WSJ : Next-Generation GPS Firm NextNav Reaches SPAC Deal to Go Public

Next-Generation GPS Firm NextNav Reaches SPAC Deal to Go Public
Platform can locate indoor location, including vertical positioning

NextNav Holdings LLC is combining with a special-purpose acquisition company that would take the next-generation GPS firm public and value it at about $1.2 billion, the companies said.

Founded in 2007, NextNav says its platforms can locate a device’s specific indoor positioning, including what floor of a building it is on. Vertical positioning data are a focus for regulators to improve responses to 911 emergency calls in urban areas and could have consumer applications in sectors like gaming and transportation that require a device’s specific location. NextNav owns licenses to use wireless airwaves that support nationwide telecom networks.

The McLean, Va., company has reached a deal to merge with the SPAC Spartacus Acquisition Corp., the firms said Thursday. The Wall Street Journal had previously reported they were nearing an agreement. Spartacus is focused on deals in the technology, media and telecom industries.

NextNav is expected to generate roughly $410 million in cash through the deal from the money held by the SPAC and a private investment in public equity, or PIPE, associated with the merger. PIPE investors in the deal include Koch Strategic Platforms, a subsidiary of Koch Investments Group, and funds managed by Fortress Investment Group.

Existing NextNav investors include funds managed by Fortress and funds managed by Goldman Sachs Asset Management. XM Satellite Radio founder Gary Parsons is the chairman of NextNav’s board.

The deal will accelerate NextNav’s expansion of its network and capabilities, giving investors and potential customers more certainty that the company will be around for years, Mr. Parsons said.

“They need to know that we’re building this out,” he said. He added that the company hopes to eventually have the capability to fully back up and augment GPS data with its more advanced technology.

SPACs like Spartacus are shell companies that list on an exchange to acquire a private firm and take it public. They are also called blank-check companies. Merging with a SPAC has become a popular way for startups to quickly raise large sums and access investors who are excited about speculative technologies. One reason is that SPAC mergers let startups make projections about their businesses, which aren’t allowed in normal IPOs.

SPACs have raised about $105 billion so far in 2021, shattering last year’s record north of $80 billion, per data provider SPAC Research. The 2020 total was more than the amount previously raised in the nearly 30-year history of the SPAC market.

Some companies that go public via blank-check firms have become popular investments for individual investors, while many professionals argue that they are overvalued and are wagering that their share prices will fall. That tension has driven volatility and put some of the firms linked to SPACs at the center of the recent day-trading frenzy. Just this week, shares of Clover Health Investments Corp. more than doubled before sliding 24% Wednesday.

In another illustration of the risks of investing in certain companies that merge with SPACs, electric-truck startup Lordstown Motors Corp. warned Tuesday that it doesn’t have enough cash to begin production and isn’t sure whether it can continue operating.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • FCEL -10.5%, GME -6.3% (also names former Amazon execs as CEO and CFO; also files for 5 mln share at-the-market offering; also received SEC request for documents), LAKE -5.5%

Other news:

  • OCGN -41.7% (to pursue a BLA path in the US for its COVID-19 vaccine candidate)
  • MTLS -13.8% (prices offering of 4.0 mln ADSs at $24.00 per ADS)
  • CELH -10.8% (prices offering of 6,518,267 shares of common stock at $62.50 per share)
  • EGLX -8.2% (stock offering)
  • CAKE -5.8% (announces its intention to offer $300 mln convertible senior notes due 2026 and $175 mln of common stock in separate public offerings)
  • IMBI -5.4% (prices underwritten public offering of 4,830,918 shares at $9.00 per share)
  • PLBY -4.3% (prices offering of 4.72 mln shares of common stock at $46.00 per share)
  • CMCT -3.4% (commencement of the previously announced rights offering for an aggregate of approximately $137.3 million of newly issued shares of common stock)
  • LTHM -2.9% (stock offering; also files mixed securities shelf offering)
  • WETF -2.8% (prices offering of $150.0 million of convertible senior notes due 2026)
  • REVG -2.1% (stock offering)
  • AMC -1.9% (announces shareholder count ahead of Shareholder Meeting in July)
  • TRP -1.4% (confirms termination of Keystone XL Pipeline Project)

Analyst comments:

  • CME -2.6% (downgraded to Neutral from Overweight at Atlantic Equities)
  • FSLY -2.5% (downgraded to Perform from Outperform at Oppenheimer)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • OXM +9.1%, RH +8%, SIG +7.6%, GEF +2.1%, CANO +1.4%, PNR +1.2%

Other news:

  • VRNA +16.4% (Verona Pharma and Nuance Pharma announce $219 mln strategic collaboration to develop and commercialize Ensifentrine in greater China)
  • BTBT +3.9% (announces strategic collaboration with digihost to increase combined hashrates by 400 PH/S)
  • ACRS +3.7% (prices offering of 7,042,254 shares of its common stock at $17.75 per share)
  • ARAY +3.7% (expands commercialization of ClearRT helical fan-beam kVCT imaging for the Radixact system with CE mark certification)
  • TLYS +3.4% (delares $1.00/sh special dividend)
  • LTRX +3.1% (expanded relationship with Insight Enterprises (NSIT), now offering full range of products)
  • NOA +2.5% (to acquire DGI Trading Pty)
  • CASI +1.8% (prices offering of $150.0 million of convertible senior notes due 2026)
  • COIN +1.8% (partnering with ForUsAll, a 401(k) provider to offer cryptocurrency, according to WSJ)
  • OBSV +1.7% (reports PROLONG Phase 2a Proof-of-Concept Data on Ebopiprant)
  • HYFM +1.6% (stock offering)
  • LESL +1.5% (prices offering of 24.5 mln shares of common stock at $27.64 per share)
  • AB +1.4% (reports May AUM)
  • APR +1.3% (prices secondary offering of 4.5 mln shares of common stock at $27.00 per share)
  • EARN +1.1% (raises quarterly dividend by 7% to $0.30 per share)
  • DM +1% (receives CE Mark Certification and international launch for Flexcera Next Generation 3D printed dentures)

Analyst comments:

  • CYH +4.8% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
  • IOVA +4.5% (upgraded to Mkt Outperform from Mkt Perform at JMP Securities)
  • PUBM +3.2% (upgraded to Outperform from In-line at Evercore ISI)
  • NOW +2.9% ( upgraded to Conviction Buy from Buy at Goldman)
  • BSMX +2.4% (upgraded to Buy from Hold at HSBC Securities)
  • PNTG +2.3% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
  • CPG +1.8% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
  • FFIV +1.7% (upgraded to Outperform from Neutral at Credit Suisse)
  • UPS +1.6% (upgraded to Overweight from Neutral at JP Morgan)
  • DNB +1.5% (upgraded to Outperform from Mkt Perform at Raymond James)
  • MRO +1.3% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)

WSJ : Jeff Bezos and Other Space Tourists Will Enter Sparse Regulatory Territory

Jeff Bezos and Other Space Tourists Will Enter Sparse Regulatory Territory
Suborbital travel isn’t subject to same rules as commercial flight

When Jeff Bezos climbs into the New Shepard capsule for its first passenger trip to space next month, his safety will be almost entirely in the hands of the spaceflight company he founded two decades ago.

Mr. Bezos plans to join the small band of tourists who have flown in space as the emerging industry prepares to launch hundreds of people aloft. For now, they aren’t protected by the meticulous federal safety regulations that govern commercial air travel.

Passengers planning a ride on the New Shepard must sign a form waiving their right to sue Mr. Bezos’ Blue Origin LLC in the event of an accident. Richard Branson’s Virgin Galactic Holdings Inc., SPCE -6.21% which plans to send paying passengers on its space plane as early as next year, requires a similar step.

Congress agreed in 2004 to let the space-tourism industry self-regulate to speed its preparations for passenger flights. Years of delays, including an accident that killed a Virgin Galactic test pilot in 2014, have pushed back the start of flights for fare-paying passengers. The policy has been extended several times and now runs until October 2023.

The Federal Aviation Administration’s jurisdiction is limited to protecting public safety and the environment during launches and re-entries, a spokesman for the agency said. “Congress has not allowed the FAA to extend its authority to the safety of crew or space flight participants,” the spokesman said.

Regulators, lawmakers and industry executives are debating whether to introduce tougher rules, such as requiring passengers to be trained for the rigors of reaching the edge of space. The companies already offer some training for their short flights, which include periods of high G-forces and the possible disorientation that can come with weightlessness.

Blue Origin and Virgin Galactic have said they are following rigorous testing and safety standards as they prepare to open ticket sales. Analysts expect flights to cost as much as $500,000 for a brief up-and-down that includes several minutes of weightlessness. Blue Origin’s flights take about 10 minutes. Virgin Galactic’s take more than two hours because the spacecraft is launched from an airplane that must first climb to a high altitude.

Mr. Bezos will be joined on the planned July 20 flight by his brother, Mark Bezos, and the winner of a charity auction due to conclude Saturday.

Blue Origin said more than 6,000 bidders from 143 countries have taken part in the auction so far. The highest bid stood at $4 million Thursday morning. The company, like Virgin Galactic, hasn’t commented on future ticket prices.

Blue Origin said would-be passengers will have to be able to run to the top of the company’s launch tower—about seven flights of stairs—in 90 seconds and fit into a spacesuit. Beyond that, it won’t require passengers to take a medical exam before flying, referring them to their personal doctor for any fitness concerns. A Virgin Galactic official said flight preparations include a medical consultation.

The companies provide training over two or three days. Virgin Galactic’s preparation includes sessions with its pilots, instruction on weightlessness and time in a cabin mock-up. The company offers passengers optional flights in aircraft that simulate zero gravity, as well as time in a centrifuge that replicates some of the forces astronauts experience during flight.

Blue Origin said traveling in its spacecraft requires minimal training. “It’s familiarization of the safety features and preparations to travel to space on the fully autonomous New Shepard rocket,” said a spokeswoman.

The cost of space launches means the rockets and capsules have been tested much less exhaustively in flight than commercial aircraft, which are sent on thousands of hours of test flights before carrying paying customers.

Virgin Galactic’s testing program suffered an in-flight breakup in 2014, killing a test pilot. Accident investigators attributed the crash to design defects by Scaled Composites LLC, the company that manufactured the spacecraft, that allowed a pilot’s error to lead to an accident.

A Virgin Galactic spokeswoman said Virgin Galactic has since taken over design and manufacturing of the spacecraft.

Aside from risks related to the spacecraft, some passengers will probably experience more intense medical issues than the mild ear effects familiar from airline flights, said Dr. Jeffrey Jones, a flight surgeon who has worked with astronauts at the National Aeronautics and Space Administration. Many people vomit during their first encounter with weightlessness, he said, and passengers can also get injured if they aren’t properly strapped in when gravity returns.

“Passengers are part of the safety system. They need to know what’s going to happen,” said David Allen, head of operations at Blue Sky Flight Training LLC, which has helped dozens of would-be astronauts prepare for space.

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • VRNA +19.8%, OXM +13.8%, RH +6.3%, GEF +5.1%, CANO +4.2%, OBSV +4%, TLYS +3.9%, EARN +2.6%, ACRS +2.2%, GNSS +1.7%, MNKD +1.5%, AB +1.4%, MDWD +1%, LESL +0.8%, DM +0.8%, EZPW +0.6%, TSM +0.6%, ASX +0.6%
  • Gapping down:
    • MTLS -13.9%, CELH -8.6%, LAKE -7.3%, IMBI -5.6%, GME -5.6%, PLBY -4.3%, AMC -3.8%, REVG -3.4%, EGLX -1.7%, MTW -1.7%, GENI -1.3%, LTHM -1%, HYFM -1%, FLXN -0.9%, MXL -0.6%, SACH -0.6%, STLA -0.5%

FT : Global banking regulator calls for tough capital rules for cryptocurrencies

Global banking regulator calls for tough capital rules for cryptocurrencies
Basel committee report comes as authorities step up plans to regulate the fast-emerging sector

Global regulators are calling for cryptocurrencies to carry the toughest bank capital requirements of any asset, arguing that institutions should have to hold the highest level of capital against crypto assets such as bitcoin, far above conventional stocks and bonds.

Banks with exposure to cryptocurrencies should face the toughest capital requirements to reflect the higher risks, according to the Basel Committee on Banking Supervision, the world’s most powerful banking standards-setter, as global authorities step up plans to regulate the fast-emerging market.

In a report released on Thursday, the Basel committee acknowledged that while banks’ exposure to the nascent crypto industry was limited, “the growth of crypto assets and related services has the potential to raise financial stability concerns and increase risks faced by banks”.

Among the risks it cited included market and credit risk, fraud, hacking, money laundering and terrorist financing risk.

Some assets, such as stock tokens, would fit into modified existing rules on minimum capital standards for banks. Others, such as bitcoin, would face a new “conservative” prudential regime, it recommended.

Stablecoins, cryptocurrencies pegged to traditional assets such as currencies, would also qualify for existing rules if they were fully reserved at all times, the committee said. Banks would have to monitor that this was “effective at all times”, it added.

All other crypto assets, including bitcoin and ethereum, would go into the new more strenuous regime. The Basel committee proposed a risk weight of 1,250 per cent, in line with the toughest standards for banks’ exposures on riskier assets.

That would mean banks would in effect have to hold capital equal to the exposure they face. A $100 exposure in bitcoin would result in a minimum capital requirement of $100, Basel said.

The standards would apply to assets created for decentralised finance (DeFi) and non-fungible tokens (NFTs), but potential central bank digital currencies were outside the scope of the consultation, it added.

The Basel proposals come as global regulators grapple with the rapid emergence of digital assets and mushrooming interest from investors. US authorities also want to take a more active role in supervising the $1.5tn cryptocurrency market because of concerns that a lack of oversight risks harming investors in the highly volatile and speculative industry.

State Street and Citigroup are among the banks that have indicated they are looking to provide more crypto services to customers.

Prudential rules set requirements on liquid assets and capital levels that a bank must set aside so it can wind down in an orderly way, without harming its customers or creating panic in the market.

Digital tokens that are based on traditional assets, such as shares, bonds, commodities and cash, would fit into the first category for crypto assets.
However, they would have to have the same level of legal rights as the traditional asset, such as the right to a dividend or other cash flows some do not currently carry.

The consultation ends in September.

FT : French music group Believe shares tumble on market debut

French music group Believe shares tumble on market debut
Disappointing response comes as blow to tech IPO ambitions at Euronext Paris bourse

Shares in music group Believe, which has set out to create a novel music label for the streaming era, fell more than 13 per cent on its first day of trading, in what is likely to be a blow for the French market as it tries to recover from pandemic volatility.

Believe, whose brands include New-York based platform TuneCore and its own family of labels, reached a valuation of about €1.67bn as its shares dropped to around €17 in early French trading on Thursday, down from the offer price of €19.50.

The flotation marks the first tech listing on the Euronext Paris bourse since 2014, when online payments group Wordline went public, and is among roughly 30 flotations in the pipeline of the Paris market.

Believe had already priced its initial public offering at the bottom of its scaled back price range, of between €19.50 and €22.50 a share, which would give the group a market value of €1.9bn to €2.1bn.

The disappointing response to the listing is a setback for the Paris market, which is trying to establish itself as a location for IPOs and foster the growth of tech companies. The fact Believe is in a fast-growing sector that is popular among investors is likely to add salt to the wound. 

The slip in Believe’s valuation on its debut follows a weak run for tech flotations this year, after Deliveroo’s shares plunged 26 per cent on the company’s first day of trading in March, wiping almost £2bn from its opening £7.6bn market capitalisation.

Commodities broker Marex Spectron and Parts Holding Europe, a French distributor of auto parts, pulled their planned IPOs this month due to turbulent market conditions.

Other French IPOs lined up for this year include OVH, a cloud computing provider, and Aramis, the online seller of second-hand cars that is a unit of carmaker Stellantis.

New investors in Believe include French mutual fund Fonds Stratégique de Participations and Sycomore Asset Management, which specialises in responsible investment.

Founded in 2005, Believe has been looking to capitalise on growing enthusiasm for the music sector, which has returned to growth after two decades in decline. 

Believe works with independent musicians and music labels as they seek to build popularity via social media and put their work on streaming music platforms. These include newcomers and more established artists, such as French rapper Jul, Australian band Parcels and Lebanese singer Nancy Ajram.

The company, which serves more than 850,000 artists, intends to use the €300m it has raised to expand into new countries, both through organic growth and further acquisitions.

This month, the company scaled back its initial ambitions, saying it would look to raise €300m rather than €500m in its flotation, because investors said they preferred a staged approach to raising funds. Founder and chief executive Denis Ladegaillerie, a former executive at Universal Music Group, said he planned to return to the market for finance in 2024 and 2025.

Believe’s biggest shareholder is California-based investment fund TCV, which holds a 42 per cent stake in the company, while other backers include French venture group Ventech, at 17 per cent, and London-based GP Bullhound. Ladegaillerie now owns a 13 per cent stake. About 15 per cent of the company’s shares will float freely on the public market.

Citi, JPMorgan and Société Générale, BNP Paribas, Goldman Sachs, HSBC and UBS acted as joint bookrunners. Rothschild & Co acted as an independent financial adviser.