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First Republic awaits bidders as FDIC deadline inches closer

Brandon Foster on July 6, 2023

First Republic — According to sources close to the situation, federal regulators are holding an auction for regional bank First Republic.

According to the source, the final bids for First Republic Bank are due at 4 pm on Sunday.

The auction

The auction will be handled by the Federal Deposit Insurance Corporation, the independent government agency that insures bank customers’ deposits.

A decision regarding a buyer for First Republic is likely going to be announced on Sunday evening.

As the market continues to endure stress, government officials typically try to announce solutions before global markets initiate trading.

Some Asian markets are usually scheduled to start trading at 8 pm on Sundays.

The bank’s shares

First Republic shares took a sharp decline, going from $122.50 on March 1 to around $3 a share last Friday.

There were expectations that the FDIC would get involved by the end of the day and take control over the San Francisco-based bank, along with its deposits and assets.

However, the move never materialized.

The FDIC already did something similar with two other banks in March, Silicon Valley Bank and Signature Bank.

The takeover occurred when runs on the two banks by their customers left lenders unable to make up for customer demands for withdrawals.

Potential buyers

In another report, The Wall Street Journal pegged JPMorgan Chase and PNC Financial among the prominent banks bidding on First Republic.

The reported bids are part of a potential deal that would follow an FDIC takeover of the regional bank.

“We are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients,” said First Republic on Friday night.

If a buyer should come by for the regional bank, the FDIC would be stuck with money-losing assets.

The same thing had happened after it found buyers for viable portions of SVB and Signature after the FDIC took control of the banks.

Similar instances

During the financial crisis in 2008, which sparked the Great Recession, several shotgun marriages occurred under the arrangement of regulators.

They didn’t want significant banks to fall into the hands of the FDIC before it was sold.

For example, JPMorgan bought Bear Stearns for a fraction of its initial value in March 2008.

In September that year, it bought savings and loan firm Washington Mutual.

Bank of America later bought Merrill Lynch.

The downfall of Washington Mutual in 2008 was the largest bank failure in the history of the United States.

First Republic, a regional bank more prominent than Silicon Valley Bank or Signature Bank, is the second largest failure.

Not enough lifeline

Following the collapse of SVB and Signature in March, First Republic received a lifeline of $30 billion.

It came in the form of deposits from several of the largest banks in the United States.

They all came together after the intervention of Treasury Secretary Janet Yellen.

The banks that provided the lifeline include:

JPMorgan Chase
Bank of America
Wells Fargo
Citigroup
Truist

The banks agreed to take the risk and collaborate to keep cash flowing in First Republic, hoping it would provide confidence in the country’s failing banking system.

The banks and federal government wanted to reduce chances of other banks suddenly starting a mass withdrawal of their cash.

Although the cash helped First Republic get through the last six weeks, the regional bank’s quarterly financial reports were less than enthusiastic.

The disclosure of massive withdrawals by the end of March led to new concerns regarding its long-term viability.

Shaky depositors

First Republic’s financial reports showed depositors withdraw over 41% of their money from the bank over the first quarter.

Most withdrawals were from accounts that had more than $250,000, suggesting the excess funds weren’t insured by the FDIC.

Uninsured deposits at the bank dropped by $100 billion throughout the first quarter, a period that saw total net deposits dropping by $102 billion, excluding the infusion of deposits from other banks.

The uninsured deposits were at 68% of its total deposits around December 31, but only 27% of its non-bank deposits by March 31.

In First Republic’s earnings statement, the bank said insured deposits dropped moderately over the quarter and remained stable from the end of March until April 21.

Banks don’t have all the cash on hand to cover all deposits.

Instead, they take in deposits and use the cash to make loans or investments like buying US Treasuries.

When customers lose confidence in a bank and rush to withdraw their money, typically known as a “run on the bank,” it could cause a profitable bank to collapse.

First Republic’s recent earnings report indicates it was still profitable in the first quarter, with net income at $269 million, down by 33% from 2022.

However, the news of the loss of deposits concerned investors and regulators.

While others who had more than $250,000 in their First Republic accounts were likely wealthy individuals, most were probably businesses that needed the cash to cover daily operating costs.

Companies with 100 employees can easily need more than $250,000 to cover a biweekly payroll.

First Republic’s annual report said that 63% of its total deposits were from business clients with the rest from consumers.

Voyager to pay $5.2 million in legal fees

Jerry Cooper on July 6, 2023

Voyager — In the realm of cryptocurrencies, unsecured creditors are less prevalent than in traditional financial systems. Cryptocurrencies function on decentralized networks with no intermediaries that give unsecured credit. However, there are examples of unsecured lending in the bitcoin ecosystem.

Smart contracts enable lending and borrowing without collateral on Decentralized Finance (DeFi) networks. Lenders become unsecured creditors in these situations and stand the danger of default. They base loan terms on the borrower’s creditworthiness and reputation. It’s vital to highlight that unsecured crypto lending entails risks like default, smart contract weaknesses, and regulatory uncertainty.

While unsecured lending is becoming more common in the crypto realm, it remains a smaller market when compared to collateralized lending.

Voyager

A crypto creditor is a company or person who loans cryptocurrency to another party in return for collateral or interest payments. These lenders are crucial in facilitating loaning and borrowing operations in the bitcoin market. Voyager is one platform that allows for such operations.

Voyager is a cryptocurrency brokerage platform and digital asset wallet that provides customers with an easy-to-use interface for buying, selling, and trading multiple cryptocurrencies. It gives you access to a broad variety of cryptocurrencies, including major ones like Bitcoin, Ethereum, and Litecoin. Voyager’s standout feature is its clever order routing technology, which searches numerous exchanges for the best available trade rates, possibly saving consumers money on fees. Furthermore, Voyager provides interest-bearing accounts for various cryptocurrencies, allowing customers to earn interest on their cryptocurrency holdings.

The platform emphasizes security features such as cryptocurrency cold storage and two-factor authentication. Before using the platform’s services, users should check compliance with local legislation and become acquainted with Voyager’s terms, fees, and regulatory requirements.

Bankruptcy filing

Voyager filed for bankruptcy in July 2022, joining the early wave of high-profile crypto businesses, claiming more than 100,000 creditors and $1 to $10 billion in assets. The business also disclosed that it had exposure to the crypto hedge fund 3AC.

The company’s financial difficulties coincided with a time of crypto market sell-offs caused by the demise of TerraUSD and LUNA. Celsius Network, another cryptocurrency loan service, exacerbated the problem by halting operations and withdrawals in June. The measures had a domino effect throughout the market, revealing a liquidity issue faced by numerous high-profile companies, including:

BlockFi
Genesis Trading
Three Arrow Capital (3AC)
Vauld
Voyager

Voyager tried to attract buyers such as Binance US and FTX. The arrangement with the latter fell apart after Sam Bankman-Fried filed for Chapter 11 bankruptcy in November 2022, becoming the cryptocurrency industry’s greatest bankruptcy. Binance US backed out of a possible transaction in April 2023. The corporation emphasized the harsh regulatory environment in the United States.

The United States Bankruptcy Court for the Southern District of New York authorized a liquidation plan in May, allowing Voyager Digital to compensate consumers for $1.33 billion in digital assets. The procedure also entails the firm incurring large legal expenditures.

Updates

A committee representing Voyager’s unsecured creditors was charged $5.17 million in legal expenses during the bankruptcy saga. According to a recent court filing in the US Bankruptcy Court for the Southern District of New York, law firm McDermott Will & Emery stipulated the fee from March to May.

As a result of this, the entire cost of the credit committee’s legal costs from July 22, 2022 to May 18, 2023 was around $9 million of the under $16.5 million. The “blended hourly rate” for timekeepers was indicated as $1,026.76 in the filing.

According to reports last week, Kirkland & Ellis, Voyager’s law firm, invoiced the former broker $1.1 million in fees for services completed in April 2023.

A silver lining for legal firms

Terra’s company encountered an avalanche in 2022 when its stablecoin was depegged, resulting in an ecosystem collapse in May. As a result, a slew of firms declared bankruptcy, sparking an industry-wide credit constraint known as the “crypto winter.”

Companies that have been significantly impacted include:

BlockFi
Celsius
FTX
Holdnaut
Vauld
Voyager

However, there is a silver lining to the numerous failures: attorneys rushed to the rescue of companies, generating mouth-watering sums of money from legal fees. For example, in December 2022, Celsius’s attorneys together billed the business a whopping $52.8 million. The charge is valid from the date of filing through the end of October.

The most notable loss was definitely FTX, which caused the collapse of nearly 130 linked agencies. So far, it has racked up legal expenses of about $200 million for the seven months of assistance it has gotten since its bankruptcy filing in November.

Bitcoin receives a 5% boost

Alice Blake on July 3, 2023

Bitcoin — Most cryptocurrencies have moved in an unexpected and less steady manner during the last year.

The failure of multiple stablecoins contributed significantly to the crypto market’s downturn, and the November collapse of FTX pulled the sector back from its sluggish comeback.

Since then, the crypto market has gained some stability, and this week has brought more good news.

On Monday, the price of Bitcoin surged as banking institutions validated the popular cryptocurrency.

Bitcoin increased by more than 5% to $28,0002.18 according to Coin Metrics.

The gain brought the cryptocurrency to its highest level since early May.

Sympathy for crypto

Since late last week, the response to cryptocurrencies has been overwhelmingly favorable.

Some of the feelings may be traced back to a BlackRock filing in which it applied for the first-ever spot Bitcoin ETF in the United States.

BlackRock is one of the leading suppliers of investment, advising, and risk management solutions, making it one of the most trustworthy businesses to invest in cryptocurrency.

The move comes after the Securities and Exchange Commission sued two prominent cryptocurrency exchanges, Binance and Coinbase.

As a result, many people are wondering about the timing of BlackRock’s decision, particularly because Coinbase is expected to be its crypto custody partner.

A new exchange

On Tuesday, Bitcoin received another boost.

EDX Markets, a new cryptocurrency exchange, said that it has been operational for many weeks, acting as an alternate trading platform for Bitcoin and Ether.

EDX is supported by financial behemoths Charles Schwab, Citadel Securities, and Fidelity Digital Assets.

CEO Jamil Nazarali made the announcement on LinkedIn, writing:

“I am proud to announce that EDX Markets (EDX) has successfully launched our digital asset market and completed an investment round with new equity partners.”

“EDX’s official launch allows our outstanding team to bring crypto the same values and standards of competition, transparency, fairness, and safety that investors in traditional assets expect and enjoy.”

EDX is an unusual platform in that it does not have custody of its clients’ digital assets.

To acquire and sell crypto assets, they must go via financial intermediaries, similar to trading on the Nasdaq or the New York Stock Exchange.

The strategy is preferred by regulators, according to Nazarali, since it emphasizes the separation of the broker transaction function and the exchange function.

“What we’re seeing is that increasingly, investors want to trade through their trusted intermediaries, and that’s especially true post-FTX, which was supposed to be the leader in the digital market. If you can’t trust them, who can you trust?”

“So people are falling back on the firms that have been around for a really long time and that have really stood the test of time, and that’s a really important tailwind for us.”

Because of the ambiguous restrictions in the United States, EDX now only provides four cryptocurrencies:

Bitcoin (BTC)
Ethereum (ETH)
Bitcoin (LITE)
Bitcoin (BCH)

“We have a limited set of tokens because until there is more regulatory clarity, we don’t want to trade something that’s potentially a security,” Nazarali explained.

“Regulators really like that we don’t take that risk.”

Other institutions

Fidelity has been keeping up with crypto developments since 2014.

To maintain its interest in the crypto area, the corporation took the following steps a few years ago:

Fidelity Crypto, a commission-free retail investing app, was launched.
Access to cryptocurrencies was made available to 401(k) holders.

Several financial institutions are keen to demonstrate their enthusiasm for blockchain technology, particularly how it may upgrade outdated financial infrastructure.

However, only a handful are as vociferous about their opinions on cryptocurrency investing.

However, with large companies such as BlackRock and Fidelity highlighting their crypto pledges, investors were more hopeful on Tuesday.

They were especially hoping that some of the negative perceptions of the crypto industry’s hazards would dissipate, as several investors thought they had encountered a mental hurdle while purchasing Bitcoin.

In the meanwhile, Bitcoin has struggled to break out of its current trading range.

Regardless, they have yet to fall far below $25,000.

Bitcoin’s monthly gains crossed into the green zone on Tuesday, increasing by 69% in 2023.

Retirement budget now higher amid economic crisis

Brandon Foster on July 3, 2023

Retirement — The amount of retirement savings required by Americans varies depending on their lifestyle, region, and personal aspirations.

However, it is generally suggested to strive for a retirement nest fund equal to 70-90% of pre-retirement income.

A typical yearly income of roughly $52,000 recommends a $1.05 million goal retirement savings.

Achieving this objective will require careful saving, investing, and maybe depending on employer-sponsored retirement plans such as 401(k)s and IRAs.

Seeking expert financial guidance and reassessing retirement objectives on a regular basis might assist individuals in tailoring their savings programs to match their needs.

However, the recent economic crisis and inflation have resulted in several financial failures.

As a consequence, for a decent retirement, Americans would need to save a whopping $1.27 million.

The increase

According to Northwestern Mutual research, Americans will require $1.27 million for retirement.

The figures are $1.25 million greater than those identified in the 2022 study.

Between February and March, the financial services firm polled 2,740 respondents via an online survey.

According to the poll, respondents in their 50s will require more than $1.5 million when they retire.

People in their 60s and 70s, on the other hand, have reduced their expectations to less than $1 million.

According to Akao Patel, a Chicago-based certified financial planner and Northwestern Mutual asset management advisor, it’s not unexpected that retirement demands have increased while inflation remains high.

Patel pointed out that if Americans retire at 60 and live to be 100, they will have to consider expenditures for the next 40 years.

“It’s not just about your expenses, but it’s also the mentality of feeling assured that you can spend money throughout retirement,” he added.

Savings & retirement goals

Across all age groups who replied, many indicated their present retirement savings fell short of their million-dollar targets.

They said that they have an average of $89,300 saved aside, a 3% increase from 2022.

Meanwhile, those nearing retirement reported saving an average of $110,900 in their 50s.

People in their 60s and 70s saved $112,500 and $113,900, respectively.

The poll also discovered that older adults are altering and downplaying their expectations about how much they would need for retirement, as well as preparing to work longer.

According to the findings, Americans want to work until they are 65 on average, which is higher than 64 in 2022 and 62.6 in 2021.

Boomers were also shown to be the most likely to work until the age of 71, followed by Gen Xers at 65, millennials at 63, and Gen Z at 60.

Concerns

While the majority of retirees are concerned about their finances, 44% are concerned about their health.

Cerulli Associates discovered that 58% of retirement savers and retirees are most anxious about outliving their money.

Many people are prone to getting lost in the figures of how much they should save.

Sun Group Wealth Partners’ managing director and founding partner, Winnie Sun, stated:

“A lot of people get so overwhelmed that the number is so big that they have to save this much by this age.”

Calculating the ‘magic number’

According to Patel, it is more vital for people to understand their income needs rather than focusing on a large retirement goal figure.

They can, for example, study their credit card and bank statements to better understand where their money is going.

“By multiplying your estimated annual budget – for example, $100,000 – by a factor of 25, you may arrive at a generic lump sum you may need to cover your retirement years which, in this example, would be $2.5 million,” said Patel.

He also proposed that people lower the amount needed to satisfy their retirement obligations by decreasing expenditures.

Meanwhile, Sun stated that in order to assist individuals achieve larger objectives, she divides them into manageable chunks of activity, such as a debit or credit card fast for at least a month to allow for better budget management.

“That will give them a sense of how much they’re spending,” she explained.

Sun also employs a savings challenge, in which they set a target for a particular amount to save over the next three months.

“If we put pressure to have them do it sooner, even when they think they’re not ready, it will help develop better patterns long term.”

Three expenses

Everyone, according to Akao Patel, has three categories of expenses:

Mundane costs – groceries, property taxes, utilities
Discretionary expenses – vacation
Aspirational spending – anniversary trips or children’s wedding

“As you think about retirement, in an ideal world, you would have enough guaranteed zero-risk income to cover your guaranteed expenses,” he said.

Patel also suggested that retirees look into annuities.

People may feel more comfortable taking chances in other parts of their portfolio if their monthly costs are met by guaranteed income.

General Motors hits record sales, but plans to let the Bolt go

Scarlet Logan on June 26, 2023

General Motors — Car manufacturing giant General Motors has endured a few lackluster years in terms of performance.

The company has also had to go through a fire-provoked recall recently, which might have dented its performance.

However, General Motors’ all-electric Chevrolet Bolt EV is finally gaining traction.

Recent success

The United States’ cheapest EV is going through significant price cuts, and US sales of the Chevy Bolt were up by more than 50% in 2022.

General Motors also said it would produce a record 70,000 units this year.

However, the company isn’t leaning into the vehicle’s recent success and improved production.

On Tuesday, General Motors CEO Mary Barra said the company would end production of the vehicle dubbed “a game-changer” later this year.

“We have progressed so far that it’s now time to plan to end the Chevrolet Bolt EV and EUV production, which will happen at the very end of the year,” said Barra during an earnings call.

Her comments regarding the vehicle’s canceled production spoke volumes when combined with the company’s plans to produce profitable electric vehicles in the coming years.

General Motors is looking to deliver single-digit profits from its EV portfolio by 2025.

The company wants to hit a production capacity of 1 million EVs in North America by then.

To achieve the goal, General Motors needs the production capacity, profits, and market position of the upcoming next-generation EVs.

However, the company believes it needs the Bolt.

Production projections

The timing of the company’s decision caught experts off guard as many expected General Motors to produce the Bolt into at least 2024.

“It was more than I expected,” said Michelle Krebs, the executive analyst for Cox Automotive.

“I thought it would go away at some point when new batteries came on and they went to more body styles, but it struck me as rather abrupt.”

A company spokesman said the timing of the announcement aligned with the General Motors need to notify suppliers about the end of production.

It also coincides with progress linked to the $4 billion GM is spending to retool the Bolt plant in Michigan for the GMC Sierra and Chevrolet Silverado electric pickup trucks.

The decision is part of General Motors’ EV strategy to retool existing plants instead of building new ones, but it will likely be done in the future.

GM also said retooling would save time and capital, allowing the company flexibility to partially convert plants and build different gas-powered models.

Regarding the Orion plant that solely manufactures the Bolt, it doesn’t make sense as the company believes it needs the extra capacity.

Additionally, the Bolt doesn’t contribute to General Motor’s bottom line.

On Tuesday, Barra said when the Orion plant reopens in 2024, General Motors would have a total production capacity of 600,000 EV pickups annually.

“We’ll need this capacity because our trucks more than measure up to our customers’ expectation, and we’ll demonstrate that work and EV range are not mutually exclusive terms for Chevrolet and GMC trucks,” said Barra.

Ultium and profits

General Motors promised investors that its next-generation EVs would be profitable.

The EVs will be built on a new architecture, Ultium.

The promise marks a milestone that the Bolt models were never believed to have achieved.

General Motors will cut starting prices by as much as $6,300 for the 2022 model year to increase interest for the Bolt and make it more affordable.

The Bolt EV will then start at $26,595, while the Bolt EUV at $28,195.

“Bolt is selling better than it ever has since the company dropped the price,” said Sam Abuelsamid, Guidehouse Insights principal analyst.

“So, they don’t want to keep it going longer. They’re losing money on it.”

General Motors is expecting to earn low to mid-single-digit adjusted profit with its EV portfolio in 2025.

The expectations exclude the positive impact of clean tax credits, like those included in the Inflation Reduction Act.

With those credits, the company said it expects the new EV portfolio to be profitable like its cars and trucks with traditional engines by 2025, years earlier than many anticipated.

While the credits would have boosted the profit margin on the Bolt, the car uses older battery technology from LG.

General Motors is now focused on scaling up most cost-effective in-house battery production through a plant that operates as a joint venture with a South Korean firm.

The Ultium ramp-up and cost efficiencies achieved with the new EV pickups allows for margin improvements the Bolt couldn’t have realized in the long-term.

“As we scale EVs, we will lower fixed costs and will continue to drive margin improvements,” said Barra.

Jamie Inlow on going from a single unit to managing 30 properties

Scarlet Logan on June 19, 2023

Jamie Inlow — Airbnb has become a prominent platform for people looking to earn some extra cash while pursuing other endeavors.

They are especially prominent within the city as dozens of condo and apartment units are typically put up for rent.

Occasionally, beachside travelers have the opportunity to spend less with houses situated by the shore.

However, no one would have expected that a barn and an apartment would lead to a lucrative opportunity.

Jamie Inlow, the CEO of property management company Be Still Getaways, saw something that others didn’t, paving the way for her success.

Be Still Getaways

Jamie Inlow and her family moved to Scottsville, Virginia, in June 2019, around 20 miles south of where she worked as a student program director for the University of Virginia.

They were touring around their neighbor’s property, which consisted of an unfurnished apartment, a barn, and 150 merino sheep.

The apartment had been emptied after the previous owner rented it out, giving Inlow an idea.

She later drafted a business plan and made a proposition to furnish the apartment and list it for Airbnb.

In doing so, Jamie Inlow created Be Still Getaways, sharing the profits with her neighbor.

Once the listing started picking up, they sought another, finding another partner for the unit and splitting profits down the middle.

Since then, Be Still Getaways has grown to run 119 vacation rentals in Virginia.

According to Airbnb and rental platform Eviivo, the company generated $2.28 million revenue in 2022.

Growing the venture

Be Still Getaways initially started as a side hustle for Jamie Inlow before dropping her director position to focus on her company full-time down the road.

“If I wouldn’t have kept my two jobs, I could never have scaled my business,” said Inlow.

Prior to her venture, Inlow worked over 30 hours weekly, making $50,000 annually between her consulting work and university job.

Jamie Inlow was eager to either cut down her work or find a remote job to stay at home and spend more time with her son.

However, her plan changed after her neighbor agreed to list the apartment.

Inlow came up with “Be Still Getaways” and had a former student design its logo.

Like most rookie entrepreneurs, Jamie Inlow found everything she needed on Google, using search engine optimization to bring new customers.

She also created an Instagram page and a website, paying a company to help create hashtags and grow her online presence.

With the help of a local influencer, Inlow managed to get the “Stays and Getaways” page promoted, with the apartment booked daily two months after getting listed.

Jamie Inlow later asked her neighbor (now investor) for $110,000 to buy and fix up a tiny home from Craigslist.

After going through their business model, the listing went live in March 2020.

While the pandemic might have created a problem, the unit was regularly rented out,

Jamie Inlow also helped an old classmate, redesigning a unit, running the property, and splitting the profits.

At the end of the year, Be Still Getaways was managing 20 properties.

“I was definitely spending 20 hours per week on research alone,” said Inlow.

“I was probably pushing 30 to 40 hours per week [at Be Still Getaways], on top of my other jobs.”

Expanding an empire

In 2021, Jamie Inlow and Be Still Getaways managed 30 properties.

Due to the massive growth, she sought a team, hiring for the following positions:

Operations director
Cleaning
Staging
Repairs

While the company’s expansion is something to behold, it also took a chunk off of Inlow’s time and paycheck.

In the fall, Jamie Inlow bought another property management company and co-founded a new venture with a local realtor: Carriage House.

Eventually, she quit her full-time university job in March 2022, and four months later, bumped up her annual salary from scraps to $72,000.

According to Inlow, she and her husband work for Be Still Getaways, earning a combined $150,000 annually.

The company also employs eight full-time workers, including an on-call handyman, and over 60 part-time staff.

Be Still Getaways manages several units that have been featured in online rental platforms, including:

Short-term rentals
Mid-term rentals
Inns
Motels

For now, Jamie Inlow is learning the ropes of being a CEO, but she has her sights on hiring more people to streamline workflows, allowing everyone to get a break from the hustle.

“My life is not chill, and I’m a workaholic by nature,” Inlow admitted.

“I have to practice strategies to create work-life balance.”

She is currently taking business therapy and tuning her Apple Watch to “do not disturb” mode to give herself more time to play with her son.

Banks to be pitched to save First Republic with urgency

Jeah Lorraine Adams on June 19, 2023

Banks — In the past couple of weeks, the economy has been bombarded with several problems, namely within the banking system.

Silvergate Bank and Signature Bank collapsed in March, with Silicon Valley Bank joining the fray.

Investors have grown concerned about the situation, inciting panic.

Lender First Republic Bank is on the brink of a collapse, but there could be a way to avoid the situation.

When banks collapse

If banks were to collapse, it would have severe consequences on the financial system and the wider economy.

Firstly, there would be a loss of confidence in the banking system, leading to panic withdrawals and further bank failures.

This could lead to a credit crunch, as businesses and individuals struggle to obtain loans and finance, which in turn could lead to a slowdown in economic activity and job losses.

Governments would likely have to step in to provide support and bailouts to prevent further collapses, which would be costly for taxpayers.

In extreme cases, bank collapses could even trigger a recession or depression, as seen in the 2008 financial crisis.

Another favor

First Republic Bank has a chance of avoiding collapse, and it all boils down to how persuasive a group of bankers can be with another group.

According to reports, First Republic advisors will try to persuade big US banks that have already propped it up for another favor.

Bankers aware of the situation will pitch the US banks to purchase bonds from First Republic at above-market rates for a total loss of a few billion.

Otherwise, they would face over $30 billion in Federal Deposit Insurance Corp. fees when First Republic fails.

Recent developments

The proposal is the latest development in the banking situation after Silicon Valley Bank in March.

After the government seized SVB and Signature, mid-sized banks were hit by heavy deposit runs.

The country’s biggest lenders came together to loan $30 billion in deposits to First Republic.

However, the solution was temporary after the gravity around the company’s problems surfaced.

If the First Republic advisors convince big banks to buy bonds for more than they were worth, they would be confident that other parties would join and help the bank recapitalize itself.

According to sources, the advisors have already listed potential buyers of new First Republic stock.

Urgency

Investment banks are looking to raise the alarm and create a sense of urgency.

This week marks a crucial period for First Republic.

Since Monday, the bank’s stock has been in a free fall after sharing that its deposits recently fell by 41%, which includes big banks’ infusion.

Analysts following the company published negative reports after CEO Michael Roffler refused to take questions after a brief 12-minute conference call.

“Now that the earnings are out, once you’ve got a window to act, it’s time to do it,” said an anonymous banker.

“You never know what will happen if you wait, and you don’t want to be dealing with an emergency situation.”

Sources say that advisors might offer warrants or preferred stock so banks involved can reap part of the upside of helping First Republic, which would help the deal.

False starts

First Republic has always been the envy of other banks due to its focus on rich Americans helping growth and allowing it to lure talent.

However, the model broke down after the SVB failure, with customers pulling out uninsured deposits.

The advantage to the advisor’s plan is that it allows First Republic to offload some of its underwater bonds.

When it comes to government receivership, the whole portfolio must be marked down immediately, which results in what Morgan Stanley analysts estimated to be $27 billion.

However, one problem is that advisors rely on the US governments to bring bank CEOs together to come up with other solutions.

There have already been false starts as one of the top four US banks said the government told it to prepare to act on the First Republic situation in the past weekend.

But nothing happened.

Banks and doubts

While any deal is a matter for negotiation and could have a special purpose vehicle or direct purchases, there are several possibilities that could address the bank’s balance sheet.

On Tuesday, Bloomberg reported that the bank is weighing the sale of $50 billion to $100 billion in debt.

First Republic loaded up on low-yield assets like mortgages, municipal bonds, and Treasuries.

When they loaded up, the bank learned it suffered losses of tens of billions of dollars.

By reducing the size of the balance sheet, the bank’s capital ratios would be healthier, paving the way for it to raise more funds and continue as an independent company.

Other decisions they can take include the conversion of the big bank’s deposits into equity or search for a buyer.

However, a suitor has yet to appear, and it’s unlikely as any buyer would also own the losses on First Republic’s balance sheet.

Sources close to the big banks believe the most likely scenario for First Republic is government receivership.

Those close to the banks were hesitant to endorse a plan that would recognize losses for overpaying the bonds.

They are also doubtful about government-brokered deals following pacts from the 2008 financial crisis leading to higher costs than expected.

WGA strike could lead to production halt for movies and shows

Jerry Cooper on June 15, 2023

WGA — The Writers Guild of America (WGA) is a labor union representing writers in the motion picture, television, and new media industries.

Its mission is to protect and advance the economic and creative rights of its members through collective bargaining, legal action, and public advocacy.

For the first time since 2007, the WGA is set to go on strike.

The collective decision could bring another halt to the production of several televisions.

Additionally, it could delay the onset of new seasons for other shows later in 2023.

“Though we negotiated intent on making a fair deal… the studios’ responses to our proposals have been wholly insufficient, given the existential crisis writers are facing,” the union leadership said in a statement.

“They have closed the door on their labor force and opened the door to writing as an entirely freelance profession.”

“No such deal could ever be contemplated by this membership.”

The strike and AMPTP

The WGA tweeted that union members would go on strike around 3 am Tuesday.

However, the WGA would not picket lines until the afternoon.

Meanwhile, the Alliance of Motion Pictures and Television Producers (AMPTP) is negotiating on behalf of studio management.

The organization said it was willing to improve its initial offer, but they would not meet some of the union’s demands.

The management’s negotiating committee released a statement saying:

“The primary sticking points are ‘mandatory staffing,’ and ‘duration of employment’ – Guild proposals that would require a company to staff a show with a certain number of writers for a specified period of time, whether needed or not.”

“Member companies remain united in their desire to reach a deal that is mutually beneficial to writers and the health and longevity of the industry, and to avoid hardship to the thousands of employees who depend upon the industry for their livelihoods.”

The gap

The gap in agreement between the WAG and AMPTP indicates the strike could be a long one.

The last strike that occurred was in November 2007, extending into February 2008.

According to the AMPTP, there were no scheduled talks for Tuesday after conversations broke off more than three hours before the strike deadline on Monday night.

What happens to the shows?

Several shows on cable and broadcast networks completed production for the final episodes of the current seasons.

However, viewers could see late night shows, daytime soap operas, and other shows hit an abrupt end to their season as the WAG go on strike.

According to sources, “Jimmy Kimmel Live!” and “The Late Show with Stephen Colbert” is set to air repeat episodes due the WAG strike.

Show host Seth Meyers was hesitant as an SNL writer in the 2007 strike.

However, he prepared his viewers that Late Night with Seth Meyers wouldn’t go on air if a strike occurred.

Monetary problems

The WAG strike may feel necessary, but it also comes at a time when financial pain is rampant.

The multi-employer contract stands between the WGA and AMPTP represents the following:

Amazon
Apple
CBS
Disney
NBC Universal
Netflix
Paramount Global
Sony
Warner Bros. Discovery

Many of the aforementioned companies witnessed stock price drops, leading to deep cost cutting like layoffs.

However, writers can’t support themselves with their work.

They are suffering from a lack of job opportunities and the loss of income sources due to an industry shift that went from traditional broadcast and cable programming to streaming services.

The gap between the WAG and AMPTP includes several complex rules and contract provisions that make little sense to outsiders, but it still boils down to money.

The WGA released a summary of their bargaining positions, saying the union’s proposals would give writers as a group over $429 million annually.

Meanwhile, AMPTP’s offer is only $86 million a year.

AMPTP questioned the estimates, highlighting that it’s hypothetical due to not knowing how many movies and shows would be either ordered or renewed in the three years of the contract.

Not all members of the WGA are currently working, but the strike could affect thousands of other workers on the sets of shows and movies.

It could also lead to broader implications for the industry, economies of Southern California and other locations like New York City.

According to an AMPTP estimate, over 20,000 people working on as many as 600 productions could be out of work if the writers shut production down.

Check marks become symbol of punishment on Twitter today

Jerry Cooper on May 1, 2023

Check marks — The verification check marks on Twitter is a process by which Twitter verifies the authenticity of an account and confirms that it belongs to the person or entity it claims to represent.

This verification is indicated by a blue check mark next to the account’s name on Twitter.

The purpose of this process is to help users identify the authenticity of the account and to prevent impersonation or misrepresentation.

To be eligible for verification, an account must meet certain criteria, including being active, complete, and public, as well as meeting Twitter’s guidelines for verification.

The verification process involves submitting an application to Twitter and providing documentation to support the request.

However, ever since Tesla CEO Elon Musk took over the social media giant, the blue check marks have taken a new turn.

What happened?

Days earlier, Twitter removed the check marks from VIP users and prominent organizations.

However, the check marks reappeared on high-profile accounts, with many of the users saying they didn’t ask for it or want a new verification badge.

Several accounts of deceased figures have also been noted to receive their verification marks, leaving many to question how many badges Twitter is distributing without charging the users.

A declining value

The recent Twitter check mark situation highlighted how Elon Musk eroded the value of the blue check.

It is especially noteworthy that he is working to drive subscription revenue for the company following a massive drop in the core advertising business.

The blue check mark had once been an online status symbol that authenticated influential accounts.

However, the symbol has evolved into a source of confusion due to Musk’s decision to monetize it.

Punishment

This past weekend, several high-profile figures announced that they were punished with verification check marks.

Several celebrities and key figures like authors Neil Geiman and Stephen King expressed difficulties getting the check marks removed.

The celebrity backlash and Twitter’s decision to restore some badges at its own expense only highlighted the gaps in Musk’s plan and execution.

Additionally, it showed how out of the loop Musk is from celebrity users who produced content to help keep the social media platform popular.

The cost

Ironically, Elon Musk slammed the company’s legacy approach in 2022, which verified celebrities, news organizations, and government accounts.

“Twitter’s current lords & peasants system for who has or who doesn’t have a blue checkmark is bullshit,” he said in November 2022.

“Power to the people! Blue for $8/month.”

The new Twitter CEO then rolled out a paid verification option as part of the subscription product Twitter Blue.

He also removed legacy blue check marks from accounts, leading to consequences like waves of impersonation and potential for new scams and misinformation.

Musk’s attempts to address the errors only prompted him to make a u-turn, implementing the system he previously criticized.

However, things are different today as Elon Musk is at the helm, making verification less transparent.

Rather than symbolizing authenticity, Twitter verification is now riddled with conflicting messages.

For some, it reflects a loyalty pledge and support for the direction Musk is guiding the company.

Meanwhile, those who received a badge without asking for it view the check mark as a symbol of shame or embarrassment.

Others, however, consider it a mark of gullibility.

Users

Independent researcher Travis Brown has kept tabs on the tally of paying Twitter users.

The past few days had a net increase of 12,000 Twitter Blue accounts, mounting to 551,517.

Before going private, the figures showed more than 237 million active users.

Several big-name users refused to pay, and Musk explained he was personally covering their subscriptions.

Last weekend, several check marks were restored, appearing on influential users who claimed they didn’t pay for them.

A fading symbol

Elon Musk’s initial plan seemed to depend on leveraging verification’s current cachet as a status symbol to increase subscriptions.

While there were other features in the subscription product, the verification option was the main driver.

However, changing the meaning of the verification transformed the check mark’s value proposition.

Supporters of the new system criticized those opposed to it.

Coca-Cola exceeds Wall Street revenue expectations

Brandon Foster on April 24, 2023

Coca-Cola — On Monday, beverage titan Coca-Cola shared its quarterly earnings, which came out as a positive.

The company’s earnings and revenues were revealed to have topped analysts’ expectations.

Factors behind the positive development can be attributed to price hikes and higher demand for the beverage.

Trading

On Monday morning trading, shares of Coca-Cola were up by less than 1%.

Based on a survey by Refinitiv analysts, the following is a comparison of the company’s report with Wall Street’s expectation:

Coca-Cola earnings per share: 68 cents adjusted
Coca-Cola revenue: $10.96 billion adjust
Wall Street expected earnings per share: 64 cents
Wall Street expected revenue: $10.8

Coke reported that first-quarter net income due to shareholders of $3.11 billion (72 cents per share) were up from $2.78 billion (64 cents per share) from 2022.

Coca-Cola earned 68 cents per share, excluding certain tax matters, restructuring changes, and other items.

Additionally, net sales rose by 5%, going up to $10.98 billion.

Organic revenue, which removes the impact of acquisitions and divestitures, went up by 12% in the quarter.

It was largely driven by the higher prices of Coca-Cola drinks.

Higher prices

As with most companies this past year, Coca-Cola has been increasing its prices to counter the effects of inflation.

Majority of the first quarter’s price hikes were implemented in 2022.

However, company executives said Coke raised prices even more across operating segments over the first three months of the year.

However, higher prices have also had a muted effect on the demand for Coke products.

Unit case volume

Coca-Cola’s unit case volume grew by 3% in the quarter, excluding the impact of pricing and currency changes.

In North America, volume was flat, while volume fell by 3% in areas like Africa, Europe, and the Middle East.

However, Latin America and Asia-Pacific regions showed that demand remained strong.

Coke also reported a 3% volume growth with its sparkling soft drinks units.

The Coca-Cola soda showed positive signs, with reports of 3% volume growth.

Meanwhile, Coke Zero Sugar’s volume also saw an 8% increase.

Several of the company’s divisions witnessed volume growth of 4% including:

Water
Sports
Coffee
Tea

The surge can be attributed to strong demand for Coke’s coffee and bottled water.

The company’s coffee business reported that its volume saw a 9% volume increase.

Meanwhile, the water division volume rose by 5%.

The tea division saw volume shrink by 4% in the quarter following an earthquake in Turkey.

Sports drinks volume, which covers Bodyarmor and Powerade, also saw declines.

Additionally, the suspension of Coke’s Russian business offset some strong parts, which includes strong sales for the Fairlife dairy brand in the United States.

Previous forecast

In February, Coca-Cola projected comparable revenue growth of 3% to 5%, with comparable earnings per share growth at a higher 4% to 5% for 2023.

Meanwhile, Wall Street projected revenue growth of 3.9%, while earners per share growth were cast at 3% for the year.

Coca-Cola CEO James Quincey said:

“Inflation is likely to moderate as we go through the year, and there we expect the rate in which prices are going to increase will start to moderate and become more normal by the end of the year.”

In the latest earnings report, the company said it was projecting organic revenue growth of 7% to 8% with comparable earnings per share growth of 4% to 5%.

Furthermore, Coca-Cola is expecting commodity inflation to impact its cost of goods sold by mid single digits this year.

CFO John Murphy spoke with analysts during the company conference call, saying that while oil spot prices and freight costs are down, other commodities’ higher prices will stay for a longer period.

Murphy added that Coca-Cola is holding on to its financial flexibility during its long-running tax battle with the IRS.

Earlier in November 2020, the US Tax Court maintained that the company owed $3.4 billion in taxes.

Since then, the figure has been cut down to $1.6 billion.

Murphy said the company is waiting for the tax court to make its final opinion on the case before the company moves forward in the appeals process.

“Overall, we don’t expect the tax dispute to have a bearing on our ability to deliver on our capital allocation agenda and drive long-term business growth.”