Raphael Stevens

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    in Finance

    Think Nvidia looks dear? American shares could get pricier still

    How can you tell it’s time to get out of the market? In 1929 Joseph Kennedy, an American businessman and politician, supposedly realised the party was over upon hearing a shoe-shine boy dispensing stock tips. In 2000 the exit doors beckoned after 17 “dotcom” firms paid millions of dollars each for brief advertising slots during the Super Bowl, an American football extravaganza.And so to a sell signal fit for 2024: Keith Gill is back on social media. Mr Gill was an architect of the meme-stock frenzy of 2021, exhorting retail traders to buy shares in GameStop, a struggling chain of video-game shops. After a three-year absence he is posting once again, now apparently in possession of a stake in the firm worth a few hundred million dollars. GameStop’s share price has resumed a gut-churning rollercoaster ride and is up by more than 40% since Mr Gill’s return; the ailing company has made use of the excitement to issue some $3bn-worth of new shares. If you are looking for signs of speculative excess in markets, this is Exhibit A. More

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    Family films led by ‘Inside Out 2’ could reignite the box office

    In the last few months, a steady stream of family-friendly movies have arrived in cinemas, including Paramount’s “IF” and Sony’s “The Garfield Movie.”
    The latest release, Disney and Pixar’s “Inside Out 2” tallied $155 million during its domestic opening weekend.
    Each family-film release has built on the success of the last, reinvigorating the box office and giving movie theater operators hope for a stronger second half of the year.

    Amy Poehler and Maya Hawke voice Joy and Anxiety, respectively, in Disney and Pixar’s “Inside Out 2.”
    Disney | Pixar

    A big piece has been missing from the box office — family films.
    A handful of kid-friendly hits — Universal’s “Super Mario Bros.” chief among them — have boosted ticket sales. But many family features either debuted on streaming platforms instead of the big screen after the pandemic, or were released so far away from each other on the calendar that any ticket sales momentum soon disappeared.

    In the last few months, a steady stream of family-friendly movies have arrived in cinemas. Each release has built on the success of the last, reinvigorating the box office and giving movie theater operators hope for a stronger second half of the year. Disney and Pixar’s “Inside Out 2” gave an especially big jolt as it tallied $155 million during its opening weekend — a feat that helped restore the animation studio’s reputation within the industry following a rough patch.
    “Momentum is a huge factor” in ticket sales, said Chris Johnson, CEO of Classic Cinemas, a Midwestern theater chain.
    So far in 2024, the domestic box office is down 23% from last year and trails 40% from 2019. It currently stands at $3.08 billion, according to Comscore.
    More kid-friendly hits, like the coming “Despicable Me 4,” could be one of the keys to a box office rebound.
    The “family-friendly” film genre is a wide one. The definition varies even among box-office analysts, as some say the film’s rating is the qualifier while others suggest it depends on the content of the film itself.

    “Family movies come in all shapes and sizes,” said Shawn Robbins, founder and owner of Box Office Theory. “We as observers sometimes limit the descriptor to animated movies, or films of a certain rating, or those that are literally about a family of characters. They encapsulate a wide variety of stories, though.”
    Robbins noted that family movies can often include superhero flicks, live-action adventure films and comedies.
    “Think about how many families it took for the likes of Star Wars, the Marvel universe, ‘Top Gun: Maverick,’ and ‘Barbie’ to earn as much as they did,” he said. “The bottom line is what’s friendly, accessible and relatable to as many demographics as possible.”

    So while some families that came out for “Inside Out 2” might consider the likes of Universal’s “Twisters” or Warner Bros.’ “Beetlejuice Beetlejuice” family-friendly fare due out later this year, others might choose to stick to Sony’s “Harold and the Purple Crayon,” Paramount’s “Transformers One” or Universal’s “The Wild Robot.” The much-anticipated “Moana 2” arrives at Thanksgiving and a third “Sonic” film hits in December.
    “No matter how you define it, the family-film genre arguably more than any other was hit hardest by the pandemic with parents understandably reluctant to head out to a brick-and-mortar theater during the height of that unfortunate situation,” said Paul Dergarabedian, senior media analyst at Comscore. “Fast forward to 2024 and family films have been the undeniable bright spot for what has been a very challenging summer.”
    Prior to the pandemic, more than two dozen family films arrived in theaters in 2019, with Disney’s “Aladdin,” “The Lion King,” “Toy Story 4” and “Frozen II” making up four of the 10 highest grossing films of the year.
    In 2020, less than a dozen family films were released. Due to production shutdowns from the pandemic and dual Hollywood labor strikes, the number of releases remains significantly below 2019 levels.
    “2023, for us, was actually a record year, but it could have been much better,” Classic Cinemas’ Johnson said, noting the absence of family-friendly fare. “You cannot ignore the family audience and its importance.”

    Much-needed momentum

    Johnson said he feels “reenergized” after the opening performance of “Inside Out 2.”
    The film tallied another $22.2 million on Monday, 14% of its weekend and the second-best Monday ever for a Pixar film.
    While it was clear there was an appetite for the sequel, Johnson noted that it benefited from the recent releases of Paramount’s “IF,” which opened to $33 million, and Sony’s “The Garfield Movie,” which opened to $24 million.
    Families that attended screenings of these films would have seen posters and cardboard cutouts marketing the approaching release of “Inside Out 2” and likely saw a trailer for the film as part of the theater’s coming attractions reel.
    “‘Inside Out 2’ was certainly it’s own entity and was going to do well,” Johnson said. “But I think those lead-ins helped. I think the momentum of the box office and the similar genre does [have an] impact and I can’t wait for that to roll into ‘Despicable Me 4.'”
    Due out July 3, “Despicable Me 4” is currently expected to snare between $60 million and $80 million during its debut, on par with previous installments in the franchise, according to data from Comscore. Dergarabedian agreed that the success of “Inside Out 2” could boost the potential for “Despicable Me 4.”
    — Disclosure: Universal Pictures, which distributes “Despicable Me 4,” is owned by NBCUniversal, the parent company of CNBC.

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    Fitch pushes back China rate cut expectations to next year as Fed holds interest rates steady

    Ratings agency Fitch no longer expects China to cut its policy rate this year, instead delaying such a reduction to next year as the U.S. Federal Reserve keeps its interest rates high.
    Fitch now forecasts China will keep its one-year medium-term lending facility (MLF) unchanged this year at 2.5%, and cut it to 2.25% next year.
    In March, the ratings agency had forecast one cut for 2024.

    People walk past the headquarters of the People’s Bank of China (PBOC), the central bank, in Beijing, China September 28, 2018. 
    Jason Lee | Reuters

    BEIJING — Ratings agency Fitch no longer expects China to cut its policy rate this year, and has pushed back its expectations for a reduction to next year as the U.S. Federal Reserve keeps its interest rates high.
    Fitch now forecasts China will keep its one-year medium-term lending facility (MLF) unchanged this year at 2.5%, and cut it to 2.25% next year. In March, the ratings agency had forecast one cut for 2024.

    “There are a couple of factors behind this. First on the external side, concerns around the exchange rate against the U.S. dollar, because of changing expectations for the Fed, restrain the [People’s Bank of China],” Jeremy Zook, Fitch Ratings’ head of sovereign rating in Asia Pacific, said during a presentation Wednesday.
    Next year, “as the Fed begins to cut policy rates we think that should give a bit more space for the PBOC to maneuver,” he said. Zook expects Beijing to make greater use of fiscal policy this year.
    The Fed last week held steady on its key interest rate and indicated just one cut by the end of the year. That contrasts with investor expectations heading into 2024 that the Fed would soon ease monetary policy after aggressively hiking rates.

    Tighter Fed policy has kept the U.S. dollar strong against the Chinese yuan, which is close to re-touching lows last seen in 2008, according to Wind Information data. A weaker Chinese currency increases the pressure of capital outflows.
    “Also there do seem to be concerns around bank net interest margins being quite low, and this also poses challenges for the PBOC,” Zook said. Net interest margin (NIM) is a measure of bank profitability as it calculates the difference between the interest the financial institution receives from borrowers and how much it must pay on deposits.

    The last time China cut the one-year MLF was in August 2023, according to official data accessed through Wind Information.
    The People’s Bank of China sets the MLF every month and uses it to guide the benchmark loan prime rate (LPR), which is the major reference for financial institutions’ lending rates.
    PBOC Governor Pan Gongsheng said in a speech earlier on Wednesday that monetary policy would remain “supportive,” and noted the yuan’s exchange rate has “remained basically stable under complex circumstances,” according to a CNBC translation of the Chinese transcript.
    He noted that major developed economies have repeatedly postponed a shift in their monetary policy, and that “the interest rate gap between China and the U.S. remains at a relatively high level.” More

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    Klarna rival Zilch raises $125 million with aim to triple sales and accelerate path to IPO

    British online payments firm Zilch says it has raised $125 million in debt financing from Deutsche Bank in a deal that will help the company triple sales in the next couple of years and move closer toward an IPO.
    The buy now, pay later firm said the debt was structured as a securitization, where multiple loans can be packaged together.
    Zilch said its deal with Deutsche Bank came with more flexible terms and would enable it to draw down up to $315 million of credit in total — including from different banks.

    Zilch CEO Phil Belamant.

    LONDON — British fintech firm Zilch said Wednesday it’s raised $125 million in debt financing from German banking giant Deutsche Bank in a deal that will help the company triple sales in the next couple of years and move closer toward an initial public offering.
    The company, which offers shoppers the ability to purchase items and pay off the debt they owe in monthly, interest-free installments, said the debt was structured as a securitization, where multiple loans can be packaged together.

    Zilch initially sourced credit for its installment plans and other loans from Goldman Sachs’s private credit arm. The company said the deal with Deutsche Bank came with more flexible terms and would enable it to draw down up to $315 of credit in total — including from different banks.
    Philip Belamant, Zilch’s CEO and co-founder, noted the terms of its arrangement with Goldman Sachs were beneficial for a young, fast-growing startup — but ultimately too restrictive. Zilch’s capital needs have accelerated as the business has matured, and required a credit arrangement that was more flexible, he said.

    “For us, we think it’s a major milestone in the company’s growing stage, which is, we’ve gone through the line we have with Goldman, it’s been a brilliant relationship and partnership,” Belamant told CNBC. “But now we’re stepping it up to securitization … so we [can] continue scaling.”
    The additional $190 million of credit will become available to Zilch as the firm continues to grow. Belamant said the firm is already planning to strike agreements with other banks to raise more debt in the coming months.
    The move is a sign of how buy now, pay later upstarts are continuing to double down on their products and loan growth, even as larger incumbent players in finance and technology are bowing out of the once-buzzy market.

    This week, Apple announced it would shutter its BNPL program, Pay Later, which let users split purchases over four interest-free installments. It will integrate third-party services from firms like Affirm and Citi, instead. Meanwhile, Goldman Sachs recently sold Greensky, a BNPL firm it bought in 2021.

    IPO within 2 years?

    Belamant said that with additional capital of $125 million, the firm’s path toward an IPO will likely be accelerated, with Zilch currently aiming to go public in the next 12 to 24 months.
    The deal will help Zilch generate $3.75 billion of gross sales by 2026, Belamant said.
    He explained that for every $1 of debt raised, Zilch can generate $30 of gross merchandise value (GMV) — the combined value of sales processed on its platform.
    So, with $125 million of capital, that will drive $3.75 billion of gross sales. Once Zilch has reaches the $315 million maximum funding threshold, it expects to generate nearly $10 billion of GMV by 2026.
    Zilch has already generated over £2.5 billion in GMV since its founding in 2018. The firm reported revenues of £30 million ($38 million) in the 12 months ended March 2023. Losses totaled £71.7 million, marginally down from a 2022 loss of £78.3 million.

    Zilch has three key ways of making money. The first is through interchange fees, where card networks charge merchants’ bank account each time a consumer makes a payment. The second is commission fees, where merchants pay to appear on Zilch’s app.
    Zilch also has an advertising sales network where it provides placements for retailers to promote their wares to consumers. The UK firm claims it is able to achieve conversion rates of up to 55%, more than 10 times higher than the search industry average.
    Belamant caveated the firm is keeping a watchful eye on uncertainty around the U.K.’s upcoming election and market conditions more generally.
    “It’s hard to obviously say we’re on that range just due to the market, [and] there’s an election happening, [so] obviously we’ll see what happens,” he said. More

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    Top BofA auto analyst says Detroit automakers need to exit China as soon as possible

    General Motors, Ford Motor and Stellantis should exit the Chinese market “as soon as they possibly can,” Bank of America’s top automotive analyst said Tuesday.
    The rise of local Chinese automakers, such as BYD and Geely, has put growing pressure on the companies.
    President Joe Biden announced last month that his administration would quadruple tariffs on China-made electric vehicles.

    Employees on the assembly line produce cars in Mazda’s “Family” line of vehicles at China First Automobile Works (FAW) Group Haima Automobile Co., Ltd. April 6, 2005 in Haikou, Hainan Province, China.
    China Photos | Getty Images

    DETROIT – The traditional Detroit automakers – General Motors, Ford Motor and Stellantis – should exit the Chinese market “as soon as they possibly can,” Bank of America’s top automotive analyst said Tuesday.
    The warning from BofA Securities research analyst John Murphy comes amid unprecedented competition in China – the world’s largest auto market – and as the country significantly increases vehicle production for Chinese consumers as well as for global exports.

    Murphy, who has previously asked General Motors about exiting the market, said the “D3” automakers need to focus on their core products and more profitable regions.
    “I think you have to see the D3 exit China as soon as they possibly can,” he said Tuesday during an Automotive Press Association event to discuss BofA’s annual “Car Wars” report in suburban Detroit. He said, “China is no longer core to GM, Ford or Stellantis.”
    It’s a prospect that would have been unthinkable for the automakers, specifically GM, just a few years ago, but the rise of local Chinese automakers, such as BYD and Geely, has put growing pressure on the companies.
    GM’s market share in China, including its joint ventures, has plummeted from roughly 15% as recently as 2015 to 8.6% last year — the first time it has dropped below 9% since 2003. GM’s earnings from the operations have also fallen, down 78.5% since peaking in 2014, according to regulatory filings.
    GM executives have said they believe they can turn around the operations and regain market share in China, largely with the help of new electric vehicles.

    There’s also geopolitical risks and uncertainty for U.S. companies operating in China. President Joe Biden announced last month that his administration would quadruple tariffs on China-made electric vehicles.
    While the Detroit automakers need to rethink the way their doing business in China, Murphy said it’s slightly different for U.S. electric vehicle leader Tesla.
    Murphy said Tesla has a roughly $17,000 cost advantage in EV components compared with the traditional Detroit automakers to assist the company in the Chinese market, allowing it to have “more room to run.”

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    Fisker files for bankruptcy protection in wave of EV startups, moment of déjà vu for its founder

    Fisker on Monday became the latest all-electric vehicle startup to file for Chapter 11 bankruptcy protection.
    The new filing comes after the automaker failed to secure an investment from a big automaker to keep afloat.
    Consumer adoption for EVs has grown slower than expected, costs have risen and investor interest in EVs other than Tesla has dried up.

    Henrik Fisker stands with the Fisker Ocean electric vehicle after its unveiling at the Manhattan Beach Pier ahead of the Los Angeles Auto Show and AutoMobilityLA in Manhattan Beach, California. on Nov. 16, 2021.
    Patrick T. Fallon | AFP | Getty Images

    Fisker on Monday became the latest all-electric vehicle startup to file for Chapter 11 bankruptcy protection amid lackluster consumer demand, significant cash burn and operational and product issues.
    For investors, the writing’s been on the wall for some time as Fisker issued a going concern about its ability to continue as a company in February, leading its charismatic founder and CEO Henrik Fisker to disappear from social media and the limelight.

    It’s the latest in a series of EV companies to collapse. Other companies backed by special purpose acquisition companies, or SPAC, have also filed for bankruptcy protection. That list includes companies such as Proterra, Lordstown Motors and Electric Last Mile Solutions. Others such as Nikola and Faraday Future remain in business but trade for under $1 per share amid operational challenges, missed targets and broader industry headwinds.
    It’s also a bit of déjà vu, as it marks Henrik Fisker’s second car company, both branded under his last name, to file for bankruptcy protection.
    The new filing comes after the Fisker company failed to secure an investment from a big automaker to keep afloat. Nearly four years ago, Fisker announced plans to go public through a reverse merger with an Apollo-backed SPAC that valued the company at $2.9 billion. The deal infused Fisker with more than $1 billion in cash.
    Fisker, like many other companies at the time, was fueled by low interest rates and a bullishness on Wall Street around EVs following the rise of U.S. electric vehicle leader Tesla.
    “They looked at Tesla’s success, and Tesla was more of an anomaly than an example,” said Sam Abuelsamid, principal research analyst at Guidehouse Insights.

    But consumer adoption for EVs has grown slower than expected, costs have risen and investor interest in EVs other than Tesla has dried up. The company also faced significant issues with its operations as well as the launch of its first product, called the Ocean SUV EV.

    Software focus

    When going public through a SPAC in 2020, Henrik Fisker compared the company with U.S. EV leader Tesla. He also touted its production relationship with Canadian auto supplier Magna, comparing it with the relationship between Apple and Foxconn.
    The automaker, unlike most of its peers, contracted a third-party manufacturer to build the Fisker Ocean crossover. The partnership with Magna was supposed to be an “asset-light” strategy, as Fisker described it, to allow the company to save cash and focus on differentiating technologies, such as software.
    Abuelsamid said such a strategy isn’t inherently bad, but he called the management of the company inept and pointed the finger at Geeta Gupta-Fisker, the company’s chief financial officer and chief operating officer. Gupta-Fisker is also Henrik Fisker’s wife.
    “That approach can be made to work,” he said. “The problem in the case of Fisker that I underestimated was … the incompetency of the senior management.”

    The company burned through cash and last month recalled thousands of Ocean SUVs in North America and Europe due to issues with vehicle software.
    According to the company’s Chapter 11 filing, it owes millions to software and engineering companies, such as Adobe, SAP America, Manpower Group and Prelude Systems, among others. CNBC parent company NBCUniversal is also listed as a top creditor.
    “[The auto industry is] capital intensive. You’re trying to match production, consumer demand and when they have any kind of issue with the vehicle, money has to be allocated to that,” said Stephanie Valdez Streaty, Cox Automotive Director of Industry Insights. “Also when they don’t have other revenues like [internal combustion engines] to fund it … it makes it very challenging.”
    Its operating unit, Fisker Group Inc., estimated assets of $500 million to $1 billion and liabilities of $100 million to $500 million.
    At the end of last year, Fisker had $530 million in inventory, as it only sold 4,700 of the more than 10,000 Ocean EVs it had produced in 2023.

    Déjà vu

    For Henrik Fisker, a renowned automotive designer credited with designing the BMW Z8 and Aston Martin DB9, it’s déjà vu.
    His first namesake company – Fisker Automotive – filed for bankruptcy protection in 2013, shortly after he left the company. It later sold its assets to China’s Wanxiang Group for $150 million.
    It was supposed to be better the second time around for the founder, who said he had learned from his past mistakes with his former bankrupt company.
    “Having done this before, I’m in a unique position to kind of almost take lessons learned, which is very rare especially in the car industry,” he said in 2017, a year after launching the new company.
    But the parallels between the two failed companies are hard to ignore.
    Both companies were much-hyped, largely by Fisker himself claiming they would revolutionize the industry. They were fueled by “free” money – first federal funds, more recently Wall Street – on the premise that “green,” or electrified, vehicles were the future of the auto industry.
    Both also faced significant quality problems that led to recalls. The first Karmas produced by Fisker were recalled for a battery safety issue and fire risk in 2011.

    Both companies also changed direction and priorities many times.
    After delivering less than half of the more than 10,000 vehicles it produced through a direct-to-consumer approach that resembled Tesla’s model, the second Fisker turned to a dealership-based distribution model in January.
    But there was one key difference this time. With the failure of the second Fisker, its investors were left out to dry instead of American taxpayers. While Henrik Fisker’s first company was boosted by a $529 million federal loan — $139 million of which the government lost — the second was funded through Wall Street’s bullishness on SPACs and EVs. Its stock was delisted in April.
    A Fisker spokesperson said in a statement early Tuesday that the company is “proud of our achievements” but determined that Chapter 11 was the best option.
    “Like other companies in the electric vehicle industry, we have faced various market and macroeconomic headwinds that have impacted our ability to operate efficiently,” the spokesperson said in a release. “After evaluating all options for our business, we determined that proceeding with a sale of our assets under Chapter 11 is the most viable path forward for the company.”

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    Watch Boeing CEO Dave Calhoun testify before Senate panel on whistleblower allegations

    [The stream is slated to start at 2:00 PM ET. Please refresh the page if you do not see a player above at that time.]
    Boeing CEO Dave Calhoun will face questions from the Senate Permanent Subcommitee on Investigations on Tuesday over quality control concerns and whistleblower allegations.

    Boeing’s bestselling 737 Max plane has been the source of controversy since two deadly crashes in 2018 and 2019. Scrutiny of the company increased again after a door plug blew out of one of its nearly new 737 Max planes during an Alaska Airlines flight in January.
    Following the incident, company whistleblower Sam Salehpour came forward and claimed that the aerospace company put excessive stress on airplane joints, which reduced some of the planes’ lifespans. Boeing denied the claims as “inaccurate.”
    The subcommittee released new whistleblower claims Tuesday from Boeing quality assurance investigator Sam Mohawk, who alleges that the company lost track of parts that were damaged or not up to specification. Mohawk alleges that the lost parts were likely installed on airplanes in Boeing’s Washington plant where 737 Max models are made.
    The company announced March that Calhoun will step down from his post as CEO before the end of the year.
    — CNBC’s Leslie Josephs contributed to this report
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    Steve Cohen is set to make a big push into investing in AI

    Billionaire investor Steve Cohen’s Point72 plans to launch a separate, artificial intelligence-focused hedge fund to capitalize on the boom.
    The firm is aiming to raise $1 billion, with Cohen himself and Point72 employees expected to contribute.

    Steve Cohen, chairman and CEO of Point72, speaking to CNBC on April 3, 2024.

    Billionaire investor Steve Cohen’s Point72 plans to launch a separate, artificial intelligence-focused hedge fund to capitalize on the boom, according to a person close to the firm’s plans.
    The new long/short equity fund, to be launched later this year or early 2025, will be focused on AI and AI-related hardware, the person said.

    The firm is aiming to raise $1 billion, with Cohen himself and Point72 employees expected to contribute, the person added. This stand-alone public equity offering will live outside the main fund due to the need for a more-flexible net exposure, the person said.
    Point72 declined to comment. Bloomberg News first reported on the potential offering Tuesday.
    Cohen recently came out as a long-term AI bull. He has called AI a “really durable theme” for investing, comparing the rise to the technological developments in the 1990s.
    The massive rally in AI-related stocks such as Nvidia has lifted the broader market to record highs this year. The chipmaker giant has topped a $3 trillion market cap amid the increasing enthusiasm, while any stock tangentially connected to AI has experienced a runup in value.
    “I don’t see it as a bubble. I think the markets are discounting some of what we … think AI is going to do for companies,” the Point72 founder said in a CNBC interview in April.

    The Mets owner highlighted AI’s role in enhancing productivity at basically every company. Cohen said his investment firm found a way to save $25 million by using large language models such as ChatGPT to improve efficiency.
    Point72 oversees nearly $34 billion in assets as of April.

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