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In today’s newsletter:
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The fascinating life of Harald McPike
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Revolut’s negotiations with SoftBank
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Atomico bucks the VC trend
The secretive billionaire and the Spac gone wrong
Harald McPike doesn’t like being taken for a ride.
That’s unless he’s being sent to the moon, a trip that was supposed to happen with a company called Space Adventures, until the $150mn agreement fell through in 2017.
McPike, a secretive billionaire who is the largest shareholder in London-based Starling Bank, sued the Northern Virginia company to get back his initial $7mn deposit. The two eventually settled but not before their time in court had revealed some of McPike’s fascinating back-story.
The Bahamas-based investor, who has fiercely guarded his private life, started making money as a blackjack player and at one point revealed in a deposition that he had probably been banned from more than 20 casinos for card counting.
McPike then got into currency trading, seemingly built a fortune from it and for a while lived on his yacht in the Bahamas. But he kept an interest in the gambling sector, which is how he happened to come across gaming investor Jason Ader when they both bought shares in UK group Playtech through their respective investment firms in 2018.
Three years later, Ader had another investment opportunity for McPike — his own special purpose acquisition company, which had just agreed a deal to take public a casino business in the Philippines owned by Japan’s Universal Entertainment.
It was still boom times for blank-cheque companies and McPike’s family office Rimu Capital decided to use $25mn to buy up shares and warrants in his Spac, 26 Capital Acquisition Corporation. What Rimu apparently didn’t know is that Ader was on the other side of that transaction, selling his own founder stake.
Now, Rimu has accused Ader of fraudulently inducing it into backing his Spac and alleged in a filing made last month in the Southern District of New York that Ader pocketed the cash it invested for his “own personal purposes”.
Ader, who called the claims “frivolous and without merit”, apparently needed the money because his mother had hired lawyers to help dispose of a $16mn stake in SpringOwl, her son’s investment firm, the lawsuit states.
The deal with Universal eventually fell through as the blank-cheque company boom deflated, and in September Ader was forced to liquidate his Spac and return capital to shareholders.
Under normal circumstances, the sponsor would lose pretty much all the money they put in the Spac but instead Ader ended up walking away with millions of dollars in profit by selling most of his founder stake in 26 Acquisition.
It gets us back to an important lesson for DD readers. Many Spac stocks didn’t go to the moon, just like McPike himself. Spac sponsors, however, certainly made out like bandits.
Revolut’s long road to a UK banking licence
Revolut has finally received some good news in its two-and-a-half-year bid for a UK banking licence.
The digital banking start-up has agreed to simplify its ownership structure with its largest investor SoftBank, the FT revealed on Tuesday.
For a business that has grown to become Britain’s most valuable fintech, that removes an obstacle in its mission to appease UK regulators.
Among the Bank of England’s conditions for granting the license was for Revolut to cut its six share classes down to one. The structure was the legacy of multiple funding rounds since it was founded in 2015.
But SoftBank wasn’t going to give up its perks for free.
The two groups have been locked in negotiations — internally codenamed “Project Swan” — for months, with SoftBank demanding stiff compensation for giving up its priority class of shares, according to three people familiar with the matter.
Like many UK challenger banks, Revolut has been tested by a slowdown in venture capital dealmaking.
Nik Storonsky, Revolut’s co-founder and a former Lehman Brothers derivatives trader, appealed directly to SoftBank founder Masayoshi Son six months ago to break the deadlock.
He argued that a licence was key to justifying its lofty valuation. Without it, the payments group can’t offer a full suite of lending services nor offer customers the security of the UK’s deposit insurance scheme.
Addressing its complex multi-tier share structure is only part of the equation, however.
Revolut has come under regulatory scrutiny over some of its recent audits. After being forced to issue qualified and late accounts for 2021, it admitted last month that its 2022 accounts would also be delayed.
It’s also in talks with the UK’s financial watchdog about failures that allegedly allowed as much as £1.7mn to be released from accounts flagged as suspicious by the UK’s National Crime Agency.
“As a global financial institution, we work closely with regulators around the world, ensuring that we maintain strong governance and compliance practices across our business,” the fintech said.
SoftBank win aside, Revolut’s recent hiccups raise a big question: is it actually ready to become a bank?
Atomico’s vision for a European start-up renaissance
Skype co-founder Niklas Zennström shook up the telecoms industry facilitating international calls online. Two decades later, he’s taking on another global superpower.
“Let’s break the [Silicon Valley] monopoly. We could build the same thing or even better in Europe,” he told the FT’s John Thornhill recently over yellowtail sashimi.
He’s putting his efforts behind those words. His venture capital firm Atomico has raised $1.1bn worth of funding to invest in start-ups — defying a broader slowdown in the tech industry.
The London-based group has raised fresh funds across its new venture and growth funds, according to US regulatory filings, nearing its goal of $1.35bn for both vehicles.
Meanwhile, European venture capital funding for start-ups has declined more than 60 per cent in the first half of this year compared with the same period in 2022, according to PitchBook research.
Since launching in 2006, Zennström’s firm has established itself as one of Europe’s most prolific tech investors, backing companies including buy-now-pay-later fintech Klarna and electric flying car start-up Lilium.
As Silicon Valley VCs such as Sequoia and Andreessen Horowitz push into Europe, the challenge will be not only to keep the money flowing but also to defend its territory.
Job moves
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Law firm Kirkland & Ellis has named 205 partners.
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Veteran European healthcare banker and dealmaker Michele Colocci is retiring from Morgan Stanley at the end of the year, according to an internal memo seen by DD. Colocci joined Morgan Stanley in 2004 as a managing director. He left for JPMorgan Chase in 2017 before returning in 2019.
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Goldman Sachs veteran Chris Kojima has become the latest high-profile banker to leave the firm. He’s set to join private equity firm General Atlantic as a senior adviser.
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Covington has promoted 13 lawyers to partnership.
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Clifford Chance named Jason Ewart as a partner in its US leveraged finance group, based in New York. He joins from Latham & Watkins.
Smart reads
Who is Sam Altman? The OpenAI chief is advancing artificial intelligence while also warning of its dangers. New York Magazine examines the morals of the man straddling one of the world’s most pressing ethical debates.
Slam dunk scoops True NBA fans know that one of the biggest rivalries in basketball is happening off-court: ESPN’s Adrian Wojnarowski and his former protégé, The Athletic’s Shams Charania, The Washington Post reports.
Notes on a scandal The FT has compiled a helpful explainer for who’s who at the trial of FTX founder Sam Bankman-Fried.
News round-up
FTX founder Sam Bankman-Fried in court as jury selection begins (FT)
Eli Lilly to buy cancer specialist Point for $1.4bn (FT)
Brookfield swoops for UK wind farms in $1bn deal (FT)
PNC Bank buys $16.6bn capital commitment portfolio from Signature Bridge Bank (Reuters)
Indian ports operator JSW Infrastructure shares jump 30% in debut (FT)
Krispy Kreme puts Insomnia Cookies brand up for sale as it doubles down on doughnuts (CNBC)
Billionaire hedge fund founder Izzy Englander bought Paul Allen’s French villa (Bloomberg)
Read the full article here