Finance

IT WAS BUSINESS as usual at the European Central Bank (ECB). At the press conference on July 22nd that followed its regular monetary-policy meeting, Christine Lagarde, the bank’s boss, might have been hoping for a few plaudits. The ECB had recently announced that it was changing to a symmetric inflation target, bringing it into line with practice everywhere else. No such luck. Many of the questions were critical in nature. Why is the ECB not doing more? How split are its members? And so on.As dispiriting as this was for Ms Lagarde, the focus on issues of fine-tuning is rather cheering. Mario Draghi, her predecessor as ECB president, spent a lot of time fighting to keep the euro zone together. These days it looks a lot more solid, a lot more normal. The new inflation target is only one sign of this. Another is that the active use of fiscal policy is no longer anathema. The next-generation EU fund (NGEU), which will disburse €750bn ($880bn) to member states, affords a degree of burden-sharing between countries. And the politics of “Europe” are notably less ugly. Populists in France and Italy no longer talk about leaving the euro or the EU.This is progress. Only a few years ago a common opinion among American investors was that the euro would break up. If the euro zone is to become truly normal, though, a corollary is that the bonds issued by its members’ governments should be almost interchangeable. For some countries, the spread (or excess yield) over German bunds has already narrowed considerably. France trades at 30 basis points (0.3 percentage points) over ten-year bunds. Ireland’s spread is 45 basis points. The widest spreads are found on Italy’s government bonds, or BTPs. A ten-year BTP has a spread of around 110 basis points over the equivalent bund. But a case can be made that these will narrow further.It begins with the changes at the ECB. After the completion of a recent strategy review, the central bank tweaked its inflation goal. Instead of “below, but close to, 2%”, it will aim at a symmetric target. Inflation below 2% will be as undesirable as inflation above it. Reasonable people might have expected the bank to further relax monetary policy as a consequence. Its most recent forecast, made in June, was for sub-2% inflation over much of the next few years.What the bank offered instead was a fresh dose of “forward guidance”—a pledge that it would keep interest rates at their present level, or lower, until it saw durable 2% inflation on the horizon. This did not imply that interest rates would be “lower for longer”, said Ms Lagarde. Rather, it was a commitment that they would not be increased prematurely. Any expansion of its various bond-buying schemes would have to wait until fresh inflation forecasts were made in September.Perhaps it is prudent to wait. After all, the reopening of America’s economy has brought with it a string of big upside surprises to inflation. But the betting is that things will be different in the euro zone. Fiscal support there has been in the form of job subsidies rather than the cash transfers that fuelled a surge of spending in America. And there has been nothing quite on the scale of the $1.9trn package that Congress passed in March. A reasonable bet, then, is that the ECB will extend its bond purchases to meet the new target, or at least not curtail them abruptly.If it does, spreads are likely to narrow. Italy’s have the furthest to go. Its bonds have been an outlier for a reason. Italy is a big, sluggish economy with a heavy public-debt burden. A wider spread is justified by the greater risk of default.Yet a state of affairs in which euro-zone bonds, bar Italy’s, look more like bunds would be an odd one. It would imply that the euro could survive a default or exit by Italy. That is a bold assumption. If Italy blows up, other countries would be at risk, too. Indeed if you believe the euro is doomed, the last bonds you should sell are BTPs, because at least you’ll get a higher yield while you wait. And there are lots of investors who are obliged to own Italy. For those that track a benchmark euro index, being underweight Italy is costly.Moreover, Italy is coming into the fold. It is a big beneficiary of the NGEU fund. Mr Draghi is now the prime minister, and is trusted in Brussels and in Berlin to use the money well. But what about after that? Well, here’s a thought. Every year the euro survives, it becomes harder to imagine an alternative. The longer it lasts, the longer-lasting it appears to be.This article appeared in the Finance & economics section of the print edition under the headline “Pulling tight” More

INVESTORS RUSH to American Treasuries when they get anxious. In spring 2020, as the severity of the pandemic became clear, yields on ten-year Treasuries sank. That comprised a fall in both expected inflation and real yields, as investors became gloomy about both price and GDP growth. In recent weeks yields have drifted down again, reflecting worries about the strength of the economic recovery. On July 26th the real yield fell to a record low. Investors’ expectations of inflation, though, have held up.This article appeared in the Finance & economics section of the print edition under the headline “Real bond yields fall” More

In this articleNOCTAPYUMTPXMRKCMCSACheck out the companies making headlines before the bell:Comcast (CMCSA) – Comcast rose 1.9% in the premarket after reporting adjusted quarterly earnings of 84 cents per share, beating the consensus estimate of 67 cents. The NBCUniversal parent also reported better-than-expected revenue, helped by a rebound in ad sales and a reopening of theme parks.Merck (MRK) – The drug maker matched estimates with adjusted quarterly profit of $1.31 per share, with revenue beating Street forecasts. Sales of cancer drug Keytruda jumped 23%, in line with expectations. Merck fell 1.8% in premarket trading.Tempur Sealy (TPX) – The mattress maker earned an adjusted 79 cents per share for its latest quarter, 22 cents above estimates, with revenue topping forecasts as well. Tempur Sealy also raised its full-year outlook, and the stock jumped 4.9% in premarket action.Yum Brands (YUM) – The parent of KFC, Taco Bell and Pizza Hut came in 20 cents ahead of estimates with adjusted quarterly earnings of 1.16 per share, and revenue also beating analyst projections. Results got a boost from restaurant reopenings as well as continued strong demand in online orders. Yum rallied 2.3% in premarket trading.Molson Coors (TAP) – Molson Coors added 1.8% in the premarket after its adjusted quarterly earnings of $1.58 per share beat the consensus estimate of $1.34. The beer brewer’s revenue was above Wall Street forecasts as well.Northrup Grumman (NOC) – The defense contractor reported adjusted quarterly earnings of $6.42 per share, beating the $5.84 consensus estimate, with revenue also topping estimates. The company was helped by continued strength in its satellite and missile-making units, and the stock rose 1.1% in premarket trading.Facebook (FB) – Facebook shares fell 3.7% in premarket trading after the company said revenue growth will slow during the second half of the year as a change in Apple’s (AAPL) privacy policies will hurt Facebook’s ability to target ads. For the second quarter, Facebook reported earnings of $3.61 per share compared to a consensus estimate of $3.03, with revenue also topping Wall Street forecasts.Ford (F) – Ford surprised analysts with an adjusted quarterly profit of 13 cents per share. The automaker had been expected to report a second-quarter loss of 3 cents per share, due in large part to a chip shortage crimping production. However, Ford said it expected that situation to improve in the second half, and it raised its full-year outlook. Ford jumped 4% in the premarket.PayPal (PYPL) – PayPal beat estimates by 3 cents with adjusted quarterly earnings of $1.15 per share, with the payment service’s revenue essentially in line with analyst projections. However, shares came under pressure after it gave a lower-than-expected outlook, as former PayPal parent eBay (EBAY) continues its transition to its own payment platform. The stock slid 5.6% in premarket trading.Qualcomm (QCOM) – Qualcomm reported adjusted quarterly earnings of $1.92 per share, beating the $1.68 consensus estimate, with the chip maker’s revenue also exceeding Street forecasts. Qualcomm also gave an upbeat forecast as it expects supply chain disruptions to ease. Qualcomm added 3.2% in the premarket.Uber Technologies (UBER) – Uber dropped 5.1% in premarket trading after sources told CNBC that Japanese investment giant Softbank is selling a chunk of its stake in Uber to cover losses related to its investment in another ride-hailing company, Didi Global (DIDI). Didi itself is in the news, denying an earlier Wall Street Journal report that it was considering going private. Didi had been up well over 30% in the premarket before that denial, before trimming that still-large gain to 17.5%.iRobot (IRBT) – iRobot shares plunged 11.5% in premarket trading after it reported a second-quarter loss and cut its full-year outlook. The maker of the Roomba robotic vacuum cleaner said the worldwide chip shortage would continue to hurt its ability to fulfill orders during the second half of the year. More

A vehicle from electric car maker NIO sits outside of the New York Stock Exchange (NYSE), September 12, 2018 in New York City.Drew Angerer | Getty Images News | Getty ImagesChina will continue to allow Chinese companies to go public in the U.S. as long as they meet listing requirements, China’s securities regulator told brokerages late Wednesday, according to a source familiar with the matter.A series of regulatory actions in the last few weeks has heightened investor concerns that Beijing is trying to block foreign capital flows into Chinese assets.The cross-border stock listings can also occur using the variable interest entity structure, the source said, citing the regulator. It refers to a legal structure which allows international investors to access shares of Chinese companies in the U.S.The regulator recognized the structure is a vital way for companies to attract foreign capital, but said it would have to be adjusted if there were national security concerns, said the source, who requested anonymity due to the sensitivity of the matter.China Securities Regulatory Commission Vice Chairman Fang Xinghai made the comment during a virtual meeting with major investment banks on Wednesday, the source said. It followed days of sharp selling in Chinese stocks on fears of increased regulatory crackdown by Beijing.Bloomberg first reported news of the meeting.The securities regulator has stopped short of making an official public statement. The commission did not immediately respond to a CNBC request for comment.Chinese stocks listed in Asia and the U.S. — including big names like Alibaba and Tencent — plunged in the last several days as Chinese authorities increased scrutiny on tech companies over monopolistic practices and data security.A policy document that began circulating widely Friday called for Chinese after-school tutoring companies to become non-profits, sending the stocks plunging by double-digits in Hong Kong and the U.S.Read more about China from CNBC ProTencent and more: Investment firm names ‘high quality’ Chinese stocks trading at a discountArk Invest’s Cathie Wood dumps more Chinese stocks amid crackdownGoldman Sachs downgrades Chinese education stocks on prediction market will ‘shrink significantly’The policy specifically banned tutoring companies from raising money through the stock market or having foreign investors, particularly through the variable interest entity legal structure that allows international investors to access Chinese shares.The speed and breadth of the policy surprised many. Goldman Sachs on Monday downgraded Chinese education stocks on expectations the after-school tutoring market would “shrink significantly” — to less than one-fourth its current $106 billion size.However, the securities commission’s Fang said the policy was intended to reduce the burden on parents — not shut off foreign investment — and the education companies will have as much time as needed to restructure, according to the source.The education policy in question was issued by the State Council — China’s top executive body — and the Chinese Communist Party’s central committee. More

In this articleOCBC-SGUOBH-SGDBSM-SGAutomated teller machines of the three Singapore-listed banks: OCBC, DBS and UOB.Munshi Ahmed | Bloomberg | Getty ImagesSINGAPORE — Shares of Singapore’s top three banks rose Thursday after the country’s financial regulator lifted a cap on dividend payouts that was implemented following the Covid-19 pandemic.Singapore’s largest bank DBS Group Holdings climbed around 0.6% in early trade, while smaller peers Oversea-Chinese Banking Corp and United Overseas Bank were up by around 1%.The three banks make up around one-third of the benchmark Straits Times Index, which rose 0.5%.The Southeast Asian city-state’s financial regulator and central bank, the Monetary Authority of Singapore, said Wednesday that restrictions on bank dividend payments “will not be extended.”MAS had last year urged banks to cap their total dividends per share for 2020 to 60% of the previous year’s amount in light of economic uncertainties due in part to the pandemic.”The global economic outlook has since improved. While some uncertainties remain, Singapore’s economy is expected to continue on its recovery path, given strengthening global demand and progress in our vaccination programme,” the regulator said in a statement.Stock picks and investing trends from CNBC Pro:BlackRock’s Rieder says the Fed could begin tapering bond purchases in NovemberMorgan Stanley names 4 global stocks that are about to surprise markets to the upsideHere are Wall Street’s favorite value stocks that should benefit from the economic reopeningBefore MAS’ move, the European Central Bank and U.S. Federal Reserve made similar decisions to relax restrictions on dividend payouts by banks.Eugene Tarzimanov, vice president and senior credit officer at Moody’s Investors Service, said in a note he expects the three large Singapore banks to increase dividend payments to pre-pandemic levels of around 50% of their net income.He noted that Moody’s had changed its outlook on the Singapore banking system from negative to stable in March, in recognition of the improving economy, potential for bank earnings to grow and broadly stable asset quality.DBS, OCBC and UOB are scheduled to report second-quarter earnings next week. More

Robinhood, whose stock trading app has surged in popularity among retail investors, sold shares in its IPO at $38 a piece, valuing the company at about $32 billion.Ahead of its Nasdaq debut on Thursday, Robinhood priced shares at the low end of the $38 and $42 range. The company, which will trade under ticker symbol HOOD, 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.Robinhood has become a central gateway to the markets for young and first-time investors. The app, which offers equity, cryptocurrency and options trading, as well as cash management accounts, experienced record trading levels during the pandemic and amid the meme stock craze of early 2021.Robinhood estimates it has 22.5 million funded accounts (those tied to a bank account) as of the second quarter. That’s up from 18 million in the first quarter of 2021, which was an increase of 151% from a year earlier. The company was last valued in the private markets at $11.7 billion in September.Goldman Sachs and JPMorgan Chase are the lead investment banks on the deal. Underwriters will have an option to buy an additional 5.5 million shares. In its updated prospectus, Robinhood estimated second quarter revenue of $546 million to $574 million, up from $244 million in the second quarter of 2020. Revenue jumped 309% in the first quarter to $522 million from $128 million a year prior.However, Robinhood expects to swing to a net loss of $487 million to $537 million in the second quarter after turning a profit in the same quarter last year.Robinhood collected $331 million in payment for order flow – the money brokerage firms receive for directing clients’ trades to market makers – in the first quarter. Payment for order flow has received scrutiny from regulators in 2021.Options trading accounts for about 38% of revenue while equities and crypto are 25% and 17% of revenues, respectively. But Robinhood warned that the brokerage could see a slowdown in its trading revenue and account growth as the retail trading boom cools.Competitors of Robinhood include Fidelity, Charles Schwab, Interactive Brokers and newer services like Webull and SoFi. Charles Schwab has a market capitalization of $130 billion and Interactive Brokers has a market valuation of $26 billion.DST Global, Index Ventures, NEA and Ribbit Capital are some of Robinhood’s biggest investors.WATCH: Here’s why short selling does more harm than good for U.S. economy More

The Federal Reserve on Wednesday held its benchmark interest rate near zero and said the economy continues to progress despite concerns over the pandemic spread.As expected, the Federal Open Market Committee concluded its two-day meeting by keeping interest rates in a target range between zero and 0.25%.Along with that, the committee said in a unanimously approved statement that the economy continues to “strengthen.”Despite the optimism about the economy, Chairman Jerome Powell said the Fed is nowhere near considering a rate hike.”Our approach here has been to be as transparent as we can. We have not reached substantial further progress yet,” he said. “We see ourselves having some ground to cover to get there.””Substantial further progress” on inflation and employment is the benchmark the Fed has set before it will tighten policy, which would mean slowing and ultimately stopping monthly bond purchases and ultimately raising interest rates.. The statement noted only that “progress” has been made, and the FOMC will continue to watch conditions to see how close they get to the Fed’s goals.The notation that “progress” has been made towards the Fed’s goals on employment and inflation was nevertheless seen as a nod that changes to policy, particularly regarding the monthly bond purchases, could be on the way.”The Fed has started the tapering clock,” said PNC chief economist Gus Faucher.Markets had been watching for the Fed’s views on the spread in the Covid-19 delta variant, but Powell and his fellow officials were relatively sanguine at least in terms of the threat the virus poses to the economy.Stocks shaved some losses during Powell’s remarks, with the Dow negative but the S&P 500 and Nasdaq in the green.Powell noted the rising threat that the pandemic is posing but said he does not see it having a major economic impact.”What we’ve seen is with successive waves of Covid over the past year and some months now, there has tended to be less in the way of economic implications from each wave,” Powell said at his post-meeting news conference. “We will see if that is the case from the delta variety.””We’ve kind of learned to live with it,” he said later.In a separate move, the Fed said it would establish two standing repo facilities, one for domestic markets and the other for foreign and international authorities. The facilities allow institutions to exchange high-quality collateral, primarily Treasurys in the case of the domestic offering, for reserves.With the Fed likely on hold relative to interest rates at least until late-2022, investors have been looking for clues as to when the monthly bond purchases might start to be pulled back.The central bank currently is buying at least $120 billion a month in bonds, with at least $80 billion going to Treasurys and another $40 billion floor on mortgage-backed securities. Critics say the Fed’s mortgage purchases are helping stoke another housing bubble, with prices at record levels even though sales have tailed off amid tightening supply.Some Fed officials have said they would be willing to entertain cutting back on mortgages first. Powell, though, has said several times that the mortgage purchases are having only a minimal effect on housing. He said Wednesday that he does not expect the Fed to begin reducing its mortgage purcahses ahead of the Treasurys tapering.On the broader economy, the Fed has kept its foot to the accelerator despite some of the fastest post-World War II growth the U.S. has ever seen. Second-quarter GDP numbers are out Thursday, with the Dow Jones estimate at 8.4% annualized growth for the April-to-June period. That would be the fastest pace since early 1983, not counting last year’s outsized Q3 growth as the economy reopened from the pandemic shutdown.Stock picks and investing trends from CNBC Pro:BlackRock’s Rieder says the Fed could begin tapering bond purchases in NovemberMorgan Stanley names 4 global stocks that are about to surprise markets to the upsideHere are Wall Street’s favorite value stocks that should benefit from the economic reopeningThe Fed has faced growing inflation fears, with consumer prices running at their highest since just before the financial crisis of 2008. However, officials insist the current surge is temporary and will abate once supply chain bottlenecks ease, demand returns to normal levels, and certain items, particularly used car prices, also get back to baseline.Heading into this week’s meeting, markets were pricing in zero chance of any rate increases this year. However, the likelihood of a 2022 hike rose from 54.4% before the meeting to 62% afterward, with futures fully pricing in the first hike by March 2023, according to CME’s FedWatch tool and Reuters.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 is scheduled to hit the markets Thursday in one of the most highly anticipated initial public offerings of the year.The stock trading app will trade on the Nasdaq under ticker HOOD, priced at an expected $38 to $42 per share. Robinhood is looking to sell 55 million shares at that range to raise as much as $2.3 billion.At the top end of the range, Robinhood would be valued at $35 billion, and the co-founders would each own stakes worth about $2.8 billion. Coinbase, which went public in April, has a fully diluted market capitalization of $65 billion. The apps are among the most popular places for consumers to by cryptocurrencies, which have surged in trading in 2021.Robinhood, whose longstanding mission is to democratize investing, is seen as the main gateway to the markets for young investors. The free-trading pioneer has experienced explosive growth in the past few years amid a boom in retail trading. The company 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.Robinhood is the third-largest brokerage based on number of funded accounts, behind Fidelity and Charles Schwab, which purchased TD Ameritrade last year.Robinhood went after a largely underserved demographic in the retail investing space, providing a significant runway for growth, according to Autonomous Research analyst Christian Bolu. The Menlo Park, California-based app pioneered free trading and forced the brokerage industry to drop commissions in 2019.”Robinhood serves the [approximately 84 million] U.S. households with [less than $100,000] in wealth that existing retail brokers have largely ignored,” Bolu wrote in a research report. “We size the money app opportunity at [about $120 billion] in revenues implying Robinhood has a significant runway for growth.”While Robinhood was successful in acquiring clients who were largely left behind by legacy brokerages, their account balances are lower compared with peers, which should give Robinhood a lower valuation, according to MKM Partners.Robinhood’s IPO pricing implies a roughly $1,350 valuation per active and funded account, based on its estimated 22.5 million accounts as of the second quarter of 2021.This compares with $2,500 per account for E-Trade, which was purchased by Morgan Stanley, and $2,200 per account for each TD Ameritrade account, based on Schwab’s purchase price, according to the MKM analysis. Autonomous Research estimates Schwab accounts are worth more than $3,600 per funded account.An unorthodox IPORobinhood’s longstanding mission is to lower the barrier to enter the world of finance, and its IPO has been nothing but on brand.The stock trading app is reserving 20% to 35% of its IPO shares for its own clients, which CEO Vlad 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.However, some analysts said Robinhood may be leaving itself exposed to the whims of the very amateur investors it’s trying to help.”There’s no doubt that retail traders are much more fickle. The more [Robinhood] sells to retail, the more susceptible they will be to some sort of Reddit super squeeze type of activity,” Greg Martin, managing director and co-owner at Rainmaker Securities, told CNBC earlier this month.Robinhood’s loose lock-up structure is also unconventional. Employees will be able to sell 15% of their shares immediately after the public debut, compared with the traditional six-month lockup period. After three months, investors can sell another 15%.Robinhood even had a public virtual roadshow over the weekend, an event historically reserved for investment banks and high-net-worth individuals. The company’s executives invited everyday investors to join the call and spoke on topics from a pool of 2,000 questions.David Erickson, a finance professor at the University of Pennsylvania’s Wharton School, said investment banks typically don’t like novelty in the IPO process. However, Robinhood is such a high-profile IPO that it’s worth it for the underwriters. Goldman Sachs and JPMorgan are the lead bankers on the deal.Robinhood is the latest company to change the structure of public offerings. The traditional IPO is rapidly becoming a thing of the past amid the rise in direct listings and special purpose acquisition companies.”I am betting that several of these institutional investors will take a pass especially at a significant valuation step-up from just a few months ago,” Erickson said.Robinhood will likely be the seventh IPO of 2021 to raise more than $2 billion. The six prior ones are trading below their IPO prices.Robinhood co-founders Tenev and Baiju Bhatt each are planning to sell about $50 million worth of shares in the IPO. Top investors include DST Global, which owns about 9% of Robinhood pre-IPO. Index Ventures has roughly 13%, NEA has about 13% and Ribbit Capital has approximately 10% of pre-IPO ownership.Trading slowdown and regulatory risksRobinhood warned in its updated prospectus that the brokerage could see a slowdown in its epic growth as the retail trading boom cools.”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, during the three months ended June 30, 2021, and expected seasonality,” Robinhood said in an amended prospectus released last week.Robinhood, which offers equity, cryptocurrency and options trading, as well as cash management accounts, benefits from more speculative trading practices from its clients. Options trading makes up about 38% of revenue, while crypto is 17% of revenue. Plus, margin and stock lending trading levels have been elevated in 2021.”Since the lion’s share of Robinhood’s revenue is derived from transactional activity there is a risk that a market downturn or even less turnover could lead to top-line pressures,” said Peter Hobson, senior analyst at Third Bridge. “The last time there was similar gangbusters retail trading growth was in early 2000, which then saw a material decline in retail trading activity after the pop of the dot-com bubble.”Robinhood also said it anticipates the growth rate of new clients will be lower in the third quarter of 2021 from second quarter “due to the exceptionally strong interest in trading, particularly in cryptocurrencies, we experienced in the three months ended June 30, 2021 and seasonality in overall trading activities,” the filing said.”It is unclear to us whether the new influx of customers at HOOD will continue to be repeat traders or would behave differently from prior cohorts of users. Approximately 60% of funded accounts on Robinhood were opened in the last 12 months, and a vast majority of them are first-time investors,” said MKM Partners analyst Rohit Kulkarni.Another major risk to Robinhood’s valuation would be regulatory changes to the firm’s largest revenue source, payment-for-order flow, or the money-brokerage firms receive for directing clients’ trades to market makers. Payment-for-order flow is a controversial practice that has garnered attention from the Financial Industry Regulatory Authority and Main Street.In the first quarter of 2021, Robinhood found itself in the middle of a firestorm amid an epic short squeeze in GameStop, which was partially fueled by Reddit-driven retail investors. At the height of the so-called meme stocks’ 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.”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 that if the model changed, Robinhood and the industry would be able to adapt.Wharton’s Erickson called Robinhood “the most concerning high profile IPO since WeWork tried to go public a few years ago.” The embattled office-sharing company pulled its IPO in 2019 after investors balked at public numbers and disclosures in its prospectus. Robinhood has given no indication that investors have lost their appetite for its IPO. But there are plenty of reasons for concern.In June, Robinhood was slapped with FINRA’s largest-ever penalty, totaling about $70 million. The company has also faced lawsuits for its multiple days of outages during times when trading volume was heavy during the pandemic. Additionally, Tenev was forced to testify to the House Financial Services Committee in February regarding the GameStop trading mania. Tenev’s phone was seized by federal attorneys in investigations about restricted stock trading.Robinhood governance seems to be “tone deaf” to these issues, Erickson said.”Based on significant issues with both their internal controls and regulators, you would have thought that their board would be filled with people that have extensive securities internal control and regulatory experience to compensate for this,” said Erickson, who was formerly the head of global equity capital markets at Barclays. “Unfortunately, that isn’t even close to being the case.”— with reporting from CNBC’s Michael Bloom and Ari Levy. More