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August 30, 2021

Robinhood tumbles 7% after SEC’s Gary Gensler says ban of payment for order flow ‘is on the table’

Robinhood Vlad standing at Nasdaq time square billboard — Brendan McDermid/Reuters

Robinhood fell as much as 9% on Monday before closing 7% lower after SEC Chairman Gary Gensler said a ban of the payment for order flow model “is on the table.”
Gensler made the comments in a Monday interview with Barron’s.
Robinhood derives a bulk of its revenue from payment for order flow in stocks and options trades.
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Shares of Robinhood fell as much as 9% on Monday afternoon following comments from SEC Chairman Gary Gensler. The stock closed 7% lower on the day.

In a Monday interview with Barron’s, Gensler said a ban of the payment for order flow model used by many brokerage firms “is on the table.”

Payment for order flow is a practice in which brokers route trade orders from customers to market makers, who then execute those trades and often collect a small spread from the transaction.

Gensler told Barron’s the practice has “an inherent conflict of interest. They get the data, they get the first look, they get to match buyers and sellers out of that order flow. That may not be the most efficient markets for the 2020s.”

According to Barron’s, Gensler didn’t say whether the SEC found any instances of where the conflicts of interests resulted in harm to investors. Proposals on the practice could come from the SEC in the coming months, Gensler said.

To the end user buying a few shares of Apple or Microsoft, the spread taken by market makers in price paid is often to the tenth of a penny and negligible.

Robinhood utilized payment for order flows to lower its trading commission to $0 when it launched in 2014, as most discount brokerages were charging upwards of $9.99 per trade. Besides $0 commission trades, payment for order flow has helped enable the ability for fractional share investing.

Robinhood derives a bulk of its revenue from payment for order flow and transaction rebates. In 2020, 75% of its revenue was derived from those practices, and that number increased in the first and second quarter of 2021.

The company listed a potential ban of payment for order flow as a risk to its business in the firm’s S-1 filing.

“Because a majority of our revenue is transaction-based (including payment for order flow, or “PFOF”), reduced spreads in securities pricing, reduced levels of trading activity generally, changes in our business relationships with market makers and any new regulation of, or any bans on, PFOF and similar practices may result in reduced profitability, increased compliance costs and expanded potential for negative publicity,” Robinhood said.

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August 30, 2021

Affirm soars 47% after partnering with Amazon to bring buy now, pay later service to the online retail giant

trader nyse celebrate — Reuters / Brendan McDermid

Affirm soared as much as 47% on Monday after the buy-now-pay-later fintech partnered with Amazon.
Amazon customers will now be able to split purchases over $50 into monthly payments.
The offering is currently in test mode and will be rolled out more broadly in the next few months.
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Shares of Affirm soared as much as 47% on Monday after the buy-now-pay-later fintech inked a partnership with Amazon.

Customers that make a purchase of more than $50 on Amazon will be offered the Affirm payment option at checkout, often with 0% interest, and no late fees.

Amazon said the Affirm payment offering is currently being tested among certain customers, and will be broadly rolled out in the next few months.

“By partnering with Amazon we’re bringing the transparency, predictability and affordability that Affirm provides today to the millions of people who shop on Amazon.com in the U.S.,” said Eric Morse, senior vice president of sales at Affirm. “Offering Affirm’s alternative to credit cards also delivers more of the payment choice and flexibility consumers on Amazon want.”

The move comes amid a surge in popularity for buy-now-pay-later services, and as companies rush to offer the service to customers. While PayPal has built its own in-house option, Square purchased Afterpay for $29 billion earlier this month.

Buy-now-pay-later services allow customers to make monthly installment plans on purchases of goods and services, usually with 0% interest payments and no later or hidden fees. Merchants are interested in offering the service because it can lead to increased sales among those who may be on a tight budget.

Apple recently partnered with Affirm to bring its buy-now-pay-later service to Canadian customers of the iPhone, iPad, and Mac, and is also working on offering a similar payment option in the US, according to reports.

The partnership with Amazon is welcome news for Affirm investors, as the company looks to diversify away from its concentrated base of Peloton users that helped fuel growth for the company. On Friday, shares of Affirm sold off after Peloton lowered the price of its bike by a few hundred dollars.

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August 26, 2021

Lordstown Motors soars 41% after new CEO takes charge of EV developer

Endurance electric pickup truck by Lordstown Motors — The Endurance.
Lordstown Motors

Lordstown Motors soared as much as 41% on Thursday after the EV developer named Daniel Ninivaggi as its CEO.
Ninivaggi was previously the CEO of Icahn Enterprises and has experience in the auto business.
He hinted at plans to raise more cash and said Lordstown’s Endurance pickup truck could take market share.
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Shares of Lordstown Motors soared as much as 41% on Thursday after the EV developer named Daniel Ninivaggi as its CEO..

The Ohio-based company has been struggling in recent months following the resignation of its CEO and CFO, as well as being the subject of a DOJ and SEC investigation into whether it misled investors on its pick-up truck reservations.

Ninivaggi was previously the CEO of Icahn Enterprises, a conglomerate founded by Carl Icahn. At Icahn Enterprises, he oversaw the company’s auto parts and distribution businesses.

Lordstown’s appointment of a new CEO is likely easing some investor concerns, as Morgan Stanley commented earlier this month about the EV company, “Our team is not aware of any example in contemporary automotive history where a product was successfully validated, launched and commercialized without a CEO.”

The new CEO is taking charge of the company as it looks to compete in the increasingly competitive EV market. Ninivaggi said he sees potential for Lordstown’s Endurance pick-up truck to take meaningful market share from incumbents like Tesla, Ford, and General Motors.

“I believe the demand for full-size electric pickup trucks will be strong and the Endurance truck, with its innovative wheel hub motor design, has the opportunity to capture a meaningful share of the market,” Ninivaggi said.

But to execute on that vision, Lordstown Motors badly needs cash, which is top of mind for the new CEO, who said the company will evaluate all options to raise cash to fund the development, manufacturing, and sale of the Endurance pick-up truck.

Despite Thursday’s rally, shares of Lordstown Motors are still down 68% year-to-date, and down as much as 73% from its record high.

Lordstown Motors stock price — Markets Insider

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August 19, 2021

Nvidia surges 8% after record earnings results blow past analyst expectations

NVIDIA logo shown at SIGGRAPH 2017

Reuters

Shares of Nvidia jumped as much as 8% on Thursday after the company reported strong second-quarter earnings.
Shares of the GPU manufacturer reversed early losses of 1% as investors digested the results.
Nvidia said it expects the ongoing semiconductor shortage to last well into 2022 and remains hopeful its proposed acquisition of Arm will be approved.
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Nvidia surged as much as 8% on Thursday after the graphics card manufacturer reported record second-quarter earnings results that surpassed analyst estimates.

The company saw surging demand in its gaming, data center, and professional visualizations business units, and said it is struggling to keep up with demand amid an ongoing semiconductor shortage. Nvidia CEO Jensen Huang expects the chip shortage to last well into 2022.

Here were the key numbers:

Revenue: $6.51 billion, versus estimates of $6.34 billion
Adjusted earnings per share: $1.04, versus estimates of $1.02
Third quarter outlook: $6.80 billion, versus estimates of $6.53 billion

On the crypto front, Nvidia said it expects a decline in the sale of its crypto mining processors, especially as ethereum transitions to EIP-3554, which will make the cryptocurrency essentially unmineable. The company also said it expects the ongoing chip shortage to last well into 2022.

Nvidia also said it continues to work through the regulatory process for completing its proposed $40 billion acquisition of Arm, which has not yet closed due to anti-trust concerns.

“Although some Arm licensees have expressed concerns or objected to the transaction, and discussions with regulators are taking longer than initially thought, we are confident in the deal and that regulators should recognize the benefits of the acquisition to Arm, its licensees, and the industry,” Nvidia CFO Colette Kress said.

The results impressed Wall Street analysts, with many seeing demand outstripping supply in the immediate future. While that’s often a great problem to have in business, it will limit near-term upside in the stock, analysts said.

The strong results helped add to Nvidia’s year-to-date gains of 51% as of Thursday afternoon. The stock has remained perched near record highs even after it completed its 4-for-1 stock split earlier this year.

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August 16, 2021

Oil slumps 4% as dismal data from China highlights supply-chain risks associated with Delta variant

Mercer Street oil tanker — Johan Victor via AP

The price of crude oil fell as much as 4% on Monday after pessimistic industrial and retail data out of China signaled an economic growth slowdown.
Chinese retail sales, industrial production, fixed-asset investment, and unemployment all came in below expectations, according to official data released Monday.
Last week, the International Energy Agency said that the resurgent Delta variant posed a significant risk to rising oil demand, especially in Asia, and slashed projections for the second half of the year.
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The price of crude oil fell as much as 4% on Monday after pessimistic industrial and retail data out of China highlighted signaled a Delta variant-driven slowdown in economic activity.

July economic data released by China’s statistics bureau on Monday revealed misses across the board. Retail sales, industrial production, fixed-asset investment, and unemployment all came in below expectations, underscoring the costs of China’s tough “zero COVID” approach to new waves of infection.

“July’s data suggest the economy is losing steam very fast,” Raymond Yeung, chief China economist at ANZ, told Bloomberg. “The resurgence of Delta also adds extra risk to August’s activities.”

Delta has spelled complications for supply chains running through China. Last week, the country partially shut down the Ningbo-Zhoushan port in eastern Zhejiang province, one of the world’s busiest, after a few workers contracted COVID. Freight rates have surged and shipping reliability has cratered as pandemic bottlenecks throttle global commerce.

Last week, the International Energy Agency said that the resurgent Delta variant posed a significant risk to rising oil demand, especially in Asia, and slashed projections for the second half of the year. The IEA now expects 500,000 barrels per day lower production, driven by lower demand.

“We now estimate that demand fell in July as the rapid spread of the COVID-19 Delta variant undermined deliveries in China, Indonesia, and other parts of Asia,” the agency said.

The oil slump came alongside broader weakness in global stocks, as the weak Chinese data bit into markets that have only marched upward in recent weeks.

WTI futures were trading at $66.66 as of 10:30 a.m. ET, down 2.6% on the day.

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August 12, 2021

Palantir jumps 9% after 2nd-quarter earnings and future guidance beat estimates

Shares of Palantir surged as much as 9% on Thursday after its second-quarter earnings beat estimates.
The company said it closed 62 deals worth $1 million or more, with 21 of those deals being worth more than $10 million.
Palantir expects third-quarter revenue of $385 million, ahead of analyst estimates for $380 million.
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Shares of Palantir surged as much as 9% on Thursday after it reported second-quarter earnings that beat analyst estimates.

The data analytics company said it closed 62 deals worth $1 million or more in the quarter, with 21 of those deals being worth more than $10 million, and 30 of those deals being worth more than $5 million.

Palantir added 20 new customers in its second quarter, with total customers up 13% sequentially, and commercial customers up 32% sequentially.

Here are the key numbers:

Revenue: $375.6 million, versus estimates of $361.1 million
Adjusted earnings per share: $0.04, versus estimates of $0.03

With revenue growth of 49% year-over-year, Palantir expects the strength to continue into year-end. The company gave third-quarter revenue guidance of $385 million, ahead of analyst estimates for $380 million, and expects adjusted operating margins of 22%.

For the full year, Palantir raised its guidance for adjusted free cash flow to more than $300 million, more than double its previous estimate of $150 million. Meanwhile, the company reiterated its long-term outlook for annual revenue growth of 30% through 2025.

Finally, Palantir has continued to invest in SPAC merger transactions, as it uses the deals to help cement business contracts with emerging growth companies. The company said it has made $250 million in investment commitments to SPAC transactions during the quarter.

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August 9, 2021

Moderna spikes 19% amid a flood of encouraging vaccine news, surpassing Merck in market value

Moderna soared as much as 19% on Monday amid a flood of news suggesting that demand for its COVID-19 vaccine will continue to be strong.
Monday’s move catapulted Moderna ahead of Merck in market value, giving the mRNA developer a valuation of nearly $200 billion.
Moderna saw its revenue soar 6,516% to more than $7 billion in the second quarter.
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Moderna, the almost 11 year old mRNA developer that created a 95% effective pandemic ending vaccine in less than a year, is now worth more than Merck, a 130-year-old vaccine giant.

That milestone came on Monday after shares of Moderna surged as much as 19% on a flood of news indicating that the mRNA vaccine developer will experience continued strong demand for its COVID-19 vaccine.

The company said on Monday that its vaccine received provisional registration in Australia, paving the way for it to be administered to individuals 18 years of age and older. Additionally, Swiss regulators expanded its indication of Moderna’s COVID-19 vaccine to be used in children ages 12 to 17, based on an ongoing of nearly 4,000 children in that same age group.

Also potentially helping Moderna shares continue its record surge on Monday was encouraging news from its competitor, BioNTech, which partnered with Pfizer to distribute its COVID-19 vaccine. The company saw strong growth in its second quarter earnings and said it expects strong demand for its vaccine in 2022 and beyond.

Finally, the potential for a third booster shots for some age groups seems likely, as Israel has already begun to administer them to some portions of the older population. Dr. Fauci said that he is also in favor of giving booster shots to the most vulnerable populations.

Moderna is now within striking distance of a $200 billion valuation, having last traded at a valuation of $197 billion. Merck last traded at a valuation of $191 billion.

Moderna’s second-quarter earnings revealed year-over-year revenue growth of 6,516% to more than $7 billion. The company is the best performing S&P 500 stock year-to-date, being up 553% at time of publication.

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August 4, 2021

Robinhood’s 126% post-IPO rally puts its founders within reach of a $1.4 billion stock payout

Robinhood co-founders Baiju Bhatt (left) and Vlad Tenev.
Spencer Platt/Getty Images

Robinhood’s post IPO rally of as much as 126% put its founders within reach of a $1.4 billion payout.
Co-founders Vlad Tenev and Baiju Bhatt stand to receive 13.8 million shares if Robinhood’s stock price closes above $101.50 by 2025.
Shares of Robinhood hit an intra-day high of $85 on Wednesday, just 19% below the award price.
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A wild post-IPO rally in shares of Robinhood this week put its co-founders within reach of a $1.4 billion stock payout, according to the company’s S-1 filing.

Vlad Tenev and Baiju Bhatt stand to each receive 13.8 million shares if Robinhood’s stock price closes above $101.50 by 2025 for an extended period of time. Shares of Robinhood hit an intra-day high of $85 on Wednesday, just 19% below the price needed for Tenev and Bhatt to unlock their stock award.

The $101.50 price hurdle is based on the average of the daily volume weighted average of Robinhood’s stock price for each day over a consecutive 60-day trading period.

Robinhood stumbled in its IPO debut last week, with shares falling as much as 12%, but the stock has since staged an impressive rebound and recovered all of its losses and then some. The online trading app staged a two-day rally of as much as 126% on Tuesday and Wednesday.

The 13.8 million restrictive stock units were granted to both founders in 2013, but the award terms were revised in May to extend the deadline of the award to 2025. Under the original plan, Tenev and Bhatt would have only received 20% of the stock award if at the time of IPO shares were priced between $30.45 and $50.75, according to the filing.

The company priced its IPO at $38 per share, meaning Tenev and Bhatt would have only received 20% of their stock award if the terms weren’t revised.

Tenev and Bhatt also stand to receive millions of more Robinhood shares if their stock price eventually trades up to $300 per share by the end of this decade. The co-founders were granted an additional RSU equity award, 22 million shares for Tenev and 13 million shares of Bhatt, if the stock price hit a number of price hurdles, starting at $120 and moving up in increments of $30 until topping out at $300.

All in all, if successful, the equity awards for Tenev and Bhatt could be worth up to $10.8 billion and $8.1 billion, respectively, assuming both co-founders don’t sell a single share of their accumulated equity awards after the last tranche is granted at the $300 per share level.

“The 2021 Market-Based RSUs are designed to incentivize the Co-Founders toward further growing our share price over and above the price hurdles applicable to the 2019 Market-Based RSUs,” Robinhood said in the filing.

In April, Robinhood reduced the annual salary of Tenev and Bhatt to $34,248, which is the 2019 median wage of US workers. Both were previously paid a base salary of $400,000.

Tenev and Bhatt founded Robinhood in 2013. The company has seen its business explode as millions of Americans began investing in the stock market amid the COVID-19 pandemic and government stimulus checks. Epic rallies in dogecoin and meme-stocks like GameStop and AMC Entertainment have also boosted its business in recent months.

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July 27, 2021

Workday falls 7% on report that Amazon has canceled its contract with the HR software company

Trader NYSE — A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 5, 2020.
Andrew Kelly/Reuters

Workday stock fell Tuesday after a report from Insider revealed that Amazon ended its contract with the HR software firm.
Amazon had originally announced plans to adopt Workday’s software companywide in 2017.
According to Business Insider, Amazon halted the plan to roll out Workday software last year.
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Workday fell as much as 7% in Tuesday trades after Insider reported that Amazon ended plans to roll out its HR software last year.

Amazon had originally announced plans in 2017 to rollout Workday’s human-resources software across the entire company, but challenges in deploying the cloud software proved to be too great.

Senior engineers at Amazon had warned about migration issues before the deal was announced, according to the report, citing people familiar with the matter. The deal struggled because the database behind Workday’s software didn’t scale as planned to fully support Amazon’s growing workforce.

Workday confirmed in an e-mail to Insider that the deal was no longer in place.

“The partnership between the two companies remains strong, with the possibility of revisiting the deployment in the future,” the person said in a statement.

“The technical recommendation to then-CEO Jeff Bezos and his ‘S-team’ of senior decision-makers was that switching to Workday would be expensive and unlikely to succeed,” Insider reported, adding that Bezos and team did not heed the warnings, “resulting in years of costly work.”

An Amazon representative told Insider that some teams within the company still use the Workday software solution, and that “the partnership between the two companies remains strong.”

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July 21, 2021

Bitcoin rises 10% as Elon Musk, Jack Dorsey, and Cathie Wood gather to discuss the volatile cryptocurrency

David McNew/AFP via Getty; ARK Invest; Patricia De Melo Moreira/AFP via Getty; Bitcoin; Samantha Lee/Insider

Bitcoin jumped as much as 10% on Wednesday as Elon Musk, Cathie Wood, and Jack Dorsey talked crypto at The B Word conference.
Musk, Wood, and Dorsey all advocated for the cryptocurrency and talked about its future potential.
Bitcoin reclaimed the key support level of $30,000 and traded as high as $32,415 on Wednesday.
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Bitcoin’s surged as much as 10% on Wednesday as Tesla CEO Elon Musk, Square CEO Jack Dorsey, and Ark Invest’s Cathie Wood gathered to talk about cryptocurrencies at The B Word conference.

Musk, Dorsey, and Wood answered a series of questions on cryptocurrencies and addressed a number of pain points associated with bitcoin, including its extreme volatility, intense energy usage, and reliance on fossil fuels and sustainable energy.

The surge higher in bitcoin helped the popular cryptocurrency reclaim a key technical support level at $30,000. As of Wednesday afternoon, bitcoin traded as high as $32,820, well above its Tuesday low of $29,308.

Many technical analysts view bitcoin’s $30,000 level as a make or break level for the cryptocurrency that could lead to significant downside if it doesn’t hold.

Katie Stockton of Fairlead Strategies said in a note on Wednesday that since the $30,000 level is heavily watched by traders, it is prone to a shakeout below that level, also known as a false breakdown. A false breakdown often traps bears below a key support level before surging higher.

So far, that playbook is playing out, with bitcoin breaking the $30,000 level on Tuesday before surging significantly higher on Wednesday.

Stockton sees bitcoin hitting resistance near its 50-day moving average at $35,000, representing potential upside of 8% from current levels. If bitcoin can decisively clear that level, bitcoin would likely gravitate towards its 200-day moving average near $44,000, representing potential upside of 36% from current levels.

Ultimately, bitcoin holding the $30,000 support level is instrumental for bitcoin bulls as they look to stem the significant bleeding in the crypto space that has occurred since bitcoin topped out near $65,000 in mid-April.

Bitcoin price chart — Fairlead Strategies

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