Financial PR Firms Took PPP Money. Do They Need It?
In spite of their big-name asset manager client rosters, financial PR firms say times are tough.
For the most part, hedge funds were not among the small businesses announced this week that qualified for the 4.9 million low-interest government loans granted so far under the Paycheck Protection Program. But several of the public relations firms they employ to burnish their brands and finesse negative headlines were.
Among the recipients are Prosek Partners, which was approved for a loan of between $2 million and $5 million, according to data from the Small Business Administration; Gasthalter & Co., which was approved for between $150,000 and $350,000, Dukas Linden Public Relations, which was approved for between $350,000 and $1 million; and Peppercomm, which received between $350,000 and $1 million, according to the data.
Prosek’s clients include Bridgewater Associates — the largest hedge fund firm in the world, managing roughly $160 billion — while Gasthalter & Co. represents several other boldface hedge fund names. Asset managers have performed strongly relative to other industries amid the pandemic, thanks to solid profit margins and strong performance in some strategies.
But executives at public relations firms that represent them say that their advisors and attorneys advised them to apply for the loans, given that they qualified under small business guidelines — and that the aid has enabled them to continue to service their clients without disruption.
These executives added that their fortunes ebb and flow with those of their clients — and many of those companies, not all of which are successful asset managers, have trimmed budgets amid their own struggles.
In a statement to Institutional Investor, Prosek pointed out that as an independent, 200-person business directly affected by the Covid-19 pandemic, it applied for a PPP loan “under the strict guidance of our legal counsel and financial advisers,” and that it has been adhering to the disclosures and certifications required to qualify for loan forgiveness. Prosek added that the loan has enabled the firm to preserve jobs. “We are grateful to the government for this assistance, which has allowed Prosek to retain its workforce thus far through the crisis.”
Peppercomm founder and chief executive officer Steve Cody said in a statement to II that some of its clients, particularly in the hard-hit food and beverage sectors, were negatively affected by the pandemic, forcing them to put his firm on “furlough.”
“As a small business quite vulnerable to the uncertainty brought on by the pandemic, we applied for, and received, a PPP loan,” Cody said in the statement. “The cash infusion not only provided us with a safety net to avoid layoffs despite the economic downturn but also allowed us to continue bringing new service offerings to market.” He added that the firm is using the money to cover operational expenses and salaries per the program guidelines. “We are confident these measures will assure the long-term success of our firm.”
Dukas and Gasthalter & Co. declined to comment.
[II Deep Dive: The Asset Managers Approved for PPP Money]
The Paycheck Protection Program was launched as part of the Coronavirus Aid, Relief, and Economic Security Act passed in late March, with the intention of helping small businesses keep workers on their payrolls during the Covid-19 crisis. The loans carry an interest rate of 1 percent, with no collateral required, and payments are deferred for six months. Borrowers also cannot be charged fees by lenders or the government.
What’s more, the loans will be forgiven by the SBA as long as companies meet certain employee retention criteria and the funds are used for eligible expenses. The program resumed accepting applications this week and will do so through August 8.
Since the government’s data dump on Monday, controversy has emerged over some of the recipients of the loans — which include white-collar law firms, lobbying firms, and investment firms run by wealthy former hedge fund managers. Critics contend that some of these companies did not need the financial help as much as other, more consumer-oriented businesses that are struggling to stay afloat amidst the coronavirus pandemic.
In late April, the Small Business Administration released a new rule barring hedge funds and private equity funds from receiving the loans after reports surfaced that some hedge funds and private equity firms had applied or intended to apply for them. But some investment firms apparently applied for and received the aid regardless, in spite of the rule, SBA data show.
Some of the investment firms listed as recipients of PPP loans contended that they were listed in error and had never applied for or received such a loan.