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Tag: financing and stock offering

  • Apple Fast Facts | CNN

    Apple Fast Facts | CNN

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    CNN
     — 

    Here’s a look at Apple, Inc, creator of the Mac computer and the iPhone.

    The corporate headquarters are in Cupertino, California.

    As of September 2023, the company reported that it employs approximately 161,000 people full-time.

    April 1, 1976 – Apple Computers, Inc. is founded by Steve Jobs and Steve Wozniak. Their first product is the Apple I personal computer.

    June 1977 – The Apple II is released.

    December 1980 – Apple conducts an initial public offering of 4.6 million shares at $22 per share.

    January 1983 – Apple introduces the Lisa, a new brand of personal computer.

    January 22, 1984 – The Macintosh computer is introduced with a futuristic commercial that airs during the Super Bowl.

    1985 – Apple discontinues the Lisa after a disappointing run, and Jobs leaves the company.

    December 1996 – Apple buys Jobs’ company, NeXT Software.

    1997 – In the wake of corporate shakeups and a sales slump, Apple welcomes Jobs back as interim CEO.

    August 15, 1998 – The iMac, a streamlined personal computer, debuts.

    January 2000 – Jobs becomes permanent CEO.

    January 9, 2001 – iTunes is introduced.

    October 23, 2001 – The iPod MP3 player makes its debut.

    January 2003 – Apple releases the Safari web browser.

    April 28, 2003 – Apple introduces the iTunes Music Store.

    January 2006 – Apple rolls out its first Intel-based computers, the iMac and the MacBook Pro.

    January 9, 2007 – The iPhone is unveiled.

    March 2007 – Apple TV hits stores.

    January 27, 2010 – The iPad is announced.

    June 6, 2011 – Apple announces iCloud, an online media storage system.

    August 24, 2011 – Jobs resigns as CEO. Tim Cook takes his place.

    October 5, 2011 – Jobs dies after battling cancer.

    February 6, 2013 – Apple announces that iTunes has reached a milestone of 25 billion songs sold.

    May 28, 2014 – Apple announces deal to buy Beats for $3 billion.

    June 9, 2014 – Apple conducts a stock split, bringing the price down from $647.50 to $92.44.

    September 9, 2014 – Apple unveils the Apple Watch, a wearable device.

    December 16, 2014 – Apple wins an antitrust lawsuit brought by eight million iPod owners who alleged that Apple abused its monopoly power in the music industry to force out competition.

    June 8, 2015 – Apple unveils Apple Music, a streaming music service, live radio station and social network.

    February 3, 2016 – A jury orders Apple to pay $626 million in damages after finding that iMessage, FaceTime and other Apple software infringed on another company’s patents. The lawsuit, originally filed in 2010 by the company VirnetX, accuses Apple of violating four patents, which mostly involve methods for real-time communications over the Internet.

    February 16, 2016 – Apple refuses to comply with a California judge’s order to assist the FBI in hacking the iPhone of the San Bernardino gunman. A public letter signed by Cook states why the company is refusing to abide by the government’s demands.

    March 28, 2016 – The Department of Justice says the FBI has “successfully retrieved the data stored on the San Bernardino terrorist’s iPhone,” and is dropping the case against Apple, since it no longer needs the company’s help.

    August 30, 2016 – The European Union rules that Apple must pay Ireland $14.5 billion in back taxes. According to the EU, Ireland had been giving the tech company a break on taxes for more than two decades. Ireland’s finance minister issues a statement criticizing the EU’s ruling and declares that the country does not play favorites with a lower tax rate for certain companies. In a letter, Cook says he anticipates the EU’s tax ruling will be reversed on appeal.

    September 12, 2017 – Apple unveils the iPhone X, alongside the iPhone 8 and iPhone 8 Plus – all of which support wireless charging. The iPhone X will also feature facial detection technology, no home button, a 3D camera and an edge-to-edge screen.

    December 21, 2017 – Apple issues a statement saying that it has used software updates to limit the performance of older iPhones that may have battery issues that would cause them to turn off suddenly.

    December 28, 2017 – Apple apologizes to customers for how it rolled out an update that can slow down older iPhones. It is offering cheaper battery replacements to make up for it.

    June 15, 2018 – Oprah Winfrey signs a multiyear deal with Apple to create new original programming.

    August 2, 2018 – Apple becomes the first American public company to surpass $1 trillion in value.

    October 10, 2019 – In a memo to employees, Cook defends Apple’s decision to pull a map app that Hong Kong protesters used to track police, saying that it had been used in ways that “endanger law enforcement and residents in Hong Kong.”

    November 1, 2019 – Apple TV+, a subscription streaming service containing original programming, launches.

    November 4, 2019 – Apple announces a $2.5 billion financial package to help address the housing crisis in California, which has worsened in part because of the rapid growth of tech companies.

    July 29, 2020 – Cook, Amazon CEO Jeff Bezos, CEO of Google’s parent company Sundar Pichai and Facebook CEO Mark Zuckerberg all testify before a House subcommittee on anti-trust to address concerns that their businesses may be harming competition.

    August 20, 2020 – Apple reaches the $2 trillion market value mark.

    November 18, 2020 – Apple agrees to pay $113 million to settle an investigation by states including California and Arizona over how Apple wasn’t transparent about its iPhone battery problems that led to unexpected device shutdowns.

    December 14, 2020 – Launches Apple Fitness+, a service built around Apple Watch.

    November 23, 2021 – Apple files a lawsuit against NSO Group and its parent company, accusing the Israeli firm of violating a federal anti-hacking law by selling potent software that clients have used to spy on Apple customers. The lawsuit alleges that NSO’s spyware, known as Pegasus, and other malware have caused Apple monetary and property damages, and violated the human rights of Apple users along the way.

    January 3, 2022 – Apple becomes the world’s first company valued at $3 trillion.

    May 10, 2022 – Apple announces that it is ceasing production of the iPod.

    June 18, 2022 – Workers in Maryland vote to form the first-ever labor union at one of Apple’s US stores.

    June 30, 2023 – Apple’s stock ends trading valued at $3 trillion, the only company ever to reach that milestone.

    December 18, 2023 – Apple announces plans to stop selling its Apple Watch Series 9 and Apple Watch Ultra 2 in US due to a patent dispute. In January 2024, a federal appeals court denies the company’s motion to temporarily pause the ban while it appealed the US International Trade Commission ruling.

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  • Birkenstock heads for Wall Street in another blow to Europe | CNN Business

    Birkenstock heads for Wall Street in another blow to Europe | CNN Business

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    London
    CNN
     — 

    German shoemaker Birkenstock has filed for an initial public offering in New York, becoming the latest European company to choose the United States as the place to raise money on the stock market.

    The iconic footwear brand said in a filing to the US Securities and Exchange Commission Tuesday that it planned to list on the New York Stock Exchange under the symbol “BIRK.” It didn’t disclose its target share price or the proposed date of the listing.

    The Financial Times, citing unnamed sources familiar with the matter, reported Tuesday that Birkenstock was seeking a valuation of more than $8 billion.

    In its filing, the company said revenue in the six months to the end of March had risen 19% from the same period in the 2021-22 financial year but that its net profit had fallen 45%. Birkenstock said inflationary pressures had pushed up the cost of labor and materials.

    The family business traces its origins back to 1774 when church archives mention Johannes Birkenstock, who worked as a cobbler in Langen-Bergheim, Germany.

    In 2021, the Birkenstock family sold most of the company to L Catterton, a private equity firm backed by LVMH — the owner of luxury brands such as Tiffany & Co. and Dior, with brothers Christian and Alex Birkenstock retaining a minority stake.

    The planned IPO marks another milestone for the shoemaker, which joins the ranks of high-profile European companies seeking a public offering across the pond rather than at home. British chip designer Arm is gearing up for a blockbuster IPO on the Nasdaq this week.

    The listings come after an 18-month slump in the IPO market. As the world’s major central banks have jacked up interest rates to combat inflation, the appetite among investors for riskier assets has waned. US grocery delivery firm Instacart has also revealed plans to list on the Nasdaq in the near future, albeit at a significant discount to recent valuations.

    “It’s safe to say the US is leading the [IPO] revival at this stage, and other financial centers, most notably London, have a lot of work to do to compete better going forward,” Craig Erlam, senior market analyst at Oanda, told CNN.

    Susannah Streeter, head of money and markets at Hargreaves Lansdown, added in a note Wednesday: “Birkenstock’s step shows that the IPO engine is whirring back to life after an 18-month downturn. Hopes that the end of the interest rate hiking cycle is in sight [are] also driving more confidence.”

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  • China is huge for chip designer Arm. That’s a risk for its new investors | CNN Business

    China is huge for chip designer Arm. That’s a risk for its new investors | CNN Business

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    Hong Kong
    CNN
     — 

    As British chip designer Arm prepares to raise about $5 billion in an initial public offering (IPO) on Thursday, its China business has become a serious point of concern.

    The SoftBank-owned firm used many pages of its IPO prospectus to warn investors of risks related to its exposure to China at a time of rising tension between Washington and Beijing over chip technology.

    Its regulatory filing last month revealed that a quarter of its sales come from China, through an unusual relationship with an entity it does not control and with which it has a complex history.

    Arm China is “an entity that operates independently of us and is our single largest customer,” the company said in its prospectus. “Neither we nor SoftBank Group control the operations of Arm China.”

    Arm, which is based in Cambridge, added that the scale of its business in China made it “particularly susceptible to economic and political risks,” which could be worsened by tensions between the country and the United States or the United Kingdom.

    The company has long been vulnerable in this area, which may have already contributed to a lower market valuation than SoftBank was expecting.

    Arm blamed an economic slowdown in China as well as “factors related to export control and national security matters” for slower growth in royalty revenues from China in its fiscal year to March. Total revenue from China did increase in that period, however.

    Royalties are hugely significant for Arm, which gets a fee from each chip developed using its products. The company relies on royalties and licensing for most of its income.

    Arm said Wednesday it priced its shares at $51 each, raising as much as $4.9 billion. The tally could rise to $5.2 billion if banks exercise an option to buy additional shares, valuing the chip designer at as much as $54.5 billion.

    That’s less than the $64 billion valuation implied when SoftBank bought a remaining 25% stake in the company from its Vision Fund unit just last month.

    Arm has declined to comment.

    Concerns about China are likely to have been “built into IPO pricing expectations already, although a worst-case scenario of increased US sanctions [or] trade restrictions probably is not,” Kirk Boodry, an investment advisor at Astris Advisory, a Japanese investment research firm, told CNN.

    Arm was publicly listed until 2016, when Japan’s SoftBank bought it for $32 billion.

    Four years later, SoftBank tried to sell Arm to Nvidia for $40 billion, in what would have been the biggest chip deal of all time. But it didn’t pass muster with global antitrust regulators, and was called off in February 2022.

    Now, Arm’s return to the stock market is being closely watched as it promises to be the biggest US IPO since 2021.

    SoftBank CEO Masayoshi Son has touted it as an AI company that could have “exponential growth,” and promised that ChatGPT-like services will eventually be offered on Arm-designed machines.

    “The value of chips, and Arm’s technology, has maybe never been more in demand from the global economy,” said Kyle Stanford, lead venture capital analyst at PitchBook.

    But Arm is a middleman in the semiconductor industry, which is a key source of tension in US-China relations. Both countries are racing to boost their prowess in the sector, and each side has recently enacted export controls aimed at limiting the other’s capacity.

    “Chip tensions will never go away,” Stanford argued. “Political and regulatory pressure is likely to increase.”

    On Tuesday, former US Securities and Exchange Commission Chairman Jay Clayton told US lawmakers that large public companies with major exposure to China should be prompted to disclose specific risks associated with the country, “and what type of scenario planning they have done in the event of abrupt decoupling.”

    Although US officials have insisted that America is not seeking to decouple from China, they have pointed to the importance of reducing its reliance on the world’s second largest economy.

    In its filing, Arm said it held just a “4.8% indirect ownership interest in Arm China,” through a 10% non-voting stake in a SoftBank-controlled entity that owns less than half of the Chinese company.

    While such convoluted corporate structures aren’t unique in China, “in my view, it is very problematic,” said Ivana Delevska, founder and chief investment officer of asset manager Spear Invest.

    “Investors of other companies are just waking up to this fact in light of increased tensions,” she added.

    Arm has had trouble with Arm China before. In its filing, it said the business has a record of late payments.

    “Although these historical issues did not have a material impact on our operations, any future failure to pay us the amounts we are owed … could have a material adverse effect on our business,” Arm said.

    Arm China has also been subject to a legal battle with its former CEO, Allen Wu.

    Since April 2022, Wu and entities effectively controlled by him have lodged several lawsuits in Chinese courts against Arm China, “seeking to challenge certain aspects of Arm China’s corporate governance and the actions of Arm China’s board of directors,” Arm said in its filing.

    As of August, the cases had been resolved in favor of Arm China, it said, but the outcome could still be appealed. potentially hurting the British firm in the future.

    That hasn’t stopped many of the biggest names in global tech from jumping on board.

    Companies including Apple (AAPL), Google (GOOGL), Nvidia (NVDA), AMD (AMD), Samsung and TSMC (TSM) have indicated interest in acting as cornerstone investors in the offering, according to a filing last week.

    Delevska said the interest reflected Arm’s strong position in the industry and had helped to prop up its overall valuation.

    “I believe it is good timing for the IPO,” she added. “Investors will just have to price in the China risk.”

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  • Another top Silicon Valley investor is splitting off its China business as pressure mounts | CNN Business

    Another top Silicon Valley investor is splitting off its China business as pressure mounts | CNN Business

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    Editor’s Note: Sign up for CNN’s Meanwhile in China newsletter which explores what you need to know about the country’s rise and how it impacts the world.


    Hong Kong
    CNN
     — 

    GGV Capital, a prominent Silicon Valley venture capital firm, has become the latest big investor to break up its US and China operations into separate companies as tensions between the two countries over tech and geopolitics continue to rise.

    The firm announced Thursday that it would divide its business into two “completely independent” firms with separate new brands, which have not been revealed.

    According to the company, one side will concentrate on North America, Latin America, Europe, Israel and cross-border US-India deals, led by teams in California and New York by managing partners Glenn Solomon, Hans Tung, Jeff Richards and Oren Yunger.

    The other side will focus on China, Southeast Asia and South Asia, run from its headquarters in Singapore, by managing partners Jenny Lee and Jixun Foo.

    GGV’s existing Chinese yuan-denominated funds “will continue to be managed independently” under its Chinese brand, Jiyuan Capital, it said.

    In a statement, the firm attributed the decision to the fact that “over the last decade, the investment landscape has shifted significantly, and the operating environment has become highly complex.”

    “Against these new realities, GGV is also evolving,” it added, without elaborating further.

    The transition is expected to be completed by the end of the first quarter of next year.

    GGV Capital has approximately $9.2 billion in assets under management. The firm is known for backing tech companies around the world, such as Alibaba (BABA), Airbnb (ABNB), Slack, TikTok owner ByteDance and Chinese ride-hailing provider Didi.

    The move comes as US-China tensions continue to affect how businesses operate across the world’s top two economies.

    Last month, the Biden administration announced it would restrict investments by US venture capital and private equity firms, as well as joint ventures, in Chinese artificial intelligence, quantum computing and semiconductors.

    The executive order will exacerbate a slump in deals between the United States and China, and deliver a “major blow” to Chinese startups, analysts and investors previously told CNN.

    Asked whether the US order or wider geopolitical tensions had factored into its decision, GGV Capital declined to comment.

    The firm has recently come under greater scrutiny from US lawmakers.

    In July, a US House committee said it had sent letters to four investment firms, including GGV, “expressing serious concern and demanding information about the firms’ investments” in artificial intelligence, chips and quantum computing companies in China.

    One investment named was a GGV deal with Megvii, an AI developer. The company is best known for its facial recognition software, and has long been accused of human rights violations against Uyghurs and other members of Muslim minority groups in China’s Xinjiang region.

    Megvii was added to a US trade blacklist in 2019 over the issue and previously told CNN that there were “no grounds” for that decision.

    The ongoing pressure has already led other firms to separate their US and Chinese businesses this year.

    In June, top global venture capital firm Sequoia announced a similar decision to cordon off its operations into three entities that cover Europe and the United States; China; and India and Southeast Asia. Its China business will be run independently under its Chinese name, Hongshan.

    Leaders of the Silicon Valley firm said at the time that it had “become increasingly complex to run a decentralized global investment business.”

    In August, Dentons, a leading law firm, also said its China unit would become a standalone legal entity, in response to new Chinese regulations related to data privacy, cybersecurity and capital control.

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  • Arm’s mega IPO could be just around the corner, a year after the biggest chip deal in history fell apart | CNN Business

    Arm’s mega IPO could be just around the corner, a year after the biggest chip deal in history fell apart | CNN Business

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    New York
    CNN
     — 

    A hotly anticipated IPO for a company that designs chips for 99% of the world’s smartphones is just around the corner, after it filed paperwork Monday to go public.

    Arm is a British tech company that architects power-sipping microchips for phones and tablets and licenses them to CPU makers, including Apple and Samsung. The company was public until 2016, when Japan’s Softbank bought it for $32 billion.

    Softbank tried to offload Arm to Nvidia for $40 billion, in what would have been the biggest chip deal of all time. But global antitrust regulators put a stop to it, and the deal fell apart in February 2022.

    Arm had been a hot commodity for decades, when the smartphone business was booming. But sales of smartphones have subsided recently, as customers opt to keep their phones for longer and new tech features have become less enticing to consumers.

    The company, in its regulatory filing, said sales slipped 1% to $2.7 billion in the year that ended March 31, 2023. In the following quarter, which ended in June, sales fell 2.5%.

    Still, Arm has piqued the interest of tech investors who are looking to catch the AI wave. Softbank CEO Masayoshi Son has touted Arm as an AI company that could have “exponential growth.” He promised ChatGPT-like services would eventually be offered on Arm-designed machines.

    In its IPO filing, Arm said the company “will be central” to the transition to AI.

    “Arm CPUs already run AI and [machine learning] workloads in billions of devices, including smartphones, cameras, digital TVs, cars and cloud data centers,” the company said. “In the emerging area of large language models, generative AI and autonomous driving, there will be a heightened emphasis on the low power acceleration of these algorithms.”

    But Son and Arm’s AI promises may overstate the company’s potential, at least somewhat. Arm-based chips have appeared in some gadgets beyond smartphones and tablets, such as servers that are less power-hungry. But Arm said it does not make AI chips and is not a direct competitor to Nvidia and others that make chips that are purpose-built for AI. Nvidia’s stock has exploded more than 200% this year.

    Arm did not list the number of shares it planned to sell, so a valuation wasn’t determinable yet. But Reuters reported Softbank is looking to basically double its investment from seven years ago with a $60 billion to $70 billion valuation for Arm when it IPOs, likely next month.

    Softbank also this week bought the 25% stake in Arm that it did not own directly but that had been held by the Saudi Vision Fund, which Softbank manages. That purchase valued Arm at $64 billion, according to the Financial Times.

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  • Judge denies AMC settlement on stock conversion, shares surge | CNN Business

    Judge denies AMC settlement on stock conversion, shares surge | CNN Business

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    A judge on Friday blocked a proposed settlement on AMC Entertainment Holdings’ stock conversion plan that would allow the company to issue more shares, sending its common shares soaring and preferred shares down in after-hours trading.

    Delaware Vice Chancellor Morgan Zurn said in the ruling that she cannot approve the settlement “as submitted,” because it would release potential claims by preferred shareholders who were not represented in the lawsuit or settlement.

    AMC shares were up 69% at $7.44 in trading after the bell. Its preferred shares were down 20% at $1.43.

    The company was sued in February for allegedly rigging a shareholder vote that would allow AMC to convert preferred stock to common stock and issue hundreds of millions of new shares.

    The conversion would dilute the common stockholders’ ownership, but allow AMC to pay down some of its $5.1 billion in debt.

    AMC has told investors it is burning cash at an unsustainable rate and warned that an inability to raise capital could force the company into bankruptcy.

    It cannot carry out its plan to do so until the litigation has been resolved.

    The settlement received more than 2,800 objections from shareholders, a level of interest Zurn called “unprecedented” in her ruling on Friday.

    “AMC’s stockholder base is extraordinary,” she said, adding that many “care passionately about their stock ownership and the company.”

    The judge rejected the settlement after determining the holders of common stock could not release AMC from potential claims that belong to holders of preferred shares, an issue which objectors did not raise.

    Many objectors sought permission to opt out of the settlement and sue on their own behalf, dismissing AMC’s dire financial predictions as “fear tactics.”

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  • Silicon Valley Bank collapse renews calls to address disparities impacting entrepreneurs of color | CNN Business

    Silicon Valley Bank collapse renews calls to address disparities impacting entrepreneurs of color | CNN Business

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    CNN
     — 

    When customers at Silicon Valley Bank rushed to withdraw billions of dollars last month, venture capitalist Arlan Hamilton stepped in to help some of the founders of color who panicked about losing access to payroll funds.

    As a Black woman with nearly 10 years of business experience, Hamilton knew the options for those startup founders were limited.

    SVB had a reputation for servicing people from underrepresented communities like hers. Its failure has reignited concerns from industry experts about lending discrimination in the banking industry and the resulting disparities in capital for people of color.

    Hamilton, the 43-year-old founder and managing partner of Backstage Capital, said that when it comes to entrepreneurs of color, “we’re already in the smaller house. We already have the rickety door and the thinner walls. And so, when a tornado comes by, we’re going to get hit harder.”

    Established in 1983, the midsize California tech lender was America’s 16th largest bank at the end of 2022 before it collapsed on March 10. SVB provided banking services to nearly half of all venture-backed technology and life-sciences companies in the United States.

    Hamilton, industry experts and other investors told CNN the bank was committed to fostering a community of minority entrepreneurs and provided them with both social and financial capital.

    SVB regularly sponsored conferences and networking events for minority entrepreneurs, said Hamilton, and it was well known for funding the annual State of Black Venture Report spearheaded by BLK VC, a nonprofit organization that connects and empowers Black investors.

    “When other banks were saying no, SVB would say yes,” said Joynicole Martinez, a 25-year entrepreneur and chief advancement and innovation officer for Rising Tide Capital, a nonprofit organization founded in 2004 to connect entrepreneurs with investors and mentors.

    Martinez is also an official member of the Forbes Coaches Council, an invitation-only organization for business and career coaches. She said SVB was an invaluable resource for entrepreneurs of color and offered their clients discounted tech tools and research funding.

    Minority business owners have long faced challenges accessing capital due to discriminatory lending practices, experts say. Data from the Small Business Credit Survey, a collaboration of all 12 Federal Reserve banks, shows disparities on denial rates for bank and nonbank loans.

    In 2021, about 16% of Black-led companies acquired the total amount of business financing they sought from banks, compared to 35% of White-owned companies, the survey shows.

    “We know there’s historic, systemic, and just blatant racism that’s inherent in lending and banking. We have to start there and not tip-toe around it,” Martinez told CNN.

    Asya Bradley is an immigrant founder of multiple tech companies like Kinley, a financial services business aiming to help Black Americans build generational wealth. Following SVB’s collapse, Bradley said she joined a WhatsApp group of more than 1,000 immigrant business founders. Members of the group quickly mobilized to support one another, she said.

    Immigrant founders often don’t have Social Security numbers nor permanent addresses in the United States, Bradley said, and it was crucial to brainstorm different ways to find funding in a system that doesn’t recognize them.

    “The community was really special because a lot of these folks then were sharing different things that they had done to achieve success in terms of getting accounts in different places. They also were able to share different regional banks that have stood up and been like, ‘Hey, if you have accounts at SVB, we can help you guys,’” Bradley said.

    Many women, people of color and immigrants opt for community or regional banks like SVB, Bradley says, because they are often rejected from the “top four banks” — JPMorgan Chase, Bank of America, Wells Fargo and Citibank.

    In her case, Bradley said her gender might have been an issue when she could only open a business account at one of the “top four banks” when her brother co-signed for her.

    “The top four don’t want our business. The top four are rejecting us consistently. The top four do not give us the service that we deserve. And that’s why we’ve gone to community banks and regional banks such as SVB,” Bradley said.

    None of the top four banks provided a comment to CNN. The Financial Services Forum, an organization representing the eight largest financial institutions in the United States has said the banks have committed millions of dollars since 2020 to address economic and racial inequality.

    Last week, JPMorgan Chase CEO Jamie Dimon told CNN’s Poppy Harlow that his bank has 30% of its branches in lower-income neighborhoods as part of a $30 billion commitment to Black and Brown communities across the country.

    Wells Fargo specifically pointed to its 2022 Diversity, Equity, and Inclusion report, which discusses the bank’s recent initiatives to reach underserved communities.

    The bank partnered last year with the Black Economic Alliance to initiate the Black Entrepreneur Fund — a $50 million seed, startup, and early-stage capital fund for businesses founded or led by Black and African American entrepreneurs. And since May 2021, Wells Fargo has invested in 13 Minority Depository Institutions, fulfilling its $50 million pledge to support Black-owned banks.

    Black-owned banks work to close the lending gap and foster economic empowerment in these traditionally excluded communities, but their numbers have been dwindling over the years, and they have far fewer assets at their disposal than the top banks.

    OneUnited Bank, the largest Black-owned bank in the United States, manages a little over $650 million in assets. By comparison, JPMorgan Chase manages $3.7 trillion in assets.

    Because of these disparities, entrepreneurs also seek funding from venture capitalists. In the early 2010s, Hamilton intended to start her own tech company — but as she searched for investors, she saw that White men control nearly all venture capital dollars. That experience led her to establish Backstage Capital, a venture capital fund that invests in new companies led by underrepresented founders.

    “I said, ‘Well, instead of trying to raise money for one company, let me try to raise for a venture fund that will invest in underrepresented — and now we call them underestimated — founders who are women, people of color, and LGBTQ specifically,’ because I am all three,” Hamilton told CNN.

    Since then, Backstage Capital has amassed a portfolio of nearly 150 different companies and has made over 120 diversity investments, according to data from Crunchbase.

    But Bradley, who is also an ‘angel investor’ of minority-owned businesses, said she remains “really hopeful” that community banks, regional banks and fintechs “will all stand up and say, ‘Hey, we are not going to let the good work of SVB go to waste.’”

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  • The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed | CNN Business

    The tech industry avoided an ‘extinction-level event,’ but it’s not unscathed | CNN Business

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    CNN
     — 

    For much of the weekend, Silicon Valley scrambled to find a way through what one prominent tech investor described as an “extinction-level event for startups” after the collapse of a top lender in the industry.

    Startups raced to line up loans from venture funds and fintech firms to make payroll. Venture-backed retailers hosted last-minute sales to boost their cash reserves. And at least one prominent startup accelerator convinced thousands of CEOs and founders to sign an “urgent” petition calling for Treasury Secretary Janet Yellen and others to offer “relief.”

    Then, late Sunday, federal officials stepped in to guarantee that all customers of the failed Silicon Valley Bank would have access to their full deposits on Monday. The sense of relief was palpable throughout the tech sector.

    “Obviously, I’m quite relieved,” said Stefan Kalb, co-founder and CEO of Seattle-based startup Shelf Engine, who told CNN that his company would have had to shut down by the end of the week without the government intervention. “It was a very stressful weekend and I’m quite relieved with the news.”

    Parker Conrad, the CEO of HR platform Rippling, who had previously said some customers’ payrolls were being delayed by the bank failure, tweeted Sunday: “Anyone else breathing a sigh of relief and looking forward to a good night’s sleep tonight?”

    And Garry Tan, the CEO of tech startup accelerator Y Combinator who authored the petition to Yellen, praised the federal government for “decisive action.” Tan, the investor who had previously warned of “an *extinction level event* for startups” that would “set startups and innovation back by 10 years or more,” added his appreciation on Sunday for “everyone who helped us through a very very intense time.”

    But even as the tech industry enjoys a respite from a fearful weekend, unknowns remain. “You can feel the collective *sigh*,” Ryan Hoover, a tech founder and investor wrote on Twitter Sunday. “I’m still nervous,” he added. “Hard to predict the collateral effects.”

    It’s unclear how the aftershocks of the bank’s collapse will add to the startup industry’s growing challenges accessing capital. SVB’s collapse also risks changing how the world, and prospective recruits, think of Silicon Valley.

    For years, the term itself conjured an image of an enclave of bright, contrarian, libertarian engineers and thinkers who could see around corners and make big bets on the future. Now, that same industry is relying on the federal government to survive after failing to see the risk, or worse, contributing to it through a shared hysteria.

    In the chaotic days leading up to the bank’s collapse on Friday, some venture firms reportedly urged their portfolio companies to withdraw their money, which may have contributed to the bank failing.

    Then, over the weekend, many venture capitalists and tech founders banded together to try and lobby government and public goodwill towards saving the companies impacted by Silicon Valley Bank’s sudden collapse.

    While some VCs appeared to embrace fear-mongering on Twitter, much of the public messaging focused on the small businesses with exposure to Silicon Valley Bank that might be not be able to continue operating after losing access to the money in their bank account.

    “We are not asking for a bailout for the bank equity holders or its management; we are asking you to save innovation in the American economy,” the Y Combinator petition stated. “We ask for relief and attention to an immediate critical impact on small businesses, startups, and their employees who are depositors at the bank.”

    A separate coalition of more than a dozen venture capital firms, including Lightspeed Venture Partners and Upfront Ventures, released a joint statement late Friday supporting Silicon Valley Bank, given its unique and vital role in the startup economy. The bank worked with nearly half of all venture-backed tech and healthcare companies in the United States.

    “For forty years, it has been an important platform that played a pivotal role in serving the startup community and supporting the innovation economy in the US,” the statement read. “In the event that SVB were to be purchased and appropriately capitalized, we would be strongly supportive and encourage our portfolio companies to resume their banking relationship with them.”

    Even before the bank’s collapse, the startup industry was in a tough moment. Venture capital funding had dwindled amid rising interest rates and broader macroeconomic uncertainty; tech companies were cutting staff and ambitious projects; and some of the biggest private companies were reportedly slashing their valuations.

    The instability at a top tech lender, and the lingering questions about its impact on other regional banks and the broader financial system, risk making it even harder for money-losing startups to access the capital they need to survive.

    President Joe Biden emphasized in remarks Monday that “no losses will be borne by the taxpayers” related to the government’s intervention for Silicon Valley Bank. But some are already skeptical of that statement, including Democratic Sen. Elizabeth Warren of Massachusetts, who wrote in an op-ed Monday morning, “We’ll see if that’s true.”

    More immediately, there’s uncertainty around how long it will take for companies to get their money out of the bank.

    As of Monday, Kalb said the money in his Silicon Valley Bank account has not been transferred yet to the new JPMorgan Chase account he set up for Shelf Engine on Thursday. “I’ve been obsessively checking my email,” he said. “Hopefully the money will be able to be transferred shortly.”

    Ben Kaufman, the co-founder of venture-backed toy store and online retailer Camp, told CNN’s Poppy Harlow in an interview Monday morning that he and his team spent the weekend trying to “fight for survival,” including holding a last-minute 40% off sale, using the code “BANKRUN,” to raise capital over the weekend.

    “We did not know how long it was going to take for us to get our cash out … we still kind of don’t, they say today, we’ll see what happens,” he said, noting the bank held 85% of his company’s assets. “We hope we can, and we’re so grateful that the Fed stepped in, and the way they did.”

    When asked if the past week’s events would change how and where he stores his money, Kaufman said that is “going to have to be a consideration moving forward.”

    “I don’t want to do this again,” he said.

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  • Why Silicon Valley Bank collapsed and what it could mean | CNN Business

    Why Silicon Valley Bank collapsed and what it could mean | CNN Business

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    London
    CNN
     — 

    Silicon Valley Bank collapsed with astounding speed on Friday. Investors are now on edge about whether its demise could spark a broader banking meltdown.

    The US federal government has stepped in to guarantee customer deposits, but SVB’s downfall continues to reverberate across global financial markets. The government has also shut down Signature Bank, a regional bank that was teetering on the brink of collapse, and guaranteed its deposits.

    In a sign of how seriously officials are taking the SVB failure, US President Joe Biden told Americans Monday that they “can rest assured that our banking system is safe,” adding: “We will do whatever is needed on top of all this.”

    Here’s what you need to know about the biggest US bank failure since the global financial crisis.

    Established in 1983, Silicon Valley Bank was, just before collapsing, America’s 16th largest commercial bank. It provided banking services to nearly half of all US venture-backed technology and life science companies.

    It also has operations in Canada, China, Denmark, Germany, Ireland, Israel, Sweden and the United Kingdom.

    SVB benefited hugely from the tech sector’s explosive growth in recent years, fueled by ultra-low borrowing costs and a pandemic-induced boom in demand for digital services.

    The bank’s assets, which include loans, more than tripled from $71 billion at the end of 2019 to a peak of $220 billion at the end of March 2022, according to financial statements. Deposits ballooned from $62 billion to $198 billion over that period, as thousands of tech startups parked their cash at the lender. Its global headcount more than doubled.

    SVB’s collapse came suddenly, following a frenetic 48 hours during which customers yanked deposits from the lender in a classic run on the bank.

    But the root of its demise goes back several years. Like many other banks, SVB ploughed billions into US government bonds during the era of near-zero interest rates.

    What seemed like a safe bet quickly came unstuck, as the Federal Reserve hiked interest rates aggressively to tame inflation.

    When interest rates rise, bond prices fall, so the jump in rates eroded the value of SVB’s bond portfolio. The portfolio was yielding an average 1.79% return last week, far below the 10-year Treasury yield of around 3.9%, Reuters reported.

    At the same time, the Fed’s hiking spree sent borrowing costs higher, meaning tech startups had to channel more cash towards repaying debt. At the same time, they were struggling to raise new venture capital funding.

    That forced companies to draw down on deposits held by SVB to fund their operations and growth.

    While SVB’s problems can be traced back to its earlier investment decisions, the run on the bank was triggered Wednesday when the lender announced that it had sold a bunch of securities at a loss and would sell $2.25 billion in new shares to plug the hole in its finances.

    That set off panic among customers, who withdrew their money in large numbers.

    The bank’s stock plummeted 60% Thursday and dragged other bank shares down with it as investors began to fear a repeat of the global financial crisis a decade and a half ago.

    By Friday morning, trading in SVB shares was halted and it had abandoned efforts to raise capital or find a buyer. California regulators intervened, shutting the bank down and placing it in receivership under the Federal Deposit Insurance Corporation, which typically means liquidating the bank’s assets to pay back depositors and creditors.

    US regulators said Sunday that they would guarantee all SVB customers’ deposits. The move is aimed at preventing more bank runs and helping tech companies to continue paying staff and funding their operations.

    The intervention does not amount to a 2008-style bailout, however, which means investors in the company’s stock and bonds will not be protected.

    “Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out … and the reforms that have been put in place mean that we’re not going to do that again,” Treasury Secretary Janet Yellen told CBS in an interview Sunday.

    “But we are concerned about depositors and are focused on trying to meet their needs.”

    There are already some signs of stress at other banks. Trading in First Republic Bank

    (FRC)     and PacWest Bancorp

    (PACW)     was temporarily halted Monday after the shares plunged 65% and 52% respectively. Charles Schwab

    (SCHW)     stock was down 7% at 11.30 a.m. ET Monday.

    In Europe, the benchmark Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, fell 5.6% in morning trade — notching its biggest fall since last March. Shares in embattled Swiss banking giant Credit Suisse were down 9%.

    SVB isn’t the only financial institution whose investments into government bonds and other assets have fallen dramatically in value.

    At the end of 2022, US banks were sitting on $620 billion in unrealized losses — assets that have decreased in price but haven’t been sold yet, according to the FDIC.

    In a sign that regulators have concerns about wider financial chaos, the Fed said Sunday that it would make additional funding available for eligible financial institutions to prevent the next SVB from collapsing.

    Most analysts point out that US and European banks have much stronger financial buffers now than during the global financial crisis. They also highlight that SVB had very heavy exposure to the tech sector, which has been particularly hard hit by rising interest rates.

    “While SVB is a major failure, [it] and other niche players like Signature are quite unique in the broader banking world,” research analysts David Covey, Adrian Cighi and Jaimin Shah at M&G Investments commented in a blog post on Monday. “So unique, in our view, that it is unlikely to create material problems for any of the large diversified banks in the US or Europe from a credit point of view.”

    HSBC stepped in Monday to buy SVB UK for £1 ($1.2), securing the deposits of thousands of British tech companies that hold money at the lender.

    Had a buyer not been found, SVB UK would have been placed into insolvency by the Bank of England, leaving customers with only deposits worth up to £85,000 ($100,000) — or £170,000 ($200,000) for joint accounts — guaranteed.

    The HSBC rescue is “fantastic news” for the UK startup ecosystem, said Piotr Pisarz, the CEO of Uncapped, a financial tech startup that lends to other startups. “I think we can all relax a bit today,” he told CNN.

    In a statement, HSBC CEO Noel Quinn said the acquisition “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life science sectors, in the UK and internationally.”

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  • Norfolk Southern is paying $6.5 million to derailment victims. Meanwhile, it’s shelling out $7.5 billion for shareholders | CNN Business

    Norfolk Southern is paying $6.5 million to derailment victims. Meanwhile, it’s shelling out $7.5 billion for shareholders | CNN Business

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    New York
    CNN
     — 

    Norfolk Southern CEO Alan Shaw pledged Tuesday the freight railroad will spend $6.5 million to help those affected by the release of toxic chemicals from its derailment nearly three weeks ago in East Palestine, Ohio. But in a plan released earlier this year, the company said it’s planning to spend more than a thousand times that amount — $7.5 billion — to repurchase its own shares in order to benefit its shareholders.

    The company spent $3.4 billion on share repurchases last year, and $3.1 billion in 2021, bringing its recent share repurchases to $6.5 billion. That towers over what it said is its financial commitment to East Palestine, which it said exceeds $6.4 million in direct aid to families and government agencies, in addition to what will be required in cleanup costs.

    There is no estimate as to the total cost to Norfolk Southern from the derailment, including the cost of cleanup that the Environmental Protection Agency says will be the railroad’s responsibility.

    It’s not clear how much of the accident’s cost will fall on Norfolk Southern. The company revealed Wednesday during a conference call with investors that it has as much as $1.1 billion worth of liability insurance coverage that it can draw upon to compensate third parties for losses caused by the accident. It also has about $200 million worth of insurance coverage to cover damage to its own property, such as tracks or equipment.

    In March 2022, Norfolk Southern

    (NSC)     announced a new $10 billion share repurchase plan. Its latest annual financial report, filed just hours before the derailment this month, shows that it still had $7.5 billion available to buy additional shares under that repurchase plan as of December 31.

    Norfolk Southern did not respond to questions Wednesday on whether it expects to change its share repurchase plans in the wake of the derailment.

    The company also returned an additional $1.2 billion to shareholders in the form of dividend payments in 2022, and $1 billion in 2021, bringing total payments to shareholders to $4.6 billion last year and $4.1 billion in 2021.

    The shareholders did much better than the company’s 19,000 employees. Total employee compensation in 2022 came to $2.6 billion, up from $2.4 billion in 2021.

    The amount that Norfolk Southern and other major freight railroads are spending on shareholders got a lot of attention in December, when they successfully fought a move in Congress to require them to give hourly workers at least seven sick days a year as part of a labor contract imposed on the industry by Congress in order to avoid an economically crippling rail strike. And it’s getting new attention in the wake of the derailment, along with questions about whether the environmental disaster could have been avoided if the railroad had spent more on staffing and safety.

    “Corporations do stock buybacks, they do big dividend checks, they lay off workers,” said Democratic Sen. Sherrod Brown of Ohio, on CNN’s State of the Union on Sunday. “They don’t invest in safety rules and safety regulations, and this kind of thing happens.”

    The accident is under investigation by the National Transportation Safety Board. While the cause has yet to be determined, it is known that freight railroads have fought tougher safety rules in the past.

    One rule the industry successfully fought would have required a more modern braking system on trains carrying significant amounts of hazardous materials. The Federal Railroad Administration, which proposed the rule under the Obama administration, estimated a more modern braking system would reduce by nearly 20% the number of rail cars in a derailment that puncture and release their contents.

    The FRA estimated those better brakes would cost the entire industry $493 million, spread over a period of 20 years. The Association of American Railroads, the trade industry group that represents most US freight railroads, estimated a much greater cost — about $3 billion, but again, spread over 20 years. That would mean around $150 million a year for an entire industry that is earning billions of dollars of annual profits.

    Still, it was able to block the rule from ever taking effect, based partly on the argument it was too costly for the potential benefit.

    “The railroads are quick to point out their lack of funds to provide adequate staffing, paid sick leave and improved safety, yet they have billions of dollars to spend on stock repurchases,” said Eddie Hall, national president of the Brotherhood of Locomotive Engineers, the industry’s second-largest union behind the one that represents conductors.

    Share repurchases are designed to help increase the value of the stock by reducing the number of shares outstanding.

    In theory, each remaining share becomes more valuable since it represents a greater percentage of the company’s overall ownership. The earnings per share, a key measure used by investors to judge a company’s profitability, can rise even if the total dollars earned by the company goes down, as the pool of shares available to the public shrinks further.

    But Norfolk Southern’s profits aren’t going down. They’re going up — by quite a bit. It posted record profits from railway operations of $4.45 billion in 2021, and broke that record in 2022 when it earned $4.8 billion on that basis.

    Other freight railroads are also reporting improving profits, and have joined Norfolk Southern in massive share repurchases.

    Union Pacific

    (UNP)     purchased $6.3 billion worth of shares in 2022, and has plans to purchase an additional 84 million shares, worth more than $16 billion at its current value. CSX repurchased $4.7 billion worth of shares last year and has plans to buy an additional $3.3 billion going forward. Like Norfolk Southern, both UP and CSX spent more on share repurchases than they did on total employee compensation.

    Share repurchases are not limited to the rail industry. Chevron

    (CVX)     recently announced plans to repurchase $75 billion worth of its stock with windfall record profits that came from high oil prices. Across corporate America, share repurchases reached almost $1 trillion for the first time last year, coming in at $936 billion according to S&P Dow Jones Indices, up from $882 billion in 2021.

    Share repurchases are forecast to top $1 trillion this year.

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  • Warren Buffett is missing out on this year’s market comeback | CNN Business

    Warren Buffett is missing out on this year’s market comeback | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN
     — 

    Warren Buffett is arguably the most legendary investor of all time. But the Oracle of Omaha has missed out on this year’s stock market rally. So far, at least.

    Shares of Buffett’s Berkshire Hathaway

    (BRKB)     conglomerate, a company that owns businesses ranging from Geico and the Burlington Northern Santa Fe railroad to consumer brands like Dairy Queen, Duracell and Fruit of the Loom, are down slightly this year — lagging the market, as the S&P 500 is up 6%. (The Nasdaq has done even better, surging 12%.)

    Berkshire Hathaway also has a giant stock portfolio that Buffett helps run. Apple

    (AAPL)     is now by far the top holding for Berkshire, which also has big stakes in Bank of America

    (BAC)    , Chevron

    (CVX)    , American Express

    (AXP)     and Coca-Cola

    (KO)    .

    So is Berkshire’s portfolio, dare we say it, a little too boring? After all, if you want exposure to the big blue chips he owns, you could just buy an S&P 500 index fund.

    Buffett, in fact, has promoted that idea to investors many times, arguing that most individual stock pickers will not be able to beat the market. The 92-year-old Buffett, who has a net worth of more than $100 billion according to Forbes, even said that he wants the trustee in charge of his will to put 90% of his wife’s inheritance in index funds.

    Still, investors pay extremely close attention to Buffett every time he speaks. So traders will be poring over every word in his annual shareholder letter, which will be released the morning of Saturday, February 25, along with Berkshire’s latest earnings report.

    Don’t expect any major surprises. Buffett will probably continue to extol the virtues of a long-term, patient approach to investing and give a bullish outlook for the US economy. And to his credit, that usually pays dividends: Berkshire stock was up 3% last year in a down market.

    But market watchers are looking to see what Buffett says about the current inflationary scourge that has had a big impact on consumers and investors. He has lived through a couple of bouts of high inflation, after all.

    “I would like to hear Buffett address what’s going on with interest rates and inflation up as much they are,” said Steve Check, president of Check Capital Management, an investment firm that owns Berkshire shares. “He talked a lot about how concerned he was in the 1970s and 1980s.”

    Buffett has made numerous comments about inflation over the past few decades. And he was particularly nervous during the late 1970s and early 1980s, when soaring oil prices created an inflationary shock that severely hurt the economy.

    “High rates of inflation create a tax on capital that makes much corporate investment unwise,” Buffett said in his 1980 shareholder letter to Berkshire investors. Buffett also described inflation as a gigantic parasitic “tapeworm” for businesses in 1981.

    Buffett may also need to address how top-heavy and concentrated his portfolio has become. Berkshire’s five largest holdings make up about 75% of the company’s stock investments.

    “The portfolio is significantly overweight [in] technology, energy, consumer staples, and financials relative to the S&P 500,” said Bill Stone, chief investment officer with The Glenview Trust Company, another Berkshire shareholder, in a report. Stone noted that Berkshire also has big stakes in Kraft Heinz

    (KHC)     and oil company Occidental Petroleum

    (OXY)    .

    Investors also want to hear more about what Buffett plans to do with Berkshire’s massive pile of cash. The company has more than $100 billion on its balance sheet. Are more acquisitions coming?

    Buffett has talked for the past few years about how he’s longing to do an “elephant-sized” deal with Berkshire’s cash. Its most recent big deal was last year’s purchase of insurer Alleghany for $11.6 billion.

    Still, the recent sluggish performance of Berkshire’s stock is unlikely to deter the faithful Buffett fans, many of whom are expected to make the annual pilgrimage to Omaha on May 6 for the company’s shareholder meeting.

    Berkshire vice chairman Charlie Munger will likely be on stage with Buffett. So will Greg Abel, the chairman and CEO of Berkshire Hathaway Energy who Buffett has handpicked to eventually succeed him as Berkshire Hathaway CEO.

    Buffett’s faith in the US economy is well founded. American consumers have proven to be remarkably resilient despite rampant inflation. The surprisingly strong retail sales gains for January is further proof of that.

    Investors will get several more clues about consumer spending this week when several top retailers report earnings.

    Dow components Walmart

    (WMT)     and Home Depot

    (HD)     are the highlights. Walmart

    (WMT)    , which has a massive grocery business, should shed some light on how shoppers are coping with surging grocery prices.

    Walmart could still benefit from its reputation as a place for bargains, though. That could even attract more affluent shoppers looking to save a buck.

    “With inflation remaining elevated in the U.S., we expect Walmart to see continued trade-down benefits…particularly from higher-income customers,” said Arun Sundaram, an analyst at CFRA Research, in a report.

    And investors will be looking for clues about the health of the housing market when Home Depot reports. Placer.ai, a research firm that measures foot traffic at top retailers, said in a recent report that consumers are returning to Home Depot and rival Lowe’s at almost pre-pandemic levels — even despite the housing slowdown.

    One reason? Current homeowners may decide to spend more on renovations if they now plan to stick in their current house longer instead of looking to sell.

    “Although the hot home-buying market is cooling off…foot traffic remains close to pre-pandemic levels due to a shift towards projects aimed at sprucing up a current living space,” said Placer.ai’s Ezra Carmel in a report. “It appears that projects that enhance the prospect of staying in place also have the ability to drive visits.”

    Investors will be keeping close tabs on several other retailers set to report earnings this week, including TJX

    (TJX)     — the owner of TJ Maxx, Marshalls and HomeGoods — as well as online retailers eBay

    (EBAY)    , Etsy

    (ETSY)    , Overstock

    (OSTK)    , Wayfair

    (W)     and China’s Alibaba

    (BABA)    .

    The US government is also set to release personal spending figures for January on Friday, another data point that will give a glimpse of consumers’ financial health.

    Monday: US stock and bond markets closed for Presidents’ Day

    Tuesday: US existing home sales; Eurozone and UK PMI; earnings from Walmart, Home Depot, Medtronic

    (MDT)    , Fluor

    (FLR)    , Molson Coors

    (TAP)    , Caesars Entertainment

    (CZR)    , Diamondback Energy

    (FANG)    , Chesapeake Energy

    (CHK)    , Palo Alto Networks

    (PANW)    , Coinbase, La-Z-Boy

    (LZB)     and Hostess Brands

    (TWNK)

    Wednesday: Weekly crude oil inventories; earnings from Stellantis, Baidu

    (BIDU)    , TJX, Garmin

    (GRMN)    , Overstock, Wingstop

    (WING)    , Nvidia

    (NVDA)    , eBay, Etsy and Bumble

    Thursday: US weekly jobless claims; US Q4 GDP (second estimate); Eurozone inflation; Turkey interest rate decision; earnings from Alibaba, Netease

    (NTES)    , Keurig Dr Pepper

    (KDP)    , Wayfair, Newmont, Domino’s

    (DPZ)    , Papa John’s

    (PZZA)    , Yeti

    (YETI)    , Nikola, CNN owner Warner Bros. Discovery, Block

    (SQ)    , Booking Holdings

    (BKNG)    , Live Nation

    (LYV)    , Carvana

    (CVNA)    , Intuit

    (INTU)     and Beyond Meat

    (BYND)

    Friday: US personal income and spending; US PCE inflation figures; US new home sales; Japan inflation; Germany Q4 GDP; earnings from CIBC

    (CM)    , Scripps

    (SSP)     and Cinemark

    (CNK)

    Saturday: Berkshire Hathaway earnings and Warren Buffett annual shareholder letter

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  • Bed Bath & Beyond was a retail pioneer. Here’s what went wrong | CNN Business

    Bed Bath & Beyond was a retail pioneer. Here’s what went wrong | CNN Business

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    New York
    CNN
     — 

    Bed Bath & Beyond, America’s quintessential home furnishings’ chain, is fighting to stay in business.

    The company has avoided a bankruptcy filing for now by completing a complex stock offering that will give it an immediate injection of $225 million in funds and a pledge for $800 million in the future to pay down its current debt load.

    Bed Bath & Beyond is also shrinking to save money. The company said it plans to close around 400 of its roughly 760 Bed Bath & Beyond stores. It will keep open its most profitable stores in key markets.

    The moves are a lifeline for Bed Bath & Beyond. They will give the company time to pursue a turnaround without a bankruptcy filing, which can be costly, out of its control and wind up in a liquidation.

    “They are essentially doing a reorganization outside of bankruptcy court,” said Daniel Gielchinsky, an attorney at DGIM Law specializing in bankruptcy. “Slow the cash burn is the name of the game for the next 6 to 12 months and allow the company to pivot into a profitable position.”

    It will be a complicated turnaround and the company’s future remains uncertain. If Bed Bath & Beyond comes up short in the current version of its turnaround plan, the likelihood of a liquidation increases.

    Here’s how Bed Bath & Beyond, once a retailer pioneer, veered to the edge of bankruptcy and where it turns next.

    Bed Bath & Beyond had been a crown jewel of the era of so-called “category killers”: chains that dominated a category of retail, such as Toys “R” Us, Circuit City and Sports Authority. Those companies, too, ultimately filed for bankruptcy.

    Bed Bath & Beyond became known for pots and pans, towels and bedding stacked from the floor to the ceilings at its cavernous stores — and for its ubiquitous 20%-off coupons. The blue-and-white coupons became something of a pop culture symbol, and millions of Americans wound up stashing them away in their cars, closets and basements.

    The retailer attracted a broad range of customers by selling name brands at cut-rate prices. Brands coveted a spot on Bed Bath & Beyond’s shelves, knowing it would lead to big sales. Plus, the open-store layout encouraged impulse buying: Shoppers would come in to buy new dishes and walk out with pillows, towels and other items.

    Stores were a fixture for shoppers around the winter holidays and during the back-to-school and college seasons, and Bed Bath & Beyond also had a strong baby and wedding registry business.

    Founded in 1971 by two veterans of discount retail in Springfield, New Jersey, the chain of small linen and bath stores — then called Bed ‘n Bath — first grew around the northeast and in California selling designer bedding, a new trend at the time. Unlike department stores, it didn’t rely on sales events to draw customers.

    “We had witnessed the department store shakeout and knew that specialty stores were going to be the next wave of retailing,” co-founder Leonard Feinstein reportedly said in 1993. “It was the beginning of the designer approach to linens and housewares and we saw a real window of opportunity.”

    In 1987, the company changed its name to Bed Bath & Beyond to reflect its expanded merchandise and bigger “superstores.” The company went public in 1992 with 38 stores and around $200 million in sales.

    By 2000, those figures leaped to 241 stores and $1.1 billion in sales. The 1,000th Bed Bath & Beyond store opened in 2009, when the chain had reached $7.8 billion in sales.

    The company was something of an iconoclast. It spent little on advertising, relying instead on print coupons distributed in weekly newspapers to attract customers.

    “Why not just tell the customer that we’ll give you a discount on the item you want — and not the one that we want to put on sale? We’ll mail a coupon, and it will be a lot cheaper,” Bed Bath & Beyond co-founder Warren Eisenberg, now 92, said in a 2020 New York Times interview.

    The chain was known for giving autonomy to store managers to decide which products to stock, allowing them to customize their individual stores, and for shipping products directly to stores instead of a central warehouse.

    But as brick-and-mortar began to give way to e-commerce, Bed Bath & Beyond was slow to make the transition — a misstep compounded by the fact that home decor is one of the most commonly bought categories online.

    “We missed the boat on the internet,” Eisenberg said in a recent Wall Street Journal interview.

    Online shopping weakened the allure of Bed Bath & Beyond’s fan-favorite coupons, too, because consumers could find plenty of cheaper alternatives on Amazon or browse a wider selection on sites like Wayfair

    (W)    .

    It wasn’t just Amazon and online shopping that sank Bed Bath & Beyond, however.

    Bed Bath & Beyond's ubiquitous coupons lost some of their appeal.

    Walmart

    (WMT)    , Target

    (TGT)     and Costco

    (COST)     have grown over the past decade, and they have been able to draw Bed Bath & Beyond customers with lower prices and a wider array of merchandise. Discount chains such as HomeGoods and TJ Maxx and have also undercut Bed Bath & Beyond’s prices.

    Without the differentiators of the lowest prices or widest selection, Bed Bath & Beyond’s sales stagnated from 2012 to 2019.

    The company was hit hard during the pandemic, closing stores temporarily during 2020 while rivals remained open. Sales sunk 17% in 2020 and 15% in 2021.

    What’s more, Bed Bath & Beyond has rotated through several different executives and turnaround strategies in recent years.

    Former Target executive Mark Tritton took the helm in 2019 with backing from investors and a bold new strategy. He scaled back coupons and inventory from national brands in favor of Bed Bath & Beyond’s own private-label brands.

    But this change alienated customers who were loyal to big brands. The company also fell behind on payments to vendors and stores did not have enough merchandise to stock shelves. Tritton left as CEO in 2022.

    As of late November the company had 949 stores, including 762 Bed Bath & Beyond stores and 137 buybuyBaby stores.

    It said Tuesday that it will ultimately have about half that number – 360 Bed Bath & Beyond stores and 120 buybuyBaby locations.

    Bed Bath & Beyond will close stores that drain the most cash out of its business.

    But the closures will mean Bed Bath & Beyond will give up on stores that brought in $1.2 billion in annual sales, Michael Lasser, an analyst at UBS, said in a note to clients Tuesday. Bed Bath & Beyond will recapture a portion of those sales from its other stores and online, Lasser said, but the majority will go to other retailers.

    But, to survive, the company needs to grow sales at its remaining stores. Otherwise, too much of Bed Bath & Beyond’s revenue will go toward repaying debt that it won’t be able to turn a profit.

    Reversing sales declines won’t be easy given challenges with waning customer demand, online traffic and rising competition in Bed Bath & Beyond product categories, Lasser said. Bed Bath & Beyond will have to overcome its significant hurdles to become a healthy, profitable company.

    Bankruptcy lawyer Daniel Gielchinsky, however, said it was an encouraging sign that Bed Bath & Beyond was able to raise enough cash through a public offering to stay afloat. The offering was reportedly backed by investment firm Hudson Bay Capital. (Hudson Bay did not respond to a CNN Business request for comment.)

    Still, liquidators will be watching closely, he said, eager to pounce.

    “They are assuredly waiting on the sidelines to dismantle the company at the ready.”

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  • Bed Bath & Beyond is closing 150 more stores | CNN Business

    Bed Bath & Beyond is closing 150 more stores | CNN Business

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    New York
    CNN
     — 

    Bed Bath & Beyond is closing 150 more stores — just a week after the struggling retailer announced the closure of 87 locations.

    The company’s brick-and-mortar footprint has already shrunk dramatically, a regulatory filing showed late Monday, and the new closings mean it will have shuttered 400 stores in the past year — almost half the 950 or so stores it had open in February 2022.

    That includes last week’s announcement that it was also closing all 49 remaining Harmon Face Value stores, which sold cosmetics; plus 5 buybuy Baby locations. A list of the new store closures wasn’t immediately available.

    A turnaround doesn’t look imminent: The embattled home goods chain forecasts first quarter sales to be down by 30% to 40% with “sequential, quarterly sales improvement thereafter” the filing said.

    The company also said Monday it was planning to raise some $1 billion through an offering of preferred stock and warrants in a last-ditch effort to stave off bankruptcy. If it can’t complete the complex transaction, it would “likely file for bankruptcy protection.” It also appointed Holly Etlin, a bankruptcy expert, as interim chief financial officer.

    The chain has said in recent weeks that it had defaulted on a loan and may not be able to remain in business, raising concerns about its future. Bed Bath & Beyond held talks in recent days with an investment firm to underwrite a significant portion of the proposed offering, according to Reuters.

    Bed Bath and Beyond has been part of the meme stock phenomenon, with shares skyrocketing as much as 400% last year when activist investor and GameStop chairman Ryan Cohen took a stake and sought changes.

    Shares of the retailer, which closed up 92% at $5.86 in a rollercoaster session Monday, were down 40% in in pre-market trading Tuesday.

    Founded in 1971, Bed Bath & Beyond became a staple for affordable home decor, kitchenware and college dorm room furniture. It’s also known for its ubiquitous 20% off blue coupons, and cavernous stores with merchandise stacked high to the ceilings.

    But the company struggled to make the transition to online shopping and fend off larger chains such as Walmart and Target

    (TGT)    . Many shoppers switched to those competitors as the novelty of Bed Bath & Beyond’s coupons faded.

    The company was also hit hard during the pandemic, closing stores temporarily during 2020 while rivals remained open. The company lost 17% of its sales in 2020 and 14% in 2021.

    – Reuters contributed to this report

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  • Gautam Adani fails to calm investors over market mayhem that wiped out billions | CNN Business

    Gautam Adani fails to calm investors over market mayhem that wiped out billions | CNN Business

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    New Delhi
    CNN
     — 

    Indian billionaire Gautam Adani tried to reassure investors on Thursday after he abruptly abandoned his flagship firm’s $2.5 billion share sale.

    “For me, the interest of my investors is paramount and everything is secondary,” the 60-year-old businessman said in a recorded video address. “Once the market stabilizes, we will review our capital market strategy.”

    This was the first time the tycoon has spoken about the stock market mayhem that has wiped billions off his logistics and energy business empire.

    A week-long meltdown in the value of Adani Group shares started when an American short seller accused the conglomerate of fraud. The group, which has seven listed companies, has lost more than $90 billion in market value in the week since Hindenburg Research published its report.

    Foreign banks have started to closely scrutinize the conglomerate. According to Bloomberg, Credit Suisse has stopped accepting bonds of Adani firms as collateral for margin loans to its private banking clients. The Swiss lender declined to comment on a CNN request for confirmation.

    Despite the turmoil, the group’s flagship company, Adani Enterprises, managed to issue new shares worth $2.5 billion on Tuesday. The capital raising exercise was touted as India’s biggest ever public offering by a listed company. After a tepid start, the offer was fully subscribed.

    A day later, though, Adani abandoned the deal. The shares have been trading considerably below the offer price since last week, meaning that investors in the capital raise were looking at immediate losses.

    “Hence to insulate the investors from potential losses we have withdrawn,” Adani said in the video. “This decision will not have any impact on our existing operations and future plans. We will continue to focus on timely execution and delivery of projects.”

    Adani added that his group’s fundamentals were “strong” and that it had an “impeccable track record of fulfilling our debt obligations.”

    In an investigation published on January 24, Hindenburg Research accused the Adani Group of “brazen stock manipulation and accounting fraud scheme over the course of decades.”

    The research firm also questioned the “sky-high valuations” of Adani firms and said their “substantial debt” put the entire group “on a precarious financial footing.”

    While the Adani Group had immediately denounced the report as “baseless” and “malicious,” the video address marked the first time the founder spoke about the crisis.

    But it wasn’t enough calm the markets. Shares in Adani Enterprises were down almost 9% in Mumbai, while shares in his other companies plunged 5% to 10%.

    Indian market regulators have not yet commented on the events of the past week. But, Reuters reported Wednesday that the Securities and Exchange Board of India (SEBI) was examining the stock price falls and also looking into any possible irregularities in Tuesday’s share sale, citing a source with direct knowledge of the matter.

    The scrapping of the share sale on Wednesday was a huge setback for one of India’s most prominent industrialists. Just a week ago, Adani’s sprawling group was worth over $200 billion, making him Asia’s richest man by a wide margin. At one point last year, he even overtook Jeff Bezos to become the second richest person in the world.

    On Wednesday, Adani lost his perch as Asia’s richest man, according to the Bloomberg Billionaire’s Index. He had a net worth of $72.1 billion, according to the index, behind Mukesh Ambani, who has a fortune of $81 billion.

    CNN’s Mark Thompson contributed to this report.

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  • Here’s why you should always wait for the earnings call | CNN Business

    Here’s why you should always wait for the earnings call | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    Investors are pretty bad at living in the moment. We’re currently in the thick of fourth quarter earnings reports, but traders don’t seem to care about how companies fared during the final months of 2022. They’re more focused on what’s going to happen in the future.

    Case-in-point: Earnings calls, where top execs pontificate about their economic outlook, have been moving markets more than earnings-per-share and revenue reports.

    What’s happening: The mantra on Wall Street has become, as Ritholtz Wealth Management CEO Josh Brown puts it, “ignore the numbers, wait for the call.”

    Microsoft reported great fourth quarter earnings last Tuesday that beat Wall Street’s expectations, but the stock dropped 4% the next day. That’s because CEO Satya Nadella got on an earnings call with investors and warned of a slowdown in the company’s cloud business and software sales. His negative outlook came just as the company announced it was letting go of 10,000 employees, further spooking investors. 

    Other tech companies are following suit — while things are fine for the time being, they’re reporting that the future is foggy.

    IBM stock sank 4.5% last Thursday even as the tech titan beat Wall Street’s Q4 expectations. The reason for the drop might be because Jim Kavanaugh, IBM’s finance chief, warned on the conference call that it would be wise to expect the company’s total 2023 revenue growth to be on the low end. IBM also announced layoffs – the company said it plans to cut around 3,900 jobs or 1.5% of its total workforce. 

    The economic environment is rapidly changing. CEOs on earnings calls are talking more about recession than inflation now, according to an analysis by Purpose Investments.

    Wall Street is also beginning to fear an economic downturn more than painful rate hikes and as a result investors are putting more weight on CEO and CFO forecasts.

    And they’re looking bleak. As of Friday, 19 companies in the S&P 500 had issued forward earnings-per-share guidance for the first quarter of 2023, according to FactSet data. Of these 19 companies, 17, or 89%, issued negative guidance. That’s well above the 5-year average of 59%.

    “My best guess is that cautious tones on conference calls will be the norm, not the exception,” wrote Brown in a recent post. These slowdowns have been partially factored into stock prices, he said, “but not necessarily in full.”

    The upside: Market reaction appears to go both ways. American Express missed on earnings last week but said that credit card spending was hitting new records and that the future looks bright. The stock shot up more than 10%. 

    Prices at the pump typically fall during the coldest months as wintry weather keeps Americans off the roads. But something unusual is happening this year, reports my colleague Matt Egan. Gas prices are rocketing higher.

    The national average for regular gas jumped to $3.51 a gallon on Friday and remained there through the weekend, according to AAA. Although that’s a far cry from the record of $5.02 a gallon last June, gas prices have increased by 12 cents in the past week and 41 cents in the past month.

    All told, the national average has climbed by more than 9% since the end of last year – the biggest increase to start a year since 2009, according to Bespoke Investment Group.

    Why are gas prices jumping? It’s not because of demand, which remains weak, even for this time of the year. Instead, the problem is supply.

    The extreme weather in much of the United States near the end of last year caused a series of outages at the refineries that produce the gasoline, jet fuel and diesel that keep the economy humming. US refineries are operating at just 86% of capacity, down from the mid-90% range at the start of December, according to Bespoke.

    Beyond the refinery problems, oil prices have crept higher, helping to drive prices at the pump northward. US oil prices have jumped about 16% since December partially due to expectations of higher worldwide demand as China relaxes its Covid-19 policies and also because oil markets are no longer receiving massive injections of emergency barrels from the Strategic Petroleum Reserve.

    What’s next: Expect more pain at the pump. Patrick De Haan, head of petroleum analysis at GasBuddy, worries the typical springtime jump in prices will be pulled forward.

    “Instead of $4 a gallon happening in May, it could happen as early as March,” De Haan told CNN. “There is more upside risk than downside risk.”

    A return of $4 gas would be painful to drivers and could dent consumer confidence. Moreover, pain at the pump would complicate the inflation picture as the Federal Reserve debates whether to slow its interest rate hiking campaign.

    Goldman Sachs had a rough time in 2022, and the investment bank’s CEO, David Solomon, is being punished for it. Well, kind of. 

    The investment banking giant said in a Securities and Exchange Commission filing Friday that Solomon received $25 million in annual compensation last year. While that is still a very large amount of money, it’s down nearly 30% from the $35 million that Solomon raked in during 2021, reports my colleague Paul R. La Monica. 

    Solomon’s $2 million annual salary is unchanged. But the company said that his “annual variable compensation,” paid in a mix of performance-based restricted stock units and cash, was well below 2021 levels.

    Goldman Sachs (GS) shares fell more than 10% in 2022. The company also  reported a 16% drop in revenue in the fourth quarter and profit plunge of 66% earlier this month, mainly due to the lack of merger activity and initial public offerings.

    Maybe Solomon can make that extra $10 million with payouts from his burgeoning DJ career. 

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  • Chevron earnings soar to a record | CNN Business

    Chevron earnings soar to a record | CNN Business

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    New York
    CNN
     — 

    Chevron reported a record full-year profit of $36.5 billion, buoyed by high oil prices.

    Adjusted earnings for the year more than doubled from the $15.6 billion Chevron earned in 2021 and up 36% from its previous record profit set in 2011.

    The oil company’s fourth-quarter earnings came in at $7.9 billion, up 61% from a year earlier but less than the record quarterly income of $11.4 billion it reported for the second quarter.

    The fourth quarter earnings per share of $4.09 fell short of the forecast of $4.38 a share from analysts surveyed by Refinitiv. But revenue in the quarter of $56.5 billion topped forecasts by nearly $2 billion and was up 17% from a year earlier.

    Full-year revenue of $246.3 billion was up 52% from 2021.

    Shares of Chevron

    (CVX)     were down slightly more than 1% in premarket trading.

    Ahead of Friday’s report Chevron, the nation’s second largest oil company, behind only ExxonMobil, had announced it was hiking its dividend by 6% along with a massive $75 billion share repurchase plan. The decision brought criticism from those who said oil companies should be investing their money in producing more oil and gasoline to increase supply and drive down prices for inflation-weary drivers.

    “For a company that claimed not too long ago that it was ‘working hard’ to increase oil production, handing out $75 billion to executives and wealthy shareholders sure is an odd way to show it,” said Abdullah Hasan, assistant press secretary at the White House, in a tweet Wednesday evening after the share repurchase was announced.

    Chevron said Friday its investments in operations increased by more than 75% from 2021, and annual US production increased to the equivalent of 1.2 million barrels of oil a day.

    The amount it spent on capital spending and exploration in 2022 was $12.3 billion, up 43% compared with $8.6 billion spent in 2021, but only slightly more than the $11 billion it spent on dividends or the $11.3 billion on share repurchases during the year.

    The record profit came primarily from the soaring oil prices during the year, not its increased production.

    Chevron and other major oil companies all benefited from the spike in oil and gasoline prices during 2022, in the wake of Russia’s invasion of Ukraine. While Russia, one of the world’s leading oil exporters, sent relatively little oil to the United States, sanctions placed on Russia following the invasion roiled global commodity prices which set the price of oil.

    Futures for a barrel of Brent crude oil, the global benchmark, hit a record of $123.58 close in early June, up more than 50% from six months earlier ahead of the war, and the average price of a gallon of regular gas in the United States broke the $5 mark a week later to reach a record $5.03.

    But oil and gas prices have fallen substantially since then. Brent closed Thursday at $87.47, slightly below the year-earlier level, while the average price of a gallon of regular gas stands at $3.51 a gallon, only slightly higher from the $3.35 average of a year ago.

    But prices have started to rise once again, partly because Covid lockdown rules in China have been lifted. Traders believe that’s a bullish sign for global demand for oil and gasoline. Refinery problems caused by winter weather are also pushing prices higher.

    The average US price of a gallon of regular gasoline is up nearly 12 cents in just the last week and up 41 cents, or 13%, in the last month. Brent oil is up 12% in the last three weeks.

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  • Asia’s richest man Gautam Adani is addicted to ChatGPT | CNN Business

    Asia’s richest man Gautam Adani is addicted to ChatGPT | CNN Business

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    New Delhi
    CNN
     — 

    Asia’s richest man Gautam Adani says he is addicted to ChatGPT, the powerful new AI tool that interacts with users in an eerily convincing and conversational way.

    In a LinkedIn post last week, the 60-year-old India tycoon said that the release of ChatGPT was a “transformational moment in the democratization of AI given its astounding capabilities as well as comical failures.”

    The billionaire admitted to “some addiction” to ChatGPT since he has started using it.

    The tool, which artificial intelligence research company OpenAI made available to the general public late last year, has sparked conversations about how “generative AI” services — which can turn prompts into original essays, stories, songs and images after training on massive online datasets — could radically transform how we live and work.

    Some claim it will put artists, tutors, coders, and writers out of a job. Others are more optimistic, postulating that it will allow employees to tackle to-do lists with greater efficiency.

    “But there can be no doubt that generative AI will have massive ramifications,” Adani wrote in his post, adding that generative AI holds the “same potential and danger” as silicon chips.

    “Nearly five decades ago, the pioneering of chip design and large-scale chip production put the US ahead of rest of the world and led to the rise of many partner countries and tech behemoths like Intel, Qualcomm, TSMC, etc,” Adani, who has businesses in sectors ranging from ports to power stations, wrote.

    “It also paved the way for precision and guided weapons used in modern warfare with more chips mounted than ever before,” he added. The race in the field of generative AI will quickly get as “complex and as entangled as the ongoing silicon chip war,” he said.

    Chipmaking has emerged recently as a new flashpoint in US-China tensions, with Washington blocking sales of advanced computer chips and chip-making equipment to Chinese companies. Some Chinese investments in European chipmaking have also been blocked.

    The Indian infrastructure magnate believes that China has an edge over the United States in the AI race because Chinese researchers published twice as many academic papers on the subject as their American counterparts in 2021, he wrote in the post published on Friday after attending the World Economic Forum in Davos.

    Back home, Adani is also considering taking five new businesses to the stock market in the next five years, according to his conglomerate’s chief financial officer Jugeshinder Singh.

    Speaking to reporters on Saturday in the western Indian city of Ahmedabad — where the Adani empire is headquartered — Singh said the group’s metals and mining, energy, data center, airports, and roads businesses will likely be spun off between 2025 to 2028.

    Adani Enterprises, the conglomerate’s flagship company, functions as an incubator for Adani’s businesses. Once they have matured, they are often given their independence via a stock market listing. Many of Adani companies have become leading players in their respective sectors.

    Later this month, Adani Enterprises is also raising 200 billion rupees ($2.5 billion) by issuing new shares. It would be India’s biggest ever follow-on public share offering.

    A college dropout and a self-made industrialist, Adani is worth over $120 billion, making him the world’s third richest man, ahead of Jeff Bezos and Bill Gates.

    Shares of Adani’s seven listed companies — in sectors ranging from ports to power stations — have seen turbocharged growth in the last few years. But some analysts fear that this growth comes at a huge risk as Adani’s $206 billion juggernaut has been fueled by a $30 billion borrowing binge, making his business one of the most indebted in the country.

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  • Bank earnings fail to impress investors as recession worries rise | CNN Business

    Bank earnings fail to impress investors as recession worries rise | CNN Business

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    New York
    CNN
     — 

    JPMorgan Chase, Bank of America, Citigroup and asset management giant BlackRock posted results that topped Wall Street’s forecasts Friday, but investors were nonetheless a little disappointed at first.

    Trading was choppy, with most bank stocks falling at the open before rebounding. Shares of JPMorgan Chase

    (JPM)     were up about 2.5% in late afternoon trading while BofA

    (BAC)     was up 2%. Wells Fargo

    (WFC)    , which reported earnings that missed Wall Street’s targets, reversed earlier losses and was up 3%. Citi

    (C)     was up 2% while BlackRock

    (BLK)     was flat.

    “The earnings were solid, but the market is concerned with recession fears,” said John Curran, managing director and head of North American bank coverage at MUFG.

    Investors might have been concerned by the downbeat tone of the big banks. Executives are clearly still worried about inflation and the threat of a recession this year following several big interest rate hikes by the Federal Reserve.

    JPMorgan Chase CEO Jamie Dimon said in the bank’s earnings statement that although the economy is still strong and that consumers and businesses are spending and healthy, “we still do not know the ultimate effect of the headwinds coming from geopolitical tensions including the war in Ukraine, the vulnerable state of energy and food supplies, persistent inflation that is eroding purchasing power and has pushed interest rates higher.”

    The bank added in the earnings release that it now expects a “mild recession” as a base economic case. CFO Jeremy Barnum added during a conference call with reporters that in addition to the slowdown that has already started in its home lending unit, it is starting to see “headwinds” in auto lending.

    Meanwhile, BofA CEO Brian Moynihan noted that this is “an increasingly slowing economic environment” and Wells Fargo CEO Charlie Scharf said “we are carefully watching the impact of higher rates on our customers.” Wells Fargo recently announced plans to pull back on its massive mortgage business.

    Banks are clearly worried about a looming recession, and Wall Street has taken notice.

    Moody’s Investors Service analyst Peter Nerby noted in a report that “credit provisions are rising” at JPMorgan Chase and that Citi “built capital and reserves in anticipation of a slowdown in core markets.”

    The Fed’s rate hikes aren’t helping either.

    “Higher than expected interest rates pose a significant risk to the outlook for credit quality, loan growth and net interest margins,” said David Wagner, a portfolio manager at Aptus Capital Advisors, in an email.

    Concerns about the economy were one reason why stocks plunged in 2022, suffering their worst year since 2008. As a result of the Wall Street slump, there was a major slowdown in merger activity and initial public offerings.

    That hurt the investment banking businesses for the top banks. JPMorgan Chase and Citi each said that advisory fees plummeted nearly 60% in the quarter.

    Goldman Sachs

    (GS)     and Morgan Stanley

    (MS)     will give more color about the health of Wall Street next Tuesday when they both report their fourth quarter results.

    Goldman Sachs, which has aggressively built up a consumer banking unit over the past few years, has struggled to make money in that division. Goldman Sachs disclosed in a regulatory filing Friday that it has lost more than $3 billion in its consumer business since 2020.

    There were some signs of optimism though. BlackRock, which owns the massive iShares family of exchange-traded funds, reported a rebound in assets under management from the third quarter to the fourth quarter as stocks soared in October and November.

    “The current environment offers incredible opportunities for long-term investors,” said BlackRock CEO Larry Fink in the earnings release.

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