tyb and chek't
Crackdown on US listings: Will China close $1.6tn VIE loophole?
Variable interest entities used by Alibaba and Didi poised as next target.
A method used by top Chinese companies to offer shares in the U.S. while skirting restrictions on foreign listings risks coming into regulators' crosshairs as Beijing ramps up oversight. Variable interest entities are used by businesses in sectors where China limits foreign ownership, including telecommunications and education, to let foreign investors buy in through shell companies based in jurisdictions such as the Cayman Islands. This is also called the "Sina model," after the internet company that used it to list in New York in 2000.
U.S. listings of Chinese companies using VIEs which include such big names as Alibaba Group Holding, Pinduoduo and JD.com are worth a total of $1.62 trillion. Of the estimated $700 billion in Chinese shares held by American investors in 2017, Caymans-based shells accounted for $477 billion, according to a report last year by the U.S.'s National Bureau of Economic Research. But the method is in a legal gray area. If Chinese authorities start to question it amid the crackdown that has already battered ride-hailing company Didi Global another VIE user the resulting loss of investor trust could send shock waves through global financial markets. Rules set by China in 1994 require companies to get approval from the State Council to list on foreign stock markets. But these assume that the company issuing the shares is based in China, and do not consider the possibility of listing through an overseas shell company. The China Securities Regulatory Commission is leading the charge to change this, according to U.S. media. As the government tightens restrictions on foreign listings, authorities could require businesses using VIEs to seek permission to list abroad, even via a foreign-registered holding company.
The U.S. Securities and Exchange Commission noted the uncertain legal status of VIEs in a report last November on disclosure considerations for Chinese companies. "China-based Issuer VIE structures pose risks to U.S. investors that are not present in other organizational structures," the report said. "The Chinese government could determine that the agreements establishing the VIE structure do not comply with Chinese law and regulations," which "could subject a China-based Issuer to penalties, revocation of business and operating licenses, or forfeiture of ownership interests," the SEC warned. The U.S.-China Economic and Security Review Commission, a bipartisan advisory body to Congress, has recommended legislation to block Chinese companies from issuing shares on American markets through VIEs. Typically, VIE listings involve a U.S.-listed shell company registered in the Caymans signing contracts through a China-based subsidiary with the Chinese enterprise actually running the operations. These in effect grant the Caymans company control over the business and a claim on its profits even without direct ownership. This allows overseas investors to become de facto shareholders in the Chinese company.
Alibaba, for example, set up Alibaba Group Holding as a Caymans-based shell company to go public in New York. The holding company established foreign-owned subsidiaries in China, which inked contractual control agreements with the enterprises handling Alibaba's e-retail and other operations, and with their shareholders, turning the companies into variable interest entities. The contracts give the Caymans-based holding company control of the operating enterprises and allow their profits to flow to it as well. In a 2016 case, the Supreme People's Court of China rejected an argument that an education company's VIE contract was not valid under China's restrictions on foreign ownership, a ruling that in effect tacitly validated the arrangement. "This was the first decision by the Supreme People's Court touching on the legality of VIEs," said Gao Xiang, a partner at Chinese law firm Jingtian & Gongcheng and an expert on overseas listings. But, he added, "China is not a country that uses judicial precedent, so it's still possible that another court could rule differently."
https://asia.nikkei.com/Business/Markets/Crackdown-on-US-listings-Will-China-close-1.6tn-VIE-loophole
Fed President Blames Neverending QE On High Incarceration Rates Of Blacks And Latinos
Over the past year, Fed watchers have observed a deeply ironic and circular paradox: the Fed, which has been engaged in $120 billion in monthly QE ever since the covid crisis, has vowed it will continue to inject $120 billion in monthly liquidity - in the process making the rich richer, the poor poorer and decimating the middle class while pushing inflation higher - until such time as there is "substantial progress" on the employment front, meaning there will be no taper as long as the unemployment and labor participation rates remain elevated.
And yet, it is the Fed itself that is enabling this lack of "substantial progress" whatever it actually means, by monetizing the trillions in US deficit which makes it possible for Biden to send out periodic stimmy checks to the population, which eliminates the urgency for millions of Americans to go back to work, and also keeps the unemployment and labor participation rates artificially elevated even as there is a record number of job openings in the US at this moment. Of course, the Fed knows this - it knows that most finance professionals (at least those who don't merely play finance professionals as finance tv anchors) know this - but so far the Fed's role in enabling this pernicious economic cycle has been kept out of the public view as the outcry would be vicious and would also risk a popular backlash against the central bank, something which the establishment needs to avoid at all costs, or else.
That's why the Fed has been especially focused on finding diversions and distractions to its own role in perpetuating this circular scheme, distractions which include global warming, LGBTQ activism and now - minorities in jail. In a lamentable excuse for economic analysis, today Atlanta Fed President Raphael Bostic said that it was the high level of incarceration in the US especially among black, hispanics and indigenous people, that constrains the labor market and the economy’s ability to reach its full potential. Not the Fed, not the Fed's monetization of trillions in stimmy checks. No - it's criminals in prison that have caused the biggest labor shortage in modern US history. "Incarceration is a drag on our ability achieve our maximum-employment goal,” Bostic said Tuesday at the start of the latest iteration of the Fed’s Racism and the Economy series, this one focused on the criminal justice system. And since it is the Fed's inability to hit its maximum-employment goal that is greenlighting the Fed's $120 billion monthly injections month after month indefinitely, Bostic effectively blamed the continuation of QE on minorities in prison. What is bizarre about this argument is that the U.S. has - and has had long before covid struck - the world’s highest incarceration rate. Somehow this did not prevent unemployment from hitting 3% last January. But now it's somehow different, and the formerly incarcerated people are less likely to find employment and have much lower lifetime earnings, factors that weigh on the economy at large, Bostic said, blaming minority crime for the Biden's administration's catastrophic labor crisis.
But wait, there's more: it's not just that minorities tend to end up in jail - according to Bostic it is the very criminal justice system that is broken and is forcing the Fed to keep injection trillions into the economy stock market. “Incarceration and how we execute criminal justice inhibits global competitiveness,” Bostic said. Incarceration and who it targets in the U.S. “can have the effect of exacerbating race-based employment, income and wealth disparities, which can limit economic mobility and resilience and ultimately constrain labor markets and compromise the performance of the overall economy.” Bostic added that Black, Latino and indigenous Americans are overrepresented in the prison population and disproportionately targeted by the criminal justice system. It was unclear if Bostic substantiated his argument with facts demonstrating that blacks and latinos commit a minority of the crimes in the US.
In other words, the Fed is gradually making the case that i) unless criminals are released on US streets, and ii) employers are mandated to hire felons, QE may never end.
https://www.zerohedge.com/economics/fed-president-blames-neverending-qe-high-incarceration-rates-blacks-and-latinos
German Foreign Minister arriving in NYC-JFK Int'l Airport - German AF GAF917 Airbus A350 departed Detroit Metro Airport, MI after visiting the pFizer plant in Kalamazoo, MI
Germany's Heiko Maas hints at vaccine patent talks
The US has backed patent waivers for coronavirus shots, something Germany has so far opposed. But on a visit to a Pfizer facility in Michigan, the foreign minister seemed open to the idea.
German Foreign Minister Heiko Maas said Tuesday that Berlin could enter talks on easing a patent shield for COVID-19 vaccines in order to benefit poorer nations. "This is a discussion that we are having and which we do not want to avoid at all," said Maas on a visit to a Pfizer plant in Kalamazoo, Michigan. The US pharmaceutical giant co-produces the Comirnaty vaccine with the shot's German developers BioNTech.
Germany has so far rejected US propsals to suspend patents on coronavirus vaccines. The issue is expected to be addressed when German Chancellor Angela Merkel meets US President Joe Biden in Washington on Thursday. As he departed Berlin, Maas had called for "every chance" to be used to boost vaccine deliveries, also to poorer nations hoping for easier patent access to make locally-produced vaccines. At the Pfizer plant, he said short-term he saw little possibility for a BioNTech-Pfizer patent relaxation: "therefore the priority lies at the moment in improving delivery chains and production capacity in poorer countries." "One can do both, one can also do it in parallel," he added, referring to increased vaccine deliveries and the patent wrangle. He also took a sideswipe at vaccine deliveries by China and Russia, accusing them of conducting influence-peddling "problematic vaccine diplomacy… rather than first and foremost saving lives."
https://www.dw.com/en/covid-germanys-heiko-maas-hints-at-vaccine-patent-talks/a-58256583
Smart GLobal Holdings, Inc, sold by Silver Lake Partners: $151.15m-July 13
Secondary offering
SMART Global : Underwriting Agreement (Form 8-K)
https://www.marketscreener.com/quote/stock/SMART-GLOBAL-HOLDINGS-IN-34991349/news/SMART-Global-nbsp-Underwriting-Agreement-Form-8-K-35850903/
SMART Global Holdings, Inc. is a provider of specialty memory, storage and hybrid solutions. The Company delivers components, modules and storage solutions to original equipment manufacturers (OEMs) in computing, networking, communications, storage, mobile and industrial markets. The Company, through its SMART Specialty Compute & Storage Solutions (SCSS) unit is focused on offering its services in areas requiring specialized computing platforms in artificial intelligence (AI), machine learning (ML), advanced modeling and high performance computing serving enterprises and government organizations. It has its operations in the United States, Europe, Asia and Latin America, and enables it to provide customized, integrated supply chain services assisting worldwide OEM customers in the management and execution of their procurement and asset management processes. It also manufactures mobile memory products, memory components and modules for smart phones, desktops, notebooks and servers. Number of employees : 1 754 people.
https://www.marketscreener.com/quote/stock/SMART-GLOBAL-HOLDINGS-IN-34991349/company/
Silver Lake is a global private equity firm focused on investments in technology, technology-enabled and related industries. Founded in 1999, the firm is one of the largest technology investors in the world. Its investment holdings have included Airbnb, Alibaba Group, Ancestry.com, Broadcom Inc., Credit Karma, City Football Group, Dell Technologies, Endeavor, Expedia Group, Fanatics, First Advantage, Global Blue, GoDaddy, Jio, Lightbox, Motorola Solutions, NortonLifeLock, Red Ventures, Sabre Corporation, Skype, SoFi, GLG, Seagate Technology, SolarWinds, TEG, Twitter, Unity, Waymo, Weld North Education, WP Engine, Vacasa and ZPG. Silver Lake is headquartered in Silicon Valley, and has offices in New York, London, and Hong Kong.
https://en.wikipedia.org/wiki/Silver_Lake_(investment_firm)
https://finviz.com/insidertrading.ashx?oc=1487793&tc=7&b=2
and the general population just can't process how F&G it all is.