Nov 21, 2023 - Business

Forbes deal dead as Austin Russell fails to raise cash by deadline

Austin Russell, the 28-year-old CEO of electric vehicle company Luminar Technologies, is no longer buying Forbes, the company’s CEO told staff in a statement Tuesday.

Why it matters: Russell’s bid has been on shaky ground ever since he announced a deal to buy the company in May. His failure to close the deal means Forbes will now need to go through another process to find a buyer, which could prolong its sale ever further.

  • What to watch: Axios is already aware of at least one other buyer preparing a rival bid.

Details: Axios reported early Tuesday morning that Russell missed a two-week extension deadline earlier this week to get his $800 million bid together.

  • Sources told Axios that Russell had until midnight Monday to come up with some of the money to prove to Forbes' current owners, a Hong Kong-based investment firm called Integrated Whale Media (IWM), that he could still make the deal happen.
  • Russell was emailing Forbes' board and owners throughout the early hours of the morning making excuses for why he couldn't get that money over to the owners, sources said.

In an email to staff, Forbes' CEO Mike Federle said, "The cancelation of this sale does not affect our day-to-day operations or business goals. In fact, we are well positioned to continue delivering strong results and enhance the value of our incomparable global brand."

Catch up quick: Russell was supposed to close the deal on Nov. 1, roughly six months after his bid was announced, but he couldn't come up with the cash, Axios reported.

Be smart: Forbes' owners and its board had an incentive to close the deal. Russell's bid valued the company at $800 million, a considerable premium over previous valuations of the company, including one to take the company public at a $620 million valuation.

  • But Russell struggled to find investors that wanted to get in on that price, and a number of strategic investors passed on the deal because of the high valuation.
  • Russell inherited the deal to buy the company from an international consortium of investors, after it was clear they needed an American to be the face of the deal to get regulatory approval for it.
  • He tried for months to replace the cash from that deal with money from American investors.
  • Russell claimed he was blindsided by Indian investment firm Sun Group and others who didn't wire the money they were contractually obligated to send on the day the deal was supposed to close, sources told Axios.

The big picture: The deal to buy Forbes has been riddled with drama.

  • Forbes' majority owners have been trying to sell the asset privately for years, and Axios has reported about past conversations the company has had with companies like blockchain software firm and GSV, a Silicon Valley-based investment firm.
  • In 2022, Forbes' majority owners explored taking the company public through a blank check merger. That deal ultimately fell through.
  • Last winter, it was announced that an international consortium of investors was in exclusive talks to buy Forbes after its push to go public fell through. Axios reported that Sun Group was leading that bid.

What to watch: The deal included a $35 million breakup fee that Russell and his investors may now have to pay.

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