Forbes’s New Leadership Buyout Isn’t What It Seems; It’s an International Takeover

On May 12, it was announced that the founder and CEO of Luminar, Austin Russell, will acquire majority ownership of Forbes Global Media Holdings in a transaction valuing the company at nearly $800 million. Russell, an American who is the youngest self-made millionaire at 28 years old, has entered into a definitive agreement with Hong-Kong based investment firm Integrated Whale Media (IWM). According to the deal structure made public, Russell will hold an 82% interest in the entity. 

IWM acquired Forbes Media from the Forbes family in 2014, in a deal that was valued at $475 million and gave IWM 95% of the company. The media brand has been trying to sell since 2019, but has faced regulatory pushback due to concerns over foreign investors, notably those with connections to Russia and the Chinese Community Party. 

With this latest deal, media headlines from sources like Businesswire declare that it brings Forbes ownership back to the United States, with a “renewed focus on helping shape the next generation of capitalism where financial success and building value for the world both intersect.” However, the acquisition has been a false narrative. The agreement is an international takeover and not the domestic salvation the American public is being promised. 

The Misinformation of the Forbes Buyout

According to a report by Axios, Russell plans to pay only $10 million of his own money for his 82% share of Forbes, which comes at a total cost of $656 million. 

Where is the rest of the money coming from? Sources familiar with the deal tell Axios, the rest is coming from foreign investors. 

While Russell has been put forward as the face behind the deal, making it appear that an American citizen is buying the giant media asset, he’s actually making a small personal financial contribution. Behind the scenes, the deal is being negotiated with Russell and four other sources to finance his portion, according to Axios. 

The potential acquisition partners include:

• Julius Mwale, a Kenyan businessman who contributed tens of millions of dollars.

• Bulat Utemuratov, a Kazakhstani businessman who was reportedly prepared to contribute roughly $50 million, sources say, although he is no longer involved in the deal, according to the Utemuratov spokesperson communicating with Axios.

• Sun Group, an India-based media conglomerate, whose vice chairman Shiv Khemka plans to contribute roughly $200–300 million.

• GSV, a Silicon Valley-based investment firm that is reportedly helping to bring in a special purpose vehicle, but doesn’t plan to invest its own capital.

• Integrated Whale Media, the current Hong Kong-based majority owner of Forbes, which will retain an 8% stake in the company. The Forbes family will be giving up its 5% stake and Steve Forbes will no longer serve on the board. 

A spokesperson for IWM told Axios that its report does not align with the facts of the deal signed last week, and added, “Investors from the United States account for a majority of the total committed capital.” However, Axios questions if the acquisition announcement was meant to be a trial balloon to determine how the agreement would be received by the media and congressional leaders.

Russell has just six months to gather the funds and there is a $35 million fee if either side of the deal walks away. A deal involving many of the same players was on the table earlier this year, but eventually dropped when IWM feared that the lead investor, India-based Sun Group, would cause regulator pushback. 

Why the Deception?

So, what makes this deal different? 

An American face. 

While mainstream media is touting the acquisition of Forbes as an American win—keeping the brand in the hands of a U.S. businessman, sources familiar with the deal indicate that a substantial portion of the bill is being paid for by foreign investors. 

Why use Russell as the face of the deal when he’s contributing only 1.5% of the money needed to pay for it? 

When considering a Forbes deal that fell through earlier this year, after concerns were raised about the deal discussed before that, the focus may now be on bypassing regulatory concerns. 

In April, Forbes removed Sun Group as the lead investor in an acquisition deal because of the group’s ties to Russia, Axios reported. Forbes hoped to close that deal by the end of March, but feared it wouldn’t be cleared by the U.S. regulatory review. The involvement of foreign entities in a merger would require approval by the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign investments in major American operations and how they will impact national security.

Because Sun Group vice chair Shiv Khemka built his business and has lived in Russia for decades, Forbes opted to find a regulatory-friendly face to lead the deal instead. Axios reported in April that Forbes had its eyes on high-net American individuals, such as tech billionaires who would come in as investors to make up the majority of the funds needed. 

According to an article by Semafor, Citigroup bankers had been canvassing private-equity shops and family offices for names that might win approval from Washington. The goal was to raise enough additional American money to make Khemka a minority investor.

This recent deal bust was after United States senators and Treasury Secretary Janet Yellen raised concerns in 2022 about the previously proposed deal between Forbes and Magnum Opus, a special purpose acquisition company controlled by the Chinese Communist Party. 

History of the Deal

After Sun Group was removed as lead investor from the investor consortium in April, Austin Russell entered the Forbes acquisition deal. Russell seems an unlikely candidate to be the main investor—his fortune is not large enough and he has never been involved in media before.  

Axios reports Russell was approached by Russian businessman Magomed Musaev, who bought Forbes Russia in 2018. Russell had ties to Musaev, the president of GVA Capital whose company invested $20 million in Russell’s business Luminar. 

Musaev also has ties to Sun Group vice chairman and Indian billionaire Shiv Khemka; the two have done business in Russia for years.   

Why Is This a Problem?

Forbes is an editorial institution, a recognized name in news, journalism, and American business. While headlines claim that it will once again be in American hands, after a decade of “controversial Chinese ownership,” according to The Capitalist, Forbes and Russell have not disclosed how (and by whom) the $656 million will be secured. Their strategy is to use the guise of a young wonderkid, when in reality he’s the face of a group of many faceless confirmed foreign investors. 

Why may this be a problem? 

A 1990 article published in the Los Angeles Times states that “in the past decade, foreign companies have acquired a significant share of American media, taking control of companies that sell images and ideas for the ultimate marketplace of people’s minds.” 

In the case with Forbes, Americans are being sold a homegrown leading man to appease the masses and regulatory agencies, while foreign investors are kept out of the headlines. When a mega-business media company isn’t upfront about its ownership and strategy, how does it expect to secure American trust? 

Last year, Gallup reported that only 28% of U.S. adults have confidence in the media and 38% have none at all in newspapers, TV, and radio. It is more important than ever that news outlets recapture the trust of the public and undo the political polarization that has been linked to false stories propagated by foreign countries such as Russia.

Does IWM have the company’s or America’s best interests in mind, or are they focused on solidifying a deal they’ve been trying to close for five years?

An educated public is required for democracy to function effectively. Despite the past few years of fake news claims and divisive news outlets, journalism still remains integral to informing the public. A news and information outlet the size of Forbes, funded by outside investments, is bad news for people living in the United States. This is especially true when you consider that the deal itself isn’t being reported on accurately.