Finance

People walk around the International Hotel Grand Hyatt during the outbreak of the COVID-19 pandemic on May 21, 2020 in New York City.
VIEW press | Corbis News | Getty Images

Check out the companies making headlines after the bell Tuesday:
FedEx – Shares of the shipping company fell nearly 4% after FedEx reported quarterly results. The company reported a slight beat on revenue, but earnings of $4.37 per share came in 54 cents below analysts’ estimates, according to Refinitiv. The company cited labor availability, higher wages and transportation expenses for the quarterly results.

Stitch Fix – The digital styling service soared by more than 15% after reporting strong quarterly earnings of 19 cents per share, compared to the loss Wall Street analysts surveyed by Refinitiv forecasted of 13 cents per share. It also beat on revenue, recording $571.2 million compared to the expected $548 million, and cited outsized growth in its women’s and kids’ categories.
Adobe – Software company Adobe also reported earnings Tuesday night. The stock was more than 3% lower despite reporting earnings of $3.11 per share, higher by 10 cents than Refinitiv analysts’ estimates. Adobe also beat on revenue and issued solid fourth-quarter earnings and revenue guidance.
Hyatt Hotels – Shares of the hotel corporation fell about 3% following its announcement late Tuesday that it will offer 7 million shares of its Class A common stock to fund some of the purchase price for its pending acquisition of Apple Leisure Group.

Become a smarter investor with CNBC Pro. Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today

WATCH LIVEWATCH IN THE APP More

DraftKings is making a $20 billion offer to acquire U.K. online sports betting company Entain, people familiar with the matter told CNBC’s David Faber.
On Monday, before news of the deal, the enterprise value of Entain was about £13.2 billion, or $18 billion.
MGM Resorts and Entain have an online sports betting partnership in the U.S. called BetMGM, and MGM’s consent is required for any deal involving the U.S. assets of Entain.

DraftKings is making a $20 billion offer to acquire U.K. online sports betting company Entain, people familiar with the matter told CNBC’s David Faber on Tuesday.
The offer is largely in DraftKings stock, along with cash, according to the sources.

Entain shares jumped about 18% in London trading Tuesday. DraftKings shares closed 7.4% lower Tuesday after the news.
On Monday, before news of the deal, the enterprise value of Entain was about £13.2 billion, or $18 billion.
In a filing with the London Stock Exchange, Entain’s board confirmed that it received a proposal from DraftKings, which would include a combination of stock and cash. The filing did not contain any information on the price of the offer.
“A further announcement will be made as and when appropriate,” Entain noted in the filing. “Shareholders are urged to take no action at this time.”
The U.K. gaming company rejected an all-stock offer from MGM Resorts earlier this year worth $11 billion at the time. Entain said the deal significantly undervalued the company.

A closed Ladbrokes is seen in Manchester, following the outbreak of the coronavirus disease (COVID-19), Manchester, Britain, June 12, 2020.
Jason Cairnduff | Reuters

MGM and Entain have an online sports betting partnership in the U.S. called BetMGM.
While MGM is not involved with DraftKings’ bid for Entain, MGM’s consent is required for any deal involving the U.S. assets of Entain, the company said.
“Any transaction whereby Entain or its affiliates would own a competing business in the U.S. would require MGM’s consent,” the company said in a statement. “MGM will engage with Entain and DraftKings, as appropriate, to find a solution to the exclusivity arrangements which meets all parties’ objectives.”
DraftKings has not returned CNBC’s request for comment.
Entain’s brands include U.K. poker and gambling companies Coral, Ladbrokes and PartyPoker.
DraftKings went public via a reverse merger with a special purpose acquisition company in 2020. The online gaming giant operates fantasy sports contests and sports betting.

Enjoyed this article?For exclusive stock picks, investment ideas and CNBC global livestreamSign up for CNBC ProStart your free trial now

WATCH LIVEWATCH IN THE APP More

Uber CEO Dara Khosrowshahi speaks at a product launch event in San Francisco, California on September 26, 2019.
Philip Pacheco | AFP via Getty Images

Check out the companies making headlines in midday trading.
Uber — The ride-hailing giant saw its stock surging 11.5% after the company boosted its third-quarter financial outlook in a regulatory filing. Uber’s bookings and adjusted earnings are now expected to be better than first reported. CEO Dara Khosrowshahi also told CNBC that he sees surging ride prices easing up by the end of the year.

DraftKings — Shares of DraftKings fell 7.4% after news that the online gaming giant made a bid to acquire U.K. sports betting company Entain. The offer is worth $20 billion and is largely in DraftKings stock, along with cash, sources told CNBC.
Seagen — The drugmaker’s shares popped 3.7% after announcing the Food and Drug Administration granted accelerated approval of its drug TIVDAK, which treats adult patients with recurrent or metastatic cervical cancer.
Activision Blizzard — Shares of the video gaming company sunk 4.1% after the Wall Street Journal, citing people familiar, reported that the Securities and Exchange Commission is investigating Activision Blizzard’s handling of employees’ allegations of sexual misconduct and discrimination.
ConocoPhillips — Shares of the energy company rose 4% the day after ConocoPhillips and Shell announced a $9.5 billion sale of West Texas oil field assets to ConocoPhillips. The deal gives ConocoPhillips an additional 225,000 acres of energy assets. The London-traded shares of Royal Dutch Shell also moved higher.
AutoZone – Shares of AutoZone rose 3.7% after the auto parts retailer reported strong quarterly earnings. Earnings per share of $35.72 beat analysts’ estimates of $29.88.

Big Lots — The retail stock dropped more than 5.9% on Tuesday after Piper Sandler downgraded Big Lots to neutral from overweight. The investment firm said in a note to clients that the end of fiscal stimulus and rising costs would hurt the retailer over the next year.
Johnson & Johnson — Shares of the drugmaker rose nearly 1% after announcing its Covid-19 booster shot is 94% effective when administered two months after the first dose in the U.S. The company said the booster increases antibody levels four to six times higher than just one shot.
— with reporting from CNBC’s Yun Li, Jesse Pound, Tanaya Macheel and Hannah Miao.

Become a smarter investor with CNBC Pro. Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today

WATCH LIVEWATCH IN THE APP More

JPMorgan Chase has acquired college planning platform Frank to deepen relationships with students and their parents, CNBC has learned exclusively.
Frank is an online portal with tools that help students apply for and negotiate financial aid, enroll in online courses and find scholarships.
It has served more than 5 million students at 6,000 institutions since it was launched by Charlie Javice in 2017.

JPMorgan Chase has acquired college planning platform Frank to deepen relationships with students and their parents, CNBC has learned exclusively.
Frank is an online portal with tools that help students apply for and negotiate financial aid, enroll in online courses and find scholarships. It has served more than 5 million students at 6,000 institutions since it was launched by Charlie Javice in 2017.

JPMorgan, the biggest U.S. bank by assets, has been acquiring start-ups at a steady clip since CEO Jamie Dimon declared last year that he would be “much more aggressive” in searching for takeovers. The firm has bought a string of fintech players to bolt on capabilities in sustainable investing, robo-advising and constructing tax-efficient portfolios.
But in some ways this deal most resembles another recent acquisition made by JPMorgan, that of restaurant review service The Infatuation. With both transactions, the company is diving deeper into a vertical in the hopes of generating loyalty with a specific cohort.
“We really have a desire to have lifelong, engaged relationships with all of our customers, and Charlie and her team have built an amazing connection to the student population,” Jennifer Roberts, head of Chase consumer banking, said in an interview. “While we do work with students today and obviously have branches in proximity to over 300 universities, this really gives us access to a much larger pool of students.”

Jen Roberts, consumer banking CEO at JPMorgan Chase
Source: JPMorgan Chase

One-fourth of Chase customers have children aged 6 to 17 who may eventually benefit from using Frank, and the bank hopes users will sign up with Chase for their first checking accounts, said Roberts.
Frank will keep its branding and continue to be led by Javice, who has joined JPMorgan as head of student solutions on the bank’s digital products team. The companies declined to say how much JPMorgan is paying for Frank, which has raised more than $20 million from investors since 2017.

Frank users tend to be from low-to-moderate income families, and many are women and first-time college attendees, according to a JPMorgan spokeswoman. The tools and content are free; Frank charges schools an annual fee, Javice said.
While many companies in the financial aid arena focus on providing private student loans and refinancing — potentially shackling users with enormous debts — Javice wanted Frank to help Americans apply for federal aid.

Arrows pointing outwards

“The goal was thinking the complete opposite of what all the student lenders and refinancers and lead generators in this market are,” Javice said. “It was thinking about financial wellness, similarly to health care, from a preventive lens. We are committed to doing that in terms of financial education and meeting students and parents where they are.”
JPMorgan exited private student lending in 2013 after the government overhauled the market, and the bank has no plans on returning to it, according to the spokeswoman.
Despite negotiating the deal for weeks, Javice said she hadn’t met her new colleagues in person until Monday, she said.
“Today is my first day employed by someone else, ever,” she said. “It’s a fantastic place to be, and I couldn’t find a better and bigger platform to be working to further.”

Become a smarter investor with CNBC Pro. Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today.

WATCH LIVEWATCH IN THE APP More

Klarna CEO Sebastian Siemiatkowski told CNBC that volatility in the stock market makes him “nervous” about the prospect of an IPO.
Global markets have been roiled lately by fears over embattled Chinese property developer Evergrande, which is on the brink of collapse.
Siemiatkowski said Klarna’s debut was “more likely to happen soon than it was a few years ago” — but the firm is in no rush.

LONDON — Klarna will likely wait for volatility in the stock market to settle before solidifying plans for an initial public offering, CEO Sebastian Siemiatkowski has told CNBC.
“The volatility in the market right now makes me nervous to IPO to be honest,” Siemiatkowski told CNBC’s Karen Tso at the London Tech Week conference on Monday. “I think it would be nice to IPO when it’s a little bit more sound. And right now it doesn’t feel really sound out there.”

Klarna is one of the largest players in the burgeoning buy now, pay later market. BNPL providers have flourished during the coronavirus pandemic by letting consumers split their purchases into three or four monthly instalments, typically without charging interest.
According to a report from Worldpay, the payment processor owned by FIS, BNPL accounted for 2.1% — or about $97 billion — of all global e-commerce transactions in 2020. The industry’s share of the e-commerce market is expected to double to 4.2% by 2024, Worldpay said in its report.
Last privately valued at $46 billion, Klarna is by far the most valuable “pure play” BNPL firm. Its two closest rivals in the public markets are Australia’s Afterpay — which is being acquired by Square for $29 billion — and San Francisco-headquartered Affirm.
Siemiatkowski has previously said Klarna may opt to list either sometime this year or in 2022. On Monday, emphasized the company was in no rush.
“It’s more likely to happen soon than it was a few years ago,” he said. “But we have no immediate plans.”

The main purpose of a float would be to give long-time employees and investors the chance to cash in their shares, Klarna’s boss said. Klarna’s private investors include Japanese conglomerate SoftBank, Chinese fintech giant Ant Group and even the American rapper Snoop Dogg.
As for where Klarna could eventually go public, Siemiatkowski says it hasn’t yet decided on a location. He said he likes the London market due to “the amount of expertise and the quality of the regulators” and “the fact that the U.K.’s a neutral place in the world.”

Klarna co-founder and CEO Sebastian Siemiatkowski speaks on stage at TechCrunch Disrupt Berlin 2019 on December 11, 2019.
Noam Galai | Getty Images

However, Siemiatkowski added he’s not sure institutional investors in London have a good enough understanding of high-growth tech companies like his. He gave the example of U.K. food delivery firm Deliveroo’s disastrous IPO, in which the company’s shares fell as much as 30% on the first day of trading.
“I don’t think what happened to Deliveroo is entirely fair,” Klarna’s founder said. “I think there were some aspects of that where it was misunderstood, and I think maybe it would have fared better in the U.S. as a consequence of that.”
Klarna and other BNPL firms are under increasing scrutiny in the U.K., where the government is looking to bring regulation to the industry. A consultation on the rules is expected to be released by the British Treasury in October. For its part, Klarna says it welcomes the move toward regulation.
Siemiatkowski said that, compared to credit cards, Klarna is about 20% to 30% lower than the industry average when it comes to default rates. “Overall if you look at the actual outcomes, this product works better than the other alternatives in the market,” he said.
However, he admitted the firm “could have done a better job” in focusing on areas other than credit in the U.K. market. In some European markets, for example, Klarna enables users to pay for products directly from their bank account, rather than via card transactions.

WATCH LIVEWATCH IN THE APP More

People wear protective masks in front of Uber Technologies Inc. headquarters in San Francisco, California, U.S., on Wednesday, June 9, 2021.
David Paul Morris | Bloomberg | Getty Images

Take a look at some of the biggest movers in the premarket.
Uber (UBER) — Uber shares rose 5.7% in the premarket after the ride sharing company revised its financial outlook higher for the third period. The company now expects to report between $22.8 billion and $23.2 billion in gross bookings for the third quarter, according to an SEC filing. It previously forecast $22 billion to $24 billion on its second-quarter earnings call.

Johnson & Johnson (JNJ) — Johnson & Johnson shares gained 0.8% in early morning trading after the pharmaceutical company said its Covid-19 booster shot is 94% effective when administered two months after the first dose in the U.S. The company said the booster increases antibody levels four to six times higher than just one shot
Apple (AAPL) — Shares of Apple ticked up 0.9% in the premarket after a Wall Street Journal report that the technology company is working on iPhone features to help identify depression and cognitive decline. The features would use sensor data to help detect these health issues, the Journal said, citing people familiar with the matter.
Chevron (CVX), Exxon Mobil (XOM) — Oil stocks rebounded in the premarket as crude prices rose. Chevron and Exxon Mobil each gained more than 1% in the premarket. The stocks were hit during Monday’s sell-off as concerns about global economic growth sent oil lower.
Enphase Energy (ENPH) — Enphase Energy shares rose 1.8% in early morning trading after KeyBanc initiated coverage of the stock with an overweight rating. The firm said the solar energy play had a solid base business and growing opportunities.
Vail Resorts (MTN) — Vail Resorts shares added 1.7% in the premarket after KeyBanc upgraded the stock to overweight from sector weight. KeyBanc said Vail Resorts should benefit from strong demand for winter vacations.

Big Lots (BIG) — Shares of Big Lots fell 1.3% in early morning trading after Piper Sandler downgraded the retailer to neutral from overweight. The firm said the end of fiscal stimulus will hurt Big Lots.

Become a smarter investor with CNBC Pro. Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today

WATCH LIVEWATCH IN THE APP More

The start-up is set to announce Tuesday that it secured a U.S. broker-dealer license, enabling it to compete with the likes of Robinhood and Square in the red-hot world of retail trading, according to CEO and founder Nik Storonsky.
The service will be available in a few months and will eventually allow for fractional share purchases and investing spare change from card transactions.
Like peers including Robinhood, Revolut will earn payment for order flow revenue in the U.S., according to a spokeswoman.
Revolut will eventually aim for a public listing in the U.K., U.S. or perhaps a dual listing, said Storonsky.

Revolut CEO Nikolay Storonsky speaks onstage at the TechCrunch Disrupt conference in San Francisco, California.
Kimberly White | Getty Images

Revolut, the global fintech player valued at $33 billion, will soon offer commission-free stock trading to U.S. customers for the first time, CNBC has learned.
The start-up is set to announce Tuesday that it secured a U.S. broker-dealer license, enabling it to compete with the likes of Robinhood and Square in the red-hot world of retail trading, according to CEO and founder Nik Storonsky.

Revolut has grown to become one of the dominant European consumer fintech firms since its 2015 founding by continually piling on new features. The app started out as a way for people to avoid currency conversation fees while traveling, but quickly added banking, trading and crypto features among dozens of products. It now has more than 16 million customers.
That approach helped it garner a massive $33 billion valuation in July from investors including Softbank and Tiger Global, firms that see London-based Revolut as a contender to create the first global financial super-app. But to get there, it needs to crack the U.S. market, where competitors from Robinhood to Chime have already staked out corners of the fintech ecosystem.
“We are building a single app where people can manage all aspects of their finances, from banking and foreign exchange, to cryptocurrency and stock trading,” Storonsky said. “We’re eager to break down common barriers to entry around stock trading such as account minimums and complex interfaces.”
Revolut launched in the U.S. last year just as the pandemic began, and has since added high interest savings, small business banking, U.S.-Mexico remittances and cryptocurrency trading.

Revolut’s trading feature lets users buy or sell popular U.S. stocks including Apple, Tesla and Beyond Meat.

Retail stock trading may give it the broadest appeal yet, however: More than 20 million new investors have entered the fray since last year, according to JMP Securities. Amid the trading boom, which has benefited disruptors and legacy players alike, others are looking to jump in: PayPal is working on its own stock-trading platform, CNBC reported last month.

Revolut is currently testing its stock trading service, which will allow users to buy ETFs and shares of NYSE and NASDAQ listed companies, according to Ron Oliveira, head of Revolut’s U.S. business. It will be available in a few months and will eventually allow for fractional share purchases and investing spare change from card transactions.
The broker-dealer license took 16 months to acquire through the Financial Industry Regulatory Authority, Oliveira said. Specifically, Revolut is approved to be an “introducing broker” and will lean on New Jersey-based fintech DriveWealth to clear the trades, just as it does for Revolut’s European trading business, he said.
FINRA “took a deep dive, they asked lots of questions because they wanted to see exactly what the consumer experience was,” Oliveira said. “It took them a period of time to get comfortable, but we’re very happy they got there.”

Payment for order flow

While a Revolut executive said in 2019 that its European operations wouldn’t lean on payment for order flow, an industry practice where market makers pay brokerages for client orders, the U.S. business is shaping up to have a different approach.
Revolut will earn payment for order flow revenue in the U.S., according to a spokeswoman. The tactic is one of the main ways Robinhood earns revenue, and it’s a practice under scrutiny by Securities and Exchange Commission Chair Gary Gensler.
Revolut is also working with regulators on its U.S. bank charter application in California, first reported by CNBC last year, said Oliveira. That process isn’t likely to be completed this year, he said.
The company will eventually aim for a public listing in the U.K., U.S. or perhaps a dual listing, said Storonsky. After raising $800 million in July, Revolut should be done raising money from private investors, he said.
“That will be my hope, because the reality is we are generating free cash flow,” the founder said. “We shouldn’t need any additional capital from external investors.”

Become a smarter investor with CNBC Pro. Get stock picks, analyst calls, exclusive interviews and access to CNBC TV. Sign up to start a free trial today.

WATCH LIVEWATCH IN THE APP More

Millions of shoppers now use a buy now, pay later, or BNPL, service to finance their purchases. And the options are more varied than ever.
BNPL plans, also known as point-of-sale loans, let shoppers pay for their items over a period of installments.
BNPL accounted for 2.1% — or about $97 billion — of all global e-commerce transactions in 2020, according to Worldpay.

Klarna logos displayed on a laptop and phone screen.
Jakub Porzycki | NurPhoto via Getty Images

Buy now, pay later is having a moment.
Millions of shoppers now use a buy now, pay later, or BNPL, service to finance their purchases. And the options are more varied than ever — Klarna, Affirm and Afterpay are just a few of the many providers in the space.

Meanwhile, big companies are jumping on the bandwagon, with PayPal launching its own product, Amazon and Apple partnering up with Affirm, and Square agreeing to buy Afterpay in a $29 billion deal.
BNPL companies tout their service as a better alternative to credit cards. But critics are worried many people are spending more than they can afford and that some may not even realize they’re getting into debt.
So what is buy now, pay later? And why is it suddenly booming?

What is BNPL?

BNPL plans, also known as point-of-sale loans, let shoppers pay for their items over a period of instalments.
The concept isn’t new. Instalment plans have been around for years, known as “layaway” in the U.S., or “lay-by” in Australia. These agreements let people spread the cost of items over a certain amount of time.

BNPL is similar in that consumers get the product upfront and pay for it in incremental amounts, often interest-free.
Buyers can opt to use a BNPL service when checking out online with just a few clicks. They typically pay the first instalment then, and get invoiced the remaining sum during a period of three to four months.
BNPL providers often add a checkout button to a retailer’s website and then take a cut from the merchant on each transaction. Experts say retailers are incentivized to agree to this as it often leads to higher average order value and better conversion rates.
Some BNPL firms also generate income from late payment fees and interest on longer-term instalment plans.
The advantage for shoppers is that they can buy a more expensive item than they might normally be able to pay for in one go — say, a $300 jacket — and spread the cost of their purchase over monthly instalments.

Why is it so popular?

One word: coronavirus.
The pandemic resulted in many brick-and-mortar retailers being forced to temporarily shut down and saw consumers spend much more of their time at home.
This accelerated the growth of online shopping. According to a report from Worldpay, the payment processing firm owned by FIS, global e-commerce transactions totaled $4.6 trillion last year, up 19% from 2019.
BNPL accounted for 2.1% — or about $97 billion — of that sum. This figure is expected to double to 4.2% by 2024, according to Worldpay.
While BNPL plans had already been growing in popularity prior to the pandemic, a shift in consumer spending habits and surging e-commerce adoption gave the market a significant lift.
That’s been a boon to a number of companies in the space, with Klarna reaching a $46 billion valuation in a recent private fundraising round, PayPal acquiring Japanese firm Paidy for $2.7 billion and Square snapping up Afterpay.

What are the risks?

One of the main criticisms of BNPL is that it could encourage shoppers to spend more than they can afford. Pay-later plans are particularly popular with millennial and Gen Z shoppers.
Which?, a consumer advocacy group in the U.K., says it conducted an investigation which found that almost a quarter of BNPL users spent more than they initially intended to because the service was available.
There are also fears over how easily people can get into debt, sometimes without even realizing, since there are no hard credit checks involved.
The sector has been compared to controversial payday loans that allow short-term borrowing, often with high interest rates. While BNPL is typically interest-free, some providers charge high late payment fees.
BNPL providers say they have safeguards in place to make sure users don’t overspend. Klarna, for example, sets spending limits on a case-by-case basis.
“For every transaction, we take a new position and look at how consumers are using this product,” Sebastian Siemiatkowski, Klarna’s CEO, told CNBC.
“If they’re using it in a positive way, we’re able to expand their ability to use it. If not, we’re going to restrict their ability to use it or stop their ability entirely to use it.”
But critics argue BNPL needs regulations to sufficiently protect consumers. The U.K. government is seeking to rein in the industry with a range of proposals including affordability checks on customers. A consultation on the rules is expected to be released in October.
For their part, Klarna and Clearpay — the U.K. arm of Afterpay — say they welcome the move toward regulation.

WATCH LIVEWATCH IN THE APP More