PornHub Is Being Bought By A Private Equity Firm Called Ethical Capital

Proving once again that there is money in porn, adult content firm MindGeek–and PornHub’s parent–has been acquired by Ethical Capital Partners, a newly formed Canadian private equity firm.

MindGeek, based in Luxembourg, has dominated the adult market since the introduction of video streaming. According to those acquainted with the subject, its most current reported data suggest that revenues in 2018 topped $460 million, with profit margins approaching 50% at times.

Ethical Capital would not say how much it paid for MindGeek or where it raised the funds that enabled the six co-founders to acquire a company that claims to have over 115 million daily visits to porn sites like YouPorn and Brazzers.

Solomon Friedman, a lawyer and co-founding partner of Ethical Capital, said the management team, which includes lawyers and former cannabis investors, have “complete control of the acquisition and the assets,” adding that “no previous shareholders retain any ownership, right or control of the company in any way.”

MindGeek was embroiled in scandal three years ago after reports that young women’s movies emerged on its platforms, prompting Visa and Mastercard to cut relations, Canada’s parliament to open an investigation, and the firm to seek a buyer. In response, Prime Minister Justin Trudeau’s government approved a proposal to crack down on damaging online content, but the proposals were condemned as being overly draconian, and the project has now dropped farther down the legislative schedule.

Ethical Capital was founded last year and claims to be focused on technology companies with “legal and regulatory complexity and a value on transparency and responsibility.” It is led by cannabis entrepreneur Rocco Meliambro and criminal lawyer Fady Mansour, who is described as a managing partner. Derek Ogden, a retired Royal Canadian Mounted Police chief superintendent, is also a partner in the firm.

“The adult entertainment industry will always be the subject of significant legal and regulatory scrutiny,” Ogden said in the statement. “Our pre-close reviews revealed that MindGeek operates legally and responsibly. We look forward to communicating the path forward for MindGeek and its holdings.”

In the released statement, the equity firm touted that its acquisition will “add to the success that [MindGeek] continues to build” through, apparently, state-of-the-art tech and intellectual property investments.

Friedman stated that he believed the MindGeek lawsuits and criticism originated from a misunderstanding of how the company is currently securing its information, which was exacerbated in part by the previous owners’ secrecy.

“I want to engage regularly with stakeholders, including the media,” he said, adding that the new ownership wanted to exercise transparency.

Ethical Capital will not reveal the identity of its investors, but a representative stated that they do not include former MindGeek owners Bernd Bergmair, Feras Antoon, and David Tassillo, who will no longer be involved in the company.

Antoon and Tassillo resigned as CEO and COO of MindGeek, respectively, last year amid the blowback on the company’s policies in restricting nonconsensual video uploads on its websites.

The equity firm also said MindGeek’s remaining executives would continue to run the company but would not reveal their identities.

“At this point we are not identifying the current executives, as there is an unfortunate stigma [attached to the industry],” Friedman said.

MindGeek has subsequently confirmed that Mastercard has restored access to its subscription sites, but not to its advertising subsidiary TrafficJunky, which was knocked off by credit card providers last year after a court verdict deemed Visa accountable for illegal content on tube sites.

Visa, along with MindGeek’s former owners and the company itself, has been implicated in a lawsuit alleging that MindGeek made money by placing advertising next to illicit movies involving people under the age of 18 on its user-generated sites.

Though MindGeek’s legal headquarters are in Luxembourg, the majority of its operations are centered in Montreal. According to traffic tracking firm Similarweb, Pornhub was the 12th most visited website in the world last year.

The acquisition of MindGeek is Ethical Capital’s first transaction.

Information for this briefing was found via Bloomberg, Financial Times, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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