Business Of Fashion : Fashion’s Metaverse Reality Check

Fashion’s Metaverse Reality Check
The marketing value of digital fashion and NFTs may now be clear, but fashion brands will need to separate hype from the concrete opportunities to generate sustainable revenue streams from the metaverse.
The next frontier for brands will be to translate metaverse activities into sustainable revenue streams. (Getty Images)


KEY INSIGHTS
  • Global spending on virtual goods reached an estimated $110 billion in 2021, more than doubling the total in 2015, with around 30 percent attributed to virtual fashion.
  • Fashion companies focused on metaverse innovation and commercialisation could generate more than 5 percent of revenues from virtual activities over the next two to five years.
  • NFTs used for authentication or loyalty tokens are likely to be most relevant for fashion players in the future.


This article first appeared in The State of Fashion: Technology, an in-depth report co-published by BoF and McKinsey & Company.
Pioneers in the metaverse have shown there is a business case for fashion brands to invest in virtual worlds. Granted, a fully formed metaverse — comprising an interconnected, virtual ecosystem that overlaps with or offers an alternative to physical reality — is not yet possible given technology constraints. But brands’ experiments with metaverse principles, such as virtual fashion, extended reality, gaming and non-fungible tokens (NFTs), demonstrate the impact that virtual activities can have as marketing and community-building tools for fashion. Global spending on virtual assets reached around $110 billion in 2021 and is expected to grow at roughly the same rate as the gaming market to be worth around $135 billion or higher by 2024.
The next frontier for leading brands will be to translate unproven technologies into sustainable revenue streams, effectively separating hype from reality. Over the next two to five years, fashion brands focused on metaverse innovation and commercialisation could generate more than 5 percent of revenues by investing in virtual activities today.
Looking beyond a five-year horizon, some bullish observers expect mass consumer adoption of virtual worlds, creating the biggest opportunity for the fashion industry since e-commerce. The bears predict that the hype around the metaverse will fade as technologies fail to meet expectations or users prove reluctant to use virtual spaces as extensively as some business plans are counting on.

While it is uncertain whether a meaningful number of consumers will develop fully fledged virtual lives and spend most of their time in the metaverse, significant revenue opportunities for fashion brands will emerge.

The pace of adoption will be driven by technological advancement, the interoperability between virtual environments and social acceptance. Tech players as well as fashion start-ups and brands need to develop technologies that help evolve today’s unrefined virtual experiences into mature, immersive realities. Mass consumer adoption could be a significant hurdle — 78 percent of people who have already ventured into virtual worlds say they miss physical interaction when doing so.
As a result, many players will likely hang back to see evidence of commercialised use cases and a tangible ROI before investing. For others that want to capture the commercial opportunity, the biggest short-term revenue potential lies with virtual assets that can be traded, transferred or used for payment. We identify two clear use cases for virtual assets that have long-term potential:
AR Fashion and Virtual Skins
In virtual spaces and on social media platforms, the appetite for creating and adapting online identities is high: approximately 70 percent of US consumers from Gen-Z to Gen-X rate their digital identity as “somewhat important” or “very important.” A similar appetite for virtual goods can be found in China, where 70 percent of luxury consumers have purchased or will consider purchasing virtual assets.
Some companies are using augmented reality (AR), to enable users to alter photos and videos, and are creating digital skins to change the appearance of a user’s avatar. For example, digital fashion start-up DressX, which sells virtual clothing that can be added to a photo and posted on social media, has partnered with brands such as H&M to launch digital collections. Meanwhile, users on online gaming platforms such as Roblox update their avatars with new skins regularly, even daily in some cases. The potential revenue generation of in-game outfits and accessories can be significant. Gucci sold a virtual version of its Dionysus bag for the equivalent of $6 on Roblox, which later led to bids of more than $4,000 per bag when resold on the secondhand market.
The multi-billion-dollar gaming market will continue to offer opportunities for fashion — the market for gaming skins could reach $70 billion by 2024, up from $40 billion in 2020. Brands will need to turn to established gaming and platform partners to find inroads.
Over the next two to five years, fashion brands focused on metaverse innovation and commercialisation could generate more than 5 percent of revenues by investing in virtual activities today.
Still, as with any nascent technology, there are risks. For one, brands — particularly those in luxury — should be aware of selling “cheap” digital items that could weaken the exclusivity of their brand image. AR technology is at a relatively early phase of development, where glitchy or unwieldy applications can undermine the user experience.
Furthermore, if brands choose to partner with virtual platforms, in gaming or otherwise, the top-line opportunity may be dampened by high take rates, which could reach as high as 50 percent commission on revenues.

NFTs as Digital Twins and Loyalty Tokens
Much of the frenzy about blockchain-based NFTs has been centred around digital art collectibles, which are in some cases bought and traded for inordinate sums, driving news headlines as some observers scratch their heads. The compound annual growth rate of the value of the NFT market skyrocketed 750 percent between 2018 and 2021, from $41 million to $24.9 billion.
But the rapid rate of growth in NFT sales is already starting to moderate. Indeed, the daily trading volume on NFT marketplace OpenSea fell by 80 percent between February and March 2022. NFT sceptics suggest that this could indicate the bursting of a bubble in an unsustainable market with a limited number of active customers and rampant hoaxes and scams.
However, even as the hype subsides, use cases will emerge that address industry pain points and consumer desires with applications that support community building, product traceability and authenticity.

The long-term business opportunity for fashion brands to engage with NFTs will likely serve more pragmatic purposes by using NFTs as “loyalty tokens.” Gucci, Adidas and The Hundreds, among others, have used NFTs to offer benefits like early access to new NFT drops and physical products, essentially serving as a membership programme. In a sense, these NFTs are digital collectibles, since users cannot yet wear them in virtual worlds, though they could use them for social media profiles. Brands are starting to add more “utility” to collectible NFTs, which could make buying one more worthwhile to consumers and translate into a long-term opportunity for brands.

We see the most compelling use case for NFTs as digital twins that host information about a physical or digital product’s history, authenticity and ownership — something that is especially beneficial to the luxury segment in its battle against counterfeiting. Twins enable products to be paired with a theoretically tamper-proof record and unlock the ability for brands to collect royalties from resale. A host of start-ups and industry initiatives such as Aura Blockchain Consortium, Lablaco and Arianee are aiming to make blockchain-based digital twins commonplace. Lablaco is working to link its digital IDs to virtual versions of garments, so that customers can engage in augmented reality experiences such as try-ons.
Partner, Build, Acquire
While a few disruptors, such as marketplaces for digital fashion, will solely focus on virtual goods, most tech-savvy, innovative brands will tap the opportunity to diversify revenue streams and target Gen-Z and Millennial consumers. Players that want to experiment in the metaverse but lack the requisite in-house capabilities can:
  • Partner with gaming or tech companies, as Gucci did in its tie-up with Zepeto, a social network and avatar simulation app, to produce paid-for digital skins, or as Burberry did when it partnered with Tencent to launch a limited-edition scarf with the Chinese virtual influencer Ayayi.
  • Build their own capabilities by recruiting talent with tech-related skills alongside a deep-rooted understanding of the metaverse and its communities, as Balenciaga is doing by creating a “metaverse business unit” dedicated to metaverse marketing and commerce.
  • Make acquisitions, along the lines of Nike’s deal to buy virtual fashion studio RTFKT in 2021.
Like the early days of e-commerce, some metaverse-related ventures are likely to fail outright or need rapid iteration. However, fashion is well placed to capitalise on the engagement with virtual worlds and the metaverse, owing to its connection to self-expression, status and creativity. Executives should consider metaverse strategies based on their companies’ digital ambitions and customer targets.

WWD : Chanel Backed Biotech Firm Evolved by Nature Gains Major Investment

Chanel Backed Biotech Firm Evolved by Nature Gains Major Investment
Evolved by Nature has raised $120 million in Series C financing.

A Chanel-backed green chemistry company has scored its biggest investment to date.

Evolved by Nature has raised $120 million in Series C financing in a round led by Teachers’ Venture Growth, part of the Ontario Teachers’ Pension Plan Board, and Senator Investment Group, with participation from existing investors including Mousse Partners, Jeff Vinik, The Kraft Group, Roy Disney, Emerald Development Managers and Chanel.

In 2019, Chanel acquired a minority stake in the company as part of its strategy of developing sustainable materials.

Evolved by Nature develops biomaterial-based products for industries ranging from personal care to textiles and medical devices. Its so-called activated silk technology, consisting of natural silk in liquid form, provides a nontoxic alternative to petrochemicals.

“By harvesting nature’s most powerful chemistry, we are advancing health and a healthier relationship between industries and ecosystems,” said Dr. Greg Altman, cofounder and chief executive officer of Evolved by Nature. “Natural silk protein has evolved over millions of years, and we can finally make it available to sustainably enhance the performance potential of essentially anything with a surface. And TVG’s support allows us to focus our commercialization efforts on the treatment of skin while making activated silk molecules accessible for limitless applications.”

Olivia Steedman, executive managing director of TVG, added: “Evolved By Nature has a compelling vision to break through new scientific boundaries to reduce our reliance on problematic chemicals and build better, more sustainable supply chains in the process. We’re delighted to partner with them in executing this vision and growing their operations globally.”

According to the Evolved By Nature, this financing will aid both research and the launch of activated silk bioactive molecules — skin barrier enhancing ingredients and treatments — in both brand-owned and third-party personal care products, which may serve as natural replacements to retinoids and fossil fuel derivatives like petrolatum.

Its own brand petrochemical free skin care products are set to launch later this year and will include a serum, face cream and body products for ultra sensitive skin.

The funding also advances Evolved by Nature’s biodegradable activated silk technology for sustainable leather and textile finishes, which in the last year have been adopted by fashion brands including Anya Hindmarch, nylon mills such as Alpine Creations and Apex Holdings, and leather tanneries including Richard Hoffmans GmbH & Co. KG, Cyclica Srl and Curtidos Bengala.

“We started with the thought that if we could clean up the supply chains in personal care that utilize products that treat the skin and hair, we could start to have a massive impact,” Altman said. “In developing some of these novel molecules and ingredients, we also realized we can treat the surface of leather and our really large ambitious goal that is now 100 percent realizable is that we can now make natural leather return to its origins.

“We now have the technology that can make leather waterproof and we eliminate the use and need or polyurethane,” he continued. “There’s mushroom leather and new innovations in growing leather in petri dishes and all of this stuff, but most people don’t understand is that you can make whatever you want in terms of the substrate but it’s all getting coated in plastic and then as a result it’s not going to biodegrade. That’s where we have our sights set in fashion.”

Much of this will be done at Evolved by Nature’s full-scale production facility in Walpole, Mass., which opened in May 2022 and produces 150 metric tons of activated silk per year — a 500 percent increase in capacity from 2021. At full operation by 2024, the facility will be able to generate 900 metric tons of activated silk per year.

As for its work with investor Chanel, Altman declined to comment.

WWD : H&M Is About to Go Big With AI

H&M Is About to Go Big With AI
H&M will soon reveal its secret weapon to fight supply chain woes and unite the business, from front to back, with data: Google Cloud.

H&M and Google Cloud are on the verge of disclosing a strategic partnership that will inject more intelligence into the very core of the Swedish fast-fashion retailer.

Notably, their connection isn’t brand new, as the companies have been working together for some time. But this will mark a new threshold in the partnership. In essence, it means they’re taking the relationship up a notch.

Alan Boehme, H&M Group’s chief technology officer, spelled it out in the upcoming announcement: “We are now further accelerating digitalization as we believe in sustainable growth powered by advanced analytics and tech.”

The work includes a so-called “data mesh,” a system designed to offer more access to all types of data and events from multiple parts of the business spanning stores and e-commerce, as well as its brands’ ecosystem and suppliers.

The latter is significant. One of the stated goals for this deal is to address H&M’s supply chain — a key area that came up on a recent conference call.

Although the retailer reported a sizzling first half of the year, with sales jumping 20 percent, chief executive officer Helena Helmersson warned about inflation worries dragging sales, a concern that has H&M weighing price increases. Meanwhile, head of investor relations Nils Vinge noted that supply chain challenges may be easing on the textile and materials sourcing side, but not when it comes to other logistics, like transportation. That will necessitate adjustments to purchasing.

“Throughout the autumn we will start to adjust them to better tailor to the new situation and continue to have the high precision that we offer,” Vinge said. Knowing how and where to make changes will be crucial, and the Google Cloud deal appears to be at least part of the equation.

While that operates in the back of the house, the AI and data backbone may have implications out in front as well. According to Eva Fors, managing director of Google Cloud Nordic Region, the partners look forward to creating “new and exciting customer experiences, whether that’s in-store or online.” No other details were offered, but across fashion, home, beauty and other categories, algorithms are all the rage for everything from product recommendations to refinements in augmented reality.

Google’s cloud business clocked an excellent first quarter, with $5.8 billion in revenue soaring 44 percent. While it still follows Amazon Web Services and Microsoft’s Azure, which showed increases of 36 percent to $18.44 billion and 32 percent to $23.4 billion in the first quarter, respectively, Google Cloud outpaced its rivals for percentage growth.

Some of that momentum may stem from its retail outreach, especially in fashion. The tech giant has been steadily growing its base in that sector, especially in recent years.

H&M may be an ideal match as a partner, as the fashion retailer is no stranger to data intelligence. The company employs its own data engineers and analysts (more than 200 of them, in fact), and according to its current job listings, it’s still hiring. Their work goes into everything from demand prediction and trend-spotting to optimizing for a more sustainable supply chain — an issue that Google Cloud also advocates.

This week, the tech giant unveiled an “Earth Engine” service at its Google Cloud Sustainability Summit, to offer access to more than 70 petabytes of “analysis-ready geospatial data,” the company said.

FT : Hello Kitty parent company Sanrio’s shares surge on Alibaba deal

Hello Kitty parent company Sanrio’s shares surge on Alibaba deal
Five-year licensing agreement comes as Japanese group works to introduce characters to new markets

Shares in Sanrio shot up as much as 15 per cent on Thursday morning after the Japanese company behind Hello Kitty struck a licensing deal with Chinese ecommerce group Alibaba in a bid to expand its footprint.

The five-year deal signed with Alibaba’s intellectual property licensing subsidiary, Alifish, will cover Sanrio’s cast of characters including Hello Kitty, My Melody and her rival devilish rabbit character Kuromi — a hugely popular character in China after a local influencer with more than 14mn followers posted a viral video on social media last year.

The Japanese company said it wanted to “maximise its growth opportunity” created by the rapid digitalisation of the Chinese market, its largest overseas market. Sales in China grew 39 per cent in the fiscal year that ended in March to ¥4.7bn ($34mn), while operating profits were up 19 per cent from a year earlier.

Sanrio had a licensing deal with Hong Kong-based KT Licensing, owned by an investment arm of the families of Victor Fung and William Fung, who are behind the sourcing and apparel manufacturing conglomerate Li & Fung Group.

“We expect not only a notable increase in our merchandise volume with the platformer giant, but also some potential clues from the tech company as we explore new businesses in metaverse and blockchain,” said a Sanrio spokesperson.

Sanrio, which handed control from the 94-year-old founder to his 33-year-old grandson Tomokuni Tsuji in 2020, is shifting its strategy after its operating profits have declined from a peak in 2013. In the fiscal year through March 2021, Sanrio was not profitable for the first time in 12 years. It returned to profit the following year.

The fall in performance followed smash hits from Disney including Frozen, which caused Sanrio brands to lose their lustre in lucrative US and European markets.

The coronavirus pandemic temporarily forced theme parks and stores to close, prompting Tsuji to boost the group’s digital strategy and attract new fans by creating mascots other than Hello Kitty.

Sanrio hosted a metaverse music festival in December to lure tech-savvy consumers. The company is now assessing data on how to promote such digital events, said the spokesperson.

The company is experiencing unanticipated success in China, where Kuromi has been searched on Baidu four times more than Frozen’s Elsa, according to Nikkei. The surge was prompted by a video posted in January 2021, which has drawn 2.7mn likes, in which an influencer danced in costumes imitating the rabbit mascot, among others.

>>> Stoxx 600 Pre-Market Indications

  • ArcelorMittal (ARRD TH) -2%
  • Persimmon (OHP TH) -2%
    • Michael Gove must put up or shut up over housebuilder cartel claims
  • SAP (SAP TH) -2.2%
    • SAP Cut to Neutral at Exane BNP Due to Risks on Demand Side
  • Lufthansa (LHA TH) -2.3%
  • Zalando (ZAL TH) -2.5%
  • Delivery Hero (DHER TH) -2.6%
  • Worldline (WO6 TH) -2.7%
  • Sanofi (SNW TH) -2.8%
  • Fortum (FOT TH) -4.8%
  • Uniper (UN01 TH) -10%
    • Uniper Discusses Potential Rescue Deal With German Government

>>> TradeGate Pre-Market Indications

DAX:
  • Vonovia (VNA TH) -0.8%
    • Adler Chairman Says Winding Up Company Is One Option: B-Z
  • SAP (SAP TH) -1.6%
    • SAP Cut to Neutral at Exane BNP Due to Risks on Demand Side
  • Zalando (ZAL TH) -1.7%
  • Mercedes (MBG TH) -1.7%
  • RWE (RWE TH) -1.8%
  • E.On (EOAN TH) -1.8%
MDAX:
  • Lufthansa (LHA TH) -2.1%
  • Delivery Hero (DHER TH) -2.2%
    • German Holdings Round-Up: TAG Immobilien, Delivery Hero
  • Grand City Properties (GYC TH) -2.7%
  • Uniper (UN01 TH) -10%
    • Russian Gas Squeeze Spurs Bailout Talks for Germany’s Uniper (1)
    • Uniper Prelim 1H Adjusted Ebit Below EU580M
SDAX:
  • Jenoptik (JEN TH) -0.9%
  • Salzgitter (SZG TH) -1.1%
  • Suedzucker (SZU TH) -1.1%
  • Hensoldt (HAG TH) -1.3%
  • AUTO1 (AG1 TH) -2.2%

WSJ : China’s Economy Returns to Growth Mode as Covid Lockdowns Lift

China’s Economy Returns to Growth Mode as Covid Lockdowns Lift
Services and construction activity rebounded in June, while weak export orders weighed on manufacturers, surveys showed

SINGAPORE—Economic activity in China expanded in June after three straight months of contraction, according to official surveys of businesses and factories that point to a modest recovery after Covid-19 restrictions were eased in the world’s second-largest economy.

Economists are downbeat about the prospects for a major revival, however, given the darkening global backdrop and the risk of further Covid outbreaks.

The U.S. and European economies slowed sharply in June as surging prices of energy and food weakened demand for other goods and services, surveys last week showed, underlining how gloomy the outlook has become as Russia’s war in Ukraine saps global growth and high inflation prompts central banks to jack up interest rates.

For China, that pullback in overseas spending means that it can’t rely on exports to propel a robust rebound from its lockdown-induced doldrums, as it did after the initial outbreak in early 2020.

Instead, Beijing is banking this time on an infrastructure splurge to power its economy, though many economists are doubtful that big investments will be enough to offset a sinking real-estate market and subdued consumer and business confidence.

Urban unemployment was 5.9% in May, higher than the government’s target of 5.5% or lower, while joblessness among those age 16 to 24 rose to a new high of 18.4%.

China’s official purchasing managers index for nonmanufacturing sectors posted a reading of 54.7 in June, a big jump from the previous month’s 47.8, the National Bureau of Statistics said Thursday. The surge was led by a rebound in construction and the services sector, where the lifting of Covid-19 restrictions unclogged transportation blockages and allowed people to return to stores and restaurants.

The reading was the highest since May last year, survey data shows, and follows three straight months of declines as lockdowns blanketed major cities such as Shenzhen and Shanghai. A reading above 50 indicates activity is expanding rather than shrinking.

Manufacturing activity returned to growth but the rebound was weaker than economists were anticipating. The purchasing managers index for the manufacturing sector notched up a reading of 50.2, higher than the previous month’s 49.6, but lower than the 50.5 reading expected by analysts polled by The Wall Street Journal.

Overall production rose, but new export orders were weak, the survey showed, highlighting fading global demand.

Weakening demand is the biggest problem that factories now face, said Zhao Qinghe, a senior statistician with China’s statistics bureau, who added that falling factory-gate prices are squeezing companies’ earnings.

Official data earlier this week showed profits at industrial companies dropped 6.5% from a year earlier in May, though that marked an improvement from the 8.5% year-over-year decline registered in April.

A subindex tracking service-sector activity surged to 54.3 from 47.1, while a subindex for construction activity reached 56.6 as infrastructure investment accelerated. China’s cabinet, known as the State Council, said this week that construction began on 120 new expressway and other highway projects between January and May, with overall investment in the road network during that period exceeding the equivalent of $1 trillion.

Separately on Thursday, a survey of 102 member companies by the American Chamber of Commerce in China found that 44% of respondents had reduced or delayed planned investment in China as a result of recent Covid-19 outbreaks, highlighting the strain on foreign businesses from Beijing’s zero-tolerance approach to the virus.

Forty-six percent reported lingering production difficulties even after lockdowns were eased, citing staff shortages, supply issues and other problems, according to the survey, which was conducted between June 22 and 24.

>>> Europe : Brokers Upgrades & Downgrades - 30th of June 2022

>>> Up
* Atea Raised to Hold at Handelsbanken
* Bank of Cyprus Raised to Outperform at KBW; PT 172.29 pence
* Orsted Raised to Buy at HSBC; PT 930 kroner
* Uniper Raised to Outperform at Oddo BHF; PT 25 euros
* Virgin Money UK Raised to Overweight at Barclays; PT 200 pence

>>> Down
* SAP Cut to Neutral at Exane; PT 100 euros
* Spie Cut to Hold at Stifel; PT 24 euros
* Supermarket Income Cut to Reduce at Peel Hunt; PT 115 pence
* YIT Cut to Hold at DNB Markets; PT 3.50 euros

>>> Initiation
* ABB Rated New Buy at Stifel; PT 35 Swiss francs
* Barry Callebaut Rated New Buy at Berenberg
* El.En. Rated New Buy at Berenberg; PT 16.10 euros
* Unity Software Rated New Sector Weight at KeyBanc

>>> Call
* Barry Callebaut a New Buy at Berenberg With Re-Rating Seen Ahead
* Citi Opens Positive Catalyst Watch on WPP, Publicis Into Results
* El.En. Set For Next Phase of Growth, New Buy at Berenberg
* Just Eat Share Drop Overdone, 2Q May Bring Respite, MS Says
* National Grid Downgraded at Jefferies as Upside Looks Limited

>>> What to look at today - 30th of June 2022

Stocks in Asia fluctuated Thursday as investors weighed signs of gradual improvement in China’s economy amid ongoing concerns about a US recession from monetary tightening.  Stocks fell in Japan and rose in China, while Hong Kong was steady. The dollar dropped and Asian currencies rebounded after China data showed a strong pickup in services spending as Covid outbreaks and restrictions were gradually eased. US futures pared declines after the S&P 500 and the Nasdaq 100 ended little changed in choppy trading amid end-of-quarter portfolio rebalancing. European futures were lower. Treasury yields edged higher. They had dropped earlier as traders upped their bets on a recession eventually halting the Federal Reserve’s aggressive tightening campaign. Oil bounced around $110 a barrel as demand worries persisted.  Fed Chair Jerome Powell and his counterparts in Europe and the UK warned inflation is going to be longer lasting as they gathered at the European Central Bank’s annual forum in Portugal.  A view that central banks misjudged inflation has roiled financial markets this year, with global stocks about to close out their worst quarter since the three months ended March 2020. President Xi Jinping declared Covid Zero the most “economic and effective” policy for China. The nation eased quarantine rules earlier this week, providing a brief boost to markets, but investors remain cautious of the stringent adherence to eradicating the virus. US After Hours PFE and BNTX announce new vaccine supply agreement with US govt; RH -5% falls on weak guidance; SGH -12.8% and DCT -12.3% lower on earnings

Nikkei -1.44% Hang Seng +0.03% CSI +1.62% Shanghai +1.31% Shenzen +1.76%

Eur$ 1.0455 CNH 6.6995 CNY 6.6958 JPY 136.43 GBP 1.2132 CHF 0.9541 RUB 52.9260 TRY 16.6438 WTI$ 109.85 +0.06% Gold 1,816.10 -0.09% BTC 20,010 -0.92% ETH 1,087 -1.84%

S&P -0.68% Nasdaq -0.77% EuroStoxx -1% FTSE -1 Dax -0.97% SMI -0.58%

Macro :
- Israel Prime Minister Naftali Bennett Won’t Run in Next Election
- Swiss Franc Soars to Seven-Year High, Reaches Euro Parity
- SEC Rejects Grayscale Bid to Turn Biggest Bitcoin Fund Into ETF
- China’s Economy Shows Signs of Improvement as Covid Eases
- London Struggles to Wean Itself From Russian Billions
- US Hypersonic Missile Fails in Test in Fresh Setback for Program

Keep an eye on :
- ADJ GY : Adler Chairman Says Winding Up Company Is One Option: B-Z
- AML LN : Aston Martin Seeking New Funds; Could Offer Board Seat: Autocar
- BNTX US : Pfizer, BioNTech to Get $3.2b From US for Extra Covid Vaccines
- CFEB BB : CFE Decides to Repurchase Up to 1.25M Own Shares
- CBK GY : BlackRock Takes Big Bet on Commerzbank as Stake Almost Doubles
- CON GY : Vitesco to Slash Two-Thirds of Jobs at German Plant by 2026
- EQNR NO : Equinor Transfers Operatorship for Gulf of Mexico Field to Shell
- EQNR NO : Equinor Delivering as Much Gas to Europe as Possible: CEO to HB
- EUCAR FP : Europcar Mobility Names Peter Gowers Group CEO
- GRF SM : Grifols in Talks With Funds (KKR & CVC) to Raise Up to EU2b: Confidencial
- IMPN SW : Implenia Expects to Exceed CHF80M Planned Total Equity Increase
- MC FP : LVMH buys California wine giant Joseph Phelps as high-end drinks market soars
- MFEB IM : MFE Is Interested in Bidding for UK’s Channel 4: CFO
- ORP FP : Orpea Publishes Summary of Audit on Elderly Residents
- OVH FP : OVH Boosts FY Revenue Forecast
- RNO FP : Nissan Makes Renault Pact Disclosure Amid Calls for Transparency
- STLA IM : Stellantis Warns of Car Market Collapse If EVs Don’t Get Cheaper
- TTE FP : Gabon Plans World’s Biggest Ever Issuance of Carbon Credits
- TRI FP : Trigano 3Q Revenue EU921.2M Vs. EU905.7M Y/y
- UN01 GY : Uniper Prelim 1H Adjusted Ebit Below EU580M
- DG FP : Portugal to Build New Lisbon Airport in Montijo, Jornal Reports
- VTSC GY : Vitesco to Slash Two-Thirds of Jobs at German Plant by 2026

FT : UK companies that sought to ride Spac wave crushed by sell-off

UK companies that sought to ride Spac wave crushed by sell-off
From electric vehicles to fintech start-ups, their stocks have lost an average of 61% of value

UK companies that went public via a Spac listing in the last two years have been crushed by the market sell-off, losing on average 61 per cent of their value as investors dump the once-hot start-ups.

Electric vehicle company Arrival has suffered most, losing 93 per cent of its value since completing its Spac deal in March last year, while online used car retailer Cazoo’s shares have plunged 91 per cent since the start-up listed last August, according to Dealogic data.

Most of the UK companies listed in the US, losing on average 72 per cent of their value and underperforming even battered American companies, which are down 63 per cent.

The plight of UK ventures that merged with a Spac comes amid a broader tech sell-off and as investors ditch their holdings of early-stage, cash intensive start-ups that epitomised the Spac boom but which have since failed to meet their often rosy projections.


Special purpose acquisition companies raise money and list on the stock exchange as a cash shell, later searching for a private company to merge with and take public. They offer a faster route to market than a traditional initial public offering and allow companies to present rosy forecasts.

Fourteen UK companies have merged with blank-cheque vehicles since 2020, with newspaper publisher JPI Media the only one to choose to list in London, according to Dealogic — and the only one of the group to rise in value.

In the US, Spacs surged in popularity to become Wall Street’s hottest investment product, with 231 US-listed Spacs merging with US companies since 2020, the Dealogic data finds.

The majority of UK companies who chose to list via a Spac picked the US as their listing destination, due in part to London’s tighter rules. Arrival, quantum tech company Arqit and data analysis business Wejo are among those who merged with New York-listed Spacs, adding to concerns that the London market was being deprived of tech companies.

The UK revamped its Spac rules in July 2021 in an effort to make the City more competitive, though it appears to have missed the boom. “The global Spac market was starting to turn quite considerably at that point,” said Paul Amiss, partner at law firm Winston & Strawn.


Investors have soured on Spacs following numerous scandals that left some investors nursing heavy losses. Earlier this year the US Securities and Exchange Commission also outlined a sweeping overhaul of the market, including clamping down on companies’ abilities to provide projections.

Electric van maker Arrival was valued at $13.6bn when it listed in New York in March 2021, a valuation that has plunged to under $1bn. In its Spac investor presentation, Arrival expected 2022 revenues to hit $60mn and production to reach 10,600 vehicles. Last month, the Hyundai-backed group said it expected to manufacture up to 600 vans “plus low volume” of buses this year.

The Spacs that (mainly) flopped
Arrival 
Like many of the new electric car companies, Arrival broke on to the public markets before actually manufacturing a vehicle. The bus and van developer plans to use “microfactories” to avoid the production pitfalls that have ensnared other start-ups including Tesla, Rivian and Lucid. Denis Sverdlov, who founded Arrival in 2015, previously served Russian president Vladimir Putin as his deputy communications minister but has distanced himself from the Kremlin’s recent actions.

Cazoo
Online used-car seller Cazoo was founded in 2018 by Alex Chesterman, who had previously started LoveFilm. It listed in New York at an $8bn valuation but has since shed most of its worth, with its market capitalisation now under $600mn. The lossmaking online car marketplace cut 750 jobs across the UK and Europe this month as it warned of the threat of a recession due to rising inflation and disruption to supply chains.

Paysafe 
Founded in London in 1996, fintech group Paysafe helps businesses handle their customers’ payments. The company was a constituent of London’s FTSE 250 index until it was taken private in 2017. In April 2021, it listed in New York after merging with a Spac backed by billionaire businessman Bill Foley — owner of the Vegas Golden Knights ice hockey team.

Babylon Health
Healthcare start-up Babylon was founded in 2013 by British-Iranian entrepreneur Ali Parsa. The tech company has received backing from Saudi Arabia’s sovereign wealth fund and data analytics group Palantir. Babylon’s “GP at hand” app allows customers to access their NHS doctors virtually.

GBT Travel Services UK
American Express’s business travel arranger was spun off by the payment group in 2014 and merged with a Spac backed by private equity firm Apollo Global Management in 2021. Videoconferencing company Zoom and buyout group Ares were among the investors in its Spac deal. The company helps businesses manage travel plans and expenses.

LumiraDx 
Founded in 2014 by three scientifically-minded businessmen, LumiraDx has its headquarters in London and creates diagnostic products for patient care. The company merged with a healthcare Spac led by Larry Neiterman, former chief operating officer for global Deloitte Consulting.

Vertical Aerospace 
Based in Bristol, Vertical Aerospace was founded in 2016 and develops electric aircraft. The company was set up by Stephen Fitzpatrick, who also leads energy retailer Ovo Energy.

Rockley Photonics 
Founded in 2013 by Andrew Rickman, Rockley Photonics makes biomarker sensors for communication products. Based in Oxford, the company focuses on the healthcare sector and wearable health-tracking devices. Its “clinic on the wrist” device analyses users’ blood and skin to measure temperature, alcohol and glucose levels, among other issues.

Genius Sports Group 
London-based Genius Sports Group is a data company that provides video, betting and other technology services to sports companies and associations including the Premier League and International Basketball Federation.

BenevolentAI 
Artificial intelligence drug discovery company BenevolentAI was founded in 2013. With headquarters in London and a research laboratory in Cambridge, the pharma company uses machine learning to find new treatments. The company’s atopic dermatitis treatment is its only programme currently in phase 2 trials.

Wejo 
Founded in 2013 in Manchester, Wejo is a connected vehicle analysis company. Backed by General Motors, Palantir and Microsoft, Wejo collects and processes data on traffic and driving.

Arqit 
Quantum encryption company Arqit was founded in 2017 by David Williams, a former investment banker. It merged with a Spac launched by London-based investment firm Centricus, which has close ties to SoftBank.

JPI Media Publishing 
JPIMedia Publishing was formed in 2018 after the acquisition of the assets of national, regional and local newspaper company Johnston Press by its lenders. The company runs about 200 titles across the UK, with flagships like The Scotsman and The Yorkshire Post. It listed on the London stock exchange in January 2021.

Super Group SGHC 
Headquartered in Guernsey, Super Group is the parent company of online gambling platform Betway and casino site Spin. It has ridden the wave of gambling legalisation and sports betting in the US, signing deals with San Francisco’s Golden State Warriors basketball team, among others.