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Polygon Crypto Jumps on Disney Selection for Accelerator Program

(Bloomberg) — Polygon’s MATIC token jumped after Walt Disney Co. chose it for a business-development accelerator program.

MATIC was 1.3% higher Friday morning in Asia after surging 21% on Thursday in the wake of Disney’s announcement that Polygon was one of six companies selected. Read more on Disney’s venture into the metaverse here.   

“The implications for Polygon are significant, given that it was the only blockchain provider chosen,” Walter Teng, digital-asset strategy associate at Fundstrat, wrote in a note Thursday. Since Disney “hasn’t invested or built an in-house crypto solution, the accelerator marks its foray into the digital-asset space.”

The rally in MATIC is a rare bit of good news for cryptocurrencies, which have struggled in recent months amid Federal Reserve rate hikes to quell inflation, a souring of risk appetite and high-profile meltdowns involving the Terra/Luna ecosystem and hedge fund Three Arrows Capital. 

Read: Crypto Slide Puts Outlook of a Billion Investors by 2023 to Test

MATIC itself, which was co-founded by Sandeep Nailwal and counts billionaire Mark Cuban as a mentor, is about 75% below its record high in December. But such announcements from a blue-chip company like Disney can raise expectations for greater potential backing and adoption.

“As crypto onboards its next 100 million users, it is perhaps apt to consider partnerships and mainstream exposure,” Teng said.

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©2022 Bloomberg L.P.

Secret Service Texts That Could Shed Light on Trump’s Actions Erased, Jan. 6 Panel Says

(Bloomberg) — The House panel investigating the assault on the US Capitol is seeking to recover US Secret Service text messages that could shed light on then-President Donald Trump’s actions as the attack unfolded, but were erased.

“If there’s a way we can can reconstruct the texts or what have you, we will,” Representative Bennie Thompson, a Mississippi Democrat, told reporters at the Capitol Thursday.

Some of the most riveting testimony from the panel’s televised hearings concerned Trump’s actions after he addressed a rally near the White House on Jan. 6, 2021. A former aide, Cassidy Hutchinson, said she was told Trump wanted to join the mob then marching on the Capitol but was blocked by his security detail.

The texts could provide insight into that episode as well as security concerns surrounding then-Vice President Mike Pence, who had gone to the Capitol to preside over the Electoral College certification of Joe Biden’s victory in the 2020 election.

The Department of Homeland Security’s Inspector General has notified the committee that some text messages sent by Secret Service agents on Jan. 5 and Jan. 6 were erased. 

The inspector general, Joseph Cuffari, said in a letter to the committee that the texts were lost during an equipment replacement only after his office asked for them as part of its investigation of the assault. He offered to brief the committee on the situation.

Homeland Security personnel also repeatedly told the Inspector General’s staff “that they were not permitted to provide records directly to OIG and that such records had to first undergo review by DHS attorneys. This review led to weeks-long delays in OIG obtaining records and creating confusion over whether all records had been produced,” Cuffari said in the letter.

The Secret Service issued a statement Thursday saying, “The insinuation that the Secret Service maliciously deleted text messages following a request is false.”

The statement says some data was lost when the agency had begun to reset its mobile phones to factory settings in January 2021, before the Inspector General’s inspection began the next month. 

“The Secret Service notified DHS OIG of the loss of certain phones’ data, but confirmed to OIG that none of the texts it was seeking had been lost,” according to the statement.

Also, the agency said in the statement, Homeland Security has cooperated with the Inspector General and has “publicly debunked” the allegation that its employees weren’t granted access to materials due to attorney review.

It’s not the first time friction with the Secret Service has emerged over the Jan. 6 investigation.

After Hutchinson’s testimony, Tony Ornato, a long-time Secret Service agent who worked as a deputy chief of staff to Trump, told people that her account of being told that Trump lunged for the steering wheel of the presidential SUV to redirect it to the Capitol with the rioters wasn’t consistent with his understanding of the incident, according to a person familiar with Ornato’s denial who spoke on condition of anonymity.

Thompson, asked Thursday if the committee had plans to talk to Secret Service agents, said, “I think it’s important for us to get as much information about how this discrepancy occurred and go from there.”  

(Updates with Secret Service statement beginning in eighth paragraph)

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Alibaba Leads Drop in China Tech Shares as Regulatory Fears Grow

(Bloomberg) — Alibaba Group Holding Ltd. dragged Chinese tech shares lower as concerns about a crackdown on the sector resurfaced after company executives were reported to be facing an inquiry linked to the theft of a vast police database.

The e-commerce giant’s stock slid as much as 5.8%, taking its decline this week to more than 15%. The Hang Seng Tech Index dropped as much as 2.1%, in line with the Nasdaq Golden Dragon China Index’s slide on Thursday.

The probe is the latest indicator to investors that risks abound when it comes to Chinese tech stocks even after the year-long clampdown on private enterprise. Fines levied on Alibaba and Tencent Holdings Ltd. over the weekend for not properly reporting past transactions had sent shares tumbling earlier this week.

“The probe will give investors pause to assess if the reforms are over or still ongoing,” said Justin Tang, head of Asian research at United First Partners. “Given the fragile state of the markets, investors will adopt a sell first and ask questions later approach.” 

Executives from Alibaba’s cloud division have been summoned for talks by authorities in Shanghai in connection with the theft of a vast police database, the Wall Street Journal reported, citing people familiar with the matter. The nation had been rocked in recent weeks by one of the largest cybersecurity breaches in the country’s history, with hackers claiming to have stolen data on as many as one billion residents. 

But, not everyone is worried.

The reported probe is not a regulatory issue and executives may only be facilitating the police’s investigations, according to Steven Leung, executive director at UOB Kay Hian in Hong Kong. The slide in US-listed Chinese shares was overdone, he added.

Still, there are other reasons to remain skittish on the broader Chinese equities market. Property sector risks and a resurgence of Covid cases onshore are weighing on the economic outlook. Gross domestic product rose 0.4% in the second quarter from a year earlier, the worst performance since early 2020 and below the 1.2% gain forecast by a Bloomberg survey of economists, data showed Friday.

A separate report showed new home prices in 70 cities, excluding state-subsidized housing, slipped 0.1% in June, in a 10th month of declines. The authorities also refrained from injecting funds into the banking system, while keeping borrowing costs unchanged.

(Updates with UOB Kay Hian comment in seventh paragraph)

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Xi Makes First Xinjiang Visit Since ‘Strike Hard’ Campaign

(Bloomberg) — President Xi Jinping made his first trip to China’s remote Xinjiang region since ordering the “strike hard” campaign eight years ago that targeted the local Uyghur population and soured ties with the US over alleged human rights abuses. 

Xi made an “inspection” of the western region’s capital of Urumqi, where he “called for strengthening party organizations” and offering services “to benefit residents of all ethnic groups,” the official Xinhua News Agency reported late Thursday.

The Chinese leader spent Tuesday and Wednesday in the region, which he lauded as a “hub in Belt and Road cooperation,” referring to Beijing’s infrastructure initiative to expand its influence abroad. He also visited a museum where he urged the “better preservation” of minority groups’ cultural heritage and watched a performance by the Kyrgyz ethnic minority.

James Millward, professor of history at Georgetown University, said that Xi’s public embrace of the region’s ethnic diversity amounted to “erasure by inclusion,” after the Community Party’s sustained campaign to disempower minorities.

Xi’s comments were “clearly attempts to respond to the international criticism and voluminous evidence of his regime’s assimilationist policies,” Millward said. “Meanwhile, the bulldozers have razed shrines and mosques, religious faith is criminalized, and children are prevented from speaking their native language, unless it’s Mandarin.” 

READ MORE: Why China and US Disagree on Forced Labor in Xinjiang: QuickTake

Xi’s trip to Xinjiang comes less than two weeks after he traveled to Hong Kong to celebrate its 25th anniversary of Chinese rule. The frontier regions were once two of China’s most-restive spots, with regular displays of opposition to the Communist Party. Under the 69-year-old’s decade of rule, however, dissent in both places has been crushed. 

In Hong Kong, a Beijing-imposed national security law has locked up the political opposition and shuttered pro-democracy newspapers, while its electoral reform has ensured only party loyalists can hold office in the once free-wheeling financial hub.

The Chinese leader’s back-to-back visits of the cities some 2,000 miles (3,200 kilometers) apart demonstrates the vast breadth of Xi’s control, months before a twice-a-decade party congress that’s likely to hand him an unprecedented third term in power.   

‘Strike Hard’

Xi’s visit to Xinjiang is his first since 2014, the year his government ordered authorities to “strike hard” against violence in the region. That year, terrorists used knives and bombs to attack a train station in Urumqi, killing three and injuring scores — part of a series of attacks that Beijing blamed on separatists.

Critics of Beijing’s rule said the violence was a response to heavy-handed intrusion as China’s dominant Han ethnic group was officially encouraged to move to the region and industries such as cotton growing, dairy farming and solar panel production expanded.

In the wake of those events, the Chinese government swept an estimated 1 million Uyghurs and other local ethnic minorities into mass detention camps for offenses as trivial as having a beard or downloading certain apps to phones. 

The US claims those labor camps are part of a campaign of genocide against the Muslim majority Uyghurs, and last month enacted the Uyghur Forced Labor Prevention Act, which blocks imports from Xinjiang unless companies can prove they weren’t made by coerced workers. Beijing says it’s fighting terrorism and calls the facilities vocational training centers that teach valuable job skills. 

In 2020, Xinhua quoted Xi as saying that “facts prove that the party’s policies on Xinjiang in the new era are completely correct and must be adhered to in the long term.” 

(Updates with expert comment in the fourth and fifth paragraphs.)

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VW’s Battery Business Faces Supply-Chain Hurdles in Road to IPO

(Bloomberg) — Volkswagen AG’s newly formed battery business is working to overcome supply-chain headwinds as it ramps up production and prepares for an initial public offering as soon as next year.

PowerCo, which bundles the carmaker’s global battery efforts, is trying to secure raw materials amid surging prices and logistics issues, according to the unit’s Chief Financial Officer Kai Alexander Mueller. VW plans to partner with Umicore SA to source cathode materials, is exploring working with Robert Bosch GmbH for machinery and agreed to offtake battery-grade lithium hydroxide from miner Vulcan Energy Resources.

“The supply chain for our business simply doesn’t exist today,” Mueller said in an interview. “What is important is working with suppliers to scale this industry.”

Automakers from VW to General Motors Co. are exploring different business models as they race to electrify their lineups and catch Tesla Inc., the world’s top seller of electric vehicles. Europe is trying to build up a homegrown battery industry to counter the dominance of Asian suppliers.

READ: The Next Electric-Car Battery Champion Could Be European

PowerCo, which broke ground on its first European factory last week, is expected to invest more than 20 billion euros ($20 billion) in five of its own cell factories by 2030. Its flagship plant in Salzgitter, Germany, is due to start pilot production in 2024. VW is building a sixth factory in Sweden via a partnership with Northvolt AB.

VW remains open to IPO the unit after financing it internally and inviting in strategic partners, VW CFO Arno Antlitz said last month, adding that the business has been set up in a way to facilitate a potential listing next year or in 2024.

PowerCo is meant to bundle VW’s battery-making activities much in the same way as its Cariad unit is attempting to streamline software efforts. It will oversee activities including procurement, raw-materials processing, product development and plant management. The push ties into VW’s efforts to streamline decision-making and make the vast conglomerate leaner and more focused.

“We are starting from the beginning to cover all aspects, from the mine to the end product,” Mueller said. “We need to understand the sourcing, pricing to have a competitive product.”

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Alibaba Shares Drop More Than 5% on Probe Report

(Bloomberg) — Hong Kong shares for Alibaba Group Holding Ltd. tumbled as much as 5.8% on Friday, after a report that the company faces an inquiry in China in connection with a data theft case renewed regulatory concerns broadly.

In the US, the Nasdaq Golden Dragon China Index fell 2.2%, bringing its weekly drop to 7.7%. The move was led by Alibaba’s US-traded shares hitting their fifth consecutive day of decline. Technology peers Baidu Inc. and JD.com Inc. slid 3% and 1%, respectively, while electric vehicle stock Nio Inc. lost 0.2%.

Executives from Alibaba Group’s cloud division have been summoned for talks by authorities in Shanghai in connection with the theft of a vast police database, one of the nation’s largest cybersecurity breaches, according to the Wall Street Journal.

Alibaba Faces China Inquiry Over Data Theft, WSJ Says 

The news, coupled with reports Monday that China hit tech giants with regulatory fines, is denting investors sentiment on the group after a rally in June. 

Alibaba, China Stocks in US Tumble Amid Fines, Covid Risks

In June, the Golden Dragon Index soared 16%, its best month since 2019, with a string of analysts calling a bottom in the group, as the government appeared to step back from regulatory crackdowns on the tech industry and continued to roll out supportive measures. The rally then paused amid jitters over regulatory uncertainty and fresh Covid-19 lockdown risks. The Golden Dragon Index is still about 17% lower this year.

This week, the Hang Seng Tech Index entered a technical correction, with analysts questioning if fresh probes on internet giants would trigger another downturn in the sector. 

(Updates shares. An earlier version corrected the first paragraph to say it was steepest weekly loss since May.)

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NFT Marketplace OpenSea Cuts 20% of Staff as Crypto Job Losses Deepen

(Bloomberg) — OpenSea, the world’s largest marketplace for nonfungible tokens, is cutting about 20% of its staff, the latest in a series of layoffs that’s rocked the crypto industry as digital-asset prices continue to plummet.

Chief Executive Devin Finzer announced the job cuts in a tweet on Thursday, and warned of a prolonged downturn amid the collapse in crypto prices and broader economic instability. About 230 people remain with OpenSea, according to company spokesperson Allie Mack. 

The layoffs are big blow for OpenSea, which was valued at more than $13.3 billion in January during the height of the venture capital boom in crypto. OpenSea joins other crypto firms that have since announced major job cuts, including Coinbase Global Inc., Gemini Trust Co., Crypto.com and BlockFi Inc.

OpenSea is the top NFT marketplace by trading volume, having done more than $31 billion in sales all-time, according to blockchain data tracker DappRadar.

But demand for NFTs has dropped sharply during the most recent downturn. OpenSea has seen its sales cut in half over the past month, with the average price of an NFT on its marketplace dropping by nearly 40%, according to DappRadar. Even blue-chip NFT collections, such as Bored Ape Yacht Club and CryptoPunks, have felt the chill of the so-called crypto winter.

OpenSea plans to provide severance and health care coverage into 2023, and accelerate equity vesting for employees who were let go, according to Finzer.

(Updates company headcount in second paragraph)

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UST Co-Founder Targets $1 Billion Funding for Tech Investment

(Bloomberg) — The investment firm led by the Indian co-founder of technology services company UST is looking to raise about $1 billion to invest in startups and private equity opportunities in Asia’s third-largest economy and beyond.

McLaren Strategic Ventures has started preliminary roadshows and has seen good interest from family offices and Middle Eastern state investors, chairman Sajan Pillai, 54, told Bloomberg News in an interview in Mumbai.

The firm aims to complete the fundraising by March and will target investments in banking and fintech, health tech and in supply-chain companies operating in the digital space, Pillai said.

Set up by Pillai in 2019 with funds from the sale of his stake in UST, then known as UST Global, MSV has invested $300 million to date, in areas including chip design and product engineering. 

MSV also provides advisory services including preparing companies for initial public offerings in the US, where Pillai is based. He is also general partner of early-stage fund Season Two Ventures, which he said has invested in 20 companies in India and overseas. 

In addition to the US, MSV has a six-person office in Bangalore and Pillai said they are weighing starting one in Mumbai.

He named MSV after the racing car brand and is a proud owner of a McLaren, though as its website notes, the firm has no affiliation with McLaren Automotive. UST was a Formula One race sponsor, he said, and described himself as “crazy” for McLaren cars due to their acceleration. Pillai wanted MSV to accelerate the opportunities for entrepreneurs, he said.

SPAC Believer 

Last year MSV joined the blank-check craze, sponsoring McLaren Technology Acquisition Corp. which raised $201 million in an IPO in November. The special purpose acquisition company is seeking targets in banking, financial services and insurance that use technologies such as AI and machine learning, according to its prospectus.

Pillai is undeterred by the fate suffered by numerous firms created via mergers with SPACs, as US regulators weigh proposals to add protections for retail investors. Billionaire investor Bill Ackman said Tuesday his blank-check firm will return $4 billion to investors after failing to consummate a merger deal. 

“The correction was inevitable, but SPAC as a strategy will continue to be a legitimate alternative for entrepreneurs to list their companies,” Pillai said. “It is a relative collapse but not absolute.” 

He is confident that the McLaren SPAC will complete a merger with a target by the first quarter of next year, and wants to launch two more of the vehicles by 2024 after the first one’s merger closes.

“Eight months ago, the interest was off the chart, but legitimate companies are still trying to list” via SPAC, Pillai said. Despite the regulatory changes, “SPAC is here to stay.” 

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Pinterest Rallies on Report That Elliott Has Acquired a Stake

(Bloomberg) — Pinterest Inc. shares jumped more than 20% in postmarket trading after the Wall Street Journal reported that activist investor Elliott Management has acquired a stake in the struggling social-media company.

Elliott has built a stake of more than 9%, making it the company’s biggest investor, the newspaper reported Thursday, citing unidentified people familiar with the matter. The shareholder has engaged in discussions with Pinterest management, though the nature of those talks wasn’t clear, the Journal said.

The news follows a shake-up at Pinterest last month, when co-founder and Chief Executive Officer Ben Silbermann handed the reins to Google and PayPal Inc. veteran Bill Ready. The San Francisco-based company, which lets users create virtual scrapbooks, has been trying to expand further into e-commerce. 

The company also fielded a takeover approach by PayPal last year, but the digital-payment company said in October that it wasn’t going to pursue such a deal.

What Bloomberg Intelligence Says:

“Pinterest’s turnaround strategy may get help from the Elliott stake, as most social media platforms remain challenged by weak digital-ad spending. We believe comparisons could ease in 2H, and partnerships with e-commerce providers could spark a revival in top-line growth.”

— Mandeep Singh, BI senior technology industry analyst

Click here to read the research

Pinterest had enjoyed a surge in growth during the early days of Covid-19, when locked-down consumers turned to the service. But like other pandemic darlings such as Peloton Technology Inc., Pinterest suffered a slowdown in recent months. Its shares are down more than 50% this year, a steeper drop than broader technology indexes.

It’s not the first time Elliott has targeted a well-known technology company in recent years. The firm took a $1.4 billion stake in EBay Inc. in early 2019, and CEO Devin Wenig stepped down later that year.

Elliott then accumulated a stake of more than $1 billion in Twitter Inc., a holding that was made public in early 2020. Twitter CEO Jack Dorsey kept his job for another 20 months, but Elliott’s presence led to aggressive revenue and user growth goals. The company was still struggling to meet those targets by the time Elon Musk showed up with a takeover offer this year — a deal that’s now unraveling.

People familiar with the situation have said they believe Dorsey left his job at Twitter in part because he was worn down by Elliott’s pressure.

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Amazon’s UK Recruitment Drive Slows After Rapid Pace of Pandemic

(Bloomberg) — Amazon.com Inc. said it would create more than 4,000 new permanent jobs in the UK this year, the smallest number it’s announced in at least three years, despite planning to open two more fulfillment centers in the north of England.

The new roles will span corporate, technology, as well as delivery and fulfillment positions, some of which will be based at warehouses opening in Wakefield and Knowsley later this year, the Seattle-based firm said in a statement on Friday.

It marks a deceleration in Amazon’s publicized recruitment efforts in the UK. In 2020, it said it would create 7,000 new local positions; a year later, it announced the addition of 10,000 more. A spokesman for the company said that in 2021 it exceeded that figure by more than double.

But in April, Amazon told investors a pandemic-fueled hiring and warehouse-building binge was catching up to it as e-commerce sales growth inevitably slowed from the torrid pace of the coronavirus outbreak. Fuel and labor costs were already biting, and soaring inflation has only continued since. 

Still, the company said Friday that by the end of the year it would have 75,000 permanent employees in the UK, making it one of the nation’s biggest private sector employers.

Read more: Amazon Aims to Sublet, End Warehouse Leases as Online Sales Cool

 

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