The Notorious PPP

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Athersys, a Cleveland-based biotech group, is one the few companies that can raise capital from a position of strength at the moment. 

Its stem cell treatment has shown promise against acute respiratory distress syndrome, which can be a complication of Covid-19. On Monday, it successfully raised $60m in a stock offering at a share price almost double where it was trading at the beginning of the year.

But the stock offering was not its only financing in recent days. Last week Athersys secured a $1.3m loan through the Treasury’s Paycheck Protection Program. The PPP is administered through the Small Business Administration and was thought to be a lifeline for struggling mom-and-pop outfits. But as an FT investigation by DD’s Sujeet Indap shows, so far more than 80 public companies have tapped the PPP.

As the likes of restaurant chain Shake Shack have been revealed as PPP recipients, outrage has grown about how large, sophisticated companies may have squeezed out the most needy American businesses from a lifeline.

A treemap breaking down which public companies received PPP loans.

One chief financial officer of a public company who tapped PPP told the FT he “feels very good” about using the money because it would go directly towards saving the jobs of his lowest-paid employees. The 1 per cent loans can be forgiven if the funds go to keeping employees on payrolls. Public companies have to adhere to the same rules as all PPP borrowers. 

The FT analysis showed that the average loan for the 83 listed companies came out to $4m and that overall, more than $300m had gone to public companies whose collective market capitalisation was nearly $9bn.

But the controversy is around whether big companies, that have access to other sources of financing, should be crowding out small businesses, for a limited pool of money that was quickly exhausted. 

As DD explained on Tuesday, Shake Shack, which had recently also sold stock, was embarrassed enough that it returned the money.

Now, small businesses have another shot at getting funding with another $480bn added to the PPP pot. While we don’t expect a lot of other companies with alternative funding to return the money (although we’d happily be proven wrong on this point), it will be interesting to see if the backlash will prompt changes to eligibility.

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The Ghanaian scandal that touches Turkey and Goldman Sachs

When Aksa Energy, one of Turkey’s largest power producers, announced a deal in Ghana in 2015, the company heralded it as the start of an expansion into Africa that would ease the pressure on its stretched balance sheet.

© Aksa Energy

But questions have emerged after the FT identified Aksa as the unnamed energy group referred to in a recent bribery complaint by US regulators against a former Goldman Sachs banker.

The SEC filing alleged that, with the help of the then Goldman employee, the energy company funnelled about $2.5m to Ghanaian officials as the deal to build and operate a power plant in the country cleared various hurdles.

While there are no charges against Goldman, the case is uncomfortable for the bank because it continued to own a 16.6 per cent stake in Aksa Energy even after its compliance team investigated the Ghana deal. The bank sold it back to Aksa’s parent company in 2018 for nearly three times its market value thanks to a put option agreed six years earlier.

Ghana, however, didn’t get such a good deal. The transaction has contributed to a glut of power and the country now has capacity that is about double its peak demand needs, forcing the country’s electricity utility to pay independent producers $450m a year for energy it doesn’t use.

Brussels takes a second look at pre-Covid aerospace deal

It’s fair to assume many EU regulators had no idea what Zoom was until about a few weeks ago when the entire bloc went into shutdown due to the coronavirus pandemic.

The initial reaction from Brussels was to bring everything to a halt. It asked merging companies to wait while they got their house in order.

But it appears the Berlaymont bureaucrats are now back to business.

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The EU has restarted an investigation into the tie-up between aircraft makers Embraer and Boeing over concerns that the deal could reduce competition on prices or product development.

© AP

The probe officially started in October and was put on pause in late February. What’s interesting is that Brussels has decided to resume an investigation into a deal that was struck before the coronavirus spread globally in one of the worst affected industries.

Regulators in Brussels are worried that a transaction would remove Embraer from the single-aisle plane market. The EU’s competition authority said both companies were active competitors and that a potential deal could lead to higher prices and less choice.

Proponents of the deal argue that Embraer is a small company that is on the brink of failure and a tie-up with Boeing would actually be good for competition. They also point to Boeing’s lack of penetration in Europe, having sold no planes on the continent in years.

The question now is: Will investigators’ views in Brussels change in the post-Covid environment, much as the UK antitrust enforcers changed their opposition to Amazon investing in Deliveroo

Job moves

  • Cleary Gottlieb Steen & Hamilton has hired Chase Kaniecki as a counsel in its Washington office to focus on foreign investment reviews, economic sanctions, and export controls. He joins from rival firm Jones Day

  • Tullow Oil has named Rahul Dhir, currently chief executive of Africa-focused oil and gas group Delonex Energy, as its new chief. Dhir will be taking over from Paul McDade at a difficult time for the industry. 

Smart reads

Singapore sling Most oil companies are having difficult conversations with their lenders, but few are quite as bad as Hin Leong Trading. Founder Lim Oon Kuin had to admit that the company had not been making a profit in years, that it had suffered $800m in losses and the oil pledged as collateral had been sold. The admission has rocked commodity traders and the banks that finance global trade. (FT)

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Oil questions answered Sticking with the oil theme, prices turned negative for the first time in history on Monday and since many of us received emails and text messages from friends and relatives asking why they were still paying for petrol, here is an explainer from the FT’s energy team on what the negative prices mean for the industry. (FT)

Surveillance software The data analytics company Palantir Technologies caught on to the coronavirus pandemic early and was among the first to start preparing for its effects. But since the rest of the world didn’t, that may not be enough to protect Peter Thiel’s company from the fallout. (Wall Street Journal)

News round-up

Expedia looking to tap private equity for $1bn (FT)

ValueAct eyes Nintendo with stake of over $1.1 billion (Reuters)

Disney stops paying 100,000 workers to save $500m a month (FT)

US law firms more aggressive than UK peers in cutting pay (FT)

Alphabet leads tech retreat on real estate deals (The Information)

Trump (the company) asks Trump (the administration) for hotel relief (New York Times)

New blank-check IPO by firm that backed Virgin Galactic (Bloomberg)

KPMG UK chairman warns of coronavirus ‘economic disaster’ (FT)

Vivendi buys stake in Lagardère ahead of activist showdown (FT)

Copper miner SolGold bolsters defences against takeover (FT)

Trump faces opposition over proposal to help energy groups (FT)

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Due Diligence is written by Arash Massoudi, Kaye Wiggins and Robert Smith in London, Javier Espinoza in Brussels, James Fontanella-Khan, Ortenca Aliaj, Sujeet Indap, Eric Platt and Mark Vandevelde in New York, Miles Kruppa in San Francisco and Don Weinland in Beijing. Please send feedback to




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