Brady Dougan, CEO and founding father of Exos Financial.
Philipp Schmidli/Bloomberg
Exos Financial became intended to be a immense return to Wall Boulevard for Brady Dougan, the ex-CEO of Credit score Suisse. But 5 years after its start, the firm has already missed payroll and is scrambling to accumulate its potential in subtle markets.
On the morning of Friday, January 13, employees at Exos Financial awoke to glimpse their financial institution accounts were missing most of their anticipated payday deposit. Some had received diminutive tests for handiest a chunk of what they were owed. At 10:30 am that day in the route of a firm-wide meeting over Zoom, chief govt officer Brady Dougan advised roughly 50 employees contributors that the firm would no longer create payroll, venerable employees tell.
The next month, the firm laid off on the very least a dozen other folks. Those fired were given one week’s take a look at with no severance pay or advantages, a venerable worker says. As well to downsizing its employees, the firm is now timorous its substitute, tell sources familiar with the firm’s plans. In the case of six months later, staffers have but to receive the fat steadiness for the January duration, though the frequent paychecks have resumed.
Launched in 2018, Midtown Long island’s Exos Financial is the advent of Dougan, one of Wall Boulevard’s most a success funding bankers, earning millions and hundreds over his 25-year occupation at Credit score Suisse. Exos became supposed to be Dougan’s entrepreneurial second act, a contemporary age funding financial institution–or as a December 2022 press description locations it, “a B2B fintech firm constructing a smartly-liked institutional finance platform designed to lift the entire services of a ancient funding financial institution, reimagined and tailored to a smartly-liked digital world pushed by files and files science.” Consistent with one insider, Dougan, 63, believes that his contemporary digital first financial institution will sometime convey of affairs incumbents fancy Goldman Sachs.
In 2020 and 2021, Exos had the wind at its serve. Despite the pandemic, the stock market and anything tech linked became booming because the Federal Reserve’s straightforward cash policy became offering mammoth gasoline for even some of the speculative enterprise. Exos appeared fat of attainable and by mid-2021 it had raised as valuable as an estimated $175 million, about $80 million of which came from its founding partners. Almost straight Exos jumped into the SPAC whisper, participating in an ideal replacement of initial public choices by strategy of these blind pool acquisition autos, in step with SPACInsider.
But over the previous year, whereas hobby charges jolted upward and the IPO market ground to a pause, it has struggled to build a sustainable substitute. Its two SPAC-focused substitute-traded funding funds (ETFs) have fizzled, with one shutting down and the other attracting correct $8 million in assets beneath administration. Within the intervening time, its scattershot device of experimenting with many traces of substitute and acquisitions–along side constructing lending, a merger and acquisitions advisory substitute, mounted-income buying and selling, crypto mining and asset administration–isn’t producing sufficient to reliably duvet responsibilities fancy payroll.
Forbes spoke with an ideal replacement of different folks shut to the firm for this epic, along side plenty of contemporary and venerable Exos employees. The firm declined to create Brady Dougan obtainable for an interview or commentary on emailed questions.
Raised in suburban Chicago, Dougan began his occupation as an equities seller. He rose to radically change CEO of world banking powerhouse Credit score Suisse in 2007, correct earlier than the financial crisis, and held the post for 8 years, earning himself a recognition as one of many few chief executives in banking to abet sometime of the crisis. He became applauded for acting snappy in responding to elevated regulatory requires and serving to the financial institution stay on the credit crisis in higher form than some opponents. At some point soon of that duration, Credit score Suisse’s stock fell about 60%, roughly in step with the drops seen at opponents UBS and Barclays MS
. Credit score Suisse’s return on equity, a valuable profitability metric for funding banks, became 4.25%, when put next with 14.2% for Goldman Sachs, 5.3% for Morgan Stanley, 4.43% for Barclays and -5.4% for shut competitor UBS.
In 2014, the year earlier than Dougan’s final as CEO, the firm agreed to pay $2.6 billion to the Justice Department for serving to U.S. possibilities evade taxes, the most life like price ever for a prison tax case on the time. “We deeply remorse the previous misconduct that led to this settlement,” Dougan said in a statement on the time of the announcement. Dougan in my notion pulled in roughly $120 million, other than bonuses, in compensation made up of stock and cash whereas he became chief govt, in step with regulatory filings.
The marketplace for particular cause acquisition companies (SPACs) has long previous from sizzling hot when Exos entered to frigid winter.
Delight in many other Wall Boulevard veterans who departed to form highly a success boutique companies, Dougan’s Exos had the entire attainable to be the venerable Credit score Suisse CEO’s swan song. He on the starting put began taking into consideration the postulate for a boutique Wall Boulevard advisory firm in 2016, in step with the Wall Boulevard Journal, and had even lined up as valuable as $3 billion in funding from sovereign wealth funds whose commitments later evaporated. By 2018, his notion had morphed to focal point on securities buying and selling and constructing instrument instruments both for Exos’ absorb operations and to license to other shops.
Exos forged a wide accumulate opening substitute traces in funding banking, technology incubation, crypto mining and ETF sponsorships. It concerned about smaller companies in general no longer eminent by bigger banks, with the postulate that Exos would be in a position to build relationships and scale up to score more profitable advising deals fancy initial public choices once the stock markets increase. Most of its contemporary choices have but to endure most indispensable fruit however just a few of that is timing.
As an illustration, in 2019, Exos began a cryptocurrency mining operation in North The US concerned about mining Bitcoin BTC
, Z-Money, Zen and Bolt DASH
tokens. In 2021, it identified Paraguay as a dapper destination for crypto mining since the country equipped score admission to to renewable hydro-electric energy and imposed low taxes on mining machine imports. Exos even utilized for a $12 million loan from decentralized finance market MakerDAO to purchase 3,000 mining machines, which became denied. Closing year became a brutal year for crypto mining operations as higher prices of capital and falling bitcoin prices turned many of these ventures into cash losers.
Likewise the marketplace for particular cause acquisition companies (SPACs) has long previous from sizzling hot when Exos entered to frigid winter. No doubt one of Exos’ advisory possibilities became Alpha Healthcare Acquisition Corp, a SPAC that merged with Humacyte, a biotechnology firm cofounded by Dougan’s wife, Dr. Laura Niklason, and a firm that Dougan serene retains a $59 million stake in. Humacyte is in dead stage clinical trials for bioengineered human tissues and organs that will be weak to restore sufferers with vascular trauma. Humacyte’s stock has fallen to $3.39 from its IPO label of $10 in dead 2020.
Exos has also launched two SPAC ETFs in partnership with asset manager Morgan Creek in January 2021 and July 2020, however both have flopped. In August 2022, the Morgan Creek-Exos SPAC Originated ETF (SPXZ) became liquidated. The opposite one, Morgan Creek-Exos Active SPAC Arbitrage ETF (CSH), has handiest $8 million in assets beneath administration. Since 2021, SPAC deal volume has shrunk by about 98%, in step with SPACInsider, as rising inflation and pastime charges have made investors nervous, inflicting them to drag their funding, and regulators have elevated scrutiny.
Synthetic intelligence has been any other put of funding for Exos. Four years ago, Exos incubated a startup known as Claira, which makes say of man made intelligence to snappy define apt contracts. The early stage startup has since spun out into its absorb firm–it has about 20 employees on the present time, in step with LinkedIn. In June 2022, thru its technology ventures arm, Exos got a firm leveraging AI in asset administration known as Pluribus Labs. Exos has also constructed a product for diminutive substitute lending known as Snort and a portfolio optimization instrument dubbed Mortgage Hunter it hopes to license externally. It be unclear on the present time if any of Exos’ siloed substitute traces and early-stage investments have had any unswerving traction.
Even earlier than Exos’ contemporary missed payroll, worker turnover has been high and employees morale low, tell contemporary and venerable employees. Since 2018, three replacement other folks have served as head of operations. Closing June, Chief Financial Officer Jason Hauf abandoned Exos for financial technology firm and brokerage BGC partners. Workers learned of Hauf’s departure from BGC’s announcement on his final day in region of labor, two venerable employees tell.
Earlier this week, Dougan’s venerable employer Credit score Suisse met a distressed quit to its existence as an objective firm—it became got for correct $3.2 billion by competitor UBS amid concerns that losses at Credit score Suisse would exacerbate turmoil in the realm banking machine. Now Exos has a steep climb ahead because it faces a no longer easy ambiance for advisory deals and startup funding. Dougan is rarely any stranger to navigating valuable markets, however he now no longer has the backing of a longtime designate and the generation of easy cash deals and continuously buoyant markets also can almost definitely be in the rearview judge. Quit tuned.
