Wall Street Breakfast: Electric Road Trip

Electric road trip - Shares of Harley-Davidson (HOG) soared as much as 14% on Monday after detailing plans to merge its electric motorcycle division with SPAC AEA-Bridges Impact Corp. (IMPX). The deal valued at $1.77B would result in the first publicly traded EV motorcycle company in the U.S. by listing on the New York Stock Exchange under ticker "LVW." Harley-Davidson would retain a 74% stake in the company, with CEO Jochen Zeitz becoming chairman of LiveWire for up to two years following the completion of the listing.Backdrop: Earlier this year, Harley-Davidson spun off LiveWire into its own standalone brand as the company looked to recapture market share. Its core baby boomer customer base is getting older, interest in motorcycling is not as popular as it once was, and there's growing interest in greener vehicles. The company aims to launch multiple electric motorcycles under the LiveWire nameplate, starting with LiveWire ONE, a $21,999 bike with approximately 145 miles of range. Its first model, launched back in 2019, also did not require a clutch or gear shifting, simplifying the operation for new riders.In an accompanying investor presentation, LiveWire forecast sales volumes of 100,961 electric bikes by 2026. The latest deal is also expected to raise $545M, including a PIPE of $100M from Harley and a similar amount from Taiwan-based power sports manufacturer KYMCO. LiveWire hopes to benefit from at-scale manufacturing, as well as distribution capabilities from Harley and KYMCO, and will also loop in STACYC (a kids electric bike company) into the operation.Outlook: "If anything this underlines what we've been saying for a long time. Detroit, wake up! The train has left the station! EVs are inevitable," Roth Capital analyst Craig Irwin declared. "Many traditional OEMs with emerging EV businesses can obviously do similar spinoff transactions." While the electric vehicle SPAC frenzy has seen some successes, like Rivian (RIVN) and Lucid Motors (LCID), others have hit some speed bumps after going public, such as Lordstown (RIDE), Canoo (GOEV), and Nikola (NKLA).

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Top News Electric road trip Shutterstock Shares of Harley-Davidson (HOG) soared as much as 14% on Monday after detailing plans to merge its electric motorcycle division with SPAC AEA-Bridges Impact Corp. (IMPX). The deal valued at $1.77B would result in the first publicly traded EV motorcycle company in the U.S. by listing on the New York Stock Exchange under ticker "LVW." Harley-Davidson would retain a 74% stake in the company, with CEO Jochen Zeitz becoming chairman of LiveWire for up to two years following the completion of the listing. Backdrop: Earlier this year, Harley-Davidson spun off LiveWire into its own standalone brand as the company looked to recapture market share. Its core baby boomer customer base is getting older, interest in motorcycling is not as popular as it once was, and there's growing interest in greener vehicles. The company aims to launch multiple electric motorcycles under the LiveWire nameplate, starting with LiveWire ONE, a $21,999 bike with approximately 145 miles of range. Its first model, launched back in 2019, also did not require a clutch or gear shifting, simplifying the operation for new riders. In an accompanying investor presentation, LiveWire forecast sales volumes of 100,961 electric bikes by 2026. The latest deal is also expected to raise $545M, including a PIPE of $100M from Harley and a similar amount from Taiwan-based power sports manufacturer KYMCO. LiveWire hopes to benefit from at-scale manufacturing, as well as distribution capabilities from Harley and KYMCO, and will also loop in STACYC (a kids electric bike company) into the operation. Outlook: "If anything this underlines what we've been saying for a long time. Detroit, wake up! The train has left the station! EVs are inevitable," Roth Capital analyst Craig Irwin declared. "Many traditional OEMs with emerging EV businesses can obviously do similar spinoff transactions." While the electric vehicle SPAC frenzy has seen some successes, like Rivian (RIVN) and Lucid Motors (LCID), others have hit some speed bumps after going public, such as Lordstown (RIDE), Canoo (GOEV), and Nikola (NKLA).       Covid Omicron roundup Omicron continues to make headlines around the globe as the fast-spreading variant pushes to become the dominant form of COVID-19. Infections in the U.K. are estimated to be running at 200,000 a day, prompting the country to impose new restrictions, while it also became the first nation to publicly confirm a death from the heavily mutated variant. Meanwhile, Norway is banning alcohol in bars in restaurants to curb the outbreak there, while China detected its first Omicron case on the mainland in the city of Tianjin. Latest research: Vaccine names rose on Wall Street yesterday as additional studies showed COVID shots can protect against Omicron. An Israeli study of 40 participants found that those who received a booster shot had a significant rise in antibodies, while a University of Oxford study also discovered increased protection from boosters. Last week, Pfizer (NYSE:PFE) and partner BioNTech (NASDAQ:BNTX) said preliminary research they conducted found that three doses of their vaccine were effective in neutralizing Omicron. Over in the U.S., California is imposing a month-long statewide mask mandate for indoor public places regardless of vaccination status. Mandates are also hitting Philadelphia, with the city requiring proof of a COVID vaccine to eat inside a restaurant or food establishment starting from January. On the other side of the fence, some of the largest U.S. hospital systems like HCA Healthcare (NYSE:HCA) and Tenet Healthcare (NYSE:THC) have dropped COVID mandates for staff after a federal appeals court upheld an order blocking the White House's mandate for healthcare workers and as the industry deals with a severe labor shortage. Return to the office? Morgan Stanley (NYSE:MS) CEO James Gorman has walked back an order that employees should be back at the office by now, saying he was "wrong" about a widely publicized plan that was based on being out of the pandemic's worst after Labor Day. "I think we'll still be in it through most of next year," he told CNBC. "Everybody's still finding their way and then you get the Omicron variant; who knows, we'll have Pi, we'll have Theta and Epsilon, and we'll eventually run out letters of the alphabet. It's continuing to be an issue."       Sponsored By Pfizer Pfizer: Vaccine News Hundreds of millions have received a COVID-19 vaccine. Data from a clinical trial in kids 5-11 years old is available and use is being considered by FDA. Click here to learn more. Energy Slower solar Tough times could be coming for the solar industry due to supply chain constraints and rising costs for developers. The U.S. market is expected to grow 25% less than previously forecast during 2022, according to a new report by the Solar Energy Industries Association and Wood Mackenzie. Solar shipments were also disrupted for months after an anonymous group filed a petition with the U.S. Commerce Department asking tariffs to be extended to Vietnam, Thailand and Malaysia, though that the appeal was dismissed in November. Snapshot: Costs related to utility-scale solar projects had declined by 12% between Q1 2019 and Q1 2021, but the recent spike in the price of materials has erased two years' worth of cost declines. Despite the pressures, the U.S. installed solar capacity jumped 33% Y/Y to 5.4 GW, marking the most additions on record for Q3. America's total generating capability now consists of 1,200 GW, according to the Public Power Association (though that represents the maximum amount of energy that installations can produce, not what they will necessarily generate).

"The U.S. solar market has never experienced this many opposing dynamics," said Michelle Davis, principal analyst at Wood Mackenzie. "On the one hand, supply chain constraints continue to escalate, putting gigawatts of projects at risk. On the other, the Build Back Better Act [and extension of the Investment Tax Credit] would be a major market stimulant for this industry, establishing long-term certainty of continued growth."

Other impediments: In a decision known as NEM 3.0, California regulators have proposed significant changes to the state's solar incentive program. The policy would reduce payments to solar customers for the excess power they generate - known as net-energy metering - and add monthly charges for customers to connect to the grid. Solar companies and advocacy groups are slamming the proposal, warning that it would slow solar adoption, though proponents feel the current policy harms poorer ratepayers (solar installations are expensive to install) and also flagged a $600M fund to help lower income customers gain access to distributed clean energy.

     

Financials

Tax evasion

A Paris appeals court ordered UBS (UBS) to pay around €1.8B for helping wealthy clients in France evade taxes, reducing the size of an earlier penalty of around €4.5B. The payment will consist of €800M in damages and interest, as well as the confiscation of €1B. In making the decision, the court upheld the guilty verdict against the Swiss banking giant in a case tried under French criminal law.

Flashback: Two years ago, UBS was found guilty of unlawful solicitation and aggravated laundering of the proceeds of tax fraud related to the bank's cross-border business activities in France between 2004 and 2012. It was said to canvass clients at cocktail parties, hunting trips, sporting events and opera performances, looking for them to open accounts in Switzerland and avoid paying tax. The legal battle originated from visits more than a decade ago, and some bankers were said to even used "James Bond-like" tactics to travel covertly to France.

"We're not happy about the guilty verdict. We still believe that we didn't commit any wrongdoing, and that the law is in our favor," announced Denis Chemla, a lawyer who represented UBS, though he said it was too early to say whether the bank would appeal the case to France's highest court.

Bottom line: Fines in Europe for tax-related offenses have historically been lower than in the U.S., so the UBS case marks an exception that has been closely watched by other financial institutions.

     

Today's Markets

In Asia, Japan -0.7%. Hong Kong -1.3%. China -0.5%. India -0.3%.
In Europe, at midday, London +0.4%. Paris +0.1%. Frankfurt flat.
Futures at 6:20, Dow flat. S&P +0.2%. Nasdaq +0.6%. Crude flat at $71.26. Gold -0.2% at $1785.30. Bitcoin -2.4% at $47809.
Ten-year Treasury Yield +2 bps 1.44%

Today's Economic Calendar

FOMC meeting begins
6:00 NFIB Small Business Optimism Index
8:30 Producer Price Index
8:55 Redbook Chain Store Sales

Companies reporting earnings today »

What else is happening...

Biden-Harris release electric vehicle charging action plan.

Moderna (NASDAQ:MRNA) in pact with Australia to manufacture mRNA vaccines.

McDonald's (NYSE:MCD) may launch Beyond Meat's (BYND) McPlant nationwide.

Starbucks (NASDAQ:SBUX) investigates stores in China for using expired ingredients.

Bitcoin, Ethereum stumble as global crypto market cap tumbles to $2.1T.

Does Pfizer's (NYSE:PFE) $6.7B acquisition of Arena Pharmaceuticals make sense?

Apple (NASDAQ:AAPL) gets close, but ends day just shy of $3T valuation.

MGM Resorts (MGM) to sell Mirage Hotel & Casino for about $1.1B.

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