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North American Edition
30th July 2021
Global regulators come together to intensify SPAC scrutiny
The International Organization of Securities Commissions (IOSCO), made up of regulators in 130 jurisdictions worldwide, says its members have begun trading information and jointly monitoring deals involving special purpose acquisition companies (SPACs). Global SPAC IPOs boomed during the first half of 2021 - exceeding the record level set for all of last year - with 634 transactions completed, EY said in a report. Among those, 182 SPACs announced acquisitions by the end of June valued at a total of $470bn and 452 SPACs with about $136.5bn in funds were looking for investment targets. “While SPACs have long existed, transactions have surged recently, drawing regulatory attention to the issues SPACs raise,” IOSCO said in a statement after the first meeting of its SPAC Network. “While SPACs may offer alternative sources of funding and provide opportunities for investors, they may also raise regulatory concerns.” The SEC, an IOSCO member, issued guidance in April cautioning companies about the accounting treatment of SPAC warrants and the liability risk of forward-looking disclosures.
Credit Suisse profit slides in Q2
Credit Suisse has recorded a 78% fall in second-quarter net profit after the bank took a hit from the collapse of family office Archegos Capital. Revenues were down by 41% to $1.7bn compared to a year earlier. A Credit Suisse-commissioned report by law firm Paul, Weiss, Rifkind, Wharton & Garrison said the lender's “lackadaisical” attitude to risk and a lack of action on red flags led to its $5.5bn loss from the collapse of Archegos. Credit Suisse said that it will “put risk management at the heart of our decision-making processes” as a result of the Archegos failure.
U.S. Q2 economic growth weaker than expected
U.S. GDP surged 6.5% in the second quarter of the year on an annual basis, according to the Commerce Department, falling short of expectations as business reopenings and government aid fueled the recovery, but inflation and shortages held growth back. The overall increase came thanks to increasing personal expenditures, which rose 11.8% as consumers accounted for 69% of all activity. Nonresidential fixed investment, exports and state and local government spending also helped boost output. “The good news is that the economy has now surpassed its pre-pandemic level,” wrote Paul Ashworth, chief U.S. economist at Capital Economics. “But with the impact from the fiscal stimulus waning, surging prices weakening purchasing power, the Delta variant running amok in the south and the saving rate lower than we thought, we expect GDP growth to slow to 3.5% annualized in the second half of this year.”
Fed keeps rates unchanged, but heralds 'progress' toward goals
The Federal Reserve inched toward scaling back the easy-money policies adopted at the start of the pandemic by signaling that the process could start later this year. The Fed cut its benchmark interest rate to near zero in March 2020 and has been purchasing at least $120bn a month in Treasurys and mortgage bonds to provide extra stimulus to the economy. At the conclusion of their two-day meeting, Fed officials said the economy has made progress towards their goals of low unemployment and stable inflation - an indication that they could start reducing, or tapering, the purchases, later this year. The Fed’s statement modestly upgraded its assessment of the economy. “With progress on vaccinations and strong policy support, indicators of economic activity and employment have continued to strengthen,” it said. Fed Chairman Jerome Powell played down concerns about economic fallout from the spread of COVID-19’s Delta variant, which has led to increasing cases among unvaccinated populations; while it could lead to significant public health problems, he acknowledged, higher rates of vaccination and greater improvisation by consumers and businesses suggest “we’ve kind of learned to live with” the virus.
Canadian start-up 1Password is valued at $2bn
Canadian security and privacy tech start-up 1Password has announced a $100m fundraising round led by Silicon Valley venture capital firm Accel, valuing the company at $2bn. 1Password CEO Jeff Shiner noted the increasing cybersecurity challenges faced by organizations. For example, employees using apps an employer may not know about, and the difficulty of tracking employee usernames and passwords that has led to IT employees continuing to have access to their former employers' system.
Deloitte acquires cybersecurity firms Sentek and TransientX
Deloitte has announced the acquisition of two companies, Sentek Global and TransientX, as it continues efforts to bolster its secure networking and cyber remediation product offerings. A San Diego, California-based systems engineering and cybersecurity firm, Sentek serves the U.S. Navy and Department of Defense, also providing cybersecurity, program management, and integrated logistics services to undisclosed customers in “defense, security, and justice.” Complementing the Sentek deal, Deloitte’s TransientX acquisition is aimed at expanding the consultancy’s reach in a zero trust security market anticipated to be worth $59.43bn by 2028. 
Facebook is working on the 'metaverse'
Facebook is creating a product team to work on the "metaverse," a digital world where people can move between different devices and communicate in a virtual environment. "You can think about the metaverse as an embodied internet, where instead of just viewing content — you are in it," CEO Mark Zuckerberg said, adding "I believe the metaverse will be the successor to the mobile internet, and creating this product group is the next step in our journey to help build it." He told The Verge: "If we do this well, I think over the next five years or so ... we will effectively transition from people seeing us as primarily being a social media company to being a metaverse company."
Nokia is firmly back in the global 5G rollout race
Reuters takes a look at how a shifting geopolitical backdrop and cost-cutting have seen Nokia firmly back in the global 5G rollout race just a year after CEO Pekka Lundmark took the helm. The Finnish company has been gaining ground on arch-rival Ericsson, even as both benefit from U.S. pressure on European governments to crackdown on China’s Huawei. “The drastic changes and improved performance under Pekka’s stewardship is clearly evident,” observed Paolo Pescatore, an analyst at PP Foresight. “Opportunities in 5G, misfortunes of others and focus on key products have helped reignite the business.” Lundmark, who became CEO at Nokia last August, has laid off thousands of employees.
Procter & Gamble names Jon Moeller as new CEO
Procter & Gamble has announced that Jon Moeller will become CEO in November, replacing David Taylor, who will become executive chairman of the company. Moeller has worked at Procter & Gamble since 1988, when he was hired as a cost analyst for the consumer goods giant’s food products division. The Wall Street Journal notes that the change at the top comes at a delicate moment for P&G; the pandemic spurred demand for household products but has put immense pressure on supply chains and pushed up costs in a sector that operates on thin profit margins.
EU's planned carbon border tax violates trade principles, China says
China says the European Union's proposal for the world's first carbon border tax will expand climate issues into trade in violation of international principles and adversely affect prospects for economic growth. The European Commission’s plan for a Carbon Border Adjustment Mechanism (CBAM), or CO2 tariff, on polluting goods from 2026 will force some companies importing into the bloc to pay carbon costs at the border on carbon-intensive products including steel. "CBAM is essentially a unilateral measure to extend the climate change issue to the trade sector. It violates WTO principles ... and (will) seriously undermine mutual trust in the global community and the prospects for economic growth," said Liu Youbin, a spokesman of the Ministry of Ecology and Environment.
Remington offers $33m to families of Sandy Hook victims
Remington Arms Co. has offered to pay nearly $33m to nine families to settle lawsuits claiming that its marketing of firearms contributed to the 2012 Sandy Hook school massacre in Newtown, Connecticut, where 26 people died. The Sandy Hook families have sought to prove that Remington violated the Connecticut Unfair Trade Practices Act by marketing what it knew was a weapon designed for military use to civilians such as the shooter, who used a Bushmaster AR-15 in the attack. Remington had filed for Chapter 11 protection in 2018 and emerged the same year under the control of its creditors. It filed for bankruptcy again in July 2020, after more retailers restricted gun sales following other school shootings.
Germany's top court rejects appeal in cum-ex tax evasion case
The German Federal Court of Justice, the country’s top court, has confirmed an earlier regional court ruling in a trial over so-called cum-ex tax fraud and upheld fines amounting to millions of euros against a bank and two London share traders. The court classified all such trades as illegal tax fraud. Cum-ex fraud sees traders use a legal loophole to trick governments and receive millions in tax repayments for taxes they had never paid. The Bonn district court had earlier issued a fine of around €14m ($16.5m) for one of the traders held responsible for cum-ex trades and ordered the private German bank MM Warburg to pay back around €176m. The sentence also included suspended jail time. The Federal Court confirmed that "there could be no doubt" regarding the intentions of the accused.
Amazon misses sales expectations, but maintains profit run
Jeff Bezos' final quarter as Amazon chief executive saw the firm post sales of $113.1bn, an annual increase of 27%, but short of the $115.4bn forecast by analysts polled by FactSet. Nevertheless, profits for the three months to June 30th beat expectations at $7.8bn or $15.12 per share, up 48% from $5.2bn a year earlier and exceeding Wall Street projections of $12.28 per share. Amazon Web Services, the cloud computing division operated by Andy Jassy - Mr Bezos' successor as Amazon CEO - saw its revenue rise 37% to $14.8bn, ahead of estimates of more than $14.1bn. The company's "Other" business segment, which is primarily its advertising business, grew 87% to $7.9bn, and within its consumer business, Amazon’s revenue from fees it charges marketplace sellers totalled $25bn. Subscriptions, largely Prime memberships, brought in $7.9bn. Looking forward, the company says it expects sales of $106bn-$112bn for the current quarter and operating income of $2.5bn-$6bn.
Global Brands Group’s North American business files for bankruptcy
The North American unit of Global Brands Group (GBG) has filed for Chapter 11 bankruptcy protection, putting its apparel and footwear brands up for sale with help from a $16m bankruptcy loan. In papers filed in New York Southern District bankruptcy court, GBG USA disclosed between $1bn to $10bn in assets and liabilities, and listed between 1,000 to 5,000 creditors, including landlords and brands such as Kenneth Cole and Authentic Brands. The business owes Kenneth Cole some $6m in unsecured trade debt and roughly $3.6m to Authentic Brands, according to court filings. GBG USA sells footwear and apparel wholesale to Macy’s, Nordstrom and other U.S. department stores and also warehouses, off-price retailers and Amazon, according to the court papers.
Lebanon picks billionaire to form new government
Former Lebanese premier Najib Mikati is on course to become Lebanon’s prime minister-designate after receiving the endorsement of local Sunni political leaders, including former prime minister Saad Hariri. Mikati, a billionaire telecoms tycoon, is the third politician delegated by the Parliament to form a government since the huge explosion nearly a year ago in the port of Beirut that killed more than 200 people and led to the resignation of the cabinet in charge at the time. A company that Mikati founded with his brother has invested in real estate, telecoms and other businesses around the world, giving him a net worth of $2.7bn, according to Forbes. “By myself, I don't have a magic wand, nor can I do miracles,” said Mikati as he warned in a public statement that easing Lebanon's woes would not be easy.

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