Trung Phan Profile picture
Sep 12, 2021 25 tweets 10 min read Read on X
This is Lex Greensill.

He founded Greensill Capital to disrupt "supply-chain finance", a $500B industry supporting global trade.

A year ago, Greensill was headed for a $30B+ IPO. Now, it's worth $0 (oh, and Softbank was a big backer).

Here's the story 🧵
1/ First, what is supply chain finance (SCF)?

Let's say you supply widgets to a car company. Typically, you give CarCo 90-120 days to pay its invoice for the widgets.

Waiting for the money sucks, though. You have working capital needs that the CarCo money could help cover.
2/ Let's say your invoice to CarCo is $1000.

A bank or finance firm will offer you this SCF deal:

1⃣ Advance you $990
2⃣ Take on the credit risk of CarCo's bill owing
3⃣ At 90-120 days, the bank/financier collects $1000 from CarCo and profits $10
3/ According to McKinsey, here is the opportunity:

◻️ Global trade in goods is $17T
◻️ Of that, there is a $1.5T trade finance gap (eg people that want it but can't get it)
◻️ Supply chain finance platforms can facilitate trade in $500B of buyer-approved invoices
4/ Enter Lex Greensill.

His interest in supply chain finance tracks back to childhood, growing up on his father's Australian sugarcane farm.

Per the origin story: Greensill saw his parents send crop to grocers and wait 1yr+ for payment.

"There had to be a better way," he said.
5/ Lex worked on the farm but moved to the UK in 2001, where he worked in SCF for Morgan Stanley and Citi.

In 2011, he launched Greensill Capital with the pitch to "give small players access to big bank services" -- like SCF -- by creating a new tech lending platform.
6/ SCF is a low-margin business. Banks (Citi, JPM) will do it so they can up-sell other services.

Conversely, Greensill claimed to use -- ugh -- "AI" to improve underwriting (e.g. forecast sales) and expand the potential market of borrowers.

(Spoiler Alert: there was no AI).
7/ Greensill was an expert networker, building a rolodex of important UK business and political players.

In the mid-2010s, he was a "senior advisor" to Prime Minister David Cameron who -- as a private citizen in 2018 -- received millions worth of Greensill equity.
8/ Using the "AI" pitch and vast network, Greensill tapped funding pools desperate to earn yield:

◻️ Credit Suisse launched 4 supply-chain finance funds ($10B total) linked to Greensill's lending
◻️ He acquired a German bank (renamed Greensill Bank). It had $300m+ in deposits.
9/ The highest profile funding was Softbank's Masayoshi Son, who called Greensill his "money guy" and "AI entrepreneur".

In 2019, Son put $1.5B into Greensill at a $4B valuation. The funds were meant to build AI tech, but was used to prop up a failing business.

"Why?" you ask.
10/ Greensill's underwriting was trash:

1⃣It lent to businesses that typically don't get SCF (skyscraper builders, plane leasing)
2⃣Overused a method called "future receivables loan" (FRL), in which a financier lends money against future cash flows that are *projected to happen*
11/ FRLs are meant for conservative (and guaranteed) borrowers, like a government infrastructure project.

Instead of deploying "AI", Greensill was handing out billions in FRLs with nothing more than a potential customer list (or less).
12/ Industrialist Sanjeev Gupta received $5B+ in Greensill loans.

Gupta's steel empire (GFC Alliance, 35k employees) has long been dogged by opaque funding and fuzzy accounting.

While Goldman Sachs and Macquarie wouldn't lend to Gupta, he was Greensill's top client.
13/ Jim Justice -- the Governor of West Virginia -- got $700m+ of loans for his coal empire (Bluestone Resources) based on future customers.

Absurdly, Greensill itself gave Bluestone the list of "potential" clients to justify the loan (which Justice had to personally guarantee).
14/ Per Bloomberg, Greensill "took money from investors looking for safety and put it in risky loans"

Through it all, he was LIVING: the paper billionaire owned 4 private jets (aka"Lex Air") and happily received the Most Excellent Order of the British Empire from Prince Charles.
15/ In early 2020, Credit Suisse floated a memo saying Greensill could IPO at $30B.

COVID pummelled Sanjeev Gupta's business, though. As Greensill's biggest client, it had big ripple effects.

By March 2021, Greensill declared bankruptcy after 1 of its insurers pulled coverage:
16/ Former PM David Cameron may have walked w/ $5m+ (salary + share sales) on 2.5yrs of part-time work for Greensill.

He even lobbied for Greensill to receive COVID relief (it didn't).

While no rules were broken, UK officials want to tighten post-office rules for politicians.
17/ In March, PE firm Apollo tried buying Greensill's "technology", valuing it at $50m+. Turns out it was all 3rd party tools and pretty much worthless (Apollo walked away).

Here are other updates:
18/ Lex Greensill has mostly avoided government investigators. But optics are awful and there are clear parallels to WeWork/Theranos:

◻️ Charismatic founder
◻️ Too much $ desperate for return
◻️ New "innovation" disrupts old industry
◻️ Rope in powerful players to sell the story
19/ If you enjoyed that, I write threads breaking down tech and business 1-2x a week.

Def follow @TrungTPhan to catch them in your feed.

Here's another story of financial disaster that involves Credit Suisse:
20/ Sources

BBC on Cameron: bbc.com/news/uk-politi…

WSJ: wsj.com/articles/behin…

McKinsey market breakdown: mckinsey.com/~/media/mckins…

Recent Bloombgerg profile: bloomberg.com/news/features/…
21/ We discuss interesting topics like this once a week (with a healthy dose of dumb jokes) on the Not Investment Advice (NIA) podcast.

Check it here🔗 linktr.ee/notinvestmenta…
24/ Worth flagging that there are numerous outstanding Greensill-related lawsuits charging fraud including:

◻️ Bluestone suing Greensill (Greensill's US arm declared bankruptcy last month to halt lawsuit)
◻️ Credit Suisse is suing Gupta
◻️ A pension fund is suing Credit Suisse

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More from @TrungTPhan

Jul 28
The invention of bánh mì is a combination of climate, trade and urban layout of Saigon in late-19th century designed by French colonist.

When the French captured the area in 1859, most economic activity in the region took place along the Saigon river.

The population built makeshift homes tightly bundled by the river banks. Outgrowth from this eventually lead to narrow alleyways between many buildings that is trademark of the city (the Khmer named the region Prey Nokor then French renamed it Saigon and then it was renamed to Ho Chi Minh City in 1976 after end of Vietnam War).

Over decades, the French created European street grids and built wide Paris-type boulevards in the city to funnel commerce to larger markets (also make the city easier to administer).

It was at these markets that French baguettes were introduced and traded.

Bánh mì bread is known for being flaky and crispy on the outside while fluffier on inside (so god damn good).

Two features of Saigon helped create this texture:

▫️Climate: The heat and humidity in Southeast Asia leads dough to ferment faster, which creates air pockets in bread (light and fluffy).

▫️Ingredient: Wide availability of rice meant locals added rice flour to wheat flour imports (which were quite expensive). Rice flour is more resistant to moisture and creates a drier, crispier crust.

Fast forward to the 1930s: the French-designed street layout is largely complete. Now, the city centre has wide boulevards intersected by countless narrow alleyways.

The design was ideal for street vendor carts. These businesses were inspired by shophosue of colonial architecture to sell all types of goods as chaotic traffic rushed by.

Vietnam has some of the most slapping rice and soup dishes, but many people on the move in the mornings wanted something more portable and edible by hand.

Bánh mì was traditionally upper class fare but it met the need for on-the-go food.

Just fill the bread with some Vietnamese ingredients (braised pork, pickled vegetable, Vietnamese coriander, chilies) along with French goodies (pate).

Pair it with cà phê sữa đá (aka coffee with condensed milk aka caffeinated crack) and you’re laughing.Image
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Haven’t lived in Saigon for 10+ years but ate a banh mi every other day when I did.

While there, I also sold a comedy script to Fox (pitch: “The Fugitive meets Harold & Kumar set in Southeast Asia”).

It never got made but fun story to retell: readtrung.com/p/im-making-a-…
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Feb 4
Norway discovered off-shore oil in 1969. It launched its sovereign wealth fund with $300m in 1996.

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Norway’s SWF roughly is 65% equity, 25% bond, 10% real estate/infra (all global).

Unsurprisingly, its largest holding is Apple ($47B, or 1.4% of the entire company).

On a related note, here is my deep dive podcast on Steve Jobs and making of the iPhone: podcasts.apple.com/us/podcast/caf…
Norway spared no expense on its SWF website. Look at that carousel!
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