Raphael Stevens

Image taken with a drone) A Tesla collision center is seen in this aerial view in Orlando.
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Check out the companies making headlines in midday trading Tuesday.
Tesla — Shares popped 5% after Moody’s upgraded Tesla to Baa3 rating from its junk-rated credit. Moody’s called the electric-vehicle maker the “foremost manufacturers of battery electric vehicles” and said the upgrade reflects Tesla’s prudent financial policy and management’s operational track record.

First Republic, KeyCorp, U.S. Bancorp — Regional bank stocks rebounded on Tuesday as Treasury Secretary Janet Yellen said the government would consider backstopping deposits at more banks in order to protect the financial system. Shares of First Republic jumped more than 41%, while KeyCorp added 9%. U.S. Bancorp rose nearly 8%.
JPMorgan, Bank of America — Shares of larger U.S. banks rose on Tuesday as investors showed increased optimism after Yellen’s remarks. JPMorgan gained about 3% and Bank of America rose by 3.5%. 
Foot Locker — Foot Locker gained 6% after Citi upgraded the retail stock to a buy from neutral after its investor day on Monday. The firm said the company’s move away from malls and toward digital, kids and loyalty projects is a step in the right direction.
Harley-Davidson — Shares of Harley-Davidson rose more than 5% after Morgan Stanley upgraded the motorcycle maker and said its focus on its core business can lift the stock by more than 30%. Jefferies also upgraded the stock, saying the company’s risk and reward are more balanced after a recent decline.
UBS — U.S.-listed shares of the Swiss-based bank gained 12% during midday trading following its agreement over the weekend to buy Credit Suisse for $3.2 billion. Credit Suisse rose 5% after taking a nearly 53% plunge on Monday.

Roblox — Shares rose more than 3% after D.A. Davidson said the online game platform has an “underappreciated” opportunity in artificial intelligence.
Emerson Electric — Shares added nearly 2% after Morgan Stanley said shares of the multinational tech company are too attractive to ignore. The firm upgraded the stock to overweight from equal weight.
Exxon Mobil — The oil and gas giant’s stock price gained 3% after Morgan Stanley said it likes the company’s robust “competitive positioning.”
— CNBC’s Alex Harring, Jesse Pound, Tanaya Macheel and Michelle Fox Theobald contributed reporting.

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Swiss regulator FINMA announced that the AT1s, widely regarded as relatively risky investments, will be written down to zero, while stock investors will receive payouts as part of the takeover.
California-based global litigation firm Quinn Emanuel Urquhart & Sullivan announced on Monday that it had put together a “multi-jurisdictional team of lawyers from Switzerland, the U.S. and the U.K.” to discuss “possible legal actions” with Credit Suisse bondholders.

A sign of Credit Suisse bank is seen at their headquarters in Zurich on March 20, 2023.
Fabrice Coffrini | AFP | Getty Images

A number of Credit Suisse bondholders said Tuesday that they were considering legal action after $17 billion of the bank’s additional tier-one (AT1) bonds were wiped out as part of its emergency sale to UBS.
Swiss regulator FINMA announced Sunday that the AT1s, widely regarded as relatively risky investments, will be written down to zero, while stock investors will receive payouts as part of the takeover, angering bondholders.

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David Benamou, chief investment officer at Axiom Alternative Investments and a holder of Credit Suisse AT1 bonds, told CNBC on Tuesday that he would be joining the lawsuit along with, he imagined, “probably most bondholders.”
California-based law firm Quinn Emanuel Urquhart & Sullivan said Monday that it had put together a “multi-jurisdictional team of lawyers from Switzerland, the U.S. and the U.K.” following the rescue deal.
“That team are already in discussions with a number of holders of Credit Suisse’s AT1 capital instruments, representing a significant percentage of the total notional value of AT1 instruments issued by Credit Suisse, about the possible legal actions that may be available to them in light of the announcement of the merger between UBS and Credit Suisse,” the firm said.
The firm previously represented bondholders following Spanish bank Banco Popular’s sale to Banco Santander for 1 euro in 2017, which also saw AT1s written down to zero.
The firm said it was planning to convene a call for bondholders on Wednesday to talk through “potential avenues of redress.”

Was Credit Suisse failing?
Ordinarily in the event of a bank failure, AT1s — also known as contingent convertibles or “CoCos” — would be prioritized above equity holders.
The bonds were created after the Global Financial Crisis as a means of diverting crisis risk away from taxpayers. The Credit Suisse write-down represents the largest loss ever inflicted on AT1 investors since their inception.
The decision by Swiss authorities to upend the long-established norms and hit AT1 bondholders over equity investors has been criticized for damaging confidence in the asset class, potentially creating a spillover effect in global markets
The ECB Banking Supervision authority, Single Resolution Board (SRB) and European Banking Authority (EBA) issued a joint statement Monday seeking to reassure investors that the Credit Suisse deal is a one-off. Switzerland is not part of the European Union and so is not subject to the bloc’s regulations.
“In particular, common equity instruments are the first ones to absorb losses, and only after their full use would Additional Tier 1 be required to be written down,” the EU authorities insisted.

“This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions. Additional Tier 1 is and will remain an important component of the capital structure of European banks.”
As of the end of 2022, Credit Suisse had a common equity tier one (CET 1) capital ratio, a measure of bank solvency of 14.1% and a liquidity coverage ratio of 144%. These figures suggest that the bank was solvent and had ample liquidity, leading Axiom’s Benamou to question whether the bank should be deemed “failing” in the traditional sense.
The bank lost the confidence of investors and depositors over the last two weeks, resulting in a freefalling share price and massive net asset outflows, and FINMA specified Sunday that there was a risk Credit Suisse could become illiquid, even if it was not insolvent.
Political backdrop
One of the catalysts for Credit Suisse’s most recent share price capitulation was the announcement from top investor the Saudi National Bank that it would not be able to offer any further financial assistance.
The acquisition of its 9.9% stake in October played a large part in funding Credit Suisse’s massive strategic overhaul, while the Qatar Investment Authority became the bank’s second-largest shareholder after doubling its stake to 6.8% late last year.
Asked if he thought there was political motivation behind the decision to secure the shares before AT1 bondholders, given the scale of Credit Suisse’s anchor shareholders, Benamou said that was the “only logical explanation.”
A spokesperson for FINMA was not immediately available for comment.
Credit Suisse’s AT1 bonds offered higher yields than many comparable assets, in some cases yielding almost 10%, reflecting the inherent risk investors were taking.
They also contained a clause enabling them to be written down to zero by Swiss authorities should the bank no longer be viable, regardless of whether stock holders were also wiped out.

Benamou acknowledged that the yield reflected the risk of failure or “non-viability,” but dismissed the suggestion that the write-down was covered by the existing clause.
“In reality, they changed the law on Sunday to allow FINMA to write down the AT1 without any constraint. Of course, there is a degree of flexibility in the prospectuses but if they change the law on Sunday, it’s because they didn’t have enough flexibility to write down the AT1s to zero,” he said.
However Mark Yallop, chair of the U.K.’s Financial Markets Standards Board and the former CEO of UBS U.K., told CNBC that it was plausible that FINMA took a “technical decision” based on its interpretation of the aforementioned write-down clause.
“This is a legal interpretation of that document and I’m sure it will be fought over in court in due course, but I think it’s not right to see this as a political fix-up to suit certain equity holders, necessarily,” he said.
“I think there is grounds to believe that FINMA probably felt that they were within their rights as it were to insist on this outcome.”

British litigation specialists Stewarts suggested that far from being an “unjustified frolic,” the Swiss regulator and relevant parties will likely have taken legal advice before wiping out the AT1 bondholders.
“Given the stakes, they may have considered that the risk of future litigation is better than the alternative, although there is some precedent in the 2017 takeover of Banco Popular by Santander organised by the ECB oversight unit when its AT1s were wiped out,” the law firm said in a statement.
Some of Credit Suisse’s shareholders have also reacted angrily to the authorities’ use of “emergency measures” to rush through the deal without a vote.
Equity holders will only receive payouts at the value of the UBS buyout, a fraction of their value prior to the deal.
Vincent Kaufmann, CEO of the Ethos Foundation which holds more than 3% of the bank’s stock, told CNBC on Monday that the organization would consult its lawyers on a possible legal action.
Ethos, which is comprised of 246 Swiss pension programs and public utility foundations, accuses Swiss authorities of using their emergency powers to pass two key pieces of legislation without shareholder approval.

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UBS agreed on Sunday to buy its embattled domestic rival Credit Suisse for 3 billion Swiss francs ($3.2 billion) as part of a government-backed, cut-price deal.
Swiss authorities and regulators helped to regulate the agreement, which came amid fears of contagion to the global banking system after two smaller U.S. banks collapsed in recent weeks.
“Switzerland’s standing as a financial centre is shattered,” Octavio Marenzi, CEO of Opimas, said in a research note. “The country will now be viewed as a financial banana republic.”

Switzerland, a country heavily dependent on finance for its economy, is on track to see its two biggest and best-known banks merge into just one financial giant.
Fabrice Coffrini | Afp | Getty Images

The demise of banking giant Credit Suisse sent shockwaves through financial markets and appears to have dealt a blow to Switzerland’s reputation for stability, with one executive suggesting investors will now look at the mountainous central European country as “a financial banana republic.”
UBS, Switzerland’s largest bank, agreed on Sunday to buy its embattled domestic rival Credit Suisse for 3 billion Swiss francs ($3.2 billion) as part of a government-backed, cut-price deal.

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Swiss authorities and regulators helped to regulate the agreement, which came amid fears of contagion to the global banking system after two smaller U.S. banks collapsed in recent weeks.
The rescue deal means Switzerland, a country heavily dependent on finance for its economy, is on track to see its two biggest and best-known banks merge into just one financial giant.
“Switzerland’s standing as a financial centre is shattered,” Octavio Marenzi, CEO of Opimas, said in a research note. “The country will now be viewed as a financial banana republic.”

“The Credit Suisse debacle will have serious ramifications for other Swiss financial institutions. A country-wide reputation with prudent financial management, sound regulatory oversight, and, frankly, for being somewhat dour and boring regarding investments, has been wiped away,” Marenzi said.
Shares of UBS on Tuesday rose 7.3% by around 12:50 p.m. London time (8:50 a.m. ET), extending gains after closing higher in the previous session.

Credit Suisse traded 3.5% higher during afternoon deals after ending Monday’s session down a whopping 55%.

Credit Suisse bond wipeout

Under the terms of the emergency takeover, investors of Credit Suisse’s additional tier-one bonds — widely regarded as a relatively risky investment — will see the value of their holdings slashed to zero. It means investments worth roughly 16 billion Swiss francs will become worthless.
AT1 bonds, also known as contingent convertibles or “CoCos,” are a type of debt that is considered part of a bank’s regulatory capital. Holders can convert them into equity or write them down in certain situations – for example when a bank’s capital ratio falls below a previously agreed threshold.
“The extraordinary government support will trigger a complete write-down of the nominal value of all AT1 debt of Credit Suisse in the amount of around CHF 16 billion, and thus an increase in core capital,” the Swiss regulator FINMA said Sunday.

The extraordinary move is at odds with the typical practice of prioritizing bondholders over shareholders when a bank fails and prompted turmoil in the market for convertible bank bonds on Monday.
Vítor Constâncio, who served as the vice president of the ECB from 2010 to 2018, said via Twitter that FINMA’s announcement was a “mistake with consequences and potentially a host of court cases.”
The European Central Bank and Britain’s Bank of England both sought to distance themselves from FINMA’s decision.
European Union regulators, composed of the European Central Bank, the European Banking Authority and the Single Resolution Board, said Monday that they would continue to impose losses on shareholders before bondholders.
“This approach has been consistently applied in past cases and will continue to guide the actions of the SRB and ECB banking supervision in crisis interventions,” they said.
The Bank of England echoed this sentiment shortly thereafter. “Holders of such instruments should expect to be exposed to losses in resolution or insolvency in the order of their positions in this hierarchy,” the BOE said.

What about the Swiss franc as a safe haven?

“One feature of this whole banking pressure that we’ve seen over the last week or two is that actually yes we’ve seen major volatility in equity markets, major volatility in fixed income markets, and also commodity markets, but very little volatility in foreign exchange markets,” Bob Parker, senior advisor at International Capital Markets Association, told CNBC’s “Squawk Box Europe” on Tuesday.
Asked about how investors might now think about Switzerland’s reputation for stability, Parker replied, “When I was in Zurich last week, this subject actually was a hot topic.”

He said there had been “some very modest” weakness in the Swiss franc against the euro in recent days, noting that this is the currency pair the Swiss National Bank focuses on.
One euro was last seen trading at 0.9961 Swiss francs, weakening from 0.9810 when compared to March 14.
“We’ve moved back close to parity on Swiss franc-euro. So, I think to answer your question, yes, to some extent the Swiss franc as a safe haven currency has lost some of its allure. There is no doubt about that,” Parker said.
“Will that be regained? Probably yes, I would argue this is very much sort of a short-term effect,” he added.
— CNBC’s Elliot Smith & Sophie Kiderlin contributed to this report.

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The collapse of Silicon Valley Bank was “a little bit like the Lehman moment for technology,” Cliff Marriott, co-head of tech, media and telecoms in Europe for Goldman Sach’s investment banking division, told CNBC Tuesday.
SVB, a vital source of funding for tech startups and venture capital firms, was shut down and taken over by the U.S. government after its clientele withdrew billions out of their accounts.
Marriott said that there was still a “big question mark” surrounding what company or companies might replace SVB as the go-to bank for the tech industry.

An employee gets into his car after arriving to work to a shuttered Silicon Valley Bank (SVB) headquarters on March 10, 2023 in Santa Clara, California.
Justin Sullivan | Getty Images News | Getty Images

The collapse of Silicon Valley Bank was a “Lehman moment” for the technology industry, according to a top Goldman Sachs dealmaker.
Cliff Marriott, co-head of technology, media and telecoms in Europe for the investment banking division of Goldman Sachs, said that the March 10 shutdown of SVB was “pretty stressful,” as the lender’s clientele scrambled to figure out how they would make payroll.

“That first weekend was a little bit like the Lehman moment for technology and it was really more operational for those companies,” Marriott told CNBC’s Arjun Kharpal.
“They needed access to capital. A lot of their balances were on SVB. And, secondly, SVB was propelling and making a lot of their payments for payroll to pay their employees.”
Founded in 1983, SVB was considered a reliable source of funding for tech startups and venture capital firms. A subsidiary of SVB Financial Group, the California-based commercial lender was, at one point, the 16th biggest bank in the U.S. and the largest in Silicon Valley by deposits.
SVB was taken over by the U.S. government after its clientele of venture capitalists and tech startups withdrew billions from their accounts. Many VCs had advised portfolio companies to pull funds on the back of fears that the lender may crumble.
SVB Financial Group’s holdings — assets such as U.S. Treasury bills and government-backed mortgage securities that were viewed as safe — were hit by the Fed’s aggressive interest rate hikes, and their value dropped dramatically.

Earlier this month, the firm revealed it had sold $21 billion worth of its securities at a roughly $1.8 billion loss and said it needed to raise $2.25 billion to meet clients’ withdrawal needs and fund new lending.
The future of SVB remains uncertain, even though deposits were ultimately backstopped by the government and SVB’s government-appointed CEO attempted to reassure clients that the bank remained open for business.
Marriott said that there is “still a big question mark regarding what bank or firm or set of firms is going to replace SVB in terms of providing those utility-like services for technology, giving them bank accounts, allowing them to make payroll, holding their cash balances.”
The SVB collapse has also raised questions over the potential consequences for other banks, with SVB being far from the only lender that has come under strain. Swiss investment banking titan Credit Suisse was rescued by its main rival UBS in a government-backed, cut-price deal last week.
Marriott also addressed tech IPOs and their outlook for 2023. Europe’s tech IPO market has been largely closed due to a confluence of market pressures, including higher interest rates, which make the future cashflows of high-growth tech companies less attractive.
Marriott said that he would have been more optimistic about a recovery in tech IPO activity two weeks ago.
“I’m still hopeful that we’ll see tech IPO activity in 2023. And if we don’t, I think 2024 will be a big year for tech IPOs,” Marriott said.
“I think what we’ll see is the more established profitable companies come first, so the easier to understand business models, profitable companies, before we see the really highly valued profit or negative profit companies that we saw in 2021.”

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The move comes after a speech from Treasury Secretary Janet Yellen was released that said the government could backstop the deposits at more banks if there was risk of contagion.
CNBC’s David Faber reported Monday that JPMorgan Chase is giving advice on alternatives to the San Francisco bank that’s drawn the attention of Wall Street for its large amount of uninsured deposits.

People make their way near a First Republic Bank branch on March 16, 2023 in New York City.
View Press | Corbis News | Getty Images

First Republic led a comeback rally in regional bank shares Tuesday, as investors hoped for some sort of strategic action by the troubled bank — or another big regulatory move — to stem the downward spiral in the sector.
The move comes after a speech from Treasury Secretary Janet Yellen was released that said the government could backstop the deposits at more banks if there was risk of contagion. Regional bank stocks have been under pressure since a large outflow of deposits lead to the failure of Silicon Valley Bank and Signature Bank. Regulators guaranteed the deposits at those banks after they were closed.

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“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system,” Yellen said Tuesday in remarks prepared for a speech to the American Bankers Association. “And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
First Republic shares soared more than 20% in Tuesday premarket trading, following a 90% plunge so far in March and hitting a record low on Monday. The SPDR S&P Regional Banking ETF gained 4.5% in early trading, following a 29% slide in March so far.
First Republic has been seen as one the remaining regional banks most at risk for the same fate as SVB, due to the large percentage of uninsured deposits it had as of the end of the fourth quarter. JPMorgan led a group of 11 banks last week that deposited a combined $30 billion into First Republic, but its stock has continued to decline.
“Following Thursday’s uninsured deposit of $30 billion by the 11 largest banks in the country, together with cash on hand, First Republic Bank is well positioned to manage short-term deposit activity,” the bank said in a recent statement.
CNBC’s David Faber reported Monday that JPMorgan Chase is giving advice on alternatives to the San Francisco bank. Those alternatives include a capital raise or possibly even a sale, sources told Faber. CNBC’s Kayla Tausche reported Tuesday that the capital infusion would come only if a sale fails to materialize.

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First Republic, 1-day

Also helping sentiment was a report by Bloomberg News that the Treasury Department is studying whether regulators have the authority to temporarily insure deposits above the current Federal Deposit Insurance Corp. cap without approval of Congress, citing people with knowledge of the talks. Though, the report said these government officials don’t believe such drastic action is necessary yet.

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Regional bank ETF, 1-day

“There has been speculation that the limit could be doubled, and further speculation that the FDIC could decide to insure all deposits,” wrote Alexander Twerdahl, a Piper Sandler analyst, in a recent note. “In actuality, it would take an act of Congress to change the FDIC’s insurance limit and our understanding is that it isn’t an issue that is likely to be taken up any time soon.”
KeyCorp and Huntington Bancshares were up about 4% Tuesday in early trading, while U.S. Bancorp gained nearly 5%.
— CNBC’s Michael Bloom contributed reporting.

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A vehicle charges a Tesla Supercharging station in Corte Madera, California, US, on Thursday, March 2, 2023.
David Paul Morris | Bloomberg | Getty Images

Check out the companies making the biggest moves in premarket trading:
Tesla — The electric vehicle maker rose 2% after Moody’s assigned it a Baa3 rating and removed its junk-rated credit. Moody’s said the upgrade reflects Tesla’s prudent financial policy and management’s operational track record.

First Republic — The beleaguered bank jumped nearly 19% in premarket trading, following a 90% plunge so far this month as investors focused on its large amount of uninsured deposits. On Monday, CNBC’s David Faber reported JPMorgan Chase is giving advice on alternatives for First Republic.
New York Community Bancorp — The bank popped 7%, a day after surging 31.65%. The Federal Deposit Insurance Corporation has said New York Community Bancorp’s subsidiary, Flagstar Bank, will assume nearly all of Signature Bank’s deposits and some of its loan portfolios, as well as all 40 of its former branches.
Regional banks — Regional banks were also higher on the heels of First Republic’s rise and as investors continued to digest the likelihood of expanded federal insurance. PacWest rallied 8.3%, Fifth Third Bancorp rose 3.4% and KeyCorp gained 3.3%.
UBS — U.S.-listed shares of the Swiss-based bank were up 4%, a day after gaining 3.3% following its agreement to buy Credit Suisse for $3.2 billion. Credit Suisse was essentially flat in the premarket, after plummeting 52.99% on Monday.
Harley-Davidson — The motorcycle maker climbed 3.8% after Morgan Stanley upgraded the stock to overweight from equal weight, citing Harley’s focus on the core business and a better-off consumer. The firm’s price target of $50 implies a 33.2% upside from Monday’s close.

Foot Locker — Its shares rose more than 4% after Citi upgraded the retailer to “buy” from “neutral.” Citi said the company is moving in the right direction, turning attention away from malls and the Champs brand and instead focusing on offerings related to kids, loyalty and digital.
Meta Platforms — Shares of the Facebook parent climbed nearly 3% in premarket trading after Morgan Stanley upgraded Meta and said it has about 25% potential upside thanks to its Reels strategy and efficiency plans. The upgrade comes a week after Meta announced plans to layoff another 10,000 employees.
— CNBC’s Alex Harring and Tanaya Macheel contributed reporting.

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