Remember StraightPath Venture Partners? The “boutique private equity firm” accused of overselling the extremely hot and hotly-desired pre-IPO shares it flogged to its 2,200 investors, thereby necessitating—according to the Securities and Exchange Commission, anyway—a bit of fund commingling and Ponzi schemery?
Well, a court-appointed receiver has had a bit of a look around. It turns out that saying StraightPath sometimes sold more of those shares than it actually had in its possession—a fact that StraightPath itself acknowledges—may have been a rather generous interpretation.
[Reciever Melanie] Cyganowski said it may take the rest of the year or more to sort out a jumble of investments and investors, noting that the Jupiter, Fla.-based firm didn’t compile a single listing of some 600 participants in its latest fund before she took over. She also said that in many cases, the firm obtained shares through unrelated third parties, including via contracts for restricted securities with hundreds of pre-IPO company employees as well as special-purpose vehicles, which now must be contacted to secure the investments.
Ms. Cyganowski said that as a result of these arrangements, the firm’s funds generally don’t hold pre-IPO shares directly and the investors in those funds may only be entitled to cash reimbursements.
A straight path to those lucrative shares, indeed. Not that they’re quite as lucrative anymore.
She noted that the pre-IPO market has changed dramatically in the past year or so….
StraightPath investor Michael Black in Michigan said he initially did well through StraightPath…. But his next round left him holding pre-IPO shares of finance company Klarna Bank AB and other companies that have faced headwinds recently…. The firm allocated Klarna shares to him at a price of $1,900 each in April 2021. Klarna’s enterprise value has since fallen by 85%, Ms. Cyganowski said, citing recent news reports.
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