Greensill, Gupta, Trust & “skin in the game”

Another darling bites the dust

A lot has been made about the reasons behind the collapse of Greensill: the withdrawal of trade credit insurance by Bond & Credit, too much exposure to the GFG Alliance, allegations of all sorts around loans made to key decision makers and influencers, risk committees at Credit Suisse being overruled and so on and so forth.  The best places to find a concise summary of articles remain the usual suspects i.e.

Robert Smith and his colleagues at the FT https://www.ft.com/stream/1b922032-dfbe-4026-acf0-cc26be850f32

The entire team at Bloomberg https://www.bloomberg.com/search?query=greensill&sref=dg6kE46V

However, a surprisingly positive side effect of this whole saga was the discovery of this incredibly well researched website and blog. These guys really do their homework and we suggest that you check them out:

https://www.behindthebalancesheet.com/blog-1/greensill-revisited

At the end of the day, it all comes down to the oldest lesson in the book. Make sure you only lend money to, and invest in, somebody who has “skin in the game” and a lot to lose. 

Greensill went over its concentration limits because it could – after all, it was other people’s money! Lex has made his millions. Something tells me that notwithstanding the winding down of his precious paper unicorn, we aren’t going to see him at the local food bank. 

Sanjeev Gupta borrowed other people’s money from Greensill and went on a wild shopping spree, overpaying for demonstrably underperforming assets in the hope that the sum of parts would magically be greater than the whole. Even if it didn’t work (and it now hasn’t), he allegedly has enough salted away – the £4.5 million estate in Chepstow, the A$38 million Potts Point mansion and the recently purchased £38 million house  in Belgrave Square.

Even Credit Suisse played along. After all, allocating $10 billion of other peoples’ money into this merry-go-round whilst introducers allegedly got £12 million success fees window-dressed as loans (an absolutely amazing piece of investigative work by the superstars at behindthebalancesheet.com), risk managers got overruled and senior managers got great bonuses for creating an “innovative” product for their patsies…. oops! I mean key investors and very important clients – sorry, sorry! (On a serious note, it amazes us how private banks continue to get away with it).

Softbank put in $1.5 billion because…. you get the point. Take other people’s money – gamble it away and who knows, if the ball lands on the Straight then you get a 35:1 payout, take your performance fee and buy your G5. If it doesn’t land (and most times it won’t), no worries – no performance fee for you but you still get your management fee and that will help with the ski chalet in Verbier, thank you very much.

People continue to use your money to get rich and have nothing to lose when their gambles don’t work out.

Invest in someone you know, invest in someone you trust – at least you know they’ll give it everything and will fight tooth and nail to get the money back. And now, you can do it while having a frictionless secondary market. We’re working on getting you the liquidity (hey we just started!) but at least the possibility exists and as our platform grows, your liquidity will increase!

Check us out at: 

iHuddle – Co-Investments and Club Deals