Impact of Tax Cuts and Jobs Act, Blackstone's Investment in Autolus Therapeutics, Challenges of Chin

Background of Tax Cuts and Jobs Act and Corporate Tax Rates

1) First paragraph answer this question: Before the Tax Cuts and Jobs Act of 2017, when the corporate income tax for large U.S. firms was 35%, tax inversion was a popular method to lower a firm’s tax burden. Tax inversion is typically done by buying a foreign target located in a country with a lower tax rate and then incorporating the combined firm in the target’s country. Provide an example of a U.S. firm that used tax inversion recently 2021, and cite the source of your information.

 

2) second paragraph answer these questions of this article: Article: Blackstone to Invest Up to $250 Million in Autolus Therapeutics of U.K Link:

 

https://www.wsj.com/articles/blackstone-to-invest-up-to-250-million-in-autolus-therapeutics-of-u-k-11636336822 Blackstone Inc.

 

Is an American alternative investment management company that through different units within the firm is investing in the BioMed industry within the U.K. One particular firm they are investing in is biotechnology company Autolus Therapeutics which is currently going through the final stages of developing a new therapy to treat acute lymphoblastic leukemia.

 

Blackstone has invested through direct investments which we discussed in module 3 focusing on the BOP. Direct investments are long-term investments where the investor has a minimum ownership interest of 10%. The investment measure is the net balance of capital dispersed from and into a country for the purpose of exerting control over assets.

 

Blackstone has directly invested in Autolus by buying $100 million worth of shares taking a significant stake in the company. The investment is said to be a "bet on Autolus's model of cell therapy, which could be applied to other forms of cancer". Moreover, because there is a lot less capital available in Europe and the U.K in regard to sciences, Blackstone has a lot less competition which made it easier for them to exert control. Blackstone has committed to investing up to $250 million in the specific therapy treatment on top of their share purchase. Blackstone will start by funding $50 million to fund the final stages of new therapy treatment for leukemia, and once milestones are made within the development, the rest will be paid. This has been done so Blackstone's capital flows to where they believe it can earn the greatest return for the level of risk. Even though 85% of those who are in Autolus's trial for the therapy have no detectable sign of acute lymphoblastic leukemia after receiving the treatment there is still a high risk that it could not be as successful as deemed, which is why the money is dispersed when milestones have been achieved. In relation to this in our class, it is important to think about how this large amount of capital is being invested in an international firm and the impact it has on the balance of payments within the US. As money is flowing out of the US, it enters the balance of payments as a negative cash flow.

Blackstone's Investment in the BioMed Industry

 

However, this investment can potentially bring a large return to Blackstone therefore, a positive cash flow on the balance of payments although is risky.

 

Possible Discussion Questions: It is said to be always somewhat controversial when investments are made in foreign firms. Do you think it is still controversial to invest in an international firm if the return may not be as high capital-wise but putting capital towards something that can benefit those who are sick? Instead of investing money into an international firm, should Blackstone have found a US-based clinical trial firm to have invested in to potentially create the same outcome but keep the BOP positive? It is also said that workers of any nation feel that the profits of their work should remain in their own hands in their own country. With this in mind, do you think that if the trial ends in a positive outcome and proves to be successful that this therapy will be delayed in coming to the US even though Blackstone has a significant stake in the company?

 

3) paragraph answer the questions of this article: As we learned from Module 10, ADRs were first conceived in the 1920s to help the average Americans invest in foreign companies while helping foreign companies to raise equity globally via American stock exchanges. There are over 250 Chinese ADRs, with a combined market capitalization of over $2 trillion, according to the U.S.-China Economic and Security Review Commission. For a long time in the past, China was regarded as the golden land of rapid economic growth, and Americans loved to invest in Chinese ADRs to participate in the exploding market. However, investing in the Chinese ADR market is much more complicated this year due to two major reasons. On one side, U.S. securities regulators have started a countdown that will force many Chinese companies to leave American exchanges, after a long impasse between Washington and Beijing over access to the companies’ audit records. On the other side, the Chinese government vows to crack down on domestic companies that list on U.S. exchanges. The rules of the overseas listing system for domestic enterprises will be updated. It could pressure the popular Chinese ADR market. U.S. investors will have to weigh the risks of owning Chinese ADRs at a time when tensions between Beijing and Washington remain elevated while all global investors will have to balance the allure of China’s vast potential market with the possibility that officials may reshape company prospects at the stroke of a pen via the imposition of regulatory restrictions. The stock price of Didi, a Chinese ride-hailing app, slumped nearly 20% after Beijing announced a cybersecurity investigation, suspending new user registrations. Nasdaq-listed Weibo is now planning to go private after its operator Tencent reportedly experienced a regulatory probe in its fintech business. Alibaba has experienced a series of investigations since last year, and Ant Group's $37 billion IPO (ADR) was canceled. China's after-school tutoring restraint slams the ADR market of the education sector.

 

It's worth discussing: How many questions do we need to ask ourselves before investing in Chinese ADRs when going to take advantage of the rapid growth? Is it political and national security dynamics or international situation? Will share price lose due to delisting? Some investors have exchanged their ADRs in Chinese companies for shares that trade on the HK exchange. Is it a good strategy?

 

4) watch these two videos and write one summary page for both of them: Wharton term sheet negotiation

 

https://www.youtube.com/watch?v=jbHB0qwcoOw&ab_channel=WhartonSchool Harvard Term Sheet Video

 

https://www.youtube.com/watch?v=ls1bPCGKQgQ&ab_channel=HarvardInnovationLabs