s the world’s shortest horror story: A stranger’s bare foot touching your thigh on a flight. We get our fix of plane and airport-related stories that make you go YIKES from Passenger Shaming. It’s the new true crime.

Getting overwhelmed by all your feeds? Try creating your own personal digest with Mailbrew. It condenses  everything you want to read into one easy, daily email update. Talk about efficient.*

Netflix stock is up 30,294% since Stock Advisor recommended it to members. If you missed that train, learn why we think you should hop on this one: Check out their 3 new Double Down picks for 2021.*

*This is a sponsored post.

Meme of the day
Goldman Sachs tweet

Goldman Sachs is in hot water after an internal survey of first-year analysts found that the SPAC boom over the past year has led to crushing 100-hour workweeks, per CNBC (with original reporting from Litquidity).

Somewhat ironically, the results of the survey were created in a PowerPoint presentation… the same ones that junior analysts spend countless hours adjusting the formatting on for investment banking pitches.

Shower Thoughts

  1. The things you pretend your pet says out loud in a human voice reveal a lot more about your own mental state than it does about theirs.
  2. Our brain is the most powerful computer in the world, and no one, not even the owners, have administrative access to it.
  3. Most people have trouble understanding how anyone could stay in an abusive relationship, but no one ever questions staying at a job they hate.
  4. Beds are human charging pads.
  5. The saying “surround yourself with positive people” didn’t age well.
via Reddit

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