Finance

In this articleHOODShares of Robinhood closed down more than 8% in its Nasdaq debut, after pricing near the low end of its IPO range.The online brokerage started trading at $38 per share, the low end of its range, valuing the company at roughly $32 billion. After dropping as much as 10% and ending the session at $34.82, Robinhood’s market capitalization was about $29 billion.Trading for the first time under the ticker HOOD, the online brokerage hit the public markets it seeks to democratize for amateur investors.Robinhood, whose stock trading app has surged in popularity among retail investors, sold shares in its initial public offering at $38 a piece on Wednesday evening. Robinhood is valued at 10.5 times forward EBITDA.The company sold 52.4 million shares, raising close to $2 billion. Co-founders Vlad Tenev and Baiju Bhatt each sold about $50 million worth of stock. The company was last valued in the private markets in September at $11.7 billion.Goldman Sachs and JPMorgan Chase are the investment banks that led the deal. Underwriters will have an option to buy an additional 5.5 million shares.Unlike many recent IPOs, Robinhood was profitable last year, generating net income of $7.45 million on net revenue of $959 million in 2020, versus a loss of $107 million on revenue of $278 million in 2019.However, the brokerage had a loss of $1.4 billion in the first quarter of 2021 tied to emergency fundraising-related losses during January’s GameStop trading mania. The company generated $522 million in revenue in the quarter, up 309% from the $128 million earned a year earlier.Rapid growthFounded in 2013, the free trading pioneer forced the brokerage industry to drop commissions on retail trading, lowering the barrier for millions of new investors to access the stock market.The app experienced record levels of new, younger traders entering the stock market during the coronavirus pandemic. That surge has continued into 2021, marked by frenzied trading around so-called meme stocks. The millennial-favored stock trading app found itself in the middle of a firestorm in January amid the short squeeze in GameStop, which was partially fueled by Reddit-driven retail investors.Robinhood — which offers equity, cryptocurrency and options trading, as well as cash management accounts — had 18 million clients as of March 2021, up from 7.2 million in 2020, an increase of 151%. The company estimates funded accounts reached 22.5 million in the second quarter.Robinhood estimates its 18 million retail clients and more than $80 billion in customer assets in the first quarter ballooned to 22.5 million users and more than $100 billion in the second quarter of 2021.Assets under custody have jumped to roughly $80 billion from $19.2 billion last March and are expected to top $100 billion in the second quarter.Robinhood is the third-largest brokerage based on number of funded accounts, behind Fidelity and Charles Schwab, which purchased TD Ameritrade last year. Other competitors include Interactive Brokers and newer services like Webull and SoFi. Charles Schwab has a market capitalization of nearly $130 billion, and Interactive Brokers has a market valuation of about $26 billion.The Menlo Park, California-based company reserved 20% to 35% of its IPO shares for its own clients, which CEO Tenev said he expects will be one of the largest retail allocations ever.IPO shares have historically been set aside for Wall Street’s institutional investors or high net worth individuals. Retail traders typically don’t have a way to buy into newly listed companies until those shares begin trading on an exchange, so they miss out on the pop.Robinhood’s loose lock-up structure is also unorthodox. Employees will be able to sell 15% of their shares immediately after the public debut, compared with the traditional six-month lock-up period. After three months, investors can sell another 15%.DST Global, Index Ventures, NEA and Ribbit Capital are some of Robinhood’s biggest venture capital investors.Road aheadDespite its rapid growth in the past few years, Robinhood has some future risks.Most notably, the Securities and Exchange Commission is reviewing payment for order flow, or the money brokerage firms receive for directing clients’ trades to market makers. This controversial practice accounted for roughly 80% of Robinhood’s revenue in the first quarter.The stock trading company collected a record $331 million in payment for order flow in the first quarter of 2021, according to an SEC filing.”We think payment-for-order flow is a better deal for our customers, vs. the old commission structure. It allows investors to invest smaller amounts without having to worry about the cost of commissions,” Robinhood CFO Jason Warnick said Saturday at the company’s virtual roadshow. However, Warnick said Robinhood wants to be fully engaged in the regulatory and political discussion about PFOF. He said if the model changed, Robinhood and the industry would be able to adapt.Robinhood —which benefits from more speculative trading practices from its clients — also warned of a slowdown in trading revenue and account growth as the retail trading boom simmers. Options trading accounts for about 38% of revenue while equities and crypto are 25% and 17% of revenues, respectively.”We expect our revenue for the three months ending September 30, 2021, to be lower, as compared to the three months ended June 30, 2021, as a result of decreased levels of trading activity relative to the record highs in trading activity, particularly in cryptocurrencies,” Robinhood said in an amended prospectus released last week.Robinhood also said it anticipates the growth rate of new clients will be lower in the third quarter of 2021 from the second quarter.Robinhood is a five-time CNBC Disruptor 50 company and topped this year’s list.  More

In this articleAMZNSWKSGILDTMUSPINSA worker assembles a box for delivery at the Amazon fulfillment center in Baltimore, Maryland, U.S., April 30, 2019.Clodagh Kilcoyne | ReutersCheck out the companies making headlines Thursday after the bell: Amazon — Amazon shares fell more than 6% in after-hours trading after the company reported its first revenue miss in three years and gave weak third-quarter guidance. For the three months ending Sept. 30, Amazon said it expects to book sales between $106 billion and $112 billion, well below consensus estimates of $119.2 billion.Skyworks Solutions — The California-based semiconductor company reported fiscal third-quarter earnings per share of $2.15, just ahead of the $2.14 per share anticipated by analysts, according to Refinitiv. Revenues also just managed to top estimates. The company’s stock dropped 5% in the overnight session despite the company’s strong fiscal fourth-quarter guidance.Gilead Sciences — The biopharmaceutical company saw its equity fall just over 2% even after it leapt to a profit in the second quarter. Gilead said its sales increase 21% thanks to demand for its therapies like Covid-19 treatment remdesivir and its hepatitis C virus products. Its net profit was $1.52 billion for the quarter, compared with a loss of $3.34 billion a year earlier.T-Mobile — Shares of T-Mobile dipped more than 2% in extended trading after the telecommunication company posted a modest beat on revenues during the second quarter. Sales increased 13% to $19.95 billion compared with the $19.34 billion expected by analysts polled by Refinitiv.Pinterest — Pinterest shares tanked 16% in extended trading after the social media service reported monthly active user figures below Wall Street’s expectations for its second-quarter earnings. The company also said it expects that third-quarter revenues will grow in the “low-40% range” year over year, below where some analysts had forecast. More

In this articleHLT9984.T-JPDIDIYUMHilton Worldwide Holdings Inc. signage is displayed outside one of the company’s hotel locations in San Francisco.David Paul Morris | Bloobmerg | Getty ImagesCheck out the companies making headlines in midday trading.Zoom Video — Shares of the teleconferencing company jumped 4% after KeyBanc upgraded the stock to overweight from sector weight. The investment firm said in a note that the shift to hybrid work should create more demand for Zoom from corporate clients.Uber — Shares of the ride-hailing company fell 3% after CNBC reported SoftBank is selling about one-third of its Uber stake, in part to cover losses on its investment in Chinese ride-hailing company Didi. It’s planning to sell 45 million shares, which will have a 30-day lock-up.Didi — The Chinese ride-hailing company saw its shares jump more than 11% after it denied a Wall Street Journal report that said it could go private amid scrutiny from Chinese regulators. Didi went public on the New York Stock Exchange in June, and the stock’s price has trended downward since Chinese authorities announced a cybersecurity review of the business.Yum Brands — Shares of Yum Brands added roughly 6% after the company’s second-quarter earnings report beat Wall Street expectations. The company reported earnings of $1.16 per share on revenue of $1.6 billion. Analysts expected earnings of 96 cents per share on revenue of $1.48 billion. Same-store sales increased at all three of its major brands: Kentucky Fried Chicken, Taco Bell and Pizza Hut.Qualcomm — The semiconductor and telecoms company’s stock jumped 6% after reporting earnings Wednesday night. It reported $1.92 per share, beating the consensus estimate by 24 cents. It also beat revenue estimates and gave an upbeat forecast. Morgan Stanley confirmed its overweight rating on the stock Thursday saying it sees “surprising” upside in chipsets.PayPal — PayPal shares are down more than 6%, despite beating analysts’ estimates by 3 cents, at $1.15 per share, in its second-quarter earnings report Wednesday evening. The payments giant gave a lower-than-expected outlook and noted that eBay is transitioning off PayPal to its own payment platform.Hilton — The hotel brand’s shares rose 3.5% after the company reported quarterly earnings of 56 cents per share, which beat analysts’ estimates by 16 cents. Hilton said it expects leisure and business travel demand to increase in the back half of the year.Northrop Grumman — Shares of the aerospace and defense company rose 1.5% following its earnings report, which showed $6.42 per share, 58 cents higher than analysts’ projections, for the second quarter. The company also beat on revenue and raised its full year guidance.Facebook — The social media giant’s stock fell 4% after it warned that its revenue growth could slow in the near term. The company beat expectations on the top and bottom lines for its second-quarter report, but its user metrics came in near Wall Street projections.Ford Motor — Shares of the automobile company jumped more than 3.5% after Ford raised its 2021 outlook after reporting a surprise profit in the second quarter. However, its revenue slightly missed expectations due to the ongoing global shortage of semiconductor chips, which continues to disrupt the automaker’s production.Tesla — Tesla shares jumped 4.5% after Morgan Stanley kept its overweight rating on the company and said its second-quarter results may be bearish for the auto industry as a whole. Even though it may “take several years to play out,” it’s prepared to see the electric vehicle maker price different products as low as $20,000 or even $10,000 “this decade.” — CNBC’s Hannah Miao, Yun Li and Jesse Pound contributed reportingBecome 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 More

Traders wearing masks work inside posts, on the first day of in-person trading since the closure during the outbreak of the coronavirus disease (COVID-19) on the floor at the New York Stock Exchange (NYSE) in New York, U.S., May 26, 2020.Brendan McDermid | ReutersFor a few glorious weeks, Wall Street employees who were vaccinated against Covid-19 could ditch their masks at the office.That appears to be ending after the Centers for Disease Control and Prevention recommended this week that even fully vaccinated people should wear masks indoors in areas with significant transmission rates.Citigroup told employees late Wednesday in a memo that they will now be required to wear masks in U.S. corporate offices, according to a person with knowledge of the situation. Other Wall Street firms including Morgan Stanley are closely monitoring the situation, said another person with knowledge.The rise of the more contagious delta variant of Covid-19 has forced companies to reassess their plans to return employees to physical offices. Some, including Facebook, Alphabet and The Washington Post, are requiring employees to be vaccinated. Others such as Lyft have pushed back the date it expects employees back, saying it now anticipates them returning in February.Citigroup, the third-biggest U.S. bank by assets, is following CDC guidance, according to the person who declined to be identified speaking about the company’s plans.Back in May, the CDC said that fully vaccinated adults didn’t need to wear masks or socially distance indoors, and Citigroup had been following that protocol for corporate offices, although masks have been required at branch locations, the person said.Employees sitting at their desks or eating in a cafeteria don’t need to wear masks, the person added. Citigroup declined to comment on the record about its employee policy, which was reported earlier by Bloomberg.Financial firms have generally been more aggressive than other industries in touting a return to office life, based on concern that the collaborative culture of Wall Street banks was beginning to degrade during the remote work era.JPMorgan Chase, the biggest U.S. bank by assets, had no changes as of Thursday from its latest guidance, which allowed the vaccinated to relinquish masks and daily health attestations as of this month, according to a person familiar with its planning.Bank of America is maintaining its guidance that employees should use masks in areas where social distancing isn’t possible like elevators, said a person with knowledge of the bank. The firm still plans to bring back most of its employees after Labor Day, the person said.This story is developing. Please check back for updates.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. More

In this articleHOODRobinhood CEO and co-founder Vlad Tenev on Thursday defended retail clients who invest in so-called meme stocks, saying the phenomenon gives embattled companies access to capital they otherwise wouldn’t have.”I think it’s a real thing. There’s customers that love these companies, they want them to thrive,” Tenev told CNBC’s Andrew Ross Sorkin on Thursday ahead of the stock trading app’s Nasdaq debut. “You’re seeing [meme stocks] also get resources that allow them to hire really good management teams, in some cases, and then build for the future.”Robinhood helped draw unprecedented levels of new, younger traders to the stock market during the pandemic. That surge has continued into 2021, marked by frenzied trading around meme stocks.The millennial-favored stock trading app found itself in the middle of a firestorm in January amid the short squeeze in GameStop, which was partially fueled by Reddit-driven retail investors.”I think what’s interesting with what we’ve seen in retail investing over the past year is that a lot of these companies have been hit hard by the pandemic,” Tenev said.” “It started with some of the airlines and then followed with some of the retailers, some movie chains and brick and mortar. You have the institutions that are basically writing these companies off and then retail investors coming in and keeping them up and supporting them.”At the height of the meme stock surge, Robinhood restricted trading of certain securities due to increased capital requirements from clearing houses. Robinhood raised more than $3.4 billion in a few days to shore up its balance sheet.”I don’t know if people have understood the ramifications of what high retail participation in the markets means but I think fundamentally it’s a very good thing,” added Tenev.Trouble selling sharesRobinhood, which is expected to start trading Thursday under ticker HOOD, sold shares in its IPO at $38 a piece — the low end of the $38 and $42 range — valuing the company at about $32 billion. The online brokerage sold 52.4 million shares, raising close to $2 billion.It was not until roughly 9 a.m. ET that Robinood and its underwriters were finished allocating its IPO shares, an unusual circumstance for a syndicate at that point in the process. Goldman Sachs and JPMorgan Chase are the lead investment banks on the deal.An institutional source said, “They’re begging us to take Robinhood shares,” CNBC’s David Faber said on “Squawk on the Street” before Thursday opening bell. “And I said ‘what do they got left?’ and he said ‘lots,'” Faber added.Robinhood — which planned to allocate 20% to 35% of its IPO shares to its retail clients — was reportedly sending messages late Wednesday to those retail investors about buying shares, according to CNBC’s Leslie Picker.”Mad Money” host Jim Cramer said Robinhood’s IPO is a “must-work deal.””I think retail sentiment is on the line because these are people who want very much to make money and don’t really understand the process because the process is pretty arcane,” Cramer said.Robinhood is a five-time CNBC Disruptor 50 company and topped this year’s list. Sign up for our weekly, original newsletter that offers a closer look at CNBC Disruptor 50 companies like Robinhood, before they go public. More

EARLIER THIS summer Turkey’s president, Recep Tayyip Erdogan, announced that he had asked his central-bank governor, the fourth he has appointed in two years, to begin slashing interest rates. Mr Erdogan even provided a date for the start of the easing cycle. “We need to see July, August for interest rates to start coming down,” he said. He may have to wait much longer. A week ahead of the bank’s monetary-policy meeting on July 14th, the country’s statistical authority (TUIK) revealed that inflation had swollen to 17.5% in June, beating even the most pessimistic forecasts. That is more than three times the central bank’s inflation target of 5%, and close to the benchmark lending rate, 19%. In the event, the bank had no choice but to keep rates unchanged. It will almost certainly do the same in August.Many Turks are convinced that the situation is even worse than the data suggest. According to a recent poll, a whopping 83% believe the true inflation rate is higher than the official one. The Inflation Research Group, an independent group of academics, believes it to be in the region of 40%. The group’s own index relies on price data gathered from online retailers and updated several times a day, says Veysel Ulusoy, the academic heading the project. Its basket of goods overlaps largely with TUIK’s, but excludes items like alcohol, education and health, where the government is able to control prices. Mr Ulusoy insists his price index is more consistent with consumer and market sentiment.For their troubles, he and his colleagues may face charges. In May TUIK filed a criminal complaint against the researchers, claiming that the metadata on their website did not meet legal standards. The group has been “misinforming the public” and “undermining trust in official statistics”, the complaint says. That trust appears to be long gone.Powered by stimulus spending and booming demand, inflation is mounting across most economies. But Turkey’s problem has much deeper roots. Double-digit inflation took hold four years ago, the result of cheap credit, bad monetary policy and a currency crisis, and has not relaxed its grip since. This has revived fears of a return to the 1970s, when inflation hovered near 20% for a few years, only to explode into triple digits. It took three more decades, and a painful economic crisis in 2001, to bring it below 10%.The central bank has pledged to keep prices in check. But under pressure from Mr Erdogan, it will raise rates only as a last resort, and possibly too late. “If we can’t control inflation at the current levels, we may lose control,” warns Kerim Rota, a former treasury official and one of the founders of a fledgling opposition party. Mr Rota says he retains some faith in the official data. “But even with the TUIK figures”, he says, “this is a disaster.” ■This article appeared in the Finance & economics section of the print edition under the headline “Pick a number” More

GREEN TYPES had hoped that the recovery from the pandemic might jump-start the world’s decarbonisation efforts. Governments say they want to build back better and greener, and have announced ambitious plans to kick the fossil-fuel habit. In Europe, officials have unveiled policies to achieve a 55% reduction in greenhouse-gas emissions, compared with their level in 1990, by the end of this decade. On July 21st Japan announced plans for fossil fuels to fall from 76% of its power-generation mix in 2019 to 41% by 2030.Despite the grand talk, though, fossil fuels are resurgent. A recent report from the International Energy Agency makes for sobering reading. Global electricity demand is forecast to grow by nearly 5% in 2021 and by 4% in 2022. Fossil-fuel-based power will probably make up 45% of the extra demand this year and 40% next year. (By contrast, it made up about a quarter of new power generation in 2019.)The revival of the American economy has led to strong demand for natural gas from industrial firms. In Asia and Europe, a hot summer has boosted demand for imports of liquefied natural gas. Citigroup, a bank, calculates that European gas-storage levels, an indicator of the tightness of the global market, are below those seen in the past five years. S&P Global Platts, a research firm, reckons that demand in parts of Asia and Europe partly reflects the need to replenish stores ahead of the winter.Coal markets are heating up, too: the price of one benchmark has nearly trebled so far this year. Chinese electricity demand, which relies heavily on the sooty stuff, shot up to a record in mid-July. Production bottlenecks in South Africa and Colombia have not helped. Anastacia Dialynas of Bloomberg NEF, a data outfit, reckons that high natural-gas prices may encourage power producers to favour coal-burning plants over gas-fired generators. America’s Energy Information Administration forecasts that coal’s share of domestic electricity production will rise to 26% this year, from 22% in 2020. Steelmaking, which uses a lot of coal, provides another boost. Commerzbank, a German lender, predicts that global steel output could hit a record high this year.Politics has added fuel to the fire. In October China banned coal imports from Australia. Some 70% of its usual imports of seaborne metallurgical coal (used to make steel) became off-limits, says Jim Truman of Wood Mackenzie, a consultancy. Steel mills along China’s coast rushed to find alternatives. But local sources proved insufficient, and imports from Mongolia were curtailed by covid-related border closures.The price spike may ease over time. In May China’s central government ordered provinces to curb electricity use, which should reduce the demand for fuel. Supply bottlenecks will be overcome. An expected boost to American gas production should eventually refill storage units worldwide.Even so, the fossil-fuel surge offers a warning. Hopes that the world would permanently lower its energy use after the global financial crisis of 2007-09 came to nothing. In late July this year a gathering of environment ministers from the G20 group of countries in Italy turned into farce, with officials from China, India, Russia and Saudi Arabia blocking an agreement to end fossil-fuel subsidies and phase out the use of coal. Build back better, come back greener may be an admirable goal, observes David Fyfe of Argus Media, an industry publisher, but unless it is accompanied by serious policies, “coal will remain the default fuel for base-load power in many countries.” ■This article appeared in the Finance & economics section of the print edition under the headline “Fired up” More

SEVENTEEN MONTHS into the covid-19 pandemic, plenty of questions about the catastrophe remain unanswered. It is still unclear how SARS-CoV-2 originated, for instance. Another puzzle is why some areas have had less destructive epidemics than others. Why has Florida had fewer deaths per person from covid-19 than the American average, even though restrictions there have been looser for longer? But researchers are getting closer to the “magic” variable: the factor that does most to explain variance in deaths from the virus. It turns out that this has little to do with health measures, climate or geography. Instead it relates to economics.The huge literature on the determinants of covid-19 infections and deaths finds that many widely assumed relationships do not always hold in the real world. Everyone knows that the old are most at risk; but Japan, where 28% of people are over the age of 65 compared with 9% globally, has seen remarkably few deaths so far. Some studies suggest that places that had bad flu seasons before the pandemic suffered less since; but other researchers have called that conclusion into question. There is no consistent correlation between the toughness of lockdowns and cases or deaths.Faced with these surprising results, a hunt has begun that is as morbid as it is nerdy. Wonks are searching for less obvious variables that do more to explain variation in deaths from covid-19. And so far the most powerful of them all is inequality—usually measured as the Gini coefficient of income, where zero represents perfect equality and one represents perfect inequality.In a recent exercise Youyang Gu, a data scientist, ran multiple versions of a model that seeks to find correlations between 41 different variables and American state-level deaths from covid-19. Only three variables “consistently have non-zero coefficients”, he finds: inequality, population density and nursing-home residents per person. And of those three, inequality has the biggest effect.Look around the world, and it seems that Mr Gu may be on to something. Deaths from covid-19 have been lower in egalitarian Scandinavia (even in Sweden, which imposed few restrictions) than for Europe as a whole. France, where the Gini is 0.29, has seen far fewer excess deaths than neighbouring Britain, where it is 0.34. New York state has both extremely high inequality and a huge covid-19 death toll; Florida is less exceptional on both counts.Few other researchers rank the variables in the way that Mr Gu does. Yet our survey of the dozens of papers investigating the determinants of the toll from covid-19 finds that inequality has consistently high explanatory power. A recent study by Frank Elgar of McGill University and colleagues, looking at 84 countries, finds that a 1% increase in the Gini coefficient is associated with a 0.67% increase in the mortality rate from covid-19. Another, by Annabel Tan, Jessica Hinman and Hoda Abdel Magid of Stanford University, looks at American counties. They find that the association between income inequality and covid-19 cases and deaths varied over 2020 but was generally positive; higher inequality tends to lead to more suffering.There is a lot less research on the potential reasons behind this intriguing relationship. Three sound plausible. The first relates to pre-existing health. A study in 2016 by Beth Truesdale and Chris topher Jencks of Harvard University found “modest evidence” of a link between higher income inequality and lower life expectancy. This may be because of what economists call a “concave” relationship between health and income: giving a rich woman an extra dollar in income probably improves her health by less than removing a dollar from a poor man harms his. People in worse health tend to suffer more from covid-19 (and indeed some other research has drawn links between inequality and pre-existing conditions that may aggravate the disease, such as obesity).The second potential factor is workplace relations. Workers in relatively egalitarian countries tend to have more bargaining power, and may therefore find it easier to air and redress concerns with employers. This can have its disadvantages, but it may help stop practices that aid the spread of covid-19. In Sweden, a country with strong workers’ rights, frontline (or “essential”) workers, such as meat-packers and police officers, have not on average faced a higher risk of dying from covid-19 than others, potentially limiting the overall number of deaths. This is in contrast to results from America, Britain and Canada, which are more lightly regulated. One study in California found that people in some jobs were much more likely to die of covid-19 than those in other occupations. Chefs and taxi drivers saw among the biggest increases in excess deaths in 2020.The third factor relates to social capital. In areas of high inequality people are more likely to say they distrust strangers or to have little interest in civic engagement. Research published by the IMF in 2016 suggests why: in places where people have very different lifestyles, they see little in common with each other. Weak social capital almost certainly reduces people’s willingness to comply with virus-control measures, such as self-isolation or mask mandates, for which the private incentives to obey are weak.Equal opportunityThere were already good reasons to think that inequality, at least in some countries, was too high. This is another. Yet turning around the income-distribution supertanker can hardly be done overnight, and some solutions to income inequality, such as raising taxes, bring trade-offs of their own. In the meantime, governments need to tailor their pandemic response to take account of inequalities. That could include, for instance, changing the economic incentives to stay at home if infectious—say, by using self-isolation payments—or investing more in poor children’s health to make them healthier adults. Without these improvements, high inequality is likely to continue to mean greater vulnerability to pandemics. ■This article appeared in the Finance & economics section of the print edition under the headline “Establishing the cause of death” More