Home » Entries posted by ALEX VEIGA AP Business Writer

Robinhood IPO asks customers to play big role as investors

LOS ANGELES — Robinhood is disrupting another stock market norm — and taking a big risk — by giving ordinary investors access to a huge slice of its initial public offering.The popular online brokerage is taking the unusual step of allowing users of its trading app to buy up to a third of its IPO shares before they begin trading on the Nasdaq Thursday under the “HOOD” ticker symbol. Typically, only institutional investors and company insiders can buy shares in companies before they go public.Early access can potentially give investors a big advantage if shares move higher once they debut. Between 2001 and 2020 the average U.S. IPO returned 14.5% from the offer price on day one, according to Renaissance Capital. So far this year, the jump is even greater, at 34%. For IPOs that have raised at least $100 million, the average first-day return this year is 25%.But expanding early access beyond Wall Street insiders isn’t without risk, especially given that Robinhood is making available such a large chunk of its offering to users via its own trading platform. The move could backfire if many individual investors, often referred to as retail traders, flip their shares for a quick profit, rather than hold them, said Matt Kennedy, senior IPO market strategist at Renaissance Capital.“The major downside, and the reason this is so unusual, is issuers typically place a great deal of value on the investment bank’s ability to place the shares with institutional, long-only investors who understand the business, believe in it and have done their homework,” Kennedy said. “Retail traders have more of a reputation of flipping, so this could result in higher volatility.”The Menlo Park, California, company expects to offer up to $770 million worth of its shares to its customers. The estimate is based on an offering price of $40 per share, the midpoint in a range of $38 to $42 per share, the company said a filing with the Securities and Exchange Commission last week. All told, Robinhood is seeking a market valuation of up to $35 billion.While giving individual investors a shot at pre-IPO shares is unusual, there have been some high-profile examples in recent years.Ride-hailing apps Uber and Lyft gave their drivers a way to buy IPO shares, while online marketplace Etsy let its users get a piece of its IPO. Some companies also elect to go public via what is known as a direct listing. That’s where a company sells its shares to the public without involving underwriters. So, essentially everyone is on equal footing.Robinhood’s approach stands out mainly because it is setting aside up to 35% of the IPO shares for its users. That’s the largest portion by far of pre-IPO shares to be designated for retail investors in an underwritten offering, Kennedy said.Robinhood recently rolled out IPO Access, a platform that allow users to get in early on IPOs. The first such IPO made accessible to Robinhood users was Figs’ stock market debut in May. Shares in the online scrubs seller soared 36% in their first day of trading.Robinhood users interested in buying shares of the company via its platform must sign up for the IPO Access feature. Once there, they place a “conditional offer to buy,” or COB, and say how many shares they hope to purchase. That conditional offer doesn’t become an official order until the IPO is priced, likely Wednesday night.Robinhood has warned that users of IPO Access may get the full number of shares they want, or a partial amount, or none at all, depending on demand and other factors.Robinhood is discouraging users from flipping shares they buy through its IPO platform. The company warns that users who sell IPO shares within 30 days of the IPO will be restricted from buying shares in IPOs for 60 days.That may explain the two-pronged approach Robinhood user Allen Tran of New York is taking.The 23-year-old, who began using Robinhood in 2016 and hosts online communities of investors, says he has signed up for Robinhood’s IPO platform and intends to buy shares in the company and hold them “for a very long time.” Tran also plans to use another trading platform to buy shares in Robinhood once they make their debut and then “scalp,” or sell those right away to profit on what he expects will be a big first-day pop in the stock.“I’m going to watch the stock rally with hype, then I’m going to get out relatively quickly, banking my profits,” Tran said.And if the stock should open below its offering price?“I would be very, very surprised if that happens,” he said. “If that does happen, that just means that I will be able to buy more shares with the same amount of capital.”

Existing US home sales up in June; prices reach new heights

Existing US home sales up in June; prices reach new heights

Sales of previously occupied U.S. homes rose in June, snapping a four-month losing streak, while strong demand for higher-end properties and ultra-low mortgage rates helped push prices to new highsBy ALEX VEIGA AP Business WriterJuly 22, 2021, 3:11 PM• 4 min readShare to FacebookShare to TwitterEmail this articleSales of previously occupied U.S. homes rose in June, snapping a four-month losing streak, while strong demand for higher-end properties and ultra-low mortgage rates helped push prices to new highs.Existing homes sales rose 1.4% last month from May to a seasonally-adjusted annual rate of 5.86 million units, the National Association of Realtors said Thursday. That’s just under the 5.9 million annual rate economists were expecting, according to FactSet.Sales jumped 22.9% from June last year, when some states were still locked down due to the pandemic. Last month’s home sales pace is ahead of the 5.7 million annual rate in February 2020, before the coronavirus led to a spring slowdown in sales last year.The modest sales rebound last month followed a string of four monthly declines as soaring prices and a limited number of available homes on the market discouraged many would-be buyers, especially those seeking to become homeowners for the first time.While sales of homes under $150,000 fell in June from a year earlier, buyers who purchased properties that sold for $250,000 or above helped push the median U.S. home price 23.4% higher from a year earlier to an all-time high $363,300, the NAR said.With so few homes up for sale, it has become routine for anyone putting a house on the market to receive multiple offers that exceed the asking price, and many sell within days.Still, there are signs the red-hot housing market is beginning to cool a bit, said Lawrence Yun, the NAR’s chief economist.While the market remains heated, Yun said sellers are now typically receiving about four offers, down from five. Prices are still at all-time highs, but he points out that that tends to be a lagging indicator.“Maybe we have already turned the corner from super-hot to somewhat-hot,” Yun said.Another positive sign for would-be homebuyers: The number of homes on the market, while still down sharply from a year ago, edged up last month.“Inventory is beginning to open up,” Yun said. “Small increments, but nonetheless, we may have turned the corner on inventory.”At the end of June, there were 1.25 million unsold homes for sale, an increase of 3.3% from May, but down 18.8% from June 2020. At the current sales pace, that amounts to a 2.6 months’ supply, the NAR said. At the end of May, unsold homes supply was at 2.5 months.Homes typically remained on the market for 17 days in June, unchanged from May and down from 24 days a year ago.Several trends are likely to keep the housing market competitive. Mortgage rates remain near historic lows, helping make financing more affordable. The average interest rate on a 30-year mortgage fell this week to 2.78%, according to mortgage buyer Freddie Mac. A year ago it averaged 3.01%.More millennials are looking to become homeowners, while many Americans who’ve been able to work remotely during the pandemic are increasingly opting to move to another city or state to buy a home they can afford.Another driver has been increased activity on Wall Street in the acquisition of single-family homes. Big institutional investors have begun to buy property and rent them out. All-cash transactions, which includes investors and wealthy buyers, made up 23% of sales in June, up from 16% a year ago.Robust demand has also pushed up prices for new homes. New home sales fell 5.9% in May, the second monthly decline in a row, the Commerce Department reported last month. The median price of a new home sold in May jumped to $374,400, up 18.1% from a year ago.

Taylor Morrison Home CEO Sheryl Palmer talks homebuilding

Taylor Morrison Home CEO Sheryl Palmer talks homebuilding

Low mortgage rates and a severe shortage of previously occupied U.S. homes on the market have helped stoke demand for new homes this year, but supply chain problems and rising costs for building materials and labor have been a drag on the industryBy ALEX VEIGA AP Business WriterJuly 19, 2021, 1:43 PM• 3 min readShare to FacebookShare to TwitterEmail this articleLOS ANGELES — Low mortgage rates and a severe shortage of previously occupied U.S. homes on the market have helped stoke demand for new homes this year, but supply chain problems and rising costs for building materials and labor have been a drag on the industry.Big homebuilders like Scottsdale, Arizona-based Taylor Morrison Home Corp., have had to calibrate construction schedules to account for the supply crunch, which has caused delays and limited the number of homes for sale.CEO Sheryl Palmer recently spoke to The Associated Press about the U.S. housing market, the impact of inflation and supply chain problems, and the company’s push to sell homes online. The interview has been edited for length and clarity.Q: It’s been a strong year for the new-home market. How do you see it heading from here?A: There are a lot of dynamics at work, but when I just look at the supply-demand needs of providing shelter, the trajectory we’ve seen, with pricing moving the way it has, and the level (of construction) — I think everybody slowed it down to match production, to allow production to get caught up — I think we have a good runway ahead for the industry.Q: How have the building materials constraints and higher prices for key components like lumber affected your business?A: We found ourselves with $1,600-$1,700 lumber for a good part of this year, really unprecedented levels. We went ahead and continued to build … customers’ houses. They cost a lot more than we thought they were going to cost when we sold them the house, because it was such an unprecedented movement in lumber.Q: The supply crunch has also lengthened the time it takes to build homes, correct?A: It’s extending timelines a little bit. Most builders are deploying the same strategy, and that is aligning sales with production capacity.Q: When you look at the surge in U.S. home prices this year, do you worry the pool of buyers who can afford a new home is shrinking?A: There’s such an undersupply. When I look at affordability — I think the average was a 23% increase in (home) prices year-over-year — that’s unprecedented. Is that a sustainable formula? Absolutely not. Having said that, what’s also really interesting and has probably seeded some of that is if I were to look at a $400,000 house today and put a conventional loan on it — 20% down payment, 80% mortgage — my (monthly) payment would be lower today than it was a year ago, because interest rates have been so attractive.Q: The pandemic helped popularize virtual home tours. Taylor Morrison is leaning into this trend with the launch of an online homebuying portal. Will this have enduring appeal outside of a social distancing scenario?A: The whole intent of the virtual suite is that there isn’t one-size-fits-all and we want to engage with the customer in the way that’s most comfortable for them. And if they want to do it in person, great. If they’re out of state, which is something that happens quite often, and they know the neighborhood and they’re comfortable doing it virtually, that works, too.

After Branson flight, Virgin Galactic slumps on stock sale

After Branson flight, Virgin Galactic slumps on stock sale

Virgin Galactic’s shares turned sharply lower Monday after the spaceflight company said it’s made arrangements to sell up to $500 million in stockBy ALEX VEIGA AP Business WriterJuly 12, 2021, 6:18 PM• 3 min readShare to FacebookShare to TwitterEmail this articleVirgin Galactic shares veered sharply lower Monday after the spaceflight company said it’s made arrangements to sell up to $500 million in stock.The disclosure comes a day after founder Richard Branson briefly rocketed into space aboard Virgin’s winged space plane for the first time in what was the company’s highest-profile flight yet as it looks to begin taking up customers next year.The stock was down about 15% as of 1:47 p.m. Eastern. Trading in the stock was briefly halted shortly after the market opened. Virgin is still up 76% so far this year.The company didn’t reveal the timing of the proposed stock sale, but said it plans to use the net proceeds to fund manufacturing, development of its spaceship fleet and infrastructure improvements, among other expenses, according to a filing with the Securities & Exchange Commission.Virgin Galactic already has more than 600 reservations from would-be space tourists, with tickets initially costing $250,000 apiece. The company received clearance from the Federal Aviation Commission last month to begin taking paying customers into space from its facilities in New Mexico, something the company has said it is looking to start doing next year.The launch with Branson marked the 22nd test flight of Virgin Galactic’s VSS Unity space plane. The company has planned at least two more space test flights this year.Branson had teased a major announcement about ferrying more people to space following his flight, which some expected would be an announcement about Virgin Galactic reopening ticket sales. Instead, upon his return to Earth Sunday, Branson announced a sweepstakes drawing for just two seats on a Virgin Galactic jaunt. That announcement was “likely less than what investors were hoping for,” analysts at Canaccord Genuity wrote in a research note Sunday.The analysts, which have a “Buy” rating on the stock, say the reopening of ticket sales is going to be a key barometer for assessing the company’s future customer backlog beyond the roughly 600 people who have already signed up for space flights.“While the full power of the Virgin brand was on display, and Sir Richard’s knack for showmanship is clearly a powerful asset for the company, the challenge now will be for the company to maintain the momentum and establish a flight plan in 2022 that can demonstrate a repeatable and increasing commercial launch cadence,” the analysts wrote.Branson edged out billionaire Jeff Bezos, founder of rival space tourism company Blue Origin, as the first person to blast off in his own spaceship. Bezos, his brother and two other people are set to go up on a Blue Origin rocket on July 20.Blue Origin has yet to sell tickets to the public. It’s waiting for Bezos’ flight before announcing its ticket prices.Virgin’s other rival, SpaceX, plans to take tourists on more than just brief, up-and-down trips just outside the Earth’s atmosphere. The company, which is already launching astronauts to the space station for NASA and building moon and Mars ships, plans to ferry customers into orbit around the Earth for days, with seats costing well into the millions. The company’s first private flight is set for September.

After Branson flight, Virgin Galactic slumps on stock sale

After Branson flight, Virgin Galactic slumps on stock sale

Virgin Galactic’s shares turned sharply lower Monday after the spaceflight company said it’s made arrangements to sell up to $500 million in stockBy ALEX VEIGA AP Business WriterJuly 12, 2021, 6:18 PM• 3 min readShare to FacebookShare to TwitterEmail this articleVirgin Galactic shares veered sharply lower Monday after the spaceflight company said it’s made arrangements to sell up to $500 million in stock.The disclosure comes a day after founder Richard Branson briefly rocketed into space aboard Virgin’s winged space plane for the first time in what was the company’s highest-profile flight yet as it looks to begin taking up customers next year.The stock was down about 15% as of 1:47 p.m. Eastern. Trading in the stock was briefly halted shortly after the market opened. Virgin is still up 76% so far this year.The company didn’t reveal the timing of the proposed stock sale, but said it plans to use the net proceeds to fund manufacturing, development of its spaceship fleet and infrastructure improvements, among other expenses, according to a filing with the Securities & Exchange Commission.Virgin Galactic already has more than 600 reservations from would-be space tourists, with tickets initially costing $250,000 apiece. The company received clearance from the Federal Aviation Commission last month to begin taking paying customers into space from its facilities in New Mexico, something the company has said it is looking to start doing next year.The launch with Branson marked the 22nd test flight of Virgin Galactic’s VSS Unity space plane. The company has planned at least two more space test flights this year.Branson had teased a major announcement about ferrying more people to space following his flight, which some expected would be an announcement about Virgin Galactic reopening ticket sales. Instead, upon his return to Earth Sunday, Branson announced a sweepstakes drawing for just two seats on a Virgin Galactic jaunt. That announcement was “likely less than what investors were hoping for,” analysts at Canaccord Genuity wrote in a research note Sunday.The analysts, which have a “Buy” rating on the stock, say the reopening of ticket sales is going to be a key barometer for assessing the company’s future customer backlog beyond the roughly 600 people who have already signed up for space flights.“While the full power of the Virgin brand was on display, and Sir Richard’s knack for showmanship is clearly a powerful asset for the company, the challenge now will be for the company to maintain the momentum and establish a flight plan in 2022 that can demonstrate a repeatable and increasing commercial launch cadence,” the analysts wrote.Branson edged out billionaire Jeff Bezos, founder of rival space tourism company Blue Origin, as the first person to blast off in his own spaceship. Bezos, his brother and two other people are set to go up on a Blue Origin rocket on July 20.Blue Origin has yet to sell tickets to the public. It’s waiting for Bezos’ flight before announcing its ticket prices.Virgin’s other rival, SpaceX, plans to take tourists on more than just brief, up-and-down trips just outside the Earth’s atmosphere. The company, which is already launching astronauts to the space station for NASA and building moon and Mars ships, plans to ferry customers into orbit around the Earth for days, with seats costing well into the millions. The company’s first private flight is set for September.

Earnings boom is expected a year after pandemic-driven skid

Earnings boom is expected a year after pandemic-driven skid

LOS ANGELES — Wall Street is gearing up for a slew of blockbuster earnings over the next few weeks as companies issue their results for the April-June quarter.The heightened expectations reflect companies’ improving fortunes this year versus the second quarter of 2020, when much of the economy ground to a halt under restrictions aimed on stemming the spread of the coronavirus.Second-quarter earnings by S&P 500 companies are projected to be up 63.6% from a year earlier, according to FactSet. That would be the highest annual growth rate since the fourth quarter of 2009, when earnings by companies in the benchmark index soared 108.9%.S&P 500 companies’ second-quarter revenue growth is projected to be up 19.6% from a year earlier — the biggest annual increase since at least 2008, according to FactSet. In the second quarter of 2020, S&P 500 earnings plunged more than 31% and revenue fell about 9%.“The numbers are going to be big and they’re skewed, because the second quarter of last year was awful for a lot of companies,” said Willie Delwiche, investment strategist at All Star Charts.The second-quarter earnings reporting season officially kicks off on Tuesday when JPMorgan and Goldman Sachs issue their results. Bank of America, Wells Fargo and other major banks will also deliver quarterly report cards next week, along with other companies, including Delta Air Lines, PepsiCo and UnitedHealth Group.The S&P 500′s 11 sectors are expected to report earnings growth for the April-June quarter, led industrials, which include airlines, and consumer discretionary, which includes retailers, homebuilders and other companies that rely on consumer spending. The materials and financial sectors are also projected to post strong earnings growth.So far, 66 companies in the S&P 500 have issued earnings guidance for the second quarter that is above Wall Street analysts’ mean estimate. That’s well above the 5-year average of 37, according to FactSet.Analysts have also become increasingly bullish on the strength of earnings as the quarter went by. On a per-share basis, their second-quarter earnings growth projections increased by 7.3% from March 31 to June 30, according to FactSet. Typically, analysts end up revising their earnings projections downward the closer it gets to the end of the quarter.“With the bar set so high for the second quarter, there’s a potential for disappointment,” said Sam Stovall, chief investment strategist at CFRA.As a result, individual stock prices are likely to make more modest moves when a company exceeds its earnings estimates than if they miss.S&P 500 companies have mostly beat earnings estimates every quarter since the second quarter of 2009 except one: The second quarter of 2020, when companies were left scrambling to adjust to the economic fallout from the pandemic.A big surge in corporate earnings growth in the second quarter would echo S&P 500 companies’ results in the first three months of the year, when earnings jumped 52.5%, while revenue increased nearly 11%.Still, analysts are expecting earnings growth to taper off from here. S&P 500 company earnings are now projected to grow about 24% in the third quarter from a year earlier and about 18% in the fourth quarter, according to FactSet.“It seems as if we are, at least in the near term, on the leeward side of this earnings mountain,” Stovall said.Among the reasons: beating prior-year results won’t be anywhere near as easy as it was in the second quarter. And there’s uncertainty about how the economy and consumer spending will fare in the second half of the year and into 2022 as the impact of pandemic-related government stimulus eases and whether a surge in inflation across much of the economy will be transitory, as the Federal Reserve contends.Companies have been grappling with higher costs as prices for oil and other commodities have risen sharply amid a rapid surge in consumer demand for goods and services as coronavirus vaccinations paved the way for the economy to reopen. Companies are also facing higher labor costs as many struggle to woo new hires.“We likely will not know the true nature of the post-pandemic economy until this fall when unemployment benefits lapse, kids are back in school and many people go back to work in person,” portfolio managers at T. Rowe Price bond funds wrote in a recent outlook.Wall Street will be listening for what company management teams have to say about how their business is shaping up in the second half of the year, and beyond.“There’s a thought that 2021 is borrowing some of the growth from 2022,” said Ross Mayfield, investment strategist at Baird. “We’re expecting a really strong second quarter, and we’re just looking at what companies are saying about their inflation outlook and their growth outlook for the coming year.”