know about Robert F. Smith haunted by tax scandal after losing career with Denver Broncos: sources
This spring, Robert F. Smith, the richest African American in the US, was thrust into the spotlight when the NFL urged him to buy the Denver Broncos to help the league address a racial equity crisis.
Now, having lost a contest to buy the equipment to Walmart heir Rob Walton, the 59-year-old billionaire is dealing with a crisis of his own as he struggles to raise a new flagship tech fund for his buyout firm Vista Equity Partners. , The publication has learned.
The problem: Vista seems to be having trouble attracting investors not only because of the recent turmoil in the tech sector, but also because of the turmoil in the background after Smith, whose fortune Forbes estimates at $6.7 billion, was caught up in a dodge of taxes. scandal at the end of 2020.
Smith, who is the president of Carnegie Hall and who shelled out $34 million in 2019 to pay off student loans for Morehouse College’s entire graduating class, avoided federal prosecution for evading taxes on hundreds of millions of dollars in investment earnings by cooperate. as a witness against Robert Brockman, an initial Vista investor who was criminally charged in 2020 in a record $2 billion tax fraud case.
However, experts say the scandal continues to haunt Vista. Co-founder and former chairman Brian Sheth, a respected rainmaker whose deal-seeking prowess was credited for much of the company’s early success, stepped down after Smith refused to hand over the reins, even temporarily, while negotiating with the Department of Justice in the tax case. At the time, Sheth said his departure was not related to Smith’s “personal matter.”
Signs have emerged recently that investors may be increasingly scared of Smith flying alone with the company. In October, Vista reportedly launched an effort to raise a new buyout fund worth between $20 billion and $24 billion, dwarfing the $17 billion it raised for its most recent flagship fund in 2019, at the time the largest technology-focused buyout fund.
Vista had targeted its latest flagship for a “first closing” in April, according to the Wall Street Journal, meaning an initial trove of cash would be available to invest. But Vista has received only $9.4 billion in commitments so far, and it’s unclear whether the company has started implementing it, sources close to the situation told The Post.
A Vista spokesman declined to comment for this story.
The New York state pension fund invested just $400 million in Vista’s new fund in May after committing $500 million to the smaller fund in 2019, according to public filings. The Oregon Public Employees Retirement System revealed in a March filing that it has committed just $250 million to the new Vista fund after investing $500 million in 2019.
Some government pensions have a policy not to invest with those who have defrauded the government, a Vista investor said, adding that his pension has yet to be decided.
It’s an especially sore point given that Vista’s archrival, tech-focused buyout fund Thoma Bravo, closed in May with a fund of more than $20 billion after being on the market for about the same amount of time. That was after Thoma Bravo outshone Vista’s 2019 fund with his own $17.8 billion fund.
The shortfall occurs when Smith, for the first time, runs Vista without Sheth. As investors assess the importance of that, some point out that Vista has used a formula for its acquisition targets, almost always enterprise software companies, that includes acquiring rival companies in the same space and combining them to cut costs while gaining leverage in the market.
“Do you need Sheth to oversee the business management process? I don’t think so,” said a current Vista investor. “I think it could be useful in pricing bids.”
One possible example: On January 31, Vista teamed up with Elliott Management to buy software giant Citrix for $16.5 billion, or $104 per share. A historic drop in tech stocks has followed since then, with experts estimating Citrix’s value has halved. However, Citrix is trading at more than $98 per share as the market believes the $104 deal will close in the next few months due to a strictly drafted merger deal.
Banks that agreed to finance the deal stand to lose $1 billion when they resell Citrix’s debt at well below face value, an adviser to private equity firms said of the Citrix deal.
“This is the biggest bust of the year,” the adviser said.
For comparison, Elon Musk suggested he might back out of his deal to buy Twitter for $54.20 a share, but shares of the social network are trading at just $38. The difference: Vista is in the business of buying companies, and if Smith breaks a merger deal with what is considered a flimsy excuse, it would be very difficult for him to gain the trust of other sellers.
Smith opted not to make a formal offer for the Denver Broncos after some Vista investors expressed concern that it would be a huge distraction while he runs the company, the sources said.
Despite the setbacks, insiders say Smith appears to be focused on the future at Vista, and that he appears to be thinking more offensively than defensively.
Just a few weeks ago, Vista was looking to take advantage of the tech market dislocation and acquire software companies trading near 52-week lows, a source with direct knowledge of the situation said. Vista has been doing it by sending out opportunistic letters aimed at pressuring a company to sell, according to a source close to the situation.
“Vista calls the CEOs to see if they are interested in selling, the CEOs say no and then write letters to the directors forcing board meetings,” the source said.