Bloomberg (Bloomberg) -- Credit Suisse Group AG executives ignored warnings from colleagues about troubled steel tycoon Sanjeev Gupta as they channeled $1.2 billion of client funds to his businesses, according to people familiar with the matter.Bankers in Credit Suisse’s commodity trade-finance unit blacklisted Gupta’s Liberty Commodities Ltd. in 2016 because they suspected some of its deals weren’t legitimate, the people said. When they learned about two years later that the bank was lending to his companies through a suite of investment funds, which eventually grew to $10 billion, they flagged their worries to leaders in compliance and the division that housed the loans, one of the people said.The disclosure that Credit Suisse may have put clients at risk despite internal concerns over Gupta’s businesses adds a new twist to the debacle stemming from the March implosion of Greensill Capital, the finance firm at the center of the three-way relationship.Investigations, LawsuitsThe U.K. Serious Fraud Office is now investigating Gupta’s group of companies for suspected fraud, including in its financing deals with Greensill, according to a May 14 statement. Credit Suisse has sued to force Gupta’s Liberty Commodities into insolvency and has since shut the funds that made the loans and launched an internal investigation. Investors are staring at losses as the bank confronts embarrassing lawsuits.“We are currently focusing our efforts on recovering our investors’ money,” Will Bowen, a spokesman for Credit Suisse in London, said in an emailed statement, adding that the bank’s internal probe will focus on “all of the issues” linked to the funds. “We are committed to learning the lessons and will share the relevant lessons learnt at the appropriate time.”Andrew Mitchell, a spokesman for the Gupta Family Group Alliance, or GFG Alliance, a collective of businesses linked to Gupta including Liberty Commodities, denied any wrongdoing.The Greensill saga represents just one of the two disasters that rocked Credit Suisse in the first half of 2021. Since Greensill began unraveling, the bank has announced a $5.5 billion hit from the blowup at Archegos Capital Management.ApologiesFormer Chairman Urs Rohner apologized to shareholders and his successor, Antonio Horta-Osorio, who arrived at the end of April, has promised a sweeping strategy review.Chief Executive Officer Thomas Gottstein, who was head of the division that oversaw trade finance, wasn’t aware of the internal concerns about Gupta that had prompted the bank to cut him off, according to a person familiar with the matter.Employees at the trade-finance unit, which lends money for the buying and selling of commodities, cut ties with Gupta in 2016 after becoming skeptical toward his Liberty Commodities, the people said. They distrusted the documents the company provided, triggering doubts about its transactions, they said. In one example reported by Bloomberg, the company had presented another bank with what seemed to be duplicate shipping receipts. A spokesman for Gupta has denied any wrongdoing.Banking TiesLiberty Commodities pledged assets to Credit Suisse as security for borrowings in 2013 but by early 2016, all such commitments had been extinguished, indicating that the financing relationship had ceased, U.K. Companies House filings show. And while Gupta’s company listed the Swiss bank as one of its lenders in its 2014 annual report, it didn’t in the following year’s report, which is dated May 2016, according to the filings.Their counterparts at other banks, including Macquarie Group Ltd. and Sberbank PJSC, halted trading with Liberty Commodities around the same time because of similar concerns; Goldman Sachs Group Inc. also stopped in 2016, Bloomberg has reported.Nevertheless, executives at Credit Suisse’s asset-management division -- which creates investment products for clients and charges a fee for overseeing them -- began arranging a suite of funds focused on supply-chain finance in 2017. The entities bought securitized loans packaged by Greensill, a firm created by Australian businessman Lex Greensill. Much of the debts were linked to Gupta’s businesses.WarningsOfficials at the commodity trade-finance unit were concerned when they found out about the funds’ links to Gupta and took their fears to Thomas Grotzer, general counsel for the bank’s Swiss division. They also warned Luc Mathys and Lukas Haas, the bankers who helped oversee the trades at the asset-management unit.Grotzer was promoted last month to interim global head of compliance at Credit Suisse. He didn’t respond to requests for comment. Mathys, head of fixed-income at the asset-management division, and Haas, a portfolio manager, were put on temporary leave in March. Neither responded to requests for comment.The bank pushed ahead with the funds and marketed them to investors as being made up of short-term debt secured on invoices, assets considered so safe that Credit Suisse gave the largest vehicle its lowest rating for risk. Yet part of the loans were linked to mere possible future revenues.Other parts of the bank continued working with Gupta as well. Credit Suisse’s investment bankers were due to lead an initial public offering for Liberty’s U.S. steel arm, which was ultimately pulled, according to a statement from the company. Gupta also announced that the Swiss bank would finance his planned acquisition of Thyssenkrupp AG’s steel unit, which fell apart earlier this year.Credit Suisse has so far recouped about $5.9 billion of the $10 billion in these supply-chain funds, but it remains unclear how much will be returned ultimately to investors. Loans to Gupta’s businesses are among a batch of debts that are the “principal sources of valuation uncertainty,” the bank said earlier this month.Liberty Commodities’s external legal advisors investigated “alleged rumors concerning the paperwork” it used in 2019, according to Mitchell, the spokesman for GFG Alliance. They found no evidence to substantiate the rumors, nor was the company “ever subject to further complaints or proceedings,” he said.“LCL has ongoing banking relationships with separate financial institutions,” Mitchell said, referring to Liberty Commodities. “The trade-finance market has been hugely challenging for all but the very largest commodities traders in recent years. Nevertheless, no financial institution has been left out of pocket as a result of lending money to LCL. On the contrary, they have received substantial commercial returns.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.<doc-sep>Bloomberg (Bloomberg) -- Credit Suisse Group AG executives ignored warnings from colleagues about troubled steel tycoon Sanjeev Gupta as they channeled $1.2 billion of client funds to his businesses, according to people familiar with the matter.Bankers in Credit Suisse’s commodity trade-finance unit blacklisted Gupta’s Liberty Commodities Ltd. in 2016 because they suspected some of its deals weren’t legitimate, the people said. When they learned about two years later that the bank was lending to his companies through a suite of investment funds, which eventually grew to $10 billion, they flagged their worries to leaders in compliance and the division that housed the loans, one of the people said.The disclosure that Credit Suisse may have put clients at risk despite internal concerns over Gupta’s businesses adds a new twist to the debacle stemming from the March implosion of Greensill Capital, the finance firm at the center of the three-way relationship.Investigations, LawsuitsThe U.K. Serious Fraud Office is now investigating Gupta’s group of companies for suspected fraud, including in its financing deals with Greensill, according to a May 14 statement. Credit Suisse has sued to force Gupta’s Liberty Commodities into insolvency and has since shut the funds that made the loans and launched an internal investigation. Investors are staring at losses as the bank confronts embarrassing lawsuits.“We are currently focusing our efforts on recovering our investors’ money,” Will Bowen, a spokesman for Credit Suisse in London, said in an emailed statement, adding that the bank’s internal probe will focus on “all of the issues” linked to the funds. “We are committed to learning the lessons and will share the relevant lessons learnt at the appropriate time.”Andrew Mitchell, a spokesman for the Gupta Family Group Alliance, or GFG Alliance, a collective of businesses linked to Gupta including Liberty Commodities, denied any wrongdoing.The Greensill saga represents just one of the two disasters that rocked Credit Suisse in the first half of 2021. Since Greensill began unraveling, the bank has announced a $5.5 billion hit from the blowup at Archegos Capital Management.ApologiesFormer Chairman Urs Rohner apologized to shareholders and his successor, Antonio Horta-Osorio, who arrived at the end of April, has promised a sweeping strategy review.Chief Executive Officer Thomas Gottstein, who was head of the division that oversaw trade finance, wasn’t aware of the internal concerns about Gupta that had prompted the bank to cut him off, according to a person familiar with the matter.Employees at the trade-finance unit, which lends money for the buying and selling of commodities, cut ties with Gupta in 2016 after becoming skeptical toward his Liberty Commodities, the people said. They distrusted the documents the company provided, triggering doubts about its transactions, they said. In one example reported by Bloomberg, the company had presented another bank with what seemed to be duplicate shipping receipts. A spokesman for Gupta has denied any wrongdoing.Banking TiesLiberty Commodities pledged assets to Credit Suisse as security for borrowings in 2013 but by early 2016, all such commitments had been extinguished, indicating that the financing relationship had ceased, U.K. Companies House filings show. And while Gupta’s company listed the Swiss bank as one of its lenders in its 2014 annual report, it didn’t in the following year’s report, which is dated May 2016, according to the filings.Their counterparts at other banks, including Macquarie Group Ltd. and Sberbank PJSC, halted trading with Liberty Commodities around the same time because of similar concerns; Goldman Sachs Group Inc. also stopped in 2016, Bloomberg has reported.Nevertheless, executives at Credit Suisse’s asset-management division -- which creates investment products for clients and charges a fee for overseeing them -- began arranging a suite of funds focused on supply-chain finance in 2017. The entities bought securitized loans packaged by Greensill, a firm created by Australian businessman Lex Greensill. Much of the debts were linked to Gupta’s businesses.WarningsOfficials at the commodity trade-finance unit were concerned when they found out about the funds’ links to Gupta and took their fears to Thomas Grotzer, general counsel for the bank’s Swiss division. They also warned Luc Mathys and Lukas Haas, the bankers who helped oversee the trades at the asset-management unit.Grotzer was promoted last month to interim global head of compliance at Credit Suisse. He didn’t respond to requests for comment. Mathys, head of fixed-income at the asset-management division, and Haas, a portfolio manager, were put on temporary leave in March. Neither responded to requests for comment.The bank pushed ahead with the funds and marketed them to investors as being made up of short-term debt secured on invoices, assets considered so safe that Credit Suisse gave the largest vehicle its lowest rating for risk. Yet part of the loans were linked to mere possible future revenues.Other parts of the bank continued working with Gupta as well. Credit Suisse’s investment bankers were due to lead an initial public offering for Liberty’s U.S. steel arm, which was ultimately pulled, according to a statement from the company. Gupta also announced that the Swiss bank would finance his planned acquisition of Thyssenkrupp AG’s steel unit, which fell apart earlier this year.Credit Suisse has so far recouped about $5.9 billion of the $10 billion in these supply-chain funds, but it remains unclear how much will be returned ultimately to investors. Loans to Gupta’s businesses are among a batch of debts that are the “principal sources of valuation uncertainty,” the bank said earlier this month.Liberty Commodities’s external legal advisors investigated “alleged rumors concerning the paperwork” it used in 2019, according to Mitchell, the spokesman for GFG Alliance. They found no evidence to substantiate the rumors, nor was the company “ever subject to further complaints or proceedings,” he said.“LCL has ongoing banking relationships with separate financial institutions,” Mitchell said, referring to Liberty Commodities. “The trade-finance market has been hugely challenging for all but the very largest commodities traders in recent years. Nevertheless, no financial institution has been left out of pocket as a result of lending money to LCL. On the contrary, they have received substantial commercial returns.”More stories like this are available on bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.<doc-sep>Photo : Spencer Platt ( Getty ) Rideshare unicorn Uber doesn’t do anything small. When it was in the game of raising money, it raised close to $25 billion. When it loses that money—and it does every single quarter—it loses it at astronomical burn rates. It finally debuted on the New York Stock Exchange today, in the middle of international trade uncertainty and following a massive, international strike by its own drivers, how’d it do? Advertisement According to University of Florida professor Jay Ritter, Uber’s 7.62 percent decline since hitting the NYSE makes it “bigger than first day dollar losses of any prior IPO in the U.S.” In terms of percentage losses, Uber’s dip doesn’t even scratch the surface of the worst IPOs. But the staggering valuation of the company makes it, in raw scale, “among the top 10 IPOs ever” including companies outside the U.S., Ritter told Gizmodo in a phone interview. That single digit decline resulted in an estimated $617 million paper losses. Consider also that Uber’s debut valuation of $76.5 billion was a considerable drop from the between $90 billion and $120 billion the company had been worth in some analysts estimation just a month earlier—one meant to stanch the forthcoming bleeding that had begun with competitor Lyft’s bellyflop IPO. This defensive position did little to keep Uber or its investors from taking on water within a single day of trading. According to one analyst, the company may be profitable by 2024, though its only real plan so far is to continue to screw workers and eventually replace them with unproven technology. As former CEO Travis Kalanick said in 2014, “the reason that Uber could be expensive is you’re not just paying for the car, you’re paying for the other dude in the car who’s driving.” Presently, investors are probably realizing that what they’re paying for is an unsustainable company so huge that its main justification for existing is sunk cost. [Rolfe Winkler]<doc-sep>Ouch. Yikes. Oof. Sigh. Those are some of the friendlier phrases I imagine came out of the mouths of bankers, investors, executives and really anyone who has been paying close attention to Uber’s road to the stock markets today when the company debuted on the New York Stock Exchange below its initial public offering price. The ride-hailing business (NYSE: UBER), previously valued at $72 billion by venture capitalists, priced its stock at $45 apiece for a valuation of $82.4 billion on Thursday. It began trading this morning at $42 apiece, only to close even lower at $41.57, or down 7.6% from its IPO price. Still, the IPO was successful enough for Uber. The business now has $8.1 billion on its balance sheet to invest in growth and, ideally, transform into a profitable business. Anyone who expected Uber to climb past $100 billion at its IPO is surely disappointed. And those who projected a valuation of some $120 billion, well, they’re probably feeling pretty dumb. Nonetheless, Uber’s new market cap makes its exit one of the most valuable in history, and represents a landmark event for tech, mobility and the gig economy at large. Where the stock will go from here, who knows. Lyft, as we’ve observed, has taken quite a hit since it completed an IPO in March. The Uber competitor is currently trading at a higher price than Uber: $51 per share with a market cap of about $14.6 billion. Its stock has fallen all week long, however, after the company posted losses of more than $1 billion in the first quarter of 2019.<doc-sep>
Uber's long-anticipated debut on public stock markets failed to live up to expectations on Friday, with the company's stock falling 7.6 percent during its first day of trading. As the closing bell rang, Uber's stock was worth $41.57, valuing the entire firm at $76 billion. Uber has suffered from steadily diminishing expectations in recent months. When Uber solicited proposals from banks to handle the massive stock offering, some banks reportedly estimated that the company could be worth as much as $120 billion. By the time Uber's shares actually went on sale, the company was seeking a more modest $82 billion. Now the company isn't worth even that much. Still, Uber raised $8.1 billion in the initial public offering, replenishing the company's warchest. That's important because Uber has yet to turn a profit. In fact, Uber reportedly lost more than $1 billion in each of the last three quarters. Uber's new valuation makes Travis Kalanick, Uber's founder and former CEO, worth $4.9 billion. At least two other Uber insiders, Garrett Camp and Ryan Graves, have become billionaires from their Uber holdings. Uber's $76 billion valuation also provides something of a vindication for those who invested in Uber during previous years. A lot of observers scoffed when investors valued Uber at $17 billion during a 2014 fundraising round. They scoffed even more when the company was valued at $62.5 billion in 2015. Yet despite a series of setbacks over the last three years—and despite a steady string of money-losing quarters—Wall Street now believes the company is worth around $76 billion. Perennial price war Uber's IPO comes weeks after its leading US rival, Lyft, debuted its stock in late March. On paper, Lyft lost $1.1 billion in the first quarter of 2019—though the company says that mostly reflects a one-time cost from employees cashing in their stock options. Ignoring those and other one-time losses, Lyft says it lost $211 million in the first quarter of 2019. That's still a lot of red ink for a company whose revenues are a lot smaller than Uber's. Lyft's shares have been battered since the company debuted on public markets in late March. The company was valued at more than $22 billion on its first day of trading. But the stock has since fallen 34 percent to $14 billion. That includes a 7% decline on Friday, as the poor performance of Uber's stock seems to have spooked Lyft shareholders. The two companies keep losing money because they're locked in a bitter, years-long price war. Each company has been under-charging for rides in an effort to gain market share from its rival. Yet with both companies slashing prices, the result has been a lot of red ink but little change in relative market position. Uber remains a much bigger company, but Lyft controls a significant share of the market in the cities where it operates. Presumably at some point growth will level off, investors will get tired of red ink, and the companies will have to charge more money for their services. Investors hope that at this point, they'll settle into a comfortable—and highly profitable—duopoly. But given the rapid pace of technological change—including the expected introduction of self-driving cars over the next decade—that seems like a fairly risky bet.