FTX, Sam Bankman-Fried and his parents bought Bahamas real estate worth $121M: report
Disgraced FTX ex-CEO Sam Bankman-Fried, his parents and other executives at the bankrupt platform have snapped up a fortune in real estate properties across the Bahamas in the last two years, according to a report Tuesday.
Bankman-Fried and his associates own at least 19 properties in the island chain with an estimated value of nearly $121 million, Reuters reported, citing property records. The sprawling real estate empire was mostly comprised of high-end beachfront properties.
The lavish purchases belie Bankman-Fried’s image as a scruffy, T-shirt-and-sneakers-wearing donor to progressive causes. They also raise further questions about FTX’s handling of more than $1 billion in missing client funds.
Bankman-Fried’s parents, the Stanford University law professors Joseph Bankman and Barbara Fried, are reportedly listed as signatories on a beach house within the Old Fort Bay gated community.
Documents from last June indicated the property was intended as a “vacation home” for the family.
A spokesperson for Bankman and Fried said they plan to “return” the property. It’s unclear how the home was purchased.
“Since before the bankruptcy proceedings, Mr. Bankman and Ms. Fried have been seeking to return the deed to the company and are awaiting further instructions,” a spokesperson for Bankman-Fried’s parents told the outlet.
A branch of FTX purchased seven beachfront condos for nearly $72 million in the ritzy Albany community – the same resort that housed the “luxury penthouse” from which Bankman-Fried, his ex-lover Caroline Ellison and other associates purportedly ran FTX.
Property deeds indicated the properties were tabbed for use as “residence for key personnel” at FTX, though it’s unclear who actually lived in the condos.
The single most expensive property found in documentation was $30 million penthouse in the Albany resort. FTX spent $8.55 million on a group of homes that formed the company’s local campus – though the report employees left that area earlier this month as the company imploded.
Three other condos were purchased in the One Cable Beach, another prime waterfront venue, and identified as residences for Bankman-Fried, FTX co-founder Gary Wang and ex-FTX executive Nishad Singh.
FTX and Bankman-Fried did not return Reuters’ request for comment on the documents.
Reuters stated that it “could not determine the source of funds that FTX and its executives used to buy these properties.”
The finances of FTX and Bankman-Fried are under immense scrutiny as the platform navigates complicated bankruptcy proceedings. A court filing showed that FTX owed its top 50 creditors a whopping $3 billion, including $$226 million to its largest creditor.
Bankman-Fried’s net worth crumbled from an estimated $16 billion to zero in recent days following FTX’s collapse.
Last week, the Wall Street Journal reported that Bankman-Fried cashed out $300 million in 2021 after FTX closed a massive fundraising round — a move he reportedly dismissed to investors as partial reimbursement after he bought out a rival’s stake.
Bankman-Fried had raised further alarm bells after calling ethics a “dumb game we woke Westerners play” in an interview last week.
New FTX CEO John Ray III touched on lavish spending at the company in the same court filing in which he slammed its corporate governance practices as worse than those he encountered while leading the infamous energy firm Enron through its bankruptcy.
“In the Bahamas, I understand that corporate funds of the FTX Group were used to purchase homes and other personal items for employees and advisors,” Roy said in the filing.
“I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of the Bahamas,” Ray added.
The filing also described a chaotic system in which FTX supervisors often used emojis to approve expense requests.Sam Bankman-Fried’s FTX, parents bought Bahamas property worth $121M
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SocGen and AllianceBernstein agree equities merger
French bank will have option of buying joint venture outright five years after it launches
French bank Société Générale has agreed to create a joint venture with US investment company AllianceBernstein, with the two financial groups merging their equities research and cash equities businesses.
The deal, announced on Tuesday morning, will create a global player in equities services that SocGen will have the option of buying outright five years after it launches, which is expected to happen by late 2023.
The merger has been discussed since last year by Seth Bernstein, AllianceBernstein chief executive, and Slawomir Krupa, head of SocGen’s investment bank, who is due to become group chief executive in May next year.
“What you should expect from me is trying to create value — that’s for sure. This is what we are doing here,” Krupa told the Financial Times.
Krupa has been handed the task of rebooting the French bank after years of restructurings and underperformance compared to European peers.
Under his leadership, the investment bank has tried to move away from a reliance on equity derivatives — exotic financial products that caused heavy losses for the bank at the outbreak of the coronavirus pandemic.
SocGen will offer its corporate and investor clients a wide range of equities services alongside those within the joint venture, including equity capital markets, equity derivatives and prime broking.
The joint venture will allow SocGen to compete head on with its Paris rival BNP Paribas, which bought out its equities joint venture, Exane, last year.
For AllianceBernstein, the deal could eventually see the investment group with $627bn of assets under management part ways with the research division that has been a key part of the company throughout its 55-year history.
“There were a lot of things we needed to grow in our businesses but we didn’t have the resources to give our sellside team what they needed in Asia, in the US and in Europe,” Bernstein said. “We had to make choices.”
Four years ago, AllianceBernstein’s research arm bought Autonomous Research, which specialises in financial institutions and will be included in the joint venture.
The new business will be headquartered in London and led by Robert van Brugge, currently chief executive of AllianceBernstein’s research arm, with Stephane Loiseau, head of SocGen’s cash equities business, becoming his deputy.
SocGen will own 51 per cent of the new venture, with AllianceBernstein owning the remaining 49 per cent.
Krupa said that because the two businesses had little geographic overlap — with AllianceBernstein strong in North America and Asia, and SocGen bigger in Europe — there would be minimal job cuts and loss of clients.
SocGen said the deal would result in 15-20 basis points of additional return on tangible equity by 2025, with around 10 bps impact on the group’s common equity tier 1 ratio.
Both companies’ boards have signed off on the merger, although it will still require regulatory approval.
Enel seeks to slash debt with €21bn asset sale
Italian utility to withdraw from several markets to focus on six ‘core countries’ in renewable push
Italy’s Enel has announced plans to sell assets valued at €21bn as it moves to cut debt and streamline its business to focus on six core countries and the development of renewable energy.
The Italian state-backed utility, one of the world’s largest renewable producers, said on Tuesday it would sell its gas assets in Spain and withdraw from countries including Argentina and Peru to focus on clean energy developments in Europe and the US.
Francesco Starace, chief executive, said the company would seek to raise €21bn through the asset disposals, reducing net debt towards €51bn-€52bn while focusing on “geographies that can add value despite the current challenging scenario, embracing a leaner structure and a more robust set of financial ratios”.
The company will also increase its dividend from 40 cents a share to 43 cents between 2023 and 2025.
“The bulk of this plan is expected to be rolled out by the end of 2023, resulting in a more agile company focused on six core countries” of Italy, Spain, the US, Brazil, Chile and Colombia, Enel said.
The company said that by 2025 it expected group ordinary earnings before interest, tax, depreciation and amortisation to reach €22.2bn-€22.8bn, compared with projected 2022 ebitda of €19.0bn-€19.6bn.
Group net ordinary income is expected to rise to €7.0bn-€7.2bn, compared with a forecast of €5.0bn-€5.3bn in 2022.
Has the Luxury Watch Market Peaked?
An uncertain economy and free falling resale prices have created a sense of unease in the category, but watch dealers and experts say the best is still ahead.
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The Patek Philippe Nautilus 5711 watch is among the highly coveted models that peaked in value on the secondary market earlier this year. According to WatchCharts, its average resale price has fallen 16 percent in the past six months. (Shutterstock)
KEY INSIGHTS
- Since a peak in May, the overall resale value of luxury watches has dropped by a quarter.
- A decline on the secondary market may be an early indicator of softening demand in the primary market, analysts say.
- Watch dealers, however, say that slipping resale prices reflect a correction of the market rather than a permanent downturn.
Earlier this fall, vintage watch dealer Eric Wind was concerned about the state of his industry.
Pre-owned watches had seen record performance since 2020, with the most sought-after pieces — such as the Rolex Daytona and Patek Philippe Nautilus 5711 — trading at three or four times their retail prices at their peak this year.
But in September and October, Wind’s transactions slowed down as prices on the secondary market fell. According to WatchCharts, which tracks the resale prices of high-end timepieces (also known as the market value), the overall market index has fallen by more than a quarter since its peak in May 2022.
A decline on the secondary market may be an early indicator of softening demand in the primary market, according to Adam Cochrane, retail and luxury analyst at Deutsche Bank.
There are potential challenges on the horizon: signs of deceleration in luxury spending, especially in the US; continued Covid-19 restrictions that prohibit international travel from China and an uncertain world economy could all threaten the category’s turbo-charged streak.
The industry, however, remains optimistic. Watch dealers say that slipping resale prices reflect a correction of the market rather than a permanent downturn. Sales in the primary watches market remain strong; Richemont’s specialist watchmakers segment, which includes Piaget and IWC Schaffhausen, saw sales rise by 22 percent year-over-year in the first half of 2022. Swatch Group, which owns Omega and Breguet, also posted a 7 percent uptick in sales in the same period.
“The total addressable market for luxury watches is huge, for both new and pre-owned,” said Russell Kelly, chief merchandising officer for Hodinkee, a watch publication and e-commerce retailer. “We are just scratching the surface of that.”
Already this month, Wind began to see his sales pick up again.
The Luxury Watch Craze
Declining resale prices is a natural reaction to the frenzy of demand in a period of intense wealth creation in 2020 and 2021, according to Tim Stracke, co-chief executive of Chrono24, one of the largest online marketplaces for new and pre-owned upscale watches.
“There are a multiple of factors, including an abundance of cheap capital that drove the demand,” Stracke said, pointing to sky-high valuations in tech and cryptocurrency last year. “A lot of people started buying the watches, and so they rose in value.”
For example, when Patek Philippe introduced a limited-edition Nautilus 5711/1A-018 model in collaboration with Tiffany & Co. last year at a retail value of $52,635, the first piece sold for $5.35 million in an auction. Seeing an opportunity to flip similar models for 10 or more times its original price, buyers flooded the resale market with supply.
“These people had not only a love for watches but also a love for profit,” Stracke explained. The sneaker resale market has observed a similar dip in recent months.
Moreover, there’s simply far more people interested in luxury watches today versus decades past, said Wind, the vintage watch dealer. The phenomenon, which began before the pandemic, reaches across income levels and tax brackets, thanks to the accessory’s rise in prevalence in popular culture.
“You see it in hip-hop music videos and on Instagram everywhere,” Wind said. “People are interested in how the wealthy live, and that’s led to much more interest in watches.”
And overall, there is still far more demand than there is supply for watches in the primary market. Walking away with a new Rolex from a certified retailer, for instance, remains extremely difficult for first-time buyers.
The Nautilus and other “hype” styles made by brands like Rolex, Patek and Audemars Piguet still command two to four times their original prices on secondhand platforms. Meanwhile, other models by brands including Swatch Group-owned Omega and Cartier have not seen prices fall, Stracke noted.
Despite a cooldown in resale prices, secondhand sellers including Wind, Chrono24, Hodinkee and The RealReal said they don’t foresee overall sales to decrease. Chrono24 saw its sales volume increase by 42 percent in the first eight months of 2022. Hodinkee, which sells both new and pre-owned pieces, reached $100 million in revenue last year and is on track to surpass that number this year.
“My best estimate is that there are millions more people interested in watches today than three years ago, and that’s had a huge impact on value,” said Wind.
What Brands Should Know
But despite burgeoning demand, luxury watch makers should navigate the coming months carefully given economic uncertainties. After all, the category isn’t recession-proof, said Luca Solca, an analyst for Bernstein.
As of now, prices on the secondary market are higher than retail prices, demonstrating that demand outweighs supply in the primary market. This means that brands can get away with not only increasing their retail prices but also increasing supply to better meet their demand.
The latter has proven difficult for watch companies; luxury watches require extensive time and resources to produce. Rolex said in a rare public statement last fall that it doesn’t intentionally limit supply.
“The scarcity of our products is not a strategy on our part,” the privately-held company said. “Our current production cannot meet the existing demand in an exhaustive way, at least not without reducing the quality of our watches — something we refuse to do as the quality of our products must never be compromised.”
Many brands, however, are working to ramp up supply. In the first half of 2022, the Swiss watch industry exported watches worth a total of 11.9 billion Swiss francs ($12.4 billion), or 8 percent more than in the same period in 2021, according to the Federation of the Swiss Watch Industry. But it’s far easier to hike up prices, which they have done across the board in the last few years.
Both measures should be pursued cautiously, said Deutsche Bank’s Cochrane. Dropping market prices “may suggest that there is less scope for further price increases than we expected a year ago,” Cochrane told BoF in an email statement. “Consumers view high end watches as a store of value and even an inflation hedge and this would be negatively impacted if the retail selling price were to come under pressure.”
All the while, “managing the supply is the key issue for the brands to ensure it does not run far ahead of [demand],” he added, especially for entry-level luxury watches that are more accessible to aspirational consumers.
While consumer sentiment toward buying a watch may be lower today compared to months prior, the market is ultimately cyclical, Solca said.
“With the return to earth of cryptocurrencies much of the froth in the market has disappeared,” he added. “Iconic products remain very difficult to find, and are still trading at a premium over and above the recommended retail price.”
A global recession notwithstanding, falling resale prices may simply end up to be a tiny blip on the radar.
“The [resale] bubble has burst but I don’t think it’s a big deal,” said watch enthusiast Mark Cho, co-owner and co-founder of menswear brands Drake’s and The Armoury, respectively. “People had a lot of FOMO [fear of missing out] in the past few years where the mindset was, ‘if I don’t buy this now, someone else will get it.’ Today, that FOMO has reduced a lot.”
DSM, Firmenich Exchange Offer Gets Green Light
Their merger is expected to close in first-quarter 2023.
PARIS – The merger of DSM and Firmenich is moving ahead.
The Dutch science-based health and nutrition concern and the Swiss fragrance and flavors supplier said jointly Tuesday morning that France’s stock market regulator, the Autorité des Marchés Financiers, has approved the offering circular related to their deal.
As announced on May 31, the two groups said they would merge to become the largest fragrance, beauty, wellbeing and nutrition supplier in the world, with revenues of more than 11 billion euros.
The new group combining DSM and Firmenich, which is the largest privately owned fragrance and flavors supplier and among the biggest globally, is to be called DSM-Firmenich.
The acceptance period starts at 9 a.m. CET on Nov. 23 and expires at 5:40 p.m. CET on Jan. 31, 2023, unless extended.
The merger will be made through a public offer for DSM shares in exchange for DSM-Firmenich shares, with a one-to-one ratio, plus a contribution of Firmenich shares to DSM-Firmenich in exchange for DSM-Firmenich shares and 3.5 billion euros in cash.
DSM shareholders will own 65.5 percent of the company, and Firmenich stakeholders the remainder at DSM-Firmenich’s inception.
The deal is expected to close in the first quarter of 2023.
“This merger is a transformational moment for the history of both businesses. DSM-Firmenich will be a global-scale partner, uniquely positioned to anticipate and better address the evolving needs of consumers by unlocking opportunities for our customers, and our people,” Gilbert Ghostine, chief executive officer of Firmenich, said in a statement.
“Our two companies have an unrelenting commitment to their role in society with ESG at the core of everything we do, and I firmly believe that DSM-Firmenich will have a positive and measurable impact on people, climate and nature,” he added.
The companies said their merged entity will be well-positioned to accelerate growth by addressing changes in consumer preferences and needs, driven by trends such as climate change, accessible nutrition, inequalities, and hygiene and sanitation.
“These shifts drive consumer preferences for health and sustainability benefits whilst enjoying superior experiences in areas such as taste and fragrance,” they said in the statement. “As a market leader with enhanced creation and application capabilities, DSM-Firmenich will be able to serve both global and local customers, informed by local consumer preferences, across regional and local hubs around the world. Opportunities from new pioneering and complementary digitally powered business models will build upon the 125-plus year heritages of each DSM and Firmenich in purpose-led scientific discovery and innovation.”
In a separate release on Tuesday, Firmenich published its first-quarter results. In the three months ended Sept. 30, the group generated sales of 1.25 billion Swiss francs, or $1.3 billion, up 8.8 percent in reported terms and up 1.6 percent on a constant-currency basis versus the same prior-year period.
Firmenich posted adjusted earnings before interest, taxes, depreciation and amortization of 237 million Swiss francs, despite a negative currency exchange rate effect.
The company said that in the period, it continued experiencing strong end-market demand across geographies, customers and segments.