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Robinhood’s Bad Day Got Worse

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Many (now ex-) employees at a once high-flying Roinhood had a terrible day just get worse.
What’s the best way to get out from under a multimillion-dollar fine? Employees at the company learned this lesson the hard way.

HOOD – Robinhood (film Troubled brokerage firm Get Robinhood Markets Inc., which attracted Gen Z clients, can’t get a break and is laying off 23% of its workforce.
A multi-million dollar fine was the first step in the process. It was ironic that the problem stemmed from understaffing in one of the company’s most important departments.

CEO Vlad Tenev said the majority of the layoffs will occur for those working in the operations, marketing and program management divisions, according to a blog post.

Earlier in the year, Tenev claimed the company will reduce its employment by 9 percent , but the cut was not sufficient financially.

“This did not go far enough,” he remarked.

“The macroeconomic situation has continued to deteriorate, with inflation reaching 40-year highs and the crypto market collapsing broadly.

This has further curtailed customer trading activity and assets under custody,” Tenev wrote in the blog post.

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“In this new context, we are operating with more staffing than appropriate. As CEO, I agreed and assumed responsibility for our aggressive staffing trajectory – this is on me,” he said.

According to the company’s SEC filing, the newest wave of layoffs included 780 employees.

They are being brought in as a result of a company restructuring to create a structure centered on general managers. A restructure and related costs associated with the layoffs are expected to cost Robinhood $30 million to $40 million in cash.

In addition, Aparna Chennapragada, the company’s Chief Product Officer, is stepping down.

Less than a year after its initial public offering, Robinhood has announced that it is laying off hundreds of its employees, just as the meme stock mania has sent shares of companies like GameStop (GME) – Get GameStop Corporation Report and AMC Entertainment (AMC) – Get AMC Entertainment Holdings Inc. Class A Report surging.

According to Tenev, the company’s all-hands meeting on Thursday would include information on the company’s future activities, including an overhaul of its organizational structure. Tenev added. In the future, he claimed, “GMs would acquire broad responsibility for our individual businesses” in a General Manager (GM) structure. We’ll eliminate unnecessary jobs and positions and flatten hierarchies as a result of this modification.

Layoff victims “will be offered the opportunity to remain employed with Robinhood through October 1, 2022 and receive their regular pay, benefits (including equity vesting),” Tenev stated in his email. This includes severance money, payment of COBRA costs for healthcare (including dental/vision), and aid in finding a new work (including an opt-in Robinhood alumni talent directory).”
Growth in ad revenue

In Robinhood’s case, things are only getting worse. At $38 a share when it went public in July 2021, the business earned $318 million in its second quarter, compared to Refinitiv’s estimate of $321 million.

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By Refinitiv‘s estimates, the brokerage lost 34 cents per share compared to 37 cents per share.

Revenue from cryptocurrency operations and interest earned by Robinhood pushed total net revenue to $318 million, an increase from the first quarter’s $299 million.
The second quarter of 2021 saw total net revenue of $565 million.

Monthly active users and assets in custody both decreased, according to the data.
Other Concerns

The New York Department of Financial Services has fined Robinhood’s cryptocurrency unit $30 million for allegedly breaking anti-money laundering and cybersecurity standards.

After falling by 76% in the last year, Robinhood’s stock has been hit hard by the fears of high inflation and a possible recession that have weighed heavily on its target demographic, Generation Z, as the stock market has collapsed in response.

After-hours trading saw Robinhood at $9.07. Shortly after coming public, it hit a 52-week high of $85 per share.
Finer People

Following regulatory scrutiny over the last few years, Robinhood agreed to pay a $135 million fine. The brokerage paid a $65 million fine to the Securities and Exchange Commission (SEC) in 2020 and a $70 million fine to the Financial Industry Regulatory Authority (FINRA) in 2021 after it was found to have misled consumers and caused outages.
This slowdown has affected both the cryptocurrency market and the wider financial markets since Robinhood’s start, making it difficult for the company to attract a new generation of investors.

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China State-Owned Giants May Delist From US Exchanges

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Exchanges

Five of China’s largest state-owned corporations want to delist from US exchanges as the two countries struggle to agree on auditing Chinese businesses.
China Life Insurance Co., PetroChina Co., and China Petroleum & Chemical Corp. announced their delisting intentions Friday, together with Aluminum Corp. of China and Sinopec Shanghai Petrochemical Co.

The US and China have been at conflict for 20 years over American inspectors’ access to Chinese company audit work files. Negotiators haven’t reached a deal despite a 2024 deadline to shut down noncompliant enterprises. Mainland China and Hong Kong are the only two jurisdictions that don’t allow PCAOB inspections, citing security and confidentiality concerns.

As US and Chinese officials struggle to achieve a settlement, speculation mounts that sensitive Chinese companies could leave US markets willingly.

“These state-owned firms are in vital areas and may have access to information foreign regulators don’t,” said Saxo Markets strategist Redmond Wong.

The China Securities Regulatory Commission said the delisting plans were business-related.

Bloomberg Intelligence projected in May that 300 Chinese and Hong Kong companies worth $2.4 trillion risk being removed off US exchanges as the SEC raises scrutiny. China Life, PetroChina, China Petroleum & Chemical, Alibaba Group Holding Ltd., and Baidu Inc.

Uncertain if delisting will improve discussions on audit inspections, a US regulatory requirement aimed to safeguard investors from accounting frauds and other financial wrongdoing. The 2024 deadline comes from a popular 2020 bill, the Holding Foreign Companies Accountable Act.

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PCAOB Chair Erica Williams said a voluntarily delisting may not stop the board from reviewing audit work papers. The PCAOB’s jurisdiction to investigate was retrospective, so the watchdog could still require work files from departing corporations, Williams noted.

If a corporation or issuer delists this year, it doesn’t matter to Williams because he wants to know if they committed fraud last year.

Alibaba joined a growing list of corporations that could be booted off American exchanges on July 29.

Alibaba stated in July it was seeking a Hong Kong main listing, joining Bilibili and Zai Lab. The switch might help corporations attract more Chinese investors and provide a model for US-listed Chinese enterprises facing delisting.

Alibaba stated in August it would aim to keep its NYSE and HKE listings.

Alibaba, Pinduoduo, JD.com, China Life, and Sinopec sank 3% in US pre-market trade. PetroChina lost 1% and Kraneshares CSI China Internet Fund ETF sank 1.8%.

China considers eight companies listed on major US exchanges to be “national-level Chinese state-owned enterprises,” according to a congressional investigation. China Southern Airlines Co., Huaneng Power International Inc., Aluminum Corp. of China, China Eastern Airlines Corp., and Sinopec Shanghai Petrochemical.

Delistings will have little impact on the companies because their New York shares are thinly traded, but they highlight rising US-China tensions, said Bloomberg Intelligence strategist Marvin Chen.

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Relations between the superpowers have been tight following Nancy Pelosi’s trip to Taiwan provoked Chinese military drills near the island.

Congress may speed up the delisting deadline to 2023, adding pressure for the two parties to achieve a compromise.

The PCAOB chair declined to set a deadline for reaching a deal with Chinese officials, but said it must be soon.

China Mobile Ltd., China Telecom Corp., and China Unicom Hong Kong Ltd. were delisted from the New York Stock Exchange in January 2018 after President Trump banned investment in Chinese enterprises with military ties. Huaneng Power International plans to delist owing to poor volume and administrative complexity and costs.

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Tesla Stock Rises As Elon Musk Sells $6.9 Billion Worth of Shares

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Tesla Stock

“It is crucial to avoid an emergency sale of Tesla stock,” Musk wrote, “in the event that Twitter compels this deal to close, which is hopefully improbable, and certain equity partners don’t come through.”
The announcement that Tesla (TSLA) CEO Elon Musk had sold approximately $7 billion worth of stock in order to set aside cash for his contentious purchase of Twitter caused the company’s shares to rise on Wednesday (TWTR).
According to documents filed with the Securities and Exchange Commission, Musk sold 7.92 million shares between August 5 and August 9, resulting in a profit of around $6.9 billion. After sales of approximately 8.5 billion in early April, he still controls approximately 155 million shares of the clean energy carmaker, which accounts for 15% of the company.

Musk claimed that he wanted to avoid a “emergency sale” of Tesla stock in the event that “Twitter forces this deal to close *and* some equity partners don’t come through” on the $44 billion transaction. He took advantage of a 47% rally in Tesla shares between late May and August 5, when the first sale was made, in order to accomplish this goal.

He also stated that he would repurchase the stock in the event that the Twitter deal, which is scheduled to be heard by a judge from the Delaware court system in the middle of October, is finally unsuccessful.
During the late morning session of trading on Wednesday, Tesla shares were marked 2% higher to reach a price of $868.20 a share. In the meantime, Twitter shares increased by 3.4% to $44.30 per share.
Since the beginning of July, Musk has been in a public dispute with Twitter regarding the number of accounts on the social media platform that are referred to as “fake” or “bots.” Musk believes that these accounts constitute a material change to the terms of the merger that he agreed to in the spring.

Twitter, for its part, is suing Musk to force him to purchase the group for $44 billion, or $54.20 per share. In court papers published last week, Twitter argued that the idea of a “billionaire founder of multiple companies, advised by Wall Street bankers and lawyers” being “hoodwinked into signing a $44 billion merger agreement” is “as implausible and contrary to fact as it sounds.” Twitter is suing Musk to force him to purchase the group for $44 billion.

Twitter was forced to manage a slowdown in worldwide ad spending and the uncertainty tied to Musk’s disputed takeover, which resulted in the company posting an unexpected loss for the second quarter late last month.
The company stated that this was due to “headwinds in the advertising industry associated with the macroenvironment as well as uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.” Group revenues decreased by 1% to $1.14 billion, again falling short of the Street forecast of a $1.315 billion tally. Twitter said that this was because of “uncertainty related to the pending acquisition of Twitter by an affiliate of Elon Musk.”

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New Tax Credit Affects Top-Selling EVs

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Evs

In a win for Democrats, the Inflation Reduction Act passed the Senate and will likely pass the House. If all goes as planned, President Biden might sign the bill in two weeks.

For the auto sector, the proposal expands the $7,500 federal tax credit for EVs by removing the 200,000-vehicle cap.

While it sounds excellent for automakers, new requirements mean 70% of EVs and PHEVs won’t qualify for the credit.

72 EV models are currently available in the U.S., including battery, plug-in hybrid, and fuel cell electric vehicles, says John Bozzella, CEO of the Alliance for Automotive Innovation, a trade group that includes GM, Toyota, and Ford. 70% of EVs would be disqualified when the measure passes, and none would qualify for the entire credit when further sourcing restrictions take effect. Zero.”

These changes will make EV tax incentives more restrictive:

North America must finish assembly.

Car MSRP must be below $55,000, and trucks and SUVs below $80,000.

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The U.S. or free-trade partners must supply battery materials by 2024.

In less than two years, the last battery sourcing component will mean no EVs qualify for the credit, says Bozzella. The plan imposes consumer income criteria that will make many high-earning Americans and joint filers ineligible for tax advantages.

The Automotive Alliance for Innovation lists all zero-emission EVs and PHEVs on sale in America, as well as EV and battery producers.

Yahoo Finance has verified how the top 5 EVs and PHEVs in America will fare under the new guidelines.

Models 3 and Y

Following enactment, both U.S.-made Model 3 cars and Model Y SUVs, the best selling EVs in America, would qualify for the tax credit, a benefit for Tesla given the credit is currently being phased out. Registration data is used as a proxy for Tesla Model 3 and Model Y sales.

Only the $46,990 Model 3 RWD qualifies. Assuming the Model Y is an SUV, both versions qualify (Long Range – $65,990; Performance – $69,990).
Mach-E

Ford Mustang Mach-E finished second in EV/PHEV sales last quarter with 10,941 units. The $43,895 base Mach-E might qualify as a vehicle or SUV, and because it’s produced in Mexico, it would qualify for the tax credit.
Jeep 4xE

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Last quarter, 10,861 Wrangler 4xE plug-in hybrids were sold. With a starting MSRP of $54,595, it would qualify for the tax credit because it’s built at Jeep’s Toledo, Ohio plant.
Kia EV6 and Hyundai IONIQ5

The all-electric Hyundai IONIQ 5 sold 7,448 units in the second quarter, and Kia’s EV6 EV sold 7,287. The IONIQ 5 and Kia EV 6 are constructed in South Korea, so they don’t qualify for the tax credit. This is a hit for Hyundai as the IONIQ 5 and EV6 have been hailed by reviewers and start at $39,950 and $33,900 respectively. The affordable MSRPs may still make both feasible options for many Americans despite loss of the credit.
Bolt EV/EUV

GM’s Bolt EV and Bolt EUV sold 6,945 units last quarter. With a starting price of $25,600, it’s the cheapest pure electric vehicle on the market, and final assembly will take place at GM’s Orion factory in Michigan.
Audi e-tron, Polestar 2

Popular cars including the Audi e-tron, Lucid Air, Polestar 2 sedan, and Porsche Taycan that currently qualify for the federal tax credit will not if the bill is enacted into law.

Manufacturers may no longer need incentives, so all is not lost.

Sam Fiorani, Vice President of Global Vehicle Forecasting at AutoForecast Solutions, told Yahoo Finance, “By the time vehicle makers can take full credit for the legislation, the market will be ready to accept electric vehicles and the incentives will no longer be necessary.” Without incentives, the buyer’s pricing won’t alter much. These incentives boost prices and boost manufacturing profits.

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