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Reid Hoffman and Mark Pincus On What Makes Their SPAC Different

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In a crowded field of blank-check companies, Reid Hoffman and Mark Pincus think that their special purpose acquisition company, or SPAC, is particularly special. Their company, Reinvent Technology Partners, raised $600 million in an I.P.O. and started trading yesterday, posting one of the biggest one-day share price gains of any SPAC so far this year. That suggests that investors see promise in their approach, well before their vehicle finds a target company to merge with.

It also helps that the duo are Silicon Valley royalty: Mr. Hoffman co-founded LinkedIn and is a respected venture capitalist, while Mr. Pincus founded the game maker Zynga. Both are sought-after mentors among the tech set. They spoke with Andrew about how SPACs differ, and in some cases, complement, traditional I.P.O.s, venture capital, private equity and all the other ways that companies can raise money these days.

On whether SPACs are a rebuke of traditional I.P.O.s:

While some SPAC founders, like Chamath Palihapitiya, have made that argument, Mr. Hoffman played down the idea. “I think marketing against I.P.O.s is wrong,” he said, noting that a SPAC lists on the public markets through … an I.P.O.

On whether SPACs compete with venture capital or private equity:

Mr. Pincus described SPACs as “venture at scale,” letting companies go public in close partnership with experienced growth investors. The “scale” comes from SPAC founders pushing the companies they merge with to maintain a venture mind-set even after they list. “There’s an interesting entry point into a company at the point they’re going public,” Mr. Pincus said, “to help them think, ‘How do you go from $1 billion to $10 billion in revenues? How do you 10X and 100X your business long after you’re public?’”

On the future of SPACs:

Mr. Pincus is thinking big. “Maybe the next beauty contest for an Airbnb, before they go public, there is somebody saying, ‘Hey, we’re going to invest in you now, and be on your board,’ ” Mr. Pincus said. “I believe it’s more compelling to say to the next Brian Chesky, ‘Look, I’m going to be in the trenches with you. I’m not getting out. You’re not going to be here alone holding the keys.’ ” (A reminder: Airbnb was courted by Bill Ackman’s SPAC — and rejected the offer.)

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Today’s DealBook Briefing was written by Andrew Ross Sorkin in Connecticut, Lauren Hirsch in New York, Ephrat Livni in Washington, and Michael J. de la Merced and Jason Karaian in London.

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Credit…Anna Moneymaker for The New York Times

Elizabeth Warren dismissed the Business Roundtable’s new focus on stakeholders as a “stunt.” In a letter to the trade group, which represents top American C.E.O.s, the senator said (in 11 pages, with 59 footnotes) that companies failed to provide “any evidence of a change in behavior” to support their pledge to focus on more than shareholders.

Moderna and Pfizer unveiled their Covid-19 vaccine road maps. The highly unusual move — clinical trials are usually shrouded in secrecy — is meant to instill confidence about the safety of their treatments. Relatedly, here’s why distributing vaccines will be really hard.

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British scientists are proposing a second pandemic lockdown. The Financial Times reports that scientific advisers to the government have recommended shutting down businesses and schools for two weeks next month in an effort to reverse a climbing infection rate. Prime Minister Boris Johnson has publicly opposed such a move.

Amazon is a lucrative U.S.P.S. customer. Records obtained by the nonpartisan watchdog American Oversight revealed that the e-commerce giant accounted for 30 percent of the Postal Service’s volume in its most recent fiscal year, generating around $3.9 billion in revenue and $1.6 billion in profit for the agency. That contradicts President Trump’s assertions that Amazon is responsible for the agency’s financial woes.

Citigroup suspended an I.T. employee who ran a prominent QAnon website. The firm said it had placed the worker, Jason Gelinas, on paid leave after he was revealed as the operator of a popular site that hosted content about the conspiracy theory. Citi said it acted because he hadn’t received approval to run the site, from which he earned over $3,000 a month.

Credit…China Stringer Network/Reuters

The Treasury Department and ByteDance, the Chinese owner of TikTok, have a deal in principle to change the video app’s ownership to satisfy the Trump administration’s national security concerns. More details are emerging — but some big questions remain unanswered, as President Trump is expected to decide on the deal’s fate as soon as today.

Here’s what we know:

Walmart and Oracle are involved, with each set to take stakes in TikTok when it’s spun out of ByteDance. Walmart’s C.E.O., Doug McMillon, would take a seat on TikTok’s board — which would reportedly consist only of U.S. citizens.

TikTok would go public on a U.S. stock market about a year after the deal closes, which is meant to further demonstrate the company’s independence from China. (ByteDance had always intended to take TikTok public in the U.S., a source told DealBook.) The Times adds that the I.P.O. plans aren’t a formal part of the deal.

TikTok’s future C.E.O. could be another Kevin. Among the candidates the company has interviewed to replace Kevin Mayer, who resigned last month, is Kevin Systrom, the Instagram co-founder who left Facebook in 2018, The Times reports.

Here’s what we don’t know:

Who will control TikTok? News reports differ on who would hold a majority stake in the app: ByteDance or the consortium of American investors. The answer could determine whether Mr. Trump approves the proposal.

Will Beijing be satisfied? The deal would allow ByteDance to keep control over the algorithms that power TikTok, a major demand by China, but it would give Oracle power to review that code. It’s unclear how Chinese regulators would view that concession to the U.S.

Here’s what comes next:

Fights over other Chinese tech businesses are brewing. The Trump administration’s effort to ban many interactions with WeChat in the U.S. may be temporarily blocked by a federal judge. Meanwhile, the administration is reportedly scrutinizing investments in American gaming companies by the Chinese tech giant Tencent, according to Bloomberg.

Some of the academic research that caught our eye this week, summarized in one sentence:

• The unemployed get worse sleep than people with jobs, and that may make it harder for them to find work. (David Blanchflower and Alex Bryson)

• What will happen to company culture when the pandemic reduces the value of “exploration and creativity” in favor of “safety and resilience”? (André Spicer)

Credit…Johannes Eisele/Agence France-Presse — Getty Images

As more companies bring employees back to their offices, we said earlier this week that it wasn’t just JPMorgan Chase that would have to deal with sending workers home after positive Covid-19 tests. And so it goes:

• Two workers at Goldman Sachs tested positive in recent weeks, The Times reports. One works in a revenue-producing business, while the other is in the back office, and they sit on different floors of the bank’s downtown Manhattan headquarters. The firm believes both contracted the virus outside of the office.

Barclays sent some workers home from its London office earlier this month after two colleagues had tested positive, Financial News reported and DealBook confirmed.

It puts a spotlight on what firms are doing about coronavirus testing. For instance, we’ve learned that Goldman is working with two companies — Sterling, a portfolio company of the firm’s merchant bank, and Vault — to perform rapid tests at a site behind its Manhattan headquarters. And JPMorgan is distributing home-testing kits to U.K. employees who show symptoms.

There are other factors that companies need to take into account. The Times notes that cities that are home to Big Ten universities are worried about the college football conference’s plans to start games soon. A potential rise in infections complicates return-to-office plans in those places, among other moves to reopen local economies.

💥 “I think the word ‘unprecedented’ gets way overused this year, 2020, and you use the figure of speech ‘earth shattering,’ which I don’t actually think we can use in 2020 because it might actually literally happen.” — Paul Jacobson, C.F.O. of Delta Air Lines

🌯 “Our portion sizes are much more consistent because there’s not somebody pointing at every single pan and … the crew will see just the way that a customer is looking at them and think, ‘Oh, I better put another scoop in.’ ” — Jack Hartung, Chipotle’s C.F.O., on the benefits of online versus in-person orders

🍩 “A lot of our early morning traffic that used to be in that 6 to 9 a.m. window for us has really shifted into that 10 to 2 or 10 to 1. People are coming out a little later. Maybe they need a break from their Zoom.” — Kate Jaspon, C.F.O. of Dunkin’ Brands

Credit…Leah Millis/Reuters

A fascinating report in Vanity Fair lays out how Jared Kushner, the White House official and President Trump’s son-in-law, tried to introduce private-sector tactics into the government’s efforts to combat the coronavirus. He reportedly relied on consultant-minded staff members who approach the task more like a venture capital firm than a civil service, with mixed results. An excerpt:

One attendee explained to Kushner that due to the finite supply of PPE, Americans were bidding against each other and driving prices up. To solve that, businesses eager to help were looking to the federal government for leadership and direction. “Free markets will solve this,” Kushner said dismissively. “That is not the role of government.”

Read the whole thing.

Deals

• Uber is reportedly planning to sell part of its $6.3 billion stake in Didi Chuxing, its onetime ride-hailing competitor in China. (Bloomberg)

• SoftBank will sell Brightstar, a U.S. cellphone distributor, to a former executive as part of its plan to shed billions in assets. (Reuters)

• CaixaBank agreed to buy a top rival, Bankia, in a $5 billion all-stock deal to create Spain’s biggest lender. (MarketWatch)

Politics and policy

• President Trump will give $14 billion in new aid to pandemic-stricken farmers. (NYT)

• Democratic lawmakers in New Jersey agreed on a plan to raise taxes on individuals who earn between $1 million and $5 million. (WSJ)

• The president of the European Union’s executive arm still believes a trade deal with Britain is possible, despite growing rancor between the two sides. (FT)

Tech

• Facebook plans to tamp down debate on divisive issues like politics — on its internal message boards. (WSJ)

• It isn’t just tech giants that are booming right now: Small tech companies’ share prices are soaring. (NYT)

Best of the rest

• The head of Fidelity’s $230 billion Contrafund is worried that younger investors are abandoning traditional mutual funds for apps like Robinhood. (Bloomberg)

• Queen Elizabeth’s real estate portfolio has been hit hard by the pandemic. (FT)

• “Is This the End of the New York Yoga Studio?” (NYT)

Thanks for reading! We’ll see you next week.

We’d love your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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