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‘A real man of mystery’: how Ian Osborne built a $1.5bn venture capital firm

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When tech financier Ian Osborne invests in a company, executives must agree to an unusual clause: not to talk about it without his permission.

Such tactics have helped Osborne and his firm Hedosophia largely fly under the radar despite his involvement in high-profile investments and takeover bids over the past decade.

With early support from funds linked to media baron Michael Bloomberg, Hong Kong tycoon Li Ka-shing and the Burda family of Germany, the 38-year-old Osborne has quietly created a $1.5bn venture capital business.

According to people familiar with the matter, companies from Spotify, TransferWise and Raisin in Europe to Alibaba, Ant Financial and Airwallex in Asia have all received investment from Osborne.

One tech investor compares the urbane but reticent British investor to the well-connected PR fixer Matthew Freud: “He knows everyone.” Another, who carried out due diligence before working with Osborne, said: “He is the sort of guy who will turn up behind you on a flight to Rio. He is a real man of mystery.”

As one of the architects of the boom for special purpose acquisition companies (Spacs) — which raise cash in listed funds that then hunt for a company to take public — Osborne has helped turbocharge tech valuations.

Even as the US market cools on the phenomenon and regulatory scrutiny grows, Osborne is hoping to popularise such blank cheque vehicles in Europe with plans to raise as much as €460m with a Spac listing in Amsterdam.

Michael Bloomberg
Michael Bloomberg became a connecting thread through Ian Osborne’s career © Joe Raedle/Getty

Described by contacts as “obsessively secretive”, Osborne fiercely protects his privacy and allows publicity to be drawn to high-profile partners such as Chamath Palihapitiya, a venture capitalist.

Palihapitiya, a brash former Facebook executive, with a large social media following and a love of making provocative comments on TV, describes Osborne as “a very good yin to my yang”.

The moonshot machine

It is for the relaunch of Spacs in 2017 that Osborne is becoming best known — teaming up with Palihapitiya’s Social Capital to back the listings of companies such as Virgin Galactic, Clover Health and Opendoor.

Along the way, Osborne has amassed shares worth as much as $300m, according to a person familiar with the matter, boosted by the juicy “promote” share awards given to sponsors of the listings.

To friends and investors, he is a canny dealmaker and consummate networker, connecting rich family offices to founders needing funds to expand.

Others worry he has been at the vanguard of a wave of speculative cash, bestowing stratospheric valuations on unproven companies.

Virgin Galactic — which he helped take public in 2019 — opened the floodgates for moonshot companies with little by way of revenues to list through Spacs. More than 300 Spacs have raised $97bn this year, according to Refinitiv.

With the action now shifting to Europe, it marks a homecoming for Osborne, who splits his time between houses in London and Hong Kong, where he is a resident.

Chamath Palihapitiya
Chamath Palihapitiya describes Osborne as ‘a very good yin to my yang’ © David Paul Morris/Bloomberg

From Bloomberg to Zuckerberg

Born and raised in Richmond, London, the son of a lawyer and a doctor, Osborne studied at St Paul’s school, King’s College and London School of Economics, graduating in 2005 and going to work as an adviser to Bloomberg, who became a connecting thread through Osborne’s career.

Kevin Sheekey, Bloomberg’s longstanding campaign manager and communications chief, said Osborne began working for the then New York mayor after co-hosting a dinner in London whose guests included actress Claudia Schiffer and media scion James Murdoch.

By 2007, thanks to Osborne’s connections, Bloomberg was addressing the Conservative party conference in Blackpool. “It sounds an easy thing to do but connecting people is a rare talent,” said Sheekey. “Dozens of people around the world that Mike and I have good relationships with were introduced by Ian. Global business leaders never meet without a go-between. There is no Yellow Pages for that.”

He describes a Zelig-like quality to Osborne: “His nature is not to promote himself.”

As international adviser to Bloomberg for the next four years, Osborne continued to unleash his networking skills, gaining access to people who would become his ticket to the world of tech finance.

“At first it was like, ‘what is this British 20-something doing in the midst of US politics?’ It didn’t make much sense,” said Daniel Ek, founder of Spotify, who met Osborne in this period.

Initially, Osborne offered “advice, connections with people”, according to Ek. “But his Rolodex was off the charts for someone so young. The connection between politics and business today seems like an obvious fit but at the time no one was making the link.”

Osborne began to advise, and later invest in, Palihapitiya’s Social Capital after meeting him with Mark Zuckerberg in 2008.

Palihapitiya described Osborne as “extremely, exceptionally discreet and unbelievably trustworthy. He’s unbelievably connected. He is our modern version of a homeless billionaire. Ian is constantly working, is constantly travelling, and he collects people.”

Virgin’s spaceship
Osborne teamed with Palihapitiya’s Social Capital to back the listing of Virgin Galactic © Virgin Galactic

In 2009, he set up his own consultancy, Osborne and Partners, that took on clients including DST Global, the venture capital firm run by Yuri Milner, the Israeli-Russian billionaire.

By 2010, he was helping DST lead investments in Spotify and Alibaba — where he had forged relationships with founders Ek and Jack Ma, respectively. 

Through his time working with DST and afterwards, Osborne continued to run a PR and business development consultancy, advising the businesses of US tech billionaires from Travis Kalanick and Evan Spiegel to Zuckerberg. He remained close to Bloomberg, helping on an attempt to buy the Financial Times from Pearson in 2013.

That year, he was firmly established on the tech scene as one of the organisers of the hottest party in Davos — a “taxidermy” themed bash thrown with Napster co-founder Sean Parker and Salesforce CEO Marc Benioff.

He had also started to work informally for then UK prime minister David Cameron and chancellor George Osborne, to whom he remains close, helping open doors in the US. During the 2010 election campaign, he helped prepare Cameron for TV debates. Around the same time, he organised a trip to the US for Boris Johnson, then mayor of London.

Osborne became the “ultimate co-host” — according to one person familiar with the period — gathering people from politics, tech, finance and the arts. It was at a dinner hosted by Osborne in 2014, attended by actor Ed Norton and Arianna Huffington, that an Uber executive landed in trouble for suggesting that the company could dig up dirt on a critical journalist.

Taking ‘IPO 2.0’ to Europe

Osborne set up Hedosophia in 2012 — named after Greek gods of pleasure and wisdom — aiming to specialise in earlier stage tech firms. 

Early backers included family offices such as Germany’s Burda and funds related to Li, the Hong Kong tycoon, said a person close to the group, who added that it now has a more institutional investor base of university endowments, public pension funds and insurance companies from the US, Japan, Canada and Sweden.

Daniel Ek, founder of Spotify
Daniel Ek, founder of Spotify, recalled thinking Osborne’s ‘Rolodex was off the charts for someone so young’ © Drew Angerer/Getty

It was at a dinner in Hong Kong in early 2017 with Palihapitiya that he pitched the idea for a new sort of Spac to give tech founders an easier public listing without the risk and regulatory baggage of a traditional IPO. 

Despite being partners in the sponsor company, the pair did not split earnings equally, said people with knowledge of the situation, with Palihapitiya taking the majority of profits but also putting in greater capital. Palihapitiya also coined the new term for the Spac — “IPO 2.0” — which was draped over the New York Stock Exchange at the launch in 2017.

Since then, hundreds of Spacs have followed this strategy, launched by former bank executives, athletes and politicians keen to enjoy the almost risk-free upside of the Spac sponsor model. But even those operating around Osborne wonder whether the market has now gone too far. “The bubble is definitely bursting now,” said one.

The Osborne/Palihapitiya Spac franchise has been hit as the market has turned — with Clover’s shares falling more than 50 per cent from their highs and shares in Virgin Galactic — which has yet to make a commercial flight — down more than 70 per cent from the peak.

Osborne is determined to get his European Spac right, according to those close to the plans, cutting the financial rewards for the sponsor and bringing together a heavyweight board.

This month, he will also return to an early passion in the theatre, producing one of the first musicals to open after the end of pandemic restrictions in the West End — Everybody’s Talking About Jamie.

He will need to get used to being centre stage — in Europe at least, he has no Palihapitiya to hide behind, and the scrutiny over Spacs in the US has started to raise questions for investors and sponsors alike over whether the market has gone too far, too fast.

Additional reporting by Tim Bradshaw and Arash Massoudi



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Electric vehicle Spacs: Lordstown hits its city limits

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If Lordstown was one of its own electric pick-up trucks, it would have conked out a couple of feet from the charging point. The US group has warned it could fail as a business, running out of cash before even starting commercial production.

Lordstown only listed via a $1.6bn Spac takeover last October. The wheels are coming off fast. That confirms the weakness of the business models of many electric vehicle companies. US markets exuberantly chose to overlook these when the groups listed, excited by the overblown forecasts permitted once a company lists via a takeover by a special purpose acquisition vehicle.

A two-thirds collapse in Lordstown’s shares since February is further validation for Hindenburg Research, which last year took a successful swipe at electric freight truckmaker Nikola. The short seller questioned Lordstown’s sales figures in March. Last month, the company said production of its $52,500 Endurance pick-up truck this year would be “at best” just half prior expectations of 2,200 units.

At least 18 electric vehicle and battery companies went public via Spac deals from the start of 2020, raising a combined $6.6bn from investors, according to Refinitiv. Few of these companies generate significant revenues. Many of them have missed targets.

Shares in Canoo are more than 50 per cent below a December peak after ditching many of its goals. XL Fleet has lost even more of its value after it abandoned guidance for 2021 revenue.

Traditional automakers have rebounded. General Motors shares are up by a half since the start of the year, for example.

The Spac listing process is partly to blame for over-promising by EV makers. It enabled them to publish very optimistic financial projections, compared to what is permitted in a traditional IPO.

Investment often involves backing what sceptics see as a long shot. Tesla took years to hit production targets and turn a profit. The added problem for investors now is that EV production has become a crowded field. Heavy research is required to identify a hot prospect among the no hopers. Extra scepticism applies to businesses listed via a Spac.

The Lex team is interested in hearing more from readers. Please tell us what you think of Lordstown and other EV Spacs in the comments section below.



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Shares in group linked to China’s Three Gorges Dam surge on debut

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China Three Gorges Renewables Group’s stock surged by 44 per cent on its debut after the company raised $3.6bn in China’s largest initial public offering of 2021.

Shares in the renewable energy arm of China Three Gorges Corp, the state-owned company that lends its name to the hydropower dam on the Yangtze river, shot up the maximum daily amount permitted by the Shanghai stock exchange on Thursday.

The group raised Rmb22.7bn ($3.6bn) in its IPO, the largest equity debut in the country since a $7.6bn share sale by China’s biggest chipmaker, Semiconductor Manufacturing International Corporation, last July. The first day jump pushed the company’s market capitalisation to $17.1bn, according to Bloomberg.

The day one pop for China Three Gorges Renewables, which also has interests in wind power, came as China faces a sharp rise in the cost of coal-fired power.

The move reflected strong appetite from Chinese investors for green energy assets as Beijing seeks to make wind a far greater contributor to the country’s electricity output, said Bruce Pang, head of research for investment bank China Renaissance.

“It’s not just a trend in China — it’s a trend across the world,” Pang said.

Demand for shares in the IPO outstripped supply 78 times, according to the company.

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The group will use part of the share sale proceeds to cover almost half the cost of seven offshore wind turbine projects, as it and other renewables companies rush to complete infrastructure before government subsidies expire at the end of the year.

“We anticipate China Three Gorges will strive to finish the projects this year in order to receive the subsidies,” said Apple Li, a credit analyst at S&P Global Ratings.

The credit rating agency said this week that the IPO would provide a significant injection to the balance sheet of parent group China Three Gorges as the subsidiary pursues an “ambitious non-hydro renewables development plan” over the next few years.

China Three Gorges Renewables on Tuesday launched its first floating offshore wind power platform off the coast of Zhejiang province in south-eastern China. The company said the platform could deliver “green and clean energy for 30,000 households a year”.

Unlike fixed wind turbines, which can only operate in shallow waters, floating turbines can generate electricity further offshore, harnessing the power of stronger ocean winds. 

In September, China committed to achieving carbon neutrality by 2060, but its industry-fuelled recovery from the Covid-19 pandemic has put pressure on its environmental ambitions. In 2020, it produced record amounts of steel and increased approvals for new coal plants.

Research last year led by Wang Muyi, an analyst at UK think-tank Ember, found that new wind, hydro, solar and nuclear energy investments could not keep up with a sharp rise in electricity use in China between May and October.

The country is also suffering from a shortage of coal as industrial activity booms, pushing up prices. Last month, a state council meeting chaired by Premier Li Keqiang emphasised the need to further tap China’s “rich coal resources”, but added that the capacity of wind, solar, nuclear and hydropower would be increased to ensure energy supply this summer.

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French music group Believe stumbles on market debut

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Shares in music group Believe, which has set out to create a novel music label for the streaming era, fell more than 17 per cent on its first day of trading, in what is likely to be a blow for the French market as it tries to recover from pandemic volatility.

Believe, whose brands include New-York based platform TuneCore and its own family of labels, reached a valuation of €1.53bn as its shares closed at €16 on Thursday, down from the offer price of €19.50.

The flotation marks the first technology listing on the Euronext Paris bourse since 2014, when online payments group Worldline went public, and is among roughly 30 flotations in the pipeline of the Paris market.

Believe had already priced its initial public offering at the bottom of its scaled-back price range, of between €19.50 and €22.50 a share, which would have given the group a market value of €1.9bn to €2.1bn.

The disappointing response to the listing is a setback for the Paris market, which is trying to establish itself as a location for IPOs and foster the growth of tech companies. The fact Believe is in a fast-growing sector that is popular among investors is likely to add salt to the wound. 

The slip in Believe’s valuation on its debut follows a weak run for tech flotations this year after Deliveroo’s shares fell 26 per cent on the company’s first day of trading in March, wiping almost £2bn from its opening £7.6bn market capitalisation.

Commodities broker Marex Spectron and Parts Holding Europe, a French distributor of car parts, pulled their planned IPOs this month because of turbulent market conditions.

Other French IPOs lined up for this year include OVH, a cloud computing provider, and Aramis, the online seller of second-hand cars that is a unit of carmaker Stellantis.

New investors in Believe include French mutual fund Fonds Stratégique de Participations and Sycomore Asset Management, which specialises in responsible investment.

Believe has been valued at a multiple of roughly half that of other music majors such as Warner Music Group and Universal on an enterprise value-to-sales basis for 2022, according to a person close to the company. It is about two-thirds that of Spotify.

The person said the limited level of free float shares — at only 15 per cent — damped the share price, although they acknowledged Believe’s atypical model also made investors cautious.

“It’s a hot market and a very attractive model, a lot of investors acknowledged that, but in the end [Believe] looks a bit like the underdog in this market,” they said. “There is a wait-and-see attitude from some investors.”

Founded in 2005, Believe has been looking to capitalise on growing enthusiasm for the music sector, which has returned to growth after two decades in decline. 

Believe works with independent musicians and music labels to build popularity via social media and put their work on streaming music platforms. These include newcomers and more established artists, such as French rapper Jul, UK artist La Roux and Lebanese singer Nancy Ajram.

The company, which serves more than 850,000 artists, intends to use the €300m it has raised to expand into new countries, both through organic growth and further acquisitions.



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