Stocks dropped around the world on Thursday, with the S&P 500 set for a third day of losses as traders reacted to minutes from the Federal Reserve’s latest policy meeting showing that officials were getting closer to reducing monetary stimulus.
The Stoxx Europe 600 index was down 1.7 percent, the most in a month. The S&P 500 was set to open 0.8 percent weaker, futures indicated. The index dropped 1.1 percent on Wednesday, the biggest single-day decline since mid July.
Commodities, including oil and metals, also tumbled.
The Fed meeting minutes published on Wednesday showed that policymakers were prepared to slow the central bank’s large purchases of government-backed bonds, though they were divided over when exactly to begin the process.
The mood in the stock market was also darkened by concerns about the spread of the coronavirus in the United States and a slowdown in the Chinese economy.
In China, the government is ramping up attempts to cool its property market and restrain steel production to reduce pollution. In the United States, the number of people hospitalized with the virus is rising, particularly in states with low vaccination rates. On Wednesday, officials in Alabama said there were no more intensive care unit beds.
Market moves can also be exacerbated over the summer as many traders are away and liquidity is thin.
Kit Juckes, a strategist at Société Générale, wrote in a note, “With concerns about Covid and growth in Asia, oil prices are at their lowest since May, and risk is firmly ‘off.’”
The FTSE 100 in Britain fell 1.7 percent. In Asia, the Nikkei 225 closed 1.1 percent lower, and the Hang Seng index in Hong Kong dropped 2.1 percent.
Futures of West Texas Intermediate, the U.S. crude benchmark, fell 3.3 percent to $63.27 a barrel, the lowest in three months; it has fallen nearly 15 percent this month. Brent crude futures fell 2.7 percent to $66.34 a barrel.
Prices of steel rebar, a critical component in construction, dropped nearly 4 percent.
Regulators have been scrutinizing special purpose acquisition companies, or SPACs, more closely in recent months, as the deals through which private companies have merged with public shell companies have boomed. The Securities and Exchange Commission is focusing on disclosure and accounting practices, while Congress has discussed making banks as liable for their work on SPACs as the stricter rules that apply to traditional initial public offerings.
According to new research by Usha Rodrigues of the University of Georgia School of Law and Mike Stegemoller of Baylor University, highlighted in the DealBook newsletter, there is another urgent issue to worry about: “empty voting.”
SPAC investors can vote in favor of a merger but redeem their shares before the deal is done. The SPAC structure allows investors to get their money back at the initial public offering price, plus interest, if they don’t want to keep the shares after the blank-check firm merges with a target company. But even as redemptions are rising, in some cases with large majorities of shareholders pulling their money out, deals are still almost all being approved.
Why? One reason may be because redeeming shareholders — which tend to be institutional investors like hedge funds — can keep the warrants that come with SPAC listings, which are tradable and give them exposure to the merged company despite having redeemed their shares for cash. And for the target company, redemptions deprive it of the money in the SPAC, but outside investment at the time of a deal (known as a PIPE) is usually larger and makes the merger still worth doing.
The “ability to vote ‘yes’ and nevertheless jump ship” is worrying, the researchers write, because it is a form of “empty voting.” It creates the impression that early investors in the SPAC are in favor of its chosen merger target even as they sell their shares. Later investors — more likely to be retail investors — may misinterpret this signal.
If more than 50 percent of the SPAC shareholders ask to redeem their shares, the S.E.C. should prohibit the deal from going ahead, the researchers write.
SAN FRANCISCO — Robinhood, the stock trading app, on Wednesday reported surging quarterly revenue as pandemic trading became a permanent hobby for many customers, but it still lost money.
It also lost $502 million, compared with a profit of $58 million a year prior. The company attributed a significant chunk of that loss to warrants from an emergency funding round it raised this year.
Vlad Tenev, Robinhood’s chief executive, said in a statement that he was “encouraged” by the number of people trading stock for the first time via Robinhood. The company reported 22.5 million user accounts with funding in them, a 130 percent increase from 9.8 million in the same period last year.
A significant portion of Robinhood’s growth in the quarter also came from cryptocurrency trading after the price of Bitcoin and other cryptocurrencies hit record highs in the spring. Revenue from cryptocurrency trading fees totaled $233 million, a nearly 50-fold jump from $5 million a year earlier. More than 60 percent of its customers traded cryptocurrency during the quarter, and more new customers used the app to trade cryptocurrencies than stocks, the company said.
Robinhood’s initial public offering in July was a disappointment. The company’s stock began trading at $38 a share, which was the bottom of a price range proposed by its bankers. The shares then fell, ending their first day down 8.4 percent.
A week later, individual stock traders began driving the price up, mostly through the trading of options, a high-risk form of trading that Robinhood facilitates. The company’s shares then jumped as high as $70 each.
The rally turned Robinhood into the kind of “meme stock” that trades based on momentum and sentiment rather than business fundamentals. Nothing had changed in Robinhood’s business outlook to influence the sudden surge.
The company’s share price has since settled at around $50 per share, valuing the company at $41.8 billion. Its shares fell more than 7 percent in after-hours trading on Wednesday.
Robinhood has helped fuel meme stocks by facilitating traders who have repeatedly driven up the prices of aging brick-and-mortar businesses like GameStop, the video game retailer, and AMC, the movie theater chain. Robinhood’s mission to bring Wall Street-style investing to everyday people has included options trading and other risky bets, leading some customers to record shocking losses and drawing the ire of those who believe in a more traditional “buy and hold” investing strategy.
Robinhood incorporated that ethos into its public market debut, allocating an unusually large portion of its I.P.O. shares to retail investors through its app and allowing customers to pose questions in its investor pitch and earnings calls. This month, it spent $140 million to acquire Say Technologies, a company that facilitates investor question and answer sessions and proxy voting.
Yet like many Silicon Valley companies, Robinhood has also limited the rights of its shareholders by issuing multiple classes of shares. That structure has given its founders, Mr. Tenev and Baiju Bhatt, voting control over the company.
Before the company released its results on Wednesday afternoon, one of the top shareholder questions, with more than 900 votes, was whether investors could get a Robinhood hat and “hoody jacket.”
Jason Warnick, Robinhood’s chief financial officer, said he would look into it. “I love the enthusiasm for the brand,” he said.
Kmart’s two-decade slide has transformed the commercial real estate market in unexpected ways, bringing churches, truck washes and self-storage facilities to places that once sold Martha Stewart sheets and Joe Boxer pajamas. In cities and towns across the country, former Kmarts are being used by tenants that might not typically get a crack at such a large haul of commercial space at an affordable price. READ THE ARTICLE →