More stories

  • in

    Stocks making the biggest moves midday: Apple, Robinhood, Visa, Chevron and more

    Logo on an Apple store is seen in Arlington, Virginia, January 27, 2022.
    Joshua Roberts | Reuters

    Check out the companies making headlines in midday trading.
    Apple — Shares of the tech giant jumped 6.98% following a strong quarterly report that showed its largest single quarter in terms of revenue ever. Apple beat analyst estimates for sales in every product category except iPads. Sales grew more than 11% despite supply challenges and the lingering effects of the pandemic.

    Robinhood — The stock trading app rose 9.6%, after being down more than 14% earlier in the session. Robinhood gave disappointing first-quarter guidance during its earnings report but also said it is investing heavily in product development.
    Visa — The payments giant got a 10.6% jump in its shares after it reported an adjusted quarterly profit of $1.81 per share, which beat estimates by 11 cents. It also reported revenue that beat estimates and topped $7 billion for the first time.
    VF Corp — The owner of apparel brands like North Face and Vans saw shares slide 6.5% after cutting its full-year sales forecast in its quarterly earnings report, citing delivery delays and worker shortages. The company beat analysts’ estimates on its quarterly profit and revenue.
    Western Digital — Shares of the disk drive maker fell 7.3% despite the company reporting a beat on top- and bottom-line estimates for its latest quarter. It also issued a weaker-than-expected outlook and said supply chain issues prevented it from fully meeting strong demand.
    ChargePoint — The EV charging stock surged 10.4% following an upgrade to overweight from JPMorgan. The analysts said in a note that the company still had a long potential growth path ahead and that lack of near-term profits should not be a major concern.

    Chevron — Shares declined 3.4% after the energy giant reported weaker-than-expected quarterly earnings, though its revenue exceeded analyst estimates. The company earned $2.56 per share excluding items, while analysts had been expecting $3.12 per share.
    Caterpillar — The machinery stock fell 5.1% despite a fourth-quarter report that beat estimates on the top and bottom lines. However, the company’s operating profit margin shrank, reflecting higher costs.
    Synchrony — Shares fell 6.7% after the company said it sees an increase from current levels in net charge-offs and delinquencies as part of its quarterly results. The financial services firm reported earnings that were in line with Wall Street forecasts.
    Mondelez — The snack maker dipped 1.5% after the company slightly missed earnings estimates, by a penny per share, in its most recent quarterly update. Mondelez said it raised prices during the quarter but that that wasn’t enough to offset increased ingredients and logistics costs.
     — CNBC’s Jesse Pound, Maggie Fitzgerald and Yun Li contributed reporting.

    WATCH LIVEWATCH IN THE APP More

  • in

    Visa says crypto-linked card usage hit $2.5 billion in its first quarter

    Visa said during its recent earnings call that customers made $2.5 billion in payments with its crypto-linked cards in its fiscal first quarter of 2022.
    “People are using their crypto-linked cards to spend in a variety of ways — retail goods and services, restaurants, travel,” Visa CFO Vasant Prabhu told CNBC in a phone interview.
    Visa has started a crypto consulting service and invested in crypto platforms as part of a push for digital currency adoption.

    Coinbase launched its own debit card in an effort to promote the use of cryptocurrencies in payments as well as investing.

    Visa said during its recent earnings call that customers made $2.5 billion in payments with its crypto-linked cards in its fiscal first quarter of 2022.
    That was 70% of the company’s crypto volume for all of fiscal 2021.

    “To us, this signals that consumers see utility in having a Visa card linked to an account at a crypto platform. There’s value in being able to access that liquidity, to fund purchases and manage expenses, and to do so instantly and seamlessly,” Visa CFO Vasant Prabhu told CNBC in a phone interview, providing insight as the company reported better-than-expected earnings and revenue after the bell Thursday.
    “We will continue to lean into the crypto space and our strategy is to be a key partner to provide the connectivity, scale, consumer value proposition, reliability and security that is needed for crypto offerings to continue to grow,” Visa CEO Al Kelly said on the earnings call, as the stock moved up in after-hours trading and then opened strongly higher Friday.

    The payments company also announced its network of crypto wallet partners is growing from 54 to more than 65, including Coinbase, Circle and BlockFi. The number of merchants accepting crypto as payment also grew to almost 100 million.
    “Looking at the broad categories of spend, we don’t see the volume concentrated in a specific merchant vertical with these programs. People are using their crypto-linked cards to spend in a variety of ways — retail goods and services, restaurants, travel. They’re increasingly being treated like a general purpose account,” Prabhu told CNBC.
    Back in July, Visa reported crypto-linked card usage reached $1 billion for the first six months of 2021.

    Mastercard and crypto exchange Gemini plan to launch a card allowing customers to earn cryptocurrency as a reward. But cardholders will not be given direct access to their digital wallet. Gemini, the crypto exchange co-founded by billionaires Cameron and Tyler Winklevoss, expects to make the card available to customers on a waitlist in early 2022, following previous plans to launch over the summer.
    Major cryptocurrencies saw their rapid growth slow in the second half of last year. Bitcoin, which hit an all-time high of nearly $69,000 in November, has dropped more than 45% since then.
    “We’ve seen this payment volume continue to grow despite volatility in the crypto markets,” Prabhu said, “Crypto rewards are a significant part of the value proposition for many of these card programs, particularly for consumers who are new to crypto who may not be directly investing in it, but are excited for the opportunity to earn it as they spend fiat [currency like the dollar]. We’re watching these programs closely to see how they impact the rewards category as a whole.”
    Visa has no plans to hold cryptocurrency on its balance sheet, but it’s created a crypto consulting service and made several recent investments in crypto platforms as it continues to push for adoption of digital currencies.

    WATCH LIVEWATCH IN THE APP More

  • in

    The Fed uses one inflation gauge as its North Star. Here's why

    The Federal Reserve prefers the Personal Consumption Expenditures Price Index to gauge inflation over others, like the perhaps better-known Consumer Price Index.
    That’s largely for two reasons: It has a broader scope and better reflects how consumers change what they buy to account for rising prices.
    The PCE Price Index jumped 5.8% in December from a year earlier, tied for the fastest pace since 1982, the Bureau of Economic Analysis said Friday.

    Federal Reserve Chairman Jerome Powell speaks during his re-nomination hearing before the Senate Banking, Housing and Urban Affairs Committee on Jan. 11, 2022 in Washington.
    Brendan Smialowski-Pool/Getty Images

    The Federal Reserve is expected to raise interest rates soon from rock-bottom levels to cool inflation.
    The Personal Consumption Expenditures Price Index jumped by 5.8% in December from the year prior, tied for the fastest pace since June 1982, the Bureau of Economic Analysis said Friday.

    Fed officials prefer this inflation metric over others as the North Star guiding their policy response. The U.S. central bank uses it to grade whether it’s on track to hit its 2% inflation target, according to economists.
    But why is this the preferred gauge?

    Broad scope

    Like the perhaps-better-known Consumer Price Index, the PCE Price Index reflects the prices Americans are paying for a basket of goods and services, and how those costs change over time.
    But the barometers differ in two key ways.
    For one, the PCE Price Index has a broader scope than its CPI cousin.

    More from Personal Finance:Why the stock market hates the idea of rising interest ratesMost Americans want Biden to prioritize student loan forgivenessWhat to do if you win the $421 million Mega Millions jackpot
    The latter looks at households’ out-of-pocket costs, while the PCE Price Index examines a broader swath of the cost ecosystem, according to economists.
    Take health care, for example: The PCE Price Index accounts for costs incurred by government programs like Medicare and Medicaid, as well as private insurers, where CPI does so just for health costs that directly impact Americans’ wallets, according to Josh Bivens, research director at the Economic Policy Institute.
    “The larger scope is one virtue [of the PCE Price Index],” Bivens said.

    “When the Fed is looking at inflation, they’re less concerned with what is happening to the living standard of the household; they want to know the macroeconomic inflationary pressure building up,” he added.
    The Federal Reserve looks primarily at “core” prices, which strip out volatile food and energy categories. That PCE Price Index gauge jumped 4.9% in December from a year earlier, the biggest gain since September 1983.

    Consumer behavior

    The PCE Price Index is also more dynamic, economists said. It better reflects how prices affect consumer behavior and how households respond to rising costs.
    If beef prices rise significantly, families may instead buy chicken to defray costs, for example.
    The CPI does this, too, but much more slowly — about every two years instead of each quarter, Bivens said.

    That’s why CPI tends to overstate the rate of inflation — it assumes people buy the same things in years one and two without accounting for substitution bias, according to Marc Goldwein, senior director of policy at the Committee for a Responsible Federal Budget.
    Indeed, inflation jumped 7% in December as measured by the CPI, relative to the 5.4% for the PCE Price Index.
    “[The CPI] is a bad measure of inflation,” Goldwein said.
    Directionally, the indices point in the same general direction, though, he added.

    Other factors

    Of course, Fed officials don’t just look at one data point when judging interest-rate policy. The PCE Price Index gauge may be most important metric, generally speaking, but the central bank weighs economic data like unemployment rate and labor force participation, too.
    “They are looking at as much data as they can absorb to get the best sense of the dynamics of the economy,” Goldwein said.
    High and lingering inflation is the result of supply-and-demand dynamics resulting from the pandemic, economists said.
    For one, there’s been a surge in consumer demand, especially for physical goods.

    “We’ve done all these things juicing demand.

    Marc Goldwein
    senior director of policy at the Committee for a Responsible Federal Budget

    Americans have had a pent-up willingness and ability to spend as they emerge from hibernations at home; government programs like stimulus checks, enhanced unemployment benefits and a student-loan pause also put more cash in their wallets, while interest rates near zero offered cheap access to mortgages and other loans, Goldwein said.
    “We’ve done all these things juicing demand,” Goldwein said.
    A shift toward more physical goods has also run headlong into supply-chain issues, as manufacturers have grappled with virus-related closures — limiting supply at the same time demand is increasing, Bivens said.
    Some economists expect inflation to cool throughout 2022, despite any new Fed policies.

    Fed officials expect the PCE Price Index to temper, to 2.5% to 3%, by the end of the year, they estimated in December. (This projection strips out food and energy prices.)
    “[Inflation] has lasted longer than people thought,” Bivens said. “[But] it has the seeds of its own deceleration” since high spending on physical goods is unlikely to persist.
    “No one buys a new car every year,” he added.

    WATCH LIVEWATCH IN THE APP More

  • in

    Nobel laureate Paul Krugman says crypto has ‘disturbing’ parallels with subprime mortgage meltdown

    “There are disturbing echoes of the subprime crash” in the cryptocurrency market, Nobel Prize-winning economist Paul Krugman says.
    Krugman argues crypto investors are being sold speculative financial products without truly understanding the risks involved.
    Bitcoin and other digital currencies have dropped sharply in recent weeks.

    Nobel Prize-winning economist Paul Krugman.
    Panayiotis Tzamaros | ullstein bild via Getty Images

    Nobel Prize-winning economist Paul Krugman has given an ominous warning about the volatile cryptocurrency market, comparing it to the subprime mortgage crisis of the late 2000s.
    In an opinion piece for The New York Times on Thursday, Krugman said he’s “seeing uncomfortable parallels” between crypto and the U.S. subprime crash, which brought the whole housing market to its knees and triggered the 2007-2008 global financial crisis.

    “There are disturbing echoes of the subprime crash 15 years ago,” Krugman says in the piece.
    The subprime crisis was essentially the result of banks making loans out to people of higher risk, at a time when interest rates were low and house prices were soaring. Once the market became saturated, homeowners found themselves in negative equity unable to repay their loans, resulting in hefty losses for lenders.
    Krugman argues crypto investors are similarly being sold speculative financial products without truly understanding the risks involved. It’s worth noting Krugman is a known bitcoin bear, having previously likened the cryptocurrency to a Ponzi scheme.

    “Many borrowers didn’t understand what they were getting into,” he said in the NYT op-ed. “And cryptocurrencies, with their huge price fluctuations seemingly unrelated to fundamentals, are about as risky as an asset class can get.”
    The Nobel laureate isn’t convinced cryptocurrencies pose a systemic risk, however: “The numbers aren’t big enough to do that.” The entire crypto market is worth roughly $1.7 trillion, according to CoinGecko data.
    Bitcoin and other digital currencies have dropped sharply in recent weeks. At a price of just over $37,000, the world’s top coin is currently around 46% off its November record high of nearly $69,000. At the peak, the whole crypto market was worth a combined $3 trillion.

    WATCH LIVEWATCH IN THE APP More

  • in

    Stocks making the biggest moves premarket: Caterpillar, Chevron, Apple and others

    Check out the companies making headlines before the bell:
    Caterpillar (CAT) – Caterpillar earned an adjusted $2.69 per share for the fourth quarter, beating the $2.26 consensus estimate, with revenue also coming in above analyst forecasts. The heavy equipment maker’s sales were up 23% from a year earlier despite supply chain constraints. However, increased costs weighed on Caterpillar’s profit margins and the stock slipped 1.4% in premarket trading.

    Chevron (CVX) – Chevron slid 2.8% in the premarket after missing bottom-line estimates for the fourth quarter, although revenue exceeded analyst forecasts. Chevron earned an adjusted $2.56 per share, compared with a $3.12 consensus estimate, despite higher oil and gas prices.
    VF Corp. (VFC) – The company behind North Face, Vans and other apparel brands saw its stock fall 2% in premarket trading after it cut its full-year sales forecast due to delivery delays and worker shortages. VF reported better-than-expected profit and revenue for its most recent quarter.
    Apple (AAPL) – Apple reported record profit and revenue for its latest quarter, despite supply chain issues that cut into sales. Apple earned $2.10 per share, compared with a $1.89 consensus estimate, and revenue also topped Street forecasts. CEO Tim Cook said those supply chain challenges are showing signs of improvement. Apple shares jumped 3.1% in the premarket.
    Visa (V) – Visa beat estimates by 11 cents with an adjusted quarterly profit of $1.81 per share. The payment network’s revenue also beat estimates. Visa was helped by a jump in travel spending and continued growth in e-commerce, with the company seeing quarterly revenue above $7 billion for the first time. Visa rallied 3.6% in premarket trading.
    Mondelez (MDLZ) – Mondelez fell a penny short of analyst forecasts with adjusted quarterly earnings of 71 cents per share, though the snack maker’s revenue did beat estimates. Mondelez raised prices during the quarter, but it was not enough to make up for increased costs for ingredients and logistics. Mondelez slid 2.2% in premarket action.

    Robinhood (HOOD) – Robinhood slumped 13% in the premarket after warning that current-quarter revenue could fall significantly from a year ago. The trading platform operator reported a quarterly loss of 49 cents per share, 4 cents wider than estimates, although revenue was slightly above analyst forecasts.
    Western Digital (WDC) – Western Digital shares plunged 10.4% in premarket trading after the disk drive maker issued a weaker-than-expected outlook, and supply chain issues that prevented it from fully meeting strong demand. Western Digital did beat top and bottom-line estimates for its latest quarter, earning an adjusted $2.30 per share compared with a consensus estimate of $2.13.
    3M (MMM) – 3M will appeal a ruling that awarded $110 million to two U.S. Army veterans who said they suffered hearing loss after using 3M’s combat earplugs. 3M has faced multiple lawsuits over allegations that the design of the earplugs is defective. The stock fell 1% in the premarket.
    Beazer Homes (BZH) – Beazer Homes jumped 5.1% in premarket trading after beating top and bottom-line estimates for the quarter ending in December. Beazer earned $1.14 per share, well above the 67-cent consensus estimate, and said the housing market continues to see strong demand and limited supply

    WATCH LIVEWATCH IN THE APP More

  • in

    The tech sell-off has some venture capitalists worried the good times may be coming to an end

    Tech start-ups raised a record $621 billion in venture capital funding globally in 2021, according to CB Insights.
    Some VC investors worry the boom times may not last much longer as tech stocks fall amid talk of higher interest rates.
    VCs say they’re already hearing about deals being renegotiated at lower valuations and even withdrawal of term sheets.

    A conceptual image showing stock exchange numbers and flames.
    Sean Gladwell | Moment | Getty Images

    After a blockbuster year for venture capital deals, some investors worry the boom times may not last much longer. 
    Tech start-ups raised a record $621 billion in venture funding globally in 2021, according to CB Insights, up more than double from a year earlier. The number of privately-held “unicorn” firms valued at $1 billion or more rose 69% to 959.

    Private companies such as Stripe and Klarna saw their valuations swell to the tens of billions of dollars, aided by a flood of cash as a result of ultra-loose monetary policy and the acceleration of digital adoption during the Covid-19 pandemic.
    Now, with the Federal Reserve hinting at plans to hike interest rates in a bid to cool rising prices, investors in high-growth tech firms are getting cold feet. The Nasdaq Composite has fallen over 15% so far this year as fears of tighter policy has led to a rotation out of growth stocks into sectors that would benefit from higher rates, like financials.
    In the private markets, panic over the tech sell-off is starting to set in. VC investors say they’re already hearing about deals being renegotiated at lower valuations and even the withdrawal of term sheets. Later-stage companies are likely to be the hardest hit, they say, while some firms’ plans to go public could get put on hold for the foreseeable future.

    “It’s definitely trickling through to the private markets and the later-stage rounds,” said Ophelia Brown, founder of Blossom Capital. “Term sheets are being renegotiated. Some term sheets have been pulled.”
    The shift in tone echoes negative sentiment on start-up investing around the start of the Covid pandemic. In March 2020, Sequoia warned founders of “turbulence” in a blog post reminiscent of its 2008 presentation “R.I.P. Good Times.” For a brief period, the Silicon Valley firm was right: a number of start-ups saw their valuations slashed initially, while others had term sheets pulled.

    But what followed was a banner year for start-up investment, with companies raising $294 billion in 2020 globally. Hedge fund giant Tiger Global became a significant driving force in the market, backing tech firms at much earlier stages than before as traditional investors sought out returns via alternative assets.
    Brown thinks some of the reaction in both public and privately-traded tech stocks has been overdone, however, and that most start-ups should be able to weather a changing economic cycle given the mountain of cash available in private markets.
    “There is still so much dry powder for new funding rounds,” she said. “Most companies have been very well funded that, unless they were being completely reckless with the cash, they should be able to see this through.”

    Down rounds

    A handful of firms have managed to raise impressive financing rounds in the first few weeks of the new year. Checkout.com, a U.K.-based payments company Brown has invested in, bagged a $1 billion deal at a monster $40 billion valuation, while Estonian ride-hailing firm Bolt secured an $8.4 billion valuation in a $711 million fundraise.
    But some VCs are concerned we may be about to see a wave of “down rounds,” where start-ups raise funds at a valuation lower than in earlier rounds. They say companies at the later stages of fundraising are likely to be the hardest hit.
    “There will be more downward pressure on pricing in later stage rounds,” said Saar Gur, general partner at venture capital firm CRV.
    “We will see more valuation compression and it will be harder to get many later stage rounds done,” Gur added. “And we won’t see companies have such rapid mark-ups without much more business progress.”
    Gur, an early investor in DoorDash, said many private start-ups have achieved multibillion-dollar valuations based on comparisons to multiples in the stock market. Now that several high-flying tech companies have seen their share prices fall, competitors in the private markets could be forced to follow suit, he says.

    Still, it’s not all doom and gloom, according to Gur: “I still think the system is full of capital and great companies will raise.”

    Dotcom bust?

    Hussein Kanji, partner at Hoxton Ventures, thinks private tech companies are likely to pause any plans for initial public offerings as liquidity conditions begin to tighten.
    “I think the IPO window will be closed,” said Kanji. “All the funds with companies thinking they would go out in 2022 will probably be stalled.”
    Still, there’s plenty of money in SPACs, or special-purpose acquisition companies, sitting on the sidelines, Kanji said. SPACs are listed shell companies that take other firms public through merger deals. In 2021, these companies raised a record $145 billion, almost doubling the previous year’s amount.
    Some investors fear tighter policy could cause a plunge in stock markets on par with the bursting of the dot-com bubble in the early 2000s. Though it’s worth noting there have long been concerns that U.S. stocks are in a bubble.
    “I’m curious to see if this is like [a] dot-com correction and becomes protracted, or [just] a blip,” said Kanji.
    Whatever happens in the public markets, early-stage firms are unlikely to be impacted, according to Brown, who previously worked at Index Ventures and LocalGlobe.
    “It will take some time” for the fallout from the rout in tech shares to hit early-stage start-ups, she said, adding that companies raising at earlier stages have “always been somewhat protected from the public markets.”
    Mergers and acquisitions could provide an alternative route for companies which had sat on plans to go public, according to Brown.

    WATCH LIVEWATCH IN THE APP More

  • in

    China's new rules on overseas IPOs will apply to Hong Kong, securities regulator says

    China’s forthcoming rules on overseas IPOs will apply to Chinese companies that want to list in Hong Kong, the China Securities Regulatory Commission told CNBC on Friday.
    In an exclusive interview with CNBC, the commission’s director-general of the international affairs department, Shen Bing, spoke about what draft rules will mean for Chinese companies that are planning to list in the U.S. and other markets.
    When asked whether the new rules would eliminate the possibility of any IPO being suspended two days before an expected listing, Shen said: “One of the purposes of these rules is to avoid such a situation, [with] more communication and more clear rules.”

    People wear protective masks as they stand outside of the China Securities Regulatory Commission (CSRC) in the Financial Street on April 17, 2020 in Beijing,
    Emmanuel Wong | Getty Images News | Getty Images

    BEIJING — China’s forthcoming rules on overseas IPOs will apply to Chinese companies that want to list in Hong Kong, the China Securities Regulatory Commission told CNBC on Friday.
    In an exclusive interview with CNBC, the commission’s director-general of the international affairs department, Shen Bing, spoke about what draft rules will mean for Chinese companies that are planning to list in the U.S. and other markets following last summer’s crackdown.

    “By overseas, we mean, of course, you know, anywhere besides mainland China,” Shen said in a wide-ranging interview. “Of course it includes Hong Kong.”
    Shen said the rules would apply not only to Chinese companies wanting to offer H-shares in Hong Kong, but also a category called “red chips,” which previously did not need the CSRC’s approval. H shares refers to stocks issued by mainland China companies that trade in Hong Kong, and red chips are Hong Kong-trade shares of companies that conduct most of their business in the mainland but are incorporated outside mainland China.
    Since July 2021, a rush of Chinese IPOs to the U.S. has dried up. In the last several months, Beijing has overhauled the process for letting domestic companies raise money outside its borders through stock offerings.
    One reason cited for the changes is national security, which Washington has also cited when it blacklisted some Chinese companies and moved to reduce U.S. investor exposure to stocks allegedly tied to the Chinese military in the last few years.
    From Feb. 15, the increasingly powerful Cyberspace Administration of China will officially require data security reviews for certain companies before they are allowed to list abroad.

    The CSRC and the State Council — the top executive body in China — have released more comprehensive draft rules, and the public comment period ended on Sunday. As proposed, the rules will require Chinese companies to file with the CSRC before listing overseas, and the commission said it would respond within 20 working days of receiving all materials.
    The draft rules state that overseas listings are prohibited in some of the following situations:

    when other government departments consider the offering a threat to national security;
    if there are disputes over the ownership of the company’s major assets; or
    if there’s criminal offense by a controlling shareholder or executive within the last three years.

    However, Shen said the rules would “not necessarily” prevent a Chinese company from listing overseas if it operated in an industry subject to restrictions or bans on foreign investment within mainland China.
    The CSRC’s priority in 2022 is opening China’s market further to foreigners, Shen said. “Overseas listing is one part of the opening up regime, so I think [that] in itself would also be our priority.”

    Slowdown in overseas IPOs

    In April 2021, about 60 Chinese companies were looking to go public in the U.S. That rush of New York listings essentially halted in the summer.
    Just days after Chinese ride-hailing app Didi’s roughly $4 billion U.S. IPO in late June, China’s cybersecurity regulator ordered the company to suspend new user registrations and remove its app from app stores.
    The regulator had said one reason for the cybersecurity probe was to maintain national security. It is unclear when Didi can resume adding new customers.

    We noticed the slowdown of overseas listing since the second half of last year, and we hope that with these new rules, things will resume.

    international department director, CSRC

    The company announced in December it plans to delist from the New York Stock Exchange and pursue a listing in Hong Kong, but did not disclose a timeframe.
    “We noticed the slowdown of overseas listing since the second half of last year, and we hope that with these new rules, things will resume,” Shen said, declining to comment on specific companies. “We hope the companies would make full use of these new rules, and to resume their listing in any overseas market.”
    Shen said he recognized a strength of the U.S. market is “strong inclusiveness for new start-ups in new industries,” even as markets in Greater China have been catching up.

    More communication, clearer rules

    Another event that rocked foreign investors’ confidence in Chinese stocks and markets was the sudden suspension of Alibaba-affiliated Ant Group’s IPO. The news came less than two days before what would have been a record-setting listing in Shanghai and Hong Kong.
    When asked whether the new rules would eliminate the possibility of any IPO being suspended two days before an expected listing, Shen said: “One of the purposes of these rules is to avoid such a situation, [with] more communication and more clear rules.”

    Shen confirmed again that Chinese IPOs overseas could use the variable interest entity (VIE) structure. “If they comply with relevant rules and regulations, they can still file with CSRC,” he said. “We will use the inter-departmental regime to verify the compliance issues before giving their filing a response.”
    A VIE creates a listing through a shell company, often based in the Cayman Islands, which prevents investors in the U.S.-listed stock from having majority voting rights over the Chinese company.
    Many Chinese companies have used the structure to list in the U.S.
    Overall, Shen emphasized how the commission would like to keep the filing process “as efficient as possible” and said the commission is working with relevant departments to include more detailed guidance on how companies should communicate with regulators in order to list overseas.

    Read more about China from CNBC Pro

    “In this course, we may provide regulatory advice to [the] firms so that they do not waste time to do something that eventually would not be possible,” Shen said. He noted the CSRC’s 20-day response time would be separate from other departments’ review period.
    Shen did not say when exactly the final rules would come out or be implemented.
    “Relevant authorities have reached quite [a] high degree of consensus over the rules, so we would expect the procedural process for approval would be quite efficient,” he said, and added that he hoped for “early publication” of the final rules.

    Investment banks’ concern

    Some analysts have raised concerns about how the proposed rules might increase compliance issues for foreign banks that want to work with Chinese IPOs.
    But Shen cast the rules as having a “very slight touch” approach in which investment banks need to alert the CSRC when they enter the business of underwriting Chinese IPOs, and annually disclose how many of those overseas listing projects they completed.

    “We need to consolidate information [on overseas listings] from different sources,” he said. “From this report of the financial institution, we’ll know that there’s no kind of escape from the regulation.”
    Before national security concerns came to the forefront in the U.S. and China, some Chinese companies like Luckin Coffee were forced to delist from overseas markets due to fraud.
    In 2018, the American documentary “The China Hustle” estimated that more than a decade ago, pension funds and retirement funds lost at least $14 billion to Chinese stocks that turned out to be frauds. The film called for more regulation based on increased connections between Chinese financial markets with the global system.

    WATCH LIVEWATCH IN THE APP More

  • in

    Robinhood shares tank 15% after it loses active users, forecasts weak revenue

    Robinhood anticipates first-quarter revenue of less than $340 million, down 35% compared with 2021. Wall Street expected $448.2 million in revenue for Q1, according to FactSet.
    Monthly active users fell to 17.3 million last quarter from 18.9 million in the third quarter.
    Robinhood is about to face its toughest comps in the first and second quarters of 2022 following its record year in 2021 from events like the GameStop short squeeze.

    Stock-trading app Robinhood gave a bleak revenue forecast for the first quarter of 2022 on Thursday as its latest earnings report showed a decline in active users.
    Shares of Robinhood tanked 15% in after hours trading.

    Loading chart…

    The newly public brokerage anticipates first-quarter revenue of less than $340 million, down 35% compared with 2021. Wall Street’s consensus estimate was for $448.2 million in revenue for Q1, according to FactSet.
    Monthly active users fell to 17.3 million last quarter from 18.9 million in the third quarter. This number was also below estimates of 19.8 million, according to FactSet.
    Meanwhile, net cumulative funded accounts totaled 22.7 million at the end of the fourth quarter, about in-line with estimates. This is up from 22.4 million accounts in the third quarter. To be sure, Robinhood added 10 million accounts alone in 2021.

    Vlad Tenev, co-founder and CEO of Robinhood rings the opening bell at the Nasdaq on July 29th, 2021.
    Source: The Nasdaq

    For the fourth quarter, Robinhood reported a net loss of $423 million, or a 49 cent loss per diluted share, wider than the 45 cent loss estimate collected by Refinitiv. However, Robinhood posted $363 million in revenue in the final three months of 2021, slightly above analysts expectations of $362.1 million.
    Robinhood is about to face its toughest comps in the first and second quarters of 2022 following its record year in 2021 from events like the GameStop short squeeze.

    Robinhood’s stock is more than 86% off its most recent high since the trading app’s July 2021 public debut. Shares are down more than 34% in January, bringing its market capitalization to less than $10 billion.

    Loading chart…

    Fourth-quarter transaction-based revenue was $264 million. Options trading made up $163 million, cryptocurrency trading added $48 million and equities contributed $52 million to transaction based revenue in Q4.
    Revenue from crypto has been declining since the second quarter of 2021. After a banner $233 million in the second quarter of 2021, crypto-based revenue was only $51 million in the third quarter. And Thursday’s report shows its continuing to decline.
    However, Robinhood is still investing heavily in its crypto business.

    Stock picks and investing trends from CNBC Pro:

    “Robinhood has set aggressive goals to start opening its crypto platform up to customers internationally in 2022. The company believes in the immense potential of the crypto economy and sees a big opportunity in serving customers across the globe,” the company said in a release.
    Robinhood’s assets under custody rose to $98 billion on an annualized basis. Average revenue per user decreased by 39% to $64 year over year from $106.
    Looking ahead to 2022, Robinhood said it will build products intended to support long-term investing, as well as products in spending and savings. Some of these products will include instant debit card deposits and withdrawals.

    WATCH LIVEWATCH IN THE APP More