Profile Of Russian Billionaire, Mikhail Prokhorov (GLD)
Last night on CBS, 60 minutes took an in depth look at Russian billionaire, Mikhail Prokhorov. Bloomberg Television's Ryan Chilcote also recently spent some time with Russia's first or second (depending on sources) wealthiest man in a piece titled "The Basketball Billionaire: From Russia with Cash." Prokhorov is seeking to raise his profile in America and is the new owner of the NBA's New Jersey Nets. He purchased an 80% stake in the team and a 45% share in their new Brooklyn arena for $200 million. Mr. Prokhorov is 44 years old.
Prokhorov's first foray into the business world began in 1988 when he started a company which made stone-washed jeans. Eventually, this venture grew to employ 300 people and Prokhorov realized that he had a talent for managing people. In 1989, after graduating from the Moscow Finance Institute, he made a name for himself in the financial sector by joining the International Bank for Economic Cooperation. He eventually rose to run the currency department. While working there, Prokhorov met Vladimir Potanin, who would become his primary business partner for the next 16 years. The pair started out by opening up their own financial institution, MFK. According to the billionaire, the duo complemented each other, with Potanin as the public and political face and Prokhorov acting as the banker, manager and headhunter for the group.
“One plus one was much more than two when we were together,” Prokhorov says. “We are absolutely different in everything. We have a funny joke. If you put 10 girls of different appearances in front of us, we will choose five absolutely different girls. No overlap.”
In 1995, MFK was a success and Potanin and Prokhorov decided to branch out. They paid the government $170 million to gain the right to manage the government's 38% stake in Norilsk Nickel. Two years later, they bought the stake outright for $250 million. Under Prokhorov's guidance, the company underwent a massive restructuring and net profit rose to $6 billion in 2006 compared to $1 billion in 2001. During this time period, Prokhorov also diversified his holdings by buying gold miner Polyrus.
In an embarrassing, but fortunate twist of fate, Prokhorov was arrested in France for running a ring of prostitutes in January of 2007. The magnate had flown with a group of friends, which included eight models, to an alpine resort about 125 miles outside of Lyon, France on a ski holiday. Prokhorov ended up spending four days in jail and garnered considerable notoriety in Russia as a result of his arrest. In hindsight, the whole thing appears to be a misunderstanding. Prokhorov, who makes no apologies for enjoying the company of beautiful young women, says his female companions were not prostitutes and that he never paid them. “It was just ‘lost in translation,’” Prokhorov says. “It was a total misunderstanding by the police.”
The incident did, however, exacerbate a rift between Prokhorov and his business partner, Vladimir Potanin. As a result, the two began negotiating to split up their assets. To make a long story short, Prokhorov unloaded a vast amount of very valuable assets right at the top of the market just prior to the financial crisis. This enabled him to pick through the pieces and snap up discounted assets in 2009. This good fortune allowed him to grow his wealth while many Russian billionaires were losing sizable chunks of theirs. Although Prokhorov says he is not sure how much money he has, his fortune is currently estimated at more than $13 billion.
He continues to grow his stake in gold miner, Polyrus. He says that he is using it as a hedge against the piles of cash he keeps in U.S. dollars. “I expect the price of gold to be between $1,000 and $1,300 for the next three years,” he says. For investors who have similar hedging goals as Pokhorov, the SPDR Gold Trust ETF (NYSE: GLD) is a cheap and efficient way to gain exposure to the precious metal.
The various profiles and interviews which have been circulating in the American press since Prokhorov purchased his share in the New Jersey Nets, reveal an interesting and dynamic man. The first thing that people notice about him, is his height - he is 6'7'' and probably won't look out of place when he pays his players a visit in the Nets locker room. He is a self confessed adrenaline junkie who enjoys performing extreme tricks on his jet skis. He is also extremely competitive and love sports. He works out for two hours everyday, frequently in his private gym in his home outside of Moscow. Unlike many of Russia's well known business figures, Prokhorov claims that he has never even had a sip of vodka. Another interesting tidbit is that the billionaire is a night owl, who normally goes to bed at around 3 in the morning.
If the recent media buzz surrounding the Russian billionaire and new NBA owner is any indication, we will probably be seeing a lot more of Mr. Prokhorov in the coming years as he attempts to resurrect the woeful Nets.
