If you’ve never heard of Lex Greensill, you’re not alone. The “billionaire from Bundaberg” has made a relatively quiet rise for someone who is now making billions off a controversial new financial product.
With the announcement that he just hired former foreign minister Julie Bishop, Crikey takes a look at who he is and why he might need a friend in Canberra.
From farmer to financier
The son of sugarcane and sweet potato farmers, Greensill became a lawyer before taking on the world of finance and landing a job at US investment bank Morgan Stanley.
In 2011 he founded Greensill, a finance company that operates as a kind of “bank” between big companies and their suppliers. Greensill allows suppliers to get paid immediately, for a small fee, instead of waiting up to 90 days. He claims the idea came from seeing farmers like his parents struggle to get by while waiting for multinationals to pay their bills.
In 2018, he became a billionaire overnight when private equity firm General Atlantic injected $336 million into the London-based company, valuing it at more than $2 billion. The company is largely owned by Greensill and his brother, as well as other Greensill staff, dozens of whom became instant millionaires. Its astronomical rise saw Greensill become a Commander of the British Empire in 2017 for services to the British economy.
‘Crack cocaine’ or democracy finance?
Supply-chain finance, also known as “reverse factoring”, has seen a rise in popularity in recent years. The practice is controversial, with some calling it “crack cocaine for CFOs” for the way in which it allows businesses to use an accounting trick or “debt loophole” to delay paying suppliers and free up cash on their books.
Moody’s investors service says the practice can mask the true health of a company by allowing businesses to look like they have paid people when they haven’t. (The very definition of insolvency in Australia is when a company can’t pay its suppliers). The practice was even blamed for the spectacular collapse of UK outsourcing giant Carillion in 2018.
But Greensill says he is “democratising” capital and helping small businesses and family companies get paid on time.
“It doesn’t matter whether you’re in Columbia or whether you’re in Coventry, it’s one click and we can deliver cash to you on the same day,” he told Sky News in May.
Eyes on the prize
Greensill has big ambitions to expand the company to China, India and parts of Africa. He’s eyeing off a trillion dollar marketplace with few competitors.
He also wants to move into the business of wages, including those in the public sector. In November he spruiked the product to Prime Minister Scott Morrison.
But many regulators and policymakers remain wary of the financial fad, including Australia’s Small Business Ombudsman Kate Carnell who launched an inquiry into the practice in October.
With former British prime minister David Cameron also on the company’s books, Greensill is gearing up for a battle with regulators.
“The ability to draw on Julie’s unparalleled experience and expertise … will be invaluable as we continue to unlock capital for businesses and people around the world,” Greensill said this week.