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The knives were out after
Robinhood’s
lackluster debut last week and the hotly anticipated initial public offering was quickly branded a flop. But that’s never the end of the world.
Facebook’s
IPO in 2012 was a bit of a letdown, and the shares then fell 50% in its first six months of trading. Now, Facebook is worth just under $1 trillion.
Then again, the advent of meme stocks makes comparisons, and at times logic, seem largely irrelevant. The stock soared 24% Tuesday off the back of no major news, to just below $47, or 23% above the company’s IPO price. It was up 54% in Wednesday trading.
What did you expect? Robinhood set aside about a third of the IPO for its own retail customers. The company admitted in its prospectus that would cause increased volatility. Add in the regulatory concerns facing the company, and there are risks abound.
One investor seemingly happy to take on those risks is ARK Invest’s Cathie Wood. The company’s flagship ARK Innovation fund has bought 4.9 million shares in the online brokerage, worth around $229 million, according to its own data.
After a blockbuster 2020, which catapulted her to fame, Wood’s doubters have grown more vociferous recently. The
ARK Innovation ETF
has declined in value this year, and a new ETF betting against the fund is being planned.
But Wood was quick to dump Chinese stocks as Beijing’s crackdown intensified, a move that’s looking smarter by the day, and her bold bet on Robinhood is showing early signs of paying off.
—Callum Keown
*** Join Barron’s senior managing editor Lauren R. Rublin, senior writer Al Root, and Gary Black, founder & managing partner of The Future Fund, Thursday at noon to discuss the future of electric-vehicle companies and investing. Sign up here.
***
Biden Calls Delta-Driven Surge of Coronavirus Cases ‘Largely Preventable Tragedy’
President Joe Biden called the current surge of illness linked to the Delta variant of coronavirus “a largely preventable tragedy that will get worse before it gets better,” saying 99% of last month’s deaths were among unvaccinated people. He said 90 million people eligible for vaccines haven’t gotten their shots.
- New York City will require people to show proof of vaccination for indoor activities like dining, gyms and performances, starting Aug. 16, with inspections beginning mid-September. “The only way to patronize these establishments indoors will be if you’re vaccinated, at least one dose,” Mayor Bill de Blasio said.
-
Tyson Foods
will require its entire U.S. workforce of about 120,000 processing plant and corporate office workers to get vaccinated against Covid-19 by Nov. 1, and will offer $200 incentives to front-line workers “as a thank you,” CEO Donnie King said in a memo. -
General Motors,
Ford Motor
and Jeep and Chrysler owner
Stellantis NV
and union representatives said they are mandating that employees, even if vaccinated, wear masks in all factories, offices and warehouses in areas where infections are rising.
Toyota Motor Corp.
is offering workers $100 to get vaccinated. -
Microsoft Corp.
is joining
Alphabet’s
Google and
Facebook
in requiring that all employees, vendors and visitors to its U.S. facilities provide proof of vaccination starting in September and is postponing the reopening of its U.S. offices until at least Oct. 4.
What’s Next: Biden said on Tuesday he would announce a new federal halt on evictions in areas of the U.S. hard-hit by the Delta variant to protect millions of renters affected by the pandemic. A previous moratorium expired last weekend, prompting an outcry by some Democrats.
—Janet H. Cho
***
Lyft Turns Profitable as Demand Increases
Lyft
hit profitability on an adjusted basis sooner than expected. Its results set a high bar for rival
Uber Technologies.
- The company reported second-quarter adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, of $23.8 million, hitting profitability a quarter sooner than forecast. Under generally accepted accounting principles, the company lost $251.9 million, or 76 cents a share. That includes $207.8 million related to stock-based compensation and $20.4 million in expenses related in legacy auto-insurance liabilities.
- Lyft said people who took at least one ride during the quarter hit 17.1 million, up 97% from the year prior and 27% from the first quarter of 2021.
- Revenue per active rider was $44.63, up 14% from a year ago, but down slightly from $45.13 in the March quarter. “We beat our outlook across every metric and we have growing momentum,” Lyft CEO Logan Green said in a statement.
What’s Next: Uber, which also has a food delivery business, reports results after the market closes today. Analysts expect revenue of $3.74 billion, up 67% from a year ago.
—Connor Smith and Eric J. Savitz
***
SEC’s Gensler Calls Unregulated Crypto Markets ‘the Wild West’
Securities and Exchange Commission Chairman Gary Gensler said the agency will regulate cryptocurrency markets to the maximum extent possible under its current authority, while asking Congress for more resources to oversee the asset class, calling it “like the Wild West.”
- Gensler warned that new regulations are needed to police crypto trading and lending platforms, particularly stablecoins, which are digital tokens pegged to the U.S. dollar or another fiat currencies, and enable trading between cryptocurrencies. He said roughly 75% of crypto trades involve stablecoins such as tether or USD coin.
- Unlike in the securities and derivatives markets, crypto platforms enable users to operate outside of traditional banking systems, “sidestepping anti-money-laundering and tax-compliance sanctions,” and potentially threatening U.S. national security, he said during an appearance at the virtual Aspen Security Forum.
- Gensler also called for greater regulation of decentralized finance, or DeFi, an alternate financial universe where applications run autonomously. Assets deposited as collateral with DeFi projects have swelled to $85 billion from around $3 billion a year ago, according to data provider DeBank.
- No one regulator oversees crypto exchanges or brokers, and while the market value of the asset class has exploded to more than $1 trillion, so have the scams. From January to April, DeFi frauds cost investors $83.4 million, according to analytics firm CipherTrace.
What’s Next: Although the crypto market is smaller than the equity and bond markets, it would require a great deal of expertise and attention to properly oversee. “We can double or triple the number of people we have working on this at the SEC and still probably not fully cover this field,” Gensler said.
—Janet H. Cho
***
U.K. Considers Blocking Nvidia’s $40 Billion Acquisition of Arm
The U.K. government is considering blocking
Nvidia’s
$40 billion acquisition of chip designer Arm because of potential national security risks, according to a report from Bloomberg. Nvidia, in response, has acknowledged that it’s working through the deal with U.K. regulators and confirmed that it expects to resolve any issues.
-
Owned by Japanese investor SoftBank since 2016, Arm licenses intellectual property to the likes of
Apple,
Amazon,
and Samsung, who use the chip designs in device processors globally. Nvidia’s purchase of the company is a move to transform the global semiconductor landscape at a time when the importance of chips has been underscored by a worldwide shortage. - The deal has come under scrutiny in the U.K. since it was announced in September. British companies in fields from defense to semiconductors have recently become acquisition targets, and there is political pressure to protect national control of critical industries. For its part, Nvidia has pledged to keep Arm’s English headquarters, among other commitments.
- The U.K. Competition and Markets Authority was tasked in April with assessing concerns surrounding the deal. Delivered in late July, the regulator’s report contains worrying implications for national security, and the U.K. is currently inclined to reject the takeover, the Bloomberg report said. At the very least, a deeper investigation into the merger on security issues is likely.
What’s Next: The report doesn’t seem to have hurt Nvidia stock, but it may have helped shares in
AMD
close for a fifth consecutive record high on Tuesday. As for the deal, the U.K. is under pressure to clamp down on foreign takeovers of critical companies. But making an example out of Nvidia and Arm would be a serious splash—a $40 billion one.
—Jack Denton
***
This Week Has Ushered In a Wave of Deal Activity
August’s deal activity comes amid record-high stock valuations and the return of economic growth from last year’s pandemic shutdown and federal stimulus that is boosting CEO confidence even after the strongest first-half start to a year since 2006.
-
Fintech
Square
started this week off with a $29 billion deal for Australian installment lender
Afterpay,
sparking speculation that more deal activity is due for the fast-growing digital payments industry. -
On Tuesday,
Lumen Technologies
—formerly known as CenturyLink—said it would sell part of its U.S. telecommunications network to the investment firm Apollo Global Management for $7.5 billion including debt, The Wall Street Journal reported. -
Earlier Tuesday,
PepsiCo
said it would sell its juice brand Tropicana and related units to private-equity firm PAI Partners, retaining a 39% stake in a new joint venture in a deal valued around $4.5 billion. -
On Monday, French pharmaceutical giant
Sanofi
said it was buying U.S. biotech
Translate Bio
for $3.2 billion in a bet on the next generation of mRNA vaccine technology, which is being used to combat Covid-19 but could have wide-ranging applications.
What’s Next: U.S. deals this year total 4,958 transactions valued at $1.66 trillion, Dealogic said, including 540 deals for $280 billion since the start of June. The third-quarter dollar amount is 87% of the whole second quarter, with nearly two months left until the end of September.
—Liz Moyer
***
Dear Quentin,
My second husband and I bought a large property and developed it into a successful restaurant and campground.
All of the property, and pretty much everything we own, is titled in the business corporation. His name is the only one on the corporate ownership.
We’ve both signed notes for debt, and I’ve asked for my name to be added to the property deed or corporation.
He never did. Now he wants me to sign another note to make improvements. I said no and I’m standing firm that I need protection if he should suddenly pass away (we’re pushing 60).
What if he decides to divorce me? How will I be protected? He tells me everything is just fine and those issues will never be a problem for me.
We both have children from previous marriages. We all get along great, but this property is very valuable (worth an estimated $3.5 million with only $200,000 debt).
We also live on the property. I don’t want to get kicked out if he should die.
—Wife of Shifty Spouse
Read The Moneyist’s response here.
—Quentin Fottrell
***
—Newsletter edited by Liz Moyer, Mary Romano, Camilla Imperiali, Steve Goldstein, Callum Keown