Phunware, a data company for the Trump campaign, has secured millions in small business aid against coronaviruses

Digital technology company specializing in mass collection of location data from smartphones and working for President Donald Trump’s re-election campaign has received millions from the federal government coronavirus relief fund for small businesses.

The Phunware company, which now has around 60 employees, was eligible for the low-interest loan through the Paycheck Protection Program, which targets companies with fewer than 500 workers. There is no allegation of illegality associated with his loan.

But the loan size – $ 2.85 million – is nearly 14 times the current P3 average of $ 206,000. Meanwhile, hundreds of thousands of small businesses got nothing as the nearly $ 350 billion loan program ran out of money in just two weeks. (Congress allocates an additional $ 310 billion for PPP loan fund this week.)

The speed of the loan from Phunware is also remarkable. The Texas-based listed company appointed a former Wall Street executive as chairman of the board on March 30, the day after Congress passed the PPP program under the CARES Act of 2,200. billions of dollars.

The manager is Blythe Masters, who until 2014 had spent most of her career in financial services at JPMorgan Chase, the bank that provided the PPP loan to Phunware. The company received its loan funds two days after the request.

“It was supposed to be first come, first served,” said Lou Rabon, CEO of Cyber ​​Defense Group, a New York-based security consultancy that also applied for a PPP loan through JPMorgan Chase.

Roban is the principal plaintiff in a lawsuit seeking class action status against JPMorgan Chase which alleges the bank unfairly favored larger clients to increase profits through the granting of loans for the federal program. “Data provided by the US Small Business Administration reveals that … Chase prioritized and loaded requests with higher loan amounts,” according to the lawsuit.


Small business emergency relief fund dries up …

06:35

Rabon’s company applied for a loan of less than $ 200,000 on April 6, the first day JPMorgan Chase began accepting applications.

Phunware applied for its loan through JPMorgan Chase on April 8 and received the money on April 10, according to a statement at the time from its CEO and a financial file with the Securities and Exchange Commission.

Rabon is still waiting. “My opinion of Chase is not very high right now,” he said.

Phunware CEO Alan Knitowski and Masters did not return requests for comment for this story. A spokesperson for JPMorgan Chase said he was not commenting on individual borrowers. The bank declined to comment on the lawsuit or its merits.

A potential power in tracking location data

Phunware received nearly $ 3 million in revenue from Trump’s re-election campaign last year, or about 15% of his nearly $ 20 million in total sales, according to an SEC file. In 2018, 66% of his $ 31 million in revenue at the time came from working for client Fox Networks.

Phunware has not disclosed how much he expects to make from the Trump campaign this year. But the company has said in documents that it is actively pursuing political work during the 2020 presidential election cycle.

Much of the company’s business has revolved around developing apps for clients like Fox and the NFL, and collecting data about the users of those apps, according to Brittany Kaiser, former director of business development at Cambridge Analytica, a policy consulting firm that performed data analysis. for the 2016 Trump campaign.

Kaiser was appointed to the board of directors of Phunware in June 2019, but said she soon after decided not to join the cabinet because he had agreed to serve Trump’s re-election efforts in 2020.

“They have capabilities Cambridge never had; Cambridge hasn’t really developed apps,” Kaiser said. “Cambridge bought location data, but they didn’t collect it themselves. In a presentation to investors in 2019, Phunware said it has the capacity to collect location data from more than one billion active mobile devices per month.

A spokesperson for the Trump 2020 campaign did not respond to questions sent for this article.

On Sunday, Knitowski tweeted a link to the Donald Trump for President app.

“Together let’s keep America great. @Phunware,” Knitowski wrote in the tweet.

Phunware was founded in 2009 by Knitowski and CTO Luam Dang. The company has raised over $ 100 million since then and recorded millions in losses. In an April financial filing, Phunware said the company has “a history of operating losses and negative operating cash flow and expects these trends to continue for the foreseeable future.”

In late 2018, Phunware went public in a complex transaction involving a shell company controlled by two Greek shipping executives. At the time, Phunware announced that it was launching its own digital currency, PhunCoin.

Caught in one of the waves of investor hype around bitcoin and other digital currencies, shares of Phunware climbed 2,100% in early 2019, from $ 14 to over $ 300. When this wave broke, the company’s shares collapsed. Phunware shares recently traded at just 64 cents each. The company says it has put PhunCoin on hold.

Over the past month, however, Phunware announced the launch of a national registry for ventilators and a product the company says will use geolocation data to help governments manage pandemic response programs. and follow up on cases.

As of Thursday, Phunware’s National Ventilator Registry has been a one-stop web page for hospitals and others to enter their ventilator information.

Success in Small Business Lending

JPMorgan Chase said all of the companies that got PPP loans through the bank were customers. But JPMorgan wasn’t Phunware’s first stop, CEO Knitowski told his hometown Austin Business Journal on April 16. The company initially sought help from Western Alliance’s Bridge Bank, but was told the bank was not participating in the paycheck protection program, Knitowski said.

The Western Alliance website says it has offered program loans, and a company presentation says the bank has approved about $ 1.5 billion in PPP loans to 2,600 applicants.

Masters, the former JPMorgan executive, joined the Phunware board at the end of December. On March 30, the day after the CARES Act was passed, Phunware announced his elevation to the chairmanship of its board of directors. The company has yet to disclose how much it pays Masters for serving on its board of directors, but documents indicate that it granted him at the end of February 125,523 shares in restricted stock units which vest over 13 months. . The shares were worth nearly $ 160,000 at the time of grant.


Small businesses are struggling to finance themselves …

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Masters was a star in the JPMorgan universe who led a team of bankers in the mid-1990s that pioneered credit default swaps, the derivative contracts that ultimately played a role in fueling the real estate bubble. that led to the 2008 financial crisis. She took over as head of JPMorgan’s highly profitable commodities division and was seen as a possible successor to CEO Jamie Dimon, but left the bank in 2014.

After JPMorgan, Masters was the CEO of Digital Assets Holdings, a developer of blockchain technology. She left this company at the end of 2018.

A JPMorgan spokesperson declined to answer if Masters had played a role in helping Phunware navigate JPMorgan’s PPP loan process. Messages left for Masters at Motive Partners, the private equity firm she joined in December, have not been returned.

The math behind money

Phunware said in an April 13 press release touting its $ 2.85 million in aid to small businesses that “The proceeds from the PPP loan will be mainly used for wage costs and to retain workers.”

The payroll protection program offers loans covering eight weeks of workers’ wages. Phunware had 93 employees at the end of last year, according to SEC documents. But his payroll expenses recently declined: he laid off 37 employees in the first quarter, according to a March 30 filing with the SEC.

In order for Phunware to get its entire loan canceled plus 1% interest from the government, it would have to rehire all the leave workers who had been employed in mid-February and pay them for eight weeks, according to the rules. of Paycheck Protection. Program.

Phunware did not respond to a question from CBS News about whether she has rehired any workers on leave since receiving the proceeds from her loan.

In the April 16 interview with the Austin Business Journal, Knitowski declined to say how the P3 funds would be used. “We’re more focused on getting through the unknown,” he told the publication, and the $ 2.8 million loan “gets us through these uncertain times.”

Almost 1.7 million small businesses got a slice of the $ 350 billion PPP pie before the money was spent. But large companies with access to public markets and investors have also been successful in securing loans.

As of Wednesday, 151 publicly traded companies, including owners of Ruth’s Chris Steak House and Pollo Tropical restaurant chain as well as Phunware, revealed they had received nearly $ 540 million in PPP loans, according to an analysis of data from the SEC by CBS News. (Ruth’s owner Chris said on Thursday that he would pay back the money he got from his PPP loan.) About 20% of the total loan amount was extended by JPMorgan Chase, the country’s largest bank in terms of assets.

NPR reported on Tuesday that another company linked to the White House received a large PPP loan. Continental Materials Corp., which manufactures heating and cooling equipment, received a loan of $ 5.5 million, according to public documents. The company is majority owned by the family of U.S. Ambassador to Belgium Ronald Gidwitz, who was the finance chairman of Mr. Trump’s 2016 presidential campaign in Illinois.

President Trump was questioned Monday during a White House press briefing on large companies receiving loans from the Paycheck Protection Program. He said his administration might ask some recipients to return the funds.

“If someone has something that we think is inappropriate, we will take it back,” Mr. Trump said.

Additional reporting by Megan Towey of CBS News.


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