TheChek News Flow

Shares climbed Monday while the euro advanced as investors weighed the prospect of Europe following the Federal Reserve with more outsized interest-rate hikes. Japanese and Australian equities rose, European futures advanced and US contracts were steady after the S&P 500 and Nasdaq 100 snapped three-week losing streaks on Friday. Markets in China, Hong Kong and South Korea are closed for holidays.  The euro led gains versus the greenback after Bundesbank President Joachim Nagel signaled support for further interest-rate hikes in Europe. The yen pared Friday’s rebound, even after officials in Tokyo increased their jawboning of the currency over the weekend. Crude oil dropped almost 2%.  Investor focus is on August US inflation data due Tuesday, with headline CPI expected to cool to an 8% a year pace while the core measure that excludes food and energy is seen accelerating. Traders almost fully expect another jumbo-sized Fed hike next week, following two 75-basis-point increases.  Markets also have to digest the implications of Ukraine’s counter-offensive, after its forces continued their rapid advance in the Kharkiv region, exploiting a retreat of Russian defenses.  

The rebound in risk assets and the retreat in the dollar at the end of last week contrast with the hawkish remarks from Fed officials. That stance, and recession worries, has driven equities down to nearly oversold levels. The Levkovich Index, a sentiment gauge, fell to -16 last week, a hair away from the -17 level that defines panic. Bank of America Corp.’s bull-and-bear indicator slid to the “maximum bearish” level -- often seen as a contrarian buy signal. Signs of weakening demand for oil may underscore the potential that policy makers will be willing to slow the pace of tightening going forward. West Texas Intermediate sank toward $85 a barrel amid concerns the outlook for consumption is worsening as global growth slows and China maintains its strategy of controlling Covid-19 by curbing activity.

Nikkei +1,01% Hang Seng +2,69% CSI +1,39% Shanghai +0,82% Shenzen +0,65%

Eur$ 1,0091 CNH 6,9421 CNY 6,9265 JPY 143,25 GBP 1,1627 CHF 0,9598 RUB 60,6335 TRY 18,2390 WTI$ 85,40 -2% Gold 1,714 -2% BTC 21,755 +0,5% ETH 1,726 -2%

S&P +0,04% Nasdaq +0,05% EuroStoxx +0,62% FTSE +0,20% Dax +0,73% SMI +0,47%

- Bitcoin Rally Cools Ahead of CPI Data, Ethereum Network Upgrade

- JPMorgan Says Dollar Bulls Should Stay the Course Amid Retreat

- Light at End of the Inflation Tunnel

- Zelenskiy to Appeal on Wednesday for More US Weapons: Reuters

Keep an eye on :

- AIR FP : SpaceX Appeals FCC Decision Denying Subsidy to Starlink

- AZN LN : AstraZeneca Looks to More Than Double New Cancer Drugs by 2030

- BMPS IM : Meloni Adviser Says Paschi Should Delay Plans to Raise Capital

- CA FP : Carrefour in Talks w/Grupo Mateus, Cencosud for Big Stores:Valor

- DIS US : Disney to Expand Marvel Theme-Park Attraction in California

- DIS US : Disney CEO Says Sports Betting Is a Reason for Keeping ESPN

- EDPR PL : EDPR Completes Sale of Wind Energy Portfolio in Italy to ERG

- ENT LN : Australian Govt Agency Commences Investigation Into Entain Group

- FRAS LN : Frasers Among Bidders for Tailor Gieves & Hawkes, Sky Reports

- HNR1 GY : Hannover Re Expects Further Price Increases Next Year

- HPHA GY : Heidelberg Pharma, Takeda to Develop Antibody Conjugate

- META US : Meta Questioned by Warren, Sanders on Cryptocurrency Scams

- DRLCO DC : Noble Received Acceptances for About 89.73% of Maersk Drilling

- ORP FP : Orpea Preliminary 1H Ebitdar Margin 18.5% vs 24.9% Year-Earlier

- PHIA NA : Investor Group VEB Holds Philips Liable for EU16b on Recall

- SEAW7 NO : Seaway 7 to Raise $650m Through New Equity and Debt

- STLA IM : US Auto Sales Estimates Cut at BofA on Supply Chain, Macro Risks

- TGYM IM : Fitness Firm Tonal Seeking $1.9 Billion Value With Financing

- DG FP : Vinci Airports Wins 40-Year Tahiti Airport Concession

- THULE SS : Thule Sees Reduced Sales Until Next Biking Season in Spring 2023

- VALN SW : Femsa Controls 84.41% of Valora After Offer

- YAR NO : Petrobras Denies Sale of Fertilizer Unit to Yara

Its emissions-trading system raises energy costs for no reason.

Europe is bracing for an unprecedented energy crisis this winter, and Russia’s war in Ukraine is as much to blame as European politicians say. What they don’t want you to know, however, is how their own climate-change policies are making everything worse. We’ll explain, since they won’t:

Like prices for fossil fuels, CO2-emissions permits in the European Union’s emissions-trading system (ETS) have skyrocketed in price. A certificate to emit one metric ton of CO2 now costs about €80 and last month nearly hit €100, up from €25 in late 2019. The rising emissions price translates into higher costs for electricity consumers, as well as a squeeze for industries already scrambling to absorb sky-high fuel prices.

Europe has operated the ETS since 2005. Mandarins issue a set number of permits each year, and then market participants can trade the permits so heavier emitters can buy the certificates they need from those who have reduced emissions. If demand exceeds supply, a rising permit cost is supposed to encourage green investments to reduce emissions.

The system wasn’t designed with a crisis such as this year’s in mind, however. One factor driving up permit costs is a shift in the fuel mix driven by political supply constraints rather than the kind of market incentive the ETS is supposed to change.

Amid a shortage of natural gas, European countries are turning to dirtier coal to generate electricity, driving up the demand for ETS permits and thus their price. Utilities could use nuclear to reduce their reliance on coal, or governments could encourage more domestic gas exploration. But Europe’s obstinate political resistance to those options is contributing to higher ETS permit costs.

Brussels has also created an artificial scarcity of ETS permits. Regulators should be agnostic about the permit price in a trading system, since the point is to set a target level of emissions and then let the market price that quantity. The quantity of carbon emitted in Europe has fallen with the ETS in place—by 41% for emissions covered by the trading system between 2005-2020.

But almost from the start, politicians and green activists worried the price of an emissions credit was “too low.” The complaints grow louder if the cost of a certificate is below €10, as it was for most of the mid-2010s. This led to the creation in 2019 of a “market stability reserve” to absorb hundreds of millions of unused carbon credits on top of the gradual reduction in new credits linked to Brussels’s more aggressive climate targets.

This has created the relative scarcity of permits that’s now driving up the price. Politicians, activists and bureaucrats justified their meddling on the basis that too low a price for permits wouldn’t encourage enough investment in greening Europe. But cheap permits were sending a market signal that Europe was meeting its carbon targets anyway so investment could better be directed elsewhere. This was a germane point after 2010 when an economic downturn suppressed emissions and Europe desperately needed productive investment in something other than green boondoggles.

Now Brussels’s ETS meddling means the economy can’t “borrow” carbon karma from previous years to tide Europe over this winter’s crisis—at the same time politicians keep blocking investments in nuclear or gas production that would get the Continent back on the carbon straight and narrow.

Some politicians are starting to get it. Polish Prime Minister Mateusz Morawiecki told the Financial times recently he’d support scrapping the ETS for a year or two. But such insight remains as scarce as affordable energy in Europe and until other leaders clue in, Europe’s backdoor carbon tax will continue to bite.

Problems calculating future second-hand value because of lack of data keep prices stubbornly high

To become mainstream, electric cars first have to become affordable.

Dozens of countries, from the UK to France and Norway, plan to phase out the sale of engine-driven cars by 2040 or earlier.

But their replacements, largely battery-powered electric vehicles, remain stubbornly pricey.

There is “just this huge gap between those who can afford an electric car and those who can’t”, said Meryem Brassington from Lloyds Banking Group, the UK’s largest auto lender.

This is not just down to the costly battery technology, but also the reticence of banks to make leasing deals cheaper.

These deals dominate the market. In the UK, nine out of 10 new cars are bought using a lease or similar agreement.

Before financiers work out what to charge motorists in a leasing deal, they have to calculate the residual value of a car — the vehicle’s projected value in three or four years’ time when the agreement ends.

Problems calculating residual values, or future second-hand prices, are partly responsible for keeping electric leasing prices high.

This is because there is little data to base them on, in contrast to combustion engine vehicles, where dealers use mileage and service history in a well-established market to give a car a future second-hand value.

This system meant that rather than paying outright, most buyers of combustion engine cars in Europe bought them using credit through a deal based on its expected devaluation.

For instance, if a £35,000 car loses £12,000 of value over three years, the buyer only has to finance that £12,000 rather than the total outright cost of the vehicle. This means a car that depreciates less has a higher residual value and a lower monthly lease payment.

The trend has been key to the growth of premium brands such as BMW and Mercedes, whose vehicles become more affordable because they hold their value better than mass market nameplates.

Reducing the amount that electric vehicles depreciate is therefore key to making predominantly expensive battery cars more accessible to consumers.

At the centre of the equation sits the battery.

“Remember that the battery is the greatest asset to improve the residual value of the car,” said Ashwani Gupta, chief operating officer at Nissan.

“When we look at the customers who are driving [the electric] Leaf since 2010, and when we check the state of the battery, even after years, we get a range between 85 per cent to 90 per cent,” he told the Financial Times’ Future of the Car Summit in May.

One significant advantage of electric vehicles that helps them hold their value is fewer moving parts, and so lower maintenance costs.

“Usually, there is not much to replace, there’s less maintenance compared to combustion engine vehicles,” said Simon Engelke, founder of Battery Associates, a consultancy group that runs battery vehicle education courses for industry executives.

Rental group Hertz, which recently began including electric models from Tesla and Polestar in its fleet, said last month its maintenance costs on the cars are roughly 50-60 per cent of what they spend on engine cars, with a “slightly higher” spending on extra tyres because the vehicles tend to be heavier.

“We are seeing the depreciation rate on the EV being lower than [internal combustion engine] vehicles,” chief financial officer Kenny Cheung told investors.

The big question is why growing awareness of battery longevity is not translating immediately into lower lease prices for electric vehicles, which remain stubbornly expensive.

The chief reason for this is the reluctance of banks, which sit behind these depreciation deals, to lower costs. With the small amount of data to work out future electric car values, or residual values, they have resisted dropping leasing rates.

Mike Todd, the head of VW’s financial services arm in the UK, said there is comparatively little data available on used battery cars.

“I could share data on hundreds of thousands of petrol and diesel cars, but we have a much smaller sample size for EVs,” he said.

Yet, sample sizes are growing as the first in the later generation of electric vehicles, such as VW’s ID.3 that went on sale in 2019, are starting to sell in the second-hand market, allowing financiers to gauge their battery health.

“The prices they [the ID.3s] are fetching is encouraging and is going into resetting of residual values today,” he said.

However, a factor that could lead to greater depreciation of electric vehicles, Todd added, are constant advances in battery technology, which means older models may prove harder to sell.

“If you take a petrol vehicle today sold new, the technology in three years’ time will not be that different to the petrol vehicle of today,” he said, adding that in three years’ time, the improved range or efficiency in a new EV car may make older models look less attractive by comparison.

Ultimately, it will take time — Todd reckons three to four years — for enough data to build up to convince financiers to take the jump and increase the residual values of EVs, which in turn will lower leasing rates.

“Then, we will have enough insight to be confident of the [residual value] setting,” he said.

Many of these “captive finance” companies that are owned by the carmaker, such as VW Financial Service or Ford Credit, are also large profit drivers for their parent companies. VW’s arm made €3bn profit in the first half of this year, while Ford made $1.7bn. 

This has led some in the industry to argue that the lenders have at least some incentive not to push the electric vehicle shift, which will lead to smaller short term profits, any faster than is necessary.

This has prompted the emergence of a new wave of smaller, electric-only lease companies, which aim to exploit what they sense is a gap in the market.

“The market is still being relatively conservative about [second-hand values],” argued Fiona Howarth, chief executive of Octopus EV, an electric car leasing arm of the Octopus Energy company that operates in the UK and US.

“But they don’t feel comfortable taking that step. If you were willing to be braver and set residuals in a strong way, then that would bring the monthly price down.”

As well as the lower maintenance bills, the ironclad rules of supply and demand will also strengthen residual values for used cars, predicts Howarth.

“There were 200,000 new EV cars in the UK last year, they won’t enter the second-hand market until three years’ time,” she said. By then, the number of people seeking second-hand EVs will be so high that the available cars “won’t even touch the side” of the level of demand, she added.

Last month alone, there were more than 5mn views on AutoTrader of advertisements for used electric cars, according to the online marketplace.

While electric vehicles that hold value better may be good news for new buyers who reap the benefits of lower monthly payments, it means the cars will be dearer when entering the second-hand market.

This is likely to push used buyers, who predominantly use cash or bank loans rather than depreciation-based finance deals, into leasing.

“We’re seeing significant growth in used car finance,” said Todd at VW Financial Services. He estimates roughly half the used cars sold by VW are financed, up from 35 per cent “a few years ago”.

In addition, the third-hand value of the vehicles, the factor that will determine how much second-hand buyers pay on a monthly lease, is much less certain. The data pool for cars older than six years is even shallower.

“We’re not sure how much this will be worth when five or six years old,” said Todd, “so the idea of residual value risk being covered, could be a factor as well.”

Many manufacturers, aware of this, are now offering warranty on the battery that lasts for eight years.

But consumers still want certainty — and are willing to pay for it.

In one example, consumers in the US paid $2,000 more for an electric vehicle that contains a battery health certificate than one without, said Patrick Cresswell, managing director of Future Motion consultancy.

He added: “One of the key pillars is to make used EVs an attractive thing that people can buy with confidence.”

Risk analytics company chaired by multi-millionaire financier is trying to raise capital and repay bondholders

A risk analytics company chaired by multi-millionaire financier Arki Busson has lost a number of senior managers, as it tries to raise capital and repay bondholders including Louis Bacon’s investment firm Moore Capital.

Switzerland-based LumRisk, a small fintech that offers risk analysis to global institutional investors, has lost four senior staff including its head of risk and operations, its head of IT and a board member in recent months, according to people familiar with the details and internal emails seen by the Financial Times.

LumRisk is a subsidiary of LumX, an investment firm run by Busson, who was a pioneer of the hedge fund industry.

In an internal email sent to LumRisk staff in May, Busson wrote that the pandemic, inflation and Russia’s invasion of Ukraine had affected its business and meant that growth, while “continuing to progress, did so at a slower pace than we had projected”.

“In this context, some of our colleagues, due to their high talents and work ethic, have been offered other positions,” he added.

The email mentions the departure this summer of head of risk and operations Jens Janke, of head of IT Regino Alonso and head of data Lucas Buenahora.

Another recent departure is board member and senior managing director Marc Fisher. In addition, Eric Bissonnier this summer relinquished the role of head of multi asset product, although he remains an external consultant.

Of the 23 people shown as working for LumRisk or being on its board in an internal document from last year seen by the FT, at least 9 have left.

“Like any business, LumRisk has some staff turnover. But the overall number of employees at the firm continues to grow . . . from 19 in 2019 to 23 today and we are actively recruiting an additional five staff who will join us by the end of the year. All key positions in the company are filled,” the company said.

It added that its client base had doubled since 2020, prompting it to open offices and recruit in Madrid.

The departures come as the firm looks to raise additional financing through an equity fundraising, according to people with knowledge of the details, having unsuccessfully tried to raise money last year.

In 2019 LumRisk raised SFr7.5mn ($7.8mn) from investors in convertible debt, which matures this year. LumRisk’s total debts are approximately SFr15mn.

While the identity of the debt investors has not previously been disclosed, one of them is investment firm Moore Capital, according to people familiar with the fundraising. Moore boss Louis Bacon is one of the most successful macro traders of all time and a friend of Busson.

Moore declined to comment.

LumRisk, which advertises its systems as being able to answer any question about a portfolio’s risk profile in under 10 seconds, is used by investors to gauge risks in their alternative risk premia funds — products that try to profit from market factors such as value or momentum.

Janke, Buenahora and Fisher declined to comment. Bissonnier said he is now CEO of another fintech but still works independently for LumRisk. Alonso did not respond to a request for comment.

LumRisk’s parent LumX delisted in 2020 after years of losses and a disagreement with auditor Ernst & Young, who said its financial statements did “not give a true and fair view of the consolidated financial position of the group”. LumX said at the time that it disagreed with Ernst & Young and their opinion “does not reflect the current status of the company”.

Ethereum’s switch to a greener system is seen by crypto enthusiasts as a long-awaited chance to prove critics wrong

Investor said he wants to see Disney move forward with ESPN’s ‘growth and innovation’

Activist investor Dan Loeb signaled Sunday morning on Twitter that he is backing off his push to persuade Walt Disney Co. DIS 2.54% to spin off its popular sports television network ESPN.

The change of heart comes after Disney’s Chief Executive Bob Chapek said in media interviews at this weekend’s D23 Expo event—an annual gathering of Disney fans where the company announces new shows and films—that he has plans for ESPN to be a big growth engine and a large part of the company’s entertainment offerings.

“As Bob has said, ESPN is an integral part of The Walt Disney Company, and he believes that its full potential will continue to be realized as we execute against our strategic vision for the most trusted brand in sports,” said Disney spokeswoman Kristina Schake on Sunday.

Last month, Mr. Loeb’s hedge fund Third Point LLC announced that it had renewed its stake in Disney stock after having liquidated one earlier this year. He sent a letter to Mr. Chapek asking for major changes to Disney’s business, including spinning off ESPN, refreshing Disney’s board and cutting spending.

“We have a better understanding of ESPN’s potential as a stand-alone business and another vertical for [Disney] to reach a global audience to generate ad and subscriber revenues,” Mr. Loeb wrote on Twitter Sunday morning. “We look forward to seeing [ESPN chief James] Pitaro execute on the growth and innovation plans, generating considerable synergies as part of The Walt Disney company.”

Mr. Loeb declined to comment beyond his tweets, a spokeswoman said. Messrs. Loeb and Chapek “have regular conversations” and are currently in close contact, people familiar with the matter said.

The new stake for Mr. Loeb’s fund represented less than 1% of Disney’s shares outstanding and at the time had an economic value of around $1 billion, The Wall Street Journal has previously reported.

Disney shares are down 26.5% this year as of the close of trading Friday. In August, the company reported stronger-than-expected financial results and an addition of 14.4 million subscribers to its Disney+ streaming service.

Last month, Disney said in response to Mr. Loeb’s Third Point letter, “We welcome the views of all our investors.” The company said its board has been continuously refreshed, “with an average tenure of four years.”

The idea of selling ESPN—which sends a steady flow of cash to Disney via licensing agreements with cable TV operators—has come up frequently in recent years as the price of sports broadcast rights has steadily risen. Some investors have argued that ESPN is more valuable as a stand-alone company than as a division of Disney.

The network is home to some of the most-watched events on television and it attracts huge numbers of prime-time viewers, according to Nielsen. ESPN also brings in significant fees to Disney. On average, every American with a pay-TV package that features ESPN pays more than $100 a year for access to the network, according to Kagan, a media research group within S&P Global Market Intelligence.

For Disney, ESPN+, the streaming service attached to the sports network is growing. ESPN+ has 22.8 million subscribers, Disney reported last month, a 53% gain from a year earlier.

Neighbouring countries receive emergency electricity request from grid operator RTE

France sent an emergency power alert to neighbours including the UK and Spain this week, asking them to be ready to send as much electricity as possible after a huge trading error jeopardised French supplies.

The request was triggered by a trading error by one of France’s regional energy providers, which accidentally oversold huge amounts of electricity over a two-day period.

The unusual alert added to Europe-wide energy stresses as the region faces its worst power crisis in decades owing to soaring costs driven by Russia’s cutting of gas flows.

It also underlined severe strains in France’s power network, which is struggling with an unprecedented number of outages at its nuclear reactors — the linchpin of its generation system.

French grid operator RTE said it on Tuesday sent the call for neighbouring countries to prepare to export more power overnight. The UK’s National Grid and a person close to Spain’s power network confirmed that their countries received the alert.

Électricité de Strasbourg — which provides electricity to the area around the eastern French city and is majority-owned by state-backed utility EDF — said in a statement that it was investigating the “dysfunction”. 

It said it had erroneously sold 2.03 gigawatts and 5.75GW of electricity in two separate transactions on September 6 and 7, and later added that the incident had cost it €60mn after it rebalanced its supply needs. Filings with RTE describe the issue as an IT incident.

Such requests for emergency help are rare. According to energy companies and grid officials, network operators typically send no more than a few per year, acting when they see a risk of supply falling short of demand.

Energy companies are, however, nervous about potential disruptions to intra-European electricity and gas trading if the region is hit by shortages this winter.

The French alert was sent after rebalancing operations at the end of the day showed that there could be a deficit of electricity at Électricité de Strasbourg, a person familiar with the matter said. EDF declined to comment.

Alerts are sent via the European Awareness System — which grid managers use to exchange information — and are used to ensure supplies from elsewhere can be mobilised. In this week’s French case, the extra supplies were ultimately not needed, RTE said.

Energy providers continuously enter into trades to match up supplies with demand. But the amounts at stake are abnormally large — one gigawatt alone is equivalent to the capacity of some nuclear reactors, or enough to power a small city for about a year. 

France was already turning to neighbours to provide extra electricity on a regular basis owing to its reduced nuclear supply, notably the UK — which has been a net exporter of electricity via subsea cables — as well as Germany and Spain.

But at the same time Paris is at loggerheads with Berlin and Madrid over a proposed new gas pipeline from Spain to France.

Olaf Scholz, German chancellor, and Pedro Sánchez, Spain’s prime minister, back the MidCat pipeline, arguing it would help ease energy shortages beyond the Iberian peninsula.

But Emmanuel Macron, France’s president, is opposed to the project, saying existing gas connections between France and Spain are not being used at full capacity. A pipeline that would take several years to complete would not remedy short-term strains and would push Europe further into a dependence on fossil fuels, he added.

“I don’t understand the short-term problem we’re trying to resolve [with this],” Macron said.

The French government is upping the pressure on the operator of its nuclear power fleet, EDF, to fix outages by the winter, after unexpected corrosion problems in some reactors added to scheduled maintenance stoppages and have plunged output to multi-decade lows.

At a meeting on Friday to address the gas price crisis, EU energy ministers in Brussels signalled their support for a temporary cap on the price of gas imports including those from Russia and a windfall levy on energy producers.

Prosecutors accuse Trevor Milton of lying to investors about the startup’s technology

Trevor Milton, the Nikola Corp. NKLA 3.24% founder who enticed auto-industry leaders and investors with his promise for a revolution in electric trucks, faces a securities-fraud trial beginning this week on allegations that he lied about his company’s development of environmentally friendly technology.

Federal prosecutors in Manhattan last year accused Mr. Milton of running a scheme to enrich himself and boost his stature as an entrepreneur by falsely hyping Nikola’s prospects and duping nonprofessional investors, including stock-market novices. He was indicted on two counts of wire fraud and two counts of securities fraud. Jury selection begins Monday.

“In order to drive investor demand for Nikola stock, Milton lied about nearly every aspect of the business,” then-U.S. Attorney Audrey Strauss said when announcing the charges.

Mr. Milton, who is 40 years old, has pleaded not guilty. He resigned from Nikola in 2020, several days after short seller Hindenburg Research released a report alleging dozens of misrepresentations that Mr. Milton had made about the business, including rolling an undrivable truck down a hill to make it appear functional in a marketing video.

During a pretrial hearing last week, lawyers for Mr. Milton said they would argue their client acted in good faith and didn’t intend to defraud anyone. Mr. Milton might have used certain terms like “prototype,” “functional,” and “show car” differently than some investors understood them, defense lawyer Marc Mukasey said.

“There is a linguistics aspect to this,” Mr. Mukasey said.

The top charge against Mr. Milton carries a maximum sentence of 25 years, though under federal sentencing guidelines he would likely face a much shorter prison term even if convicted on all charges.

A spokeswoman for Nikola declined to comment. The company, which wasn’t charged, has said it has cooperated with the government throughout its inquiry and settled a Securities and Exchange Commission investigation for $125 million in December. The company didn’t admit or deny wrongdoing.

Amid the fallout from Mr. Milton’s legal troubles, Nikola continues to attract partners, customers and established executives who are betting on the company’s plan for a network of long-haul trucks powered by hydrogen fuel cells. The company began production of its first truck model, powered solely by batteries, in April.

The trial marks the next chapter in the rapid rise and crash of Mr. Milton, who attracted big-name companies like General Motors Co. and Robert Bosch GmbH as potential partners in his vision for a network of zero-emission long-haul trucks.

Mr. Milton was an unconventional executive. He said he didn’t finish high school or college but was a serial entrepreneur who started several companies before Nikola. Those ventures often ended up with disputes, litigation and disappointed investors, according to former employees, customers, investors and documents.

Nikola, which Mr. Milton founded in 2015 after selling a majority stake in another of his companies for $12 million in cash, focused on hydrogen trucks and the fueling stations to support them.

Mr. Milton took Nikola public in the summer of 2020 at a valuation of $3.3 billion when the company had yet to sell a single truck. In the company’s early days of trading, its market valuation shot to $30 billion, briefly overtaking auto-industry stalwarts like Ford Motor Co.

Prosecutors allege Mr. Milton’s lies helped to fuel Nikola’s rocketing share price. They say he made false statements about the company’s ability to produce hydrogen, which it planned to use to power some vehicles, and its progress toward manufacturing products like the Badger, an electric pickup truck. Nikola scrapped plans for the Badger after Mr. Milton stepped down and a deal to have GM manufacture the trucks was significantly scaled back.

The trial could largely hinge on what Mr. Milton said in television interviews and podcasts and on social media.

On a podcast in 2020, Mr. Milton said that until Nikola came on the market, hydrogen was about $16 a kilogram. “Now Nikola is producing it well below $4 a kilogram,” he said.

Prosecutors said that Nikola had never produced hydrogen, at any price.

Mr. Milton also said in interviews that the Badger was a “fully functioning vehicle inside and outside.” When he was asked on Twitter when the first prototype would be produced, he wrote, “Already.” Prosecutors said Nikola had only renderings of vehicles and concept sketches.

In one tweet, Mr. Milton wrote that the Badger would have a drinking fountain using the water created by the truck’s hydrogen fuel cell. Days later, Mr. Milton typed “can you drink water from a fuel cell?” into an internet search, prosecutors alleged.

The rapid climb in Nikola’s shares made Mr. Milton a multibillionaire, based on his holdings. Before stepping down from Nikola, he purchased a $32.5 million ranch, the most expensive home in Utah at the time, and a Gulfstream jet.

At the time of the indictment, legal observers believed Mr. Milton’s charges indicated a coming wave of enforcement actions related to special-purpose acquisition companies, or SPACs, which are blank-check companies that raise money with a goal of buying a business and taking it public.

Such cases largely haven’t materialized, perhaps due to deterrence or because SPACs aren’t the inherent drivers of fraud they were once perceived to be, said Martin Bell, a former federal prosecutor, now a partner at Simpson Thacher & Bartlett LLP.

In the Milton case, “the DOJ and the SEC went out of their way to note the SPAC nature presumably in order to send a shot across the bow that this was an area they were going to watch,” Mr. Bell said.

SPACs had a surge in popularity in 2020 as a means for companies including Nikola, many with little or no revenue, to go public outside a traditional IPO. Many companies that went public via SPAC have struggled since.

Mr. Milton received $94 million around the company’s SPAC deal and has sold more than $300 million in Nikola stock since his resignation, according to company filings.

Defense attorneys said the case largely hinges on traditional securities-fraud questions.

“Essentially what this boils down to is: Did Trevor Milton lie, and were those lies critical to investors’ decisions?” said Celeste Koeleveld, a partner at Clifford Chance US LLP. “That’s not limited to SPACs.”

Years of preparation helped tech giant, but other phone makers, wireless carriers and aerospace companies have similar ambitions

Apple Inc.’s AAPL 1.88% new emergency-text feature on its latest iPhones makes it a first-mover in a budding market for low-cost satellite phone connections.

The Cupertino, Calif., tech giant last week said its new iPhone 14s will be able to beam short distress messages and location data from places off the cellular grid as soon as November. The service will cover the U.S. and Canada but could expand to more countries.

Apple is among companies, including Google owner Alphabet Inc. GOOG 2.16% and Chinese electronics manufacturer Huawei Technologies Inc., that are racing to integrate new technology so that ordinary smartphone users can stay connected in remote areas.

More complex communications, like voice calls between satellites and typical smartphones, are likely years away from reaching mass-market devices, industry analysts say. But the investments reflect a hot sector for tech companies looking to make their products and services stand out for customers.

Satellite-industry executives say Apple was able to clinch an early foothold by approaching satellite companies as early as 2019. The iPhone maker eventually struck an exclusive deal with Globalstar Inc. for 85% of the satellite company’s network capacity. That decision blocked rival hardware makers from using Globalstar’s infrastructure to launch competing services.

“They’ve sort of locked this up, and it’s really down to Apple to decide how far they want to take it,” said Tim Farrar, president of telecom-industry consulting firm TMF Associates, noting that only one or two other companies have the right combination of already-launched satellites and access to wireless airwaves to effectively reach smartphones.

Fleets of satellites in orbits near Earth can provide mobile-phone users with basic service options when they are out of reach of cell towers, companies and executives say. The expensive satellite links are unlikely to replace the data-rich internet connections offered by cellular networks on the ground, but with enough improvement, they could help fill in gaps.

It isn’t clear how much consumers ultimately will pay for these services. Apple said last week that its new feature, called Emergency SOS via satellite, would be free for two years.

Huawei last week said its new Mate 50 smartphones will be able to send short messages in emergencies over the BeiDou Navigation Satellite System, the Chinese government’s version of the U.S. Global Positioning System.

Earlier this month, a Google executive said on Twitter that the company was designing its next version of Android to support communications with satellites. “Wild to think about user experiences for phones that can connect to satellites,” Hiroshi Lockheimer, a senior vice president at Google, said in a tweet. A spokesman for Google declined to comment.

Satellite operator Iridium Communications Inc. said in July that it had an agreement to develop its technology for use in smartphones. The deal included provisions to recoup earlier costs incurred “for commercializing a similar capability with another party,” according to a securities filing. Iridium declined to name the partner in its filing, and a spokesman declined to comment on the company’s plans.

“There’s over a billion new smartphones a year. There’s something like seven billion smartphones out there in the coming years,” Iridium Chief Executive Matt Desch told investors in July. “I think it’s going to be a sizable market to make any kind of connection to devices like smartphones, and I wouldn’t even limit it to smartphones.”

Other satellite companies are chasing deals with mobile-phone network operators. Elon Musk’s SpaceX agreed to develop mobile satellite links for T-Mobile US Inc., an arrangement the companies announced last month.

SpaceX would use Starlink satellites that it expects to launch to let T-Mobile users send and receive texts and use messaging apps in remote locations, executives have said. The companies plan to begin with a test of the service next year, though both need to secure approvals from the Federal Communications Commission to move ahead.

Mr. Musk said on Twitter that his company has also talked to Apple about SpaceX’s Starlink satellite-broadband business. He didn’t detail the nature or depth of the discussions. An Apple representative declined to comment.

A spokesman for Space Exploration Technologies Corp., the formal name for SpaceX, didn’t respond to a request for comment.

Charles Miller, CEO of Lynk Global Inc., a company that says it has demonstrated it can connect mobile phones to a satellite to allow for text messaging, said satellite capacity constraints make it challenging right now to provide high speeds to large numbers of users at the same time.

That should change over time as operators are able to deploy larger, improved satellites, he added. “That is the key thing to design for: capacity constraints,” Mr. Miller said.

AST SpaceMobile Inc., another company working on satellite-to-mobile phone links, hired SpaceX to get a satellite to orbit so it could test connections to cellphones with network operators like Vodafone PLC.

“There’s been satphone technology for a long time,” said Scott Wisniewski, AST’s chief strategy officer. “The change is really technology improving so you can offer a service at a more attractive price.”

Meanwhile, big telecom providers have struck other types of deals with satellite operators or companies planning to roll out a network in orbit.

Last year, AT&T Inc. said it would use satellites operated by communications company OneWeb to provide links to remote cellphone towers. Verizon Communications Inc. agreed to a similar deal with Amazon.com Inc., which plans to start deploying its own satellite-internet constellation.