Finance

The Roku 3 television streaming player menu is shown on a television in Los Angeles, California, U.S., on Thursday, Sept. 12, 2013.
Patrick T. Fallon | Bloomberg via Getty Images

Check out the companies making headlines after the bell: 
Roku — Shares of video-streaming company dropped 12% in extended trading after the firm’s fourth-quarter revenue missed expectations. Roku reported revenue of $865 million last quarter, versus $894 million as expected by analysts, according to Refinitiv. The company also issued first-quarter revenue guidance below consensus.

Shake Shack — The fast food chain saw its shares plunge 10% in after-hours trading after the company forecast quarterly revenue below estimates, as the Omicron variant led to labor shortages and store closures.
Sunrun — Shares of the clean energy company fell 3% in extended trading after a wider-than-expected quarter loss. Sunrun posted a quarterly loss of 19 cents per share, more than the 4 cents per share estimate, according to Refinitiv.
Dropbox — Shares of the cloud company dipped 1% in after-hours trading even after a better-than-expected quarterly report. Dropbox reported earnings of 32 cents per share in the fiscal fourth-quarter, exceeding Wall Street analysts’ forecasts. The company also announced a repurchase of an additional $1.2 billion of its Class A common stock.

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Cathie Wood of Ark Invest said Thursday the technology companies in her innovation-focused portfolio are drastically undervalued, and she believes that her fund’s recent sell-off is short-lived.
“We’ve had a significant decline,” Wood said Thursday on CNBC’s “Halftime Report.” “We do believe innovation is in the bargain basement territory. … Our technology stocks are way undervalued relative to their potential. … Give us five years, we’re running a deep value portfolio.”

Her flagship fund Ark Innovation ETF was caught in the epicenter of the tech-driven sell-off in 2022, down 26% year to date. Some of her big holdings, including Zoom, Teladoc Health and Roku, have tumbled as much as 70% this year on expectations of rising interest rates.
“Our biggest concern is that our investors turn what we believe are temporary losses into permanent losses,” Wood said.
Higher rates typically punish growth pockets of the market that rely on low rates to borrow for investing in innovation. And their future earnings look less attractive when rates are on the rise.
Wood said she doesn’t invest in any of those mature Big Tech companies like Microsoft. ARKK bets on companies in the forefront of disruptive technology in a variety of industries from DNA to automation, robotics and artificial intelligence. Her top holdings include Tesla, Exact Sciences, UiPath and Coinbase.
“Today we have investors doing the opposite of what they did in the late ’90s. They are running for the hills. It’s risk-off because of inflation and interest rates. And the hills are their benchmarks. They are running to the past,” Wood said.

“If we are right and the disruptive innovation that is evolving is going to disintermediate and disrupt the traditional world order, those benchmarks are where the risk is. Not our portfolios,” she added.
Despite the big underperformance, her ARKK has attracted more than $70 million in net inflows year to date, according to FactSet.
The innovation investor said she believes the inflationary drag on growth stocks will end ultimately and that deflationary forces will return.
“A lot of what’s going on is supply chain related,” Wood said. “I do think the deflationary forces building in the economy are pretty strong.”

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The board game Monopoly by toymaker Hasbro at a toy store in New York City.
Getty Images

Check out the companies making headlines in midday trading Thursday.
DoorDash — Shares of DoorDash jumped 10.6% after the food delivery company’s quarterly revenue turned out better than expected. DoorDash reported $1.3 billion in revenue last quarter, beating a Refinitiv estimate of $1.28 billion. The company also posted strong order numbers and added new users, suggesting that demand for food delivery services remains high.

Palantir Technologies — Shares of Palantir dropped 15.7% after the company’s earnings fell short of forecasts for the fourth quarter, though its revenue beat estimates. Its reported net loss was $156.19 million, wider than the $148.34 million loss seen in the year-earlier period.
Hasbro — The toymaker saw shares rise 2% after activist investor Alta Fox Capital Management nominated five directors to the company’s board. Alta is pushing for Hasbro to spin off its Wizards of the Coast unit and its digital games unit, which include franchise brands like Dungeons and Dragons and Magic: The Gathering. Alta owns a 2.5% stake in Hasbro worth around $325 million.
Fastly — The cloud computing company’s shares plunged 33.6% on disappointing full year guidance. Fastly reported a fourth quarter loss, though it was narrower than analysts had expected, and revenue beat consensus estimates.
Nvidia — Shares of the chipmaker fell 7.5% despite the company reporting strong quarterly results. Nvidia noted that its automotive business, which represents a growth market for its chips, had revenue drop 14% to $125 million. It also came under pressure on concerns about its exposure to the cryptocurrency market.
Cheesecake Factory — The restaurant chain saw its shares rise 4% before pulling back, despite it reporting earnings that missed analysts’ expectations along with increased input costs that negated a beat in revenue. The company is planning a price increase in new menus that could lift prices later this year.

Walmart — The retail giant’s shares rose 4% after Walmart topped earnings expectations and said it’s on track to hit long-term financial targets, calling for adjusted earnings per share growth in the mid single-digits.
Tripadvisor — The travel site operator fell 2.5% following an unexpected quarterly loss and a revenue miss. Tripadvisor said it expects the travel market to improve significantly in 2022 following what it called “unexpected periods of virus resurgence” in 2021.
Cisco Systems — The software company added 2.7% after it reported a beat on quarterly revenue and earnings and issued an upbeat full-year forecast, citing strong demand from cloud computing companies. Cisco earnings of 84 cents per share beat estimates by 3 cents. Revenue came in at $12.72 billion, versus estimates of $12.65 billion.
Equinix — Digital infrastructure company Equinix gained 2.6% after TD Securities upgraded the stock to buy from hold, citing its recent pullback. The upgrade came a day after the company reported fourth quarter adjusted EBITDA that beat estimates, as well as a slight revenue beat.
— CNBC’s Yun Li contributed reporting.

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Solomon on Thursday reminded the audience at a Credit Suisse conference that back in 2020, at Goldman’s first-ever Investor Day, he faced doubts after revealing a set of goals for a more profitable and efficient firm
Goldman’s new guidance for returns on tangible common shareholders’ equity is 15% to 17%, up from the 14% target that the bank had set in 2020. Last year, Goldman’s returns topped 24%.
The bank also increased its 2024 targets for gathering investments and fees in asset management and wealth management as well as transaction and consumer banking revenues.  

David Solomon of Goldman Sachs
Andrew Harrer | Bloomberg | Getty Images

Goldman Sachs CEO David Solomon took a moment to bask in his firm’s recent performance before raising the company’s medium-term financial targets.
Solomon on Thursday reminded the audience at a Credit Suisse conference that back in 2020, at Goldman’s first-ever Investor Day, he faced doubts after revealing a set of goals for a more profitable and efficient firm. But Goldman blew past those targets last year after a historic surge in trading and investment banking activity spurred on by the coronavirus pandemic.

“Two years ago now, there was a lot of skepticism around the targets we laid out and what we thought we could accomplish,” Solomon said. “When you look at our progress, obviously, we way exceeded the returns.”
Goldman’s new guidance for returns on tangible common shareholders’ equity is 15% to 17%, up from the 14% target the bank had set in 2020. Still, the firm far exceeded those targets in 2021, when returns topped 24%.
The bank also increased its 2024 targets for gathering investments and fees in asset management and wealth management as well as transaction and consumer banking revenues.  
Shares of the bank dipped 2.4%, tracking the 2% decline of the KBW Bank Index.
Solomon, who took over from predecessor Lloyd Blankfein in late 2018, has presided over a revival in the company’s focus and share performance. Goldman has gained market share in traditional strengths including trading and investment banking, while building out new digital ventures in corporate cash management and consumer finance.

When Credit Suisse analyst Susan Roth Katzke admitted that she was “probably a skeptic” that Goldman could reach a 60% efficiency ratio when it disclosed the target in 2020, Solomon corrected her.
“You weren’t probably a skeptic, you were a skeptic,” Solomon interjected, before expressing confidence they could maintain the 60% target. The efficiency ratio is an industry metric that looks at expenses as a percentage of revenue; lower ratios show greater efficiency.
“We feel great about the strategy,” Solomon said. “We’re very confident about our ability to move forward and continue to deliver very strong returns to shareholders.”

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THE “DILLY-DALLYING”, to use the term put forward by Jane Fraser soon after taking over Citigroup in early 2021, is almost over. Outside America and a few international centres, the distinctive blue branches that were once common features of big cities around the world will soon be vestiges of another era, much like black, yellow and red Kodak signs. The New York-based bank, which built a reputation over decades as a global consumer giant, is in retreat. From now on it will focus primarily on commercial banking and wealth management, serving large and medium-sized businesses and millionaires. The retail branches it retains will mostly be concentrated in a few domestic markets, such as New York and California.A series of announcements have already been made: in August the sale of the Australian retail operations to National Australia Bank; in October the wind-down of those in South Korea; in December the sale of its Philippine business to UnionBank of the Philippines; in January a disposal of Indonesian, Malaysian, Thai and Vietnamese branches to Singapore’s United Overseas Bank (UOB), whose chief executive, Wee Ee Cheong, remarked that in a single deal his institution had added what it had taken “even Citi” half a century to build; and, also in January, the sale of Citi’s consumer business in Taiwan to DBS, another Singaporean bank.The remaining announcements are expected to come soon. One of the most important will be about India, where Citi has long had an outsized influence; Axis Bank, India’s third-largest private-sector lender, is rumoured to be close to picking up the business for around $2.5bn. Operations in China, Russia, Poland and Bahrain are still in play. Added to the disposal list recently has been the wholly owned Banamex, Mexico’s third-largest bank. Delay would only erode whatever value remains in these operations as employees and customers look for a stable home.Citi’s retreat is not unique. HSBC, which came closest to having Citi-like global ambitions in retail banking, has pared back—though not as dramatically, at least in part because its core market, Hong Kong, is much smaller than Citi’s. Australia’s ANZ gave up on a pan-Asia strategy six years ago. Like Citi, these banks have kept offices around the world for corporate business, from lending to treasury services.As a result, it is tempting to view Citi’s retreat as just another failed attempt at world domination in consumer banking. But it differs from past failures in two respects: the sheer ambition behind the initial expansion, and the legacy it leaves in retail-banking markets around the world.Important to ReedThe expansion was premised on rethinking global finance, with a vast network serving everyone, everywhere, in every way. As with many ambitious plans, Citi’s global push was in response to problems at home. In the 1970s, regulatory restraints resulted in a retail-branch network that was limited to New York City, unprofitable and unable to provide the funds Citi wanted for its lending business. While on holiday, John Reed, a senior executive, wrote a seven-page “memo from the beach” arguing that one option would be for Citi to dump retail banking altogether, a path later taken by Bankers Trust (now part of Deutsche Bank), Bank of New York and Boston’s State Street, among other institutions. The other option was to go very big.Mr Reed posited that rather than thinking about retail banking as deposits and loans, Citi should answer the expansive financial needs of families, whatever they may be. Through “success transfer”, as the bank dubbed it, solutions developed in one market could be rolled out in others, creating economies of scale where they would not exist in a self-contained local institution. The bank came up with a clever slogan to fit: “Citi Never Sleeps”.Years of heavy losses were incurred to create a new form of retail banking, components of which are now so familiar that it is hard to imagine they once didn’t exist. These included ATMs (Citi was the first big American bank to introduce customer-friendly machines at scale), credit cards (of which it went on to become the world’s largest issuer) and electronic payments (which it was one to the first to offer to retail customers).Citi’s reputation as a driving force in financial technology stretched into the 1990s, when more than a million customers received floppy disks biannually with software updates, enabling proto-internet banking. Aware of the identification challenge that existed in a transition from human contact in branches, the bank experimented with the retina-scanning technology that, along with facial recognition, is only now becoming common.These innovations helped drive international expansion. Mr Reed became the bank’s chief executive in 1984 and an ever-wider array of markets were opened, extending from Nigeria and Sweden to (via a Hong Kong acquisition) Thailand, as well as particularly swanky efforts in London and Geneva. The bank opened a representative office in Beijing, too. Augmenting the branches were call, processing and innovation centres in numerous places, including Silicon Valley, the Philippines and perhaps most importantly India, where they played a critical role in germinating the country’s vibrant technology-outsourcing industry.The bank’s drive was a magnet for bright people. Alumni included a former prime minister and the current finance minister of Pakistan, a former central-bank governor of the Philippines and the future leaders of innumerable financial institutions, including the largest private-sector bank in India in terms of assets, HDFC Bank—whose market capitalisation alone is more than 90% of Citi’s—and DBS, whose present chief executive came to the bank after being a star at Citi.In many ways this reflected Citi’s success but it also illustrated its vulnerability. “Success transfer” ultimately meant creating capable competitors. Local regulators created their own obstacles, limiting the rights of foreign banks to open branches or link international accounts, thereby undermining economies of scale. Technological innovation dimmed after Mr Reed’s departure in 2000. Rivals, including those run by former Citibankers, copied Citi’s innovations, sometimes improving on them or offering them more cheaply.Then came the global financial crisis in 2007. After incurring huge losses on over $300bn of risky assets, Citi required a bail-out—revealing that, in a pinch, it was an American, not global, institution. This was underscored by stringent new domestic regulations complicating, when not blocking, international transactions.That began a long period of contraction. Early to go was the German retail operation, for $7.7bn, then others in Turkey, Brazil, Egypt and over a dozen other countries. It was as if the United Nations of banking was being unwound. The Asian and Mexican operations remained, each in different ways offering much potential. But Ms Fraser, who joined the bank in 2004 and was less tied to the old strategy, concluded that the bank lacked the scale needed to compete in many of its markets.A striking feature of the final reckoning has been how little the Asian operations really mattered to Citi’s results. Their presence vastly exceeded their financial relevance: the Asian businesses that are being sold accounted for only 1.6% of group earnings in 2021. This helps explain the paucity of bidders. None of the businesses have been bought by Standard Chartered or HSBC, and their own far-reaching operations are now questioned. Years ago JPMorgan Chase’s boss, Jamie Dimon, formerly of Citi, considered replicating its global network, only to conclude that building a retail business market by market wasn’t viable. It is also striking that Chinese banks, the new Goliaths, have made barely any effort to build foreign retail operations.Buyers of Citi’s Asian assets, to the extent they have emerged, are fully or somewhat local. True, Singapore’s DBS and UOB have been willing to acquire abroad, but Taiwan and Vietnam are hardly far-flung, especially for banks whose home market is small and serves as a hub for Asian finance. Local and regional consolidation would seem to be more reflective of the times.Systemic rewardsAs Ms Fraser pushes on with the dismantlement, there will doubtless be gnashing of teeth within an institution that looks to many outsiders like a shadow of its former self. It may be some consolation to current and former Citibankers that the technological components of Mr Reed’s vision have been taken up both through interlinkages in the global financial system—ATMs and credit cards have long been ubiquitous—and through fintech operators such as Grab in Singapore, Ant Group in China and Wise in Britain, that enable electronic payments and remittances. Citi’s experience, in short, suggests that the benefits of globalised finance can be more easily enjoyed by the system as a whole than by any single institution. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “The Citi that was never finished” More

JUST AFTER the end of the first world war and the dissolution of Austria-Hungary, one observer noted that “every clock in Prague [was] gone, melted for the metals.” Another, in Vienna, saw children “wrapped in paper, for want of sheets and blankets”. At the time much of Europe was under strict economic sanctions, as western powers tried to hold the post-war peace and restrain communism. It was the first time that the “economic weapon”, the title of Nicholas Mulder’s new book, had been used, but by no means the last. By the 2010s a third of the world’s population lived under sanctions. Prominent among the current targets is Russia, which will face further sanctions if it invades Ukraine. Mr Mulder, of Cornell University, looks at sanctions over the three decades after the first world war—and reaches unsettling conclusions.Economic war against civilians is a centuries-old phenomenon. During the Hundred Years’ War English troops launched countless brutal sieges against French garrisons, often starving them into submission. Blockades were an important part of the toolkit of the naval wars of the 18th century. Sanctions were and are different. Rather than being imposed by one country on another, they often involved groups of countries coming together to punish rogue states. The formation of the League of Nations in 1919-20 made co-ordinated action easier. And rather than being seen as an act of war, sanctions were often supposed to prevent it.Sanctions were also the product of the first great wave of globalisation. In the 70 years to 1914 trade flows rose from 5% of global GDP to 14%, then an all-time high. With economies ever more integrated, like-minded governments had many points of leverage over renegades, whether by denying them the supply of crucial raw materials or by refusing to buy their goods.The role of finance truly distinguished sanctions from previous economic warfare. In 1870-1914 annual capital flows averaged 4% of global GDP. The Allied powers controlled the world’s main financial centres. Economists, as well as traditional military types, thus helped design sanctions. They aimed to hit aggressor states where they were weakest: in their financing requirements.Mr Mulder’s book is filled with anecdotes of how sanctions worked in practice. As signs of impending war grew in 1935, Italian companies such as Pirelli (tyres), Fiat (cars) and Montecatini (chemicals) were denied financing for their import needs by the Bank of England. By August 1941 expansionist Japan was cut off from the rest of the world economy, having lost 90% of its foreign oil supply and 70% of its trade revenues. Enforcing sanctions required a great deal of effort in a world of increasing financial ingenuity. In the late 1910s Banco Holandés de la América del Sud, a Buenos Aires subsidiary of a Dutch bank, used five different names to undertake transactions for various Latin American subsidiaries of German banks.William Arnold-Forster, a British administrator, argued that sanctions could “make our enemies unwilling that their children should be born”. Indeed, they could have horrific effects. Of the three main weapons targeting civilians during the period—air power, gas warfare and economic blockade—blockade was by far the deadliest, Mr Mulder argues. “Pens seem so much cleaner instruments than bayonets,” Arnold-Forster wryly noted.Whether sanctions achieved their objectives was another matter. Small countries could be bullied into obedience, such as on two occasions in the 1920s, when the threat of sanctions stopped skirmishes in the Balkans from escalating into wider war. Bigger powers were tougher nuts to crack. Overall, “most economic sanctions have not worked”—the first lesson of Mr Mulder’s book. Most significantly, they did not stop Germany from choosing war.Sanctions sometimes failed because of insufficient political will. For a long time American opinion had it that sanctions were fundamentally un-American, an anachronistic form of European-style imperialism. In other cases financial globalisation constrained, rather than widened, sanctioners’ room for manoeuvre. Britain refrained from imposing a severe financial blockade of Nazi Germany in the mid-1930s in part because British banks held huge amounts of German debt. In the event of sanctions the Reich would stop servicing this debt, and British financiers worried that the City would face a solvency crisis.The second lesson of Mr Mulder’s book is that sanctions can have unintended consequences. By the 1930s global politics and economics had radically changed from the 1920s. The Great Depression had sent many governments down a protectionist route. Global trade was in a long slump. Fascism was on the march.Doom loopSanctions, Mr Mulder shows, added fuel to the fire. Governments that believed themselves vulnerable to sanctions withdrew even further from the global economy, in order to secure strategic independence. In the 1930s Japan sought to develop a “yen bloc”, an economic zone including Korea and Taiwan, so as to reduce dependence on the Allied powers. In the mid-1930s Germany gunned for “raw-materials freedom”, in part via the construction of massive capacity for the synthetic production of oil. (Anyone witnessing Russia’s efforts in recent years to wean itself off Western finance may conclude that nothing much has changed.) It also necessitated conquest. “I need Ukraine”, said Adolf Hitler in 1939, “so that they cannot again starve us out like in the last war.”In that sense the international search for effective sanctions and the ultra-nationalist search for autarky “became locked in an escalatory spiral”. Sanctions did not work in a deglobalising world, and contributed to its continued fracturing, in turn setting the stage for the second world war. Mr Mulder is too careful a historian to labour the parallels between what happened in the inter-war period and today, when geopolitics is once again fractious and globalisation is in retreat. But the lessons are sobering. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “The wonks’ weapons” More

THE LINE between investing and gambling has always been thin. This is especially true for prediction markets, where punters bet on events ranging from the banal (“will average gas prices be higher this week than last week?”) to the light-hearted (“who will win best actress at the Oscars?”). Prediction markets have something of a cult following among finance types who rave about the value of putting a price on any event, anywhere in the world. Such prices capture insights into the likelihood of something happening by forcing betters to put money where their mouths are. But critics argue such markets will fail to grow beyond a niche group, reducing the value of their predictions in the process.The debate has been reignited by a new “event contract” exchange–a market where traders can buy and sell contracts tied to event outcomes—run by Kalshi, a New York-based startup. The firm has made headlines because it earned approval to run America’s first such exchange without regulatory limits on the scale of activity—a feat that has long eluded its predecessors. PredictIt, one of the most popular American prediction markets, operates as a non-profit research project limited to 5,000 betters for each event. The size of bets is capped too, at $850 per person, per question. Kalshi overcame such hurdles by consulting American regulators for two years to earn their trust, says its boss, Tarek Mansour. He believes this could make event contracts a real asset class, like options.That may be why the startup has attracted so much interest. It counts big names from Sequoia Capital to Charles Schwab as backers. A former member of the Commodity Futures Trading Commission, Kalshi’s regulator, has joined the firm’s board.Kalshi’s timing is also opportunistic. Retail traders have ventured far beyond blue-chip stocks to assets such as options and cryptocurrencies. The firm sees event contracts as a natural extension of that curiosity. And Kalshi specifically looks for events ripped from headlines, says Luana Lopes Lara, one of its co-founders. For instance, it launched markets on US Supreme Court cases in December 2021.In the longer run it hopes to attract more sophisticated investors. Why might they join a seemingly game-like platform? For one, they could make money off less-informed amateurs. They may also use it to hedge against risks. An investor with stock in the American construction industry, for instance, might have bet against President Joe Biden’s infrastructure bill to cushion its losses if the bill had failed.But there are several barriers to broader adoption. One is that there is a fundamental difference between betting on events and betting on stocks. Public companies generally engage in profitable projects, so shares tend to have positive returns; over a long enough period, investors would make money even if they picked stocks at random. That draws in more participants. In prediction markets, by contrast, the game is zero-sum, says Eric Zitzewitz, an economist from Dartmouth College. The pay-out of one trader is the loss of whoever takes the other side of the bet.A bigger turn-off may be lack of liquidity. Sophisticated investors will be reluctant punters if they cannot make large trades with ease. In 2002 Deutsche Bank and Goldman Sachs, two banks, launched a market for trading event contracts—similar to what Kalshi now offers, though only open to large investors—on major macroeconomic data releases such as employment numbers. It closed some years later, most likely because investors who wanted to trade on such data stuck instead with bets on the entire stockmarket using options and share indices; traditional assets had much larger volumes and were therefore easier to trade. In many cases liquidity matters more than having a perfect hedge, says a trader at a large investment bank.Looking abroad offers a clue to where volume might come from. Smarkets, a popular betting exchange in Britain, where regulations are lighter than America, has seen the most activity on major political events. The American presidential election in 2020 was its largest market to date, with more than £20m ($27m) traded, says Matthew Shaddick of Smarkets. Kalshi’s political markets are also finding some success: its most popular to date was on whether Federal Reserve chair Jerome Powell would be replaced by December 2021. Markets on elections, however, have yet to be approved in America. Mr Mansour says Kalshi is “working with regulators” to change this. Perhaps prediction markets should open a market on their own success. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Punting profits” More

THE ANCIENTS knew the source of real terror. Lions, snakes and goats (apparently) are scary creatures to stumble across, but it is the combination of different bits of them that is the stuff of nightmares. The Chimera, with the head of a lion, the body of a goat and the tail of a snake, whose “breath came out in terrible blasts of burning flame”, was a truly fearsome beast. Yet crossbreeds can also be cute and cuddly. Just think of labradoodles.What about financial crossbreeds? Are they minotaurs or maltipoos? Finance has adapted and innovated at a frenetic pace over the past few years. In 2019 there were hardly any deals using special-purpose acquisition companies (SPACs), blank-cheque vehicles which take firms public via a merger. In 2021 they raised $163bn of capital and agreed to take 267 firms public.As recently as 2020 few people had heard of non-fungible tokens (NFTs), the cryptocurrency chits attached to pieces of digital media, such as a picture or video. But interest rocketed after Beeple, a digital artist, sold one for $69m at auction at Christie’s almost a year ago. Cryptocurrencies and associated trading platforms entered the mainstream. Institutional investors now chatter about including bitcoin in their portfolios. Coinbase, a cryptocurrency trading platform, went public in April 2021. It has a market capitalisation of $45bn.As these newfangled technologies and financial vehicles have grown in size and scope they have begun to mate. First, in July 2021, Circle, a Boston-based company which issues USDC tokens, a type of stablecoin pegged to the dollar, agreed to merge with Concord Acquisition, a SPAC founded by Bob Diamond, a one-time boss of Barclays, a bank, in a transaction that valued Circle at $4.5bn. Then in December 2021 Aries Acquisition, another SPAC, announced plans to merge with InfiniteWorld, a Miami-based NFT and metaverse-infrastructure platform valued at around $700m.Keeping up? There’s more. Not to be outdone, on February 11th Binance, a cryptocurrency trading platform founded in China, announced it was making a $200m investment in Forbes, a publisher and ranker of billionaires, ahead of Forbes going public via a merger with the modestly named Magnum Opus, another SPAC. Binance’s rationale for backing the union, its boss helpfully explained, was that media is “an essential element” as cryptocurrencies, blockchain technology and “Web3”, the supposed next generation of media and internet businesses where crypto-holders run social-media platforms, come of age.What should an investor make of all this? It is tempting to dismiss these new beasts—call them Cryp SPACtaurs—as nonsense. There is nothing particularly cute or cuddly about the way SPACs typically treat their investors. In part thanks to the fat slice of shares grabbed by deal sponsors, investments in pre-merger SPACs have underperformed major stock indices by around 30 percentage points on average. Add in the risks typically associated with crypto-ventures and some punters may conclude that it looks more appealing to invest with the next Bernie Madoff.That may also explain why these crossbreeds are yet to reach maturity. Infinite World has not yet completed its merger with Aries. Circle and Concord have not tied the knot either, despite announcing their coupling around eight months ago. The Binance investment in Forbes, meanwhile, seems at least in part motivated by the prospect of the Forbes SPAC deal otherwise failing to come off. The $200m infusion replaced those mulled by other outside investors, who appear to have got cold feet. Perhaps the Chimera and the Cryp SPACtaur are alike: not because they are both monsters, but because they are both seemingly mythical creatures.Still, the prospect of facing the bright lights of public equity markets might be just what is needed to sort the puppies from the pigs. When quizzed about why the Circle SPAC transaction was taking longer than some others, Jeremy Allaire, Circle’s chief executive, explained that to enter public markets “companies have to be in a position where they have to meet necessary regulatory, disclosure and accounting standards so that the public can invest. That is a good process.” But it can take longer still for firms like Circle, which are “a very new kind of financial institution”. Only when one of them actually goes public will it start to become clear whether CrypSPACtaurs are beasts to fear or pooches to pet.For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Behold the CrypSPACtaur” More