TechCrunch : Volkswagen-backed QuantumScape to go public via SPAC to bring solid

Volkswagen-backed QuantumScape to go public via SPAC to bring solid-state batteries to EVs

QuantumScape, the solid-state battery company backed by Volkswagen Group, has agreed to merge with a special purpose acquisition company Kensington Capital Acquisition Corp. as it aims to raise the capital it needs to commercialize solid-state batteries for electric vehicles.

The merger will give QuantumScape a post-deal market valuation of $3.3 billion.

QuantumScape said it was able to raise more than $700 million through the business combination, a figure that includes $500 million in private investment in public equity, or PIPE. The raise was anchored by institutional investors including Fidelity Management & Research Company and Janus Transaction. The combined company will be named QuantumScape and is expected to remain listed on the NYSE and trade under the new ticker symbol “QS.”

The merger and associated PIPE transaction will fund the company’s plans to first production, according to QuantumScape founder and CEO Jagdeep Singh. Numerous automakers have pursued solid-state batteries, but challenges such as cost have hampered efforts to commercial the technology.

Electric vehicles on the road today are equipped with lithium-ion batteries. A battery contains two electrodes. There’s an anode (negative) on one side and a cathode (positive) on the other. An electrolyte sits in the middle and acts as the courier that moves ions between the electrodes when charging and discharging. Solid-state batteries use a solid electrolyte and not a liquid or gel-based electrolyte found in lithium-ion batteries.

Developers claim that solid electrolytes have greater energy density, which translates into squeezing more range out of a smaller and lighter battery. Solid electrolytes also are supposed to be better at thermal management, reducing the risk of fire and the reliance on the kinds of cooling systems found in today’s EVs.

Summer of the SPAC
QuantumScape joins what appears to be a seemingly endless line of venture-backed companies that have eschewed the traditional IPO path and instead opted to go public via a reverse merger with a SPAC, or blank-check company. QuantumScape is also part of a smaller and notable group of electric vehicle-related companies that have announced plans to go public via a SPAC. EV companies Canoo, Fisker Inc., Lordstown Motors and Nikola Corp. have gone public, or announced plans to, via a SPAC merger this spring and summer.

Unlike some of the companies in this new batch of SPACs, QuantumScape can hardly be called a startup. The Stanford University spinout has been working for a decade on developing solid-state batteries and designing a scalable manufacturing process to commercialize its battery technology for the automotive industry.

Volkswagen venture
QuantumScape attracted attention and capital early on from high-profile venture firms like Kleiner Perkins and Khosla Ventures. Volkswagen entered the picture in 2012. The automaker has invested a total of $300 million in QuantumScape, including $200 million this year.

The heart of the VW-QuantumScape relationship is a joint venture, which was announced in 2018, that aims to accelerate the development of solid-state battery technology and then produce them at commercial scale. The companies have plans to set up a pilot plant for the industrial-level production of the solid-state batteries. Volkswagen said in June that plans for the pilot factory will be “firmed up” sometime this year.

QuantumScape’s board is also loaded with notable investors and experts in the electric vehicle industry, notably former Tesla CTO and Redwood Materials founder JB Straubel, who called QuantumScape’s solid-state anode-less design “the most elegant architecture I’ve seen for a lithium-based battery system.”

Kensington Chairman and CEO Justin Mirro will also join the combined company’s board of directors.

WSJ : Fiat Chrysler Showcases Jeep With New Models, Stand-Alone Showrooms

Fiat Chrysler Showcases Jeep With New Models, Stand-Alone Showrooms
Auto maker prepares to reveal modern-day Grand Wagoneer as SUV market competition stiffens

Fiat Chrysler Automobiles NV is trying to put a bigger spotlight on Jeep, asking dealers to build stand-alone showrooms and rolling out larger, more expensive models to appeal to more luxury-minded buyers, including a modern-day Grand Wagoneer.

The company’s efforts come as Jeep is facing more competition than ever in the U.S.’s highly lucrative SUV market and as sales of its other mass-market brands such as Chrysler and Dodge have struggled in recent years.

Ford Motor F 1.76% Co. earlier this summer unveiled a new line of Bronco SUVs that its executives say will take direct aim at Jeep.

On Thursday, Jeep is expected to show off a new version of the Grand Wagoneer, a long-planned large SUV whose name is a throwback to the wood-paneled model that became popular in the 1970s. This vehicle will be one of several big SUVs coming from Jeep in the next year as Fiat Chrysler aims to move the brand upscale.

A Jeep Wagoneer is also in the works, along with a new Grand Cherokee and another, still-unnamed large SUV that will have three rows of seating. Jeep is also pushing to add hybrid, plug-in options to existing models, including the Wrangler, looking to diversify its lineup further.

For Fiat Chrysler, Jeep is among the company’s most recognizable nameplates and a big profit driver in North America. The expansion of the Jeep brand is critical for Chief Executive Mike Manley, who is trying to steer the company through a pandemic that is crushing auto-industry earnings and execute a merger with France’s PSA Group to create one of the world’s largest auto makers by sales.

Mr. Manley, who ran Jeep for years before taking the top job, has tried to move the brand upmarket and expand it globally. He has pressed to increase sales overseas, particularly in China, and add smaller Jeeps that can better meet emissions requirements in places including Europe, where SUVs are rising in popularity.

In the U.S., Fiat Chrysler is constructing a $1.6 billion factory in Detroit that will build two of the new Jeep models. That plant is scheduled to open next year.

While Jeep has had success in recent years with its latest Wrangler, it has struggled with lower-priced models such as the Renegade and Cherokee, which haven’t sold as well and are now starting to age.

Jeep’s sales in the U.S. declined 5% last year to 923,920 vehicles, and the brand’s share of the SUV market has slipped, according to research firm Motor Intelligence.

Michelle Krebs, an analyst at Cox Automotive, said part of the challenge ahead for Jeep is that cheaper models have targeted budget-minded buyers with subprime financing, which is lending to customers with below-average or limited credit histories. That consumer base is now shrinking in the pandemic-induced recession.

“They’ve got to get different kinds of customers at the high end,” Ms. Krebs said.

With more buyers flocking to SUVs, particularly as the virus prompts more Americans to leave cities and avoid air travel, the bigger Jeeps could be arriving at an optimal time, she added.

Still, they will confront stiff competition. The SUV market has grown far more crowded over the years as Asian and German car makers have expanded into bigger offerings.

Ford F 1.76% and General Motors Co. GM 3.93% have updated their big people-haulers in the past few years, hoping to tap this highly profitable part of the U.S. car business as more buyers move away from cheaper small cars and sedans.

Fiat Chrysler is hoping to help the brand stand out by intensifying efforts to build more Jeep-only showrooms.

These showrooms, which aim to separate Jeep from the more mainstream vehicles offered by Chrysler, Dodge and Ram, have specialized staff and displays of the latest Jeep accessories and apparel.

Jeep now has 59 stand-alone showrooms in the U.S. and is planning a few hundred more in the coming years, mostly in larger metro areas, a company spokesman said.

Dealers say the larger Jeep models are long overdue, in part because the lineup now lacks the types of family-oriented vehicles offered by Ford F 1.76% and GM. That has resulted in customers’ abandoning Jeep when they need to size up, the dealers say.

“The younger buyers love the Wrangler, but what happens as they get older and have kids?” said Doug Moreland, who recently built a stand-alone Jeep store in Fort Collins, Colo.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • PD -23.6%, ZUO -22.8%, DBI -18.8%, RKT -9.5%, CRWD -9.2%, MOMO -9.2%, SMAR -8%, CIEN -7.8%, CLDR -7.1%, SAIC -5.5%, AMBA -3%, CPB -2.1%

Other news:

  • AKBA -70.6% (following top-line results from PRO2TECT)
  • TSLA -6.8% (continued weakness following yesterday's plunge; there was positive article about Tesla competitor Lucid Motors)
  • AMC -3.7% (files for 30 mln share offering)
  • OSTK -3.4% (introduces zero trading fees)
  • CYCN -2.6% (entered into $50 mln Open Market Sale Agreement with Jefferies)
  • NIO -2.3% (August deliveries)
  • IONS -1.4% (announces publication of compassionate-use study)

Analyst comments:

  • WMC -2.2% (downgraded to Underperform from Neutral at BofA Securities)
  • FAST -1.8% (downgraded to Equal Weight from Overweight at Wells Fargo)
  • UPS -1.1% (downgraded to Sell from Hold at Berenberg)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • FIVE +8%, GWRE +4.7%, CONN +4.7%, HOFT +3.8%, MIK +3.7%, SPWH +3.5%, SIG +3.2%, CPRT +2.5%, MDB +2.3%, MEI +2.1%, GCO +2%, DCI +0.9%, POR +0.8%, PVH +0.8%, PDCO +0.7%

Other news:

  • STRO +15.3% (to discuss update on "promising" STRO-002 interim data)
  • FLGT +12.7% (partners with NYC for back-to-school COVID-19 testing)
  • ADMA +12.7% (launches COVID-19 ImmunoRank Neutralization MICRO-ELISA)
  • AGTC +8% (to provide update on trial and data on Sep 9)
  • NVAX +5.6% (announces publication of Phase 1 data for COVID-19 vaccine in NEJM)
  • ICLK +4.9% (upsizes and prices stock offering)
  • BE +4.3% (co and SK E&C announce 28-MW deployment of fuel cell technologies)
  • BKR +3% (President/CEO disclosed the purchase of ~71K shares on 9/2)
  • CRY +1.5% (acquires Ascyrus Medical)
  • SONO +1.2% (gets extension on exclusion of the co's core speaker products from tariffs through end of 2020)
  • COST +1% (reports Q4 sales slightly better than consensus; Aug comps +14.5%)

Analyst comments:

  • CS +2.5% (upgraded to Outperform from Neutral at Exane BNP Paribas)
  • LLY +1.6% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
  • AGCO +1.5% (upgraded to Buy from Neutral at BofA Securities)
  • BAC +1.1% (upgraded to Buy from Hold at Deutsche Bank)
  • JPM +1% (upgraded to Buy from Hold at Deutsche Bank)
  • BYND +1% (initiated with an Outperform at Robert W. Baird)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • CONN +16.8%, STRO +15.3%, FLGT +14.5%, FIVE +9.3%, AGTC +7.4%, BE +6.1%, GWRE +6%, HOFT +6%, NVAX +5.7%, BKR +4%, PVH +3.2%, MDB +3.1%, INCY +1.7%, SONO +1.6%, CRY +1.5%, COTY +0.9%, POR +0.8%, NVS +0.7%
  • Gapping down:
    • PD -24%, ZUO -23.3%, MOMO -9.3%, RKT -7.8%, CRWD -7.2%, TSLA -6.1%, SAIC -5.5%, SMAR -4.6%, AMBA -3.4%, AMC -2.7%, NIO -2.6%, OSTK -2.2%, IONS -1.4%, CYCN -1.4%, CLDR -1.4%, DBI -0.7%, LB -0.6%, UPS -0.6%

>>> Europe : Brokers Upgrades & Downgrades - 3rd of September 2020 V2(+)

>>> Up
* Deutsche Post PT Raised to 48 euros at Bankhaus Metzler
* FedEx Raised to Buy at Berenberg; PT $280
* Integrated Diagnostics Raised to Buy at Arqaam Capital
* Publicis Raised to Buy at Oddo BHF; PT 38 euros
* Sika PT Raised to 250 Swiss francs at Citi (+)
* Stora Enso Raised to Buy at BofA; PT 15 euros
* Technogym Raised to Buy at Banca Akros (ESN); PT 9 euros (+)

>>> Down
* A.G. Barr PT Cut to 310 pence from 380 pence at Barclays
* British Land Cut to Equal-Weight at Morgan Stanley
* Land Sec. Cut to Equal-Weight at Morgan Stanley
* Merlin Properties Cut to Equal-Weight at Morgan Stanley
* Next Cut to Underweight at Morgan Stanley; PT 3,650 pence
* UPS Cut to Sell at Berenberg; PT $130
* Wood Cut to Market Perform at Bernstein; PT 270 pence

>>> Initiation
* Covivio Resumed Equal-Weight at Morgan Stanley
* doValue SpA Rated New Outperform at Intermonte; PT 11.90 euros
* Intertrust Rated New Buy at KBC Securities; PT 20 euros

>>> Call
* *EUROPEAN ENERGY SECTOR RAISED TO MARKET WEIGHT AT BARCLAYS (+)
* Capgemini Update Confirms Pre-Announced Results, Oddo Says
* Citi Upgrades Non-Financial Value Stocks on Falling Real Rates
* Deutsche Post, FedEx Top Parcel Delivery Picks at Berenberg
* Elekta Navigates Crisis, PT and Estimates Raised at Berenberg
* Next ‘Very Overvalued,’ Cut to Underweight at Morgan Stanley
* Prada Accelerates on Instagram in 1H, Dior ‘Stellar:’ Bernstein
* Stora Enso Upgraded to Buy at BofA, Sees Improving Pulp Prices (+)
* Subsea 7’s Offshore Wind Exposure Undervalued, Citi Raises PT

WSJ : Robinhood Faces SEC Probe for Not Disclosing Deals With High-Speed Traders

Robinhood Faces SEC Probe for Not Disclosing Deals With High-Speed Traders
Company could have to pay a fine exceeding $10 million if it agrees to settle

Robinhood Markets Inc. faces a civil fraud investigation over its early failure to fully disclose its practice of selling clients’ orders to high-speed trading firms, people familiar with the matter said.

The investigation is at an advanced stage and the company could have to pay a fine exceeding $10 million if it agrees to settle the Securities and Exchange Commission probe, one of the people said. A deal, however, is unlikely to be announced this month, the people said, and the two sides haven’t formally negotiated a proposed fine, the person said.

A Robinhood spokeswoman declined to comment on the investigation or any talks with regulators, but said: “We strive to maintain constructive relationships with our regulators and to cooperate fully with them.”

An SEC spokeswoman declined to comment.

The probe is the latest headache for the upstart brokerage firm that was founded in 2013 and has developed a hugely popular app that allows individuals to trade stocks, options and cryptocurrencies without paying any commissions. While Robinhood has seen phenomenal growth this year, the Menlo Park, Calif.-based firm has faced setbacks such as outages that prevented customers from trading, the cancellation of its plans to expand to the U.K. and fallout from the suicide of a 20-year-old Robinhood customer who thought he had lost money from a sophisticated options trade.

Companies that settle SEC investigations often pay fines without admitting or denying misconduct. Any settlement may not accuse Robinhood of intentionally violating the most serious antifraud laws, and instead allege the company should have known its statements were false or misleading, one of the people said.

The investigation, run out of the SEC’s San Francisco office, examined Robinhood’s failure to fully disclose on its website—until 2018—that it took payments from high-speed trading firms for sending them customers’ orders to buy or sell stocks or options, the people said. The practice, known as payment for order flow, is a common—if controversial—way for retail brokerages to execute client trades. Critics say payment for order flow creates a conflict of interest for the broker that sells the orders. The practice has raised suspicions that it could lead to sophisticated traders exploiting mom-and-pop investors, although brokers and traders say such concerns are baseless.

Until October 2018, Robinhood had a page on its website titled “How We Make Money” that listed only two revenue sources: fees for its margin-trading service and interest collected on customer deposits. It didn’t mention payment for order flow, even though the payments to high-speed traders were detailed in regulatory disclosures available elsewhere on the website. The SEC enforces laws that require brokerage firms, public companies and other Wall Street players disclose all material facts that an investor would want to know to make a trading decision.

Payment for order flow is legal. It often results in slightly better prices for individual investors, the SEC wrote in a report about algorithmic trading issued last month. The SEC’s report said high-speed trading firms pay for access to the orders because they “generally have more information and processing power than retail traders and brokers” and value the opportunity to trade with less informed traders.

Payment for order flow represented a significant portion of Robinhood’s revenue at the time. The privately owned startup earned under half of its revenue in 2017 from such payments, and roughly half in 2018, a person familiar with the matter said.

During the second week of October 2018, Robinhood updated its webpage to disclose that it “receives rebates from executing brokers.” Also that month, Vladimir Tenev, Robinhood’s co-founder and co-chief executive, published a blog post about the firm’s payments from high-speed traders. “The revenue we receive from these rebates helps us cover the costs of operating our business and allows us to offer commission-free trading,” he wrote.


Robinhood collects payments from trading firms such as Citadel Securities and Virtu Financial Inc. for executing its customers’ orders. In 2019, the company paid $1.25 million to settle regulatory claims tied to that same practice. The Financial Industry Regulatory Authority, a supervisor of brokerage firms that reports to the SEC, said Robinhood didn’t take sufficient steps from October 2016 to November 2017 to ensure it was getting the best prices for customer orders.

Robinhood said this year it has amassed more than 13 million customer accounts, and it was valued at $11.2 billion in a recent funding round. Its trading app has boomed in popularity during the coronavirus pandemic, as more individual investors gamble with stocks and options. Its popularity has put its approach to attracting customers in the spotlight, with some critics saying Robinhood makes it too easy for novice traders to make risky bets.

Brokers and electronic-trading firms say small investors benefit from payment for order flow by getting better prices on their trades than they would get on public stock exchanges like the New York Stock Exchange or the Nasdaq Stock Market. Although the investor might be able to buy a share for just a fraction of a cent less than on an exchange, those better prices add up to billions of dollars of savings for the entire population of small investors, analysts say.

Still, the controversial nature of payment for order flow makes it an awkward topic for Robinhood, which has described itself as a democratizing force in finance that is seeking to upend traditional ways of doing business on Wall Street.

This year, new disclosure reports mandated by the SEC have shed more light on Robinhood’s revenues from electronic trading firms. Robinhood made $271 million in such revenues during the first half of this year, the reports show.

Robinhood’s co-founders, Baiju Bhatt and Mr. Tenev, both have roots in the high-speed trading world. Before founding Robinhood, they ran Chronos Research, a startup that made software for ultrafast trading firms.

Its products included Zardoz, a trading platform named after a 1974 science-fiction movie starring Sean Connery, and a data tool called Brutalis, which the company touted as “brutally fast” on an archived version of its website.

FT : H2O and the saga of its illiquid bonds

H2O and the saga of its illiquid bonds
Intervention by French regulator caps a testing 12 months for London-based asset manager

In a rare intervention, France’s financial regulator has forced H2O Asset Management to suspend a series of its funds because of their exposure to illiquid debt.

The move by the AMF late last week came more than a year after the Financial Times first revealed that London-based H2O, which for years posted some of the most consistently high returns in European fund management, had substantial investments in hard-to-sell assets, with uncertainties over their valuations.

The AMF has never taken such draconian action against a fund manager the size of H2O, which managed nearly €22bn of assets at the end of June. Below the FT examines how the saga reached this point.

What are H2O’s illiquid investments?
H2O’s investments in private debt and unlisted shares are all linked to one man: Lars Windhorst.

The German financier, who is an investor in Hertha Berlin football club, owns a network of mostly private companies backed by thinly traded bonds. But some institutional investors have blanched at the 43-year-old’s turbulent history.

Last year, the FT reported that H2O had no such qualms, however, revealing that the asset manager owned well over €1bn of hard-to-sell bonds linked to the entrepreneur. They were held across funds that allowed retail investors to withdraw their money daily.

Despite the furore, H2O’s chief executive Bruno Crastes stuck by Mr Windhorst, describing him as “very talented”.

Why has the regulator stepped in now?
While H2O weathered last year’s storm, the asset manager has come under renewed pressure after several of its flagship funds lost more than 50 per cent of their value during the March turmoil triggered by the pandemic.

The losses were not related to its investments in private debt, but the collapse in the value of its funds made it harder for the asset manager to comply with EU rules governing open-ended funds, which place a 10 per cent cap on illiquid assets.

To solve this issue, H2O struck a deal with Mr Windhorst at the end of April to buy back his businesses’ illiquid stocks and bonds. Yet months later the deal remains incomplete. H2O said the AMF’s intervention was “motivated by valuation uncertainties” around these investments.

The fund manager marked down the value of these bonds severely last year, and KPMG, the auditor of several H2O funds, subsequently flagged the “uncertainty” around these “valuation methods".

While the French regulator supervises many of H2O’s funds, given the asset manager is based in London, the group falls under the purview of the British markets watchdog. The Financial Conduct Authority told the FT that it had been “working closely” with the AMF and other overseas regulators, and remained “in regular discussions” with H2O.

What is the status of Windhorst’s buyback?
The agreement looked like it could end the questions over the illiquid investments that have dogged H2O. Yet last week the asset manager described progress on the deal as “very partial”.

One reason for this is the sheer scale of the transactions required. A new investment vehicle set up by Mr Windhorst will purchase about €2bn of securities for about €1bn, according to people familiar with the deal.

“You can’t settle over €2bn of bonds in one week,” one person involved in the buyback told the FT.

The financier is also relying on others to help fund the buyback. The new vehicle investment vehicle — Evergreen Funding — is backed with a €1.25bn bond that carries a hefty 12.5 per cent annual interest rate. Mr Windhorst has tapped his sprawling network of contacts and business associates to drum up funds.

They include Ulrich Marseille, a German entrepreneur and former business partner of US president Donald Trump, according to people familiar with the matter. Mr Marseille did not respond to a request for comment.

Mr Marseille is also a former legal adversary of Mr Windhorst, having pursued the then young entrepreneur through the courts for the best part of a decade over repayment of a loan in the 2000s.

Has H2O ‘gated’ its funds?
Mr Crastes vowed last year that he would “never gate” the firm’s funds, drawing a sharp contrast with other asset managers exposed to illiquid assets, such as the UK’s Woodford Investment Management or Switzerland’s GAM.

Last week, the French regulator asked H2O to “suspend all subscriptions and redemptions” on three of its funds. H2O decided to freeze withdrawals on four additional open-ended funds, saying it was in the “best interests” of their investors.

The AMF has only used these powers once before. In contrast, that 2014 case concerned a small asset management company, where the funds were all owned by members of a single family.

However, H2O has said that, technically speaking, it has not gated its funds.

“H2O has taken the approach of using a sidepocket, which is an entirely different tool to gating under the French framework for liquidity risk management,” the asset manager told the FT.

Under French law, gating refers to a specific mechanism used to manage a rush of redemption requests. Instead, H2O has temporarily halted its funds, while it creates new vehicles to hold the private bonds, a process it says should take about four weeks.

While investors cannot access their money for at least a month, in legal terms H2O has not gated these funds.

What does the regulator’s intervention mean for Natixis?
The AMF’s move comes at a turbulent time for Natixis, H2O’s parent company, which last month replaced its chief executive after a two-year term marked by doubts over the bank’s business model and risk management.

H2O was previously the star performer in Natixis’ stable of asset management affiliates, which have their own independent management and risk control processes.

Jean Raby, the head of asset management at Natixis, vouched for the quality of the Windhorst-linked bonds last year, assuring investors that they were “quite diversified”. And while Natixis launched an internal audit into the matter, it has refused to make its findings public.

The bank has said it supported the actions taken by H2O over its funds, while stating that the regulator’s action had “no financial impact on Natixis”.

Not everyone agrees. Matthew Clark, an equity analyst at Mediobanca, said: “I do not share their confidence.”

He estimated that H2O contributed about a fifth of the group’s underlying earnings and argued that the latest troubles could have a reputational impact on Natixis’ broader asset management business.

However, other analysts, including at Jefferies and UBS, have maintained “buy” ratings on Natixis shares, believing that if H2O successfully separates its illiquid investments into new funds, it could be positive for the French lender

>>> Stoxx 600 Pre-Market Indications

  • Erste (EBO TH) +1.5%
  • Stora Enso (ENUR TH) +1.3%
    • Stora Enso Upgraded to Buy at BofA, Sees Improving Pulp Prices
  • Covestro (1COV TH) +1.3%
  • Zalando (ZAL TH) +1.2%
  • ASML (ASME TH) +1.2%
  • Dialog Semi (DLG TH) +1.1%
  • TeamViewer (TMV TH) +1%
  • Linde (LIN TH) +0.9%
  • BP (BPE5 TH) +0.8%
  • TUI (TUI1 TH) -1%
  • Siemens Healthineers (SHL TH) -3.4%
    • Siemens Healthineers Raises $3.2 Billion to Help Fund Varian Buy