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BusinessRobinhood seeks a $35 billion valuation in its I.P.O.

Robinhood seeks a $35 billion valuation in its I.P.O.

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Daily Business Briefing

July 19, 2021, 8:31 a.m. ET

July 19, 2021, 8:31 a.m. ET

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Vlad Tenev, the chief executive of Robinhood, the popular stock-trading app.
Credit…Kimberly White/Getty Images for Robinhood

Robinhood disclosed the expected price range for its initial public offering on Monday, putting the popular stock-trading app one step closer to itself trading on the markets.

In an updated prospectus, Robinhood said it planned to sell shares at $38 to $42 each. At the midpoint of that range, it would raise $2.2 billion and be valued at about $33 billion; at the high end, it would be worth about $35 billion.

The announcement will formally kick off the final part of Robinhood’s long road to going public: a roadshow in which the company will pitch prospective investors on its financial performance.

It will test investor appetite for the online brokerage firm that forced a sea change in stock trading by eliminating commissions and becoming a platform of choice for a new generation of day traders — but has became a target for regulators and lawmakers that have accused it of misleading customers. At a House hearing in the wake of frenzied trading in so-called meme stocks, Vlad Tenev, the chief executive and a co-founder of Robinhood, faced sharp questions from lawmakers about the company’s policies and business model.

In an unusual move, Robinhood is reserving as much as a third of I.P.O. shares for its own customers, instead of the standard universe of mutual funds and other big institutional investors.

That fits into the company’s stated goal of “democratizing finance,” but it could also make trading in the offering even more volatile than in a traditional stock sale, potentially opening itself to even more criticism.

In the updated prospectus, Robinhood also provided estimates for how it performed in the second quarter, including continued growth in revenue and paying customers from the first three months of the year. Its net loss also shrank, though the first quarter had included a onetime accounting charge related to the billions of dollars it had raised earlier in the year.

It is set to begin trading on the Nasdaq market by the end of next week.

Bill Ackman in 2018. He said the Universal Music deal’s “complexity and structure” had concerned some investors in his special purpose acquisition company, or SPAC.
Credit…Krista Schlueter for The New York Times

The billionaire investor Bill Ackman said Monday he had pulled back from a plan to use his jumbo-sized SPAC to purchase a stake in Universal Music Group, the world’s largest record label, after the Securities and Exchange Commission raised concerns about the complex transaction.

Under the proposed deal, Mr. Ackman’s special purpose acquisition company, or SPAC, would have purchased a 10 percent stake in Universal Music, the label behind Taylor Swift, Lil Wayne and Lady Gaga, valuing the company at more than $40 billion.

But the deal would have been complicated, and the S.E.C. was concerned whether it qualified as a SPAC deal at all. These blank-check companies, which use capital from the public market to invest in a private company, taking it public in the process, have drawn a lot of attention from investors over the past year — and increasing regulatory scrutiny.

In a letter to investors, Mr. Ackman said the team at his investment company, Pershing Capital, had failed to change the agency’s mind about the multilayered deal. Investors in the SPAC, known as Pershing Capital Tontine Holdings, seemed wary, too: Its shares had lost nearly a fifth of their value since the deal was announced.

We underestimated the reaction that some of our shareholders would have to the transaction’s complexity and structure,” Mr. Ackman wrote.

The deal called for the Pershing Square Tontine to invest $4 billion for a 10 percent stake in Universal Music, which was already being taken public by its parent, Vivendi. That would have left $1.5 billion in the investment vehicle, which would have been rolled over into a new publicly traded acquisition fund that would have looked to do another deal. Existing investors in Pershing Square Tontine would have received a financial instrument that gave them the right to buy into yet another deal vehicle, which would seek its own takeover target.

While Mr. Ackman’s SPAC is stepping back from the Universal Music deal, Mr. Ackman is not — his hedge fund will buy the stake directly instead.

Pershing Square Tontine now has 18 months to find and close a new deal, unless shareholders give it more time, and “our next business combination will be structured as a conventional SPAC merger,” Mr. Ackman said.

Jeff Bezos will travel to space in a reusable suborbital capsule built by his company, Blue Origin.
Credit…Reuters/REUTERS
  • Bezos goes to space: Jeff Bezos, who just stepped down as chief executive of Amazon, hopes to become the second billionaire rocket company founder to go to space, following Richard Branson.

  • Netflix earnings: Everyone you know signed up for Netflix during the pandemic. What happened in the quarter when everyone wasn’t stuck at home?

  • United Airlines earnings: First of three progress reports this week from U.S. air carriers navigating their way out of the pandemic.

  • Southwest Airlines and American Airlines earnings: Delta Air Lines last week said domestic leisure travel had fully recovered to 2019 levels. But there’s still a huge question whether businesses will continue to curb travel, perhaps permanently.

  • Tokyo Summer Olympics: The event, delayed a year, begins as the city of Tokyo is under a state of emergency because of the pandemic. Most spectators are banned in response to a sudden jump in coronavirus cases. NBC Universal will also offer highlights from the games and coverage of the men’s basketball contest on its year-old streaming service Peacock.

The Zegna men’s wear fashion show in Milan in early 2020.
Credit…Valerio Mezzanotti for The New York Times

In 1910, Ermenegildo Zegna was founded in the foothills of Northern Italy as a family-run maker of wool fabrics.

On Monday, the company, now a global luxury fashion house that owns the Thom Browne brand, took a major step onto the public stock markets — through one of the biggest trends on Wall Street in recent years.

Zegna announced on Monday that it would gain a listing on the New York Stock Exchange by merging with a publicly traded acquisition fund known as a SPAC. The deal is expected to value Zegna at about $3.2 billion, including debt, and may pave a path for other privately held luxury giants to follow suit.

The deal is also the latest sign that big luxury fashion companies are gearing up to get even bigger, seeing an opportunity in taking over rivals and becoming empires. It is a trend that has perhaps been exemplified by LVMH Moët Hennessy Louis Vuitton, the fashion empire that in recent years has struck deals to buy the likes of Tiffany & Company.

Such takeovers have soared in recent years, with rivals across the ocean taking on similar empire-building ambitions. Capri Holdings, formerly known as Michael Kors Holdings, acquired the Italian fashion house Versace for $2.1 billion in 2018, while Tapestry, once known as Coach, has bought companies including Kate Spade and Stuart Weitzman.

The luxury industry has been resilient, as consumers have kept up spending on jewelry, apparel and other indulgences — including as the global economy slowly emerges from a pandemic. Shares of LVMH, whose brands include Dior, Stella McCartney and Fenty, are up by more than 60 percent this year; those in Kering, the parent of labels like Gucci and Saint Laurent, are up by 45 percent.

For much of its existence, Zegna was known primarily as a top-tier maker of men’s wear fabrics and, later, suiting. (It still makes suits for other high-end labels, notably Tom Ford.) But with its purchase in 2018 of a majority stake in the fashion label Thom Browne, Zegna began its own ambitious plan to become a stable of luxury brands.

Zegna now runs nearly 300 stores in 80 countries. And in a sign of optimism about revived consumer spending on fashion, the company expects its sales this year to come close to prepandemic levels.

While Zegna’s pursuit of more resources to expand is not novel, how it is doing so is.

It is merging with a SPAC — formally known as a special purpose acquisition company — a fund that is raised in the stock markets solely for the purpose of merging with a privately held company and giving it a stock listing.

“We will continue to invest in creativity, innovation, talent and technology in order to sustain Zegna’s leadership position in the global luxury market,” Ermenegildo Zegna, the company’s chief executive and grandson of its founder, said in a statement.

Such funds have exploded in popularity over the past two years for allowing companies to join stock markets more quickly than through a traditional initial public offering. (SPACs have increasingly come under scrutiny by regulators in the United States, where most of these funds are listed.)

Merging with Zegna is a fund run by Investindustrial, a European investment firm. The deal will give Zegna about $880 million in fresh cash while allowing its founding family to retain a roughly 62 percent stake.

“Our goal now is to support Zegna in this important new chapter of its history while opening the opportunity to the public to invest in one of the last great iconic independent luxury brands,” Sergio Ermotti, the chairman of the Investindustrial SPAC, said in a statement.

The deal is expected to close by the end of the year, pending approval by the SPAC’s shareholders.

Vanessa Friedman contributed reporting.

A Saudi Aramco oil refinery in Saudi Arabia. A deal reached on Sunday by the countries in OPEC Plus could help ease the pressure on gas prices.
Credit…Ahmed Jadallah/Reuters

Major oil-producing nations have agreed to begin pumping more oil beginning next month, Stanley Reed reports in The New York Times.

The deal, reached on Sunday by the countries in a group known as OPEC Plus, could help ease the pressure on gas prices and inflation as economies around the world recover after pandemic lockdowns.

Gasoline prices in the United States have been steadily rising, and the average price of a gallon of regular gasoline in the United States is now $3.17, according to AAA. A year ago, as pandemic lockdowns kept people close to home, gas cost just $2.18 a gallon on average. And the higher gas prices have been adding to inflation, a key measure of which climbed at the fastest pace in 13 years in June.

Under the deal announced on Sunday, OPEC Plus, a group of 23 nations led by Saudi Arabia and including Russia, will increase output each month by 400,000 barrels a day, beginning in August. That will add about 2 percent to the world’s supply by the end of the year. The group accounts for roughly 40 percent of the world’s crude oil.

Janet Yellen, the Treasury secretary, questioned tariffs that the Trump administration placed on $360 billion of Chinese imports.
Credit…Erin Scott for The New York Times

Treasury Secretary Janet L. Yellen has cast doubt on the merits of the trade agreement between the United States and China, arguing that it has failed to address the most pressing disputes between the world’s two largest economies and warning that the tariffs that remain in place have harmed American consumers.

Ms. Yellen’s comments, made in an interview with The New York Times last week, come as the Biden administration is seven months into an extensive review of America’s economic relationship with China, write The Times’s Alan Rappeport and Keith Bradsher. The review must answer the central question of what to do about the deal that former President Donald J. Trump signed in early 2020 that included Chinese commitments to buy American products and reform its trade practices.

Tariffs that remain on $360 billion of Chinese imports are hanging in the balance, and the Biden administration has said little about the deal’s fate. President Biden has not moved to roll back the tariffs, but Ms. Yellen suggested that they were not helping the economy.

“Tariffs are taxes on consumers, in some cases it seems to me what we did hurt American consumers and the type of deal that the prior administration negotiated really didn’t address in many ways the fundamental problems we have with China,” she said.

But reaching any new deal could be hard given rising tensions between the two countries on other issues. The Biden administration warned U.S. businesses in Hong Kong on Friday about the risks of doing business there, including the possibility of electronic surveillance and the surrender of customer data to authorities.

Chinese officials would welcome any unilateral American move to dismantle tariffs, according to two people involved in Chinese policymaking. But China is not willing to halt its broad industrial subsidies in exchange for a tariff deal, they said.

Academic experts in China share the government’s skepticism that any quick deal can be achieved.

“Even if we go back to the negotiating table, it will be tough to reach an agreement,” said George Yu, a trade economist at Renmin University in Beijing.



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