Finance

Returning from his paternity leave last week, your columnist was keen to get writing. After all, numerous studies say parents’ careers can suffer after they have children. Best to immediately dispel any notion that his might do so. But then he remembered that he is a man, and went to get a coffee. For the child penalty, as the career hit is known by economists, is commonly believed to affect mothers alone.In fact, it might be that women returning to work after childbirth can afford to relax, too. It is true that their immediate earnings are likely to fall, and perhaps infuriating that those of new fathers are not. Yet two new studies suggest that, in the long run, compared with women who do not have children, the motherhood penalty may vanish—or even turn into a premium. More

The HISTORY of leveraged finance—the business of lending to risky, indebted companies—is best told in three acts. High-yield (or “junk”) bonds were the subject of the first. That ended in 1990 when Michael Milken, the godfather of this sort of debt, was sent to prison for fraud. In the second act, the extraordinary growth of private equity was financed by both junk bonds and leveraged loans, which require companies to pay a floating rate of interest rather than the fixed coupons on most bonds. Private-credit investors are now supplying the third wave of money. Since 2020 such firms, which often also run private-equity funds, have raised more than $1trn. When interest rates rose in 2022 and banks stopped underwriting new risky loans, private credit became the only game in town. Wall Street chattered that its “golden age” had begun.America’s $4trn leveraged-finance market now comprises junk bonds, leveraged loans and assets managed by private-credit firms, in roughly equal proportions. Yet owing to fierce competition to refinance debt and fund scarce new deals, private credit’s prospects may no longer dazzle. The industry’s fondness for ancient Greece (two big lenders are called Apollo and Ares) seems not to extend to the work of Hesiod. If it did, fund managers would know that what follows a golden age is not a platinum one, as with American Express cards, but the descent into a grim iron age. More

Fintech executives and investors at the Money20/20 event in Amsterdam last week told CNBC that valuations have corrected from unsustainable highs from the industry’s heyday in 2020 and 2021.
Iana Dimitrova, CEO of embedded finance startup OpenPayd, told CNBC in an interview at the firm’s booth that the market has “recalibrated.”
The bruising impact of higher interest rates means that, for even the hottest and fastest-growing players, funding is either hard to come by — or being done at a lower prices than before.

Long gone are the days when venture capital was flowing into fintech startups with bold ideas — and little to show in terms of business metrics and fundamentals.
Bloomberg | Getty Images

AMSTERDAM — The financial technology industry is embracing a new normal — with some industry executives and investors believing the sector has reached a “bottom.”
Executives and investors at the Money20/20 event in Amsterdam last week told CNBC that valuations have corrected from unsustainable highs from the industry’s heyday in 2020 and 2021.

Long gone are the days when venture capital was flowing into startups with bold ideas and little to show in terms of business metrics and fundamentals.
Iana Dimitrova, CEO of embedded finance startup OpenPayd, told CNBC in an interview at the firm’s booth that the market has “recalibrated.”

Embedded finance refers to the trend of technology companies selling financial services software to other companies — even if those companies don’t offer financial products themselves.
“Value is now ascribed to businesses that manage to prove there is a solid use case, solid business model,” Dimitrova told CNBC.
“That is recognised by the market, because three, four years ago, that was not necessarily the case anymore, with crazy ideas of domination and hundreds of millions of dollars in VC funding.”

Iana Dimitrova, CEO of OpenPayd, talking onstage at Web Summit in Lisbon, Portugal.
Horacio Villalobos | Getty Images

“I think the market is now more sensible,” she added.

Lighter footfall, talks happen on the fringes 

Around the show floor of the RAI conference venue last week, banks, payment companies and big technology firms showed off their wares, hoping to reignite conversations with prospective clients after a tough few years for the sector.

Many attendees CNBC spoke with mentioned that the conference hall was a lot lighter in terms of conferencegoers and the pitter-patter of delegates flocking to various stands and booths around the RAI.
Many of the most productive conversations, some attendees CNBC spoke with say, actually happened on the fringes of the event — at bars, restaurants and even boat parties held around Amsterdam once the day on the show floor was over.
In 2021, global fintech funding reached an all-time peak of $238.9 billion, according to KPMG. Companies such as Block, Affirm, Klarna, and Revolut had hit seismically high multibillion-dollar valuations.
But by 2022, investment levels sank sharply and fintechs globally raised just $164.1 billion. In 2023, funding sank even further to $113.7 billion, a five-year low.

Have we reached the bottom?

That’s despite the massive growth of many companies. 
The bruising impact of higher interest rates means that, for even the hottest and fastest-growing players, funding is either hard to come by — or being offered at a lower prices than before.

Nium, the Singaporean payments unicorn, said in an announcement Wednesday that its valuation had fallen to $1.4 billion in a new $50 million funding round.
Prajit Nanu, CEO of Nium, told CNBC that investors have at times been too distracted with artificial intelligence to pay attention to innovative products and growth stories happening in the world of fintech.
“Investors are now in the AI mindset,” he told CNBC. “Like, whatever it costs. I want in on AI. They’re going to burn a lot of money.”
Nanu added that the trend mimics the “craziness” fintech saw in terms of frothy valuations in 2020 and 2021.
Today, he believes we have now reached a “bottom” when it comes to fintech market values.
“I believe that this is the lowest end of the fintech cycle,” Nanu said, adding that “this is the right time to make it in fintech.”
Consolidation will be key moving forward, Nanu said, adding that Nium is eyeing several startups for acquisition opportunities.
OpenPayd’s Dimitrova said she isn’t considering tapping external investors for fundraising at the moment.

But, she said, if OpenPayd were to look to accelerate its annual recurring revenue past the $100 million mark, venture capital investment would come more firmly under consideration.

Crypto comeback?

Crypto also made something of a comeback in terms of hype and interest at this year’s event.
Dotted around the RAI venue were stands from some of the industry’s major players. Ripple, Fireblocks, Token8 and BVNK, a crypto-focused payments firm, all had a big presence with notable booths around.
CoinW, a crypto exchange endorsed by Italian soccer star Andrea Pirlo, had advertising flowing through a bridge connecting two of the main halls of the conference.

Fintech execs and investors CNBC spoke with at this year’s edition of Money20/20 said they’re finally seeing a real use case for cryptocurrencies after years of bulls touting them as the future of finance.
Despite the huge promise of AI around changing how we manage our money, for instance, “there’s no new AI for moving money,” according to James Black, partner at VC firm IVP — in other words, AI isn’t changing the infrastructure behind payments. 
However, stablecoins, tokens that match the value of real-world assets like the U.S. dollar, he said, are changing the game.
“We’ve seen the crypto wave, and I do think that stablecoins is the next wave of crypto that will gain more mass adoption,” Black said.
“If you think about the most exciting payment rails, you have real-time payments — I think that’s exciting, too. And it fits in with stablecoins.”

Charles McManus, CEO of ClearBank, speaks at the Innovate Finance Global Summit in April 2023.
Chris Ratcliffe | Bloomberg | Getty Images

ClearBank, the U.K. embedded finance startup, is working on launching a stablecoin underpinned by the British pound that it is expecting to receive a provisional blessing from the Bank of England soon.
Emma Hagen, CEO of ClearBank, and Charles McManus, the firm’s chair, told CNBC at its booth at Money20/20 that the stablecoin it’s working on would be sufficiently backed by a matching number of reserves.
“We’re in the early days as we learn with our partners,” Hagen told CNBC. “It’s about doing it in a way that gives people that trust and safety that there is going to be practical issuance.”
ClearBank is also working with other crypto companies on offering the ability to earn high yield on uninvested cash, McManus said.
He declined to disclose the identity of which firm, or firms, ClearBank was in talks with. More

A humanoid robotics startup cofounded by the CEO of bankrupt fintech firm Synapse has canvassed Silicon Valley investors for funds by claiming close ties and an imminent investment from General Motors — claims rejected by the automaker.
The company, called Foundation Robotics Labs, is seeking the last $1 million in funds for an $11 million seed round, according to documents obtained by CNBC. The investor pitch claimed GM had already committed to an investment, along with the Menlo Park-based VC firm Tribe Capital.
But, according to GM and one of the startup’s founders, most of Foundation’s claims related to the automaker are exaggerated or untrue.

3alexd | E+ | Getty Images

A humanoid robotics startup cofounded by the CEO of bankrupt fintech firm Synapse has canvassed Silicon Valley investors for funds by claiming close ties and an imminent investment from General Motors — claims rejected by the automaker.
The company, called Foundation Robotics Labs, is seeking the last $1 million in funds for an $11 million seed round, according to documents obtained by CNBC. The investor pitch claimed GM had already committed to an investment, along with the Menlo Park-based VC firm Tribe Capital.

“Foundation is building humanoid robots to take over work that humans do in factories, warehouses and eventually homes,” the startup declared.
On top of the seed investment, the fundraising document said GM was set to be Foundation’s first customer, with a targeted $300 million purchase order, and had also provided access to its factories to help them train its robots.
“GM agreed to let us collect the ground truth data in their factories,” Foundation said in the document. “Our team is in their Mexico factory this week to start the collection process. We would probably be the only company in this space with a dataset like this.”

‘Fabricated’ claims

But, according to GM and one of the startup’s founders, most of Foundation’s claims related to the automaker are exaggerated or untrue.
While GM met with Foundation executives a few times, it hasn’t allowed data collection from its factories, has no agreements for robot orders and isn’t planning an investment, according to a GM spokesman.

“GM has never invested in Foundation Robotics and has no plans to do so,” spokesman Darryll Harrison said in an emailed statement. “In fact, GM has never had an agreement of any kind with the company. Any claims to the contrary are fabricated.”
In a phone interview with CNBC, one of Foundation’s cofounders, Mike LeBlanc, confirmed GM’s points and said he was embarrassed that marketing materials existed that overstated their relationship.
“The engineering stuff we’ve done is really incredible, and it’s the bedrock of what this company will be,” LeBlanc said. “That, to me is what Foundation Robotics is.”

New Foundation

Foundation was started in April by Synapse CEO Sankaet Pathak, Tribe Capital CEO Arjun Sethi, and LeBlanc, cofounder of Cobalt Robotics, a maker of autonomous security guards, according to the company’s fundraising pitch.
It’s raising money at a time when American corporations look to automate more of their labor: 25% of capital spending by industrial companies in the coming years will be on automated systems, according to McKinsey.
The misleading fundraising pitch was shared in an email group with about 1,500 startup executives and investors this month, according to one of the recipients. The contents of the document were confirmed by someone with direct knowledge of Tribe Capital.
Tribe Capital and its cofounder Sethi declined to comment, while Pathak didn’t respond to messages seeking comment.

Fintech meltdown

The robotics startup finds itself in the spotlight after the implosion of Pathak’s other company, Synapse, which enabled fintech brands like Mercury and Dave to offer banking services by connecting them to FDIC-backed banks.
Cofounded by Pathak in 2014, Synapse went bankrupt earlier this year after some of its largest clients, including Mercury, left its platform amid disagreements over customer balances.
The mess has left more than 100,000 Americans with a combined $265 million in deposits locked out of their accounts for more than a month, according to a trustee appointed to oversee the firm’s bankruptcy proceedings.
Making matters worse, there is an $85 million shortfall between what partner banks of Synapse are holding and what depositors are owed, and no answers yet on what happened to the missing funds, according to the trustee.
Pathak’s move to his next venture, coming on the heels of the still-ongoing Synapse failure, has raised eyebrows among some founders and investors in the startup community. More

A sell-off in GameStop shares intensified in afternoon trading Wednesday.
The last time “Roaring Kitty,” whose legal name is Keith Gill, disclosed his portfolio was Monday night, showing he still owned 120,000 call options contracts with a strike price of $20 and an expiration date of June 21.
GameStop calls with the exact strike price and expiration traded a whopping 93,266 contracts Wednesday.

A holding page for Keith Gill, a Reddit user credited with inspiring GameStop’s rally, before a YouTube livestream arranged on a laptop at the New York Stock Exchange on June 7, 2024.
Michael Nagle | Bloomberg | Getty Images

A sell-off in GameStop shares intensified in afternoon trading Wednesday, and that coincided with a spike in trading volume in the call options that meme stock leader “Roaring Kitty” owns.
The last time Roaring Kitty, whose legal name is Keith Gill, disclosed his portfolio was Monday night, showing he still owned 120,000 call options contracts with a strike price of $20 and an expiration date of June 21.

GameStop calls with the exact strike price and expiration traded a whopping 93,266 contracts Wednesday, more than nine times its 30-day average volume of 10,233 contracts. The price of these contracts dropped more than 40% during the session, while the stock plunged 16.5%.
It is unclear if it was indeed Roaring Kitty behind the large volume, but options traders said he could be involved given he is such a large holder of those contracts.

Stock chart icon

GameStop, 1 day

Options traders have speculated that Gill would have to sell his calls prior to expiration or roll the position into another call option to avoid having to raise a huge amount of cash to exercise them on June 21.
Wall Street has been watching for hints he was unloading the position because it could knock the price of the stock.
For Gill to exercise the calls, he would need to have $240 million to take custody of the stock — 12 million shares bought at $20 apiece — which is more than he has shown publicly in his E-Trade account.
CNBC’s “Fast Money” will be discussing the GameStop move at 5 p.m. ET.

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This is a comparison of Wednesday’s Federal Open Market Committee statement with the one issued after the Fed’s previous policymaking meeting that concluded May 1.
Text removed from the prior statement is in red with a horizontal line through the middle.

Text appearing for the first time in the June statement is in red and underlined.
Black text appears in both statements.

Arrows pointing outwards More

The Federal Reserve on Wednesday kept its key interest rate unchanged and signaled that just one cut is expected before the end of the year.
The Federal Open Market Committee also indicated that it believes the long-run interest rate is higher than previously indicated.
“In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective,” policymakers wrote in a statement.

The Federal Reserve on Wednesday kept its key interest rate unchanged and signaled that just one cut is expected before the end of the year.
With markets hoping for a more accommodative central bank, Federal Open Market Committee policymakers following their two-day meeting took two rate reductions off the table from the three indicated in March. The committee also signaled that it believes the long-run interest rate is higher than previously indicated.

New forecasts released after this week’s two-day meeting indicated slight optimism that inflation remains on track to head back to the Fed’s 2% goal, allowing for some policy loosening later this year.
“Inflation has eased over the past year but remains elevated,” the post-meeting statement said, echoing language from the last statement. In the only substantive change, the new statement followed with, “In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective.”
The previous language said there had been “a lack of further progress” on inflation.
Traders seemed encouraged by these comments, with the S&P 500 jumping to a record Wednesday after the statement was issued.

Aggressive cutting seen for 2025

For the period through 2025, the committee now sees five total cuts equaling 1.25 percentage points, down from six in March. If the projections hold, it would leave the federal funds rate benchmark at 4.1% by the end of next year.
Another significant development occurred with the projection for the long-run rate of interest, essentially a level that neither boosts nor restricts growth. That moved up to 2.8% from 2.6%, a nod that the higher-for-longer narrative is gaining traction among Fed officials.
In a further indication of a hawkish bent from central bankers, the dot plot showed four officials in favor of no cuts this year, up from two previously.

Return to 2% target

Elsewhere in the FOMC’s Summary of Economic Projections, participants raised their 2024 outlook on inflation to 2.6%, or 2.8% when excluding food and energy. Both inflation projections were 0.2 percentage point higher than in March.
The Fed’s preferred inflation gauge is the Commerce Department’s personal consumption expenditures price index, which showed respective readings of 2.7% and 2.8% for April. The Fed focuses more on core inflation as a better long-term indicator. The SEP indicates inflation returning to the 2% target, but not until 2026.
The decision and informal forecasts from the 19 meeting participants come during a volatile year for markets and investors’ hopes that the Fed would start easing after it raised benchmark rates to their highest level in some 23 years.
The federal funds rate, which sets overnight borrowing costs for banks but feeds into many consumer debt products, is targeted in a range between 5.25%-5.50%, the result of 11 rate increases between March 2022 and July 2023.
Earlier in the day, as Fed officials were preparing their economic and rate outlooks, the Bureau of Labor Statistics released the consumer price index for May. The report showed that inflation was flat on the month while the annual rate edged lower from the rate in April to 3.3%.  
During a press conference, Powell said that report was better than almost anyone had expected, and was factored into the FOMC’s decision.
“We see today’s report as progress and as, you know, building confidence,” Powell said. “But we don’t see ourselves as having the confidence that would warrant beginning to loosen policy at this time.”
Inflation remains well above the Fed’s 2% target, while also being considerably below the peak of just over 9% seen nearly two years ago. Core readings excluding food and energy prices were at 0.2% from the prior month and 3.4% from the year-ago period.
In the first quarter of 2024, economic data softened from where it had been for most of the previous year, with GDP rising at just a 1.3% annualized pace. April and May have been a mixed bag for data, but the Atlanta Fed is tracking GDP growth at 3.1%, a solid pace especially in light of persistent recession worries that have dogged the economy for the past two years.
Inflation data, though, has been equally resilient and has posed problems for central bankers.
The year began with markets expecting a vigorous pace of rate cuts, only to be thwarted by sticky inflation and statements from Fed officials that they are unconvinced that inflation is heading back convincingly to target.
“This is a nothing-burger Fed meeting. They know conditions are improving, but don’t need to rush with rate cuts,” said David Russell, global head of market strategy at TradeStation. “The strong economy is letting Jerome Powell wring inflation out of the system without hurting jobs. Goldilocks is emerging but policymakers don’t want to jinx it.”

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Federal Reserve Bank Chair Jerome Powell announces that interest rates will remain unchanged during a news conference at the bank’s William McChesney Martin building on May 01, 2024 in Washington, DC. 
Chip Somodevilla | Getty Images

The Federal Reserve on Wednesday projected only one rate cut for the remainder of 2024, down from its March forecast that called for three reductions.
The central bank’s “terminal rate” for 2024, or the rate at which its benchmark fed funds rate will peak, went up to 5.1%, equivalent to a target range of 5%-5.25%. That means that the Fed is only forecasting one quarter-point rate cut from the current target range of 5.25% to 5.5%.

The so-called “dot plot,” which indicates how 19 FOMC members, both voters and nonvoters, showed four officials in favor of no cuts this year, while seven members projected one reduction. The remaining eight officials forecast two rate cuts for 2024.
Here are the Fed’s latest targets:

Arrows pointing outwards

Back in March, the Fed projected three rate cuts this year with the fed funds rate hitting 4.6%. After a cool inflation report Wednesday but before the Fed’s new forecast release, traders were pricing in two cuts this year.
For 2025, the central bank anticipated four rate cuts in total or a full percentage point reduction in the benchmark fed funds rate. More