The rise of Aussie billionaire Lex Greensill, whose finance empire is now in tatters, had been painted as a classic rags to riches story. But the billionaire didn’t write that narrative on his own.
The Australian Financial Review has been pumping up the tyres of his eponymous supply chain finance business for years, praising its innovative business model even when regulators and ratings agencies were increasingly sceptical.
Now amid Greensill’s spectacular collapse, with billions of dollars in loans under a cloud, it’s worth revisiting some of the favourable coverage he received.
The AFR’s first story to appear about the “Bundaberg billionaire” was a profile in July 2018. Written in typical fanboy rich-lister style, it invited us to meet the sugar cane farmer turned financier who had become “Australia’s newest $2 billion unicorn”.
The story describes Greensill as a “farmer at heart” and relies solely on comments from Greensill himself, including some interesting claims about the company.
“The business is extraordinarily capital efficient,” he says, without qualification. “Dozens and dozens of our employees have become millionaires on the back of this.”
Next was a piece in March 2019 describing how the young Australian billionaire was “knocking on the doors” of Australian super funds to help build his fintech empire. It includes a line presumably copied from the company’s website about how in just over eight years the billionaire “has built Greensill into a global business” with “customers in 60 countries”.
In July 2019 the AFR ran a story about the growth of Greensill’s controversial financial product, reverse factoring. It included a comment from governance expert Dean Paatsch comparing the practice to “crack cocaine for CFOs”. Even so, the reporters cautioned, “there is nothing wrong with it”.
By September 2019, ratings agency Moody’s warned the practice of reverse factoring was risky because it could mask the true health of a company. (The very definition of insolvency in Australia is when a company can’t pay its suppliers. Reverse factoring/supply chain finance allows businesses to look like they have paid suppliers when they haven’t.).
The AFR’s response to this was to run an op-ed by Greensill himself, hitting back at the claims and painting supply finance as a “lucrative, low-risk business” that was “unlocking trillions of dollars” of capital around the world — another wild claim that included no qualification.
In October 2019 the paper ran another “exclusive” interview with Greensill about how there was “nothing evil” about the booming demand for “early payment schemes”, as it called it, and that the Australian government should learn from the UK and use them to get cash to their suppliers faster.
It wasn’t until 2020 that the AFR started to refer to Greensill’s business model as controversial. By this point concerns had been raised by small business ombudsman Kate Carnell. Carnell said she would be watching Greensill and other players in the fast-growing reverse factoring sector to ensure they were lending money to customers that treat their small business suppliers fairly. She launched an inquiry into the practice in October 2019.
Even as Greensill’s company entered insolvency this week, the AFR has resisted using some of the stronger language used by others, such as the Financial Times. FT described the implosion of Greensill’s shadow bank as an “accident waiting to happen”.
Columnist Joe Aston provided a breath of fresh air on Monday when he wrote that the most remarkable part of Greensill Capital’s collapse was that it took this long.
“For years Lex Greensill was warmly lit by newspaper profiles depicting the boy from Bundaberg ingeniously subverting the gravity of supply chain finance.”
He is so right.
There is a special gullibility found in many financial journalists. They believe that becoming wealthy, the quicker the better, is sufficient proof of superhuman financial skill.
Perhaps, for a start, every such journalist should be obliged to read Le Père Goriot by Balzac:
Le secret des grandes fortunes sans cause apparente est un crime oublié…
(The secret of a great success for which you are at a loss to account is a hidden crime…)
Today it is Lex Greensill, but this is just the latest in a very long line of shonks, crooks, fraudsters, incompetents and so on, all garlanded with gushing praise and limitless sycophancy right up to the day when the sky fell in. Whatever financial journalists do, investigation or any other due diligence does not seem to be involved. They just believe anything the great genius tells them. Bernie Madoff; Asil Nadir; Alan Bond; Jim Slater; Robert Maxwell; … Read through the press cuttings from before each fall and weep.
Reverse factoring definition:
” A supplier’s invoice is financed by a bank or financial institution at a discounted rate”
This is straight out factoring. The only difference is in the terminology.
“Gullibility”, not to mention a strong flock mentality…. dog forbid you’d go wandering off, to see the bigger picture in a wider world.
On the bright side :- When things turn to pellets you’re all in the same lairage together, keeping each other company, ’til the sun comes up and those lights come on.
The Thin has always been the home of the judas goat – to which they return, safely, after leading yet another herd to financial slaughter.
Christopher Skase
Ah yes, the Dentist.
And who can forget “In Barcelona Tonight“? – a bunch of TV hacks who couldn’t find the ferry to Majorca and didn’t realise/care that footage showing La Sagrada Familia might suggest a beat-up.
“Your Fin Revue – Picking winners instead of committing journalism.”
Just like harvesting sugar cane, burn the crop then proceed getting rich.
Very confused about the reporting of this ‘Greensill’ company in Australian media, and unclear exactly which company? (complaints online that other companies called Greensill are mistakenly attracting attention)
What is Greensill’s full public trading and/or official name?
Is this related to current news from FT UK that Greensill Capital borrowed from its sister bank?
Is Greensill, as reported in Oz, a subsidiary of the London based group with advisors including David Cameron and Julie Bishop?
From the FT in article ‘Greensill Capital borrowed almost €100m from its own bank before collapse’ (12/3/21)
‘Greensill Capital borrowed almost €100m from its sister bank in Germany in the months leading up to its collapse, raising further questions about the stricken lender’s governance and regulatory oversight. The London-based finance group, which fell into administration this week, established a revolving credit facility of €110m at Greensill Bank in July 2020, according to a witness statement from founder Lex Greensill provided to the High Court in London this week.’