🗞️Squeeze more from big tech

Taylor Swift got the most complex SPAC...

Welcome back! Monday is a fresh start, and it’s never too late to dig in and begin a new journey. 💪

Morning Wrap your day:

  1. A historic deal on global minimum tax is out. MNCs are the target.
  2. Taylor Swift is in the world’s biggest and most complex SPAC deal.
  3. Etsy finally goes younger by acquiring Depop. Here’s how.


S&P 500 rose to near a record high, and European stocks ended at a record high as weak US payrolls data pointed to lower chances of early policy tightening.

Asian stocks closed lower on Friday amid worries over higher inflation and an earlier withdrawal of US Fed’s stimulus. China stocks ended higher led by financial firms, following China’s stamp duty cut proposal, though they post weekly losses amid renewed Sino-US tensions.


Let’s squeeze more from big MNCs Source: OECD

Source: OECD

Following Biden’s proposal of a global minimum corporate tax, the G7 group reached a historic deal to revamp the taxation for the digital era - taxing multinationals such as Google and Facebook at a rate of at least 15%. 

Wait...what global minimum corporate tax?

As you may be aware, Biden proposed to increase the US corporate tax rate to 28% from 21% to fund the massive infrastructure and social spending plans. 

So it called on other countries to join and set a global minimum - to prevent MNCs’ from moving to lower-tax countries.

That rings a, are MNCs the main target this time?

Yea, the deal explicitly targets big profitable MNCs, especially tech giants. 

  • The big is targeted:🎯 It will hit the largest global firms with profit margins of at least 10%;
  • 15% or more? These large firms have to pay “at least” 15% tax, and the rate is “a starting point that could be pushed higher.”

Then is it bad news for tax havens throughout the world?

Definitely yes, as they partly use low tax rates to attract businesses. E.g. Ireland @12.5%.

But why did other G-7 members back the US’s proposal? Probably because... 

  1. They’re already adopting a higher tax rate than 15%, or even the US’s level 😂(see graph above)? 
  2. US made a compromise just weeks ago - 15% is significantly lower than the 21% rate it has proposed for its domestic firms.
  3. A 15% rate could generate 41 bln euros a year for US and 48 bln euros for EU members, by estimation.

Only 7 countries in this deal, how does it relate to the rest of the world? Because the deal would soon seek international backing from ①G20 in Venice in July, and ②OECD with 139 countries. This agreement could add important momentum to the coming discussions.


Etsy finally goes younger

Source: Dazed, Morning Wrap

This is something new for e-commerce: the American vintage gift marketplace Etsy just bought the UK-based resale platform Depop… to go younger.

Hold on… what does Depop do?

It’s a second-hand fashion marketplace, with an Instagram-like interface, and a TikTok-like user group. Depop taps into the younger generation’s obsession with “side hustles”. As of today, more than 90% of its active users are below 26 (aka. Generation Z).

  • In addition to individual sellers, Depop has also partnered with big brands like Adidas, Benetton, and Ralph Lauren to help them go sustainable.

Depop was truly popular last year. Revenue of Depop more than doubled in 2020, outpacing all resale peers.

Why did Etsy buy Depop?

Perhaps this is the reason… Etsy’s user base is way older than Depop, with a median age of 39. It needs a way to tap into the booming Generation Z.

  • Under the deal, Esty would pay USD 1.6 bln to acquire Depop, primarily in cash 💵
  • They both wish to learn from each other...Etsy’s international expansion strategy and Depop’s mobile operation experience.

Will this be “antitrust-ed”? Etsy answered “NO” - it thinks the deal could help individuals and the smaller businesses to compete with Amazon and others. This is “really aligned with where all the regulatory authorities want to go”.


Taylor Swift got the most complex SPAC deal

Source: Morning Wrap

The world’s largest SPAC is getting a deal now: it will buy 10% of Universal Music Group - the one behind Taylor Swift… perhaps the most complicated ever.

I am curious 🤔 How complex is it?

+ Better to recall the definition of SPAC first: It’s a shell company created to bring others public by going public first and then acquiring them. SPAC is the abbreviation of “special purpose acquisition company”.

Take a deep breath… here we go. 🤯

  • Billionaire Bill Ackman’s shell company PSTH will buy 10% of Universal, but will not bring Universal public in the US. Universal will go public in Amsterdam instead.
  • After the acquisition, PSTH will no longer be treated as a SPAC on the stock exchange as it no longer fulfills the definition but will remain listed.
  • The SPAC will roll into a SPARC (R for rights)... and it’s able to do another acquisition later on.

Wait, is this truly a SPAC deal?

It’s one of a kind… as it runs differently from all existing SPAC deals. SPAC investors are also treated differently here: they will know the acquisition target beforehand. If they don’t like Universal - free to go.

Investors appear cautious on the deal. Shares in Ackman’s SPAC plunged 14% in after-hours trading after the news release, before reversing some of its losses. Probably because it’s so unique for those SPAC investors…?🤔

Or perhaps we should call this a SPARC deal instead?


What To Watch This Week

🏗️ Economy is doing well? Japan GDP (Tue); Eurozone GDP (Tue)

📈 Inflation: US core CPI (Thu); China CPI and PPI (Wed)

🏛️ Central bank watch: Bank of Canada interest rate decision (Wed); European Central Bank interest rate decision (Thu)

💼 Labor market recovery: Eurozone Employment (Tue); US Initial Jobless Claims (Thu)

🛢️ Production and Oil: US Crude Oil Inventories (Wed); UK Manufacturing Production (Fri)

📱 Technology: Apple Worldwide Developers Conference (Mon); Huawei cybersecurity center opening in Dongguan, China (Wed)

Other notable events: ASEAN-China Dialogue Relations in Chongqing, China (Mon); G7 Summit in Carbis Bay, UK (Fri)


What’s Moving in the Business World?

📉 Bitcoin falls on Weibo’s move: Its decline continued over the weekend as Chinese social media Weibo blocked some crypto accounts, fueling fear of further crackdown. (More)

💉 Another milestone! US passed the milestone of administering more than 300 mln covid vaccine doses. UK could also start vaccinating children as soon as August. (More)

🏦 Largest buyout of the year (so far): Blackstone, Carlyle and other PE investors teamed up to buy Medline, a US medical supplies manufacturer, for USD 34 bln. (More)

🚫 Facebook’s Trump ban. Trump’s account would be banned for at least two years, a revision from previous indefinite suspension. (More)

⚖️ It’s “imbalanced”. US’s Trade Representative said the US-China trade relationship has “significant imbalance” and the Biden administration is committed to leveling it. (More)


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