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Goldman Sachs’ investment in a gun retailer puts it in an awkward position

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As consumers pressure corporate America to act in the wake of last month’s mass shooting at Marjory Stoneman High School in South Florida, one of Wall Street’s highest-profile companies finds itself in an awkward position: Goldman Sachs.

In 2017, Goldman’s private equity arm helped finance Bass Pro Shops’ roughly $4 billion purchase of hunting and sporting good retail rival Cabela’s. The bank contributed approximately $1.8 billion in preferred equity to the deal. It was the largest investment of the bank’s first new private equity fund since the financial crisis.

That bet makes it awkward for the bank to come out with a stance on gun control, as corporate America is now being called on to do. There is ongoing debate about the fairness of that expectation and what the appropriate response should be. Still, financial instiutions like BlackRock and Bank of America have vocally weighed in on the matter.

In a statement provided to CNBC, Goldman Sachs said: “We are saddened by recent events, especially the tragedy in Florida last month. We are in touch with management at Bass Pro/Cabela’s and know they are deeply concerned and focused as well.”

Goldman Sachs’ ownership stake in Cabela’s is small, and the company does not have a board seat. Its equity is “preferred” which, in layman’s terms, means it is more akin to a financing tool than it is to ownership. It nonetheless forges a connection between Goldman and guns at a time at which scrutiny of the firearms industry is high. Goldman declined to disclose the size of the stake.

The alleged gunman who massacred dozens of people in Las Vegas is said to have bought a gun at Cabela’s, according to multiple reports. (The retailer reportedly has since gotten rid of bump stocks, which are a legal attachment that makes guns fire faster.)

Goldman did not issue a statement in response to the Las Vegas shooting, though did provide a comment to Axios about its previous investment in SureFire, a high-capacity magazine that TMZ alleged was used in the massacre. (Goldman said SureFire moved into magazines after its investment, against its wishes. Its stake in the company is currently for sale, a source familiar with the matter tells CNBC.)

Cabela’s/Bass Pro is one of the few national retailers that has not publicly issued new gun restrictions in the wake of the Florida shooting, despite vocal measures taken by Walmart, Kroger and Dick’s Sporting Goods, among others.

It is also one of the most reliant on the industry, heavily steeped in hunting culture. Outdoor products including guns comprised roughly half Cabela’s sales, according to securities filings from before its sale to Bass Pro. The retailer has gun libraries on its grounds and displays taxidermy in its stores. It is one of a thinning number of national stores that still sell AR-15 assault rifles, the weapon allegedly used by the Parkland shooter.

Neither Cabela’s nor Bass Pro responded to CNBC’s requests for comment.

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Bitcoin Taproot upgrade: what it means

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The first bitcoin upgrade in four years has just been approved by miners around the world. It is a rare moment of consensus among stakeholders, and crypto experts tell CNBC it’s a pretty big deal for the world’s most popular cryptocurrency. 

The upgrade is called Taproot, and it’s due to take effect in November. When it does, it will mean greater transaction privacy and efficiency – and crucially, it will unlock the potential for smart contracts, a key feature of its blockchain technology which eliminates middlemen from even the most complex transactions. 

“Taproot matters, because it opens a breadth of opportunity for entrepreneurs interested in expanding bitcoin’s utility,” said Alyse Killeen, Founder and Managing Partner of bitcoin-focused venture firm Stillmark.

Unlike bitcoin’s 2017 upgrade – referred to as the “last civil war” because of the contentious ideological divide separating adherents – Taproot has near universal support, in part because these changes are fairly incremental improvements to the code.

What’s changing

Bitcoin’s makeover has to do with digital signatures, which you can think of as the fingerprint an individual leaves on every transaction they make.

Right now, the cryptocurrency uses something called the “Elliptic Curve Digital Signature Algorithm,” which is created from the private key which controls a bitcoin wallet and ensures that bitcoin can only be spent by the rightful owner. Taproot will switch over to something known as Schnorr signatures, which essentially makes multi-signature transactions unreadable, according to Alejandro De La Torre, Vice President at Hong Kong-headquartered major mining pool Poolin.

In practice, that means greater privacy, because your keys won’t have as much exposure on the chain. “You can kind of hide who you are a little bit better, which is good,” said Brandon Arvanaghi, previously a security engineer at crypto exchange Gemini.

It won’t translate to greater anonymity for your individual bitcoin address on the public blockchain, but it will make simple transactions indistinguishable from those that are more complex and comprised of multiple signatures. 

These souped-up signatures are also a game changer for smart contracts, which are self-executing agreements that live on the blockchain. Smart contracts can theoretically be used for practically any kind of transaction, from paying your rent each month, to registering your vehicle.

Taproot makes smart contracts cheaper and smaller, in terms of the space they take up on the blockchain. Killeen says that this enhanced functionality and efficiency presents “mind blowing potential.” 

Currently, smart contracts can be created both on bitcoin’s core protocol layer and on the Lightning Network, a payments platform built on bitcoin, which enables instant transactions. Smart contracts executed on the Lightning Network typically lead to faster and less costly transactions.

“Lightning transactions can be fractions of a penny…while a bitcoin transaction at the core protocol layer can be much more expensive than that,” explained Killeen.

Developers have already begun to build on Lightning, in anticipation of the upgrade, which will allow for highly specific contracts.

“The most important thing for Taproot is…smart contracts,” said Fred Thiel, CEO of cryptocurrency mining specialist Marathon Digital Holdings. “It’s already the primary driver of innovation on the ethereum network. Smart contracts essentially give you the opportunity to really build applications and businesses on the blockchain.”

As more programmers build smart contracts on top of bitcoin’s blockchain, there is also the potential for bitcoin to become more of a player in the world of DeFi, or decentralized finance, a term used to describe financial applications designed to cut out the middleman.

Today, ethereum dominates as the blockchain of choice for these apps, also referred to as “dapps.”

Why the wait

Though the bitcoin community has agreed to the upgrade, the rollout itself won’t happen until probably November. A lot of testing ahead of time will reduce the likelihood of something going wrong during an upgrade.

“Upgrades allow the – extremely remote – possibility of a bug entering the system, which would destroy confidence in the whole cryptocurrency system, effectively wiping it out – a ‘self-inflicted wound’ if you like,” said Jason Deane, an analyst at Quantum Economics.

Deane says this is why upgrade processes are so carefully tested, retested, and vetted, again and again, over very long periods of time, prior to being deployed.

Many also remember the disastrous migration of 2013, when an upgrade gone wrong resulted in bitcoin temporarily splitting in half.

“You don’t want different clients or miners in the protocol out of sync. That’s how catastrophic stuff happens,” Nic Carter, founding partner at Castle Island Ventures, told CNBC. “Because we don’t want a repeat of 2013, we have these extremely long lead times.” 

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Virgin Orbit in talks with SPAC for $3 billion deal to go public

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Richard Branson’s Virgin Orbit, with a rocket under the wing of a modified Boeing 747 jetliner, takes off for a key drop test of its high-altitude launch system for satellites from Mojave, California, July 10, 2019.

Mike Blake | Reuters

Virgin Orbit, the satellite-launching spinoff of Sir Richard Branson’s Virgin Galactic, is in advanced discussions to go public at about a $3 billion valuation through a SPAC led by a former Goldman Sachs partner, CNBC confirmed Saturday.

The company is in talks on a deal with NextGen Acquisition II, a person familiar with the discussions told CNBC. NextGen II is a special purpose acquisition company led by George Mattson, who previously co-led Goldman’s global industrials group.

Sky News first reported the talks on Saturday, saying a deal is expected to be announced in the coming weeks. Virgin Orbit declined CNBC’s request for comment.

The company is a spin-off of Branson’s space tourism company Virgin GalacticVirgin Orbit is privately held by Branson’s multinational conglomerate Virgin Group, with a minority stake from Abu Dhabi sovereign wealth fund Mubadala.

The company’s first demonstration launch in May 2020.

Greg Robinson | Virgin Orbit

Virgin Orbit uses a modified Boeing 747 aircraft to launch its rockets, a method known as air launch. Rather than launch rockets from the ground, like competitors such as Rocket Lab or Astra, the company’s aircraft carries its LauncherOne rockets up to about 45,000 feet altitude and drops them just before they fire the engine and accelerate into space – a method the company touts as more flexible than a ground-based system.

LauncherOne is designed to carry small satellites that weigh up to 500 kilograms, or about 1,100 pounds, into space. Virgin Orbit completed its first successful launch in January, and plans to conduct its second later this month.

Next Gen II raised $375 million when it completed its initial public offering in October. The funds would largely go to help Virgin Orbit scale its business. Virgin Orbit CEO Dan Hart told CNBC in October that the company was seeking to raise about $150 million in fresh capital.

Branson took Virgin Galactic public through a SPAC deal in 2019 with billionaire investor Chamath Palihapitiya.

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Jeff Bezos’ Blue Origin auctions spaceflight seat for $28 million

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A New Shepard rocket launches on a test flight.

Blue Origin

Jeff Bezos‘ space venture Blue Origin auctioned off a seat on its upcoming first crewed spaceflight on Saturday for $28 million.

The winning bidder, whose name wasn’t released, will fly to the edge of space with the Amazon founder and his brother Mark on Blue Origin’s New Shepard rocket scheduled to launch on July 20. The company said it will reveal the name of the auction winner in the coming weeks.

Bidding opened at $4.8 million but surpassed $20 million within the first few minutes of the auction. The auction’s proceeds will be donated to Blue Origin’s education-focused nonprofit Club for the Future, which supports kids interested in future STEM careers.

Blue Origin director of astronaut and orbital sales Ariane Cornell said during the auction webcast that New Shepard’s first passenger flight will carry four people, including Bezos, his brother, the auction winner and a fourth person to be announced later.

Autonomous spaceflight

New Shepard, a rocket that carries a capsule to an altitude of over 340,000 feet, has flown more than a dozen successful test flights without passengers, including one in April at the company’s facility in the Texas desert. It’s designed to carry up to six people and flies autonomously — without needing a pilot. The capsule has massive windows to give passengers a view of the earth below during about three minutes in zero gravity, before returning to Earth.

Blue Origin’s system launches vertically, and both the rocket and capsule are reusable. The boosters land vertically on a concrete pad at the company’s facility in Van Horn, Texas, while the capsules land using a set of parachutes.

The interior of the latest New Shepard capsule

Blue Origin

Bezos founded Blue Origin in 2000 and still owns the company, funding it through share sales of his Amazon stock.

July 20 is notable because it also marks the 52nd anniversary of the Apollo 11 moon landing.

Branson and Musk

VSS Unity fires its rocket engine shortly after launching on its third spaceflight on May 22, 2021.

Virgin Galactic

Bezos and fellow billionaires Elon Musk and Sir Richard Branson are in a race to get to space, but each in different ways. Bezos’ Blue Origin and Branson’s Virgin Galactic are competing to take passengers on short flights to the edge of space, a sector known as suborbital tourism, while Musk’s SpaceX is launching private passengers on further, multi-day flights, in what is known as orbital tourism.

Both Blue Origin and Virgin Galactic have been developing rocket-powered spacecraft, but that is where the similarities end. While Blue Origin’s New Shepard rocket launches vertically from the ground, Virgin Galactic’s SpaceShipTwo system is released mid-air and returns to Earth in a glide for a runway landing, like an aircraft.

Virgin Galactic’s system is also flown by two pilots, while Blue Origin’s launches without one. Branson’s company has also flown a test spaceflight with a passenger onboard, although the company has three spaceflight tests remaining before it begins flying commercial customers – which is planned to start in 2022.

SpaceX launches its Crew Dragon spacecraft to orbit atop its reusable Falcon 9 rocket, having sent 10 astronauts to the International Space Station on three missions to date.

In addition to the government flights, Musk’s company is planning to launch multiple private astronaut missions in the year ahead – beginning with the all-civilian Inspiration4 mission that is planned for September. SpaceX is also launching at least four private missions for Axiom Space, starting early next year.

Blue Origin’s auction may have netted $28 million, but a seat on a suborbital spacecraft is typically much less expensive. Virgin Galactic has historically sold reservations between $200,000 and $250,000 per ticket, and more recently charged the Italian Air Force about $500,000 per ticket for a training spaceflight.

Musk’s orbital missions are more costly than the suborbital flights, with NASA paying SpaceX about $55 million per seat for spaceflights to the ISS.

SpaceX’s Crew Dragon spacecraft named “Resilience” is seen docked to the International Space Station.

NASA

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