One scoop to start: the US billionaire Krause family is nearing an agreement to acquire a majority stake in the Italian football club Parma, in a move that would make it the latest American investor in the Serie A league.
Also, the hedge fund billionaire Steve Cohen (pictured below) clinched a deal to buy the New York Mets baseball team for $2.4bn.
Available on demand: missed last week’s DD Forum taking you inside the Wirecard investigation? The recording is here.
Nikola’s fender bender with the facts
Life comes at you faster than a hydrogen-powered electric truck rolling down a hill when you go from running a privately owned business to a public company. Just ask Trevor Milton (pictured below).
One day you’re a high-flying chief executive of an electric truck company who’s inking multibillion-dollar deals with General Motors and the next you’re having to defend allegations that your vehicles can only go downhill.
Welcome to the ups and downs (ahem) of running a publicly traded company.
Since that sleepless night back in June after Nikola agreed to go public via a reverse merger with a special purpose acquisition company, Milton has been on a wild ride.
Despite having no product to sell, Nikola’s stock price shot up to a peak of almost $80 during its first few days as a publicly traded company. At one point it reached a valuation of more than $30bn, on par with Ford. The listing made Milton a billionaire on paper.
Better yet, the Arizona-based company agreed to sell an 11 per cent stake to GM last week. Shares in Nikola jumped 50 per cent.
But just 48 hours later, short-sellers at Hindenburg Research called Nikola “an intricate fraud” in a scathing report released on Thursday. Nikola’s market capitalisation is now down to about $13bn. In response, Milton said the company “has nothing to hide”.
If you’ve got some time, the Hindenburg report is worth a full read. One particular allegation stands out — that Nikola faked a demonstration of one of its trucks in 2018 by rolling it downhill. The claim was backed up by FT reporting last week.
Then Milton himself confirmed it in a 2,700-word rebuttal to Hindenburg’s claim. “Nikola never stated its truck was driving under its own propulsion in the video,” he clarified on Monday.
Yes, Nikola described the video as “in motion” but didn’t say the truck was “under its own propulsion”. And it was a “gentle hill”. Glad we got that sorted.
The elements are all there: a founder who wants to “change the world”, a company with a large valuation but a product that doesn’t yet exist, and a “haters gonna hate” mentality at the first sign of criticism.
Milton doesn’t get any points for originality here — he did after all name his company Nikola when its biggest rival is called Tesla.
It’s important to remember that GM has not paid cash for its Nikola stake. It will instead contribute its battery and fuel cell technology to help develop Nikola’s vehicles.
If things do go wrong with the investment, it will be embarrassing but there’s likely little financial loss.
For Spacs, however, it could be a huge blow. It was just a few weeks ago that team DD asked whether blank-cheque companies could shake their bad reputation.
We’ll be talking about this very topic at the next DD forum on the Spac comeback this Thursday at 1pm New York time with DD’s James Fontanella-Khan and Ortenca Aliaj. Joining us will be Steve Girsky, a Nikola board member. Sign-up here.
TikTok Wars: episode . . . we’ve actually lost count
It’s been almost a month since DD’s James Fontanella-Khan and Miles Kruppa broke the news that Oracle had entered the race to purchase TikTok’s US operations.
Few predicted what would happen next. Oracle, best known for boring enterprise software products, has become the unlikely winner of the bidding war, beating out Microsoft to become the “trusted technology provider” for the viral video app in the US.
US Treasury secretary Steven Mnuchin said he would review the proposal this week before making a recommendation to President Donald Trump.
The deal appears to stop short of the full sale preferred by the Trump administration. But it could be more palatable to Beijing, which has fired shots at the US president for trying to force a sale to a US company.
Here’s where things get tricky. ByteDance is trying to seal the deal before a mid-September deadline imposed by the Committee on Foreign Investment in the US, which has the power to block the transaction.
If DD readers were to take Trump seriously, it’s unclear how a narrowly tailored partnership would satisfy the president’s national security concerns.
Sources have told DD that Oracle promises to firewall the data of US TikTok users from its Chinese parent company. But that limited assurance has already drawn criticism from some of the more hawkish members of Trump’s party, such as Josh Hawley, a US senator from Missouri.
People familiar with Microsoft’s thinking tell DD that China’s export controls poked holes in its proposal, making it difficult for the tech group to gain control of TikTok’s algorithms.
Former Facebook security head Alex Stamos accurately sums up the farcical nature of the current situation in one tweet.
Bottom line: there’s a bunch of issues to be hammered out before the final deadline, between both Washington and Beijing and Oracle and ByteDance.
Also on the horizon is a US election — the results of which the current president has already suggested he could contest.
As the FT’s Lex column puts it: “For Microsoft, losing out to Oracle looks less like defeat than a lucky escape.”
SoftBank: where to begin
We know what you are thinking. The endless stream of SoftBank is getting exhausting.
How much crazy could there be? Don’t forget this is the company that found WeWork’s Adam Neumann and told him, “Hey, be more crazy!”
Over the past 48 hours, SoftBank has dumped its largest-ever purchase, Arm Holdings, the UK company formerly lauded by SoftBank chief Masayoshi Son as the linchpin of the Japanese group’s future when he paid $32bn for it four years ago.
The buyer was US chip company Nvidia, who agreed to pay $33.5bn. The price raises the first question to ask about the deal, which was presented to the market as a $40bn transaction.
That figure takes into account $1.5bn of Nvidia shares being issued to Arm employees, in the hope they don’t jump ship. The other portion is a $5bn cash or stock payment that SoftBank is eligible for, but which no one seemed able to elaborate on.
Two-thirds of the deal will be paid in Nvidia shares to SoftBank, meaning the Japanese group will own 6.7 per cent of the US company when the deal closes.
Why sell a deal as $40bn when it was really something else? Ego and reputation. For years, Masa ran around the world telling anyone who would listen of SoftBank’s internal rate of return of 44 per cent.
That’s not looking so good with Arm. When SoftBank bought Arm for $32bn in cash, Nvidia was worth $30bn. Today Nvidia is worth well over $300bn.
By the way, several bankers were asking DD who advised on the deal. That would be Raine and Zaoui & Co on the SoftBank side. If Nvidia used bankers, no one on the SoftBank side claims to have seen them.
Another question to ask about the deal is that if SoftBank took so much in shares, what does it say about its ability to deploy cash in future?
That thought hasn’t escaped the financial engineers who have filled the ranks at SoftBank. Lately, they’ve been toying with the idea of borrowing money from banks and attempting a management buyout that takes the company private.
The cash on SoftBank’s balance sheet would then be used to pay down the enormous debt load involved in making the deal happen. Why do it? To capture what they believe is a huge discount between where SoftBank trades and the value of its holdings.
The other benefit of going private? Masa wouldn’t have to spend all his time convincing you he’s not crazy.
Centerview Partners hired John Rhea as a partner in its New York office. He joins from financial services group Siebert Williams Shank & Co where he worked as president of corporate finance and capital markets.
Shearman & Sterling hired Simon Marchant as a senior adviser in its London office. Marchant is a veteran lawyer who spent most of his career at Freshfields.
Latham & Watkins hired Manoj Tulsiani as a partner in its London-based capital markets practice. He joins from Linklaters.
Neil Whoriskey, who co-led the M&A and corporate advisory practices at Cleary Gottlieb Steen & Hamilton, is moving to Milbank, as reported by Law.com.
At a stalemate For an avid chess player, LVMH boss Bernard Arnault is struggling to level his checkmate move against Tiffany as he seeks to reverse a $16.6bn deal with the jeweller. (FT)
Bad education Disney expected to ace the streaming debut of its live-action Mulan remake, but instead drew a swift backlash for its decision to film in Xinjiang near a widespread network of Muslim “re-education” camps. The entertainment group faces a re-education of its own on its efforts to woo Chinese consumers. (FT)
No more Mr Nice Guy Google’s Sundar Pichai has earned a solid nice-guy reputation. But an incoming barrage of potential antitrust suits, the group’s first revenue drop in history, and a culture grappling with sexual harassment may force him to toughen his exterior. (WSJ)
Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt, Mark Vandevelde and Francesca Friday in New York and Miles Kruppa in San Francisco. Please send feedback to email@example.com
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