My Daily Commitment

[al97]

2 Oct - Commercial Awareness - Energy
Topic: Sunak makes a U-turn on Net Zero strategy
https://www.ft.com/content/9b1399fd-5ce1-427c-b6b0-aeb5a43f4d92


The UK Prime Minister announced that he will relax the commitments to Net Zero.

What are the changes?

• Originally, the ban on the sale of diesel cars will be effective starting 2030, but it is now delayed until 2035.
• Sunak’s rationale was to ensure that household bills are not too burdensome for the wider public but still be able to achieve the 2050 goal.
• This affects SME and the already difficult EV industry.
• Other targets remained unchanged, such as the plan to mandate 80% EV by 2030.

Why is it a problem?

1. Already late. The International Energy Agency criticised the government’s approach and said that the investment into clean energy requires $4.5 trillion/year globally to reach Net Zero by 2050. This year, the global investment is still short of $1.8 trillion.

1. Affect businesses’ strategy. Most companies have already integrated Net Zero as a priority into their strategy and operation. This sudden change – 5 years – is a disruption to businesses and forced them to re-prioritise.

1. Late to opportunities. Clean energy industries would create jobs and economic opportunities. It is advantageous to get in the ring earlier than later. Think of policies, sustainability-linked loans and green loans, which are loans with reduced interest rate given exclusively to projects that are “green/sustainable”. Such an incentive is offered now as we are in the earlier years of 2050, if companies are bold enough to commit to green transition, they will be able to benefit off a cheaper cost to borrow. If companies are late, say they only start their transition in 2048 – when almost every company has competed their transition – it is doubtful that such incentives would still be in place

1. Unstable policies are unattractive to foreign investors. The manufacturing industries warned that UK may lose its competitiveness as an international hub if foreign investors lose confidence. They require stability in order to invest. Many companies have already spent substantial time and money to drive to NZ. The UK needs a long-term strategy on AI and NZ.

Opposition:

1. Some companies welcomed the change: Toyota, who has been slow to roll out EV
2. The UK is still attracting investment, recent deals: Tata £4bn into gigafactory; Stellantis £100mn investment into Ellesmere Port; BMW £600mn investment into electric Minis

 

[al97]

3 Oct - Commercial Awareness - Technology
Topic: Hot Big Tech IPOs falls to room temperature
https://www.ft.com/content/665137ac...egmentId=7d4bcc2e-e664-92ba-62e3-5590579f1902
https://www.cnbc.com/2023/09/20/ins...ll-its-ipo-gains-by-second-day-on-nasdaq.html
https://www.ft.com/content/2b8f723d-52b0-4ea5-9703-7c65e3c6bd35


On the second day of trading, Instacart fell more than 11% below their first day. The plunge extinguished the IPO gains.

The two biggest IPOs recently are Arm and Instacart, both in the technology sector, the former is a Cambridge-based semiconductor, listed on NASDAQ. The latter is an online grocery delivery platform, also listed on NASDAQ, closed with a gain of 12%. The third IPO is Klaviyo, marketing automation software, which raised 15% more than its IPO price.

Interest rate ends the short Spring of IPO

• The IPO market entered winter since 2021 due to inflationary pressure and rising interest rate.
• The falling share price suggests that investors are still hesitant to buy into tech companies.
• On the day of Klaviyo’s IPO, was also the day FED announced their plans to support another interest rate rise this year and fewer cuts than expected in 2024.
• Interest rate is painful for private start-ups as they are valued by their future cash flow.

VC are “forced” to list for less desirable reasons

• VC that planned to go IPO delayed their plans. Pitchbook estimated that almost 80 IPOs are in the backlog.
• If they do go out despite the risky landscape, it would not be the traditional reasons of raising growth capital or liquidity.

1. Employee tax liabilities associated with Restricted stock units (RSU)

• RSU are shares offered to employees that allow them to cash in when a company exit — acquired or goes public
• Stripe, Klaviyo, Instacart have offered RSU
• Stripe raised more than $6.5bn to cover employee tax liabilities that comes from RSU.
• Instacart is effectively using all of the $600mn proceeds from its IPO to settle costs RSU-related costs.
• Klaviyo used almost all of $60mn to settle the outstanding RSUs

1. The need for liquidity

• VC investment is more long-term than PE as their investment lifecycle is usually 10 years. The ROI on this cycle determines how much they can raise during their next funding. VC firms need start-ups to go IPO or sale in order to distribute returns to their investors

 

[al97]

4 Oct - Commercial Awareness - Tech
Topic: Amazon’s Case against the FTC over antitrust issues
https://www.ft.com/content/5b27f142-613f-437c-890d-7abe1be6d819

Issue:
Amazon monopolises the online marketplace. FTC filed a lawsuit against Amazon for the following reasons:

Harsh and allegedly ilegally treatment of sellers

• Taking half of every dollar of sellers’ revenue
• Punishes seller that discount heavily by making them “effectively invisible” on search
• Forcing vendors to use costly logistics network
• Forcing vendors to pay for advertising
• Amazon’s pricing system aka Project Nessie, uses a surveillance network to monitor whether sellers offer their products at a cheaper price on other sites, condemns sellers who do so
• Amazon also made extensive efforts to hinder the FTC’s investigation

The Regulator

• Lina Khan is chair of the FTC
• Amazon request that Khan be removed from the lawsuit as she was known to be a longstanding critic of Amazon
• Biden administration adopted a touch approach to crack down corporate power, other lawsuits against Big Tech filed by DOJ/FTC: Google for digital advertising, Meta for acquisitions of IG and Whatsapp and Within, Microsoft acquisition of AB

Other lawsuits facing Amazon

• In June, FTC sued Amazon for allegedly tricking customers into signing up for its Prime service without their consent
• Amazon Prime Video was available on a standalone basis and also comes in a bundle, but Amazon uses dark patterns to prevent users from signing up the former
• In May, Amazon settled at $25mn for a lawsuit regarding violation of children’s privacy via Alexa

Interview questions:

Who is FTC?
Federal Trade Commission is the equivalent of CMA of the UK. Their aim is to protect consumers from unfair business activities such as regulating antitrust issues.

Impact on law firms?
Rigorous enforcement from regulators against Big Tech, advisory department will be busier. Law firms with a strong competition, regulatory, and litigation practice will be favoured. Antitrust issues mostly touches technology sector (e.g. Microsoft-AB deal) so IP litigation is highly relevant.

 

[axelbeugre]

1 Oct - Commercial Awareness - Energy sector
Topic: Oil prices records high
https://www.ft.com/content/c2482121...egmentId=7d4bcc2e-e664-92ba-62e3-5590579f1902

Oil prices surged to record-breaking highs at $93 due to Saudi Arabia and Russia’s decision to reduce supply. It is speculated to rise to $100100.

Saudi Arabia and the Western powers clash because the former prince prioritises its own interest to boost domestic economic and social programs over their allies. It affects the central bank’s ability to control inflation. SA and Russia have led Opec+ to reduce supplies.

In the US, Biden administration accused SA for aligning with Russia. Trump attempts to use the rise in oil prices and the handling of SA situation to attack Biden during the next presidential election.

Hedge Funds are betting on the oil market to pass $100 per barrel. Their attention in the oil market was sparked by SA’s announcement to keep the production curbs in place longer. Doug King does not believe the price will go higher as he believes that the market was driven by the Opec+ restraint rather than a strong demand.

So interesting, thank you so much for sharing this @al97

 

[al97]

6 Oct - Commercial Awareness - Private Credit
Topic: From Private Equity to Private Credit
https://www.ft.com/content/84409cde-1197-49c9-bf88-dbe371e44313

Today is an odd day with my news reading. I explored more topics today, spent about 1 hour reading, but didn’t really feel like I had absorbed anything particularly interesting. So short news today!

Private credit = lending that banks don’t want to do.
Blackstone merged its credit and insurance arm, totalling the AUM to $295bn, double its PE business. The founder estimated it to grow to $1tn the next decade.

Departure from traditional buyouts comes with lower returns. In contrast, private credit funds deliver returns in the low teens, expose investors to less risk as loans come with a security asset.

 

[al97]

7 Oct - Commercial Awareness- Technology
Topic: None. Some fragmented news to update my knowledge of the tech industry
https://www.ft.com/content/bf6b81cb-9d36-4ddf-b16e-d74f2b1cd446
https://www.ft.com/content/f167c499-2399-4b94-8a7b-7a5ccc1bb1cb
https://www.ft.com/content/f23e59a2...egmentId=7d4bcc2e-e664-92ba-62e3-5590579f1902


Softbank, Open AI, and LoveForm come together for a joint venture to launch an “iPhone of AI”

UK’s government

Frontier AI taskforce was created in June 2023. It received £100mn in initial funding from the government to conduct independent AI safety research, which would be used to develop safe AI models – like the one used in Chat GPT.

The UK will host a global AI Summit next month. According to my knowledge after I attended Covington’s Insight Series, I believe the US firm is playing a part in the summit, which makes sense as the firm is strong in regulatory work. The AI summit will only focus on one set of concerns, so several civil society groups and smaller tech companies launch fringe events to discuss issues they feel are being ignored.

Meanwhile, EU is also progressing with their AI act. Brussels warned against paranoia regulations that hindered the technology’s growth.

AI risks - AI systems could be used to supercharge a cyber attack on the UK health service – design pathogens or toxins. The importance of cybersecurity is parallel to NHS during COVID. For instance, in 2017, the WannaCry ransomware attack costs NHS £92mn and led to 19,000 cancellations of appointments.

AI Constitution. Google DeepMind, Open AI, Anthropic announced AI Constitution – a set of principles that their models adhere to while selecting a response, to avoid abuse. The models used a method known as RLHF - reinforced learning by human feedback. Companies hire a large teams of contractors to rate the AI response as good/bad. The large volume of response generated will help the models to be attuned to those judgements, thereby making them more human-alike. OpenAI also used red-teaming. They hired 50 experts across chemistry, nuclear weapons, law, and education, to attempt to break it.

 

[al97]

8 Oct - Commercial Awareness - Tech
Topic: Google’s antitrust trial about making its search engine default
https://www.ft.com/content/3d60547c-9d51-48a6-a6e2-426f72c76ce1
https://www.ft.com/content/d761d863-8f7f-43fa-94cd-5e74959dd19b

Another Big Tech antitrust issue today. Google search vs DOJ - bringing Microsoft’s Bing into court as testimony

The agreement - Google paid billions of dollars to Apple to use Google Search as the default search engine. The act and the astronomical figure were perceived to be an antitrust issue by the DOJ.

The DOJ’s struggle when proving antitrust

• One, they need a supply of incriminating emails or direct witnesses to bring the claims of illicit business behaviour, otherwise they’re relying on abstract economic theories.
• Two, Google deliberately delete potentially incriminating internal communications.
• Three, the prosecution produced very little evidence. One piece of evidence is an email from Google to Apple about giving users the option to choose a default search engine including Safari: “No default – no revenue share”.
• Four, one compelling evidence from the DOJ is the financial incentive to suppress rivals – Google paid $10 billion. However, the DOJ struggled to prove an “obvious harm”.

What Google is saying

• It’s relatively easy for users to switch the default setting.
• Users prefer Google Search because of its strength
• Users don’t like Microsoft because Windows is made to cater to laptops and they haven’t done enough to cater to the mobile phone market.

What Microsoft is saying

• The notion that users have a choice is “bogus”. People simply use whichever search engine that is the default.
• They’re prepared to pay $15bn to Apple for an agreement to replace Google as the default on iPhones.
• The judge asked Microsoft if AI can help, they said Google’s vicious cycle can be more vicious if default agreements are made.

I personally think the news is tied to another Big Tech news that I read this week - about the joint venture (in-discussion) between Open AI and Softbank to launch an AI phone. See here: https://www.ft.com/content/4c64ffc1-f57b-4e22-a4a5-f9f90a7419b7

Side note: I’m planning to learn more about private equity. I completed any PE-related courses on TCLA and I have a very foundational understanding inc some of the technical terms. But when researching news, I realise it’s not useful to look at sector-specific news, PE is not really sector-focused. I’m assuming it’s more effective to explore interest rate as it relates to the cost of a loan. Private credit is rising, alongside some basics of accounting like EBITDA, so will explore these too.

 

[al97]

9 Oct - Commercial Awareness - Private Credit
Topic: Bain Capital brings a lawsuit against Blackstone to recover €200mn loan
https://www.ft.com/content/d390f4c7-6bf6-4111-9f1d-9c734ca07bbd

Blackstone hired law firm Pallas and Teneo to investigate whether it could recover €200mn of loan to Bain Capital and bring a claim against Bain over the collapse of Fintyre.

The courts appointed the restructuring unit of an advisory firm, Teneo, to handle Fintyre’s liquidation. They are also advised by Pallas to assess whether they can bring claims against Bain’s directors over their actions that led to the insolvency.

The collapse of Fintyre

• Bain acquired Fintyre in 2017 with the goal to transform it to the world’s largest tyre group. Blackstone provided €200mn of debt funding.
• Bain provided equity + Blackstone provided debt = high growth of Fintyre
• Subsequently, other investors were attracted. Sardinia and German businesses have doubled the revenue to €900mn.
• Less than a year later, Fintyre collapsed, which came as a surprise as there would usually be opportunities to rescue. Hence, Bain’s directors are in trouble about their obligations to make Fintyre’s performance transparent.
• It does not impact Bain as it is the nature of PE firms to make losses on one deal and recover from another rainmaking deal.
• Blackstone's credit arm is now owed €230mn, behind another creditor group €65mn.

The news is interesting because it alarms the risks of private credit just as private equity firms have favoured private credit. Apollo, KKR, and Carlyle are increasingly focused on credit and shifting away from traditional buy-outs.

Below are short points to revise on the technical aspects of the news:

Insolvency
Power of the liquidator - when the insolvency proceeding starts, the liquidator’s power is supreme. Directors cease to have control over the company. The liquidator has the power to sell the company’s assets without consent and repay the creditors in an order approved by the court.
The liquidator is also incredibly expensive, which could be a deterring factor that companies rely on to persuade their creditors not to instigate the proceedings and allow them more time to figure out the loan.
Under the Companies Act 2006, directors owe a fiduciary duty to their creditors, if they make an unwise decision to harm their financial positions, they will incur personal liability.

 

[axelbeugre]

9 Oct - Commercial Awareness - Private Credit
Topic: Bain Capital brings a lawsuit against Blackstone to recover €200mn loan
https://www.ft.com/content/d390f4c7-6bf6-4111-9f1d-9c734ca07bbd

Blackstone hired law firm Pallas and Teneo to investigate whether it could recover €200mn of loan to Bain Capital and bring a claim against Bain over the collapse of Fintyre.

The courts appointed the restructuring unit of an advisory firm, Teneo, to handle Fintyre’s liquidation. They are also advised by Pallas to assess whether they can bring claims against Bain’s directors over their actions that led to the insolvency.

The collapse of Fintyre

• Bain acquired Fintyre in 2017 with the goal to transform it to the world’s largest tyre group. Blackstone provided €200mn of debt funding.
• Bain provided equity + Blackstone provided debt = high growth of Fintyre
• Subsequently, other investors were attracted. Sardinia and German businesses have doubled the revenue to €900mn.
• Less than a year later, Fintyre collapsed, which came as a surprise as there would usually be opportunities to rescue. Hence, Bain’s directors are in trouble about their obligations to make Fintyre’s performance transparent.
• It does not impact Bain as it is the nature of PE firms to make losses on one deal and recover from another rainmaking deal.
• Blackstone's credit arm is now owed €230mn, behind another creditor group €65mn.

The news is interesting because it alarms the risks of private credit just as private equity firms have favoured private credit. Apollo, KKR, and Carlyle are increasingly focused on credit and shifting away from traditional buy-outs.

Below are short points to revise on the technical aspects of the news:

Insolvency
Power of the liquidator - when the insolvency proceeding starts, the liquidator’s power is supreme. Directors cease to have control over the company. The liquidator has the power to sell the company’s assets without consent and repay the creditors in an order approved by the court.
The liquidator is also incredibly expensive, which could be a deterring factor that companies rely on to persuade their creditors not to instigate the proceedings and allow them more time to figure out the loan.
Under the Companies Act 2006, directors owe a fiduciary duty to their creditors, if they make an unwise decision to harm their financial positions, they will incur personal liability.

This is so interesting, thank you for sharing! @al97

 

[al97]

13 Oct - Commercial Awareness - Energy
Topic: ExxonMobil’s £60 billion acquisition of Pioneer Natural Resources
https://www.ft.com/content/f389210f-ea4d-492d-b562-62aadd6ddc42
https://www.ft.com/content/60295c70-a6a8-4e72-8597-4ce75d5b7c40


Exxon’s CEO’s longstanding belief – oil and gas will remain central to global energy supply. The company anticipates oil and gas to make up half of global energy demand and the temperature rises set out in Paris Agreement is likely to fail.

What’s Permian Basin?
A sedimentary basin in Southwest America. It is the highest-producing oil field in the US, producing an average of 4.2 million barrels of crude oil per day. Located between Texas and Mexico.

What good does it do for Exxon?
Pioneer will double the production to 1.3mn barrels per day, driving the basin’s output to 2mn b/d by 2027, access to 16bn barrels with 15-20 years of inventory.

Pioneer’s oil field is adjacent to Exxon with considerable overlapping, which enabled it to drill wells horizontally, achieving efficiency and cut costs to below $35/b – a fraction of current Texas price $83/b

Investors pressurise oil and gas companies to give up on costly drilling programs, instead, pursue acquisition.

Competitors?
BP and Shell have cut their fossil fuel portfolio and oil output since 2019. Chevron spent $6.3bn to acquire shale producer PDC Energy, adding new oil and gas reserves. It is speculated that they will pursue an M&A to compete with Exxon.

Shares in Permian-focused companies such as Diamondback, Permian Resources, Matador jumped on the speculation that they may be acquisition targets.

 

[axelbeugre]

13 Oct - Commercial Awareness - Energy
Topic: ExxonMobil’s £60 billion acquisition of Pioneer Natural Resources
https://www.ft.com/content/f389210f-ea4d-492d-b562-62aadd6ddc42
https://www.ft.com/content/60295c70-a6a8-4e72-8597-4ce75d5b7c40


Exxon’s CEO’s longstanding belief – oil and gas will remain central to global energy supply. The company anticipates oil and gas to make up half of global energy demand and the temperature rises set out in Paris Agreement is likely to fail.

What’s Permian Basin?
A sedimentary basin in Southwest America. It is the highest-producing oil field in the US, producing an average of 4.2 million barrels of crude oil per day. Located between Texas and Mexico.

What good does it do for Exxon?
Pioneer will double the production to 1.3mn barrels per day, driving the basin’s output to 2mn b/d by 2027, access to 16bn barrels with 15-20 years of inventory.

Pioneer’s oil field is adjacent to Exxon with considerable overlapping, which enabled it to drill wells horizontally, achieving efficiency and cut costs to below $35/b – a fraction of current Texas price $83/b

Investors pressurise oil and gas companies to give up on costly drilling programs, instead, pursue acquisition.

Competitors?
BP and Shell have cut their fossil fuel portfolio and oil output since 2019. Chevron spent $6.3bn to acquire shale producer PDC Energy, adding new oil and gas reserves. It is speculated that they will pursue an M&A to compete with Exxon.

Shares in Permian-focused companies such as Diamondback, Permian Resources, Matador jumped on the speculation that they may be acquisition targets.

so interesting and this will be very useful for people who are interested in the energy sector!

 

[al97]

14 Oct - Commercial Awareness - Tech
Topic: Sequoia’s Split in the APAC region
https://www.ft.com/content/6e3b6905-0b0f-4215-80a4-4082cb899966
https://www.bloomberg.com/press-rel...eadrive-completes-series-d-financing-lnjx8dki
https://www.ft.com/content/e007ce22-9763-4c9b-969f-ff4e97f320e1
https://www.ft.com/content/a37c6b7c-bec1-457b-8125-a3dbe2a8a275

Background;

• Following Sequoia’s split with its Chinese arm, there are currently three arms in the APAC regions: China, India, and Singapore.
• Sequoia China, aka HongShan, manages $56 billion, they planned to open an office in SG.
• Sequoia India aka Peak XV already has an office in SG.
• Although operating as different entities, they did not sign non-compete provisions. Though the two entities expressed that they orient towards collaboration > competition.

Singapore:

• It appears that SG is pulling both arms, but HS actually stepped in when PX was debilitating.
• Zilingo went into liquidation following complaints and the high-profile firing of its co-founder and CEO.
• Byju’s value was written down by their investors, their auditors resigned, and a series of high-profile departures.

Hong Shan in China:

• The Chinese VC fund plans to focus on EV and clean energy - a sector dominated by China with their exclusive to raw minerals required to manufacture battery. A recent deal to accentuate its growth is Leadrive’s series D financing, which raised RMB 600mn.
• It is currently managed by Neil Shen, who was famous for his early bet on Alibaba and TikTok’s owner Bytedance.
• Within China’s VC space, a recent news that I noticed is the IPO of Tiantu Capital, $144mn on the HKSE. The IPO was assisted by LA-based law firm O’Melveny.

US vs China

• The split was described by FT to be a result of the tension between Washington and Beijing. US prohibits investment into China, especially in critical sectors (military and technology), and vice versa.
• However, VC funds and PE funds are still taking risks. For example, California and Massachusetts pension funds are among HS’s investors. In fact, about 50% of its investment comes from the US.
• This may not be related to VC but I saw yesterday that Vanguard is investing in China military group indirectly.

In my personal view, I think this signifies great potential in the APAC region as private capital is flowing in. I’m not entirely sure about the start-up scenes in Asia – eg how many promising start-ups there are – but currently, there is a high amount of dry powder in the EU. I wonder if the capital will find the ideal start-ups to invest in.

 

[axelbeugre]

14 Oct - Commercial Awareness - Tech
Topic: Sequoia’s Split in the APAC region
https://www.ft.com/content/6e3b6905-0b0f-4215-80a4-4082cb899966
https://www.bloomberg.com/press-rel...eadrive-completes-series-d-financing-lnjx8dki
https://www.ft.com/content/e007ce22-9763-4c9b-969f-ff4e97f320e1
https://www.ft.com/content/a37c6b7c-bec1-457b-8125-a3dbe2a8a275

Background;

• Following Sequoia’s split with its Chinese arm, there are currently three arms in the APAC regions: China, India, and Singapore.
• Sequoia China, aka HongShan, manages $56 billion, they planned to open an office in SG.
• Sequoia India aka Peak XV already has an office in SG.
• Although operating as different entities, they did not sign non-compete provisions. Though the two entities expressed that they orient towards collaboration > competition.

Singapore:

• It appears that SG is pulling both arms, but HS actually stepped in when PX was debilitating.
• Zilingo went into liquidation following complaints and the high-profile firing of its co-founder and CEO.
• Byju’s value was written down by their investors, their auditors resigned, and a series of high-profile departures.

Hong Shan in China:

• The Chinese VC fund plans to focus on EV and clean energy - a sector dominated by China with their exclusive to raw minerals required to manufacture battery. A recent deal to accentuate its growth is Leadrive’s series D financing, which raised RMB 600mn.
• It is currently managed by Neil Shen, who was famous for his early bet on Alibaba and TikTok’s owner Bytedance.
• Within China’s VC space, a recent news that I noticed is the IPO of Tiantu Capital, $144mn on the HKSE. The IPO was assisted by LA-based law firm O’Melveny.

US vs China

• The split was described by FT to be a result of the tension between Washington and Beijing. US prohibits investment into China, especially in critical sectors (military and technology), and vice versa.
• However, VC funds and PE funds are still taking risks. For example, California and Massachusetts pension funds are among HS’s investors. In fact, about 50% of its investment comes from the US.
• This may not be related to VC but I saw yesterday that Vanguard is investing in China military group indirectly.

In my personal view, I think this signifies great potential in the APAC region as private capital is flowing in. I’m not entirely sure about the start-up scenes in Asia – eg how many promising start-ups there are – but currently, there is a high amount of dry powder in the EU. I wonder if the capital will find the ideal start-ups to invest in.

Amazing!

 

[Jaysen]

14 Oct - Commercial Awareness - Tech
Topic: Sequoia’s Split in the APAC region
https://www.ft.com/content/6e3b6905-0b0f-4215-80a4-4082cb899966
https://www.bloomberg.com/press-rel...eadrive-completes-series-d-financing-lnjx8dki
https://www.ft.com/content/e007ce22-9763-4c9b-969f-ff4e97f320e1
https://www.ft.com/content/a37c6b7c-bec1-457b-8125-a3dbe2a8a275

Background;

• Following Sequoia’s split with its Chinese arm, there are currently three arms in the APAC regions: China, India, and Singapore.
• Sequoia China, aka HongShan, manages $56 billion, they planned to open an office in SG.
• Sequoia India aka Peak XV already has an office in SG.
• Although operating as different entities, they did not sign non-compete provisions. Though the two entities expressed that they orient towards collaboration > competition.

Singapore:

• It appears that SG is pulling both arms, but HS actually stepped in when PX was debilitating.
• Zilingo went into liquidation following complaints and the high-profile firing of its co-founder and CEO.
• Byju’s value was written down by their investors, their auditors resigned, and a series of high-profile departures.

Hong Shan in China:

• The Chinese VC fund plans to focus on EV and clean energy - a sector dominated by China with their exclusive to raw minerals required to manufacture battery. A recent deal to accentuate its growth is Leadrive’s series D financing, which raised RMB 600mn.
• It is currently managed by Neil Shen, who was famous for his early bet on Alibaba and TikTok’s owner Bytedance.
• Within China’s VC space, a recent news that I noticed is the IPO of Tiantu Capital, $144mn on the HKSE. The IPO was assisted by LA-based law firm O’Melveny.

US vs China

• The split was described by FT to be a result of the tension between Washington and Beijing. US prohibits investment into China, especially in critical sectors (military and technology), and vice versa.
• However, VC funds and PE funds are still taking risks. For example, California and Massachusetts pension funds are among HS’s investors. In fact, about 50% of its investment comes from the US.
• This may not be related to VC but I saw yesterday that Vanguard is investing in China military group indirectly.

In my personal view, I think this signifies great potential in the APAC region as private capital is flowing in. I’m not entirely sure about the start-up scenes in Asia – eg how many promising start-ups there are – but currently, there is a high amount of dry powder in the EU. I wonder if the capital will find the ideal start-ups to invest in.

This is very clearly explained. Enjoying this thread!

 

[al97]

Hello, it's good to be back on TCLA and on this thread. Sorry that I've been away for the past few days. Good news is I received two interview invitations for paralegal roles! One is for a PE-focused firm and another is a tax-focused firm. Simultaneously, I also submitted an app for Cleary and Sidley, attending events in between. Although I’m absolutely exhausted, I'm grateful to be in a good state of mind and I hope all who are rushing your application are the same. Finally, my deepest condolences for all the lives we lost during the recent horrifying events.

19 Oct - Commercial Awareness - Tech
Topic: Diplomacy that led to the victory of Microsoft-Activision Blizzard

In a nutshell, Microsoft won after 21 months of elbowing with the CMA. The FT reported its diplomacy strategy, which I will summarise in the following 2 points

Critics:
Critics claimed that Microsoft artificially lowered its taxes by paying in low-tax countries and demanded $29bn back.
Microsoft’s moral high ground campaign is diverting attention from its faults that causes cyber security issues

The primary factor that led to the victory was Microsoft’s compromise. Microsoft’s compromise to the CMA is to sell Activision’s cloud streaming rights to a French rival – Ubisoft. That means Microsoft does not have monopoly dominance over AB’s games like World of Warcraft, Diablo on its own cloud gaming platform, Xbox.

1. Microsoft has been building relationships with policy officials for many years
2. They have a humongous team of diplomats influencing policy officials who are working on AI regulations, cyber defence, and protection of elections.
3. They set up an office in UN, which takes a billion a year to run. Ukraine President Zelensky paid a visit to the office to convince Microsoft to invest in Ukraine.
4. Director and legal officer, Smith, engagement with policy discussions led to a global stage.

 

[Jaysen]

Hello, it's good to be back on TCLA and on this thread. Sorry that I've been away for the past few days. Good news is I received two interview invitations for paralegal roles! One is for a PE-focused firm and another is a tax-focused firm. Simultaneously, I also submitted an app for Cleary and Sidley, attending events in between. Although I’m absolutely exhausted, I'm grateful to be in a good state of mind and I hope all who are rushing your application are the same. Finally, my deepest condolences for all the lives we lost during the recent horrifying events.

19 Oct - Commercial Awareness - Tech
Topic: Diplomacy that led to the victory of Microsoft-Activision Blizzard

In a nutshell, Microsoft won after 21 months of elbowing with the CMA. The FT reported its diplomacy strategy, which I will summarise in the following 2 points

Critics:
Critics claimed that Microsoft artificially lowered its taxes by paying in low-tax countries and demanded $29bn back.
Microsoft’s moral high ground campaign is diverting attention from its faults that causes cyber security issues

The primary factor that led to the victory was Microsoft’s compromise. Microsoft’s compromise to the CMA is to sell Activision’s cloud streaming rights to a French rival – Ubisoft. That means Microsoft does not have monopoly dominance over AB’s games like World of Warcraft, Diablo on its own cloud gaming platform, Xbox.

1. Microsoft has been building relationships with policy officials for many years
2. They have a humongous team of diplomats influencing policy officials who are working on AI regulations, cyber defence, and protection of elections.
3. They set up an office in UN, which takes a billion a year to run. Ukraine President Zelensky paid a visit to the office to convince Microsoft to invest in Ukraine.
4. Director and legal officer, Smith, engagement with policy discussions led to a global stage.

Congratulations for your interviews and sending both applications off. It sounds like you are very focussed this cycle!

 

[axelbeugre]

Hello, it's good to be back on TCLA and on this thread. Sorry that I've been away for the past few days. Good news is I received two interview invitations for paralegal roles! One is for a PE-focused firm and another is a tax-focused firm. Simultaneously, I also submitted an app for Cleary and Sidley, attending events in between. Although I’m absolutely exhausted, I'm grateful to be in a good state of mind and I hope all who are rushing your application are the same. Finally, my deepest condolences for all the lives we lost during the recent horrifying events.

19 Oct - Commercial Awareness - Tech
Topic: Diplomacy that led to the victory of Microsoft-Activision Blizzard

In a nutshell, Microsoft won after 21 months of elbowing with the CMA. The FT reported its diplomacy strategy, which I will summarise in the following 2 points

Critics:
Critics claimed that Microsoft artificially lowered its taxes by paying in low-tax countries and demanded $29bn back.
Microsoft’s moral high ground campaign is diverting attention from its faults that causes cyber security issues

The primary factor that led to the victory was Microsoft’s compromise. Microsoft’s compromise to the CMA is to sell Activision’s cloud streaming rights to a French rival – Ubisoft. That means Microsoft does not have monopoly dominance over AB’s games like World of Warcraft, Diablo on its own cloud gaming platform, Xbox.

1. Microsoft has been building relationships with policy officials for many years
2. They have a humongous team of diplomats influencing policy officials who are working on AI regulations, cyber defence, and protection of elections.
3. They set up an office in UN, which takes a billion a year to run. Ukraine President Zelensky paid a visit to the office to convince Microsoft to invest in Ukraine.
4. Director and legal officer, Smith, engagement with policy discussions led to a global stage.

This is extremely interesting to me, I have never realised the connection between Microsoft and public policy and the relationship with its competitors. As someone interested in technology, I would look more into this case so thank you so much for sharing it!
Congratulations for sending off your applications to these great firms and good luck with the application cycle! @al97

 

[al97]

Thank you both for your kind words! I hope to deliver some good news soon

 

[al97]

20 Sep - Commercial Awareness - Energy and Tech
Topic: China’s vs US, Raw Materials vs AI
https://www.ft.com/content/8af8c05c-8e54-40e9-9051-5a0b2b036c32
https://asia.nikkei.com/Spotlight/T...Asia_news_reader&utm_content=Content_Carousel


Today’s topic is an intersection of energy and tech because the subject is a critical material that is used in the manufacturing process of both computing chips and vehicles.

China imposed new export controls on graphite yesterday. It does not ban export altogether, but importing countries will need to apply for special permits and hand over commercially sensitive information.
It was perceived to be a retaliation in response to the Biden Administration’s tightened export control on chip technology announced a few days ago.

Biden’s export control on chips to China

• The export control targets US-based companies, such as Nvidia and other chip manufacturers, by adding barriers to exacerbate the difficulty of selling their chips to China
• US is explicitly clear about their intention to cut off China’s access to AI that are critical in military purpose.
• The old control set 2 threshold: power and chips’ talking speed
• The new controls prohibit sale to Chinese data centre that can operate at 300 teraflops (speed measuring unit).
• After the announcement, NVIDIA sees a drop of 6% in their revenue from China. In response, NVIDIA designed lower-performing chips that meet the performance threshold set by the US, the H100 and A100 chips. NVIDIA’s CEO is not supportive of US’s export control.
• The new rules also extends to chipmaking tools. ASML sells manufacturing equipment, a VERY specific type of machine that is used to manufacture machines used to manufacture chips.
• However, chips used for smartphones and gaming are exempted, but companies still need to notify the government if their chips operates more than 300 teraflops

China’s export control on graphite to US

• China’s dominance on graphite > dominance on battery production > dominance on electrical vehicle supply chain
• Currently, China dominates 70% of the global supply of graphite (including both natural graphite and synthetic graphite), a staggering jump from 58% last year. They are the largest producer and exporter. They also refined 90% of the world’s graphite to anode (negative side of batteries), which is virtually relied upon by the whole of battery manufacturing industries.
• Earlier in July, China also announced similar restrictions on gallium and germanium, which are used in microchips and electrical vehicles
• What can we anticipate in the business world? From my speculative POV, China will probably suffer a cut as their revenue comes from export. Also, the West will probably race to lock sales with batteries suppliers out of China in their race to Net Zero.

China with Southeast Asia

• Top 3 buyers of Chinese Graphite are US, South Korea, and Poland. Other smaller buyers in the top 10 include Thailand, Vietnam, and Malaysia.
• The latter countries are located in Southeast Asia, which is an emerging region that China is growing closer to. Recent deals that China includes: China’s $4.2bn investment into building a waste-to-energy plant in Malaysia; Widodo $7.3bn investment into Indonesia’s highspeed railway, which is a part of China’s Road-Belt initiative

 

[al97]

22 Oct - Commercial Awareness - Tech
Topic: How US Export Control on Chips Hindered the $69bn Broadcom-VMware deal
https://www.ft.com/content/b23d2a9f-d873-43e4-9032-632d4e9d438c

The Export Control restricted Chinese chip growth in three different ways

• One, only outdated chips made fell within the permitted grade.
• Two, chips that have already been tailor-made for Chinese companies cannot be shipped.
• Three, US companies cannot ship to China or even their subsidiaries in the states.

US chipmaker Broadcom’s acquisition of cloud software VM was made in May 2022

• ⅓ of Broadcom’s $33bn billion last year came from shipment to China
• Beijing is likely to delay or block the transaction now that US tightened the export control.
• Shares price of VM dropped about 9%, Broadcom 2%
• Chinese M&A regulatory process now involves another layer of review that involves consultations with the Ministry of Foreign Affairs
• In other words, Broadcom catches itself at the worst timing amidst export control war between Beijing and Washington

Whereas in China…

• It was explored in my last article that China tightened control on graphite to dampen the West’s energy sector.
• More actions include the raid of Bain and Mitz offices, banned purchase of chips from US chipmaker, Micron.
• Other deals include:
• In 2018, Broadcom bid for Qualcomm at $142bn, which was blocked by Trump, for national security concerns, despite Broadcom being an SG company at the time. Since then, Broadcom relocated to the US and is headquartered there.
• Intel called off its $5.4bn acquisition of Israel-based Tower Semiconductor after failing to secure regulatory approval from China

This additional information can be totally wrong, so it really is me throwing a prompt here inviting more comments:
While I’m not an expert on chips, I did have a brief read on the book “Chips Act”, where the science behind chip manufacturing is briefly discussed. I vaguely remember an explanation on why it is difficult to catch up to chip technology because of something called “Moore’s Law”. If my understanding is correct, the law behind chip-making essentially creates a permanent gap between a chip factory that invents a new chip in say 2020 versus a chip that catches up later at 2023. The 3 year-gap cannot be closed due to Moore’s Law, which explains TSMC's unrivalled growth.