A Long Island brokerage firm, thanks to the JOBS Act and a series of webinars, has aided in the sale of $700 million in bonds by Denver-based Phoenix Capital, with yields reaching as high as 13%. Phoenix Capital, led by Matt Willer, specializes in acquiring mineral rights and drilling independently, raising funds primarily from investors above the age of 55 and drawing half of its funds from 401(k)s and IRAs. Willer emphasizes the reliability and profitability of the unsecured private placement bonds, comparing them to “mailbox money.”
Phoenix Capital Group was founded in 2019 by Adam Ferrari, a petroleum engineer turned financier. Ferrari’s experience in the oil and gas industry led him to recognize the potential for high yields, appealing to investors seeking returns. With the assistance of Congress’s JOBS Act, which allows for the sale of unregistered securities directly to individual investors, Phoenix has been able to capitalize on the gap left by large institutional investors moving away from fossil fuels. The company has raised significant funds through its high-yield oil bonds.
Adam Ferrari’s journey to founding Phoenix Capital Group began with a background in engineering, working for major companies in the oil and gas industry before venturing into investment banking. Despite some legal issues in the past, including a felony theft charge in Colorado, Ferrari maintains his innocence and the expungement of his record. He has leveraged his expertise in the energy sector to build multiple successful companies, focusing on acquiring mineral rights and royalties.
Phoenix’s aggressive approach to selling high-yield oil bonds has raised questions about the company’s financial structure and risk profile. The company’s debt-to-EBITDA ratio is significantly higher than industry standards, prompting concerns about sustainability and credit risk. While Phoenix assures investors of profitability even at lower oil prices, critics warn against relying on probable reserves for payouts and caution against high leverage.
Despite challenges and legal scrutiny, Phoenix remains focused on expanding its fundraising efforts, recently securing a loan from Fortress Investment Group. The terms of the loan, which are more favorable than the bonds sold to retail investors, suggest a complex financial strategy to meet obligations and manage risk. While institutional investors may receive better terms, retail investors continue to be targeted by Phoenix for their high-yield offerings, raising concerns about transparency and regulatory compliance.
As Phoenix continues to navigate the complexities of the energy and finance industries, questions remain about the company’s long-term viability and risk management. The intersection of high-yield investments, regulatory scrutiny, and investor expectations creates a challenging landscape for Phoenix and its CEO, Adam Ferrari. With ongoing communication with the SEC and a focus on fundraising, Phoenix faces both opportunities and potential pitfalls as it seeks to expand its presence in the oil and gas market.
