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FNZ is embroiled in a messy legal spat with the founders of a fixed income fintech firm it bought last year for more than US$80 million to fast-track the platform’s US growth plans.
According to New York court documents filed on in December 2023, FNZ is suing YieldX founder, Adam Green and Shlomo (Steve) Gross, for “allegedly defaulting under two identical promissory notes executed upon termination of their employments with the plaintiff”.
“The suit seeks to recover more than $3.2 million in principal plus accrued interest from each defendant,” the court filing says. In total, FNZ is seeking about US$6.5 million plus interest (at 12 per cent) from the pair.
Green and Gross took on the respective roles of FNZ North America asset management chief executive, and, head of asset management strategy after selling their fixed income portfolio management technology business to the platform player almost a year ago to the day. The duo launched YieldX in 2019, snaring a US$80.7 million payout from FNZ comprised of US$34.8 million in cash and US$45.9 million in equity.
At the time, FNZ North America head, Tom Chard, said in a statement: “The [YieldX] acquisition also provides a unique opportunity to accelerate our growth and presence in the U.S. as we continue to add market leading capabilities to our global wealth platform.”
However, both Green and Gross quit last year, citing a breach of agreement after FNZ slashed the YieldX payroll from 43 employees to 26, according to a NBR story.
The NBR also quotes resignation letters from the YieldX pair claiming “the financials of the [FNZ] parent and its subsidiaries were and remain wholly inaccurate and intentionally misleading, and therefore did not and do not provide a true and fair view of the state of the financial condition”.
FNZ refuted the claims, countering Green and Gross had failed to deliver on revenue growth targets while their resignations triggered default clauses in the loan agreements.
As reported last September, FNZ, which incorporated its parent business in NZ in 2022, racked up an operating loss of £267 million (or about NZ$565 million) before tax for the 2022 calendar year.
Adrian Durham, FNZ founder, says in the group’s latest annual report: “Given the substantial level of continued investment in long-term growth, including integration and associated transaction costs of a significant number of acquisitions, a number of which are still in-flight, the Group delivered a loss attributable to shareholders of £99.8m for the year,” Durham says. “These losses are expected to continue into 2023, consistent with further planned investment in R&D and M&A as FNZ focuses on achieving global scale.”
Durham told UK trade publication, Citywire, this month that the global FNZ business has annual revenue of US$1.1 billion and earnings before interest, tax, depreciation and amortisation of US$320 million and 30 per cent growth year-on-year.
“We’re continuing to grow very strongly as a private business,” he told the UK media outlet. “We have no immediate plans to change that but if we continue to execute our plan, not just in the US but in Europe, then in three years or so, but with no particular plan, we probably will IPO.”
FNZ could be valued up to US$50 billion at listing, according to one source cited in the Citywire piece, compared to a US$20 billion price tag implied in the latest institutional capital raise in 2022.
The platform group, founded inside First NZ Capital (now Jarden/FirstCape) in Wellington in 2003, reported about US$1.5 trillion under administration across Europe, Asia, Australia, NZ and the US.
FNZ was unable to supply comment prior to publication.
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