Today the Treasury and the Small Business Administration released the full list of companies that received Paycheck Protection Program loans - which become grants and are fully forgivable if used to pay employee salaries and/or rent - for an amount greater than $150,000. The complete data, which includes a total of 661,219 recipients, can be accessed here.
As a reminder, the PPP was designed to help small businesses weather fallout from the coronavirus pandemic. It did so by funding small and medium companies with 500 employees or less; the loan/grant was meant to cover up to two and a half months of worker compensation (capped at an annualized $100,000) or in other words, the Treasury would provide at most $8,333 per employee for 2.5 months. That, at least, was the theory - in practice, things ended up being different.
To be sure, the PPP program helped a broad swath of organizations, including small restaurants, construction firms, retail locations and non-profits. Many of the conventional recipients of PPP loans were restaurant chains were struggling before the pandemic and were hit particularly hard by the health crisis, since they focus on dine-in service instead of to-go sales. Among them was P.F. Chang’s China Bistro Inc., a restaurant operator with more than 200 U.S. locations. Other restaurant chains included Mexican chain Rubio’s Restaurants Inc. and California-based Black Angus Steakhouses LLC.
That said, there was some "peculiar" recipients: among the recipients were Boies Schiller, the law firm headed by antitrust litigator David Boies, the Girl Scouts of the United States of America, Illinois-based megachurch Willow Creek Community Church and the prominent New York synagogue Temple Emanu-El.
Yet while many businesses legitimately needed the funds to continue operations as without the PPP emergency cash infusion thousands of businesses would have shut down and been forced to layoff millions of workers, when it comes to a certain subset of recipients, questions have emerged.
Take for example NAICS code 523930 which is defined as "Investment Advisors", or companies who are paid very generous fees to anticipate precisely the kind of downturn that the covid unleashed and to steer their business successfully through it, especially since many - such as this blog - were repeatedly warning about the potentially catastrophic consequences of the global pandemic as early as January.
And yet, a casual search through the list of PPP recipients reveals that no less than 1,436 Investment Advisors applied for, and received PPP assistance, in many cases for well over $1 million. One of the most prominent firms, perhaps due to its daily appearances on CNBC, is Ritholz Wealth Management which as we noted previously repaid its PPP loan which according to the SBA was in the $350K-$1MM range. Ritholtz Wealth CEO Josh Bronwn even wrote a blog post explaining what he did in "Every cent, plus interest" in which he tried to justify why a successful RIA would need up to $1 million in government bailout loans.
Two weeks ago we paid back the entirety of our loan to JPMorgan Chase that we had borrowed under the Payroll Protection Program. Every cent, plus interest.
We’re replacing it with a traditional line of credit from Chase. We’ll probably get access to our line next month, with the intention of only having to use it in an emergency. Because of the uncertainty from the pandemic and resulting economic shutdown, we’re going to add this option to give us the financial flexibility to deal with whatever may come. This is not a judgment of firms that choose to apply for forgiveness of their loans, but we don’t need to. Aside from losing the revenue from our conference business and other events, we’re operating smoothly and counting our blessings, as are the majority of our business owner clients. We’re very lucky and I don’t take it for granted.
Be that as it may, we still have a question: as the SBA disclosed, the loan was for over $350,000 and up to $1 million, and yet according to the SBA only 4 jobs were projected to be retained.
We hope this is merely a typo because otherwise someone in the loan submission process might have had a bit of a trigger finger.
Then there is the curious case of another investment advisor and Tesla permabull, Gerber Kawasaki, whose PPP loan was approved just days after he claimed on twitter that the "PPP thing looks like a scam."
Then there is the odd question of why Mr Ross Gerber submitted his loan under NAICS code 441228 "Motorcycle, ATV and Other Motor Vehicle Dealers" - does Gerber Kawasaki also sell motorbikes and cars on the side?
In any case, we will have many more questions and observations shortly, but for now, here is the full list of companies in the "Investment Advisor" NAICS category of 523930 that received PPP grants. For their sake, we certainly hope they disclosed to their clients on form ADV 2 that they were recipients of such loans, as failure to do so would be tantamount to non-disclosure of key information and both FINRA and the SEC would be especially curious why this "omission" was made.
All we will say here is that instead of hoping and waiting for the US government to bail them out, all these "professional" money managers and advisors could have predicted what was coming and profited from it instead, or is actually doing your job in a time of ubiquitous moral hazard now viewed as an anachronism?
And if that's not enough, here are another 583 PPP recipients who listed NAICS code of 523920 aka "Portfolio Management" in their loan applocation and who, if they were any good at it, would have anticipated and profited from the March crash, instead of requesting a government bailout well after the fact.