Goldman Sachs offers new way for investors to bet on SPACs: sources

Goldman Sachs offers new way for investors to bet on SPACs: sources
Getty Images
Short Url
Updated 02 November 2021

Goldman Sachs offers new way for investors to bet on SPACs: sources

Goldman Sachs offers new way for investors to bet on SPACs: sources
  • It could appeal to institutional investors who want regular income through a portfolio of many SPACs

Goldman Sachs Group Inc has come up with a new offering that allows investors to bet on special purpose acquisition companies (SPACs), its latest attempt to capitalize on the dealmaking trend, people familiar with the matter said.

The product is structured as a two-year bond that pays interest and gives investors exposure to SPACs without owning them, the sources said.

It could appeal to institutional investors who want regular income through a portfolio of many SPACs, the sources added.

One of the sources, however, said Goldman Sachs has so far only arranged a handful of these products, referred to as "SPAC-linked structured notes."

Goldman does not charge a management fee for the offering. The bank makes money by providing investors financing to participate in the product and by keeping some of the returns on the SPAC stocks for itself, depending on how well they perform, the sources said.

Investors also receive a payout based on the SPAC stocks' performance at the end of the two years, the sources said. If they are willing to take on more risk to juice their returns, they can also borrow from Goldman to add leverage to the offering, but have to pay the bank back for any losses, the sources said.

Goldman Sachs declined to comment on the details of the product.

The boom in the SPAC market, whose size has reached $137.4 billion last month from $13.6 billion two years ago, has already been a boon for Goldman Sachs' investment banking business.

The bank said in April that financing SPAC deals – though a small part of its overall business – helped boost revenue and that advising SPACs on acquisitions would be a "tailwind" for earnings in the future.

The new SPAC product is being offered by a desk in Goldman Sachs' global markets division, which is the sales and trading arm of the bank, rather than investment banking, the sources said.

Investors are allowed to bet on the shares of SPACs where Goldman Sachs bankers had a deal role, the sources added. SPACs sponsored by Goldman Sachs are excluded.

Investors have some protection against losses.

SPAC stocks can be redeemed for their initial public offering value when shareholders vote on their mergers, and investors can provide instructions to Goldman Sachs to carry out such redemptions, according to the sources.

Mike Stegemoller, a banking and finance professor at Baylor University in Waco, Texas who has studied SPACs, said that Goldman Sachs' role as both adviser and financier of SPAC deals and seller of this new product poses a conflict, even if different parts of the bank are involved.

This is because SPACs cannot complete their mergers with companies if too many investors redeem their shares, bleeding them dry on cash they need to pay for their deal.

By offering redemptions of SPAC shares as a safety net for its investor clients, Goldman Sachs is relying on a practice that is a thorn in the side of some of its investment banking clients – SPACs and the companies that do deals with them.

"It's like a doctor selling donuts in the office," Stegemoller said.

To be sure, many investors already exercise their right to redeem their SPAC shares, and Goldman Sachs' new product will not change that. Reuters could not establish whether Goldman Sachs has informed its SPAC clients about the new product and what their reaction would be.

Goldman declined to comment on the conflict.

Goldman Sachs' new product has already irked some hedge fund managers who hoped they would not be competing for investors with a top Wall Street bank.

"If you're an investment bank underwriting a SPAC IPO, and advising on a business combination, it can be perceived as effectively working against clients and potential clients if you are soliciting investors to redeem SPACs," said Julian Klymochko, founder and CEO at Accelerate Financial Technologies Inc, which manages an exchange traded fund that invests in SPACs.


US, Qatar discuss gas supplies amid Ukraine invasion fears

US, Qatar discuss gas supplies amid Ukraine invasion fears
Updated 22 January 2022

US, Qatar discuss gas supplies amid Ukraine invasion fears

US, Qatar discuss gas supplies amid Ukraine invasion fears
  • As Europe faces record energy prices, concerns especially high over possible supply dip
  • American official: ‘There’s no magic wand. It’s all really hard, really complicated’

LONDON: The US is holding discussions with Qatar and other gas exporters amid fears that a Russian invasion of Ukraine could spark a decline in supply.

The talks with the Gulf state and some EU nations have focused on new ways to secure alternative seaborne liquefied natural gas cargoes.

The discussions have become more intense in the last week as security talks between senior American and Russian ministers made little progress.

As Europe is facing record energy prices, concerns are especially high regarding a possible dip in gas supplies.

“We’re looking at what can be done in preparation for an event, especially midwinter with very low (European natural gas) supplies in storage,” a senior US administration official told the Financial Times.

“We discussed what can be moved around the market, what can help … the things we can prepare now for deployment if and when there is an escalated crisis.”

Officials are concerned that Europe could face widespread chaos, with blackouts and industrial disruption, if Russian gas exports fall sharply following an invasion. Gas stocks are at a record low for this time of year.

The US administration official said existing contracts between LNG exporters and Asian buyers risk disrupting any new plans to divert supply to Europe.

“There’s no magic wand,” the official said. “It’s all really hard, really complicated. Looking to do it within the constructs of how markets work, how commercial terms work, how cargoes work.”

An energy industry executive warned that Europe would almost certainly face extremely high energy prices amid an invasion, which could require coordinated government action to secure alternative LNG supplies.

“They will effectively have to compete for all the supply in the market, taking cargoes away from Asia, and the likely end result is the taxpayer will pay,” the executive told the FT.

“It would be like procuring PPE (personal protective equipment) at the start of the pandemic, with governments needing to intervene.”


Lebanon’s 2022 draft budget forecasts 20.8% deficit amid financial crisis

Lebanon’s 2022 draft budget forecasts 20.8% deficit amid financial crisis
Updated 21 January 2022

Lebanon’s 2022 draft budget forecasts 20.8% deficit amid financial crisis

Lebanon’s 2022 draft budget forecasts 20.8% deficit amid financial crisis

Lebanon’s debt-ridden government expects a 20.8 percent deficit for the coming year, according to a draft budget released on Jan 21. 

The plan, seen by Reuters, will see ministers put forward a long-term treasury advance to Electricité du Liban, Lebanon’s electricity company, of 5.25 trillion Lebanese pounds ($3.5 billion).

The advance will be provided to pay for fuel purchases, interest and loan installments, in a country that has been hit by energy shortages.

Last year, Lebanon’s projected budget had a deficit of 31.3 percent, and the plan was not passed by the country’s parliament.

Political dissension and escalating tensions between communities have had a negative impact on economic growth, compounding Lebanon’s woes since its 2019 default on a $90 billion debt.

Nassib Ghobril, head of research at Lebanon’s Byblos bank, warned that the government’s projection of a lower deficit depends on whether it can “improve the investment climate for business.”

Speaking to Arab News, he argued that a 10 percent tax increase on imported goods “won’t be effective if the government keeps on avoiding combatting custom evasion and smuggling.”

Ghobril said the cost of smuggling to other countries, more specifically Syria, runs into the hundreds of millions of dollars.

He added that Lebanon’s 2022 growth, which he estimates contracted by 12 percent in 2021, and 25 percent in 2020, will depend on the Lebanese government’s next policies.

“There are two scenarios: either the government reaches an agreement on economic reforms, with a deal with the IMF (International Monetary Fund), and this will push growth into positive territory after four years of contraction; or it won’t and we will face another year of economic contraction,” he said.


Gulf electricity interconnection project saves members $3bn

Gulf electricity interconnection project saves members $3bn
Updated 21 January 2022

Gulf electricity interconnection project saves members $3bn

Gulf electricity interconnection project saves members $3bn

RIYADH: Gulf countries have saved $3 billion since the establishment of the Gulf Cooperation Council Interconnection Authority in 2019, it said.

Savings have come from a reduced need for new generation plants, thus lower operating and maintenance expenses, and reduced carbon emissions, SPA reported.

The Authority has agreed an action plan for the establishment of a joint electrical interconnection project with the Egyptian Electricity Transmission and Jordan’s National Electric Power Co., it said.

In a two-day meeting, the parties agreed on preparing a business case to explain the benefits of electrical connection and to complete the required procedures, SPA reported.


Twitter offers NFT profile pics; Bitcoin falls below $40,000: Crypto moves

Twitter offers NFT profile pics; Bitcoin falls below $40,000: Crypto moves
Updated 7 min 16 sec ago

Twitter offers NFT profile pics; Bitcoin falls below $40,000: Crypto moves

Twitter offers NFT profile pics; Bitcoin falls below $40,000: Crypto moves

LONDON: Twitter’s premium users can display non-fungible tokens in new hexagonal profile pictures, as the social media giant embraces the growing craze of digital collectibles known as NFTs.

Currently, the feature is only available to Twitter Blue subscribers on Apple’s iOS platform, allowing them to link their accounts with crypto wallets where they keep their NFTs.

To distinguish them from regular profile pictures, NFTs are displayed in hexagons that, when clicked, display details about them including ownership.

Last year, Twitter — founded by Jack Dorsey — began allowing users to send and receive bitcoin. Dorsey quit as Twitter CEO in November to focus on another company he founded, Square, which has since changed its name to Block, a reflection of Dorsey’s desire to further embrace blockchain and Web3 technologies.

Sales of NFTs reached about $25 billion in 2021, according to data from DappRadar, but growth is believed to have slowed toward the end of the year.

The most-traded cryptocurrencies experienced another day of selling on Friday as Bitcoin slumped almost 9 percent to $38,464.90 as of 1:07 p.m. in London. Ethereum declined 11 percent to $2,794 and Solana lost 14 percent to $118.

Bitcoin was trading above $67,000 as recently as November.

“Crypto markets have been sitting on a critical support level for some time,” Stack Funds told CoinDesk. “Macro market weakness is causing a sell-off in risk assets. Further continuation of this sentiment will likely see BTC trade in the mid ‘30s.”

Risk assets are being hurt by expectations of at least three interest-rate hikes by the US Federal Reserve this year as it looks to counter accelerating inflation.

The selloff in cryptocurrencies has not deterred the new mayor of New York City Eric Adams, who said he plans to convert his first paycheck this week into bitcoin and Ethereum.

“New York is the center of the world, and we want it to be the center of cryptocurrency and other financial innovations,” Adams said in a statement. “Being on the forefront of such innovation will help us create jobs, improve our economy, and continue to be a magnet for talent from all over the globe.”


Mobily prepares major announcements for LEAP22 tech conference

Mobily prepares major announcements for LEAP22 tech conference
Updated 21 January 2022

Mobily prepares major announcements for LEAP22 tech conference

Mobily prepares major announcements for LEAP22 tech conference

RIYADH: Etihad Etisalat, known as Mobily, said it will launch a range of innovative and disruptive digital solutions during LEAP22, the technology event scheduled for Riyadh in February.

Mobily’s announcements will be in the area of the Internet of things, artificial intelligence, smart cities, smart health care systems and others, it said in a statement.

“LEAP is a turning point in the Kingdom’s journey toward digital transformation, elevating its position at the forefront of global players who develop and empower the latest technologies that shape the future of our world,” said Mobily CEO Eng. Salman Al Badran. “As the Kingdom moves toward enabling a leading digital economy, Mobily seeks to provide individuals and corporates with the tools they need to unlocking opportunities and pursue their ambitions.”

“At Mobily, we persistently contribute to the realization of Vision 2030 through providing advanced telecommunications services and digital solutions that contribute to transforming the Kingdom’s digitalization ambitions into reality, he said.

Leap will be held in Riyadh from Feb. 1 to Feb. 3, 2022.

Saudi Arabia has been embracing technology as a means to loosen the economy’s dependency on hydrocarbons.

In August, $1 billion of initiatives aimed at improving digital skills in the Kingdom were unveiled under the name Launch. Among the targets is an ambition to train one in every 100 Saudis to be programmers, and the creation of 25,000 jobs in data science and AI by 2030.

Saudi Arabia has also attracted the Middle East’s first Apple Developer Academy, which will initially focus on women coders.

LEAP will host 700 start-ups and will feature a host of keynotes, workshops and assemblies on topics from smart cities to space and satellites, health tech, future energy.

The LEAP Forward stage will tackle issues around the most prominent future technologies, including self-driving vehicles and AI, exosuits, nanorobotics, augmented reality, and bionics.

International speakers include Raghu Raghuram, CEO of cloud-computing giant VMware, Börje Ekholm, president and CEO of Ericsson, and Dr. Saket Kumar, chief data scientist for Global Premium Services at Google. Regional speakers include Manar Al-Moneef, regional CEO of GE Renewable Energy, and Ghinwa Baradhi, HSBC’s chief information officer in the Middle East and North Africa.

Altogether 450 speakers and 40,000 visitors are expected at the event.